G.R. No. 220978. July 5, 2016.

*
CENTURY PROPERTIES, INC., petitioner, vs. EDWIN J. BABIANO and EMMA B. CONCEPCION,
respondents.

Civil Law; Contracts; Interpretation of Contracts; Article 1370 of the Civil Code provides that “[i]f
the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control.”—Article 1370 of the Civil Code
provides that “[i]f the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control.” In Norton Resources and
Development Corporation v. All Asia Bank Corporation, 605 SCRA 370 (2009), the Court had the
opportunity to thoroughly discuss the said rule as follows: 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 should be understood in
a different sense. Courts cannot make for the parties better or more equitable agreements than
they themselves have been satisfied to make, or rewrite contracts because they operate harshly
or inequitably as to one of the parties, or alter them for the benefit of one party and to the
detriment of the other, or by construction, relieve one of the parties from the terms which he
voluntarily consented to, or impose on him those which he did not.

Labor Law; Employer-Employee Relationship; Control Test; The control test is commonly
regarded as the most important indicator of the presence or absence of an employer-employee
relationship.—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.

Same; Same; The existence of employer-employee relations could not be negated by the mere
expedient of repudiating it in a contract.—While the employment agreement of Concepcion was
denominated as a “Contract of Agency for Project Director,” it should be stressed that the
existence of employer-employee relations could not be negated by the mere expedient of
repudiating it in a contract. In the case of Insular Life Assurance Co., Ltd. v. NLRC (4th Division),
287 SCRA 476 (1998), it was ruled that one’s employment status is defined and prescribed by
law, and not by what the parties say it should be, viz.: 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 status 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. (Emphasis and underscoring supplied) Therefore, the CA correctly
ruled that since there exists an employer-employee relationship between Concepcion and CPI,
the labor tribunals correctly assumed jurisdiction over her money claims.

Remedial Law; Civil Procedure; Appeals; As a general rule, a party who has not appealed cannot
obtain any affirmative relief other than the one granted in the appealed decision.—As a general
rule, a party who has not appealed cannot obtain any affirmative relief other than the one
granted in the appealed decision. However, jurisprudence admits an exception to the said rule,
such as when strict adherence thereto shall result in the impairment of the substantive rights of
the parties concerned. In Global Resource for Outsourced Workers (GROW), Inc. v. Velasco, 678
SCRA 751 (2012): Indeed, a party who has failed to appeal from a judgment is deemed to have
acquiesced to it and can no longer obtain from the appellate court any affirmative relief other
than what was already granted under said judgment. However, when strict adherence to such
technical rule will impair a substantive right, such as that of an illegally dismissed employee to
monetary compensation as provided by law, then equity dictates that the Court set aside the
rule to pave the way for a full and just adjudication of the case.

PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are theDecision2 dated April 8, 2015 and the
Resolution3 dated October 12, 2015 of the Court of Appeals (CA) in C.A.-G.R. S.P. No. 132953,
which affirmed with modification the Decision4 dated June 25, 2013 and the Resolution5 dated
October 16, 2013 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 05-
001615-12, and ordered petitioner Century Properties, Inc. (CPI) to pay respondents Edwin J.
Babiano (Babiano) and Emma B. Concepcion (Concepcion; collectively, respondents) unpaid
commissions in the amounts of P889,932.42 and P591,953.05, respectively.
The Facts
On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was eventually6
appointed as Vice President for Sales effective September 1, 2007. As CPI’s Vice President for
Sales, Babiano was remunerated with, inter alia, the following benefits: (a) monthly salary of
P70,000.00; (b) allowance of P50,000.00; and (c) 0.5% override commission for completed sales.
His employment contract7 also contained a “Confidentiality of Documents and Non-Compete
Clause”8 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 is] employed
and for a period of one year from date of resignation or termination from [CPI].” Should Babiano
breach any of the terms thereof, his “forms of compensation, including commissions and
incentives will be forfeited.”9

During the same period, Concepcion was initially hired as Sales Agent by CPI and was
eventually10 promoted as Project Director on September 1, 2007.11 As such, she signed an
employment agreement, denominated as “Contract of Agency for Project Director”12 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.13 On March 31, 2008,
Concepcion executed a similar contract14 anew with CPI in which she would receive a monthly
subsidy of P50,000.00, 0.5% commission, and cash incentives as per company policy. Notably, it
was stipulated in both contracts that no employer-employee relationship exists between
Concepcion and CPI.15

After receiving reports that Babiano provided a competitor with information regarding CPI’s
marketing strategies, spread false information regarding CPI and its projects, recruited CPI’s
personnel to join the competitor, and for being absent without official leave (AWOL) for five (5)
days, CPI, through its Executive Vice President for Marketing and Development, Jose Marco R.
Antonio (Antonio), sent Babiano a Notice to Explain16 on February 23, 2009 directing him to
explain why he should not be charged with disloyalty, conflict of interest, and breach of trust
and confidence for his actuations.17

On February 25, 2009, Babiano tendered18 his resignation and revealed that he had been
accepted as Vice President of First Global BYO Development Corporation (First Global), a
competitor of CPI.19 On March 3, 2009, Babiano was served a Notice of Termination20 for: (a)
incurring AWOL; (b) violating the “Confidentiality of Documents and Non-Compete Clause”
when he joined a competitor enterprise while still working for CPI and provided such competitor
enterprise information regarding CPI’s marketing strategies; and (c) recruiting CPI personnel to
join a competitor.21

On the other hand, Concepcion resigned as CPI’s Project Director through a letter22 dated
February 23, 2009, effective immediately.

On August 8, 2011, respondents filed a complaint23 fornonpayment of commissions and

damages against CPI and Antonio before the NLRC, docketed as NLRC Case No. NCR-08-12029-
11, claiming that their repeated demands for the payment and release of their commissions
remained unheeded.24

For its part, CPI maintained25 that Babiano is merely its agent tasked with selling its projects.
Nonetheless, he was afforded due process in the termination of his employment
which was based on just causes.26 It also claimed to have validly withheld Babiano’s
commissions, considering that they were deemed forfeited for violating the “Confidentiality of
Documents and Non-Compete Clause.”27 On Concepcion’s money claims, CPI asserted that the
NLRC had no jurisdiction to hear the same because there was no employer-employee relations
between them, and thus, she should have litigated the same in an ordinary civil action.28

The LA’s Ruling

In a Decision29 dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI’s favor and,
accordingly, dismissed the complaint for lack of merit.30 The LA found that: (a) Babiano’s acts of
providing information on CPI’s marketing strategies to the competitor and spreading false
information about CPI and its projects are blatant violations of the “Confidentiality of
Documents and Non-Compete Clause” of his employment contract, thus, resulting in the
forfeiture of his unpaid commissions in accordance with the same clause;31 and (b) it had no
jurisdiction over Concepcion’s money claim as she was not an employee but a mere agent of
CPI, as clearly stipulated in her engagement contract with the latter.32

Aggrieved, respondents appealed33 to the NLRC.

The NLRC’s Ruling

In a Decision34 dated June 25, 2013, the NLRC reversed and set aside the LA ruling, and entered
a new one ordering CPI to pay Babiano and Concepcion the amounts of P685,211.76 and
P470,754.62, respectively, representing their commissions from August 9, 2008 to August 8,
2011, as well as 10% attorney’s fees of the total monetary awards.35

While the NLRC initially concurred with the LA that Babiano’s acts constituted just cause which
would warrant the termination of his employment from CPI, it, however, ruled that the
forfeiture of all earned commissions of Babiano under the “Confidentiality of Documents and
Non-Compete Clause” is confiscatory and unreasonable and hence, contrary to law and public
policy.36 In this light, the NLRC held that CPI could not invoke such clause to avoid the payment
of Babiano’s commissions since he had already earned those monetary benefits and, thus,
should have been released to him. However, the NLRC limited the grant of the money claims in
light of Article 291 (now Article 306)37 of the Labor Code which provides for a prescriptive
period of three (3) years. Consequently, the NLRC awarded unpaid commissions only from
August 9, 2008 to August 8, 2011 — i.e., which was the date when the complaint was filed.38
Meanwhile, contrary to the LA’s finding, the NLRC ruled that Concepcion was CPI’s employee,
considering that CPI: (a) repeatedly hired and promoted her since 2002; (b) paid her wages
despite referring to it as “subsidy”; and (c) exercised the power of dismissal and control over
her.39 Lastly, the NLRC granted respondents’ claim for attorney’s fees since they were forced to
litigate and incurred expenses for the protection of their rights and interests.40

Respondents did not assail the NLRC findings. In contrast, only CPI moved for reconsideration,41
which the NLRC denied in a Resolution42 dated October 16, 2013. Aggrieved, CPI filed a petition
for certiorari43 before the CA.

The CA’s Ruling

In a Decision44 dated April 8, 2015, the CA affirmed the NLRC ruling with modification increasing
the award of unpaid commissions to Babiano and Concepcion in the amounts of P889,932.42
and P591.953.05, respectively, and imposing interest of six percent (6%) per annum on all
monetary awards from the finality of its decision until fully paid.45

The CA held that Babiano properly instituted his claim for unpaid commissions before the labor
tribunals as it is a money claim arising from an employer-employee relationship with CPI. In this
relation, the CA opined that CPI cannot withhold such unpaid commissions on the ground of
Babiano’s alleged breach of the “Confidentiality of Documents and Non-Compete Clause”
integrated in the latter’s employment contract, considering that such clause referred to acts
done after the cessation of the employer-employee relationship or to the “post-employment”
relations of the parties. Thus, any such supposed breach thereof is a civil law dispute that is best
resolved by the regular courts and not by labor tribunals.46

Similarly, the CA echoed the NLRC’s finding that there exists an employer-employee relationship
between Concepcion and CPI, because the latter exercised control over the performance of her
duties as Project Director which is indicative of an employer-employee relationship. Necessarily
therefore, CPI also exercised control over Concepcion’s duties in recruiting, training, and
developing directors of sales because she was supervised by Babiano in the performance of her
functions. The CA likewise observed the presence of critical factors which were indicative of an
employer-employee relationship with CPI, such as: (a) Concepcion’s receipt of a monthly salary
from CPI; and (b) that she performed tasks besides selling CPI properties. To add, the title of her
contract which was referred to as “Contract of Agency for Project Director” was not binding and
conclusive, considering that the characterization of the juridical relationship is essentially a
matter of law that is for the courts to determine, and not the parties thereof. Moreover, the
totality of evidence sustains a finding of employer-employee relationship between CPI and
Concepcion.47

Further, the CA held that despite the NLRC’s proper application of the three (3)-year prescriptive
period under Article 291 of the Labor Code, it nonetheless failed to include all of respondents’
earned commissions during that time — i.e., August 9, 2008 to August 8, 2011 — thus,
necessitating the increase in award of unpaid commissions in respondents’ favor.48
Undaunted, CPI sought for reconsideration,49 which was, however, denied in a Resolution50
dated October 12, 2015; hence, this petition.

The Issue Before the Court

The core issue for the Court’s resolution is whether or not the CA erred in denying CPI’s petition
for certiorari, thereby holding it liable for the unpaid commissions of respondents.
The Court’s Ruling
The petition is partly meritorious.
I.
Article 1370 of the Civil Code provides that “[i]f the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall
control.”51 In Norton Resources and Development Corporation v. All Asia Bank Corporation,52
the Court had the opportunity to thoroughly discuss the said rule as follows:
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 should be understood in a different sense. Courts cannot make for the parties
better or more equitable agreements than they themselves have been satisfied to make, or
rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter
them for the benefit of one party and to the detriment of the other, or by construction, relieve
one of the parties from the terms which he voluntarily consented to, or impose on him those
which he did not.53 (Emphases and underscoring supplied)
Thus, in the interpretation of contracts, the Court must first determine whether a provision or
stipulation therein is ambiguous. Absent any ambiguity, the provision on its face will be read as
it is written and treated as the binding law of the parties to the contract.54
In the case at bar, CPI primarily invoked the “Confidentiality of Documents and Non-Compete
Clause” found in Babiano’s employment contract55 to justify the forfeiture of his commissions,
viz.:

Confidentiality of Documents and Non-Compete Clause

All records and documents of the company and all information pertaining to its business or
affairs or that of its affiliated companies are confidential and no unauthorized disclosure or
reproduction or the same will be made by you any time during or after your employment.
And in order to ensure strict compliance herewith, you shall not work for whatsoever capacity,
either as an employee, agent or consultant with any person whose business is in direct
competition with the company while you are employed and for a period of one year from date
of resignation or termination from the company.

In the event the undersigned breaches any term of this contract, the undersigned agrees and
acknowledges that damages may not be an adequate remedy and that in addition to any other
remedies available to the Company at law or in equity, the Company is entitled to enforce its
rights hereunder by way of injunction, restraining order or other relief to enjoin any breach or
default of this contract.

The undersigned agrees to pay all costs, expenses and attorney’s fees incurred by the Company
in connection with the enforcement of the obligations of the undersigned. The undersigned also
agrees to pay the Company all profits, revenues and income or benefits derived by or accruing
to the undersigned resulting from the undersigned’s breach of the obligations hereunder. This
Agreement shall be binding upon the undersigned, all employees, agents, officers, directors,
shareholders, partners and representatives of the undersigned and all heirs, successors and
assigns of the foregoing.
Finally, if undersigned breaches any terms of this contract, forms of compensation including
commissions and incentives will be forfeited.56 (Emphases and underscoring supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating that Babiano is barred
to “work for whatsoever capacity x x x with any person whose business is in direct competition
with [CPI] while [he is] employed and for a period of one year from date of [his] resignation or
termination from the company,” it also expressly 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, the contracting parties — namely Babiano
on one side, and CPI as represented by its COO-Vertical, John Victor R. Antonio, and Director for
Planning and Controls, Jose Carlo R. Antonio, on the other — indisputably wanted the said
clause to be effective even during the existence of the employer-employee relationship between
Babiano and CPI, thereby indicating their intention to be bound by such clause by affixing their
respective signatures to the employment contract. More significantly, as CPI’s Vice President for
Sales, Babiano held a highly sensitive and confidential managerial position as he “was tasked,
among others, to guarantee the achievement of agreed sales targets for a project and to ensure
that his team has a qualified and competent manpower resources by conducting recruitment
activities, training sessions, sales rallies, motivational activities, and evaluation programs.”57
Hence, to allow Babiano to freely move to direct competitors during and soon after his
employment with CPI would make the latter’s trade secrets vulnerable to exposure, especially in
a highly competitive marketing environment. As such, it is only reasonable that CPI and Babiano
agree on such stipulation in the latter’s employment contract in order to afford a fair and
reasonable protection to CPI.58 Indubitably, obligations arising from contracts, including
employment contracts, have the force of law between the contracting parties and should be
complied with in good faith.59 Corollary thereto, parties are bound by the stipulations, clauses,
terms, and conditions they have agreed to, provided that these stipulations, clauses, terms, and
conditions are not contrary to law, morals, public order or public policy,60 as in this case.

Therefore, the CA erred in limiting the “Confidentiality of Documents and Non-Compete Clause”
only to acts done after the cessation of the employer-employee relationship or to the “post-
employment” relations of the parties. As clearly stipulated, the parties wanted to apply said
clause during the pendency of Babiano’s employment, and CPI correctly invoked the same
before the labor tribunals to resist the former’s claim for unpaid commissions on account of his
breach of the said clause while the employer-employee relationship between them still
subsisted. Hence, there is now a need to determine whether or not Babiano breached said
clause while employed by CPI, which would then resolve the issue of his entitlement to his
unpaid commissions.

A judicious review of the records reveals that in his resignation letter61 dated February 25,
2009, Babiano categorically admitted to CPI Chairman Jose Antonio that on February 12, 2009,
he sought employment from First Global, and five (5) days later, was admitted thereto as vice
president. From the foregoing, it is 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.
II.
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.62 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.63

Guided by these parameters, the Court finds that Concepcion was an employee of CPI
considering that: (a) CPI continuously hired and promoted Concepcion from October 2002 until
her resignation on February 23, 2009,64 thus, showing that CPI exercised the power of selection
and engagement over her person and that she performed functions that were necessary and
desirable to the business of CPI; (b) the monthly “subsidy” and cash incentives that Concepcion
was receiving from CPI are actually remuneration in the concept of wages as it was regularly
given to her on a monthly basis without any qualification, save for the “complete submission of
documents on what is a sale policy”;65 (c) CPI had the power to discipline or even dismiss
Concepcion as her engagement contract with CPI expressly conferred upon the latter “the right
to discontinue [her] service anytime during the period of engagement should [she] fail to meet
the performance standards,”66 among others, and that CPI actually exercised such power to
dismiss when it accepted and approved Concepcion’s resignation letter; and most importantly,
(d) as aptly pointed out by the CA, CPI possessed the power of control over Concepcion because
in the performance of her duties as Project Director — particularly in the conduct of recruitment
activities, training sessions, and skills development of Sales Directors — she did not exercise
independent discretion thereon, but was still subject to the direct supervision of CPI, acting
through Babiano.67

Besides, while the employment agreement of Concepcion was denominated as a “Contract of

Agency for Project Director,” it should be stressed that the existence of employer-employee
relations could not be negated by the mere expedient of repudiating it in a contract. In the case
of Insular Life Assurance Co., Ltd. v. NLRC (4th Division),68 it was ruled that one’s employment
status is defined and prescribed by law, and not by what the parties say it should be, viz.:
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 status 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.69 (Emphasis and underscoring supplied)
Therefore, the CA correctly ruled that since there exists an employer-employee relationship
between Concepcion and CPI, the labor tribunals correctly assumed jurisdiction over her money
claims.

III.

Finally, CPI contends that Concepcion’s failure to assail the NLRC ruling awarding her the
amount of P470,754.62 representing unpaid commissions rendered the same final and binding
upon her. As such, the CA erred in increasing her monetary award to P591,953.05.70

The contention lacks merit.

As a general rule, a party who has not appealed cannot obtain any affirmative relief other than
the one granted in the appealed decision. However, jurisprudence admits an exception to the
said rule, such as when strict adherence thereto shall result in the impairment of the substantive
rights of the parties concerned. In Global Resource for Outsourced Workers (GROW), Inc. v.
Velasco:71
Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to it
and can no longer obtain from the appellate court any affirmative relief other than what was
already granted under said judgment. However, when strict adherence to such technical rule
will impair a substantive right, such as that of an illegally dismissed employee to monetary
compensation as provided by law, then equity dictates that the Court set aside the rule to pave
the way for a full and just adjudication of the case.72 (Emphasis and underscoring supplied)
In the present case, the CA aptly pointed out that the NLRC failed to account for all the unpaid
commissions due to Concepcion for the period of August 9, 2008 to August 8, 2011.73 Indeed,
Concepcion’s right to her earned commissions is a substantive right which cannot be impaired
by an erroneous computation of what she really is entitled to. Hence, following the dictates of
equity and in order to arrive at a complete and just resolution of the case, and avoid a
piecemeal dispensation of justice over the same, the CA correctly recomputed Concepcion’s
unpaid commissions, notwithstanding her failure to seek a review of the NLRC’s computation of
the same.

In sum, the Court thus holds that the commissions of Babiano were properly forfeited for
violating the “Confidentiality of Documents and Non-Compete Clause.” On the other hand, CPI
remains liable for the unpaid commissions of Concepcion in the sum of P591,953.05.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2015 and the
Resolution dated October 12, 2015 of the Court of Appeals (CA) in C.A.-G.R. S.P. No. 132953 are
hereby MODIFIED in that the commissions of respondent Edwin J. Babiano are deemed
FORFEITED. The rest of the CA Decision stands.

SO ORDERED.

Leonardo-De Castro** (Acting Chairperson), Bersamin and Caguioa, JJ., concur.

Sereno, CJ., On Official Leave.

Petition partly granted, judgment and resolution modified.

Notes.—A basic rule in the interpretation of contracts is that the contract should be taken as a
whole. (Catungal vs. Rodriguez, 646 SCRA 130 [2011])

The so-called “control test” is commonly regarded the most crucial and determinative indicator
of the presence or absence of an employer-employee relationship. (Atok Big Wedge Company,
Inc. vs. Gison, 655 SCRA 193 [2011])

——o0o—— Century Properties, Inc. vs. Babiano, 795 SCRA 671, G.R. No. 220978 July 5, 2016
G.R. No. 117495. May 29, 1997.*

NELLY AC TA MA RTINEZ, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,

DOMINADOR CORRO, PASTOR CORRO, CELESTINO CORRO, LUIS CORRO, EREBERTO CORRO,
JAIME CRUZ, WENCESLAO DELVO, GREGORIO DELVO, HERMEJIAS COLIBAO, JOSE OGANA and
ALONSO ALBAO, respondents.
Labor Law; Contracts; The rule is settled that unless expressly assumed, labor contracts are not
enforceable against the transferee of an enterprise.—Petitioner’s arguments are well-taken. The
claim for 13th month pay pertains to the personal obligation of Raul Martinez which did not
survive his death. The rule is settled that unless expressly assumed, labor contracts are not
enforceable against the transferee of an enterprise. I n the present case, petitioner does not only
disavow that she continued the operation of the business of her son but also disputes the
existence of labor contracts between her son and private respondents. The reason for the rule is
that labor contracts are in personam, and that claims for backwages earned from the former
employer cannot be filed against the new owners of an enterprise. Nor is the new operator of a
business liable for claims for retirement pay of employees.

Same; Probate Proceedings; Workers’ claim for 13th month pay should be filed in the intestate
proceedings involving the estate of their previous employer, not against the new employer.—
Thus the claim of private respondents should have been filed instead in the intestate proceedings
involving the estate of Raul Martinez in accordance with Sec. 5, Rule 86, of the Rules of Court
which provides in part—Sec. 5. Claims which must be filed under the notice. If not filed, barred;
exceptions.—All claims for money against the decedent, arising from contract, express or
implied, whether the s ame be due, not due, or contingent, all claims for funeral expenses and
expenses for the last sickness of the decedent, and judgment for money against the decedent,
mus t be filed within the time limited in the notice; otherwise they are barred forever, except
that they may be set forth as counterclaims in any action that the executor or administrator may
bring against the claimants x x x x Under this rule, upon the death of the defendant, a testate or
intestate proceeding shall be instituted in the proper court wherein all his creditors must appear
and file their claims which shall be paid proportionately out of the property left by the deceas ed.
The objective is to avoid duplicity of procedures. Hence, the ordinary actions must be taken out
from the ordinary courts. Conformably with Art. 110 of the Labor Code, money claims of laborers
enjoy preference over claims of other creditors in case of bankruptcy or liquidation of the
employer’s business.

Same; Employer-Employee Relationship; Taxi Drivers; Boundary System; The doctrine that the
relationship between jeepney owners/operators on one hand and jeepney drivers on the other
under the boundary system is that of employer-employee and not of lessor-lessee is applicable
by analogy to the relationship between taxi owners/operators and taxi drivers.—As early as 3
March 1956, in National Labor Union v. Dinglasan, this Court ruled that the relationship between
jeepney owners/operators on one hand and jeepney drivers on the other under the boundary
system is that of employer-employee and not of lessor-lessee. Therein we explained that in the
lease of chattels the lessor loses complete control over the chattel leased although the lessee
cannot be reckless in the use thereof, otherwise he would be responsible for the damages to the
lessor. In the case of jeepney owners/operators and jeepney drivers, the former exercise
supervision and control over the latter. The fact that the drivers do not receive fixed wages but
get only that in excess of the so-called “boundary” they pay to the owner/operator is not
sufficient to withdraw the relations hip between them from that of employer and employee. The
doctrine is applicable by analogy to the present case. Thus, private respondents were employees
of Raul Martinez because they had been engaged to perform activities which were usually
necessary or desirable in the usual business or trade of the employer. The records s how that
private respondents had been employed since 20 October 1989 except for Ogana, the Delvos,
Albao and Colibao who were employed on later dates.

Same; Administrative Law; The factual findings of quasijudicial agencies such as the NLRC, which
have acquired expertise in the m atters entrusted to their jurisdiction, are accorded by the
Supreme Court not only respect but also finality if they are supported by substantial evidence.—
The factual findings of quasi-judicial agencies such as respondent NLRC, which have acquired
expertise in the matters entrusted to their jurisdiction, are accorded by this Court not only
respect but also finality if they are supported by substantial evidence, or that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion. As
respondent NLRC found—The facts of the case will readily show that before respondent taxi
owner Raul Martinez died, he became bedridden and the management of his taxi business
passed on to his mother who was his only surviving heir. It will also be noted that despite the
information given by the mother that she will sell the business and extend separation benefits to
complainants , no such thing occurred. Instead, she replaced complainants with a new set of
drivers (See Complainants’ Position paper, p. 25, Record).

Same; Same; Evidence; Mere allegation is not evidence.—The above findings, however, were
culled from mere allegations in private respondents’ position paper. But mere allegation is not
evidence. It is a basic rule in evidence that each party must prove his affirmative allegation. In
Opulencia Ice Plant and Storage v. NLRC we ruled 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 that case, the relationship was
sufficiently proved by testimonial evidence. In the present case, however, private respondents
simply assumed the continuance of an employer-employee relationship between them and
petitioner, when she took over the operation of the business after the death of her son Raul
Martinez, without any supporting evidence. Consequently, we cannot sustain for lack of basis
the factual finding of respondent NLRC on the existence of employer-employee relationship
between petitioner and private respondents. Clearly, such finding emanates from grave abuse of
discretion. With this conclusion, consideration of the issue on illegal dismissal becomes futile and
irrelevant.

BELLOSILLO, J.:

RAUL MARTINEZ was operator of two (2) taxicab units under the business name PAMA TX and
two (2) additional units under the name P.J. TIGER TX. Private respondents Dominador Corro,
Pastor Corro, Celestino Corro, Luis Corro, Ereberto Corro, Jaime Cruz, Wenceslao Delvo,
Gregorio Delvo, Hermejias Colibao, Jose Ogana and Alonso Albao worked for him as drivers. On
18 March 1992 Raul Martinez died leaving behind his mother, petitioner Nelly Acta Martinez, as
his sole heir.

On 14 July 1992 private respondents lodged a complaint against Raul Martinez and petitioner
Nelly Acta Martinez before the Labor Arbiter for violation of P.D. 8511 and illegal dismissal. They
alleged that they have been regular drivers of Raul Martinez since 20 October 1989 earning no
less than P400.00 per day driving twenty-four (24) hours every other day. For the duration of
employment, not once did they receive a 13th month pay. After the death of Raul Martinez,
petitioner took over the management and operation of the business. On or about 22 June 1992
she informed them that because of difficulty in maintaining the business, she was selling the
units together with the corresponding franchises. However, petitioner did not proceed with her
plan; instead, she assigned the units to other drivers.

Petitioner traversed the claim for 13th month pay by contending that it was personal and
therefore did not survive the death of her son. Besides, private respondents were not entitled
thereto as Sec. 3, par. (e), of the Rules and Regulations Implementing P.D. 851 is explicit that
employers of those who are paid on purely boundary basis are not covered therein. The
relationship between her son and private respondents was not that of employer-employee but
of lessor-lessee. The operation of the business ceased upon the death of her son and that she
did not continue the business because she did not know how to run it.

On 30 August 1993 the Labor Arbiter dismissed the complaint on the following grounds: (a)
Private respondents’ claims being personal were extinguished upon the death of Raul Martinez;
(b) petitioner was a mere housewife who did not possess the required competence to manage
the business; and, (c) private respondents were not entitled to 13th month pay because the
existence of employer-employee relationship was doubtful on account of the boundary system
adopted by the parties.2

However, respondent National Labor Relations Commission viewed the case differently.
According to N LRC, (a) private respondents were regular drivers because payment of wages,
which is one of the essential requisites for the existence of employment relation, may either be
fixed, on commission, boundary, piece-rate or task basis; (b) the management of the business
passed on to petitioner who even replaced private respondents with a new set of drivers; and,
(c) the claims of private respondents survived the death of Raul Martinez considering that the
business did not cease operation outright but continued presumably, in the absence of proof of
sale, up to the moment. As regards the claim for 13th month pay, NLRC upheld the stand of
petitioner based on the express provision of P.D. 851 as reiterated in the revised guidelines on
the implementation thereof. On 28 January 1994 respondent NLRC thus set aside the appealed
decision, and as alternative to reinstatement, ordered petitioner to grant respondents
separation pay equivalent to one (1) month salary for every year of service a fraction of six (6)
months being
considered as one (1) whole year.3 On 30 September 1994 the motion for reconsideration was
denied.4 Hence, this recourse of petitioner.

On 11 October 1995 the Court issued a temporary restraining order enjoining the execution of
the assailed decision of respondent NLRC. Petitioner imputes grave abuse of discretion on
respondent NLRC in reversing the decision of the Labor Arbiter.

Petitioner argues that respondent NLRC acted as a probate court when it assumed jurisdiction
over the estate of a deceased person, pronounced her legally entitled to succeed the deceased
and ordered her to pay the money claim of private respondents. Moreover, petitioner argues
that the claims of private respondents were personal to her son and thus were abated by his
death .

Petitioner’s arguments are w ell-taken. The claim for 13th month pay pertains to the personal
obligation of Raul Martinez which did not survive his death. The rule is settled that unless
expressly assumed, labor contracts are not enforceable against the transferee of an enterprise.
In the present case, petitioner does not only disavow that she continued the operation of the
business of her son but also disputes the existence of labor contracts between her son and
private respondents. The reason for the rule is that labor contracts are in personam,5 an d th at
claims for backwages earned from the former employer cannot be filed ag ai nst th e new ow
ners of an en terprise.6 Nor is the new operator of a business liable for claims for retirement pay
of employees.7 Thus the claim of private respondents should have been filed instead in the
intestate proceedings involving the estate of Raul Martinez in accordance with Sec. 5, Rule 86, of
the Rules of Court which provides in part—

Sec. 5. Claim s which must be filed under the notice. If not filed, barred; exceptions.—All claims
for money against the decedent, arising from contract, express or implied, whether the s ame be
due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of
the decedent, and judgment for money against the decedent, mus t be filed within the time
limited in the notice; otherwise they are barred forever, except that they may be set forth as
counterclaims in any action that the executor or administrator may bring against the claimants x
xxx

Under this rule, upon the death of the defendant, a testate or intestate proceeding shall be
instituted in the proper court wherein all his creditors must appear and file their claims which
shall be paid proportionately out of the property left by the deceased. The objective is to avoid
duplicity of procedures. Hence, the ordinary actions must be taken out from the ordinary courts.
Conformably with Art. 110 of the Labor Code, money claims of laborers enjoy preference over
claims of other creditors in case of bankruptcy or liquidation of the employer’s business.8
Petitioner also insists on the absence of employer-employee relationship between her son and
private respondents because there is no evidence that her son paid a single centavo by way of
wages to private respondents; rather, they were governed by the boundary system. Neither is
there such relationship between her and private respondents because she did not continue the
operation of the business which ceased upon the death of her son.

As early as 3 March 1956, in National Labor Union v. Dinglasan,9 this Court ruled that the
relationship between jeepney owners/operators on one hand and jeepney drivers on the other
under the boundary system is that of employer-employee and not of lessor-lessee. Therein we
explained that in the lease of chattels the lessor loses complete control over the chattel leased
although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for
the damages to the lessor. In the case of jeepney owners/operators and jeepney drivers, the
former exercise supervision and control over the latter. The fact that the drivers do not receive
fixed wages but get only that in excess of the so-called “boundary” they pay to the
owner/operator is not sufficient to withdraw the relationship between them from that of
employer and employee. The doctrine is applicable by analogy to the present case. Thus, private
respondents were employees of Raul Martinez because they had been engaged to perform
activities which w ere usually necessary or desirable in the usual business or trade of the
employer.10 The records show that private respondents had been employed since 20 October
1989 except for Ogana, the Delvos, Albao and Colibao who were employed on later dates.11

Hence, these questions arise: Do private respondents, being then employees of Raul Martinez,
necessarily continue to be employees of the petitioner as the new operator of the business? In
the affirmative, were they illegally dismissed?

The factual findings of quasi-judicial agencies such as respondent NLRC, which have acquired
expertise in the matters entrusted to their jurisdiction, are accorded by this Court not only
respect but also finality if they are supported by substantial evidence, or that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.12
As respondent NLRC found—The facts of the case will readily show that before respondent taxi
owner Raul Martinez died, he became bedridden and the management of his taxi business
passed on to his mother who was his only surviving heir. It will also be noted that despite the
information given by the mother that she will sell the business and extend separation benefits to
complainants, no such thing occurred. I ns tead, she replaced complainants with a new set of
drivers (See Complainants’ Position paper, p. 25, Record).13

The above findings, however, were culled from mere allegations in private respondents’ position
paper. But mere allegation is not evidence.14 It is a basic rule in evidence that each party must
prove his affirmative allegation.15 In Opulencia Ice Plant and Storage v. NLRC 16 we ruled 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 that case, the relationship was sufficiently proved by testimonial evidence. In the present
case, however, private respondents simply assumed the continuance of an employer-employee
relationship between them and petitioner, when she took over the operation of the business
after the death of her son Raul Martinez, without any supporting evidence. Consequently, we
cannot sustain for lack of basis the factual finding of respondent NLRC on the existence of
employer-employee relationship between petitioner and private respondents. Clearly, such
finding emanates from grave abuse of discretion. With this conclusion, consideration of the
issue on illegal dismissal becomes futile and irrelevant.

WHEREFORE, the petition is GRANTED. The Decision of respondent National Labor Relations
Commission dated 28 January 1994 ordering petitioner Nelly Acta Martinez to grant
respondents separation pay as well as its Order of 30 September 1994 denying reconsideration
is SET ASIDE. The Decision of the Labor Arbiter dated 30 August 1993 dismissing the complaint is
REINSTATED.

The temporary restraining order issued on 11 October 1995 is made PERMANENT.

SO ORDERED.

     Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

     Padilla (J., Chairman), On leave.

Petition granted. Judgment set aside; that of the Labor Arbiter reinstated.

Notes.—Where a successor-employer opts to extend the services of employees beyond the cut-
off period agreed upon, such actuation could only be interpreted to m ean that it found said
employees qualified and that it chooses to retain their services to perform duties reasonably
necessary in its business. (International Container Terminal Services, Inc. (ICTSI) vs. National
Labor Relations Commission, 256 SCRA 124 [1996])

An ID card together with cash vouchers covering an employee’s salaries for the months stated
therein constitute substantial evidence adequate to support a conclusion that a person was
indeed an employee. (Domasig vs. National Labor Relations Commission, 261 SCRA 779 [1996])

——o0o——

Martinez vs. National Labor Relations Commission, 272 SCRA 793, G.R. No. 117495 May 29,
1997
G.R. No. 170087. August 31, 2006.*

ANGELINA FRANCISCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, KASEI

CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS,
TRINIDAD LIZA and RAMON ESCUETA, respondents.
Labor Law; Employment; Control Test; The better approach would therefore be to adopt a two-
tiered test.—The better approach would therefore be to adopt a two-tiered test involving: (1) the
putative employer’s power to control the employee with respect to the means and methods by
which the work is to be accomplished; and (2) the underlying economic realities of the activity or
relationship. This two-tiered test would provide us with a framework of analysis, which would
take into consideration the totality of circumstances surrounding the true nature of the
relationship between the parties. This is especially appropriate in this case where there is no
written agreement or terms of reference to base the relationship on; and due to the complexity
of the relationship based on the various positions and responsibilities given to the worker over
the period of the latter’s employment.

Same; Same; Same; Economic Activity; The determination of the relationship between employer
and employee depends upon the circumstances of the whole economic activity.—The
determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, such as: (1) the extent to which the services
performed are an integral part of the employer’s business; (2) the extent of the worker’s
investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the
degree of dependency of the worker upon the employer for his continued employment in that
line of business.

Dismissals; Constructive Dismissals; A diminution of pay is prejudicial to the employee and

amounts to constructive dismissal.—A diminution of pay is prejudicial to the employee and
amounts to constructive dismissal. Constructive dismissal is an involuntary resignation resulting
in cessation of work resorted to when continued employment becomes impossible, unreasonable
or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an employee. In
Globe Telecom, Inc. v. Florendo-Flores, 390 SCRA 201 (2002), we ruled that where an employee
ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation
arises which creates an adverse working environment rendering it impossible for such employee
to continue working for her employer. Hence, her severance from the company was not of her
own making and therefore amounted to an illegal termination of employment.

Labor Law; Equal Work Opportunity; In affording full protection to labor, this Court must ensure
equal work opportunities regardless of sex, race or creed.—In affording full protection to labor,
this Court must ensure equal work opportunities regardless of sex, race or creed. Even as we, in
every case, attempt to carefully balance the fragile relationship between employees and
employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a
greater number of employees. This would enable employees to avail of the benefits accorded to
them by law, in line with the constitutional mandate giving maximum aid and protection to
labor, promoting their welfare and reaffirming it as a primary social economic force in
furtherance of social justice and national development.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set
aside the Decision and Resolution of the Court of Appeals dated October 29, 20041 and October
7, 2005,2 respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive
dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed and set
aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003,3 in
NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter
dated July 31, 2002,4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents
were liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was
designated as Accountant and Corporate Secretary and was assigned to handle all the
accounting needs of the company. She was also designated as Liaison Officer to the City of
Makati to secure business permits, construction permits and other licenses for the initial
operation of the company.5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate
documents; neither did she attend any board meeting nor required to do so. She never prepared
any legal document and never represented the company as its Corporate Secretary. However,
on some occasions, she was prevailed upon to sign documentation for the company.6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as
accountant in lieu of petitioner. As Acting Manager, petitioner was assigned to handle
recruitment of all employees and perform management administration functions; represent the
company in all dealings with government agencies, especially with the Bureau of Internal
Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to
administer all other matters pertaining to the operation of Kasei Restaurant which is owned and
operated by Kasei Corporation.7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her
salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei
Corporation.8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that
she was required to sign a prepared resolution for her replacement but she was assured that
she would still be connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer,
convened a meeting of all employees of Kasei Corporation and announced that nothing had
changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to
Seiji Kamura and in charge of all BIR matters.9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to
September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not
paid her mid-year bonus allegedly because the company was not earning well. On October 2001,
petitioner did not receive her salary from the company. She made repeated follow-ups with the
company cashier but she was advised that the company was not earning well.10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but
she was informed that she is no longer connected with the company.11

Since she was no longer paid her salary, petitioner did not report for work and filed an action for
constructive dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They
alleged that petitioner was hired in 1995 as one of its technical consultants on accounting
matters and act concurrently as Corporate Secretary. As technical consultant, petitioner
performed her work at her own discretion without control and supervision of Kasei Corporation.
Petitioner had no daily time record and she came to the office any time she wanted. The
company never interfered with her work except that from time to time, the management would
ask her opinion on matters relating to her profession. Petitioner did not go through the usual
procedure of selection of employees, but her services were engaged through a Board Resolution
designating her as technical consultant. The money received by petitioner from the corporation
was her professional fee subject to the 10% expanded withholding tax on professionals, and that
she was not one of those reported to the BIR or SSS as one of the company’s employees.12

Petitioner’s designation as technical consultant depended solely upon the will of management.
As such, her consultancy may be terminated any time considering that her services were only
temporary in nature and dependent on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents
submitted a list of employees for the years 1999 and 2000 duly received by the BIR showing that
petitioner was not among the employees reported to the BIR, as well as a list of payees subject
to expanded withholding tax which included petitioner. SSS records were also submitted
showing that petitioner’s latest employer was Seiji Corporation.13

The Labor Arbiter found that petitioner was illegally dismissed, thus:

“WHEREFORE, premises considered, judgment is hereby rendered as follows:

1.finding complainant an employee of respondent corporation;

2.declaring complainant’s dismissal as illegal;
3.ordering respondents to reinstate complainant to her former position without loss of seniority
rights and jointly and severally pay complainant her money claims in accordance with the
following computation:
a.
Backwages 10/2001—07/2002
(27,500 x 10 mos.)
275,000.00
b.
Salary Differentials (01/2001—09/2001)
22,500.00
c.
Housing Allowance (01/2001—07/2002)
57,000.00
d.
Midyear Bonus 2001
27,500.00
e.
13th Month Pay
27,500.00
f.
10% share in the profits of Kasei
Corp. from 1996-2001
361,175.00
g.
Moral and exemplary damages
100,000.00
h.
0% Attorney’s fees
87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation

pay with additional backwages that would accrue up to actual payment of separation pay.

SO ORDERED.”14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the
dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1)Respondents are directed to pay complainant separation pay computed at one month per
year of service in addition to full backwages from October 2001 to July 31, 2002;
2)The awards representing moral and exemplary damages and 10% share in profit in the
respective accounts of P100,000.00 and P361,175.00 are deleted;
3)The award of 10% attorney’s fees shall be based on salary differential award only;
4)The awards representing salary differentials, housing allowance, mid year bonus and 13th
month pay are AFFIRMED.
SO ORDERED.”15

On appeal, the Court of Appeals reversed the NLRC decision, thus:

“WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor
Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is
hereby rendered dismissing the complaint filed by private respondent against Kasei Corporation,
et al. for constructive dismissal.

SO ORDERED.”16

The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee
relationship between petitioner and private respondent Kasei Corporation; and if in the
affirmative, (2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations
Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine
the records to determine which of the propositions espoused by the contending parties is
supported by substantial evidence.17

We held in Sevilla v. Court of Appeals18 that in this jurisdiction, there has been no uniform test
to determine the existence of an employer-employee relation. Generally, courts have relied on
the so-called right of control test where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the means to be used in
reaching such end. In addition to the standard of right-of-control, the existing economic
conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can
help in determining the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the
relationship between the parties, owing to the complexity of such a relationship where several
positions have been held by the worker. There are instances when, aside from the employer’s
power to control the employee with respect to the means and methods by which the work is to
be accomplished, economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee, independent
contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative
employer’s power to control the employee with respect to the means and methods by which
the work is to be accomplished; and (2) the underlying economic realities of the activity or
relationship.

This two-tiered test would provide us with a framework of analysis, which would take into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate in this case where there is no written
agreement or terms of reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the worker over the
period of the latter’s employment.

The control test initially found application in the case of Viaña v. Al-Lagadan and Piga,19 and
lately in Leonardo v. Court of Appeals,20 where we held that there is an employer-employee
relationship when the person for whom the services are performed reserves the right to control
not only the end achieved but also the manner and means used to achieve that end.

In Sevilla v. Court of Appeals,21 we observed the need to consider the existing economic
conditions prevailing between the parties, in addition to the standard of right-of-control like the
inclusion of the employee in the payrolls, to give a clearer picture in determining the existence
of an employer-employee relationship based on an analysis of the totality of economic
circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity,22 such as: (1) the extent to which the services
performed are an integral part of the employer’s business; (2) the extent of the worker’s
investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the
degree of dependency of the worker upon the employer for his continued employment in that
line of business.23

The proper standard of economic dependence is whether the worker is dependent on the
alleged employer for his continued employment in that line of business.24 In the United States,
the touchstone of economic reality in analyzing possible employment relationships for purposes
of the Federal Labor Standards Act is dependency.25 By analogy, the benchmark of economic
reality in analyzing possible employment relationships for purposes of the Labor Code ought to
be the economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura, the
corporation’s Technical Consultant. She reported for work regularly and served in various
capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate
Secretary, with substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for the proper
operation of the corporation such as securing business permits and other licenses over an
indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee
of respondent corporation because she had served the company for six years before her
dismissal, receiving check vouchers indicating her salaries/ wages, benefits, 13th month pay,
bonuses and allowances, as well as deductions and Social Security contributions from August 1,
1999 to December 18, 2000.26 When petitioner was designated General Manager, respondent
corporation made a report to the SSS signed by Irene Ballesteros. Petitioner’s membership in
the SSS as manifested by a copy of the SSS specimen signature card which was signed by the
President of Kasei Corporation and the inclusion of her name in the online inquiry system of the
SSS evinces the existence of an employer-employee relationship between petitioner and
respondent corporation.27

It is therefore apparent that petitioner is economically dependent on respondent corporation

for her continued employment in the latter’s line of business.

In Domasig v. National Labor Relations Commission,28 we held that in a business establishment,

an identification card is provided not only as a security measure but mainly to identify the
holder thereof as a bona fide employee of the firm that issues it. Together with the cash
vouchers covering petitioner’s salaries for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that petitioner was an employee of
private respondent.

We likewise ruled in Flores v. Nuestro29 that a corporation who registers its workers with the
SSS is proof that the latter were the former’s employees. The coverage of Social Security Law is
predicated on the existence of an employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that
petitioner never acted as Corporate Secretary and that her designation as such was only for
convenience. The actual nature of petitioner’s job was as Kamura’s direct assistant with the duty
of acting as Liaison Officer in representing the company to secure construction permits, license
to operate and other requirements imposed by government agencies. Petitioner was never
entrusted with corporate documents of the company, nor required to attend the meeting of the
corporation. She was never privy to the preparation of any document for the corporation,
although once in a while she was required to sign prepared documentation for the company.30

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001
affidavit has been allegedly withdrawn by Kamura himself from the records of the case.31
Regardless of this fact, we are convinced that the allegations in the first affidavit are sufficient to
establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not
generally look with favor on any retraction or recanted testimony, for it could have been
secured by considerations other than to tell the truth and would make solemn trials a mockery
and place the investigation of the truth at the mercy of unscrupulous witnesses.32 A recantation
does not necessarily cancel an earlier declaration, but like any other testimony the same is
subject to the test of credibility and should be received with caution.33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of
respondent Kasei Corporation. She was selected and engaged by the company for
compensation, and is economically dependent upon respondent for her continued employment
in that line of business. Her main job function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite period of engagement. Respondent
corporation hired and engaged petitioner for compensation, with the power to dismiss her for
cause. More importantly, respondent corporation had the power to control petitioner with the
means and methods by which the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a
month from January to September 2001. This amounts to an illegal termination of employment,
where the petitioner is entitled to full backwages. Since the position of petitioner as accountant
is one of trust and confidence, and under the principle of strained relations, petitioner is further
entitled to separation pay, in lieu of reinstatement.34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal.

Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to
when continued employment becomes impossible, unreasonable or unlikely; when there is a
demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain
by an employer becomes unbearable to an employee.35 In Globe Telecom, Inc. v. Florendo-
Flores,36 we ruled that where an employee ceases to work due to a demotion of rank or a
diminution of pay, an unreasonable situation arises which creates an adverse working
environment rendering it impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and therefore amounted to
an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless
of sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile
relationship between employees and employers, we are mindful of the fact that the policy of
the law is to apply the Labor Code to a greater number of employees. This would enable
employees to avail of the benefits accorded to them by law, in line with the constitutional
mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it
as a primary social economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals
dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are
ANNULLED and SET ASIDE. The Decision of the National Labor Relations Commission dated April
15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to the Labor
Arbiter for the recomputation of petitioner Angelina Francisco’s full backwages from the time
she was illegally terminated until the date of finality of this decision, and separation pay
representing one-half month pay for every year of service, where a fraction of at least six
months shall be considered as one whole year.

_______________

Note.—Factors to be considered in ascertaining an employer-employee relationship. (San

Miguel Corporation vs. MAERC Integrated Services, Inc., 405 SCRA 579 [2003]) Francisco vs.
National Labor Relations Commission, 500 SCRA 690, G.R. No. 170087 August 31, 2006
G.R. No. 155207. August 13, 2008.*

WILHELMINA S. OROZCO, petitioner, vs. THE FIFTH DIVISION OF THE HONORABLE COURT OF
APPEALS, PHILIPPINE DAILY INQUIRER, and LETICIA JIMENEZ MAGSANOC, respondents.

Labor Law; Employer-Employee Relationship; The existence of an employer-employee

relationship is essentially a question of fact; The employment status of a person is defined and
prescribed by law and not by what the parties say it should be.—The existence of an employer-
employee relationship is essentially a question of fact. Factual findings of quasi-judicial agencies
like the NLRC are generally accorded respect and finality if supported by substantial evidence.
Considering, however, that the CA’s findings are in direct conflict with those of the Labor Arbiter
and NLRC, this Court must now make its own examination and evaluation of the facts of this
case. It is true that petitioner herself admitted that she “was not, and [had] never been
considered respondent’s employee because the terms of works were arbitrarily decided upon by
the respondent.” However, the employment status of a person is defined and prescribed by law
and not by what the parties say it should be.

Same; Same; Control Test; Four-Fold Test; The test is whether the employer controls or has
reserved the right to control the employee, not only as to the work done, but also as to the
means and methods by which the same is accomplished.—This Court has constantly adhered to
the “four-fold test” to determine whether there exists an employer-employee relationship
between parties. The four elements 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. Of these four elements, it is the power of
control which is the most crucial and most determinative factor, so important, in fact, that the
other elements may even be disregarded. As this Court has previously held: the significant factor
in determining the relationship of the parties is the presence or absence of supervisory authority
to control the method and the details of performance of the service being rendered, and the
degree to which the principal may intervene to exercise such control. In other words, the test is
whether the employer controls or has reserved the right to control the employee, not only as to
the work done, but also as to the means and methods by which the same is accomplished.

Same; Same; Same; Not all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former—rules which serve as general guidelines towards the
achievement of the mutually desired result are not indicative of the power of control.—Petitioner
has misconstrued the “control test,” as did the Labor Arbiter and the NLRC. Not all rules imposed
by the hiring party on the hired party indicate that the latter is an employee of the former. Rules
which serve as general guidelines towards the achievement of the mutually desired result are
not indicative of the power of control. Thus, this Court has explained: It should, however, be
obvious that not every form of control that the hiring party reserves to himself over the conduct
of the party hired in relation to the services rendered may be accorded the effect of establishing
an employer-employee relationship between them in the legal or technical sense of the term. A
line must be drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would be a rare contract of
service that gives untrammelled freedom to the party hired and eschews any intervention
whatsoever in his performance of the engagement. Logically, the line should be drawn between
rules that merely serve as guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it, and those that control or
fix the methodology and bind or restrict the party hired to the use of such means. The first, which
aim only to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve it. x x x.

Same; Same; Same; Newspapers; Columnists; Reporters; The newspaper’s power to approve or
reject publication of any specific article a columnist writes for her column cannot be the control
contemplated in the “control test,” as it is but logical that one who commissions another to do a
piece of work should have the right to accept or reject the product; A regular reporter is not as
independent in doing his or her work for the newspaper.—The newspaper’s power to approve or
reject publication of any specific article she wrote for her column cannot be the control
contemplated in the “control test,” as it is but logical that one who commissions another to do a
piece of work should have the right to accept or reject the product. The important factor to
consider in the “control test” is still the element of control over how the work itself is done, not
just the end result thereof. In contrast, a regular reporter is not as independent in doing his or
her work for the newspaper. We note the common practice in the newspaper business of
assigning its regular reporters to cover specific subjects, geographical locations, government
agencies, or areas of concern, more commonly referred to as “beats.” A reporter must produce
stories within his or her particular beat and cannot switch to another beat without permission
from the editor. In most newspapers also, a reporter must inform the editor about the story that
he or she is working on for the day. The story or article must also be submitted to the editor at a
specified time. Moreover, the editor can easily pull out a reporter from one beat and ask him or
her to cover another beat, if the need arises.

Same; Same; Same; Same; Where a person who works for another performs his job more or less
at his own pleasure, in the manner he sees fit, not subject to definite hours or conditions of work,
and is compensated according to the result of his efforts and not the amount thereof, no
employer-employee relationship exists.—Although petitioner had a weekly deadline to meet, she
was not precluded from submitting her column ahead of time or from submitting columns to be
published at a later time. More importantly, respondents did not dictate upon petitioner the
subject matter of her columns, but only imposed the general guideline that the article should
conform to the standards of the newspaper and the general tone of the particular section.
Where a person who works for another performs his job more or less at his own pleasure, in the
manner he sees fit, not subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no employer-employee
relationship exists.

Same; Same; Same; Same; Economic Reality Test; In our jurisdiction, the benchmark of economic
reality in analyzing possible employment relationships for purposes of applying the Labor Code
ought to be the economic dependence of the worker on his employer.—Aside from the control
test, this Court has also used the economic reality test. The economic realities prevailing within
the activity or between the parties are examined, taking into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is
especially appropriate when, as in this case, there is no written agreement or contract on which
to base the relationship. In our jurisdiction, the benchmark of economic reality in analyzing
possible employment relationships for purposes of applying the Labor Code ought to be the
economic dependence of the worker on his employer.

Same; Same; Same; Same; Same; The inevitable conclusion is that petitioner columnist was not
an employee of respondent newspaper but an independent contractor, engaged to do
independent work.—Petitioner’s main occupation is not as a columnist for respondent but as a
women’s rights advocate working in various women’s organizations. Likewise, she herself admits
that she also contributes articles to other publications. Thus, it cannot be said that petitioner
was dependent on respondent PDI for her continued employment in respondent’s line of
business. The inevitable conclusion is that petitioner was not respondent PDI’s employee but an
independent contractor, engaged to do independent work.

Same; Same; Same; Same; It is a reality in the newspaper business that space constraints often
dictate the length of articles and columns, even those that regularly appear therein.—The
instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent,
skill, experience, and her unique viewpoint as a feminist advocate. How she utilized all these in
writing her column was not subject to dictation by respondent. As in Sonza, respondent PDI was
not involved in the actual performance that produced the finished product. It only reserved the
right to shorten petitioner’s articles based on the newspaper’s capacity to accommodate the
same. This fact, we note, was not unique to petitioner’s column. It is a reality in the newspaper
business that space constraints often dictate the length of articles and columns, even those that
regularly appear therein.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

   Movement of Attorneys for Brotherhood, Integrity & Nationalism, Inc. (MABINI) for petitioner.

   Ortega, Del Castillo, Bacorro, Odulio, Calma & Carbonell for private respondent.

NACHURA, J.:

The case before this Court raises a novel question never before decided in our jurisdiction—
whether a newspaper columnist is an employee of the newspaper which publishes the column.

In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure, petitioner
Wilhelmina S. Orozco assails the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 50970
dated June 11, 2002 and its Resolution2 dated September 11, 2002 denying her Motion for
Reconsideration. The CA reversed and set aside the Decision3 of the National Labor Relations
Commission (NLRC), which in turn had affirmed the Decision4 of the Labor Arbiter finding that
Orozco was an employee of private respondent Philippine Daily Inquirer (PDI) and was illegally
dismissed as columnist of said newspaper.

In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle
section. She religiously submitted her articles every week, except for a six-month stint in New
York City when she, nonetheless, sent several articles through mail. She received compensation
of P250.00—later increased to P300.00—for every column published.5

On November 7, 1992, petitioner’s column appeared in the PDI for the last time. Petitioner
claims that her then editor, Ms. Lita T. Logarta,6 told her that respondent Leticia Jimenez
Magsanoc, PDI Editor in Chief, wanted to stop publishing her column for no reason at all and
advised petitioner to talk to Magsanoc herself. Petitioner narrates that when she talked to
Magsanoc, the latter informed her that it was PDI Chairperson Eugenia Apostol who had asked
to stop publication of her column, but that in a telephone conversation with Apostol, the latter
said that Magsanoc informed her (Apostol) that the Lifestyle section already had many
columnists.7

On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor
to discuss how to improve said section. They agreed to cut down the number of columnists by
keeping only those whose columns were well-written, with regular feedback and following. In
their judgment, petitioner’s column failed to improve, continued to be superficially and poorly
written, and failed to meet the high standards of the newspaper. Hence, they decided to
terminate petitioner’s column.8

Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal dismissal,
backwages, moral and exemplary damages, and other money claims before the NLRC.

On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of petitioner,
the dispositive portion of which reads:

“WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of

respondent company; ordering respondent company to reinstate her to her former or
equivalent position, with backwages.

Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.

Other claims are hereby dismissed for lack of merit.

SO ORDERED.”9

The Labor Arbiter found that:

“[R]espondent company exercised full and complete control over the means and method by
which complainant’s work—that of a regular columnist—had to be accomplished. This control
might not be found in an instruction, verbal or oral, given to complainant defining the means
and method she should write her column. Rather, this control is manifested and certained (sic)
in respondents’ admitted prerogative to reject any article submitted by complainant for
publication.”

By virtue of this power, complainant was helplessly constrained to adopt her subjects and style
of writing to suit the editorial taste of her editor. Otherwise, off to the trash can went her
articles.

Moreover, this control is already manifested in column title, “Feminist Reflection” allotted
complainant. Under this title, complainant’s writing was controlled and limited to a woman’s
perspective on matters of feminine interests. That respondent had no control over the subject
matter written by complainant is strongly belied by this observation. Even the length of
complainant’s articles were set by respondents.

Inevitably, respondents would have no control over when or where complainant wrote her
articles as she was a columnist who could produce an article in thirty (3) (sic) months or three (3)
days, depending on her mood or the amount of research required for an article but her actions
were controlled by her obligation to produce an article a week. If complainant did not have to
report for work eight (8) hours a day, six (6) days a week, it is because her task was mainly
mental. Lastly, the fact that her articles were (sic) published weekly for three (3) years show that
she was respondents’ regular employee, not a once-in-a-blue-moon contributor who was not
under any pressure or obligation to produce regular articles and who wrote at his own whim
and leisure.”10

PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC Second
Division dismissed the appeal thereby affirming the Labor Arbiter’s Decision. The NLRC initially
noted that PDI failed to perfect its appeal, under Article 223 of the Labor Code, due to non-filing
of a cash or surety bond. The NLRC said that the reason proffered by PDI for not filing the bond
—that it was difficult or impossible to determine the amount of the bond since the Labor Arbiter
did not specify the amount of the judgment award—was not persuasive. It said that all PDI had
to do was compute based on the amount it was paying petitioner, counting the number of
weeks from November 7, 1992 up to promulgation of the Labor Arbiter’s decision.11

The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiter’s findings
of fact and law. It sustained the Labor Arbiter’s reasoning that respondent PDI exercised control
over petitioner’s work.

PDI then filed a Petition for Review12 before this Court seeking the reversal of the NLRC
Decision. However, in a Resolution13 dated December 2, 1998, this Court referred the case to
the Court of Appeals, pursuant to our ruling in St. Martin Funeral Home v. National Labor
Relations Commission.14

The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision and
dismissed petitioner’s Complaint. It held that the NLRC misappreciated the facts and rendered a
ruling wanting in substantial evidence. The CA said:

“The Court does not agree with public respondent NLRC’s conclusion. First, private respondent
admitted that she was and [had] never been considered by petitioner PDI as its employee.
Second, it is not disputed that private respondent had no employment contract with petitioner
PDI. In fact, her engagement to contribute articles for publication was based on a verbal
agreement between her and the petitioner’s Lifestyle Section Editor. Moreover, it was evident
that private respondent was not required to report to the office eight (8) hours a day. Further, it
is not disputed that she stayed in New York for six (6) months without petitioner’s permission as
to her leave of absence nor was she given any disciplinary action for the same. These undisputed
facts negate private respondent’s claim that she is an employee of petitioner.

Moreover, with regards (sic) to the control test, the public respondent NLRC’s ruling that the
guidelines given by petitioner PDI for private respondent to follow, e.g. in terms of space
allocation and length of article, is not the form of control envisioned by the guidelines set by the
Supreme Court. The length of the article is obviously limited so that all the articles to be
featured in the paper can be accommodated. As to the topic of the article to be published, it is
but logical that private respondent should not write morbid topics such as death because she is
contributing to the lifestyle section. Other than said given limitations, if the same could be
considered limitations, the topics of the articles submitted by private respondent were all her
choices. Thus, the petitioner PDI in deciding to publish private respondent’s articles only
controls the result of the work and not the means by which said articles were written.

As such, the above facts failed to measure up to the control test necessary for an employer-
employee relationship to exist.”15

Petitioner’s Motion for Reconsideration was denied in a Resolution dated September 11, 2002.
She then filed the present Petition for Review.

In a Resolution dated April 29, 2005, the Court, without giving due course to the petition,
ordered the Labor Arbiter to clarify the amount of the award due petitioner and, thereafter,
ordered PDI to post the requisite bond. Upon compliance therewith, the petition would be given
due course. Labor Arbiter Amansec clarified that the award under the Decision amounted to
P15,350.00. Thus, PDI posted the requisite bond on January 25, 2007.16

We shall initially dispose of the procedural issue raised in the Petition.

Petitioner argues that the CA erred in not dismissing outright PDI’s Petition for Certiorari for
PDI’s failure to post a cash or surety bond in violation of Article 223 of the Labor Code.

This issue was settled by this Court in its Resolution dated April 29, 2005.17 There, the Court
held:

“But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to
the perfection of an appeal, there is a plethora of jurisprudence recognizing exceptional
instances wherein the Court relaxed the bond requirement as a condition for posting the appeal.

xxxx

In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed decision of the
Labor Arbiter concerned did not contain a computation of the monetary award due the
employees, a circumstance which is likewise present in this case. In said case, the Court stated,

As a rule, compliance with the requirements for the perfection of an appeal within the
reglamentary (sic) period is mandatory and jurisdictional. However, in National Federation of
Labor Unions v. Ladrido as well as in several other cases, this Court relaxed the requirement of
the posting of an appeal bond within the reglementary period as a condition for perfecting the
appeal. This is in line with the principle that substantial justice is better served by allowing the
appeal to be resolved on the merits rather than dismissing it based on a technicality.

The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to
backwages, 13th month pay and service incentive leave pay without however including a
computation of the alleged amounts.
xxxx

In the case of NFLU v. Ladrido III, this Court postulated that “private respondents cannot be
expected to post such appeal bond equivalent to the amount of the monetary award when the
amount thereof was not included in the decision of the labor arbiter.” The computation of the
amount awarded to petitioner not having been clearly stated in the decision of the labor arbiter,
private respondents had no basis for determining the amount of the bond to be posted.

Thus, while the requirements for perfecting an appeal must be strictly followed as they are
considered indispensable interdictions against needless delays and for orderly discharge of
judicial business, the law does admit of exceptions when warranted by the circumstances.
Technicality should not be allowed to stand in the way of equitably and completely resolving the
rights and obligations of the parties. But while this Court may relax the observance of
reglementary periods and technical rules to achieve substantial justice, it is not prepared to give
due course to this petition and make a pronouncement on the weighty issue obtaining in this
case until the law has been duly complied with and the requisite appeal bond duly paid by
private respondents.”18

Records show that PDI has complied with the Court’s directive for the posting of the bond;19
thus, that issue has been laid to rest.

We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of PDI, and if the answer
be in the affirmative, whether she was illegally dismissed.

We rule for the respondents.

The existence of an employer-employee relationship is essentially a question of fact.20 Factual

findings of quasi-judicial agencies like the NLRC are generally accorded respect and finality if
supported by substantial evidence.21

 Considering, however, that the CA’s findings are in direct conflict with those of the Labor
Arbiter and NLRC, this Court must now make its own examination and evaluation of the facts of
this case.

It is true that petitioner herself admitted that she “was not, and [had] never been considered
respondent’s employee because the terms of works were arbitrarily decided upon by the
respondent.”22 However, the employment status of a person is defined and prescribed by law
and not by what the parties say it should be.23

This Court has constantly adhered to the “four-fold test” to determine whether there exists an
employer-employee relationship between parties.24 The four elements 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.25

Of these four elements, it is the power of control which is the most crucial26 and most
determinative factor,27 so important, in fact, that the other elements may even be
disregarded.28 As this Court has previously held:

“the significant factor in determining the relationship of the parties is the presence or absence
of supervisory authority to control the method and the details of performance of the service
being rendered, and the degree to which the principal may intervene to exercise such
control.”29
In other words, the test is whether the employer controls or has reserved the right to control
the employee, not only as to the work done, but also as to the means and methods by which the
same is accomplished.30

Petitioner argues that several factors exist to prove that respondents exercised control over her
and her work, namely:

a. As to the Contents of her Column—The PETITIONER had to insure that the contents of her
column hewed closely to the objectives of its Lifestyle Section and the over-all principles that
the newspaper projects itself to stand for. As admitted, she wanted to write about death in
relation to All Souls Day but was advised not to.

b. As to Time Control—The PETITIONER, as a columnist, had to observe the deadlines of the
newspaper for her articles to be published. These deadlines were usually that time period when
the Section Editor has to “close the pages” of the Lifestyle Section where the column in located.
“To close the pages” means to prepare them for printing and publication.

As a columnist, the PETITIONER’s writings had a definite day on which it was going to appear. So
she submitted her articles two days before the designated day on which the column would
come out.

This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers’
obligations to the readers with regard to timeliness and freshness of ideas.

c. As to Control of Space—The PETITIONER was told to submit only two or three pages of
article for the column, (sic) “Feminist Reflections” per week. To go beyond that, the Lifestyle
editor would already chop off the article and publish the rest for the next week. This shows that
PRIVATE RESPONDENTS had control over the space that the PETITIONER was assigned to fill.

d.  As to Discipline—Over time, the newspaper readers’ eyes are trained or habituated to look
for and read the works of their favorite regular writers and columnists. They are conditioned,
based on their daily purchase of the newspaper, to look for specific spaces in the newspapers
for their favorite write-ups/or opinions on matters relevant and significant issues aside from not
being late or amiss in the responsibility of timely submission of their articles.

The PETITIONER was disciplined to submit her articles on highly relevant and significant issues
on time by the PRIVATE RESPONDENTS who have a say on whether the topics belong to those
considered as highly relevant and significant, through the Lifestyle Section Editor. The
PETITIONER had to discuss the topics first and submit the articles two days before publication
date to keep her column in the newspaper space regularly as expected or without miss by its
readers.”31

Given this discussion by petitioner, we then ask the question: Is this the form of control that our
labor laws contemplate such as to establish an employer-employee relationship between
petitioner and respondent PDI?

It is not.

Not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former. Rules which serve as general guidelines towards the achievement of
the mutually desired result are not indicative of the power of control.32 Thus, this Court has
explained:

“It should, however, be obvious that not every form of control that the hiring party reserves to
himself over the conduct of the party hired in relation to the services rendered may be accorded
the effect of establishing an employer-employee relationship between them in the legal or
technical sense of the term. A line must be drawn somewhere, if the recognized distinction
between an employee and an individual contractor is not to vanish altogether. Realistically, it
would be a rare contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the
means used to achieve it. x x x.”33

The main determinant therefore is whether the rules set by the employer are meant to control
not just the results of the work but also the means and method to be used by the hired party in
order to achieve such results. Thus, in this case, we are to examine the factors enumerated by
petitioner to see if these are merely guidelines or if they indeed fulfill the requirements of the
control test.

Petitioner believes that respondents’ acts are meant to control how she executes her work. We
do not agree. A careful examination reveals that the factors enumerated by the petitioner are
inherent conditions in running a newspaper. In other words, the so-called control as to time,
space, and discipline are dictated by the very nature of the newspaper business itself.

We agree with the observations of the Office of the Solicitor General that:

“The Inquirer is the publisher of a newspaper of general circulation which is widely read
throughout the country. As such, public interest dictates that every article appearing in the
newspaper should subscribe to the standards set by the Inquirer, with its thousands of readers
in mind. It is not, therefore, unusual for the Inquirer to control what would be published in the
newspaper. What is important is the fact that such control pertains only to the end result, i.e.,
the submitted articles. The Inquirer has no control over [petitioner] as to the means or method
used by her in the preparation of her articles. The articles are done by [petitioner] herself
without any intervention from the Inquirer.”34

Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or
produce her articles each week. Aside from the constraints presented by the space allocation of
her column, there were no restraints on her creativity; petitioner was free to write her column
in the manner and style she was accustomed to and to use whatever research method she
deemed suitable for her purpose. The apparent limitation that she had to write only on subjects
that befitted the Lifestyle section did not translate to control, but was simply a logical
consequence of the fact that her column appeared in that section and therefore had to cater to
the preference of the readers of that section.

The perceived constraint on petitioner’s column was dictated by her own choice of her column’s
perspective. The column title “Feminist Reflections” was of her own choosing, as she herself
admitted, since she had been known as a feminist writer.35 Thus, respondent PDI, as well as her
readers, could reasonably expect her columns to speak from such perspective.

Contrary to petitioner’s protestations, it does not appear that there was any actual restraint or
limitation on the subject matter—within the Lifestyle section—that she could write about.
Respondent PDI did not dictate how she wrote or what she wrote in her column. Neither did
PDI’s guidelines dictate the kind of research, time, and effort she put into each column. In fact,
petitioner herself said that she received “no comments on her articles…except for her to shorten
them to fit into the box allotted to her column.” Therefore, the control that PDI exercised over
petitioner was only as to the finished product of her efforts, i.e., the column itself, by way of
either shortening or outright rejection of the column.
The newspaper’s power to approve or reject publication of any specific article she wrote for her
column cannot be the control contemplated in the “control test,” as it is but logical that one
who commissions another to do a piece of work should have the right to accept or reject the
product. The important factor to consider in the “control test” is still the element of control over
how the work itself is done, not just the end result thereof.

In contrast, a regular reporter is not as independent in doing his or her work for the newspaper.
We note the common practice in the newspaper business of assigning its regular reporters to
cover specific subjects, geographical locations, government agencies, or areas of concern, more
commonly referred to as “beats.” A reporter must produce stories within his or her particular
beat and cannot switch to another beat without permission from the editor. In most
newspapers also, a reporter must inform the editor about the story that he or she is working on
for the day. The story or article must also be submitted to the editor at a specified time.
Moreover, the editor can easily pull out a reporter from one beat and ask him or her to cover
another beat, if the need arises.

This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was
not precluded from submitting her column ahead of time or from submitting columns to be
published at a later time. More importantly, respondents did not dictate upon petitioner the
subject matter of her columns, but only imposed the general guideline that the article should
conform to the standards of the newspaper and the general tone of the particular section.

Where a person who works for another performs his job more or less at his own pleasure, in the
manner he sees fit, not subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no employer-employee
relationship exists.36

Aside from the control test, this Court has also used the economic reality test. The economic
realities prevailing within the activity or between the parties are examined, taking into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties.37 This is especially appropriate when, as in this case, there is no written
agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of
economic reality in analyzing possible employment relationships for purposes of applying the
Labor Code ought to be the economic dependence of the worker on his employer.38

Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights
advocate working in various women’s organizations.39 Likewise, she herself admits that she also
contributes articles to other publications.40 Thus, it cannot be said that petitioner was
dependent on respondent PDI for her continued employment in respondent’s line of
business.41

The inevitable conclusion is that petitioner was not respondent PDI’s employee but an
independent contractor, engaged to do independent work.

There is no inflexible rule to determine if a person is an employee or an independent contractor;

thus, the characterization of the relationship must be made based on the particular
circumstances of each case.42 There are several factors43 that may be considered by the courts,
but as we already said, the right to control is the dominant factor in determining whether one is
an employee or an independent contractor.44

In our jurisdiction, the Court has held that an independent contractor is one who carries on a
distinct and independent business and undertakes to perform the job, work, or service on one’s
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.45
On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that case, the
Court found, using the four-fold test, that petitioner, Jose Y. Sonza, was not an employee of ABS-
CBN, but an independent contractor. Sonza was hired by ABS-CBN due to his “unique skills,
talent and celebrity status not possessed by ordinary employees,” a circumstance that, the
Court said, was indicative, though not conclusive, of an independent contractual relationship.
Independent contractors often present themselves to possess unique skills, expertise or talent
to distinguish them from ordinary employees.47 The Court also found that, as to payment of
wages, Sonza’s talent fees were the result of negotiations between him and ABS-CBN.48 As to
the power of dismissal, the Court found that the terms of Sonza’s engagement were dictated by
the contract he entered into with ABS-CBN, and the same contract provided that either party
may terminate the contract in case of breach by the other of the terms thereof.49 However, the
Court held that the foregoing are not determinative of an employer-employee relationship.
Instead, it is still the power of control that is most important.

On the power of control, the Court found that in performing his work, Sonza only needed his
skills and talent—how he delivered his lines, appeared on television, and sounded on radio were
outside ABS-CBN’s control.50 Thus:

“We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA’s work. ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN
merely reserved the right to modify the program format and airtime schedule “for more
effective programming.” ABS-CBN’s sole concern was the quality of the shows and their standing
in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of
performance of SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over
the means and methods of the performance of his work. Although ABS-CBN did have the option
not to broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees... Thus,
even if ABS-CBN was completely dissatisfied with the means and methods of SONZA’s
performance of his work, or even with the quality or product of his work, ABS-CBN could not
dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show
but ABS-CBN must still pay his talent fees in full.

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to
continue paying in full SONZA’s talent fees, did not amount to control over the means and
methods of the performance of SONZA’s work. ABS-CBN could not terminate or discipline
SONZA even if the means and methods of performance of his work—how he delivered his lines
and appeared on television—did not meet ABS-CBN’s approval. This proves that ABS-CBN’s
control was limited only to the result of SONZA’s work, whether to broadcast the final product
or not. In either case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry of the
Agreement.

In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the
right to delete objectionable features in their shows. Since the management did not have
control over the manner of performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.

SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to
broadcast the “Mel & Jay” programs. However, the equipment, crew and airtime are not the
“tools and instrumentalities” SONZA needed to perform his job. What SONZA principally needed
were his talent or skills and the costumes necessary for his appearance. Even though ABS-CBN
provided SONZA with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole
concern was for SONZA to display his talent during the airing of the programs.
A radio broadcast specialist who works under minimal supervision is an independent contractor.
SONZA’s work as television and radio program host required special skills and talent, which
SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision
and control over how SONZA utilized his skills and talent in his shows.”51

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her
talent, skill, experience, and her unique viewpoint as a feminist advocate. How she utilized all
these in writing her column was not subject to dictation by respondent. As in Sonza, respondent
PDI was not involved in the actual performance that produced the finished product. It only
reserved the right to shorten petitioner’s articles based on the newspaper’s capacity to
accommodate the same. This fact, we note, was not unique to petitioner’s column. It is a reality
in the newspaper business that space constraints often dictate the length of articles and
columns, even those that regularly appear therein.

Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she
needed to perform her work. Petitioner only needed her talent and skill to come up with a
column every week. As such, she had all the tools she needed to perform her work.

Considering that respondent PDI was not petitioner’s employer, it cannot be held guilty of illegal
dismissal.

WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are hereby AFFIRMED.

SO ORDERED.

Ynares-Santiago (Chairperson), Austria-Martinez, Chico-Nazario and Reyes, JJ., concur.

Petition dismissed, judgment and resolution affirmed.

Notes.—The practice of having fixed-term contracts in the broadcast industry does not
automatically make all talent contracts valid and compliant with labor law—the assertion that a
talent contract exists does not necessarily prevent a regular employment status. (Dumpit-
Murillo vs. Court of Appeals, 524 SCRA 290 [2007]) Orozco vs. Fifth Division of the Court of
Appeals, 562 SCRA 36, G.R. No. 155207 August 13, 2008
G.R. No. 200094. June 10, 2013.*
BENIGNO M. VIGILLA, ALFONSO M. BONGOT, ROBERTO CALLESA, LINDA C. CALLO, NILO B.
CAMARA, ADELIA T. CAMARA, ADOLFO G. PINON, JOHN A. FERNANDEZ, FEDERICO A. CALLO,
MAXIMA P. ARELLANO, JULITO B. COSTALES, SAMSON F. BACHAR, EDWIN P. DAMO, RENATO E.
FERNANDEZ, GENARO F. CALLO, JIMMY C. ALETA, and EUGENIO SALINAS, petitioners, vs.
PHILIPPINE COLLEGE OF CRIMINOLOGY INC. and/or GREGORY ALAN F. BAUTISTA, respondents.

Labor Law; Courts; Supreme Court; The Supreme Court is not a trier of facts and this doctrine
applies with greater force in labor cases. Questions of fact are for the labor tribunals to resolve.
—Well-settled is the rule that this Court is not a trier of facts and this doctrine applies with
greater force in labor cases. Questions of fact are for the labor tribunals to resolve. Only errors of
law are generally reviewed in petitions for review on certiorari criticizing decisions of the CA.
Moreover, findings of fact of quasi-judicial bodies like the NLRC, as affirmed by the CA, are
generally conclusive on this Court.

Remedial Law; Evidence; Notarized Documents; In Destreza v. Rinoza-Plazo, 604 SCRA 775
(2009), this Court stated that “the notarized deed of sale should be admitted as evidence despite
the failure of the Notary Public in submitting his notarial report to the notarial section of the RTC
Manila;” It would have been different if the notary public was not a lawyer or was not
commissioned as such.—Respondents should not be penalized for the failure of the notary public
to submit his Notarial Report. In Destreza v. Rinoza-Plazo, 604 SCRA 775 (2009), this Court stated
that “the notarized deed of sale should be admitted as evidence despite the failure of the Notary
Public in submitting his notarial report to the notarial section of the RTC Manila.” The Court
expounded: It is the swearing of a person before the Notary Public and the latter’s act of signing
and affixing his seal on the deed that is material and not the submission of the notarial report.
Parties who appear before a notary public to have their documents notarized should not be
expected to follow up on the submission of the notarial reports. They should not be made to
suffer the consequences of the negligence of the Notary Public in following the procedures
prescribed by the Notarial Law. It would have been different if the notary public was not a
lawyer or was not commissioned as such. In this regard, however, petitioners offered no proof.

Corporation Law; Section 122 of the Corporation Code provides for a three-year winding up
period for a corporation whose charter is annulled by forfeiture or otherwise to continue as a
body corporate for the purpose, among others, of settling and closing its affairs.—The executed
releases, waivers and quitclaims are valid and binding notwithstanding the revocation of
MBMSI’s Certificate of Incorporation. The revocation does not result in the termination of its
liabilities. Section 122 of the Corporation Code provides for a three-year winding up period for a
corporation whose charter is annulled by forfeiture or otherwise to continue as a body corporate
for the purpose, among others, of settling and closing its affairs. Even if said documents were
executed in 2009, six (6) years after MBMSI’s dissolution in 2003, the same are still valid and
binding upon the parties and the dissolution will not terminate the liabilities incurred by the
dissolved corporation pursuant to Sections 122 and 145 of the Corporation Code.

Labor Law; Labor-Only Contracting; Solidary Liability; The basis of the solidary liability of the
principal with those engaged in labor-only contracting is the last paragraph of Article 106 of the
Labor Code, which in part provides: “In such cases [labor-only contracting], the person or
intermediary shall be considered merely as an agent of the employer who shall be responsible to
the workers in the same manner and extent as if the latter were directly employed by him.”—The
NLRC and the CA correctly ruled that the releases, waivers and quitclaims executed by
petitioners in favor of MBMSI redounded to the benefit of PCCr pursuant to Article 1217 of the
New Civil Code. The reason is that MBMSI is solidarily liable with the respondents for the valid
claims of petitioners pursuant to Article 109 of the Labor Code. As correctly pointed out by the
respondents, the basis of the solidary liability of the principal with those engaged in labor-only
contracting is the last paragraph of Article 106 of the Labor Code, which in part provides: “In
such cases [labor-only contracting], the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same manner and extent as
if the latter were directly employed by him.”
Civil Law; Solidary Liability; Payment made by one of the solidary debtors extinguishes the
obligation.—Considering that MBMSI, as the labor-only contractor, is solidarily liable with the
respondents, as the principal employer, then the NLRC and the CA correctly held that the
respondents’ solidary liability was already expunged by virtue of the releases, waivers and
quitclaims executed by each of the petitioners in favor of MBMSI pursuant to Article 1217 of the
Civil Code which provides that “payment made by one of the solidary debtors extinguishes the
obligation.”

Labor Law; Social Justice; The law in protecting the rights of the laborer authorizes neither
oppression nor self-destruction of the employer.—While it is the duty of the courts to prevent the
exploitation of employees, it also behooves the courts to protect the sanctity of contracts that do
not contravene the law. The law in protecting the rights of the laborer authorizes neither
oppression nor self-destruction of the employer. While the Constitution is committed to the
policy of social justice and the protection of the working class, it should not be supposed that
every labor dispute will be automatically decided in favor of labor. Management also has its own
rights, which, as such, are entitled to respect and enforcement in the interest of simple fair play.
Out of its concern for those with less privileges in life, the Court has inclined more often than not
toward the worker and upheld his cause in his conflicts with the employer. Such favoritism,
however, has not blinded the Court to the rule that justice is in every case for the deserving, to
be dispensed in the light of the established facts and applicable law and doctrine.

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
September 16, 2011 Decision1 of the Court of Appeals (CA), in CA-G.R. SP No. 120225, which
affirmed the February 11, 2011 Resolution2 and the April 28, 20113 Resolution of the National
Labor Relations Commission (NLRC). The two NLRC resolutions affirmed with modifications the
July 30, 2010 Decision4 of the Labor Arbiter (LA) finding that (a) Metropolitan Building Services,
Inc. (MBMSI) was a labor-only contractor; (b) respondent Philippine College of Criminology Inc.
(PCCr) was the petitioners’ real principal employer; and (c) PCCr acted in bad faith in dismissing
the petitioners. The NLRC, however, declared that the claims of the petitioners were settled
amicably because of the releases, waivers and quitclaims they had executed.

The Antecedents

PCCr is a non-stock educational institution, while the petitioners were janitors, janitresses and
supervisor in the Maintenance Department of PCCr under the supervision and control of Atty.
Florante A. Seril (Atty. Seril), PCCr’s Senior Vice President for Administration. The petitioners,
however, were made to understand, upon application with respondent school, that they were
under MBMSI, a corporation engaged in providing janitorial services to clients. Atty. Seril is also
the President and General Manager of MBMSI.

Sometime in 2008, PCCr discovered that the Certificate of Incorporation of MBMSI had been
revoked as of July 2, 2003. On March 16, 2009, PCCr, through its President, respondent Gregory
Alan F. Bautista (Bautista), citing the revocation, terminated the school’s relationship with
MBMSI, resulting in the dismissal of the employees or maintenance personnel under MBMSI,
except Alfonso Bongot (Bongot) who was retired.

In September, 2009, the dismissed employees, led by their supervisor, Benigno Vigilla (Vigilla),
filed their respective complaints for illegal dismissal, reinstatement, back wages, separation pay
(for Bongot), underpayment of salaries, overtime pay, holiday pay, service incentive leave, and
13th month pay against MBMSI, Atty. Seril, PCCr, and Bautista.

In their complaints, they alleged that it was the school, not MBMSI, which was their real
employer because (a) MBMSI’s certification had been revoked; (b) PCCr had direct control over
MBMSI’s operations; (c) there was no contract between MBMSI and PCCr; and (d) the selection
and hiring of employees were undertaken by PCCr.

On the other hand, PCCr and Bautista contended that (a) PCCr could not have illegally dismissed
the complainants because it was not their direct employer; (b) MBMSI was the one who had
complete and direct control over the complainants; and (c) PCCr had a contractual agreement
with MBMSI, thus, making the latter their direct employer.

On September 11, 2009, PCCr submitted several documents before LA Ronaldo Hernandez,
including releases, waivers and quitclaims in favor of MBMSI executed by the complainants to
prove that they were employees of MBMSI and not PCCr.5 The said documents appeared to
have been notarized by one Atty. Ramil Gabao. A portion of the releases, waivers and quitclaims
uniformly reads:

For and in consideration of the total amount of ______________, as and by way of separation
pay due to the closure of the Company brought about by serious financial losses, receipt of the
total amount is hereby acknowledged, I _______________, x x x forever release and discharge
x x x METROPOLITAN BUILDING MAINTENANCE SERVICES, INC., of and from any and all claims,
demands, causes of actions, damages, costs, expenses, attorney’s fees, and obligations of any
nature whatsoever, known or unknown, in law or in equity, which the undersigned has, or may
hereafter have against the METROPOLITAN BUILDING MAINTENANCE SERVICES, INC., whether
administrative, civil or criminal, and whether or not arising out of or in relation to my
employment with the above company or third persons.6

Ruling of the Labor Arbiter

After due proceedings, the LA handed down his decision, finding that (a) PCCr was the real
principal employer of the complainants; (b) MBMSI was a mere adjunct or alter ego/labor-only
contractor; (c) the complainants were regular employees of PCCr; and (d) PCCr/Bautista were in
bad faith in dismissing the complainants.

The LA ordered the respondents (a) to reinstate petitioners except Bongot who was deemed
separated/retired; (b) to pay their full back wages from the date of their illegal dismissal until
actual reinstatement (totaling P2,963,584.25); (c) to pay Bongot’s separation or retirement pay
benefit under the Labor Code (amounting to P254,010.00); (d) to pay their 3-year Service
Incentive Leave Pay (P4,245.60 each) except Vigilla (P5,141.40); (e) to pay all the petitioners
moral and exemplary damages in the combined amount of P150,000.00; and finally (f) to pay
10% of the total computable award as Attorney’s Fees.

The LA explained that PCCr was actually the one which exercised control over the means and
methods of the work of the petitioners, thru Atty. Seril, who was acting, throughout the time in
his capacity as Senior Vice President for Administration of PCCr, not in any way or time as the
supposed employer/general manager or president of MBMSI.

Despite the presentation by the respondents of the releases, waivers and quitclaims executed
by petitioners in favor of MBMSI, the LA did not touch on the validity and authenticity of the
same. Neither did he discuss the effects of such releases, waivers and quitclaims on petitioners’
claims.

Ruling of the NLRC

Not satisfied, the respondents filed an appeal before the NLRC. In its Resolution, dated February
11, 2011, the NLRC affirmed the LA’s findings. Nevertheless, the respondents were excused from
their liability by virtue of the releases, waivers and quitclaims executed by the petitioners.
Specifically, the NLRC pointed out:
As Respondent MBMSI and Atty. Seril, together are found to be labor only contractor, they are
solidarily [liable] with Respondent PCCr and Gregory Alan F. Bautista for the valid claims of
Complainants pursuant to Article 109 of the Labor Code on the [solidary] liability of the
employer and indirect employer. This liability, however, is effectively expunged by the acts of
the 17 Complainants of executing Release, Waiver, and Quitclaims (pp. 170-184, Records) in
favor of Respondent MBMSI. The liability being joined, the release of one redounds to the
benefit of the others, pursuant to Art. 1217 of the Civil Code, which provides that “[P]ayment
made by one of the solidary debtors extinguishes the obligation. x x x.”7

In their motion for reconsideration, petitioners attached as annexes their affidavits denying that
they had signed the releases, waivers, and quitclaims. They prayed for the reinstatement in toto
of the July 30, 2010 Decision of the LA.8 MBMSI/Atty. Seril also filed a motion for
reconsideration9 questioning the declaration of the NLRC that he was solidarily liable with PCCr.

On April 28, 2011, NLRC modified its February 11, 2011 Resolution by affirming the July 30, 2010
Decision10 of the LA only in so far as complainants Ernesto B. Ayento and Eduardo B. Salonga
were concerned. As for the other 17 complainants, the NLRC ruled that their awards had been
superseded by their respective releases, waivers and quitclaims.

The seventeen (17) complainants filed with the CA a petition for certiorari under Rule 65 faulting
the NLRC with grave abuse of discretion for absolving the respondents from their liability by
virtue of their respective releases, waivers and quitclaims.

Ruling of the Court of Appeals

On September 16, 2011, the CA denied the petition and affirmed the two Resolutions of the
NLRC, dated February 11, 2011 and April 28, 2011. The CA pointed out that based on the
principle of solidary liability and Article 121711 of the New Civil Code, petitioners’ respective
releases, waivers and quitclaims in favor of MBMSI and Atty. Seril redounded to the benefit of
the respondents. The CA also upheld the factual findings of the NLRC as to the authenticity and
due execution of the individual releases, waivers and quitclaims because of the failure of
petitioners to substantiate their claim of forgery and to overcome the presumption of regularity
of a notarized document. Petitioners’ motion for reconsideration was likewise denied by the CA
in its January 4, 2012 Resolution.

Hence, this petition under Rule 45 challenging the CA Decision anchored on the following

GROUNDS

The Hon. Court of Appeals COMMITTED REVERSIBLE ERRORS when:

A. IT CONSIDERED RESPONDENT METROPOLITAN BUILDING MAINTENANCE SERVICES, INC.’S

LIABILITY AS SOLIDARY TO RESPONDENT PHILIPPINE COLLEGE OF CRIMINOLOGY, INC., WHEN IN
FACT THERE IS NO LEGAL BASIS TO THAT EFFECT.
B. IT DID NOT AFFIRM THE DECISION OF THE HON. LABOR ARBITER, DATED JULY 30, 2010, AS
TO 17 PETITIONERS IN THIS CASE, DISREGARDING THE CORPORATION LAW AND
JURISPRUDENCE OF THE HON. SUPREME COURT IN SO FAR AS QUITCLAIMS, RELEASE AND
WAIVERS ARE CONCERNED IN LABOR CASES.

C. IT AFFIRMED THE DECISION OF THE HON. NATIONAL LABOR RELATIONS COMMISSION,
THAT THE 17 COMPLAINANTS HAVE SETTLED THEIR CLAIMS BY VIRTUE OF ALLEGED RELEASES,
WAIVERS AND QUITCLAIMS SIGNED BY THE COMPLAINANTS IN FAVOR OF METROPOLITAN
BUILDING MAINTENANCE, INC.

D. IT DID NOT TAKE INTO CONSIDERATION SUBSTANTIAL EVIDENCE OF

PETITIONERS/COMPLAINANTS DISPUTING THE ALLEGED WAIVERS, RELEASES AND QUITCLAIMS,
INCLUDING THE ALLEGED NOTARIZATION THEREOF.12
The petition fails.

The grounds cited by the petitioners boil down to this basic issue: whether or not their claims
against the respondents were amicably settled by virtue of the releases, waivers and quitclaims
which they had executed in favor of MBMSI.

In resolving this case, the Court must consider three (3) important sub-issues, to wit:

(a) whether or not petitioners executed the said releases, waivers and quitclaims;

(b) whether or not a dissolved corporation can enter into an agreement such as releases,
waivers and quitclaims beyond the 3-year winding up period under Section 122 of the
Corporation Code; and

(c) whether or not a labor-only contractor is solidarily liable with the employer.

The Releases, Waivers and

Quitclaims are Valid

Petitioners vehemently deny having executed any release, waiver or quitclaim in favor of
MBMSI. They insist that PCCr forged the documents just to evade their legal obligations to them,
alleging that the contents of the documents were written by one person, whom they identified
as Reynaldo Chavez, an employee of PCCr, whose handwriting they were familiar with.13

To begin with, their posture was just an afterthought. Petitioners had several opportunities to
question the authenticity of the said documents but did not do so. The records disclose that
during the proceedings before the LA, PCCr submitted several documents, including the subject
releases, waivers and quitclaims executed on September 11, 2009 in favor of MBMSI,14 but
petitioners never put their genuineness and due execution at issue. These were brought up
again by the respondents in their Memorandum of Appeal,15 but again petitioners did not
bother to dispute them.

It was only after the NLRC’s declaration in its February 11, 2011 Resolution that the claims of
petitioners had been settled amicably by virtue of the releases, waivers and quitclaims, that
petitioners, in their motion for reconsideration,16 denied having executed any of these
instruments. This passiveness and inconsistency of petitioners will not pass the scrutiny of this
Court.

At any rate, it is quite apparent that this petition raises questions of fact inasmuch as this Court
is being asked to revisit and assess anew the factual findings of the CA and the NLRC regarding
the validity, authenticity and due execution of the subject releases, waivers and quitclaims.

Well-settled is the rule that this Court is not a trier of facts and this doctrine applies with greater
force in labor cases. Questions of fact are for the labor tribunals to resolve.17 Only errors of law
are generally reviewed in petitions for review on certiorari criticizing decisions of the CA.
Moreover, findings of fact of quasi-judicial bodies like the NLRC, as affirmed by the CA, are
generally conclusive on this Court.18 Hence, as correctly declared by the CA, the following NLRC
factual findings are binding and conclusive on this Court:

We noted that the individual quitclaims, waivers and releases executed by the complainants
showing that they received their separation pay from MBMSI were duly notarized by a Notary
Public. Such notarization gives prima facie evidence of their due execution. Further, said
releases, waivers, and quitclaims were not refuted nor disputed by complainants herein, thus,
we have no recourse but to uphold their due execution.19
Even if the Court relaxes the foregoing rule, there is still no reason to reverse the factual findings
of the NLRC and the CA. What is on record is only the self-serving allegation of petitioners that
the releases, waivers and quitclaims were mere forgeries. Petitioners failed to substantiate this
allegation. As correctly found by the CA: “petitioners have not offered concrete proof to
substantiate their claim of forgery. Allegations are not evidence.”20

On the contrary, the records confirm that petitioners were really paid their separation pay and
had executed releases, waivers and quitclaims in return. In his motion for reconsideration of the
February 11, 2011 Resolution of the NLRC, Atty. Seril, President and General Manager of MBMSI,
stated that the amount of P2,000,000.00 “was coursed by PCCr to me, to be handed to the
complainants, through its employee, Rey Chavez.”21

Petitioners requested the Court to take a look at such releases, waivers and quitclaims,
particularly their contents and the handwriting, but they failed to attach to the records copies of
the said documents which they claimed to have been forged. The petition is dismissible on this
ground alone. The Rules of Court require the petition to be accompanied by such material
portions of the record as would support the petition.22 Failure to comply with the requirements
regarding “the contents of and the documents which should accompany the petition” is a
ground for the dismissal of the appeal.23

Moreover, mere unsubstantiated allegations of lack of voluntariness in executing the documents

will not suffice to overcome the presumption of authenticity and due execution of a duly
notarized document. As correctly held by the NLRC, “such notarization gives prima facie
evidence of their due execution.”24

Petitioners contend that the alleged notarization of the releases, waivers and quitclaims by one
Atty. Ramil Gabao did not take place, because there were no records of such documents in the
Notary Section of Manila. Thus, the prima facie evidence thereof has been disputed.

The Court is not moved. Respondents should not be penalized for the failure of the notary public
to submit his Notarial Report. In Destreza v. Rinoza-Plazo,25 this Court stated that “the
notarized deed of sale should be admitted as evidence despite the failure of the Notary Public in
submitting his notarial report to the notarial section of the RTC Manila.” The Court expounded:

It is the swearing of a person before the Notary Public and the latter’s act of signing and affixing
his seal on the deed that is material and not the submission of the notarial report. Parties who
appear before a notary public to have their documents notarized should not be expected to
follow up on the submission of the notarial reports. They should not be made to suffer the
consequences of the negligence of the Notary Public in following the procedures prescribed by
the Notarial Law.26

It would have been different if the notary public was not a lawyer or was not commissioned as
such. In this regard, however, petitioners offered no proof.

On the Revocation of MBMSI’s

Certificate of Incorporation

Petitioners further argue that MBMSI had no legal personality to incur civil liabilities as it did not
exist as a corporation on account of the fact that its Certificate of Incorporation had been
revoked on July 2, 2003. Petitioners ask this Court to exempt MBMSI from its liabilities because
it is no longer existing as a corporation.

The Court cannot accommodate the prayer of petitioners.

The executed releases, waivers and quitclaims are valid and binding notwithstanding the
revocation of MBMSI’s Certificate of Incorporation. The revocation does not result in the
termination of its liabilities. Section 12227 of the Corporation Code provides for a three-year
winding up period for a corporation whose charter is annulled by forfeiture or otherwise to
continue as a body corporate for the purpose, among others, of settling and closing its affairs.

Even if said documents were executed in 2009, six (6) years after MBMSI’s dissolution in 2003,
the same are still valid and binding upon the parties and the dissolution will not terminate the
liabilities incurred by the dissolved corporation pursuant to Sections 122 and 14528 of the
Corporation Code. In the case of Premiere Development Bank v. Flores,29 the Court held that a
corporation is allowed to settle and close its affairs even after the winding up period of three (3)
years. The Court wrote:

As early as 1939, this Court held that, although the time during which the corporation, through
its own officers, may conduct the liquidation of its assets and sue and be sued as a corporation is
limited to three years from the time the period of dissolution commences, there is no time limit
within which the trustees must complete a liquidation placed in their hands. What is provided in
Section 122 of the Corporation Code is that the conveyance to the trustees must be made within
the three-year period. But it may be found impossible to complete the work of liquidation within
the three-year period or to reduce disputed claims to judgment. The trustees to whom the
corporate assets have been conveyed pursuant to the authority of Section 122 may sue and be
sued as such in all matters connected with the liquidation.

Furthermore, Section 145 of the Corporation Code clearly provides that “no right or remedy in
favor of or against any corporation, its stockholders, members, directors, trustees, or officers,
nor any liability incurred by any such corporation, stockholders, members, directors, trustees, or
officers, shall be removed or impaired either by the subsequent dissolution of said corporation.”
Even if no trustee is appointed or designated during the three-year period of the liquidation of
the corporation, the Court has held that the board of directors may be permitted to complete
the corporate liquidation by continuing as “trustees” by legal implication.30 [Emphases
supplied; citations omitted]

A Labor-only Contractor is Solidarily

Liable with the Employer

The issue of whether there is solidary liability between the labor-only contractor and the
employer is crucial in this case. If a labor-only contractor is solidarily liable with the employer,
then the releases, waivers and quitclaims in favor of MBMSI will redound to the benefit of PCCr.
On the other hand, if a labor-only contractor is not solidarily liable with the employer, the latter
being directly liable, then the releases, waivers and quitclaims in favor of MBMSI will not
extinguish the liability of PCCr.

On this point, petitioners argue that there is no solidary liability to speak of in case of an
existence of a labor-only contractor. Petitioners contend that under Article 10631 of the

Labor Code, a labor-only contractor’s liability is not solidary as it is the employer who should be
directly responsible to the supplied worker. They argue that Article 10932 of the Labor Code
(solidary liability of employer/indirect employer and contractor/subcontractor) and Article 1217
of the New Civil Code (extinguishment of solidary obligation) do not apply in this case. Hence,
the said releases, waivers and quitclaims which they purportedly issued in favor of MBMSI and
Atty. Seril do not automatically release respondents from their liability.

Again, the Court disagrees.

The NLRC and the CA correctly ruled that the releases, waivers and quitclaims executed by
petitioners in favor of

MBMSI redounded to the benefit of PCCr pursuant to Article 1217 of the New Civil Code. The
reason is that MBMSI is solidarily liable with the respondents for the valid claims of petitioners
pursuant to Article 109 of the Labor Code.
As correctly pointed out by the respondents, the basis of the solidary liability of the principal
with those engaged in labor-only contracting is the last paragraph of Article 106 of the Labor
Code, which in part provides: “In such cases [labor-only contracting], the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers
in the same manner and extent as if the latter were directly employed by him.”

Section 19 of Department Order No. 18-02 issued by the Department of Labor and Employment
(DOLE), which was still in effect at the time of the promulgation of the subject decision and
resolution, interprets Article 106 of the Labor Code in this wise:

Section 19. Solidary liability.—The principal shall be deemed as the direct employer of the

contractual employees and therefore, solidarily liable with the contractor or subcontractor for
whatever monetary claims the contractual employees may have against the former in the case
of violations as provided for in Sections 5 (Labor-Only contracting), 6 (Prohibitions), 8 (Rights of
Contractual Employees) and 16 (Delisting) of these Rules. In addition, the principal shall also be
solidarily liable in case the contract between the principal and contractor or subcontractor is
preterminated for reasons not attributable to the fault of the contractor or subcontractor.
[Emphases supplied].

 The DOLE recognized anew this solidary liability of the principal employer and the labor-only
contractor when it issued Department Order No. 18-A, series of 2011, which is the latest set of
rules implementing Articles 106-109 of the Labor Code. Section 27 thereof reads:

Section 27. Effects of finding of labor-only contracting and/or violation of Sections 7, 8 or 9 of

the Rules.—A finding by competent authority of labor-only contracting shall render the principal
jointly and severally liable with the contractor to the latter’s employees, in the same manner
and extent that the principal is liable to employees directly hired by him/her, as provided in
Article 106 of the Labor Code, as amended.

A finding of commission of any of the prohibited activities in Section 7, or violation of either

Sections 8 or 9 hereof, shall render the principal the direct employer of the employees of the
contractor or subcontractor, pursuant to Article 109 of the Labor Code, as amended. (Emphasis
supplied.)

These legislative rules and regulations designed to implement a primary legislation have the
force and effect of law. A rule is binding on the courts so long as the procedure fixed for its
promulgation is followed and its scope is within the statutory authority granted by the
legislature.33

Jurisprudence is also replete with pronouncements that a job-only contractor is solidarily liable
with the employer. One of these is the case of Philippine Bank of Communications v. NLRC34
where this Court explained the legal effects of a job-only contracting, to wit:

Under the general rule set out in the first and second paragraphs of Article 106, an employer
who enters into a contract with a contractor for the performance of work for the employer,
does not thereby create an employer-employees relationship between himself and the
employees of the contractor. Thus, the employees of the contractor remain the contractor’s
employees and his alone. Nonetheless when a contractor fails to pay the wages of his
employees in accordance with the Labor Code, the employer who contracted out the job to the
contractor becomes jointly and severally liable with his contractor to the employees of the latter
“to the extent of the work performed under the contract” as such employer were the employer
of the contractor’s employees. The law itself, in other words, establishes an employer-employee
relationship between the employer and the job contractor’s employees for a limited purpose,
i.e., in order to ensure that the latter get paid the wages due to them.
A similar situation obtains where there is “labor only” contracting. The “labor-only” contractor
— i.e. “the person or intermediary” — is considered “merely as an agent of the employer.” The
employer is made by the statute responsible to the employees of the “labor only” contractor as
if such employees had been directly employed by the employer. Thus, where “labor-only”
contracting exists in a given case, the statute itself implies or establishes an employer-employee
relationship between the employer (the owner of the project) and the employees of the “labor
only” contractor, this time for a comprehensive purpose: “employer for purposes of this Code,
to prevent any violation or circumvention of any provision of this Code.” The law in effect holds
both the employer and the “labor-only” contractor responsible to the latter’s employees for the
more effective safeguarding of the employees’ rights under the Labor Code.35 [Emphasis
supplied].

The case of San Miguel Corporation v. MAERC Integrated Services, Inc.36 also recognized this
solidary liability between a labor-only contractor and the employer. In the said case, this Court
gave the distinctions between solidary liability in legitimate job contracting and in labor-only
contracting, to wit:

In legitimate job contracting, the law creates an employer-employee relationship for a limited
purpose, i.e., to ensure that the employees are paid their wages. The principal employer
becomes jointly and severally liable with the job contractor only for the payment of the
employees’ wages whenever the contractor fails to pay the same. Other than that, the principal
employer is not responsible for any claim made by the employees.

On the other hand, in labor-only contracting, the statute creates an employer-employee

relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the latter is responsible
to the employees of the labor-only contractor as if such employees had been directly employed
by the principal employer. The principal employer therefore becomes solidarily liable with the
labor-only contractor for all the rightful claims of the employees.37 [Emphases supplied;
Citations omitted]

Recently, this Court reiterated this solidary liability of labor-only contractor in the case of 7K
Corporation v. NLRC38 where it was ruled that the principal employer is solidarily liable with the
labor-only contractor for the rightful claims of the employees.

Conclusion

Considering that MBMSI, as the labor-only contractor, is solidarily liable with the respondents,
as the principal employer, then the NLRC and the CA correctly held that the respondents’
solidary liability was already expunged by virtue of the releases, waivers and quitclaims
executed by each of the petitioners in favor of MBMSI pursuant to Article 1217 of the Civil Code
which provides that “payment made by one of the solidary debtors extinguishes the obligation.”

This Court has constantly applied the Civil Code provisions on solidary liability, specifically
Articles 1217 and 1222,39 to labor cases. In Varorient Shipping Co., Inc. v. NLRC,40 this Court
held:

The POEA Rules holds her, as a corporate officer, solidarily liable with the local licensed manning
agency. Her liability is inseparable from those of Varorient and Lagoa. If anyone of them is held
liable then all of them would be liable for the same obligation. Each of the solidary debtors,
insofar as the creditor/s is/are concerned, is the debtor of the entire amount; it is only with
respect to his co-debtors that he/she is liable to the extent of his/her share in the obligation.
Such being the case, the Civil Code allows each solidary debtor, in actions filed by the creditor/s,
to avail himself of all defenses which are derived from the nature of the obligation and of those
which are personal to him, or pertaining to his share [citing Section 1222 of the Civil Code]. He
may also avail of those defenses personally belonging to his co-debtors, but only to the extent of
their share in the debt. Thus, Varorient may set up all the defenses pertaining to Colarina and
Lagoa; whereas Colarina and Lagoa are liable only to the extent to which Varorient may be
found liable by the court.

x x x x

If Varorient were to be found liable and made to pay pursuant thereto, the entire obligation
would already be extinguished [citing Article 1217 of the Civil Code] even if no attempt was
made to enforce the judgment against Colarina. Because there existed a common cause of
action against the three solidary obligors, as the acts and omissions imputed against them are
one and the same, an ultimate finding that Varorient was not liable would, under these
circumstances, logically imply a similar exoneration from liability for Colarina and Lagoa,
whether or not they interposed any defense.41 [Emphases supplied]

In light of these conclusions, the Court holds that the releases, waivers and quitclaims executed
by petitioners in favor of MBMSI redounded to the respondents’ benefit. The liabilities of the
respondents to petitioners are now deemed extinguished. The Court cannot allow petitioners to
reap the benefits given to them by MBMSI in exchange for the releases, waivers and quitclaims
and, again, claim the same benefits from PCCr.

While it is the duty of the courts to prevent the exploitation of employees, it also behooves the
courts to protect the sanctity of contracts that do not contravene the law.42 The law in
protecting the rights of the laborer authorizes neither oppression nor self-destruction of the
employer. While the Constitution is committed to the policy of social justice and the protection
of the working class, it should not be supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its own rights, which, as such, are entitled to
respect and enforcement in the interest of simple fair play. Out of its concern for those with less
privileges in life, the Court has inclined more often than not toward the worker and upheld his
cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to
the rule that justice is in every case for the deserving, to be dispensed in the light of the
established facts and applicable law and doctrine.43

WHEREFORE, the petition is DENIED.

SO ORDERED.

Velasco, Jr. (Chairperson), Peralta, Abad and Leonen, JJ., concur.

Petition denied.

Notes.—Labor-only contracting, which is prohibited, is an arrangement where the contractor or

subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal. (Iligan Cement Corporation vs. Iliascor Employees and Workers Union-Southern
Philippines Federation of Labor [IEWU-SPFL], 586 SCRA 449 [2009])

In a labor-only contract, the “labor-only” contractor is the agent of the principal. (Ibid.)

——o0o—— Vigilla vs. Philippine College of Criminology, Inc., 698 SCRA 247, G.R. No. 200094
June 10, 2013
G.R. No. 156367. May 16, 2005.*

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs. ANTONIO BAUTISTA, respondent.

Labor Law; Service Incentive Leave; Field Personnel; Words and Phrases; The phrase “other
employees whose performance is unsupervised by the employer” in Section 1(D), Rule V, Book III
of the Implementing Rules and Regulations of the Labor Code 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; Employees engaged on task or contract basis or paid on purely
commission basis are not automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel.”—A careful perusal of said provisions
of law will result in the conclusion that the grant of service incentive leave has been delimited by
the Implementing Rules and Regulations of the Labor Code to apply only to those employees not
explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, 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 same is true with respect to the phrase “those who are engaged on task or
contract basis, purely commission basis.” Said phrase should 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. Hence, employees engaged on task or contract
basis or paid on purely commission basis are not automatically exempted from the grant of
service incentive leave, unless, they fall under the classification of field personnel.

Same; Same; Same; Same; What must be ascertained in order to resolve the issue of propriety of
the grant of service incentive leave to a bus driver-conductor is whether or not he is a field
personnel; According to the Labor Code, “field personnel” shall refer to nonagricultural
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.—Petitioner’s contention that respondent is not entitled to the grant
of service incentive leave just because he was paid on purely commission basis is misplaced.
What must be ascertained in order to resolve the issue of propriety of the grant of service
incentive leave to respondent is whether or not he is a field personnel. 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.
This definition is further elaborated in the Bureau of Working Conditions (BWC), Advisory
Opinion to Philippine Technical-Clerical Commercial Employees Association which states that: As
a general rule, [field personnel] are those whose performance of their job/service is not
supervised by the employer or his representative, the workplace being away from the principal
office and whose hours and days of work cannot be determined with reasonable certainty;
hence, they are paid specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including drivers cannot be said to
be field personnel despite the fact that they are performing work away from the principal office
of the employee.

Same; Same; Same; Same; 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—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.—At this point, 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. As discussed above, 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.

Same; Same; Same; Same; Bus Drivers and Conductors; A bus driver-conductor, not being a field
personnel but a regular employee who performs tasks usually necessary and desirable to the
usual trade of the company’s business, is entitled to the grant of service incentive leave.—As
observed by the Labor Arbiter and concurred in by the Court of Appeals: It is of judicial notice
that along the routes that are plied by these bus companies, there are its inspectors assigned at
strategic places who board the bus and inspect the passengers, the punched tickets, and the
conductor’s reports. There is also the mandatory once-a-week car barn or shop day, where the
bus is regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not
there are problems thereon as reported by the driver and/or conductor. They too, must be at
specific place as [sic] specified time, as they generally observe prompt departure and arrival
from their point of origin to their point of destination. In each and every depot, there is always
the Dispatcher whose function is precisely to see to it that the bus and its crew leave the
premises at specific times and arrive at the estimated proper time. These, are present in the case
at bar. The driver, the complainant herein, was therefore under constant supervision while in the
performance of this work. He cannot be considered a field personnel. We agree in the above
disquisition. Therefore, as correctly concluded by the appellate court, respondent is not a field
personnel but a regular employee who performs tasks usually necessary and desirable to the
usual trade of petitioner’s business. Accordingly, respondent is entitled to the grant of service
incentive leave.

Same; Same; Prescription; In the computation of the three-year prescriptive period, a

determination must be made as to the period when the act constituting a violation of the
workers’ right to the benefits being claimed was committed.—It is settled jurisprudence that a
cause of action has three elements, to wit, (1) a right in favor of the plaintiff by whatever means
and under whatever law it arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an act or omission on the part of such
defendant violative of the right of the plaintiff or constituting a breach of the obligation of the
defendant to the plaintiff. To properly construe Article 291 of the Labor Code, it is essential to
ascertain the time when the third element of a cause of action transpired. Stated differently, in
the computation of the three-year prescriptive period, a determination must be made as to the
period when the act constituting a violation of the workers’ right to the benefits being claimed
was committed. For if the cause of action accrued more than three (3) years before the filing of
the money claim, said cause of action has already prescribed in accordance with Article 291.

Same; Same; Same; It is essential to recognize that the service incentive leave is a curious animal
in relation to other benefits granted by law to every employee; If the employee entitled to
service incentive leave does not use or commute the same, he is entitled upon his resignation or
separation from work to the commutation of his accrued service incentive leave.—It is essential
at this point, however, to recognize that the service incentive leave is a curious animal in relation
to other benefits granted by the law to every employee. In the case of service incentive leave, the
employee may choose to either use his leave credits or commute it to its monetary equivalent if
not exhausted at the end of the year. Furthermore, if the employee entitled to service incentive
leave does not use or commute the same, he is entitled upon his resignation or separation from
work to the commutation of his accrued service incentive leave. As enunciated by the Court in
Fernandez v. NLRC: The clear policy of the Labor Code is to grant service incentive leave pay to
workers in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the
Implementing Rules and Regulations provides that “[e]very employee who has rendered at least
one year of service shall be entitled to a yearly service incentive leave of five days with pay.”
Service incentive leave is a right which accrues to every employee who has served “within 12
months, whether continuous or broken reckoned from the date the employee started working,
including authorized absences and paid regular holidays unless the working days in the
establishment as a matter of practice or policy, or that provided in the employment contracts, is
less than 12 months, in which case said period shall be considered as one year.” It is also
“commutable to its money equivalent if not used or exhausted at the end of the year.” In other
words, an employee who has served for one year is entitled to it. He may use it as leave days or
he may collect its monetary value. To limit the award to three years, as the solicitor general
recommends, is to unduly restrict such right.

Same; Same; Same; With regard to service incentive leave, the three-year prescriptive period
commences, not at the end of the year when the employee becomes entitled to the
commutation of his service incentive leave, but from the time when the employer refuses to pay
its monetary equivalent after demand or commutation or upon termination of the employee’s
services, as the case may be.—Correspondingly, it can be conscientiously deduced that the cause
of action of an entitled employee to claim his service incentive leave pay accrues from the
moment the employer refuses to remunerate its monetary equivalent if the employee did not
make use of said leave credits but instead chose to avail of its commutation. Accordingly, if the
employee wishes to accumulate his leave credits and opts for its commutation upon his
resignation or separation from employment, his cause of action to claim the whole amount of his
accumulated service incentive leave shall arise when the employer fails to pay such amount at
the time of his resignation or separation from employment. Applying Article 291 of the Labor
Code in light of this peculiarity of the service incentive leave, we can conclude that the three (3)-
year prescriptive period commences, not at the end of the year when the employee becomes
entitled to the commutation of his service incentive leave, but from the time when the employer
refuses to pay its monetary equivalent after demand of commutation or upon termination of the
employee’s services, as the case may be.

Same; Same; Same; Social Justice; The Court’s construal of Art. 291 of the Labor Code, vis-à-vis
the rules on service incentive leave, is in keeping with the rudimentary principle that in the
implementation and interpretation of the provisions of the Labor Code and its implementing
regulations, the workingman’s welfare should be the primordial and paramount consideration.—
The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with
the rudimentary principle that in the implementation and interpretation of the provisions of the
Labor Code and its implementing regulations, the workingman’s welfare should be the
primordial and paramount consideration. The policy is to extend the applicability of the decree
to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection to labor.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 and Resolution2 of the
Court of Appeals affirming the Decision3 of the National Labor Relations Commission (NLRC).
The NLRC ruling modified the Decision of the Labor Arbiter (finding respondent entitled to the
award of 13th month pay and service incentive leave pay) by deleting the award of 13th month
pay to respondent.

The Facts
Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus
Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via
Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on
commission basis, seven percent (7%) of the total gross income per travel, on a twice a month
basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva
Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the
latter vehicle suddenly stopped at a sharp curve without giving any warning.

Respondent averred that the accident happened because he was compelled by the management
to go back to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he
had just arrived in Manila from Roxas, Isabela. Respondent further alleged that he was not
allowed to work until he fully paid the amount of P75,551.50, representing thirty percent (30%)
of the cost of repair of the damaged buses and that despite respondent’s pleas for
reconsideration, the same was ignored by management. After a month, management sent him a
letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money
Claims for nonpayment of 13th month pay and service incentive leave pay against Autobus.

Petitioner, on the other hand, maintained that respon-dent’s employment was replete with
offenses involving reckless imprudence, gross negligence, and dishonesty. To support its claim,
petitioner presented copies of letters, memos, irregularity reports, and warrants of arrest
pertaining to several incidents wherein respondent was involved.

Furthermore, petitioner avers that in the exercise of its management prerogative, respondent’s
employment was terminated only after the latter was provided with an opportunity to explain
his side regarding the accident on 03 January 2000.

On 29 September 2000, based on the pleadings and supporting evidence presented by the
parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision,4 the dispositive portion of
which reads:

“WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal
has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the
complainant the following:

a.his 13th month pay from the date of his hiring to the date of his dismissal, presently computed
at P78,117.87;
b.his service incentive leave pay for all the years he had been in service with the respondent,
presently computed at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for lack of merit.5

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC
which rendered its decision on 28 September 2001, the decretal portion of which reads:

“[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3
provides:

“Section 3. Employers covered.—The Decree shall apply to all employers except to:

x x x      x x x      x x x

e) employers of those who are paid on purely commission, boundary, or task basis, performing a
specific work, irrespective of the time consumed in the performance thereof.

x x x.”

Records show that complainant, in his position paper, admitted that he was paid on a
commission basis.
In view of the foregoing, we deem it just and equitable to modify the assailed Decision by
deleting the award of 13th month pay to the complainant.

...

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th
month pay. The other findings are AFFIRMED.”6

In other words, the award of service incentive leave pay was maintained. Petitioner thus sought
a reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC
dated 31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of
said decision with the Court of Appeals which was subsequently denied by the appellate court in
a Decision dated 06 May 2002, the dispositive portion of which reads:

“WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the assailed
Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in
toto. No costs.”7

Hence, the instant petition.

Issues
1.Whether or not respondent is entitled to service incentive leave;
2.Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor
Code, as amended, is applicable to respondent’s claim of service incentive leave pay.
Ruling of the Court
The disposition of the first issue revolves around the proper interpretation of Article 95 of the
Labor Code vis-à-vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of
the Labor Code which provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage.—This rule shall apply to all employees except:

...

(d) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those
who are paid in a fixed amount for performing work irrespective of the time consumed in the
performance thereof;

...

A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor
Code to apply only to those employees not explicitly excluded by Section 1 of Rule V. According
to the Implementing Rules, 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.”8

The same is true with respect to the phrase “those who are engaged on task or contract basis,
purely commission basis.” Said phrase should 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.9 Hence, employees engaged on task or contract basis or paid
on purely commission basis are not automatically exempted from the grant of service incentive
leave, unless, they fall under the classification of field personnel.

Therefore, petitioner’s contention that respondent is not entitled to the grant of service
incentive leave just because he was paid on purely commission basis is misplaced. What must be
ascertained in order to resolve the issue of propriety of the grant of service incentive leave to
respondent is whether or not he is a field personnel.

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. This definition is further elaborated in the Bureau of Working
Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees
Association10 which states that:

As a general rule, [field personnel] are those whose performance of their job/service is not
supervised by the employer or his representative, the workplace being away from the principal
office and whose hours and days of work cannot be determined with reasonable certainty;
hence, they are paid specific amount for rendering specific service or performing specific work.
If required to be at specific places at specific times, employees including drivers cannot be said
to be field personnel despite the fact that they are performing work away from the principal
office of the employee. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under said advisory
opinion, no employee would ever be considered a field personnel because every employer, in
one way or another, exercises control over his employees. Petitioner further argues that the
only criterion that should be considered is the nature of work of the employee in that, if the
employee’s job requires that he works away from the principal office like that of a messenger or
a bus driver, then he is inevitably a field personnel.

We are not persuaded. At this point, 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. As discussed above, 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.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there are its
inspectors assigned at strategic places who board the bus and inspect the passengers, the
punched tickets, and the conductor’s reports. There is also the mandatory once-a-week car barn
or shop day, where the bus is regularly checked as to its mechanical, electrical, and hydraulic
aspects, whether or not there are problems thereon as reported by the driver and/or conductor.
They too, must be at specific place as [sic] specified time, as they generally observe prompt
departure and arrival from their point of origin to their point of destination. In each and every
depot, there is always the Dispatcher whose function is precisely to see to it that the bus and its
crew leave the premises at specific times and arrive at the estimated proper time. These, are
present in the case at bar. The driver, the complainant herein, was therefore under constant
supervision while in the performance of this work. He cannot be considered a field personnel.11

We agree in the above disquisition. Therefore, as correctly concluded by the appellate court,
respondent is not a field personnel but a regular employee who performs tasks usually
necessary and desirable to the usual trade of petitioner’s business. Accordingly, respondent is
entitled to the grant of service incentive leave.

The question now that must be addressed is up to what amount of service incentive leave pay
respondent is entitled to.

The response to this query inevitably leads us to the correlative issue of whether or not the
three (3)-year prescriptive period under Article 291 of the Labor Code is applicable to
respondent’s claim of service incentive leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-employee
relationship shall be filed within three (3) years from the time the cause of action accrued;
otherwise, they shall be forever barred.

In the application of this section of the Labor Code, the pivotal question to be answered is when
does the cause of action for money claims accrue in order to determine the reckoning date of
the three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of
the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation
on the part of the named defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant violative of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff.12

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the
third element of a cause of action transpired. Stated differently, in the computation of the
three-year prescriptive period, a determination must be made as to the period when the act
constituting a violation of the workers’ right to the benefits being claimed was committed. For if
the cause of action accrued more than three (3) years before the filing of the money claim, said
cause of action has already prescribed in accordance with Article 291.13

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is

established that the benefits being claimed have been withheld from the employee for a period
longer than three (3) years, the amount pertaining to the period beyond the three-year
prescriptive period is therefore barred by prescription. The amount that can only be demanded
by the aggrieved employee shall be limited to the amount of the benefits withheld within three
(3) years before the filing of the complaint.14

It is essential at this point, however, to recognize that the service incentive leave is a curious
animal in relation to other benefits granted by the law to every employee. In the case of service
incentive leave, the employee may choose to either use his leave credits or commute it to its
monetary equivalent if not exhausted at the end of the year.15 Furthermore, if the employee
entitled to service incentive leave does not use or commute the same, he is entitled upon his
resignation or separation from work to the commutation of his accrued service incentive leave.
As enunciated by the Court in Fernandez v. NLRC:16

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations provides that “[e]very employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay.” Service
incentive leave is a right which accrues to every employee who has served “within 12 months,
whether continuous or broken reckoned from the date the employee started working, including
authorized absences and paid regular holidays unless the working days in the establishment as a
matter of practice or policy, or that provided in the employment contracts, is less than 12
months, in which case said period shall be considered as one year.” It is also “commutable to its
money equivalent if not used or exhausted at the end of the year.” In other words, an employee
who has served for one year is entitled to it. He may use it as leave days or he may collect its
monetary value. To limit the award to three years, as the solicitor general recommends, is to
unduly restrict such right.17 [Italics supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled

employee to claim his service incentive leave pay accrues from the moment the employer
refuses to remunerate its monetary equivalent if the employee did not make use of said leave
credits but instead chose to avail of its commutation. Accordingly, if the employee wishes to
accumulate his leave credits and opts for its commutation upon his resignation or separation
from employment, his cause of action to claim the whole amount of his accumulated service
incentive leave shall arise when the employer fails to pay such amount at the time of his
resignation or separation from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave,
we can conclude that the three (3)-year prescriptive period commences, not at the end of the
year when the employee becomes entitled to the commutation of his service incentive leave,
but from the time when the employer refuses to pay its monetary equivalent after demand of
commutation or upon termination of the employee’s services, as the case may be.

The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with
the rudimentary principle that in the implementation and interpretation of the provisions of the
Labor Code and its implementing regulations, the workingman’s welfare should be the
primordial and paramount consideration.18 The policy is to extend the applicability of the
decree to a greater number of employees who can avail of the benefits under the law, which is
in consonance with the avowed policy of the State to give maximum aid and protection to
labor.19

In the case at bar, respondent had not made use of his service incentive leave nor demanded for
its commutation until his employment was terminated by petitioner. Neither did petitioner
compensate his accumulated service incentive leave pay at the time of his dismissal. It was only
upon his filing of a complaint for illegal dismissal, one month from the time of his dismissal, that
respondent demanded from his former employer commutation of his accumulated leave credits.
His cause of action to claim the payment of his accumulated service incentive leave thus accrued
from the time when his employer dismissed him and failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive leave pay only
commenced from the time the employer failed to compensate his accumulated service incentive
leave pay at the time of his dismissal. Since respondent had filed his money claim after only one
month from the time of his dismissal, necessarily, his money claim was filed within the
prescriptive period provided for by Article 291 of the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision
of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.

SO ORDERED.

     Puno (Chairman), Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.

Petition denied, assailed decision affirmed.

Notes.—Although fishermen perform non-agricultural work away from their employer’s
business offices, the fact remains that throughout the duration of their work they are under the
effective control and supervision of the employer through the vessel’s patron or master.
(Mercidar Fishing Corporation vs. National Labor Relations Commission, 297 SCRA 440 [1998])

Piece-rate employees are not entitled to service incentive leave pay as well as holiday pay even
if they are entitled to other benefits like COLA and 13th month pay. (Mark Roche International
vs. National Labor Relations Commission, 313 SCRA 356 [1999])

——o0o——

Auto Bus Transport Systems, Inc. vs. Bautista, 458 SCRA 578, G.R. No. 156367 May 16, 2005
G.R. No. 112574. October 8, 1998.*

MERCIDAR FISHING CORPORATION represented by its President DOMINGO B. NAVAL,

petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and FERMIN AGAO, JR., respondents.

Labor Law; Service Incentive Leave Pay; Words and Phrases; Phrase “Whose Actual Hours of
Work in the Field Cannot be Determined with Reasonable Certainty,” Explained.—In the case of
Union of Filipro Employees (UFE) v. Vicar, this Court explained the meaning of the phrase “whose
actual hours of work in the field cannot be determined with reasonable certainty” in Art. 82 of
the Labor Code, as follows: Moreover, the requirement that “actual hours of work in the field
cannot be determined with reasonable certainty” must be read in conjunction with Rule IV, Book
III of the Implementing Rules which provides: Rule IV Holidays with Pay. Section 1. Coverage—
This rule shall apply to all employees except: . . . . (e) Field personnel and other employees whose
time and performance is unsupervised by the employer x x x (Italics supplied) While contending
that such rule added another element not found in the law (Rollo, p. 13), the petitioner
nevertheless attempted to show that its affected members are not covered by the
abovementioned rule. The petitioner asserts that the company’s sales personnel are strictly
supervised as shown by the SOD (Supervisor of the Day) schedule and the company circular
dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55). Contrary to the contention of the
petitioner, the Court finds that the aforementioned rule did not add another element to the
Labor Code definition of field personnel. The clause “whose time and performance is
unsupervised by the employer” did not amplify but merely interpreted and expounded the clause
“whose actual hours of work in the field cannot be determined with reasonable certainty.” The
former clause is still within the scope and purview of Article 82 which defines field personnel.
Hence, in deciding whether or not an employee’s actual working hours in the field can be
determined with reasonable certainty, query must be made as to whether or not such
employee’s time and performance is constantly supervised by the employer.

Same; Same; Same; Fishermen; Although fishermen perform non-agricultural work away from
their employer’s business offices, the fact remains that throughout the duration of their work
they are under the effective control and supervision of the employer through the vessel’s patron
or master.—In contrast, in the case at bar, during the entire course of their fishing voyage,
fishermen employed by petitioner have no choice but to remain on board its vessel. Although
they perform non-agricultural work away from petitioner’s business offices, the fact remains
that throughout the duration of their work they are under the effective control and supervision
of petitioner through the vessel’s patron or master as the NLRC correctly held.

Same; Administrative Law; Evidence; It is trite to say that the factual findings of quasi-judicial
bodies are generally binding as long as they are supported substantially by evidence in the
record of the case.—It is trite to say that the factual findings of quasi-judicial bodies are
generally binding as long as they are supported substantially by evidence in the record of the
case. This is especially so where, as here, the agency and its subordinate who heard the case in
the first instance are in full agreement as to the facts.

MENDOZA, J.:

This is a petition for certiorari to set aside the decision, dated August 30, 1993, of the National
Labor Relations Commission dismissing the appeal of petitioner Mercidar Fishing Corporation
from the decision of the Labor Arbiter in NLRC NCR Case No. 09-05084-90, as well as the
resolution dated October 25, 1993, of the NLRC denying reconsideration.

This case originated from a complaint filed on September 20, 1990 by private respondent
Fermin Agao, Jr. against petitioner for illegal dismissal, violation of P.D. No. 851, and non-
payment of five days service incentive leave for 1990. Private respondent had been employed as
a “bodegero” or ship’s quartermaster on February 12, 1988. He complained that he had been
constructively dismissed by petitioner when the latter refused him assignments aboard its boats
after he had reported to work on May 28, 1990.1
Private respondent alleged that he had been sick and thus allowed to go on leave without pay
for one month from April 28, 1990 but that when he reported to work at the end of such period
with a health clearance, he was told to come back another time as he could not be reinstated
immediately. Thereafter, petitioner refused to give him work. For this reason, private
respondent asked for a certificate of employment from petitioner on September 6, 1990.
However, when he came back for the certificate on September 10, petitioner refused to issue
the certificate unless he submitted his resignation. Since private respondent refused to submit
such letter unless he was given separation pay, petitioner prevented him from entering the
premises.2

Petitioner, on the other hand, alleged that it was private respondent who actually abandoned
his work. It claimed that the latter failed to report for work after his leave had expired and was,
in fact, absent without leave for three months until August 28, 1998. Petitioner further claims
that, nonetheless, it assigned private respondent to another vessel, but the latter was left
behind on September 1, 1990. Thereafter, private respondent asked for a certificate of
employment on September 6 on the pretext that he was applying to another fishing company.
On September 10, 1990, he refused to get the certificate and resign unless he was given
separation pay.3

On February 18, 1992, Labor Arbiter Arthur L. Amansec rendered a decision disposing of the
case as follows:

ACCORDINGLY, respondents are ordered to reinstate complainant with backwages, pay him his
13th month pay and incentive leave pay for 1990.

All other claims are dismissed.

SO ORDERED.

Petitioner appealed to the NLRC which, on August 30, 1993, dismissed the appeal for lack of
merit. The NLRC dismissed petitioner’s claim that it cannot be held liable for service incentive
leave pay by fishermen in its employ as the latter supposedly are “field personnel” and thus not
entitled to such pay under the Labor Code.4

The NLRC likewise denied petitioner’s motion for reconsideration of its decision in its order
dated October 25, 1993.

Hence, this petition. Petitioner contends:

THE RESPONDENT COMMISSION PALPABLY ERRED IN RULING AND SUSTAINING THE VIEW THAT
FISHING CREW MEMBERS, LIKE FERMIN AGAO, JR., CANNOT BE CLASSIFIED AS FIELD PERSONNEL
UNDER ARTICLE 82 OF THE LABOR CODE.

II

THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OF JURISDICTION WHEN IT UPHELD THE FINDINGS OF THE LABOR ARBITER THAT HEREIN
PETITIONER HAD CONSTRUCTIVELY DISMISSED FERMIN AGAO, JR., FROM EMPLOYMENT.

The petition has no merit.

Art. 82 of the Labor Code provides:

ART. 82. Coverage.—The provisions of this Title [Working Conditions and Rest Periods] shall
apply to employees in all establishments and undertakings whether for profit or not, but not to
government employees, field personnel, members of the family of the employer who are
dependent on him for support, domestic helpers, persons in the personal service of another,
and workers who are paid by results as determined by the Secretary of Labor in appropriate
regulations.

....

“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.

Petitioner argues essentially that since the work of private respondent is performed away from
its principal place of business, it has no way of verifying his actual hours of work on the vessel. It
contends that private respondent and other fishermen in its employ should be classified as
“field personnel” who have no statutory right to service incentive leave pay.

In the case of Union of Filipro Employees (UFE) v. Vicar,5 this Court explained the meaning of
the phrase “whose actual hours of work in the field cannot be determined with reasonable
certainty” in Art. 82 of the Labor Code, as follows:

Moreover, the requirement that “actual hours of work in the field cannot be determined with
reasonable certainty” must be read in conjunction with Rule IV, Book III of the Implementing
Rules which provides:

Rule IV Holidays with Pay

Section 1. Coverage—This rule shall apply to all employees except:

....

(e) Field personnel and other employees whose time and performance is unsupervised by the
employer xxx (Italics supplied)

While contending that such rule added another element not found in the law (Rollo, p. 13), the
petitioner nevertheless attempted to show that its affected members are not covered by the
abovementioned rule. The petitioner asserts that the company’s sales personnel are strictly
supervised as shown by the SOD (Supervisor of the Day) schedule and the company circular
dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).

Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did
not add another element to the Labor Code definition of field personnel. The clause “whose
time and performance is unsupervised by the employer” did not amplify but merely interpreted
and expounded the clause “whose actual hours of work in the field cannot be determined with
reasonable certainty.” The former clause is still within the scope and purview of Article 82 which
defines field personnel. Hence, in deciding whether or not an employee’s actual working hours
in the field can be determined with reasonable certainty, query must be made as to whether or
not such employee’s time and performance is constantly supervised by the employer.6

Accordingly, it was held in the aforementioned case that salesmen of Nestle Philippines, Inc.
were field personnel:

It is undisputed that these sales personnel start their field work at 8:00 a.m. after having
reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-
based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the
sales personnel’s working hours which can be determined with reasonable certainty.

The Court does not agree. The law requires that the actual hours of work in the field be
reasonably ascertained. The company has no way of determining whether or not these sales
personnel, even if they report to the office before 8:00 a.m. prior to field work and come back at
4:30 p.m., really spend the hours in between in actual field work.7

In contrast, in the case at bar, during the entire course of their fishing voyage, fishermen
employed by petitioner have no choice but to remain on board its vessel. Although they perform
non-agricultural work away from petitioner’s business offices, the fact remains that throughout
the duration of their work they are under the effective control and supervision of petitioner
through the vessel’s patron or master as the NLRC correctly held.8

Neither did petitioner gravely abuse its discretion in ruling that private respondent had
constructively been dismissed by petitioner. Such factual finding of both the NLRC and the Labor
Arbiter is based not only on the pleadings of the parties but also on a medical certificate of
fitness which, contrary to petitioner’s claim, private respondent presented when he reported to
work on May 28, 1990.9 As the NLRC held:

Anent grounds (a) and (b) of the appeal, the respondent, in a nutshell, would like us to believe
that the Arbiter abused his discretion (or seriously erred in his findings of facts) in giving
credence to the factual version of the complainant. But it is settled that “(W)hen confronted
with conflicting versions of factual matters,” the Labor Arbiter has the “discretion to determine
which party deserves credence on the basis of evidence received.” [Gelmart Industries (Phils.),
Inc. vs. Leogardo, 155 SCRA 403, 409, L-70544, November 5, 1987]. And besides, it is settled in
this jurisdiction that “to constitute abandonment of position, there must be concurrence of the
intention to abandon and some overt acts from which it may be inferred that the employee
concerned has no more interest in working” (Dagupan Bus Co., Inc. vs. NLRC, 191 SCRA 328), and
that the filing of the complaint which asked for reinstatement plus backwages (Record, p. 20) is
inconsistent with respondents’ defense of abandonment (Hua Bee Shirt Factory vs. NLRC, 188
SCRA 586).10

It is trite to say that the factual findings of quasi-judicial bodies are generally binding as long as
they are supported substantially by evidence in the record of the case.11 This is especially so
where, as here, the agency and its subordinate who heard the case in the first instance are in
full agreement as to the facts.12

As regards the labor arbiter’s award which was affirmed by respondent NLRC, there is no reason
to apply the rule that reinstatement may not be ordered if, as a result of the case between the
parties, their relation is strained.13 Even at this late stage of this dispute, petitioner continues to
reiterate its offer to reinstate private respondent.14

WHEREFORE, the petition is DISMISSED.

SO ORDERED.
     Regalado (Actg. C.J., Chairman), Melo, Puno and Martinez, JJ., concur.
Petition dismissed.

Notes.—An employee who falls squarely under the category of “officers or members of a
managerial staff” is exempted from payment of overtime pay, premium pay for holidays and rest
days and service incentive leave pay. (Salazar vs. National Labor Relations Commission, 256
SCRA 273 [1996])

It is clear in the law, Art. 287 of the Labor Code, as amended by R.A. 7641, that the term “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 plus 5 days of service incentive leave. (Capitol Wireless, Inc. vs. Confesor,
264 SCRA 68 [1996])——o0o—— Mercidar Fishing Corporation vs. NLRC, 297 SCRA 440, G.R. No.
112574 October 8, 1998
G.R. No. 160325. October 4, 2007.*

ROQUE S. DUTERTE, petitioner, vs. KINGSWOOD TRADING CO., INC., FILEMON LIM and
NATIONAL LABOR RELATIONS COMMISSION, respondents.

Labor Law; Dismissals; The employer, before it can legally dismiss its employee on the ground of
disease, must adduce a certification from a competent public authority that the disease of which
its employee is suffering is of such nature or at such a stage that it cannot be cured within a
period of six months even with proper treatment.—The law is unequivocal: the employer, before
it can legally dismiss its employee on the ground of disease, must adduce a certification from a
competent public authority that the disease of which its employee is suffering is of such nature
or at such a stage that it cannot be cured within a period of six months even with proper
treatment. Here, the record does not contain the required certification. And when the
respondents asked the petitioner to look for another job because he was unfit to work, such
unilateral declaration, even if backed up by the findings of its company doctors, did not meet the
quantum requirement mandated by the law, i.e., there must be a certification by a competent
public authority.

Same; Same; Why the submission of the requisite medical certificate is for the employer’s
compliance explained in Triple Eight Integrated Services, Inc. vs. National Labor Relations
Commission (NLRC), 299 SCRA 608 (1998).—In Triple Eight Integrated Services, Inc. v. NLRC, 299
SCRA 608 (1998), the Court explains why the submission of the requisite medical certificate is for
the employer’s compliance, thus: The requirement for a medical certificate under Article 284 of
the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and
arbitrary determination by the employer of the gravity or extent of the employee’s illness and
thus defeat the public policy on the protection of labor.

Same; Nature of Employment; Field Employees; To determine 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.—If required to be at specific places at specific times,
employees, including drivers, cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employer. Thus, to determine 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.

GARCIA, J.:

By this petition for review on certiorari, petitioner Roque S. Duterte seeks the review and setting
aside of the decision1 dated June 20, 2003 of the Court of Appeals (CA) in CA-G.R. SP No. 71729,
as reiterated in its resolution2 of October 5, 2003, affirming an earlier resolution3 of the
National Labor Relations Commission (NLRC) which ruled that petitioner was not illegally
dismissed from employment due to disease under Article 284 of the Labor Code.

The facts:

In September 1993, petitioner was hired as truck/trailer driver by respondent Kingswood

Trading Company, Inc. (KTC) of which co-respondent Filemon Lim is the President. Petitioner
was on the 6:00 a.m.–6:00 p.m. shift. He averaged 21 trips per month, getting P700 per trip.
When not driving, petitioner was assigned to clean and maintain respondent KTC’s equipment
and vehicles for which he was paid P125 per day. Regularly, petitioner would be seconded by
respondent Filemon Lim to drive for one of KTC’s clients, the Philippine National Oil Corporation,
but always subject to respondents’ convenience.
On November 8, 1998, petitioner had his first heart attack and was confined for two weeks at
the Philippine Heart Center (PHC). This was confirmed by respondent KTC which admitted that
petitioner was declared on sick leave with corresponding notification.

A month later, petitioner returned to work armed with a medical certificate signed by his
attending physician at the PHC, attesting to petitioner’s fitness to work. However, said certificate
was not honored by the respondents who refused to allow petitioner to work.

In February 1999, petitioner suffered a second heart attack and was again confined at the PHC.
Upon release, he stayed home and spent time to recuperate.

In June 1999, petitioner attempted to report back to work but was told to look for another job
because he was unfit. Respondents refused to declare petitioner fit to work unless physically
examined by the company physician. Respondents’ promise to pay petitioner his separation pay
turned out to be an empty one. Instead, petitioner was presented, for his signature, a document
as proof of his receipt of the amount of P14,375.00 as first installment of his Social Security
System (SSS) benefits. Having received no such amount, petitioner refused to affix his signature
thereon and instead requested for the necessary documents from respondents to enable him to
claim his SSS benefits, but the latter did not heed his request.

On November 11, 1999, petitioner filed against his employer a complaint for illegal dismissal and
damages.

In a decision4 dated September 26, 2000, the labor arbiter found for the petitioner. However,
while categorically declaring that petitioner’s dismissal was illegal, the labor arbiter, instead of
applying Article 2795 of the Labor Code on illegal dismissals, applied Article 284 on Disease as
ground for termination on the rationale that since the respondents admitted that petitioner
could not be allowed back to work because of the latter’s disease, the case fell within the ambit
of Article 284. We quote the fallo of the labor arbiter’s decision:

“WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring complainant
to have been terminated from employment on the ground that he has been suffering from a
disease.

Respondents are hereby directed to pay complainant as follows:

1.Separation pay equivalent to one-half (1/2) month salary for every year of service computed
at six (6) years of service in the amount of Forty-Two Thousand (P42,000.00) Pesos.
2.Holiday pay for three (3) years in the amount of Twenty-One Thousand (P21,000.00) Pesos;
and
3.Service Incentive Leave pay for three (3) years in the amount of Ten Thousand (P10,000.00)
Pesos.
All other claims herein sought are hereby denied for lack of merit and factual basis.

SO ORDERED.”

On respondents’ appeal, the NLRC, in its Resolution6 of April 24, 2002, set aside the labor
arbiter’s decision, ruling that Article 284 of the Labor Code has no application to this case, there
being “no illegal dismissal to speak of.” The NLRC accordingly dismissed petitioner’s complaint
for illegal dismissal, thus:

“WHEREFORE, the decision appealed from is VACATED and SET ASIDE.7 A new one is hereby
entered DISMISSING the instant case for lack of merit.”

Therefrom, petitioner went on certiorari to the CA in CA-G.R. SP No. 71729. In the herein
assailed decision dated June 20, 2003, the CA upheld the NLRC Resolution, saying that the
Commission committed no grave abuse of discretion in holding that petitioner was not illegally
dismissed and could not be granted any relief. With his motion for a reconsideration having
been denied by the CA in its resolution of October 5, 2003, petitioner is now with this Court via
the present recourse.

We REVERSE.

At bottom, this case involves the simple issue of the legality of one’s termination from
employment made complicated, however, by over analysis. Simply put, the question at hand
pivots on who has the onus of presenting the necessary medical certificate to justify what would
otherwise be classified as legal or illegal, as the case may be, dismissal from the service. The
following may be another formulation of the issue: For purposes of Article 284 of the Labor
Code, would the dismissal of an employee on the ground of disease under the said Article 284
still require the employer to present a certification from a competent public health authority
that the disease is of such a nature that it could not be cured within a period of six months even
with proper medical treatment? To both the NLRC and the CA, a dismissal on the ground of
disease under Article 284 of the Code is illegal only if the employee himself presents the
required certification from the proper health authority. Since, as in this case, petitioner failed to
produce such certification, his dismissal could not be illegal.

In the precise words of the NLRC which the CA effectively affirmed:

“Neither can it be gainsaid that Article 284 of the Labor Code applies in the instant case since
the complainant [petitioner] failed to establish that he is suffering from a disease and his
continued employment is prohibited by law or prejudicial to his health or to the health of his co-
employees nor was he able to prove that his illness is of such nature or at such stage that it
cannot be cured within a period of six months even with proper treatment.8

In order for the complainant to be covered by Article 284 of the Labor Code, he must first
present a certification by a competent public health authority that his continued employment
will result in the aforesaid consequences, but unfortunately for the complainant, we find none
in the instant case. For the respondents to require the complainant to submit a medical
certificate showing that he is already physically fit as a condition of his continued employment
under the prevailing circumstance cannot be considered as neither harsh nor oppressive. x x x

Prescinding from the above, there is no illegal dismissal to speak of. This finding is further
strengthened by the fact that no termination letter or formal notice of dismissal was adduced to
prove that complainant’s services have been terminated. Considering that no illegal dismissal
took place, the complainant’s claim that his right to due process of law had been violated finds
no application to the case at bar. (Emphasis added).”

The Court disagrees with the NLRC and CA. Article 284 of the Labor Code explicitly provides:

“Art. 284. DISEASE AS GROUND FOR TERMINATION.—An employer may terminate the services
of an employee who has been 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: Provided, That he is paid separation pay equivalent to at least one (1) month salary
or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1) whole year.”

Corollarily, in order to validly terminate employment on the basis of disease, Book VI, Rule I,
Section 8 of the Omnibus Implementing Rules of the Labor Code requires:

“Disease as a ground for dismissal.—Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his health or to the health of his co-
employees, the employer shall not terminate his employment 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. If the
disease or ailment can be cured within the period, the employer shall not terminate the
employee but shall ask the employee to take a leave. The employer shall reinstate such
employee to his former position immediately upon the restoration of his normal health. (Book
VI, Rule 1, Sec. 8 of the Implementing Rules)”

In a very real sense, both the NLRC and the appellate court placed on the petitioner the burden
of establishing, by a certification of a competent public authority, that his ailment is such that it
cannot be cured within a period of six months even with proper medical treatment. And
pursuing their logic, petitioner could not claim having been illegally dismissed due to disease,
failing, as he did, to present such certification.

To be sure, the NLRC’s above posture is, to say the least, without basis in law and jurisprudence.
And when the CA affirmed the NLRC, the appellate court in effect placed on the petitioner the
onus of proving his entitlement to separation pay and thereby validated herein respondents’ act
of dismissing him from employment even without proof of existence of a legal ground for
dismissal.

The law is unequivocal: the employer, before it can legally dismiss its employee on the ground of
disease, must adduce a certification from a competent public authority that the disease of which
its employee is suffering is of such nature or at such a stage that it cannot be cured within a
period of six months even with proper treatment.

Here, the record does not contain the required certification. And when the respondents asked
the petitioner to look for another job because he was unfit to work, such unilateral declaration,
even if backed up by the findings of its company doctors, did not meet the quantum
requirement mandated by the law, i.e., there must be a certification by a competent public
authority.9

For sure, the posture taken by both the NLRC and the CA is inconsistent with this Court’s
pronouncement in Tan v. National Labor Relations Commission,10 thus:

“Consistent with the Labor Code state policy of affording protection to labor and of liberal
construction of labor laws in favor of the working class, Sec. 8, Rule 1, Book VI, of the Omnibus
Rules Implementing the Labor Code provides—Where the employee suffers from a disease and
his continued employment is prohibited by law or prejudicial to his health or to the health of his
co-employees, the employer shall not terminate his employment, unless there is a certification
by a competent public 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. There is
absolutely nothing on record to show that such a certification was ever obtained by [the
employer] much less that one was issued by a competent public authority …[o]n the contrary,
what appears on record is a Medical Certificate dated May 5, 1999 issued by Dr. Lenita C. de
Castro certifying to the contrary, i.e., that [the employee] was in fact already fit to return to
work. However, [the employer] did not accept the certificate and insisted that [the employee]
present one issued by a government physician. For his failure to present such a certificate, [the
employee] was penalized with dismissal. Obviously, the condition imposed by [the employer]
finds no basis under the law. To reiterate, contrary to [the employer’s] insistence that [the
employee] first obtain a medical certificate attesting that he was already cured of pulmonary
tuberculosis, the abovequoted Sec. 9, Rule 1, Book VI, of the Omnibus Rules is clear that the
burden is upon [the employer] not [the employee] to justify the dismissal with a certificate
public authority that [the employee’s] disease is at such stage or of such nature that it cannot be
cured within six (6) months even with proper medical treatment. For [the employer’s] blatant
failure to present one, we can only rule that [the employee’s] dismissal, like that of Garrido, is
illegal, invalid and unjustified. (Emphasis and words in brackets supplied.)”

In Triple Eight Integrated Services, Inc. v. NLRC,11 the Court explains why the submission of the
requisite medical certificate is for the employer’s compliance, thus:
“The requirement for a medical certificate under Article 284 of the Labor Code cannot be
dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the
employer of the gravity or extent of the employee’s illness and thus defeat the public policy on
the protection of labor.”

In thus ruling out an illegal dismissal situation in the instant case, the CA effectively agreed with
the NLRC’s view that the fact of dismissal must be evidenced by positive and overt acts, citing
Veterans Phil. Scout Security Agency v. NLRC.12 Said case, however, is not on all fours with the
present one. In Veterans, the employer offered the complainantemployee a monthly cash
allowance and other benefit pending a new assignment. Therein, the employee was not
forthrightly nor constructively dismissed. In fact, the employee in Veterans was found to be in
bad faith as he filed his complaint for illegal dismissal the day immediately after he accepted the
company’s offer of employment benefits. Hence, the Court’s ruling in Veterans that the fact of
dismissal must be evidenced by positive and overt acts indicating the intention to dismiss. These
considerations do not obtain here. Petitioner was not allowed back to work. Neither did he
receive any monetary assistance from his employer, and, worse, respondents refused to give
him the necessary documents to enable him to claim his SSS benefits.

Much was made by the NLRC—and the CA—about petitioner’s refusal to comply with
respondents’ order to submit a medical certificate—irresistibly implying that such refusal is what
constrained them to refuse to take petitioner back in.

We are not persuaded.

Even assuming, in gratia argumenti, that petitioner committed what may be considered an act of
insubordination for refusing to present a medical certificate, such offense, without more,
certainly did not warrant the latter’s placement in a floating status, a veritable dismissal, and
deprived of his only source of livelihood.

We are not unmindful of the connection between the nature of petitioner’s disease and his job
as a truck/trailer driver. We are also fully aware that petitioner’s job places at stake the safety of
the public. However, we do not agree with the NLRC that petitioner was validly dismissed
because his continued employment was prohibited by the basic legal mandate that reasonable
diligence must be exercised to prevent prejudice to the public, which justified respondents in
refusing work to petitioner. Petitioner could have been admitted back to work performing other
tasks, such as cleaning and maintaining respondent company’s machine and transportation
assets.

As a final consideration, the Court notes that the NLRC, as sustained by the CA, considered the
petitioner as a field worker and, on that basis, denied his claim for benefits under Articles 9413
to 9514 of the Labor Code, such as holiday pay and service incentive leave pay. Article 82 of the
Code lists personnel who are not entitled to the benefits aforementioned.15 Among the
excluded group are “field personnel,” referring 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. As
a general proposition, field personnel are those whose job/service are not or cannot be
effectively monitored by the employer or his representative, their workplace being away from
the principal office and whose hours and days of work cannot be determined with reasonable
certainty. Field personnel are paid specific amount for rendering specific service or performing
specific work.

If required to be at specific places at specific times, employees, including drivers, cannot be said
to be field personnel despite the fact that they are performing work away from the principal
office of the employer. Thus, to determine 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.16
Guided by the foregoing norms, petitioner was definitely a regular employee of respondent
company and not its field personnel, as the term is used in the Labor Code. As it were, he was
based at the principal office of the respondent company. His actual work hours, i.e., from 6:00
a.m. to 6:00 p.m., were ascertainable with reasonable certainty. He averaged 21 trips per
month. And if not driving for the company, he was paid P125.00 per day for cleaning and
maintaining KTC’s equipment. Not falling under the category of field personnel, petitioner is
consequently entitled to both holiday pay and service incentive leave pay, as mandated by
Articles 94 and 95 of the Labor Code.

All told, we rule and so hold that petitioner’s dismissal did not comply with both the substantive
and procedural aspects of due process. Clearly, his dismissal is tainted with invalidity.17

WHEREFORE, the assailed decision of the CA in CA-G.R. SP No. 71729 is REVERSED and SET
ASIDE. Respondents are declared guilty of illegal dismissal and are ordered to pay petitioner
separation pay equivalent to one (1) month pay for every year of service, in lieu of his
reinstatement, plus his full backwages from the time his employment was terminated up to the
time this Decision becomes final. For this purpose, let this case be REMANDED to the labor
arbiter for the computation of petitioner’s separation pay, backwages and other monetary
awards due him.

Costs against respondents.

SO ORDERED.

     Puno (C.J., Chairperson), Sandoval-Gutierrez, Corona and Azcuna, JJ., concur.

Judgment reversed and set aside.

Note.—The law as it now stands requires the claimant to prove a positive thing—that the illness
was caused by employment and the risk of contracting the disease is increased by the working
conditions. (Orate vs. Court of Appeals, 399 SCRA 513 [2003])

——o0o—— Duterte vs. Kingswood Trading Co., Inc., 534 SCRA 607, G.R. No. 160325 October 4,
2007
G.R. No. 119205. April 15, 1998.*

SIME DARBY PILIPINAS, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (2ND
DIVISION) and SIME DARBY SALARIED EMPLOYEES ASSOCIATION (ALU-TUCP), respondents.

Labor Law; Management Prerogatives; Work Schedules; The right to fix the work schedules of
the employees rests principally on their employer.—We agree, hence, we sustain petitioner. The
right to fix the work schedules of the employees rests principally on their employer. In the instant
case petitioner, as the employer, cites as reason for the adjustment the efficient conduct of its
business operations and its improved production. It rationalizes that while the old work schedule
included a 30-minute paid lunch break, the employees could be called upon to do jobs during
that period as they were “on call.” Even if denominated as lunch break, this period could very
well be considered as working time because the factory employees were required to work if
necessary and were paid accordingly for working. With the new work schedule, the employees
are now given a one-hour lunch break without any interruption from their employer. For a full
one-hour undisturbed lunch break, the employees can freely and effectively use this hour not
only for eating but also for their rest and comfort which are conducive to more efficiency and
better performance in their work. Since 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. Besides, the new schedule applies to
all employees in the factory similarly situated whether they are union members or not.

Same; Same; Same; Right to Self-Organization; Where the change effected by management with
regard to working time is made to apply to all factory employees engaged in the same line of
work whether or not they are members of the union, it cannot be said that the new scheme
adopted by management prejudices the right of the union to self-organization.—The case before
us does not pertain to any controversy involving discrimination of employees but only the issue
of whether the change of work schedule, which management deems necessary to increase
production, constitutes unfair labor practice. As shown by the records, the change effected by
management with regard to working time is made to apply to all factory employees engaged in
the same line of work whether or not they are members of private respondent union. Hence, it
cannot be said that the new scheme adopted by management prejudices the right of private
respondent to self-organization.

Same; Same; Even as the law is solicitous of the welfare of the employees, it must also protect
the right of an employer to exercise what are clearly management prerogatives; Management
retains the prerogative, whenever exigencies of the service so require, to change the working
hours of its employees.—Every business enterprise endeavors to increase its profits. In the
process, it may devise means to attain that goal. Even as the law is solicitous of the welfare of
the employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives. Thus, 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. Further, management retains the prerogative,
whenever exigencies of the service so require, to change the working hours of its employees. So
long as such prerogative is exercised in good faith for the advancement of the employer’s
interest and not for the purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold such exercise.

Same; Same; Social Justice; Although the Supreme Court has inclined more often than not
toward the worker and has upheld his cause in his conflicts with the employer, such favoritism
has not blinded the Court to the rule that justice is in every case for the deserving, to be
dispensed in the light of the established facts and the applicable law and doctrine.—While the
Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every dispute will be automatically decided in favor of labor.
Management also has rights which, as such, are entitled to respect and enforcement in the
interest of simple fair play. Although this Court has inclined more often than not toward the
worker and has upheld his cause in his conflicts with the employer, such favoritism has not
blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in the
light of the established facts and the applicable law and doctrine.

BELLOSILLO, J.:

Is the act of management in revising the work schedule of its employees and discarding their
paid lunch break constitutive of unfair labor practice?

Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes
and other rubber products. Sime Darby Salaried Employees Association (ALUTUCP), private
respondent, is an association of monthly salaried employees of petitioner at its Marikina factory.
Prior to the present controversy, all company factory workers in Marikina including members of
private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30-minute paid “on call”
lunch break.

On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all
its monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and
Quality Assurance Department working on shifts, a change in work schedule effective 14
September 1992 thus—

TO: ALL FACTORY-BASED EMPLOYEES

RE: NEW WORK SCHEDULE

Effective Monday, September 14, 1992, the new work schedule of the factory office will be as
follows:

     7:45 A.M. - 4:45 P.M. (Monday to Friday)

     7:45 A.M. - 11:45 A.M. (Saturday).

Coffee break time will be ten minutes only anytime between:

     9:30 A.M. - 10:30 A.M. and

     2:30 P.M. - 3:30 P.M.

Lunch break will be between:

     12:00 NN - 1:00 P.M. (Monday to Friday).

Excluded from the above schedule are the Warehouse and QA employees who are on shifting.
Their work and break time schedules will be maintained as it is now.1

Since private respondent felt affected adversely by the change in the work schedule and
discontinuance of the 30-minute paid “on call” lunch break, it filed on behalf of its members a
complaint with the Labor Arbiter for unfair labor practice, discrimination and evasion of liability
pursuant to the resolution of this Court in Sime Darby International Tire Co, Inc. v. NLRC.2
However, the Labor Arbiter dismissed the complaint on the ground that the change in the work
schedule and the elimination of the 30-minute paid lunch break of the factory workers
constituted a valid exercise of management prerogative and that the new work schedule, break
time and one-hour lunch break did not have the effect of diminishing the benefits granted to
factory workers as the working time did not exceed eight (8) hours.
The Labor Arbiter further held that the factory workers would be unjustly enriched if they
continued to be paid during their lunch break even if they were no longer “on call” or required
to work during the break. He also ruled that the decision in the earlier Sime Darby case3 was not
applicable to the instant case because the former involved discrimination of certain employees
who were not paid for their 30-minute lunch break while the rest of the factory workers were
paid; hence, this Court ordered that the discriminated employees be similarly paid the
additional compensation for their lunch break.

Private respondent appealed to respondent National Labor Relations Commission (NLRC) which
sustained the Labor Arbiter and dismissed the appeal.4 However, upon motion for
reconsideration by private respondent, the NLRC, this time with two (2) new commissioners
replacing those who earlier retired, reversed its earlier decision of 20 April 1994 as well as the
decision of the Labor Arbiter.5 The NLRC considered the decision of this Court in the Sime Darby
case of 1990 as the law of the case wherein petitioner was ordered to pay “the money value of
these covered employees deprived of lunch and/or working time breaks.” The public respondent
declared that the new work schedule deprived the employees of the benefits of a time-honored
company practice of providing its employees a 30-minute paid lunch break resulting in an unjust
diminution of company privileges prohibited by Art. 100 of the Labor Code, as amended. Hence,
this petition alleging that public respondent committed grave abuse of discretion amounting to
lack or excess of jurisdiction: (a) in ruling that petitioner committed unfair labor practice in the
implementation of the change in the work schedule of its employees from 7:45 a.m.-3:45 p.m.
to 7:45 a.m.-4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in holding that
there was diminution of benefits when the 30-minute paid lunch break was eliminated; (c) in
failing to consider that in the earlier Sime Darby case affirming the decision of the NLRC,
petitioner was authorized to discontinue the practice of having a 30-minute paid lunch break
should it decide to do so; and, (d) in ignoring petitioner’s inherent management prerogative of
determining and fixing the work schedule of its employees which is expressly recognized in the
collective bargaining agreement between petitioner and private respondent.

The Office of the Solicitor General filed in lieu of comment a manifestation and motion
recommending that the petition be granted, alleging that the 14 August 1992 memorandum
which contained the new work schedule was not discriminatory of the union members nor did it
constitute unfair labor practice on the part of petitioner.

We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees
rests principally on their employer. In the instant case petitioner, as the employer, cites as
reason for the adjustment the efficient conduct of its business operations and its improved
production.6 It rationalizes that while the old work schedule included a 30-minute paid lunch
break, the employees could be called upon to do jobs during that period as they were “on call.”
Even if denominated as lunch break, this period could very well be considered as working time
because the factory employees were required to work if necessary and were paid accordingly
for working. With the new work schedule, the employees are now given a one-hour lunch break
without any interruption from their employer. For a full one-hour undisturbed lunch break, the
employees can freely and effectively use this hour not only for eating but also for their rest and
comfort which are conducive to more efficiency and better performance in their work. Since 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.8

Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime
Darby case9 with the facts obtaining in this case. That ruling in the former case is not applicable
here. The issue in that case involved the matter of granting lunch breaks to certain employees
while depriving the other employees of such breaks. This Court affirmed in that case the NLRC’s
finding that such act of management was discriminatory and constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of employees
but only the issue of whether the change of work schedule, which management deems
necessary to increase production, constitutes unfair labor practice. As shown by the records, the
change effected by management with regard to working time is made to apply to all factory
employees engaged in the same line of work whether or not they are members of private
respondent union. Hence, it cannot be said that the new scheme adopted by management
prejudices the right of private respondent to self-organization.

Every business enterprise endeavors to increase its profits. In the process, it may devise means
to attain that goal. Even as the law is solicitous of the welfare of the employees, it must also
protect the right of an employer to exercise what are clearly management prerogatives.10 Thus,
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.11 Further, management retains the prerogative, whenever exigencies of the service so
require, to change the working hours of its employees. So long as such prerogative is exercised
in good faith for the advancement of the employer’s interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold such exercise.12

While the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be supposed that every dispute will be automatically decided in
favor of labor. Management also has rights which, as such, are entitled to respect and
enforcement in the interest of simple fair play. Although this Court has inclined more often than
not toward the worker and has upheld his cause in his conflicts with the employer, such
favoritism has not blinded the Court to the rule that justice is in every case for the deserving, to
be dispensed in the light of the established facts and the applicable law and doctrine.13

WHEREFORE, the petition is GRANTED. The Resolution of the National Labor Relations
Commission dated 29 November 1994 is SET ASIDE and the decision of the Labor Arbiter dated
26 November 1993 dismissing the complaint against petitioner for unfair labor practice is
AFFIRMED.

SO ORDERED.

     Davide, Jr. (Chairman), Vitug, Panganiban and Quisumbing, JJ., concur.

Petition granted.

Notes.—The prerogative of the employer to transfer an employee from one work station to
another is not unlimited. (Gonpu Services Corporation vs. National Labor Relations Commission,
266 SCRA 657 [1997])

While the employer is not precluded from prescribing rules and regulations to govern the
conduct of his employees, these rules and their implementation must be fair, just and
reasonable. (Brew Master International, Inc. vs. National Federation of Labor Unions [NAFLU],
271 SCRA 275 [1997])

It is not the function of the law nor its intent to supplant the prerogative of management in
running its business, such as, to compel the latter to operate at a continuing loss. (Reahs
Corporation vs. National Labor Relations Commission, 271 SCRA 247 [1997])

——o0o—— Sime Darby Pilipinas, Inc. vs. NLRC (2nd Division), 289 SCRA 86, G.R. No. 119205
April 15, 1998
G.R. No. 176419. November 27, 2013.*
GMA NETWORK, INC., petitioner, vs. CARLOS P. PABRIGA, GEOFFREY F. ARIAS, KIRBY N. CAMPO,
ARNOLD L. LAGAHIT and ARMAND A. CATUBIG, respondents.

Labor Law; Fixed Term Employment; The Supreme Court ruled in Brent School, Inc. v. Zamora,
181 SCRA 702 (1990), that a fixed term employment contract, which specifies that employment
will last only for a definite period, is not per se illegal or against public policy.—A fifth
classification, that of a fixed term employment, is not expressly mentioned in the Labor Code.
Nevertheless, this Court ruled in Brent School, Inc. v. Zamora, 181 SCRA 702 (1990), that such a
contract, which specifies that employment will last only for a definite period, is not per se illegal
or against public policy.

  Same; Employees performing activities which are usually necessary or desirable in the
employer’s usual business or trade can either be regular, project or seasonal employees, while,
as a general rule, those performing activities not usually necessary or desirable in the employer’s
usual business or trade are casual employees.—Employees performing activities which are
usually necessary or desirable in the employer’s usual business or trade can either be regular,
project or seasonal employees, while, as a general rule, those performing activities not usually
necessary or desirable in the employer’s usual business or trade are casual employees. The
reason for this distinction may not be readily comprehensible to those who have not carefully
studied these provisions: only employers who constantly need the specified tasks to be
performed can be justifiably charged to uphold the constitutionally protected security of tenure
of the corresponding workers.

Same; Project Employees; The activities of project employees may or may not be usually
necessary or desirable in the usual business or trade of the employer.—The activities of project
employees may or may not be usually necessary or desirable in the usual business or trade of the
employer, as we have discussed in ALU-TUCP v. National Labor Relations Commission, 234 SCRA
678 (1994), and recently reiterated in Leyte Geothermal Power Progressive Employees Union-
ALU-TUCP v. Philippine National Oil Company-Energy Development Corporation, 646 SCRA 658
(2011). In said cases, we clarified the term “project” in the test for determining whether an
employee is a regular or project employee.

Same; Same; In order to safeguard the rights of workers against the arbitrary use of the word
“project” to prevent employees from attaining the status of regular employees, employers
claiming that their workers are project employees should not only prove that the duration and
scope of the employment was specified at the time they were engaged, but also that there was
indeed a project.—In order to safeguard the rights of workers against the arbitrary use of the
word “project” to prevent employees from attaining the status of regular employees, employers
claiming that their workers are project employees should not only prove that the duration and
scope of the employment was specified at the time they were engaged, but also that there was
indeed a project. As discussed above, the project could either be (1) a particular job or
undertaking that is within the regular or usual business of the employer company, but which is
distinct and separate, and identifiable as such, from the other undertakings of the company; or
(2) a particular job or undertaking that is not within the regular business of the corporation. As it
was with regard to the distinction between a regular and casual employee, the purpose of this
requirement is to delineate whether or not the employer is in constant need of the services of the
specified employee. If the particular job or undertaking is within the regular or usual business of
the employer company and it is not identifiably distinct or separate from the other undertakings
of the company, there is clearly a constant necessity for the performance of the task in question,
and therefore said job or undertaking should not be considered a project.

Same; Same; The employer’s failure to report the termination of employees upon project
completion to the Department of Labor and Employment (DOLE) Regional Office having
jurisdiction over the workplace within the period prescribed militates against the employer’s
claim of project employment, even outside the construction industry.—We are not unaware of
the decisions of the Court in Philippine Long Distance Telephone Company v. Ylagan, 508 SCRA
31 (2006), and ABS-CBN Broadcasting Corporation v. Nazareno, 503 SCRA 204 (2006), which held
that the employer’s failure to report the termination of employees upon project completion to
the DOLE Regional Office having jurisdiction over the workplace within the period prescribed
militates against the employer’s claim of project employment, even outside the construction
industry. We have also previously stated in another case that the Court should not allow
circumvention of labor laws in industries not falling within the ambit of Policy Instruction No.
20/Department Order No. 19, thereby allowing the prevention of acquisition of tenurial security
by project employees who have already gained the status of regular employees by the
employer’s conduct.

Same; Fixed Term Employment; The Supreme Court laid down indications or criteria under which
“term employment” cannot be said to be in circumvention of the law on security of tenure,
namely: 1) The fixed period of employment was knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent; or 2) It satisfactorily appears
that the employer and the employee dealt with each other on more or less equal terms with no
moral dominance exercised by the former or the latter.—Cognizant of the possibility of abuse in
the utilization of fixed-term employment contracts, we emphasized in Brent that where from the
circumstances it is apparent that the periods have been imposed to preclude acquisition of
tenurial security by the employee, they should be struck down as contrary to public policy or
morals. We thus laid down indications or criteria under which “term employment” cannot be
said to be in circumvention of the law on security of tenure, namely: 1) The fixed period of
employment was knowingly and voluntarily agreed upon by the parties without any force,
duress, or improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent; or 2) It satisfactorily appears that the employer and the
employee dealt with each other on more or less equal terms with no moral dominance exercised
by the former or the latter. (Citation omitted.) These indications, which must be read together,
make the Brent doctrine applicable only in a few special cases wherein the employer and
employee are on more or less in equal footing in entering into the contract. The reason for this is
evident: when a prospective employee, on account of special skills or market forces, is in a
position to make demands upon the prospective employer, such prospective employee needs less
protection than the ordinary worker. Lesser limitations on the parties’ freedom of contract are
thus required for the protection of the employee.

Same; Termination of Employment; It is doctrinally entrenched that in illegal dismissal cases, the
employer has the burden of proving with clear, accurate, consistent, and convincing evidence
that the dismissal was valid.—To recall, it is doctrinally entrenched that in illegal dismissal cases,
the employer has the burden of proving with clear, accurate, consistent, and convincing evidence
that the dismissal was valid. It is therefore the employer which must satisfactorily show that it
was not in a dominant position of advantage in dealing with its prospective employee. Thus, in
Philips Semiconductors (Phils.), Inc. v. Fadriquela, 427 SCRA 408 (2004), this Court rejected the
employer’s insistence on the application of the Brent doctrine when the sole justification of the
fixed terms is to respond to temporary albeit frequent need of such workers: We reject the
petitioner’s submission that it resorted to hiring employees for fixed terms to augment or
supplement its regular employment “for the duration of peak loads” during short-term surges to
respond to cyclical demands; hence, it may hire and retire workers on fixed terms, ad infinitum,
depending upon the needs of its customers, domestic and international. Under the petitioner’s
submission, any worker hired by it for fixed terms of months or years can never attain regular
employment status. x x x.

Same; Night Shift Differential; As regards night shift differential, the Labor Code provides that
every employee shall be paid not less than ten percent (10%) of his regular wage for each hour
of work performed between ten o’clock in the evening and six o’clock in the morning.—As
regards night shift differential, the Labor Code provides that every employee shall be paid not
less than ten percent (10%) of his regular wage for each hour of work performed between ten
o’clock in the evening and six o’clock in the morning. As employees of petitioner, respondents are
entitled to the payment of this benefit in accordance with the number of hours they worked from
10:00 p.m. to 6:00 a.m., if any. In the Decision of the NLRC affirmed by the Court of Appeals, the
records were remanded to the Regional Arbitration Branch of origin for the computation of the
night shift differential and the separation pay. The Regional Arbitration Branch of origin was
likewise directed to require herein petitioner to produce additional documents where necessary.
Therefore, while we are affirming that respondents are entitled to night shift differential in
accordance with the number of hours they worked from 10:00 p.m. to 6:00 a.m., it is the
Regional Arbitration Branch of origin which should determine the computation thereof for each
of the respondents, and award no night shift differential to those of them who never worked
from 10:00 p.m. to 6:00 a.m.

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari filed by petitioner GMA Network, Inc. assailing the
Decision1 of the Court of Appeals dated September 8, 2006 and the subsequent Resolution2
dated January 22, 2007 denying reconsideration in CA-G.R. SP No. 73652.

The Court of Appeals summarized the facts of the case as follows:

On July 19, 1999, due to the miserable working conditions, private respondents were forced to
file a complaint against petitioner before the National Labor Relations Commission, Regional
Arbitration Branch No. VII, Cebu City, assailing their respective employment circumstances as
follows:

NAME DATE HIRED POSITION

Carlos Pabriga 2 May 1997 Television Technicians
Geoffrey Arias 2 May 1997 Television Technicians
Kirby Campo 1 Dec. 1993 Television Technicians
Arnold Laganit 11 Feb. 1996 Television Technicians
Armand Catubig 2 March 1997 Television Technicians
Private respondents were engaged by petitioner to perform the following activities, to wit:

1) Manning of Technical Operations Center:

(a) Responsible for the airing of local commercials; and

(b) Logging/monitoring of national commercials (satellite)

2) Acting as Transmitter/VTR men:

(a) Prepare tapes for local airing;

(b) Actual airing of commercials;

(c) Plugging of station promo;

(d) Logging of transmitter reading; and

(e) In case of power failure, start up generator set to resume program;

3) Acting as Maintenance staff;

(a) Checking of equipment;

(b) Warming up of generator;

(c) Filling of oil, fuel, and water in radiator; and

4) Acting as Cameramen

On 4 August 1999, petitioner received a notice of hearing of the complaint. The following day,
petitioner’s Engineering Manager, Roy Villacastin, confronted the private respondents about the
said complaint.

On 9 August 1999, private respondents were summoned to the office of petitioner’s Area
Manager, Mrs. Susan Aliño, and they were made to explain why they filed the complaint. The
next day, private respondents were barred from entering and reporting for work without any
notice stating the reasons therefor.

On 13 August 1999, private respondents, through their counsel, wrote a letter to Mrs. Susan
Aliño requesting that they be recalled back to work.

On 23 August 1999, a reply letter from Mr. Bienvenido Bustria, petitioner’s head of Personnel
and Labor Relations Division, admitted the non-payment of benefits but did not mention the
request of private respondents to be allowed to return to work.

On 15 September 1999, private respondents sent another letter to Mr. Bustria reiterating their
request to work but the same was totally ignored. On 8 October 1999, private respondents filed
an amended complaint raising the following additional issues: 1) Unfair Labor Practice; 2) Illegal
dismissal; and 3) Damages and Attorney’s fees.

On 23 September 1999, a mandatory conference was set to amicably settle the dispute between
the parties, however, the same proved to be futile. As a result, both of them were directed to
file their respective position papers.

On 10 November 1999, private respondents filed their position paper and on 2 March 2000,
they received a copy of petitioner’s position paper. The following day, the Labor Arbiter issued
an order considering the case submitted for decision.3

In his Decision dated August 24, 2000, the Labor Arbiter dismissed the complaint of respondents
for illegal dismissal and unfair labor practice, but held petitioner liable for 13th month pay. The
dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered dismissing the
complaints for illegal dismissal and unfair labor practice.

Respondents are, however, directed to pay the following complainants their proportionate 13th
month pay, to wit:

1. Kirby Campo                              P 7,716.04

         2. Arnold Lagahit                             7,925.98
         3. Armand Catubig                           4,233.68
         4. Carlos Pabriga                              4,388.19
         5. Geoffrey Arias                              4,562.01
                                                                    P28,826.14
         10% Attorney’s fees                           2,882.61
         GRAND TOTAL                              P31,708.75

All other claims are, hereby, dismissed for failure to substantiate the same.4

Respondents appealed to the National Labor Relations Commission (NLRC). The NLRC reversed
the Decision of the Labor Arbiter, and held thus:

WHEREFORE, we make the following findings:

a) All complainants are regular employees with respect to the particular activity to which they
were assigned, until it ceased to exist. As such, they are entitled to payment of separation pay
computed at one (1) month salary for every year of service;

b) They are not entitled to overtime pay and holiday pay; and

c) They are entitled to 13th month pay, night shift differential and service incentive leave pay.

For purposes of accurate computation, the entire records are REMANDED to the Regional
Arbitration Branch of origin which is hereby directed to require from respondent the production
of additional documents where necessary.

Respondent is also assessed the attorney’s fees of ten percent (10%) of all the above awards.5

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari. On September
8, 2006, the appellate court rendered its Decision denying the petition for lack of merit.

Petitioner filed the present Petition for Review on Certiorari, based on the following grounds:

I.

THE COURT OF APPEALS GRAVELY ERRED FINDING RESPONDENTS ARE REGULAR EMPLOYEES OF
THE PETITIONER AND ARE NOT PROJECT EMPLOYEES.

II.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING SEPARATION PAY TO RESPONDENTS

ABSENT A FINDING THAT RESPONDENTS WERE ILLEGALLY DISMISSED.

III.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING NIGHT SHIFT DIFFERENTIAL PAY
CONSIDERING THE ABSENCE OF EVIDENCE WHICH WOULD ENTITLE THEM TO SUCH AN AWARD.

IV.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING ATTORNEY’S FEES TO RESPONDENTS.6

The parties having extensively elaborated on their positions in their respective memoranda, we
proceed to dispose of the issues raised.

Five Classifications of Employment

At the outset, we should note that the nature of the employment is determined by law,
regardless of any contract expressing otherwise. The supremacy of the law over the
nomenclature of the contract and the stipulations contained therein is to bring to life the policy
enshrined in the Constitution to afford full protection to labor. Labor contracts, being imbued
with public interest, are placed on a higher plane than ordinary contracts and are subject to the
police power of the State.7

Respondents claim that they are regular employees of petitioner GMA Network, Inc. The latter,
on the other hand, interchangeably characterize respondents’ employment as project and fixed
period/fixed term employment. There is thus the need to clarify the foregoing terms.

The terms regular employment and project employment are taken from Article 280 of the Labor
Code, which also speaks of casual and seasonal employment:
ARTICLE 280. Regular and casual employment.—The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment
shall be deemed to be 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, except
where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature and employment is for the
duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

Provided, That, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity actually
exist.

A fifth classification, that of a fixed term employment, is not expressly mentioned in the Labor
Code. Nevertheless, this Court ruled in Brent School, Inc. v. Zamora,8 that such a contract, which
specifies that employment will last only for a definite period, is not per se illegal or against
public policy.

Whether respondents are regular or project employees

Pursuant to the above-quoted Article 280 of the Labor Code, employees performing activities
which are usually necessary or desirable in the employer’s usual business or trade can either be
regular, project or seasonal employees, while, as a general rule, those performing activities not
usually necessary or desirable in the employer’s usual business or trade are casual employees.
The reason for this distinction may not be readily comprehensible to those who have not
carefully studied these provisions: only employers who constantly need the specified tasks to be
performed can be justifiably charged to uphold the constitutionally protected security of tenure
of the corresponding workers. The consequence of the distinction is found in Article 279 of the
Labor Code, which provides:

ARTICLE 279. Security of tenure.—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.

On the other hand, the activities of project employees may or may not be usually necessary or
desirable in the usual business or trade of the employer, as we have discussed in ALU-TUCP v.
National Labor Relations Commission,9 and recently reiterated in Leyte Geothermal Power
Progressive Employees Union-ALU-TUCP v. Philippine National Oil Company-Energy
Development Corporation.10 In said cases, we clarified the term “project” in the test for
determining whether an employee is a regular or project employee:

It is evidently important to become clear about the meaning and scope of the term “project” in
the present context. The “project” for the carrying out of which “project employees” are hired
would ordinarily have some relationship to the usual business of the employer. Exceptionally,
the “project” undertaking might not have an ordinary or normal relationship to the usual
business of the employer. In this latter case, the determination of the scope and parameters of
the “project” becomes fairly easy. It is unusual (but still conceivable) for a company to
undertake a project which has absolutely no relationship to the usual business of the company;
thus, for instance, it would be an unusual steel-making company which would undertake the
breeding and production of fish or the cultivation of vegetables. From the viewpoint, however,
of the legal characterization problem here presented to the Court, there should be no difficulty
in designating the employees who are retained or hired for the purpose of undertaking fish
culture or the production of vegetables as “project employees,” as distinguished from ordinary
or “regular employees,” so long as the duration and scope of the project were determined or
specified at the time of engagement of the “project employees.” For, as is evident from the
provisions of Article 280 of the Labor Code, quoted earlier, the principal test for determining
whether particular employees are properly characterized as “project employees” as
distinguished from “regular employees,” is whether or not the “project employees” were
assigned to carry out a “specific project or undertaking,” the duration (and scope) of which were
specified at the time the employees were engaged for that project.

In the realm of business and industry, we note that “project” could refer to one or the other of
at least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job
or undertaking that is within the regular or usual business of the employer company, but which
is distinct and separate, and identifiable as such, from the other undertakings of the company.
Such job or undertaking begins and ends at determined or determinable times. The typical
example of this first type of project is a particular construction job or project of a construction
company. A construction company ordinarily carries out two or more [distinct] identifiable
construction projects: e.g., a twenty-five-storey hotel in Makati; a residential condominium
building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for
the carrying out of one of these separate projects, the scope

703
and duration of which has been determined and made known to the employees at the time of
employment, are properly treated as “project employees,” and their services may be lawfully
terminated at completion of the project.

The term “project” could also refer to, secondly, a particular job or undertaking that is not
within the regular business of the corporation. Such a job or undertaking must also be
identifiably separate and distinct from the ordinary or regular business operations of the
employer. The job or undertaking also begins and ends at determined or determinable times.
x x x.11 (Emphases supplied, citation omitted.)

Thus, in order to safeguard the rights of workers against the arbitrary use of the word “project”
to prevent employees from attaining the status of regular employees, employers claiming that
their workers are project employees should not only prove that the duration and scope of the
employment was specified at the time they were engaged, but also that there was indeed a
project. As discussed above, the project could either be (1) a particular job or undertaking that is
within the regular or usual business of the employer company, but which is distinct and
separate, and identifiable as such, from the other undertakings of the company; or (2) a
particular job or undertaking that is not within the regular business of the corporation. As it was
with regard to the distinction between a regular and casual employee, the purpose of this
requirement is to delineate whether or not the employer is in constant need of the services of
the specified employee. If the particular job or undertaking is within the regular or usual
business of the employer company and it is not identifiably distinct or separate from the other
undertakings of the company, there is clearly a constant necessity for the performance of the
task in question, and therefore said job or undertaking should not be considered a project.

Brief examples of what may or may not be considered identifiably distinct from the business of
the employer are in order. In Philippine Long Distance Telephone Company v. Ylagan,12 this
Court held that accounting duties were not shown as distinct, separate and identifiable from the
usual undertakings of therein petitioner PLDT. Although essentially a telephone company, PLDT
maintains its own accounting department to which respondent was assigned. This was one of
the reasons why the Court held that respondent in said case was not a project employee. On the
other hand, in San Miguel Corporation v. National Labor Relations Commission,13 respondent
was hired to repair furnaces, which are needed by San Miguel Corporation to manufacture glass,
an integral component of its packaging and manufacturing business. The Court, finding that
respondent is a project employee, explained that San Miguel Corporation is not engaged in the
business of repairing furnaces. Although the activity was necessary to enable petitioner to
continue manufacturing glass, the necessity for such repairs arose only when a particular
furnace reached the end of its life or operating cycle. Respondent therein was therefore
considered a project employee.

In the case at bar, as discussed in the statement of facts, respondents were assigned to the
following tasks:

1) Manning of Technical Operations Center:

(a) Responsible for the airing of local commercials; and

(b) Logging/monitoring of national commercials (satellite)

2) Acting as Transmitter/VTR men:

(a) Prepare tapes for local airing;

(b) Actual airing of commercials;

(c) Plugging of station promo;

(d) Logging of transmitter reading; and

(e) In case of power failure, start up generator set to resume program;

3) Acting as Maintenance staff;

(a) Checking of equipment;

(b) Warming up of generator;

(c) Filling of oil, fuel, and water in radiator; and

4) Acting as Cameramen14

These jobs and undertakings are clearly within the regular or usual business of the employer
company and are not identifiably distinct or separate from the other undertakings of the
company. There is no denying that the manning of the operations center to air commercials,
acting as transmitter/VTR men, maintaining the equipment, and acting as cameramen are not
undertakings separate or distinct from the business of a broadcasting company.

Petitioner’s allegation that respondents were merely substitutes or what they call pinch-hitters
(which means that they were employed to take the place of regular employees of petitioner
who were absent or on leave) does not change the fact that their jobs cannot be considered
projects within the purview of the law. Every industry, even public offices, has to deal with
securing substitutes for employees who are absent or on leave. Such tasks, whether performed
by the usual employee or by a substitute, cannot be considered separate and distinct from the
other undertakings of the company. While it is management’s prerogative to device a method to
deal with this issue, such prerogative is not absolute and is limited to systems wherein
employees are not ingeniously and methodically deprived of their constitutionally protected
right to security of tenure. We are not convinced that a big corporation such as petitioner
cannot device a system wherein a sufficient number of technicians can be hired with a regular
status who can take over when their colleagues are absent or on leave, especially when it
appears from the records that petitioner hires so-called pinch-hitters regularly every month.
In affirming the Decision of the NLRC, the Court of Appeals furthermore noted that if
respondents were indeed project employees, petitioner should have reported the completion of
its projects and the dismissal of respondents in its finished projects:

There is another reason why we should rule in favor of private respondents. Nowhere in the
records is there any showing that petitioner reported the completion of its projects and the
dismissal of private respondents in its finished projects to the nearest Public Employment Office
as per Policy Instruction No. 2015 of the Department of Labor and Employment [DOLE].
Jurisprudence abounds with the consistent rule that the failure of an employer to report to the
nearest Public Employment Office the termination of its workers’ services everytime a project or
a phase thereof is completed indicates that said workers are not project employees.

In the extant case, petitioner should have filed as many reports of termination as there were
projects actually finished if private respondents were indeed project employees, considering
that the latter were hired and again rehired from 1996 up to 1999. Its failure to submit reports
of termination cannot but sufficiently convince us further that private respondents are truly
regular employees. Important to note is the fact that private respondents had rendered more
than one (1) year of service at the time of their dismissal which overturns petitioner’s allegations
that private respondents were hired for a specific or fixed undertaking for a limited period of
time.16 (Citations omitted.)

We are not unaware of the decisions of the Court in Philippine Long Distance Telephone
Company v. Ylagan17 and ABS-CBN Broadcasting Corporation v. Nazareno18 which held that the
employer’s failure to report the termination of employees upon project completion to the DOLE
Regional Office having jurisdiction over the workplace within the period prescribed militates
against the employer’s claim of project employment, even outside the construction industry. We
have also previously stated in another case that the Court should not allow circumvention of
labor laws in industries not falling within the ambit of Policy Instruction No. 20/Department
Order No. 19, thereby allowing the prevention of acquisition of tenurial security by project
employees who have already gained the status of regular employees by the employer’s
conduct.19

While it may not be proper to revisit such past pronouncements in this case, we nonetheless
find that petitioner’s theory of project employment fails the principal test of demonstrating that
the alleged project employee was assigned to carry out a specific project or undertaking, the
duration and scope of which were specified at the time the employee is engaged for the
project.20

The Court of Appeals also ruled that even if it is assumed that respondents are project
employees, they would nevertheless have attained regular employment status because of their
continuous rehiring:

Be that as it may, a project employee may also attain the status of a regular employee if there is
a continuous rehiring of project employees after the stoppage of a project; and the activities
performed are usual [and] customary to the business or trade of the employer. The Supreme
Court ruled that a project employee or a member of a work pool may acquire the status of a
regular employee when the following concur:

1) There is a continuous rehiring of project employees even after cessation of a project; and

2) The tasks performed by the alleged project employee are vital, necessary and indispensable
to the usual business or trade of the employer.

The circumstances set forth by law and the jurisprudence is present in this case. In fine, even if
private respondents are to be considered as project employees, they attained regular
employment status, just the same.21 (Citation omitted.)
Anent this issue of attainment of regular status due to continuous rehiring, petitioner advert to
the fixed period allegedly designated in employment contracts and reflected in vouchers.
Petitioner cites our pronouncements in Brent, St. Theresa’s School of Novaliches Foundation v.
National Labor Relations Commission,22 and Fabela v. San Miguel Corporation,23 and argues
that respondents were fully aware and freely entered into agreements to undertake a particular
activity for a specific length of time.24 Petitioner apparently confuses project employment from
fixed term employment.

The discussions cited by petitioner in Brent, St. Theresa’s and Fabela all refer to fixed term
employment, which is subject to a different set of requirements.

Whether the requisites of a valid fixed

term employment are met

As stated above, petitioner interchangeably characterizes respondents’ service as project and

fixed term employment. These types of employment, however, are not the same. While the
former requires a project as restrictively defined above, the duration of a fixed-term
employment agreed upon by the parties may be any day certain, which is understood to be
“that which must necessarily come although it may not be known when.”25 The decisive
determinant in fixed-term employment is not the activity that the employee is called upon to
perform but the day certain agreed upon by the parties for the commencement and termination
of the employment relationship.26

Cognizant of the possibility of abuse in the utilization of fixed-term employment contracts, we

emphasized in Brent that where from the circumstances it is apparent that the periods have
been imposed to preclude acquisition of tenurial security by the employee, they should be
struck down as contrary to public policy or morals.27 We thus laid down indications or criteria
under which “term employment” cannot be said to be in circumvention of the law on security of
tenure, namely:

1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties
without any force, duress, or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent; or

2) It satisfactorily appears that the employer and the employee dealt with each other on more
or less equal terms with no moral dominance exercised by the former or the latter.28 (Citation
omitted.)

These indications, which must be read together, make the Brent doctrine applicable only in a
few special cases wherein the employer and employee are on more or less in equal footing in
entering into the contract. The reason for this is evident: when a prospective employee, on
account of special skills or market forces, is in a position to make demands upon the prospective
employer, such prospective employee needs less protection than the ordinary worker. Lesser
limitations on the parties’ freedom of contract are thus required for the protection of the
employee. These indications were applied in Pure Foods Corporation v. National Labor Relations
Commission,29 where we discussed the patent inequality between the employer and employees
therein:

[I]t could not be supposed that private respondents and all other so-called “casual” workers of
[the petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract.
Cannery workers are never on equal terms with their employers. Almost always, they agree to
any terms of an employment contract just to get employed considering that it is difficult to find
work given their ordinary qualifications. Their freedom to contract is empty and hollow because
theirs is the freedom to starve if they refuse to work as casual or contractual workers. Indeed, to
the unemployed, security of tenure has no value. It could not then be said that petitioner and
private respondents “dealt with each other on more or less equal terms with no moral
dominance whatever being exercised by the former over the latter.

To recall, it is doctrinally entrenched that in illegal dismissal cases, the employer has the burden
of proving with clear, accurate, consistent, and convincing evidence that the dismissal was
valid.30 It is therefore the employer which must satisfactorily show that it was not in a
dominant position of advantage in dealing with its prospective employee. Thus, in Philips
Semiconductors (Phils.), Inc. v. Fadriquela,31 this Court rejected the employer’s insistence on
the application of the Brent doctrine when the sole justification of the fixed terms is to respond
to temporary albeit frequent need of such workers:

We reject the petitioner’s submission that it resorted to hiring employees for fixed terms to
augment or supplement its regular employment “for the duration of peak loads” during short-
term surges to respond to cyclical demands; hence, it may hire and retire workers on fixed
terms, ad infinitum, depending upon the needs of its customers, domestic and international.
Under the petitioner’s submission, any worker hired by it for fixed terms of months or years can
never attain regular employment status. x x x.

Similarly, in the case at bar, we find it unjustifiable to allow petitioner to hire and rehire workers
on fixed terms, ad infinitum, depending upon its needs, never attaining regular employment
status. To recall, respondents were repeatedly rehired in several fixed term contracts from 1996
to 1999. To prove the alleged contracts, petitioner presented cash disbursement vouchers
signed by respondents, stating that they were merely hired as pinch-hitters. It is apparent that
respondents were in no position to refuse to sign these vouchers, as such refusal would entail
not getting paid for their services. Plainly, respondents as “pinch-hitters” cannot be considered
to be in equal footing as petitioner corporation in the negotiation of their employment contract.

In sum, we affirm the findings of the NLRC and the Court of Appeals that respondents are
regular employees of petitioner. As regular employees, they are entitled to security of tenure
and therefore their services may be terminated only for just or authorized causes. Since
petitioner failed to prove any just or authorized cause for their termination, we are constrained
to affirm the findings of the NLRC and the Court of Appeals that they were illegally dismissed.

Separation Pay, Night Shift Differential

and Attorney’s Fees

Petitioner admits that respondents were not given separation pay and night shift differential.
Petitioner, however, claims that respondents were not illegally dismissed and were therefore
not entitled to separation pay. As regards night shift differential, petitioner claims that its
admission in its August 23, 1999 letter as to the nonpayment thereof is qualified by its allegation
that respondents are not entitled thereto. Petitioner points out that respondents failed to
specify the period when such benefits are due, and did not present additional evidence before
the NLRC and the Court of Appeals.32

In light, however, of our ruling that respondents were illegally dismissed, we affirm the findings
of the NLRC and the Court of Appeals that respondents are entitled to separation pay in lieu of
reinstatement. We quote with approval the discussion of the Court of Appeals:

However, since petitioner refused to accept private respondents back to work, reinstatement is
no longer practicable. Allowing private respondents to return to their work might only subject
them to further embarrassment, humiliation, or even harassment.

Thus, in lieu of reinstatement, the grant of separation pay equivalent to one (1) month pay for
every year of service is proper which public respondent actually did. Where the relationship
between private respondents and petitioner has been severely strained by reason of their
respective imputations of accusations against each other, to order reinstatement would no
longer serve any purpose. In such situation, payment of separation pay instead of reinstatement
is in order.33 (Citations omitted.)

As regards night shift differential, the Labor Code provides that every employee shall be paid not
less than ten percent (10%) of his regular wage for each hour of work performed between ten
o’clock in the evening and six o’clock in the morning.34 As employees of petitioner, respondents
are entitled to the payment of this benefit in accordance with the number of hours they worked
from 10:00 p.m. to 6:00 a.m., if any. In the Decision of the NLRC affirmed by the Court of
Appeals, the records were remanded to the Regional Arbitration Branch of origin for the
computation of the night shift differential and the separation pay. The Regional Arbitration
Branch of origin was likewise directed to require herein petitioner to produce additional
documents where necessary. Therefore, while we are affirming that respondents are entitled to
night shift differential in accordance with the number of hours they worked from 10:00 p.m. to
6:00 a.m., it is the Regional Arbitration Branch of origin which should determine the
computation thereof for each of the respondents, and award no night shift differential to those
of them who never worked from 10:00 p.m. to 6:00 a.m.

It is also worthwhile to note that in the NLRC Decision, it was herein petitioner GMA Network,
Inc. (respondent therein) which was tasked to produce additional documents necessary for the
computation of the night shift differential. This is in accordance with our ruling in Dansart
Security Force & Allied Services Company v. Bagoy,35 where we held that it is entirely within the
employer’s power to present such employment records that should necessarily be in their
possession, and that failure to present such evidence must be taken against them.

Petitioner, however, is correct that the award of attorney’s fees is contrary to jurisprudence. In
De las Santos v. Jebsen Maritime, Inc.,36 we held:

Likewise legally correct is the deletion of the award of attorney’s fees, the NLRC having failed to
explain petitioner’s entitlement thereto. As a matter of sound policy, an award of attorney’s fees
remains the exception rather than the rule. It must be stressed, as aptly observed by the
appellate court, that it is necessary for the trial court, the NLRC in this case, to make express
findings of facts and law that would bring the case within the exception. In fine, the factual, legal
or equitable justification for the award must be set forth in the text of the decision. The matter
of attorney’s fees cannot be touched once and only in the fallo of the decision, else, the award
should be thrown out for being speculative and conjectural. In the absence of a stipulation,
attorney’s fees are ordinarily not recoverable; otherwise a premium shall be placed on the right
to litigate. They are not awarded every time a party wins a suit. (Citations omitted.)

In the case at bar, the factual basis for the award of attorney’s fees was not discussed in the text
of NLRC Decision. We are therefore constrained to delete the same.

WHEREFORE, the Decision of the Court of Appeals dated September 8, 2006 and the subsequent
Resolution denying reconsideration dated January 22, 2007 in CA-G.R. SP No. 73652, are hereby
AFFIRMED, with the MODIFICATION that the award of attorney’s fees in the affirmed Decision of
the National Labor Relations Commission is hereby DELETED.

SO ORDERED.

Sereno (CJ., Chairperson), Bersamin, Villarama, Jr. and Reyes, JJ., concur.

Judgment and resolution affirmed with modification.

Notes.—A contract of employment stipulating a fixed term, even if clear as regards the existence
of a period, is invalid if it can be shown that the same was executed with the intention of
circumventing an employee’s right to security of tenure, and should thus be ignored. (San
Miguel Corporation vs. Teodosio, 602 SCRA 197 [2009])
The principal test used to determine whether employees are project employees is whether or
not the employees were assigned to carry out a specific project or undertaking, the duration or
scope of which was specified at the time the employees were engaged for that project. (Pasos
vs. Philippine National Construction Corporation, 700 SCRA 608 [2013])

——o0o—— GMA Network, Inc. vs. Pabriga, 710 SCRA 690, G.R. No. 176419 November 27, 2013
GR No, L-18938 August 31, 1964.

NATIONAL WATERWORKS & SEWERAGE AUTHORITY, petitioner, vs. NWSA CONSOLIDATED

UNIONS, ET AL., respondents.

Public corporations; NAWASA does not perform governmental but only proprietary function.—
The National' Waterworks and Sewerage Authority is a government corporation performing not
governmental but proprietary functions, and as such comes within the coverage of
Commonwealth Act No. 444.

Same; Supply of water and sewerage service are ministrant functions.—The business of
providing water supply and sewerage service are but ministrant functions of government.

Labor relations; Public utility obliged to pay differential sum under collective bargaining
agreement.—The NAWASA is a public utility. Although pursuant to Section 4 of Commonwealth
Act 444 it is not obliged to pay an additional sum of 25% to its laborers for work done on
Sundays and legal holidays, yet it must pay said additional compensation by virtue of the
contractual obligation it assumed under the collective bargaining agreement.

Same; Non-managerial employees covered by Commonwealth Act No. 444.—Employees who

have little freedom of action and whose main function is merely to carry out the company's
orders, plans and policies, are not managerial employees and hence are covered by
Commonwealth Act No. 444.

Same; Jurisdiction of Court of Industrial Relations determined at time dispute arose.—The Court
of Industrial Relations has jurisdiction to adjudicate overtime pay where there was employer-
employee relationship existing between the parties at the time the dispute arose.

Same; Employees of other offices assigned to NAWASA not employees of latter.—The GAO
employees assigned to work in the NAWASA even if they were paid out of the latter's funds
cannot be regarded as employees of the NAWASA on matters relating to compensation. They are
employees of the national government and are not covered by the Eight-Hour 'Labor Law. The
same may be said of the Bureau of Public Works assigned to work in the NAWASA.

Same; Offsetting overtime with undertime when unfair.—The method used by the NAWASA in
offsetting the overtime with the undertime and at the same time charging said undertime to the
accrued leave is unfair.

Same; Differential pay for Sundays is part of legal wage.—The differential pay for Sundays is a
part of the legal wage. Hence, it was correctly included in computing the weekly wages of those
employees and laborers who worked seven days a week and were regularly receiving the 25%
salary differential for a period of three months prior to the implementation of Republic Act 1880.
This is so even if petitioner is a public utility in view of the contractual obligation it has assumed
on the matter.

Same; Different computation of daily wages of government and non-government employees.—

In the computation of daily wages of employees paid by the month, distinction should be made
between government employees like the GAO employees and those who are not. The
computation for government employees is governed by Section 254 of the Revised
Administrative Code while for others the correct computation is the monthly salary divided by
the actual number of working hours in the month or the regular monthly compensation divided
by the number of working days in the month.

Same; Night compensation to be paid from time services were rendered.—The laborers must be
compensated for nighttime work as of the date the same was rendered,,
Same; Minimum wage rates applicable also to employees hired subsequent to date of decision.
—The rates of minimum pay pay f ixed in a CIR case are applicable not only to those who were
already in the service as of the date of the decision but also to those who were employed
subsequent to said date,

Same; "Distress pay" applicable to all employees whose work have -to do with the sewerage
chambers.—All the laborers, whether assigned to the sewerage division or not who are actually
working inside or outside the sewerage chambers, are entitled to distress pay.

Same; Staggering not required where work not continuous.—Staggering of working hours is not
required where the evidence shows that the work is not continuous.

BAUTISTA ANGELO, J.:

Petitioner National Waterworks & Sewerage Authority is a government-owned and controlled

corporation created under Republic Act No. 1383, while respondent NWSA Consolidated Unions
are various labor organizations composed of laborers and employees of the NAWASA. The other
respondents are intervenors Jesus Centeno, et a!., hereinafter referred to as intervenors.

Acting on a certification of the President of the Philippines, the Court of Industrial Relations
conducted a hearing on December 5, 1957 on the controversy then existing between petitioner
and respondent unions which the latter embodied in a "Manifesto" dated December 5, 1957,
namely: implementation of the 40-Hour Week Law (Republic Act No. 1880); alleged violations of
the collective bargaining agreement dated December 28, 1956 concerning "distr s pay";
minimum wage of P5.25; promotional appointments and filling of vacancies of newly created
positions; additional compensation for night Work; wage increases to some laborers and
employees; and strike duration pay. In addition, respondent unions raised the issue of whether
the 25% additional compensation for Sunday work should be included in computing the daily
wage and whether, in determining the daily "wage of a monthly-salaried employee, the salary
should be divided by 30 days,

On December 13, 1957, petitioner and respondent unions, conformably to a suggestion of the
Court of Industrial Relations, submitted a joint stipulation of facts on the issues concerning the
40-Hour Week Law, "distress pay," minimum wage of P5.25, filling of vacancies, night
compensation, and salary adjustments, reserving the right to present evidence on matters not
covered therein. On December 4, 1957, respondent intervenors filed a petition in intervention
on the issue for additional compensation for night work. Later, however, they amended their
petition by including a new demand for overtime pay in favor of Jesus Centeno. Cesar Cabrera,
Feliciano Duiguan, Cecilio Remotigue, and other employees receiving P4,200.00 per annum or
more,

On February 5, 1958, petitioner filed a motion to dismiss the claim for overtime pay alleging that
respondent Court of Industrial Relations was without jurisdiction to pass upon the same
because, as mere intervenors, the latter cannot raise new issues not litigated in the principal
case, the same not being the lis mota therein involved. To this motion the intervenors filed an
opposition. Thereafter, respondent court issued an order allowing the issue to be litigated.
Petitioner's motion to reconsider having been denied, it filed its answer to the petition for
intervention. Finally, on January 16, 1961, respondent court rendered Its decision stating
substan- tially as follows:

The NAWASA is an agency not performing governmental functions .and, therefore, is liable to
pay additional compensation for work on Sundays and legal holidays conformably to
Commonwealth Act No. 444, known as the Eight-Hour Labor Law even if said days should be
within the staggered f ie work-days authorized by the President; the intervenors do not fall
within the cate-gory of "managerial employees" as contemplated in Republic Act 2377 and so
are not exempt from the coverage of the Eight-Hour Labor Law; even those intervenors attached
to the General Auditing Office and the Bureau of Public Works come within the purview of
Commonwealth Act No. 444; the computation followed by NAWASA in computing overtime
compensation is contrary to Commonwealth Act 444; the undertime of a worker should not be
set-off against the worker in determining whether the latter has rendered service in excess of
eight hours for that day; in computing the daily wage of those employed on daily basis, the
additional 25 % compensation for Sunday work should be included; the computation used by
the NAWASA for monthly salaried employees to wit, dividing the monthly basic pay by 30 is
erroneous; the minimum wage awarded by respondent court way back on November 25, 1950
in Case No. 359-V entitled MWD Workers Union v. Metropolitan Water District, applies even to
those who were employed long after the promulgation of the award and even if the workers are
hired only as temporary, emergency and casual workers for a definite period and for a particular
project; the authority granted to NAWASA by the President to stagger the working days of its
workers should be limited exclusively to those specified in the authorization and should not be
extended to others who are not therein specified; and under the collective bargaining
agreement entered into between the NAWASA and respondent unions on December 28, 1956,
as well as under Resolution No. 29, series of 1957 of the Grievance Committee, even those who
work outside the sewerage chambers should be paid 25% additional compensation as "distress
pay."

Its motion for reconsideration having been denied, NAWASA filed the present petition for
review raising merely questions of law. Succinctly, these questions are:

1.Whether NAWASA is performing governmental functions and, therefore, essentially a service

agency of the government;

2.Whether NAWASA is a public utility and, therefore, exempted from paying additional
compensation for work on Sundays and legal holidays;

3.Whether the intervenors are "managerial employees" within the meaning of Republic Act
2377 and, therefore, not entitled to the benefits of Commonwealth Act No. 444, as amen-

4.Whether respondent Court of Industrial Relations has jurisdiction to adjudicate overtime pay
considering that this issue was not among the demands of respondent union in the principal
case but was merely dragged into the case by the intervenors;

5.Whether those attached to the General Auditing Office and the Bureau of Public Works come
within the purview of Commonwealth Act No, 444, as amended;

6.In determining whether one has worked in excess of eight hours, whether the undertime for
that day should be set off;

7.In computing the daily wage, whether the additional compensation for Sunday work should be
included;

8.What is the correct method to determine the equivalent daily wage of a monthly salaried
employee, especially in a f irm which is a public utility?;

9.Considering that the payment of night compensation is not by virtue of any statutory provision
but emanates only from an award of respondent Court of Industrial Relations, whether the same
can be made retroactive and cover a period orior to the promulgation of the award;

10.Whether the minimum wage fixed and awarded by respondent Court of Industrial Relations
in another case (MWD Workers Union v. MWD, CIR Case No. 359-V) applies to those employed
long after the promulgation thereof, whether hired as temporary, emergency and casual
workers for a definite period and for a specific project;

11.How should the collective bargaining agreement of December 28, 1956 and Resolution No.
29, series of 1957 of the Grievance Committee be interpreted and construed insofar as the
stipulations therein contained relative to "distress pay" is concerned; and
12,Whether, under the first indorsement of the President of the Philippines dated August 12,
1967, which authorizes herein petitioner to stagger the working days of its employees and
laborers, those whose services are indispensably continuous throughout the year may be
staggered in the same manner as the pump, valve, filter and chlorine operators, guards,
watchmen, medical services, and those attached to the recreational facilities.

DISCUSSION OF THE ISSUES

1. Is NAWASA an agency that performs governmental functions and, therefore, essentially a
service agency of the government? Petitioner sustains the affirmative because, under Republic
Act No. 1383, it is a public corporation, and as such it exists as an agency independent of the
Department of Public Works of our government. It also contends that under the same Act the
Public Service Commission does not have control, supervision or jurisdiction over it in the fixing
of rates concerning the operation of the service. It can also incur indebtedness or issue bonds
that are exempt from taxation which circumstance implies that it is essentially a
governmentfunction corporation because it enjoys that attribute of sovereignty. Petitioner
likewise invokes the opinion of the Secretary of Justice which holds that the NAWASA being
essentially a service agency of the government can be classified as a corporation performing:
governmental function.

With this contention, we disagree. While under Republic Act No. 1383 the NAWASA is
considered as a public corporation it does not show that it was so created for the government of
a portion of the State. It should be borne in mind that there are two kinds of public corporation,
namely, municipal and non-municipal. A municipal corporation in its strict sense is the body
politic constituted by the inhabitants of a city or town for the purpose of local government
thereof. It is the body politic established by law particularly as an agency of the State to assist in
the civil government of the country chiefly to regulate the local and internal affairs of the city or
town that is incorporated (62 C.J.S., p. 61). Non-municipal corporations, on the otherhand, are
public corporations created as agencies of the State for limited purposes to take charge merely
of some public or state work other than community government (Elliot, Municipal Corporations,
3rd ed, p. 7; McQuillin, Mun. Corp. 3rd ed. Vol. 1, p. 476).

The National Waterworks & Sewerage Authority was not created for purposes of local
government. It is not a municipal corporation. It was created "for the purpose of consolidating
and centralizing all waterworks, sewerage and drainage system in the Philippines under one
control and direction and general supervision," The NAWASA therefore, though a public
corporation, is not a municipal corporation, because it is not an agency of the State to regulate
or administer the local affairs of the town, city, or district which is incorporated.

Moreover, the NAWASA, by its charter, has personality and power separate and distinct from
the government. It is an independent agency of the government although it is placed, for
administrative purposes, under the Department of Public Works and Communica-tions. It has
continuous succession under its corporate name and may sue and be sued in court It has
corporate powers to be exercised by its board of directors; it has its own assets and liabilities;
and it may charge rates for its services.

In Bacani v. National Coconut Corporation, 53 O.G., 2798, we stated: "To recapitulate, we may
mention that the term 'Government of the Republic of the Philippines' x x x refers only to that
government entity through which the functions of the government are exercised as an attribute
of sovereignty, and in this are included those arms through which political authority is made
effective whether they be provincial, municipal or other form of local government These are
what we call municipal corporations. They do not include government entities which are given a
corporate personality separate and distinct from the government and which are governed by
the Corporation Law. Their powers, duties and liabilities have to be determined in the light of
that law and of their corporate charter."

The same conclusion may be reached by considering the powers, functions and activities of the
NAWASA which are enumerated in Section 2, Republic Act No. 1383, among others, as follows:
"(e)To construct, maintain and operate mains, pipes, water reservoirs, machinery, and other
waterworks for the purpose of supplying water to the inhabitants of its zone, both domestic and
other purposes; to purify the source of supply, regulate the control and use, and prevent the
waste of water; and. to fix water rates and provide for the collection of rents therefor;
"(f)To construct, maintain and operate such system of sanitary sewers as may be necessary for
the proper sanitation of the cities and towns comprising the Authority and to charge and collect
such sums for construction and rates for this service as may be determined by the Board to be
equitable and just;
"(g)To acquire, purchase, hold, transfer, sell, lease, rent, mortgage, encumber, and otherwise
dispose of real and personal property, including rights and franchises, within the Philippines, as
authorized by the purpose for which the Authority was created and reasonably and necessarily
required for the transaction of the lawful business of the same, unless otherwise provided in this
Act;"
The business of providing water supply and sewerage service, as this Court held, "may for all
practical purposes be likened to an industry engaged in by coal companies, gas companies,
power plants, ice plants, and the like" (Metropolitan Water District v. Court of Industrial
Relations, et al., L-4488, August 27, 1952). These are but mere ministrant functions of
government which are aimed at advancing the general interest of society. As such they are
optional (Bacani v. National Coconut Corporation, supra). And it has been held that "although
the state may regulate the service and rates of water plants owned and operated by
municipalities, such property is not employed for governmental purposes and in the ownership
operation thereof the municipality acts in its proprietary capacity, free from legislative
interference" (1 McQuillin, p. 683). In Mendoza v. De Leon, 33 Phil., 508, 509, this Court also
held.:

"Municipalities of the Philippine Islands organized under the Municipal Code have both
governmental and corporate or business functions. Of the first class are the adoption of
regulations against fire and disease, preservation of the public peace, maintenance of municipal
prisons, establishment of primary schools and post-offices, etc. Of the latter class are the
establishment of municipal waterworks for the use of the inhabitants, the construction and
maintenance of municipal slaughterhouses, markets, stables, bathing establishments, wharves,
ferries and fisheries, x x x"

On the strength of the foregoing- considerations, our conclusions is that the NAWASA is not an
agency performing governmental functions. Rather, it performs proprietary f unctions, and as
such comes within the coverage of Commonwealth Act No. 444.

2. We agree with petitioner that the NAWASA is a public utility because its primary function is to
construct, maintain and operate water reservoirs and waterworks for the purpose of supplying
water to the inhabitants, as well as consolidate and centralize all water supplies and drainage
systems in the Philippines. We likewise agree with petitioner that a public utility is exempt from
paying additional compensation for work on Sundays and legal holidays conformably to Section
4 of Commonwealth Act No. 444 which provides that the prohibition, regarding employment of
Sundays and holidays unless an additional sum of 25% of the employee's regular remuneration
is paid shall not apply to public utilities such as those supplying gas, electricity, power, water or
providing means of transportation or communication. In other words, the employees and
laborers of NAWASA can be made to work on Sundays and legal holidays without being required
to pay them an additional compensation of 25%.

It is to be noted, however; that in the case at bar it has been stipulated that prior to the
enactment of Republic Act No. 1880, providing for the implementation of the 40-Hour Week
Law, the Metropolitan Water District had been paying 25% additional compensation for work on
Sundays and legal holidays to its employees and laborers by virtue of Resolution No. 47, series
of 1948, of its board of Directors, which practice was continued by the NAWASA when the latter
took over the service. And in the collective bargaining agreement entered into between the
NAWASA and respondent unions it was agreed that all existing benefits enjoyed by the
employees and laborers prior to its effectivity shall remain in force and shall form part of the
agreement, among which certainly is the 25% additional compensation for work on Sundays and
legal holidays therefore enjoyed by said laborers and employees. It may, therefore, be said that
while under Commonwealth Act No, 444 a public utility is not required to pay additional
compensation to its employees and workers for work done on Sundays and legal holidays, there
is, however, no prohibition for it to pay such additional compensation if it voluntarily agrees to
do so. The NAWASA committed itself to pay this additional compensation. It must pay not
because of compulsion of law but because of contractual obligation.

3. This issue raises the question whether the intervenors are "managerial employees" within the
meaning of Republic Act 2377 and as such are not entitled to the benefits of Commonwealth Act
No, 444, as amended. Section 2 of Republic Act 2377 provides:

"Sec. 2. This Act shall apply to all persons employed in any industry or occupation, whether
public or private, with the exception of farm laborers, laborers who prefer to be paid on piece
work basis managerial employees, outside sales personnel, domestic servants, persons in the
personal service of another and members of the family of the employer working for him.

"The term 'managerial employee' in this Act shall mean either (a) any person whose primary
duty consists of the management of the establishment in which he is employed or of a
customarily recognized department or subdivision thereof, or

(b) any officer or member of the managerial staff,"

One of the distinguishing characteristics by which a managerial employee may be known as

expressed in the explanatory note of Republic Act No. 2377 is that he is not subject to the rigid
observance of regular office hours. The true worth of his service does not depend so much on
the time he spends in office but more on the results he accomplishes, In fact, he is free to go out
of office anytime.

On the other hand, in the Fair Labor Standards Act of the United States, which was taken into
account by the sponsors of the present Act in defining the degree of work of a managerial
employee, we find interesting the following dissertation of the nature of work of a managerial
employee:

"Decisions have construed and applied a regulation in substance providing that the term
'professional' employee shall mean any employee x x x who is engaged in work predominantly
intellectual and varied in character, and requires the consistent exercise of discretion and
judgment in its performance, and is of such a character that the output produced or the result
accomplished cannot be standardized in relation to a given period of time, and whose hours of
work of the same nature as that performed by non-exempt employees do not exceed twenty
percent of the hours worked in the work week by the nonexempt employees, except where
such work is necessarily in, cident to work of a professional nature; and which requires, first,
knowledge of an advanced type in a field of science or learning customarily acquired by a
prolonged course or specialized intellectual instruction and study, or, second, predominantly
original and creative in character in a recognized field of artistic endeavor. Stranger v. Vocafilm
Corp., C.C.A. N.Y., 151 F. 2d 894, 162 A.L.R. 216; Hofer v. Federal Cartridge Corp., D.C. Minn. 71
F. Supp. 243; Aulen v. Triumph Explosive, D.C. Md., 58 F. Supp. 4." (56 C.J.S., p. 666).

"Under the provisions of the Fair Labor Standards Act 29 U.S.C.A., Section 23 (a) (1), executive
employees are exempted from the statutory requirements as to minimum wages and overtime
pay. x x x

"Thus the exemption attaches only where it appears that the employee's primary duty consists
of the management of the establishment or of a customarily recognized department or
subdivision thereof, that he customarily and regularly directs the work of other employees
therein, that he has the authority to hire or discharge other employees or that his suggestions
and recommendations as to the hiring or discharging and as to the advancement and promotion
or any other change of status of other employees are given particular weight, that he
customarily and regularly exercises discretionary powers, x x x." (56 C.J.S., pp. 666-668.)

"The term "administrative employee' ordinarily applies only to an employee who is

compensated for his services at a salary or fee of not less than a prescribed sum per month, and
who regularly and directly assists an employee employed in a bona fide executive or
administrative capacity, where such assistance is nonmanual in nature and requires the exercise
of discretion and independent judgment; or who performs under only general supervision,
responsible nonmanual office or field work, directly related to management policies or general
business operations, along specialized or technical lines requiring special training experience, or
knowledge, and the exercise of discretion and independent judgment; x x x." (56 C.J.S., p. 671.)

"The reason underlying each exemption is in reality apparent. Executive, administrative and
professional workers are not usually employed at hourly wages nor is it feasible in the case of
such employees to provide a fixed hourly rate of pay nor maximum hours of labor, Helena
Glendale Ferry Co. v. Walling, C.C.A. Ark. 132 F. 2d 616, 619." (56 C.J.S., p. 664.)

The philosophy behind the exemption of managerial employees from the 8-Hour Labor Law is
that such workers are not usually employed f or every hour of work but their compensation is
determined considering their special training, experience or knowledge which requires the
exercise of discretion and independent judgment, or perform work related to management
policies or general business operations along specialized or technical lines. For these workers it
is not feasible to provide a fixed hourly late of pay or maximum hours of labor.

The intervenors herein are holding position of responsibility, One of them is the Secretary of the
Board of Directors. Another is the private secretary of the general manager. Another is a public
relations officer, and many other chiefs of divisions or sections and others are supervisors and
overseers. Respondent court, however, after examining carefully their respective functions,
duties and responsibilities found that their primary duties do not bear any direct relation with
the management of the NAWASA, nor do they participate in the formulation of its policies nor in
the hiring and firing of its employees. The chiefs of divisions and sections are given ready
policies to execute and standard practices to ob-serve for their execution. Hence, it concludes,
they have little freedom of action, as their main function is merely to carry out the company's
orders, plans and policies.

To the foregoing comment, we agree. As a matter of fact, they are required to observe working
hours and record their time work and are not free to come and go to their offices, nor move
about at their own discretion, They do not, therefore, come within the category of "managerial
employees" within the meaning of the law.

4. Petitioner's claim is that the issue of overtime compensation not having been raised in the
original case but merely dragged into it by intervenors, respondent court cannot take
cognizance thereof under Section 1, Rule 18, of the Rules of Court

Intervenors filed a petition for intervention alleging that being employees of petitioner who
have worked at night since 1954 without having been fully compensated they desire to
intervene insofar as the payment of their night work is concerned. Petitioner opposed the
petition on the ground that this matter was not in the original case since it was not included in
the dispute certified by the President of the Philippines to the Court of Industrial Relations. The
opposition was overruled. This is now assigned as error.

There is No dispute that the intervenors were in the employ of petitioner when they intervened
and that their claim refers to the 8-Hour Labor Law and since this Court has held time and again
that disputes that call for the application of the 8-Hour Labor Law are within the jurisdiction of
the Court of Industrial Relations if they arise while the employer-employee relationship still
exists, it is clear that the matter subject of intervention comes within the jurisdiction of
respondent court.1 The fact that the question of overtime payment is not included in the
principal case in the sense that it is not one of the items of dispute certified to by the President
is of no moment, for it comes within the sound discretion of the Court of Industrial Relations.
Moreover, in labor disputes technicalities of procedure should as much as possible be avoided
not only in the interest of labor but to avoid multiplicity of action. This claim has no merit

5. It is claimed that some intervenors are occupying positions in the General Auditing Office and
in the Bureau of Public Works for they are appointed either by the Auditor General or by the
Secretary of Public Works and, consequently, they are not officers of the NAWASA but of the
insular government, and as such are not covered by the Eight-Hour Labor Law.

The status of the GAO employees assigned to, and working in, government-controlled
corporations has already been decided by this Court in National Marketing Corporation, et al. v.
Court of Industrial Relations, et al., L-17804, January 31, 1963. In said case, this Court said:

"We agree with appellants that members of the auditing force can not be regarded as
employees of the PRISCO in matters relating to their compensation. They are appointed and
supervised by the Auditor General, have an independent tenure, and work subject to his orders
and instructions, and not to those of the management of appellants. Above all, the nature of
their functions and duties, for the purpose of fiscal control of appellants' operations,
imperatively demands, as a matter of policy, that their positions be completely independent
from interference or inducement on the part of the supervised management, in order to assure
a maximum of impartiality in the auditing functions. Both independence and impartiality require
that the employees in question be utterly free from apprehension as to their tenure and from
expectancy of benefits resulting from any action of the management, since in either case there
would be an influence at work that could possibly lead, if not to positive malfeasance, to laxity
and indifference that would gradually erode and endanger the critical supervision entrusted to
these auditing employees.

"The inclusion of their items in the PRISCO budget should be viewed as no more than a
designation by the national government of the fund or source from which their emoluments are
to be drawn,, and does not signify that they are thereby made PRISCO employees."

The GAO employees assigned to the NAWASA are exactly in the same position regarding their
status, compensation and right to overtime pay as the rest of the GAO employees assigned to
the defunct PRISCO, and following our ruling in the PRISCO case, we hold that the GAO
employees herein are not covered by the 8-Hour Labor Law, but by other pertinent laws on the
matter.

The same thing may be said with regard to the employees of the Bureau of Public Works
assigned to, and working in, the NAWASA. Their position is the same as that of the GAO
employees. Therefore, they are not also covered by the 8-Hour Labor Law.

The respondent court, therefore, erred in considering them as employees of the NAWASA for
the mere reason that they are paid out of its fund and are subject to its administration and
supervision.

6. A worker is entitled to overtime pay only for work in actual service beyond eight hours. If a
worker should incur in undertime during his regular daily work, should said undertime be
deducted in computing his overtime work? Petitioner sustains the affirmative, while respondent
unions the negative, and respondent court decided the dispute in favor of the latter. Hence this
error.

There is merit in the decision of respondent court that the method used by petitioner in
offsetting the overtime with the undertime and at the same time charging said undertime to the
accrued leave of the employee is unfair, f or under such method the employee is made to pay
twice for his undertime because his leave is reduced to that extent while he was made to pay for
it with work beyond the regular working hours. The proper method should be to deduct the
undertime from the accrued leave but pay the employee the overtime to which he is entitled.
This method also obviates the irregular schedule that would result if the overtime should be set
off against the undertime for that would place the schedule for working hours dependent on the
employee.

7. and 8. How is a daily wage of a weekly employee computed in the light of Republic Act 1880?

According to petitioner, the daily wage should be computed exclusively on the basic wage
without including the automatic increase of 25% corresponding to the Sunday differential. To
include said Sunday differential would be to increase the basic pay which is not contemplated by
said Act. Respondent court disagrees with this manner of computation. It holds that Republic
Act 1880 requires that the basic weekly wage and the basic monthly salary should not be
diminished notwithstanding the reduction in the number of working days a week. If the
automatic increase corresponding to the salary differen-tial should not be included there would
be a diminution of the weekly wage of the laborer concerned. Of course, this should only benefit
those who have been working seven days a week and had been regularly receiving 25%
additional compensation for Sunday work before the effectivity of the Act.

It is evident that Republic Act 1880 does not intend to raise the wages of the employees over
what they are actually receiving. Rather, its purpose is to limit the working days in a week to five
days, or to 40 hours without however permitting any reduction in the weekly or daily wage of
the compensation which was previously received. The question then to be determined is: what
is meant by weekly or daily wage? Does the regular wage include differential payments for work
on Sundays or at nights, or is it the total amount received by the laborer for whatever nature or
concept?

It has been held that for purposes of computing overtime compensation a regular wage includes
all payments which the parties have agreed shall be received during the work week, including
piece work wages, differential payments for working at undesirable times, such as at night or on
Sundays and holidays, and the cost of board and lodging customarily furnished the employee
(Walling v. Yangermah-Reynolds Hardwook Co., 325 U.S, 419; Walling v. Harischfeger Corp., 325
U.S. 427. The “regular rate" of pay also ordinarily includes incentive bonus or profit-sharing
payments made in addition to the normal basic pay (66 C. J.S., pp. 704-705), and it was also held
that the higher rate for night, Sunday and holiday work is just as much a regular rate as the
lower rate for daytime work. The higher rate is merely an inducement to accept employment at
times which are not as desirable from a workman's standpoint (International L. Ass'n v. National
Terminals Corp. C.C. Wise, 60 F. Supp. 26, affirmed C.C.A. Carbunao v. National Terminals Corp.
139 F. 2d 853).

Respondent court, therefore, correctly included such differential pay in computing the weekly
wages of those employees and laborers who worked seven days a week and were continuously
receiving 25% Sunday differential for a period of three months immediately preceding the
implementation of Republic Act 1880.

The next issue refers to the method of computing the daily rate of a monthly-salaried employee.
Petitioner in computing this daily rate divides the monthly basic pay of the employee by 30 in
accordance with Section 254 of the Revised Administrative Code which in part provides that "In
making payment for part of a month, the amount to be paid for each day shall be determined by
dividing the monthly pay into as many parts as there are days in the particular month." The
respondent court disagrees with this method and holds that the way to determine the daily rate
of a monthly employee is to divide the monthly salary by the actual number of working hours in
the month. Thus, according to respondent court, Section 8(g) of Republic Act No. 1161, as
amended by Republic Act 1792, provides that the daily rate of
compensation is the total regular compensation for the customary number of hours worked
each day. In other words, according to respondent court, the correct computation shall be (a)
the monthly salary divided by the actual of working hours in a month or (b) the regular monthly
compensation divided by the number of working days in a month.

This finding of respondent court should be modified insofar as the employees of the General
Auditing Office and of the Bureau of Public Works assigned to work in the NAWASA are
concerned for, as already stated, they are government employees and should be governed by
Section 254 of the Revised Administrative Code. This section provides that in making payment
for part of a month. the amount to be paid for each day shall be determined by dividing the
monthly pay into as many parts as there are days in the particular month. With this modification
we find correct the finding of the respondent court on this issue.

9. The Court of Industrial Relations awarded an additional 25% night compensation to some
workers with retroactive effect, that is, effective even before the presentation of the claim,
provided that they had been given authorization by the general manager to perform night work.
It is petitioner's theory that since there is no statute requiring payment of additional
compensation for night work but it can only be granted either by the voluntary act of the
employer or by an award of the industrial court under its compulsory arbitration power, such
grant should only be prospective in operation, and not retroactive, as authorized by the court:

It is of common occurrence that a working man who has already rendered night time service
takes him a long time before he can muster enough courage to confront his employer with the
demand for payment for it for fear of possible reprisal. lt happens that many months or years
are allowed to pass by before he could be made to present such claim against his employer, and
so it is neither fair nor just that he be deprived of what is due him simply because of his silence
for fear of losing the means of his livelihood. Hence, it is not erroneous for the Court of
Industrial Relations to make the payment of such night compensation retroactive to the date
when the work was actually performed.

The power of the Court of Industrial Relations to order the payment of compensation for
overtime service prior to the date of the filing of the claim has been recognized by this Court
(Luzon Stevedoring Co., Inc. v. Luzon Marine Department Union, et al, L-9265, April 29, 1957).
The same reasons given therein for the retroactivity of overtime compensation may also be
given for the retroactivity of payment of night compensation, as such reasoning runs along the
line already abovestated.

10. The Court of Industrial Relations in its resolution dated November 25, 1950 issued in Case
No. 359-V entitled MWD Workers Union, et al. v. Metropolitan Water District, fixed the
following rates of minimum daily wage: P5.25 for those working in Manila and suburbs; P4.50
for those working in Quezon City; and P4.00 for those working in Ipo. Montalban and Balara It
appears that in spite of the notice to terminate said award filed with the court on December 29,
1953, the Metropolitan Water District continued paying the above wages and the NAWASA
which succeeded it adopted the same rates for sometime, In September, 1955, the NAWASA
hired the claimants as temporary workers and it is now contended that said rates cannot apply
to these workers.

The Court of Industrial Relations, however held that the discontinuance of this minimum wage
rate was Improper and ordered the payment of the difference to said workers from the date the
payment of said rates was discontinued, advancing, among others, the following reasons: that
the resolution of November 25, 1950 is applicable not only to those laborers already in the
service but also to those who may be employed thereafter; the notice of termination of said
award given on December 29, 1968 is not legally effective because the same was given with-out
hearing and the employer continued paying the minimum wages even after the notice of
termination; and there is no showing that the minimum wages violate Civil Service Law or the
principles underlying the WAPCO. We find no valid reason to disagree with the foregoing f
inding of the Court of Industrial Relations considering that the award continued to be valid and
effective in spite of the notice of termination given by. the employer. No good reason is seen
why such award should not apply to those who may be employed after its approval by the court
there being nothing therein that may prevent its extension to them. Moreover, the industrial
court can at any time during the effectiveness of an award alter and modify in whole or in part
said award or reopen any question involved therein under Section 17 of Commonwealth Act No.
103, and such is what said court has done when it made the award extensive to the new
employees, more so when they are similarly situated. To do otherwise would be to foster
discrimination.

11. This issue has to do with the meaning of "distress pay." Paragraph 3, Article VIII, of the
collective bargaining agreement entered into between the employer and respondent unions,
provides:

"Because of the peculiar nature of the function of those employees and laborers of the
Sewerage Division who actually work in the sewerage chambers, causing "unusual distress' to
them, they shall receive extra compensation equivalent to twenty-five percent (25%) of their
basic wage."

Pursuant to said agreement, a grievance committee was created composed of representatives of

management and labor which adopted the following resolution:

"Resolution No. 9
Series of 1957

BE IT RESOLVED, That the employees and laborers of the Sewerage Division who actually work in
the sewerage chambers causing unusual distress to them, be paid extra compensation
equivalent to 25% of their basic wage, as embodied in Article VIII, Paragraph 3 of the Collective
Bargaining Agreement; PROVIDED, however, that any employee who may be required to work
actually in the sewerage chambers shall also be paid 25% extra compensation and, PROVIDED
FURTHER, that the term 'sewerage chambers' shall include pits, trenches, and other excavations
that are necessary to tap the sewer line, and PROVIDED FINALLY that this will not prejudice any
laborer or employee who may be included in one way or another in the term 'unusual distress'
within the purview of Paragraph 3 of Article VIII, of the Collective Bargaining Agreement"

And in a conference held between management and labor on November 25, 1957, the following
was agreed upon: "Distress Management agreed to pay -effective October 1, 1956 25%
additional compensation for those who actually work in and outside sewerage chambers in
accordance with Resolution 'No. 9 of the Grievance Committee/'

The question that arose in connection with this distress pay is with regard to the meaning of the
phrase "who actually work in and outside sewerage chambers." Petitioner contends that the
distress pay should be given only to those who actually work inside the sewerage chambers
while the union maintains that such pay should be given to all those whose work have to do
with the sewerage chambers, whether inside or outside. The Court of Industrial Relations
sustained the latter view holding that the distress pay should be given to those who actually
work in and outside the sewerage chambers effective October 1, 1956. This view is now
disputed by petitioner.

The solution of the present issue hinges upon the interpretation of paragraph 3, Article VIII of
the collective bargaining agreement, copied above, as explained by Resolution No. 9, and the
agreement of November 25, 1957, also copied above, which stipulation has to be interpreted as
a whole pursuant to Article 1374 of the Civil Code. As thus interpreted, we find that those who
are entitled to the distress pay are those employees and laborers who work in the sewerage
chambers whether they belong to the sewerage division or not, and by sewerage chambers
should be understood to mean as the surroundings where the work is actually done, not
necessarily "inside the sewerage chambers." This is clearly inferred from the conference held in
the Department of Labor on November 25, 1957 where it was agreed that the compensation
should be paid to those who work "in and outside" the sewerage chambers in accordance with
the terms of Resolution No. 9 of the Grievance Committee. It should be noted that. according to
said resolution, sewerage chambers include "pits, trenches, and other excavations that are
necessary to tap the sewer lines." And the reason given for this extra compensation is the
"unusual distress" that is caused to the laborers by working in the sewerage chambers in the
form and extent abovementioned.

It is clear then that all the laborers whether of the sewerage division or not assigned to work in
and outside the sewerage chambers and suffering unusual distress because of the nature of
their work are entitled to the extra compensatory. And this conclusion is further bolstered by
the findings of the industrial court regarding the main activities of the sewerage division.

Thus, the Court of Industrial Relations found that the sewerage division has three main
activities, to wit: (a) cooperation of the sewerage pumping stations; (b) cleaning and
maintenance of sewer mains: and (c) installation and repairs of house sewer connections,

The pump operators and the sewer attendants in the seven pumping stations in Manila,
according to the industrial court, suffer unusual distress. The pump operators have to go to the
wet pit to see how the cleaning of the screen protecting the pump is being performed, and go
also to the dry pit abutting the wet pit to make repairs in the breakdown of the pumps. Although
the operators used to stay near the motor which is but a f ew meters from the pump, they
unavoidably smell the foul odor emitting f rom the pit. The sewerage attendants go down and
work in the wet pit containing sewerage materials in order to clean the screen.

A group assigned to the cleaning and maintenance of the sewer mains which are located in the
middle of the streets of Manila is usually composed of a capataz and four sewerage attendants.
These attendants are rotated in going inside the manholes, operation of the window glass,
bailing out from the main to the manhole and in supplying the water service as necessity
demands. These attendants come into contact with dirt, stink and smell, darkness and heat
inside and near the sewage pipes. The capataz goes from one manhole to another seeing to it
that the work is properly performed and as such also suffers unusual distress although to a
lesser degree,

The group assigned to the third kind of activity is also usually composed of a capataz and four
attendants. Their work is to connect sewer pipes from houses to the sewer mains and to do this
they excavate the trench across the street from the proper line to the sewer main and then they
install the pipe after tapping the sewer main, In the tapping, the sewer pipe is opened and so
the sewerage gets out and fills up the trench and the men have to wade in and work with the
sewerage water. The capatas has to go near the filthy excavations or trenches full of filthy
sewerage matter to aid the attendants in making pipe connections, especially when these are
complicated.

It cannot therefore be gainsaid that all these laborers suffer unusual distress. The wet pits,
trenches, manholes, which are full of sewage matters, are filthy sources of germs and different
diseases. They emit foul and filthy odor dangerous to health, Those working in such places and
exposed directly to the distress of contamination.

Premises considered, the decision of the Court of Industrial Relations in this respect should be
modified in the sense that all employees and laborers, whether or not they belong to the
sewerage division, who actually work in and outside the sewerage chambers, should be paid the
distress pay or the extra compensation equivalent to 25% of their basic wage effective October
1, 1956.

12. On August 6, 1957, the NAWASA requested the President of the Philippines for exemption
from Executive Order No. 251 which prescribes prescribes the office hours to be observed in
government and government-owned or controlled corporations in order that it could stagger
the working hours of its employees and laborers. The request is based on the fact that there are
essential and indispensable phases in the operation of the NAWASA that are required to be
attended to continuously for twenty-four hours for the entire seven days of the week without
interruption some of which being the work performed by pump operators, valve operators, filter
operators, chlorine operators, watchmen and guards, and medical personnel. This request was
granted and, accordingly, the NAWASA staggered the work schedule of the employees and
laborers performing the activities abovementioned. Respondent unions protested against this
staggering schedule of work and this protest having been unheeded, they brought the matter to
the Court of Industrial Relations.

In resolving this issue, the industrial court justified the staggering of the work days of those
holding positions as pump operators, valve operators, filter operators, chlorine operators,
watchmen and guards, and those in the medical service for the reason that the same was made
pursuant to the authority granted by the President who in the valid exercise of the powers
conferred upon him by Republic Act No, 1880 could prescribe the working days of employees
and laborers in government-owned and controlled corporations depending upon the exigencies
of the service, The court, however, stated that the staggering should not apply to the personnel
in the construction, sewerage, maintenance, machineries and shops because they work below
365 days a year and their services are not continuous to require staggering. From this portion of
the decision, the petitioner appeals.

Considering that respondent court found that the workers in question work less than 365 days a
year and their services are not continuous to require staggering, we see no reason to disturb
this finding. This is contrary to the very essence of the request that the staggering should be
made only with regard to those phases of the operation of the NAWASA that have to be
attended to continuously for twenty-four hours without interruption which certainly cannot
apply to the workers mentioned in the last part of the decision of the respondent court on the
matter.

RECAPITULATION
In resume, this Court holds:

(1)The NAWASA, though a public corporation, does not perform governmental functions. It
performs proprietary functions, and hence, it is covered by Commonwealth Act No. 444;
(2)The NAWASA is a public utility. Although pursuant to Section 4 of Commonwealth Act 444 it is
not obliged to pay an additional sum of 25% to its laborers f or work done on Sundays and legal
holidays, yet it must pay said additional compensation by virtue of the contractual obligation it
assumed under the collective bargaining agreement;
(3)The intervenors are not "managerial employees" as defined in Republic Act No. 2377, hence
they are covered by Commonwealth Act No. 444, as amended;
(4)The Court of Industrial Relations has jurisdiction to adjudicate overtime pay in the case at bar
there being an employer-employee relationship existing between intervenors and petitioner;
(5)The GAO employees assigned to work in the NAWASA cannot be regarded as employees of
the NAWASA on matters relating to compensation. They are employees of the national
government and are not covered by the Eight-Hour Labor Law. The same may be said of the
employees of the Bureau of Public Works assigned to work in the NAWASA;
(6)The method used by the NAWASA in off-setting the overtime with the undertime and at the
same time charging said undertime to the accrued leave is unfair?
(7)The differential pay for Sundays is a part of the legal wage. Hence, it was correctly included in
computing the-weekly wages of those employees and laborers who worked seven days a week
and were regularly receiving the 25% salary differential for a period of three months prior to the
implementation of Republic Act 1880. This is so even if petitioner is a public utility in view of the
contractual obligation it has assumed on the matter;
(8)In the computation of the daily wages of employees paid by the month distinction should be
made between government employees like the GAO employees and those who are not. The
computation for government employees is governed by Section 254 of the Revised
Administrative Code while for others the correct computation is the monthly salary divided by
the actual number of working hours in the month or the regular monthly compensation divided
by the number of working- days in the month;
(9)The Court of Industrial Relations did not err in ordering the payment of night compensation
from the time such services were rendered. The laborer must be compensated for nighttime
work as of the date the same was rendered;
(10)The rates of minimum pay fixed in CIR Case No 359-V are applicable not only to those who
were already in the service as of the date of the decision but also to those who were employed
subsequent to said date;
(11)AIl the laborers, whether assigned to the sewerage division or not who are actually working-
inside or outside the sewerage chambers, are entitled to distress pay; and
(12)There is no valid reason to disturb the finding of the Court of Industrial Relations that the
work of the personnel in the construction, sewerage, maintenance, machineries and shops of
petitioner is not continuous as to require staggering.
CONCLUSION
With the modif ication indicated in the above resume as elaborated in this decision, we hereby
affirm the decision of respondent court in all other respects. without pronouncement as to
costs.

     Bengzon, C.J., Concepcion, Reyes, J.B.L., Paredes, Regala and Makalintal, JJ., concur.

Decision affirmed with modification.

Notes.—lt often happens that from the same act of a municipal corporation both governmental
and corporatefunctions arise, Such f or instance, are a municipal water system designed both for
protection against fire (a governmental function) and to supply water to the inhabitants for
profit (a corporate function). Cf. PLTD v. City of Davao, et al., L-23080, Oct 30, 1966; and
Municipality of La Carlota v. NAWASA, L-20232, Sept 30, 1964.

The dual character of a municipal corporation was also discussed in Surigao Electric Co., Inc., et
al v. Municipal-ity of Surigao, et al., L-22766, Aug. 30, 1968. To be noted in this connection is the
principle that the powers of municipal corporations delegated thereto by the National
Government cannot escape the inherent limitations to which the latter—as the source of said
powers—is subject (Homeowners' Association of the Philippines, Inc. v. Municipal Board of the
City of Manila, et al., L-23979, Aug. 30, 1968).

——oOo—— National Waterworks & Sewerage Authority vs. NWSA Consolidated Unions, 11
SCRA 766, No, L-18938 August 31, 1964
G.R. No. 195466. July 2, 2014.*

ARIEL L. DAVID, doing business under the name and style “YIELS HOG DEALER,” petitioner, vs.
JOHN G. MACASIO, respondent.

Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari; In this Rule 45 petition
for review on certiorari of the Court of Appeals’ (CA’s) decision rendered under a Rule 65
proceeding, the Supreme Court’s (SC’s) power of review is limited to resolving matters pertaining
to any perceived legal errors that the CA may have committed in issuing the assailed decision.—
In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a Rule 65
proceeding, this Court’s power of review is limited to resolving matters pertaining to any
perceived legal errors that the CA may have committed in issuing the assailed decision. This is in
contrast with the review for jurisdictional errors, which we undertake in an original certiorari
action. In reviewing the legal correctness of the CA decision, we examine the CA decision based
on how it determined the presence or absence of grave abuse of discretion in the NLRC decision
before it and not on the basis of whether the NLRC decision on the merits of the case was
correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not
a review on appeal, of the NLRC decision challenged before it.

Labor Law; Pakyaw Basis; Engagement on “pakyaw” or task basis does not characterize the
relationship that may exist between the parties, i.e., whether one of employment or independent
contractorship.—Engagement on “pakyaw” or task basis does not characterize the relationship
that may exist between the parties, i.e., whether one of employment or independent
contractorship. Article 97(6) of the Labor Code defines wages as “x  x  x 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.

Same; Employer-Employee Relationship; Elements of.—To determine the existence of an

employer-employee relationship, four elements generally need to be considered, namely: (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. These elements or indicators
comprise the so-called “four-fold” test of employment relationship. Macasio’s relationship with
David satisfies this test.

Same; Pakyaw Basis; A distinguishing characteristic of “pakyaw” or task basis engagement, as

opposed to straight-hour wage payment, is the non-consideration of the time spent in working.
—A distinguishing characteristic of “pakyaw” or task basis engagement, as opposed to straight-
hour wage payment, is the non-consideration of the time spent in working. 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.

Same; Holiday Pay; Service Incentive Leave Pay; Field Personnel; Under the Implementing Rules
and Regulations (IRR), exemption from the coverage of holiday and Service Incentive Leave (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.”—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. Because
of this difference, it may be argued that the Labor Code may be interpreted to mean that those
who are engaged on task basis, per se, are excluded from the SIL and holiday payment since this
is what the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable
interpretation of this rule may be conceded to be within the discretion granted to the LA and
NLRC as the quasi-judicial bodies with expertise on labor matters.

Same; Same; Same; Same; Pakyaw Basis; The payment of an employee on task or pakyaw basis
alone is insufficient to exclude one from the coverage of Service Incentive Leave (SIL) and holiday
pay.—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 IRR therefore
validly qualifies and limits the general exclusion of “workers paid by results” found in Article 82
from the coverage of holiday and SIL pay. This is the only reasonable interpretation since the
determination of excluded workers who are paid by results from the coverage of Title I is
“determined by the Secretary of Labor in appropriate regulations.”

Same; Same; Same; Same; In determining whether workers engaged on “pakyaw” or task basis
is entitled to holiday and Service Incentive Leave (SIL) pay, the presence (or absence) of employer
supervision as regards the worker’s time and performance is the key.—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 Article 95 (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.

Same; 13th Month Pay; As with holiday and service incentive leave pay, 13th month pay benefits
generally cover all employees; an employee must be one of those expressly enumerated to be
exempted. Section 3 of the Rules and Regulations Implementing Presidential Decree (P.D.) No.
851 enumerates the exemptions from the coverage of 13th month pay benefits.—The governing
law on 13th month pay is PD No. 851. As with holiday and SIL pay, 13th month pay benefits
generally cover all employees; an employee must be one of those expressly enumerated to be
exempted. Section 3 of the Rules and Regulations Implementing 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 x  x  x 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.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees “paid on task basis” without any
reference to “field personnel.” This could only mean that insofar as payment of the 13th month
pay is concerned, the law did not intend to qualify the exemption from its coverage with the
requirement that the task worker be a “field personnel” at the same time.   

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010
decision2 and the January 31, 2011 resolution3 of the Court of Appeals (CA) in C.A.-G.R. S.P. No.
116003. The CA decision annulled and set aside the May 26, 2010 decision4 of the National
Labor Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 decision6 of the
Labor Arbiter (LA). The LA’s decision dismissed respondent John G. Macasio’s monetary claims.

The Factual Antecedents

In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing
business under the name and style “Yiels Hog Dealer,” for nonpayment of overtime pay, holiday
pay and 13th month pay. He also claimed payment for moral and exemplary damages and
attorney’s fees. Macasio also claimed payment for service incentive leave (SIL).8 

Macasio alleged9 before the LA that he had been working as a butcher for David since January 6,
1995. Macasio claimed that David exercised effective control and supervision over his work,
pointing out that David: (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 P700.00, which was
increased from P600.00 in 2007, P500.00 in 2006 and P400.00 in 2005; and (3) approved and
disapproved his leaves. Macasio added that David owned the hogs delivered for chopping, as
well as the work tools and implements; the latter also rented the workplace. Macasio further
claimed that David employs about twenty-five (25) butchers and delivery drivers. In his
defense,10 David claimed that he started his hog dealer business in 2005 and that he only has
ten employees. He alleged that he hired Macasio as a butcher or chopper on “pakyaw” or task
basis who is, therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant
to the provisions of the Implementing Rules and Regulations (IRR) of the Labor Code. David
pointed out that Macasio: (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 P700.00 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.

Macasio disputed David’s allegations.11 He argued that, first, David did not start his business
only in 2005. He pointed to the Certificate of Employment12 that David issued in his favor which
placed the date of his employment, albeit erroneously, in January 2000. Second, he reported for
work every day which the payroll or time record could have easily proved had David submitted
them in evidence.

Refuting Macasio’s submissions,13 David claims that Macasio was not his employee as he hired
the latter on “pakyaw” or task basis. He also claimed that he issued the Certificate of
Employment, upon Macasio’s request, only for overseas employment purposes. He pointed to
the “Pinagsamang Sinumpaang Salaysay,”14 executed by Presbitero Solano and Christopher
(Antonio Macasio’s co-butchers), to corroborate his claims. In the April 30, 2009 decision,15 the
LA dismissed Macasio’s complaint for lack of merit. The LA gave credence to David’s claim that
he engaged Macasio on “pakyaw” or task basis. The LA noted the following facts to support this
finding: (1) Macasio received the fixed amount of P700.00 for every work done, regardless of the
number of hours that he spent in completing the task and of the volume or number of hogs that
he had to chop per engagement; (2) Macasio usually worked for only four hours, beginning from
10:00 p.m. up to 2:00 a.m. of the following day; and (3) the P700.00 fixed wage far exceeds the
then prevailing daily minimum wage of P382.00. The LA added that the nature of David’s
business as hog dealer supports this “pakyaw” or task basis arrangement.

The LA concluded that as Macasio was engaged on “pakyaw” or task basis, he is not entitled to
overtime, holiday, SIL and 13th month pay.
The NLRC’s Ruling

In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that
David did not require Macasio to observe an eight-hour work schedule to earn the fixed P700.00
wage; and that Macasio had been performing a non-time work, pointing out that Macasio was
paid a fixed amount for the completion of the assigned task, irrespective of the time consumed
in its performance. Since Macasio was paid by result and not in terms of the time that he spent
in the workplace, Macasio is not covered by the Labor Standards laws on overtime, SIL and
holiday pay, and 13th month pay under the Rules and Regulations Implementing the 13th
month pay law.18Macasio moved for reconsideration19 but the NLRC denied his motion in its
August 11, 2010 resolution,20 prompting Macasio to elevate his case to the CA via a petition for
certiorari.21

The CA’s Ruling

In its November 22, 2010 decision,22 the CA partly granted Macasio’s certiorari petition and
reversed the NLRC’s ruling for having been rendered with grave abuse of discretion.

While the CA agreed with the LA and the NLRC that Macasio was a task basis employee, it
nevertheless found Macasio entitled to his monetary claims following the doctrine laid down in
Serrano v. Severino Santos Transit.23 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.” As defined by the Labor Code, a “field personnel” is one who performs the work
away from the office or place of work and whose regular work hours cannot be determined with
reasonable certainty. In Macasio’s case, the elements that characterize a “field personnel” are
evidently lacking as he had been working as a butcher at David’s “Yiels Hog Dealer” business in
Sta. Mesa, Manila under David’s supervision and control, and for a fixed working schedule that
starts at 10:00 p.m.

Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay for three
years, with 10% attorney’s fees on the total monetary award. The CA, however, denied
Macasio’s claim for moral and exemplary damages for lack of basis.

David filed the present petition after the CA denied his motion for reconsideration24 in the CA’s
January 31, 2011 resolution.25

The Petition

In this petition,26 David maintains that Macasio’s engagement was on a “pakyaw” or task basis.
Hence, the latter is excluded from the coverage of holiday, SIL and 13th month pay.

David reiterates his submissions before the lower tribunals27 and adds that he never had any
control over the manner by which Macasio performed his work and he simply looked on to the
“end-result.” He also contends that he never compelled Macasio to report for work and that
under their arrangement, Macasio was at liberty to choose whether to report for work or not as
other butchers could carry out his tasks. He points out that Solano and Antonio had, in fact,
attested to their (David and Macasio’s) established “pakyawan” arrangement that rendered a
written contract unnecessary. In as much as Macasio is a task basis employee — who is paid the
fixed amount of P700.00 per engagement regardless of the time consumed in the performance
— David argues that Macasio is not entitled to the benefits he claims. Also, he posits that
because he engaged Macasio on “pakyaw” or task basis then no employer-employee
relationship exists between them.

Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality
especially when, as in this case, they are supported by substantial evidence. Hence, David posits
that the CA erred in reversing the labor tribunals’ findings and granting the prayed monetary
claims.
The Case for the Respondent

Macasio counters that he was not a task basis employee or a “field personnel” as David would
have this Court believe.28 He reiterates his arguments before the lower tribunals and adds that,
contrary to David’s position, the P700.00 fee that he was paid for each day that he reported for
work does not indicate a “pakyaw” or task basis employment as this amount was paid daily,
regardless of the number or pieces of hogs that he had to chop. Rather, it indicates a daily-wage
method of payment and affirms his regular employment status. He points out that David did not
allege or present any evidence as regards the quota or number of hogs that he had to chop as
basis for the “pakyaw” or task basis payment; neither did David present the time record or
payroll to prove that he worked for less than eight hours each day. Moreover, David did not
present any contract to prove that his employment was on task basis. As David failed to prove
the alleged task basis or “pakyawan” agreement, Macasio concludes that he was David’s
employee.

Procedurally, Macasio points out that David’s submissions in the present petition raise purely
factual issues that are not proper for a petition for review on certiorari. These issues — whether
he (Macasio) was paid by result or on “pakyaw” basis; whether he was a “field personnel”;
whether an employer-employee relationship existed between him and David; and whether
David exercised control and supervision over his work — are all factual in nature and are,
therefore, proscribed in a Rule 45 petition. He argues that the CA’s factual findings bind this
Court, absent a showing that such findings are not supported by the evidence or the CA’s
judgment was based on a misapprehension of facts. He adds that the issue of whether an
employer-employee relationship existed between him and David had already been settled by
the LA29 and the NLRC30 (as well as by the CA per Macasio’s manifestation before this Court
dated November 15, 2012),31 in his favor, in the separate illegal case that he filed against David.

The Issue

The issue revolves around the proper application and interpretation of the labor law provisions
on holiday, SIL and 13th month pay to a worker engaged on “pakyaw” or task basis. In the
context of the Rule 65 petition before the CA, the issue is whether the CA correctly found the
NLRC in grave abuse of discretion in ruling that Macasio is entitled to these labor standards
benefits.

The Court’s Ruling

We partially grant the petition.

Preliminary considerations:
the Montoya ruling and the
factual-issue-bar rule

In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a Rule 65
proceeding, this Court’s power of review is limited to resolving matters pertaining to any
perceived legal errors that the CA may have committed in issuing the assailed decision. This is in
contrast with the review for jurisdictional errors, which we undertake in an original certiorari
action. In reviewing the legal correctness of the CA decision, we examine the CA decision based
on how it determined the presence or absence of grave abuse of discretion in the NLRC decision
before it and not on the basis of whether the NLRC decision on the merits of the case was
correct.32 In other words, we have to be keenly aware that the CA undertook a Rule 65 review,
not a review on appeal, of the NLRC decision challenged before it.33

Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions of law raised
against the assailed CA decision.34
In this petition, David essentially asks the question —whether Macasio is entitled to holiday, SIL
and 13th month pay. This one is a question of law. The determination of this question of law
however is intertwined with the largely factual issue of whether Macasio falls within the rule on
entitlement to these claims or within the exception. In either case, the resolution of this factual
issue presupposes another factual matter, that is, the presence of an employer-employee
relationship between David and Macasio.

In insisting before this Court that Macasio was not his employee, David argues that he engaged
the latter on “pakyaw” or task basis. Very noticeably, David 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.

At the outset, we reject this assertion of the petitioner. Engagement on “pakyaw” or task basis
does not characterize the relationship that may exist between the parties, i.e., whether one of
employment or independent contractorship. Article 97(6) of the Labor Code defines wages as
“x x x 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[.]”35 In relation to Article 97(6), Article 10136 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.

More importantly, by implicitly arguing that his engagement of Macasio on “pakyaw” or task
basis negates employer-employee relationship, David would want the Court to engage on a
factual appellate review of the entire case to determine the presence or existence of that
relationship. This approach however is not authorized under a Rule 45 petition for review of the
CA decision rendered under a Rule 65 proceeding.

First, the LA and the NLRC denied Macasio’s claim not because of the absence of an employer-
employee but because of its finding that since Macasio is paid on pakyaw or task basis, then he
is not entitled to SIL, holiday and 13th month pay. Second, we consider it crucial, that in the
separate illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA uniformly
found the existence of an employer-employee relationship.37

In other words, aside from being factual in nature, the existence of an employer-employee
relationship is in fact a nonissue in this case. To reiterate, in deciding a Rule 45 petition for
review of a labor decision rendered by the CA under 65, the narrow scope of inquiry is whether
the CA correctly determined the presence or absence of grave abuse of discretion on the part of
the NLRC. In concrete question form, “did the NLRC gravely abuse its discretion in denying
Macasio’s claims simply because he is paid on a non-time basis?”  

At any rate, even if we indulge the petitioner, we find his claim that no employer-employee
relationship exists baseless. Employing the control test,38 we find that such a relationship exist
in the present case.  

Even a factual review shows that

Macasio is David’s employee

To determine the existence of an employer-employee relationship, four elements generally

need to be considered, namely: (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. These elements or indicators comprise the so-called “four-fold” test of employ-

First, David engaged the services of Macasio, thus satisfying the element of “selection and
engagement of the employee.” David categorically confirmed this fact when, in his “Sinumpaang
Salaysay,” he stated that “nag apply po siya sa akin at kinuha ko siya na chopper[.]”39 Also,
Solano and Antonio stated in their “Pinagsamang Sinumpaang Salaysay”40 that “[k]ami po ay
nagtratrabaho sa Yiels x x x na pag-aari ni Ariel David bilang butcher” and “kilala namin si x x x
Macasio na isa ring butcher x x x ni x x x David at kasama namin siya sa aming trabaho.” Second,
David paid Macasio’s wages. Both David and Macasio categorically stated in their respective
pleadings before the lower tribunals and even before this Court that the former had been
paying the latter P700.00 each day after the latter had finished the day’s task. Solano and
Antonio also confirmed this fact of wage payment in their “Pinagsamang Sinumpaang
Salaysay.”41 This satisfies the element of “payment of wages.”

Third, David had been setting the day and time when Macasio should report for work. This
power to determine the work schedule obviously implies power of control. By having the power
to control Macasio’s work schedule, David could regulate Macasio’s work and could even refuse
to give him any assignment, thereby effectively dismissing him.

And fourth, David had the right and power to control and supervise Macasio’s work as to the
means and methods of performing it. In addition to setting the day and time when Macasio
should report for work, the established facts show that David rents the place where Macasio
had been performing his tasks. Moreover, Macasio would leave the workplace only after he had
finished chopping all of the hog meats given to him for the day’s task. Also, David would still
engage Macasio’s services and have him report for work even during the days when only few
hogs were delivered for butchering.

Under this overall setup, all those working for David, including Macasio, could naturally be
expected to observe certain rules and requirements and David would necessarily exercise some
degree of control as the chopping of the hog meats would be subject to his specifications. Also,
since Macasio performed his tasks at David’s workplace, David could easily exercise control and
supervision over the former. Accordingly, whether or not David actually exercised this right or
power to control is beside the point as the law simply requires the existence of this power to
control 42 or, as in this case, the existence of the right and opportunity to control and supervise
Macasio.43

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

At this point, we note that all three tribunals — the LA, the NLRC and the CA — found that
Macasio was engaged or paid on “pakyaw” or task basis. This factual finding binds the Court
under the rule that factual findings of labor tribunals when supported by the established facts
and in accord with the laws, especially when affirmed by the CA, is binding on this Court.

A distinguishing characteristic of “pakyaw” or task basis engagement, as opposed to straight-

hour wage payment, is the non-consideration of the time spent in working. 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 Macasio’s work as a
butcher qualifies as necessary and desirable to David’s hog dealer business.  

Another, David had been repeatedly and continuously engaging Macasio’s services to perform
precisely the same task of butchering hogs or hog meats since 2000. David categorically
confirmed, in his various pleadings, his continuous and repeated hiring or engagement of
Macasio, albeit, insisting that the engagement is on “pakyaw” or task basis.

Lastly, Macasio regularly reported for work to earn the P700.00 fee. He would likewise ask for
cash advances from David for his and his family’s needs. David’s “Sinumpaang Salaysay”
confirms this observation when he stated that he refused to give Macasio another cash advance
as the latter already had several unpaid cash advances. These facts clearly show that Macasio
looked on to David for the former’s daily financial needs in the form of wages.

In Macasio’s case, the established facts show that he would usually start his work at 10:00 p.m.
Thereafter, regardless of the total hours that he spent at the workplace or of the total number
of the hogs assigned to him for chopping, Macasio would receive the fixed amount of P700.00
once he had completed his task. Clearly, these circumstances show a “pakyaw” or task basis
engagement that all three tribunals uniformly found.

In sum, the existence of employment relationship between the parties is determined by

applying the “four-fold” test; engagement on “pakyaw” or task basis does not determine the
parties’ relationship as it is simply a method of pay computation. Accordingly, Macasio is David’s
employee, albeit engaged on “pakyaw” or task basis.

As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether
Macasio is entitled to holiday, 13th month, and SIL pay.

On the issue of Macasio’s entitlement

to holiday, SIL and 13th month pay

The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in relation to Section
1, Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential
Decree (PD) No. 851. The NLRC, on the other hand, relied on Article 82 of the Labor Code and
the Rules and Regulations Implementing PD No. 851. Uniformly, these provisions exempt
workers paid on “pakyaw” or task basis from the coverage of holiday, SIL and 13th month pay.

In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions, as well as on
Section 1, Rule V of the IRR of the Labor Code and the Court’s ruling in Serrano v. Severino
Santos Transit.45 These labor law provisions, when read together with the Serrano ruling,
exempt those engaged on “pakyaw” or task basis only if they qualify as “field personnel.”

In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to conclude
that the worker is exempted or covered depends on the facts and in this sense, is a question of
fact: first, whether Macasio is a “field personnel”; and second, whether those engaged on
“pakyaw” or task basis, but who are not “field personnel,” are exempted from the coverage of
holiday, SIL and 13th month pay.

To put our discussion within the perspective of a Rule 45 petition for review of a CA decision
rendered under Rule 65 and framed in question form, the legal question is whether the CA
correctly ruled that it was grave abuse of discretion on the part of the NLRC to deny Macasio’s
monetary claims simply because he is paid on a non-time basis without determining whether he
is a field personnel or not.

To resolve these issues, we need to revisit the provisions involved.

Provisions governing SIL and holiday pay

Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the
Labor Code — provisions governing working conditions and rest periods.

Art. 82. Coverage.—The provisions of [Title I] shall apply to employees in all establishments

and undertakings whether for profit or not, but not to government employees, managerial
employees, field personnel, members of the family of the employer who are dependent on him
for support, domestic helpers, persons in the personal service of another, and workers who are
paid by results as determined by the Secretary of Labor in appropriate regulations.
x x x x

“Field personnel” shall refer to nonagricultural 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. [emphases and
underscores ours]

Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor
Code) and SIL pay (under Article 95 of the Labor Code). Under Article 82, “field personnel” on
one hand and “workers who are paid by results” on the other hand, are not covered by the Title
I provisions. The wordings of Article 82 of the Labor Code additionally categorize workers “paid
by results” and “field personnel” as separate and distinct types of employees who are exempted
from the Title I provisions of the Labor Code.

The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the
IRR46 reads:

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 (10)
workers[.] [emphasis ours]

x x x x

SECTION 1. Coverage.—This Rule shall apply to all employees except:

x x x x 

(e) Field personnel and other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission basis,
or those who are paid a fixed amount for performing work irrespective of the time consumed in
the performance thereof. [emphases ours]

On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR47
pertinently provides:

Art. 95. Right to service incentive.—(a) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days and those employed in
establishments regularly employing less than ten employees or in establishments exempted
from granting this benefit by the Secretary of Labor and Employment after considering the
viability or financial condition of such establishment. [emphases ours]

x x x x

Section 1. Coverage.—This rule shall apply to all employees except:

x x x x

(e) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those
who are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof. [emphasis ours]
Under these provisions, 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.

Because of this difference, it may be argued that the Labor Code may be interpreted to mean
that those who are engaged on task basis, per se, are excluded from the SIL and holiday
payment since this is what the Labor Code provisions, in contrast with the IRR, strongly suggest.
The arguable interpretation of this rule may be conceded to be within the discretion granted to
the LA and NLRC as the quasi-judicial bodies with expertise on labor matters.

However, as early as 1987 in the case of Cebu Institute of Technology v. Ople48 the phrase
“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. x x x Clearly, petitioner’s teaching personnel cannot be deemed field personnel
which refers “to nonagricultural 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 IRR therefore
validly qualifies and limits the general exclusion of “workers paid by results” found in Article 82
from the coverage of holiday and SIL pay. This is the only reasonable interpretation since the
determination of excluded workers who are paid by results from the coverage of Title I is
“determined by the Secretary of Labor in appropriate regulations.”

The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc.
v. Bautista:

A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor
Code to apply only to those employees not explicitly excluded by Section 1 of Rule V. According
to the Implementing Rules, 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 same is true with respect to the phrase “those who are engaged on task or contract basis,
purely commission basis.” Said phrase should 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.
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 generis49 declared that “employees
engaged on task or contract basis x x x are not automatically exempted from the grant of service
incentive leave, unless, they fall under the classification of field personnel.”50 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.”

In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted
the Labor Code provisions and the IRR as exempting an employee from the coverage of Title I of
the Labor Code based simply and solely on the mode of payment of an employee. The NLRC’s
utter disregard of this consistent jurisprudential ruling is a clear act of grave abuse of
discretion.51 In other words, by dismissing Macasio’s complaint without considering whether
Macasio was a “field personnel” or not, the NLRC proceeded based on a significantly incomplete
consideration of the case. This action clearly smacks of grave abuse of discretion.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only
taken counsel from Serrano and earlier cases, they would have correctly reached a similar
conclusion regarding the payment of holiday pay since the rule exempting “field personnel”
from the grant of holiday pay is identically worded with the rule exempting “field personnel”
from the grant of SIL pay. To be clear, the phrase “employees engaged on task or contract basis”
found in the IRR on both SIL pay and holiday pay should be read together with the exemption of
“field personnel.”

In short, 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 Article 95 (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

classification of “field personnel”

Based on the definition of field personnel under Article 82, we agree with the CA that 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.

Not being a “field personnel,” we find the CA to be legally correct when it reversed the NLRC’s
ruling dismissing Macasio’s complaint for holiday and SIL pay for having been rendered with
grave abuse of discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally erred in
finding that the NLRC gravely abused its discretion in denying this benefit to Macasio.

The governing law on 13th month pay is PD No. 851.52 As with holiday and SIL pay, 13th month
pay benefits generally cover all employees; an employee must be one of those expressly
enumerated to be exempted. Section 3 of the Rules and Regulations Implementing P.D. No.
85153 enumerates the exemptions from the coverage of 13th month pay benefits. Under
Section 3(e), “employers of those who are paid on x x x task basis, and those who are paid a
fixed amount for performing a specific work, irrespective of the time consumed in the
performance thereof”54 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees “paid on task basis” without any
reference to “field personnel.” This could only mean that insofar as payment of the 13th month
pay is concerned, the law did not intend to qualify the exemption from its coverage with the
requirement that the task worker be a “field personnel” at the same time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar
as the payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM
the decision dated November 22, 2010 and the resolution dated January 31, 2011 of the Court
of Appeals in C.A.-G.R. S.P. No. 116003.

SO ORDERED.

Notes.—Under Presidential Decree (P.D.) 851 or the Service Incentive Leave (SIL) Law, the
exclusion from its coverage of workers who are paid on a purely commission basis is only with
respect to field personnel; An employee who is paid on purely commission basis is entitled to
Service Incentive Leave (SIL). (Serrano vs. Severino Santos Transit, 627 SCRA 483 [2010])

The employer has the burden of proving of paying holiday pay, service incentive leave pay and
other benefits. (Pigcaulan vs. Security and Credit Investigation, Inc., 663 SCRA 1 [2012])

——o0o—— David vs. Macasio, 729 SCRA 67, G.R. No. 195466 July 2, 2014
G.R. No. 144664. March 15, 2004.*

ASIAN TRANSMISSION CORPORATION, petitioner, vs. The Hon. COURT OF APPEALS, Thirteenth
Division, HON. FROILAN M. BACUNGAN as Voluntary Arbitrator, KISHIN A. LALWANI, Union,
Union representative to the Panel Arbitrators; BISIG NG ASIAN TRANSMISSION LABOR UNION
(BATLU); HON. BIENVENIDO T. LAGUESMA in his capacity as Secretary of Labor and
Employment; and DIRECTOR CHITA G. CILINDRO in her capacity as Director of Bureau of Working
Conditions, respondents.

Actions; Pleadings and Practice; Certiorari; For the writ of certiorari under Rule 65 of the Rules of
Court to issue, a petitioner must show that he has no plain, speedy and adequate remedy in the
ordinary course of law against its perceived grievance.—[S]ince the Court of Appeals had
jurisdiction over the petition under Rule 65, any alleged errors committed by it in the exercise of
its jurisdiction would be errors of judgment which are reviewable by timely appeal and not by a
special civil action of certiorari. If the aggrieved party fails to do so within the reglementary
period, and the decision accordingly becomes final and executory, he cannot avail himself of the
writ of certiorari, his predicament being the effect of his deliberate inaction. The appeal from a
final disposition of the Court of Appeals is a petition for review under Rule 45 and not a special
civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the
1997 Rules of Civil Procedure. Rule 45 is clear that the decisions, final orders or resolutions of the
Court of Appeals in any case, i.e., regardless of the nature of the action or proceeding involved,
may be appealed to this Court by filing a petition for review, which would be but a continuation
of the appellate process over the original case. Under Rule 45 the reglementary period to appeal
is fifteen (15) days from notice of judgment or denial of motion for reconsideration. x x x For the
writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has
no plain, speedy and adequate remedy in the ordinary course of law against its perceived
grievance. A remedy is considered “plain, speedy and adequate” if it will promptly relieve the
petitioner from the injurious effects of the judgment and the acts of the lower court or agency. In
this case, appeal was not only available but also a speedy and adequate remedy.

Labor Law; Salaries; Holiday Pay; Holiday pay is a legislated benefit enacted as part of the
Constitutional imperative that the State shall afford protection to labor.—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.” It is also intended to enable
the worker to participate in the national celebrations held during the days identified as with
great historical and cultural significance.

Same; Same; Same; Unlike a bonus, which is a management prerogative, holiday pay is a
statutory benefit demandable under the law.—As reflected above, Art. 94 of the Labor Code, as
amended, affords a worker the enjoyment of ten paid regular holidays. 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. Since a worker is entitled to the enjoyment of ten paid regular holidays, the fact that
two holidays fall on the same date should not operate to reduce to nine the ten holiday pay
benefits a worker is entitled to receive.

Same; Same; Same; Article 4 of the Labor Code provides that all doubts in the implementation
and interpretation of its provisions shall be resolved in favor of labor.—In any event, Art. 4 of the
Labor Code provides that all doubts in the implementation and interpretation of its provisions,
including its implementing rules and regulations, shall be resolved in favor of labor. For the
working man’s welfare should be the primordial and paramount consideration.

Same; Same; Same; The Omnibus Rules provides for non-diminution of benefits for unworked
regular holidays.—Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code
provides that “Nothing in the law or the rules shall justify an employer in withdrawing or
reducing any benefits, supplements or payments for unworked regular holidays as provided in
existing individual or collective agreement or employer practice or policy.”

CARPIO-MORALES, J.:

Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule 65 of the
1995 Rules of Civil Procedure the nullification of the March 28, 2000 Decision1 of the Court of
Appeals denying its petition to annul 1) the March 11, 1993 “Explanatory Bulletin”2 of the
Department of Labor and Employment (DOLE) entitled “Workers’ Entitlement to Holiday Pay on
April 9, 1993, Araw ng Kagitingan and Good Friday,” which bulletin the DOLE reproduced on
January 23, 1998, 2) the July 31, 1998 Decision3 of the Panel of Voluntary Arbitrators ruling that
the said explanatory bulletin applied as well to April 9, 1998, and 3) the September 18, 19984
Resolution of the Panel of Voluntary Arbitration denying its Motion for Reconsideration.

The following facts, as found by the Court of Appeals, are undisputed:

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]. The bulletin reads:

“On the correct payment of holiday compensation on April 9, 1993 which apart from being Good
Friday is also Araw ng Kagitingan, i.e., two regular holidays falling on the same day, this
Department is of the view that the covered employees are entitled to at least two hundred
percent (200%) of their basic wage, even if said holiday is unworked. The first 100% represents
the payment of holiday pay on April 9, 1993 as Good Friday and the second 100% is the payment
of holiday pay for the same date as Araw ng Kagitingan.

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

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.

In accordance with Step 6 of the grievance procedure of the Collective Bargaining Agreement
(CBA) existing between petitioner and BATLU, the controversy was submitted for voluntary
arbitration. x x x x On July 31, 1998, the Office of the Voluntary Arbitrator rendered a decision
directing petitioner to pay its covered 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.” (Emphasis and italics supplied)

Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:

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; and
(c)As used in this Article, “holiday” includes: New Year’s Day, Maundy Thursday, Good Friday,
the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of
November, the twenty-fifth and thirtieth of December and the day designated by law for holding
a general election,
which was amended by Executive Order No. 203 issued on June 30, 1987, such that the regular
holidays are now:
1. 6.

New Year’s Independence Day

Day January 1 June 12

2. 7.

Maundy Thursday National Heroes Day Last

Movable Date Sunday of August

3. 8.

Good Friday Bonifacio Day

Movable Date November 30

4. 9.

Araw ng Kagitingan (Bataan Christmas Day

Corregidor Day)
December 25
April 9
10.
5.
Rizal Day
Labor Day
December 30
May 1

In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the Voluntary
Arbitrator 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; and that that the law, as amended,
enumerates ten regular holidays for every year should not be interpreted as authorizing a
reduction to nine the number of paid regular holidays “just because April 9 (Araw ng Kagitingan)
in certain years, like 1993 and 1998, is also Holy Friday or Maundy Thursday.”

In the assailed decision, the Court of Appeals upheld the findings of the Voluntary Arbitrator,
holding that the Collective Bargaining Agreement (CBA) between petitioner and BATLU, the law
governing the relations between them, clearly recognizes their intent to consider Araw ng
Kagitingan and Maundy Thursday, on whatever date they may fall in any calendar year, as paid
legal holidays during the effectivity of the CBA and that “[t]here is no condition, qualification or
exception for any variance from the clear intent that all holidays shall be compensated.”5

The Court of Appeals further held that “in the absence of an explicit provision in law which
provides for [a] reduction of holiday pay if two holidays happen to fall on the same day, any
doubt in the interpretation and implementation of the Labor Code provisions on holiday pay
must be resolved in favor of labor.”

By the present petition, petitioners raise the following issues:

I
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS OF THE COLLECTIVE BARGAINING
AGREEMENT BETWEEN THE PARTIES AND SUBSTITUTING ITS OWN JUDGMENT IN PLACE OF THE
AGREEMENTS MADE BY THE PARTIES THEMSELVES

II

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF THE POLICIES
ENUNCIATED IN THE EXPLANATORY BULLETIN WAS LAID TO REST BY THE REISSUANCE OF THE
SAID EXPLANATORY BULLETIN

III

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN UPHOLDING THE VALIDITY OF THE EXPLANATORY BULLETIN EVEN WHILE
ADMITTING THAT THE SAID BULLETIN WAS NOT AN EXAMPLE OF A JUDICIAL, QUASI-JUDICIAL,
OR ONE OF THE RULES AND REGULATIONS THAT [Department of Labor and Employment] DOLE
MAY PROMULGATE

IV

WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)
BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11, 1993, IN THE GUISE OF PROVIDING
GUIDELINES ON ART. 94 OF THE LABOR CODE, COMMITTED GRAVE ABUSE OF DISCRETION, AS IT
LEGISLATED AND INTERPRETED LEGAL PROVISIONS IN SUCH A MANNER AS TO CREATE
OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN SUSTAINING THE SECRETARY OF THE DEPARTMENT OF LABOR IN REITERATING
ITS EXPLANATORY BULLETIN DATED MARCH 11, 1993 AND IN ORDERING THAT THE SAME
POLICY OBTAINED FOR APRIL 9, 1998 DESPITE THE RULINGS OF THE SUPREME COURT TO THE
CONTRARY

VI

WHETHER OR NOT RESPONDENTS’ ACTS WILL DEPRIVE PETITIONER OF PROPERTY WITHOUT

DUE PROCESS BY THE “EXPLANATORY BULLETIN” AS WELL AS EQUAL PROTECTION OF LAWS

The petition is devoid of merit.

At the outset, it bears noting that instead of assailing the Court of Appeals Decision by petition
for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner lodged the
present petition for certiorari under Rule 65.

[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors
committed by it in the exercise of its jurisdiction would be errors of judgment which are
reviewable by timely appeal and not by a special civil action of certiorari. If the aggrieved party
fails to do so within the reglementary period, and the decision accordingly becomes final and
executory, he cannot avail himself of the writ of certiorari, his predicament being the effect of
his deliberate inaction.

The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45
and not a special civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65,
respectively, of the 1997 Rules of Civil Procedure. Rule 45 is clear that the decisions, final orders
or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or
proceeding involved, may be appealed to this Court by filing a petition for review, which would
be but a continuation of the appellate process over the original case. Under Rule 45 the
reglementary period to appeal is fifteen (15) days from notice of judgment or denial of motion
for reconsideration.

xxx

For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show
that he has no plain, speedy and adequate remedy in the ordinary course of law against its
perceived grievance. A remedy is considered “plain, speedy and adequate” if it will promptly
relieve the petitioner from the injurious effects of the judgment and the acts of the lower court
or agency. In this case, appeal was not only available but also a speedy and adequate remedy.6

The records of the case show that following petitioner’s receipt on August 18, 2000 of a copy of
the August 10, 2000 Resolution of the Court of Appeals denying its Motion for Reconsideration,
it filed the present petition for certiorari on September 15, 2000, at which time the Court of
Appeals decision had become final and executory, the 15-day period to appeal it under Rule 45
having expired.

Technicality aside, this Court finds no ground to disturb the assailed decision.

Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State
shall afford protection to labor.7 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.”8 It is also
intended to enable the worker to participate in the national celebrations held during the days
identified as with great historical and cultural significance.

Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last Sunday of
August), Bonifacio Day (November 30) and Rizal Day (December 30) were declared national
holidays to afford Filipinos with a recurring opportunity to commemorate the heroism of the
Filipino people, promote national identity, and deepen the spirit of patriotism. Labor Day (May
1) is a day traditionally reserved to celebrate the contributions of the working class to the
development of the nation, while the religious holidays designated in Executive Order No. 203
allow the worker to celebrate his faith with his family.

As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the enjoyment of
ten paid regular holidays.9 The provision is mandatory,10 regardless of whether an employee is
paid on a monthly or daily basis.11 Unlike a bonus, which is a management prerogative,12
holiday pay is a statutory benefit demandable under the law. Since a worker is entitled to the
enjoyment of ten paid regular holidays, the fact that two holidays fall on the same date should
not operate to reduce to nine the ten holiday pay benefits a worker is entitled to receive.

It is elementary, under the rules of statutory construction, that when the language of the law is
clear and unequivocal, the law must be taken to mean exactly what it says.13 In the case at bar,
there is nothing in the law which provides or indicates that the entitlement to ten days of
holiday pay shall be reduced to nine when two holidays fall on the same day.

Petitioner’s assertion that Wellington v. Trajano14 has “over-ruled” the DOLE March 11, 1993
Explanatory Bulletin does not lie. In Wellington, the issue was whether monthly-paid employees
are entitled to an additional day’s pay if a holiday falls on a Sunday. This Court, in answering the
issue in the negative, observed that in fixing the monthly salary of its employees, Wellington
took into account “every working day of the year including the holidays specified by law and
excluding only Sunday.” In the instant case, the issue is whether daily-paid employees are
entitled to be paid for two regular holidays which fall on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and
interpretation of its provisions, including its implementing rules and regulations, shall be
resolved in favor of labor. For the working man’s welfare should be the primordial and
paramount consideration.16

Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code provides
that “Nothing in the law or the rules shall justify an employer in withdrawing or reducing any
benefits, supplements or payments for unworked regular holidays as provided in existing
individual or collective agreement or employer practice or policy.”17

From the pertinent provisions of the CBA entered into by the parties, petitioner had obligated
itself to pay for the legal holidays as required by law. Thus the 1997-1998 CBA incorporates the
following provision:

ARTICLE XIV
PAID LEGAL HOLIDAYS
The following legal holidays shall be paid by the COMPANY as required by law:

1.New Year’s Day (January 1st)

2.Holy Thursday (moveable)
3.Good Friday (moveable)
4.Araw ng Kagitingan (April 9th)
5.Labor Day (May 1st)
6.Independence Day (June 12th)
7.Bonifacio Day [November 30]
8.Christmas Day (December 25th)
9.Rizal Day (December 30th)
10.General Election designated by law, if declared public nonworking holiday
11.National Heroes Day (Last Sunday of August)
Only an employee who works on the day immediately preceding or after a regular holiday shall
be entitled to the holiday pay.

A paid legal holiday occurring during the scheduled vacation leave will result in holiday payment
in addition to normal vacation pay but will not entitle the employee to another vacation leave.

Under similar circumstances, the COMPANY will give a day’s wage for November 1st and
December 31st whenever declared a holiday. When required to work on said days, the
employee will be paid according to Art. VI, Sec. 36 hereof.18

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

     Vitug (Chairman), Sandoval-Gutierrez and Corona, JJ., concur.

Petition dismissed.

Note.—A bonus is a demandable or enforceable obligation when it is made part of the wage or
salary or compensation of the employee. (Metro Manila Transit Organization, Inc. vs. National
Labor Relations Commission, 245 SCRA 767 [1995]) Asian Transmission Corporation vs. Court of
Appeals, 425 SCRA 478, G.R. No. 144664 March 15, 2004
No. L-58870. December 18, 1987.*

CEBU INSTITUTE OF TECHNOLOGY (CIT), petitioner, vs. HON. BLAS OPLE,

respondents. GR No. L-68345. December 18, 1987.*

Constitutional Law; Courts; The function of the Court is limited to the judicial task of saying what
the law is as enacted by the law making body.—Amidst these opposing forces the task at hand
becomes saddled with the resultant implications that the interpretation of the law would bear
upon such varied interests. But this Court can not go beyond what the legislature has laid down.
Its duty is to say what the law is as enacted by the lawmaking body. That is not the same as
saying what the law should be or what is the correct rule in a given set of circumstances. It is not
the province of the judiciary to look into the wisdom of the law nor to question the policies
adopted by the legislative branch. Nor is it the business of this Tribunal to remedy every unjust
situation that may arise from the application of a particular law. It is for the legislature to enact
remedial legislation if that be necessary in the premises. But as always, with apt judicial caution
and cold neutrality, the Court must carry out the delicate function of interpreting the law, guided
by the Constitution and existing legislation and mindful of settled jurisprudence. The Court's
function is therefore limited, and accordingly, must confine itself to the judicial task of saying
what the law is, as enacted by the lawmaking body,

Same; Same; Same; Allowances and benefits chargeable against proceeds of tuition fee
increases which the law allows for return on investments of schools have no other resources.—
This Court has consistently held, beginning with the University of the East case, that if the
schools have no resources other than those derived from tuition fee increases, allowances and
benefits should be charged against the proceeds of tuition fee increases which the law allows for
return on investments under section 3(a) of Pres. Dec. No. 451, therefore, not against the 60%
portion allocated for increases in salaries and wages (See 117 SCRA at 571). This ruling was
reiterated in the University of Pangasinan case and in the Saint Louis University case. This
interpretation of the law is consistent with the legislative intent expressed in the Decree itself,
i.e., to alleviate the sad plight of private schools and that of their personnel wrought by slump in
enrollment and increasing operational costs on the part of the schools, and the increasing costs
of living on the part of the personnel (Preamble, Pres. Dec. No. 451). While coming to the aid of
the private school system by simplifying the procedure for increasing tuition fees, the Decree
imposes as a condition for the approval of any such increase in fees, the allocation of 60% of the
incremental proceeds thereof, to increases in salaries or wages of school personnel. This
condition makes for a quid pro quo of the approval of any tuition fee hike by a school, thereby
assuring the school personnel concerned, of a share in its proceeds. The condition having been
imposed to attain one of the main objectives of the Decree, which is to help the school personnel
cope with the increasing costs of living, the same cannot be interpreted in a sense that would
diminish the benefit granted said personnel.

Same; Same; Same; Same; Allowances not included in the concept of salaries or wages.—ln the
light of existing laws which exclude allowances from the basic salary or wage in the computation
of the amount of retirement and other benefits payable to an employee, this Court will not adopt
a different meaning of the terms "salaries or wages" to mean the opposite, i.e, to include
allowances in the concept of salaries or wages.

Same; Same; Same; Same; Same; Implementing rules and regulations promulgated by the then
MECS that allowances and other benefits can be charged against the 60% proceeds of the tuition
fee increase were ultra vires and not binding upon the court.—As to the alleged implementing
rules and regulations promulgated by the then MECS to the effect that allowances and other
benefits may be charged against the 60% portion of the proceeds of tuition fee increases
provided for in Section 3(a) of Pres. Dec. No. 451, suffice it to say that these were issued ultra
vires, and therefore not binding upon this Court. Rules and regulations promulgated in
accordance with the power conferred by law would have the force and effect of law [Victorias
Milling Company, Inc. v. Social Security Commission, 114 Phil. 555 (1962)] if the same are
germane to the subjects of the legislation and if they conform with the standards prescribed by
the same law [People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450]. Since the
implementing rules and regulations cited by the private schools adds allowances and other
benefits to the items included in the allocation of 60% of the proceeds of tuition fee increases
expressly provided for by law, the same were issued in excess of the rule-making authority of
said agency, and therefore without binding effect upon the courts. At best the same may be
treated as administrative interpretations of the law and as such, they may be set aside by this
Court in the final determination of what the law means.

Same; Same; Same; Section 42 of BP Blg. 232 repeals Presidential Decree No. 451.—The Court
after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly section 3(a)
thereof, finds evident irreconcilable differences. Under Pres. Dec. No. 451, the authority to
regulate the imposition of tuition and other school fees or charges by private schools is lodged
with the Secretary of Education and Culture (Sec. 1), whereas section 42 of B.P. Blg. 232
liberalized the procedure by empowering each private school to determine its rate of tuition and
other school fees or charges. Pres. Dec. No. 451 provides that 60% of the incremental proceeds
of tuition fee increases shall be applied or used to augment the salaries and wages of members
of the faculty and other employees of the school, while B.P. Blg. 232 provides that the increment
shall be applied or used in accordance with the regulations promulgated by the MECS. A closer
look at these differences eads the Court to resolve the question in favor of repeal. As pointed out
by the Solicitor General, three aspects of the disputed provisions of law support the above
conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to
apportion the incremental proceeds of the tuition fee increases; such power is delegated to the
Ministry of Education and Culture under B.P. Blg. 232. Second, Pres. Dec. No. 451- limits the
application or use of the increment to salary or wage increase, institutional development,
student assistance and extension services and return on investment, whereas B.P. Blg. 232 gives
the MECS discretion to determine the application or use of the increments. Third, the extent of
the application or use of the increment under Pres. Dec. No. 451 is fixed at the pre-determined
percentage allocations: 60% for wage and salary increases, 12% for return in investment and the
balance of 28% to institutional development, student assistance and extension services, while
under B.P. Blg. 232, the extent of the allocation or use of the increment is likewise left to the
discretion of the MECS. The legislative intent to depart from the statutory limitations under Pres.
Dec. No. 451 is apparent in the second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451
and section 42 of B.P. Blg. 232 which cover the same subject matter, are so clearly inconsistent
and incompatible. with each other that there is no other conclusion but that the latter repeals
the former in accordance with section 72 of B.P. Blg. 232 to wit: Sec. 72. Repealing clause.—All
laws or parts thereof inconsistent with any provision of this Act shall be deemed repealed or
modified, as the case may be.

Same; Delegation of legislative power; Statutory grant of rulemaking power to administrative

agencies like the Secretary of Education is a valid exception to the rule on non-delegation of
legislative power; Requisites.—The statutory grant of rule-making power to administrative
agencies like the Secretary of Education is a valid exception to the rule on non-delegation of
legislative power provided two conditions concur, namely: 1) the statute is complete in itself,
setting forth the policy to be executed by the agency, and 2) said statute fixes a standard to
which the latter must conform.

Civil Procedure; Certiorari and/or Prohibition only persons aggrieved by the act or proceeding in
question may file a petition for certiorari and/or prohibition.—This Court finds merit in the
respondents' objection. Under Rule 65 of the Rules of Court (Secs. 1 and 2), only a person
aggrieved by the act or proceeding in question may file a petition for certiorari and/or
prohibition. The Valmonte petition fails to indicate how the petitioners would be aggrieved by
the assailed Order. It appears that the petitioners are not parties and never at any time
intervened in the conciliation conferences and arbitration proceedings before the respondent
Minister. The parties therein, who stand to be directly affected by the Order of the respondent
Minister, do not contest the validity of said Order. The petition does not even state that
petitioners act as representative of the parents' association in the School or in behalf of other
parents similarly situated.
Same; Same; Same; Motion for Reconsideration should first be availed of before filing a petition
for certiorari and prohibition.—If indeed, petitioners Valmonte and Badiola are aggrieved by the
said Order, they should have intervened and moved for a reconsideration of respondent
Minister's Order before filing the instant petition. Petitioners failed to show that the case falls
under any one of the recognized exceptions to the rule that a motion for reconsideration should
first be availed of before filing a petition for certiorari and prohibition.

Same; Due Process; Administrative agencies not strictly bound by the technical rules of
procedure.—lt could not therefore be contended that the petitioner was deprived of his right to
be heard when it appears on the record that it was permitted to ventilate its side of the issues.
There was sufficient compliance with the requirements of due process. In the face of the well-
settled principle that administrative agencies are not strictly bound by the technical rules of
procedure, this Court dismisses the petitioner's claim that formal investigative and arbitration
proceedings should be conducted. "While a day in court is a matter of right in judicial
proceedings, in administrative proceedings it is otherwise since they rest upon different
principles."

Labor Law; Employees; Incentive Leave Benefits; Petitioner's teaching personnel not deemed
field personnel; Claim that private respondents are not entitled to the service leave benefit
cannot be sustained.—The phrase "those who are engaged on task or contract basis" 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. [Vera v.
Cuevas, G.R. No. L-33693, May 31, 1979, 90 SCRA 379]. 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.

Same; Power to Investigate; Secretary of Labor or his duly authorized representatives are
accorded power to investigate complaints for non-compliance with labor laws.—Contrary to the
petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly authorized
representatives (which includes Regional Directors) are accorded the power to investigate
complaints for noncompliance with labor laws, particularly those which deal with labor
standards such as payment of wages and other forms of compensation, working hours,
industrial safety, etc.

Same; Same; Same; Labor Standard cases arising from violation of labor standard laws under the
exclusive original jurisdiction of the Regional Director.—Furthermore, Policy Instruction No. 6
which deals with the distribution of jurisdiction over labor cases restates inter alia that "(L)abor
standards cases arising from violation of labor standards laws discovered in the course of
inspection or complaints where employer-employee relations still exist" are under the exclusive
original jurisdiction of the Regional Director. Even assuming that respondent Regional Director
was without jurisdiction to entertain the case at bar, petitioner is now barred at this stage to
claim lack of jurisdiction having actively participated in the proceedings below. Petitioner never
questioned the jurisdiction of the respondent Regional Director.

Same; Allowances; Transportation allowances a form of bonus equivalent to the 13th month
pay.—This Court sustains the aforequoted view of public respondent. The benefit herein
designated as "transportation allowance" is a form of bonus equivalent to the 13th month pay.
Nevertheless, where this does not amount to 1/12 of the employees basic salary, the employer
shall pay the difference.

CORTES, J.:
Six cases involving various private schools, their teachers and non-teaching school personnel,
and even parents with children studying in said schools, as well as the then Minister of Labor
and Employment, his Deputy, the National Labor Relations Commission, and the then Minister
of Education, Culture and Sports, have been consolidated in this single Decision in order to
dispose of uniformly the common legal issue raised therein, namely, the allocation of the
incremental proceeds of authorized tuition fee increases of private schools provided for in
section 3 (a) of Presidential Decree No. 451, and thereafter, under the Education Act of 1982
(Batas Pambansa Blg. 232).

Specifically, the common problem presented by these cases requires an interpretation of section
3(a) of Pres. Decree No. 451 which states:

SEC. 3. Limitations.—The increase in tuition or other school fees or other charges as well as the
new fees or charges authorized under the next preceding section shall be subject to the
following conditions:

(a) That no increase in tuition or other school fees or charges shall be approved unless sixty
(60%) per centum of the proceeds is allocated for increase in salaries or wages of the members
of the faculty and all other employees of the school concerned, and the balance for institutional
development, student assistance and extension services, and return to investments: Provided,
That in no case shall the return to investments exceed twelve (12%) per centum of the
incremental proceeds;

*      *      *

In addition, there is also a need for a pronouncement on the effect of the subsequent
enactment of B.P. Blg. 232 which provides for the allocation of tuition fee increases in section 42
thereof.

In a nutshell, the present controversy was precipitated by the claims of some school personnel
for allowances and other benefits and the refusal of the private schools concerned to pay said
allowances and benefits on the ground that said items should be deemed included in the salary
increases they had paid out of the 60% portion of the proceeds from tuition fee increases
provided for in section 3 (a) of Pres. Decree No. 451. The interpretation and construction of laws
being a matter of judicial power and duty [Marbury v. Madison, 1 Cranch 137 (1803); Endencia
v. David, 93 Phil. 696 (1953)], this Court has been called upon to resolve the controversy.

In the process of reading and at times, having to decipher, the numerous pleadings filed in the
six cases, the Court found that the main issue has been approached by the parties from almost
diametrical points, thereby bringing into focus three sub-issues: first, whether or not allowances
and other fringe benefits of faculty members and other school employees may be charged
against the 60% portion of the tuition fee increases provided for in section 3(a) of Pres. Dec. No.
451: second, whether or not the same items may be charged against said portion under the
provisions of B.P. Blg. 232: and, third, whether or not schools and their employees may enter
into a collective bargaining agreement allocating more than 60% of said incremental proceeds
for salary increases and other benefits of said employees. After these sub-issues have been
resolved, the Court will tackle the other incidents attending the individual cases, seriatim.

The factual antecedents that brought these cases before this Tribunal are as follows:

I. FACTUAL BACKGROUND OF EACH CASE

A. CEBU INSTITUTE OF TECHNOLOGY CASE

This case originated from a Complaint filed with the Regional Office No. VII of the Ministry of
Labor on February 11, 1981 against petitioner Cebu Institute of Technology (CIT) by private
respondents, Panfilo Canete, et al., teachers of CIT, for non-payment of: a) cost of living
allowances (COLA) under Pres. Dec. Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th)
month pay differentials and c) service incentive leave. By virtue of an Order issued by the then
Deputy Minister of Labor Carmelo C. Noriel, a labor-management committee composed of one
representative each from the Ministry of Labor and Employment (MOLE), the Minister of
Education, Culture and Sports (MECS), and two representatives each from CIT and from the
teachers was created. Said committee was to ascertain compliance with the legal requirements
for the payment of COLA, thirteenth (13th) month pay and service incentive leave [Rollo, p. 84].

The position taken by CIT during the conference held by the labor management committee was
that it had paid the allowances mandated by various decrees but the same had been integrated
in the teacher's hourly rate. It alleged that the payment of COLA by way of salary increases is in
line with Pres. Dec. No. 451. It also claimed in its position paper that it had paid thirteenth
month pay to its employees and that it was exempt from the payment of service incentive leave
to its teachers who were employed on contract basis [Rollo, pp. 8586].

After the report and recommendation of the committee, herein public respondent, then
Minister of Labor and Employment issued the assailed Order dated September 29, 1981 and
held that the basic hourly rate designated in the Teachers' Program is regarded as the basic
hourly rate of teachers exclusive of the COLA, and that COLA should not be taken from the 60%
incremental proceeds of the approved increase in tuition fee. The dispositive portion of the
Order reads:

PREMISES CONSIDERED, CIT is hereby ordered to pay its teaching staff the f ollowing:

1)COLA under P.D.'s 525 and 1123 from February 1978 up to 1981;
2)COLA under P.D.'s 1614, 1634, 1678 and 1713; and
3)Service incentive ve lea ve from 1978 up to 1981. CIT is further directed to integrate into the
basic salaries of its teachers and (sic) COLA under P.D.'s 525 and 1123 starting on January 1981,
pursuant to P.D. 1751. For purposes of integration, the hourly rate shown in its Teachers'
Program for school year 198182 shall be considered as the basic hourly rate.
SO ORDERED.
Petitioner assails the aforesaid Order in this Special Civil Action of Certiorari with Preliminary
Injunction and/or Restraining Order. The Court issued a Temporary Restraining Order on
December 7, 1981 against the enforcement of the questioned Order of the Minister of Labor
and Employment.

B. DIVINE WORD COLLEGE OF LEGAZPI CASE

Upon a complaint filed by ten faculty members for alleged non-compliance by herein petitioner
Divine Word College of Legazpi with, among others, Pres. Dec. No. 451, i.e., allowances were
charged to the 60% incremental proceeds of tuition fee increase, the Labor Regulation Section
of Regional Office No. V (Legazpi City) of the Ministry of Labor and Employment conducted an
inspection of the employment records of said school. On the basis of the report on the special
inspection that the school did not comply with Pres. Dec. No. 451, herein respondent Regional
Director issued an Order dated May 30, 1983, requiring compliance by the Divine Word College.
The latter filed a Memorandum of Appeal from said Order which the Regional Director treated
as a Motion for Reconsideration. Upon failure of the school to comply with the aforesaid Order,
another Order (August 2, 1983) was issued by herein respondent Regional Director requiring
herein petitioner to pay the faculty members-complainants (herein private respondents) the
amounts indicated therein or the total sum of Six Hundred Seventeen Thousand Nine Hundred
Sixty Seven Pesos and Seventy Seven Centavos (P617,967.77). Petitioner's Motion for
Reconsideration of the Order was denied.

On appeal, the respondent Deputy Minister of Labor and Employment affirmed the Order of the
Regional Director, viz:

Coming now to the substantial merit of the case, we share the view that the emergency
allowances due the complainants under the several presidential decrees (PD's 525, 1123, etc.)
cannot be charged by the respondent against the 60% of the incremental proceeds from
increase in tuition fees authorized under PD 451, not only because as per decision of the
Supreme Court (UE vs. UE Faculty Association, et. al., G.R. No. 57387, September 30, 1982) said
allowances whether mandated by law or secured by collective bargaining should be taken only
from the return to investment referred to in the decree if the school has no other resources to
grant the allowances but not from the 60% incremental proceeds, but also because to hold
otherwise would, to our mind, inevitably result in the loss of one benefit due the complainants
—that is the salary or wage increase granted them by PD 451.

*      *      *

In other words, we believe that by paying the complainants' allowances out of the 60%
incremental proceeds intended for their salary increase they are practically being deprived of
one benefit—their share in the 60% incremental proceeds in terms of salary or wage increase.

WHEREFORE, for the reasons abovestated, the Order appealed from is hereby AFFIRMED, and
the appeal DISMISSED, for lack of merit.

SO ORDERED.

(Annex "K" to Petition; Rollo, p. 108,110).

This special civil action of Certiorari and Prohibition with Preliminary Injunction questions the
interpretation of, and application by the respondent Deputy Minister, of the provisions of Pres.
Dec. No, 451, as set forth in the assailed Order.

On March 25, 1985, after considering the allegations, issues and arguments adduced in the
Petition as well as the Comment thereon of the public respondent and dispensing with the
private respondents' Comment, the Court resolved to dismiss the Petition for lack of merit
(Rollo, p. 198). On April 26, 1985, petitioner filed a Motion for Reconsideration with Motion to
Consider the Case En Banc. On June 26, 1985 the First Division of the Court referred the case to
the Court En Banc for consolidation with G.R. No. 70832, entitled "Gregorio T. Fabros, et. al. vs.
Hon. Jaime C. Laya, etc." since it involves the same issue on the application of 60% incremental
proceeds of authorized tuition fee increases [Rollo, p. 235]. The Court EN BANC resolved to
accept the case. (Resolution of July 16, 1985). These cases were further consolidated with other
cases involving the same issues.

C. FAR EASTERN UNIVERSITY CASE

On December 17, 1978, petitioner Union filed with the Ministry of Labor and Employment a
complaint against respondent University for non-payment of legal holiday pay and under-
payment of the thirteenth (13th) month pay. On July 7, 1979, while the case was pending, the
Union President, in his personal capacity, filed another complaint for violation of Pres. Dec. No.
451 against the same respondent.

The two cases were forthwith consolidated and jointly heard and tried. On March 10, 1980,
Labor Arbiter Ruben A. Aquino promulgated a decision the dispositive portion of which is
quoted hereunder:

RESPONSIVE TO THE FOREGOING, respondent is hereby directed, within ten (10) days from
receipt hereof, to:

1.To (sic) pay the paid legal holidays that it withdrew since January 14, 1976 up to the present;
and
2.Pay the 13th month pay differential of complainant's for the covered period December 16,
1975 to December 17, 1978, date of filing of complaint for non-payment of legal holiday pay and
under payment of the 13th month pay, and thereafter. Barred forever are money claims beyond
three (3) years from the time the course (sic) of action occurred. Respondent's formula on
transportation allowance which was deducted from the 13th month pay is thus subject to this
prescriptive period, for purposes of computation of differentials for the 13th month pay.
The claim under PD 451 is hereby dismissed for lack of merit.

SO ORDERED.

(Annex "E" to Petition; Rollo, p. 55, 65-66).

Both parties appealed the decision of the Labor Arbiter. On September 18, 1984, the respondent
Commission disposed of the appeal in the following manner:

RESPONSIVE TO THE FOREGOING, the Decision of Labor Arbiter Ruben A. Aquino in the instant
case dated March 10, 1980 is hereby Modified in the sense that complainant's claims for legal
holiday pay and 13th month pay are likewise dismissed for lack of merit and the dismissal of the
claim under P.D. 451 is hereby Affirmed en (sic) toto.

(Annex "A" to Petition: Rollo, p. 24, 35).

Petitioner's Motion for Reconsideration dated September 29, 1984 was denied for lack of merit
on November 8, 1984. Before this Court is the petition on certiorari filed by the Union assailing
the abovementioned decision of the Commissioner.

D. FABROS CASE

This petition is in the nature of a class suit brought by petitioners in behalf of the faculty
members and other employees of more than 4000 private schools nationwide. Petitioners seek
to enjoin the implementation of paragraphs 7 to 7.5 of MECS Order No. 5, series of 1985 on the
ground that the said order is null and void for being contrary to Pres. Dec. No. 451 and the
rulings of the Supreme Court in the cases of University of the East v. UE Faculty Association [G.R.
No. L-57387, September 20, 1982, 117 SCRA 554], University of Pangasinan Faculty Union v.
University of Pangasinan and NLRC [G.R. No. 63122, February 20, 1984, 127 SCRA 691], St. Louis
University Faculty Club v. NLRC and St. Louis University [G.R. No. 65585, September 28, 1984,
132 SCRA 380].

On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was signed into law.
On the matter of tuition and other school fees of private schools, section 42 of said law provides
as follows:

Sec. 42. Tuition and other School Fees.—Each private school shall determine its rate of tuition
and other school fees or charges. The rates and charges adopted by schools pursuant to this
provision shall be collectible, and their application or use authorized, subject to rules and
regulations promulgated by the Ministry of Education, Culture and Sports. (Italics supplied).

Invoking section 42 of B.P. Blg. 232, among others, as its legal basis, the then Minister of
Education Jaime C. Laya promulgated on April 1,1985 the disputed MECS Order No. 25, s. 1985
entitled Rules and Regulations To Implement the Provisions of B.P. Blg. 232. The Education Act
of 1982, Relative to Student Fees for School Year 1985-1986. The relevant portions of said Order
are quoted hereunder:

7. Application or Use of Tuition and

Other School Fees or Charges.

7.1 The proceeds from tuition fees and other school charges as well as other income of each
school, shall be treated as an institutional fund which shall be administered and managed for
the support of school purposes strictly: Provided, That for the purpose of generating additional
financial resources or income for the operational support and maintenance of each school, two
or more schools may pool their institutional funds, in whole or in part, subject to the prior
approval of their respective governing boards.

7.2 Tuition fees shall be used to cover the general expenses of operating the school in order to
allow it to meet the minimum standards required by the Ministry or any other higher standard,
to which the school aspires. They may be used to meet the costs of operation for maintaining or
improving the quality of instruction/training/research through improved facilities and through
the payment of adequate and competitive compensation for its faculty and support personnel,
including compliance with mandated increases in personnel compensation and/or allowance.

7.3 Tuition fees shall be used to cover minimum and necessary costs including the following: (a)
compensation of school personnel such as teaching or academic staff, school administrators,
academic non-teaching personnel, and non-academic personnel, (b) maintenance and operating
expenses, including power and utilities, rentals, depreciation, office supplies; and (c) interest
expenses and installment payments on school debts.

7.4 Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries
or wages, allowances and fringe benefits of faculty and support staff, including cost of living
allowance, imputed costs of contributed services, thirteenth (13th) month pay, retirement fund
contributions, social security, medicare, unpaid school personnel claims, and payments as may
be prescribed by mandated wage orders. collective bargaining agreements and voluntary
employer practices, Provided: That increases in fees specifically authorized for the purposes
listed in paragraph 4.3.3 hereof shall be used entirely for those purposes. (Italics supplied).

7.5 Other student fees and charges as may be approved, including registration, library,
laboratory, athletic, application, testing fees and charges shall be used exclusively for the
indicated purposes, including (a) the acquisition and maintenance of equipment, furniture and
fixtures, and buildings, (b) the payment of debt amortization and interest charges on debt
incurred for school laboratory, athletic, or other purposes, and (c) personal services and
maintenance and operating expenses incurred to operate the facilities or services f or which f
ees and charges are collected.

The Petition prayed f or the issuance of a temporary restraining order which was granted by this
Court after hearing. The dispositive portion of the resolution dated May 28, 1985 reads as
follows:

After due consideration of the allegations of the petition dated May 22, 1985 and the arguments
of the parties, the Court Resolved to ISSUE, effective immediately and continuing until further
orders from this Court, a TEMPORARY RESTRAINING ORDER enjoining the respondent from
enforcing or implementing paragraphs 7.4 to 7.5 of MECS Order No. 25, s. 1985, which provide
for the use and application of sixty per centum (60%) of the increases in tuition and other school
fees or charges authorized by public respondent for the school year 1985-1986 in a manner
inconsistent with section 3(a), P.D. No. 451, (which allocates such 60% of the increases
exclusively 'for increases in salaries or wages of the members of the faculty and other
employees of the school concerned.') and directing accordingly that such 60% of the authorized
increases shall be held in escrow by the respective colleges and universities, i.e., shall be kept
intact and not disbursed for any purpose pending the Court's resolution of the issue of the
validity of the aforementioned MECS Order in question. (Rollo, p. 21).

In the same resolution, the Philippine Association of Colleges and Universities (PACU) was
impleaded as respondent.

Subsequent to the issuance of this resolution, four (4) schools, represented in this petition,
moved for the lifting of the temporary restraining order as to them. In separate resolutions, this
Court granted their prayers.
Ateneo de Manila University, De La Salle University (Taft Avenue) and De La Salle University-
South, through their respective counsels, manifested that for the school year 19851986, tuition
fee increase was approved by the MECS and that on the basis of Pres. Dec. No. 451, 60% of the
tuition fee increases shall answer for salary increase. However, a budgeted salary increase,
exclusive of living allowances and other benefits, was approved for the same school year which
when computed amounts to more than the 60%.

This Court granted the motions in separate resolutions lifting the temporary restraining order
with respect to these schools in order that they may proceed with the implementation of the
general salary increase for their employees.

In the case of St. Louis University, its Faculty Club, Administrative Personnel Association and the
University itself joined in a petition seeking for leave that 49% of the increase in tuition and
other fees for school year 1985-1986 be released. Petitioners manifested that the remaining
balance shall continue to be held in escrow by the University.

In a resolution dated January 28, 1986, the Court resolved as follows:

Accordingly, the Temporary Restraining Order issued by this Court on May 28, 1985 is hereby
ordered LIFTED with respect to Saint Louis University of Baguio City in order that it may proceed
immediately with the implementation of salary increases for its employees.

D. BISCOCHO CASE
The Espiritu Santo Parochial School and the Espiritu Santo Parochial School Faculty Association
were parties to a labor dispute which arose from a deadlock in collective bargaining. The parties
entered into conciliation proceedings. The union went on strike after efforts at the conciliation
failed. Subsequently, a return to work agreement was forged between the parties and both
agreed to submit their labor dispute to the jurisdiction of the Minister of Labor.

In the exercise of his power to assume jurisdiction, the Ministry of Labor and Employment
issued an Order dated April 14,1986 which provides for the following:

IN CONSIDERATION OF ALL THE FOREGOING, the Ministry hereby declares the strike staged by
the Union to be legal and orders the following:

a)the School to submit the pertinent record of employment of Romualdo Noriego to the
Research and Information Division of the NLRC for computation of his underpayment of wages
and for the parties to abide by the said computation;
b)the School to submit all pertinent record of collections of tuition fee increases for school year
(sic) 1982-1983, 1983-1984 and 1984-1985 to the Research and Information Division of the
NLRC for proper computation and for equal distribution of the amount to all employees and
teachers during the abovementioned school year (sic) as their salary adjustment under P.D. 451;
c)the parties to wait for the final resolution of the llegal dismissal (case) docketed as NLRC NCR
Case No. 5-1450-85 and to abide by the said resolution;
d)to furnish the MECS a copy of this order for them to issue the guidelines in the
implementation of PRODED Program;
e)the parties to execute a collective bargaining agreement with an economic package equivalent
to 90% of the proceeds from tuition fee increases for school year 1985-1986, and another 90%
for school year 1986-1987 and 85% for school year 1987-1988. The amount aforementioned
shall be divided equally to all members of the bargaining unit as their respective salary
adjustments. Such other benefits being enjoyed by the members of the bargaining unit prior to
the negotiation of the CBA shall remain the same and shall not be reduced.
f)the School to deduct the amount equivalent to ten (10%) per cent of the backwages payable to
all members of the bargaining unit as negotiation fee and to deliver the same to the Union
Treasurer for proper disposition. (Italics supplied).
SO ORDERED.
(Rollo, pp. 16-17)

Pursuant to the said order, private respondent Union agreed to incorporate in their proposed
collective bargaining agreement (CBA) A) with the School the following:

2)The Union and School Administration will incorporate the following in their CBA—A—
1)The computation of the tuition fee increase shall be gross to gross from which the
corresponding percentage of 90% will be taken. The resulting amount will be divided among 141
5 employees for 1985-86 and 132.5 employees for 1986-87.
A- ½ the resulting increase will be added to basic and divided by 13.3 to arrive at monthly
increase in basic. The other 1/2 will be divided by 12.3 to arrive at monthly increase in living
allowance.

*      *      *

4) x      x      x

Upon request/demand of the Union, School will deduct from backwages of managerial
employees and others outside the bargaining unit what Union will charge its own members in
the form of attorney 's fees, special assessment and union dues/agency fee.

5)The signing of the CBA and payment of backwages and others shall be on November 26,1986
at the Espiritu Santo Parochial School Library.
(Rollo, pp. 3-4).

The herein petitioners, Jasmin Biscocho and 26 others, all employees and faculty members of
the respondent School, filed the present petition for prohibition to restrain the implementation
of the April 14, 1986 Order of respondent Labor Minister as well as the agreements arrived at
pursuant thereto. They contend that said Order and agreements affect their rights to the 60%
incremental proceeds under Pres. Dec. No. 451 which provide for the exclusive application of
the 60% incremental proceeds to basic salary.

Acting on the petitioners' prayer, this Court immediately issued a temporary restraining order
on November 25, 1986 "... enjoining the respondents from enforcing, implementing and
proceeding with the questioned order of April 14,1986 and collective bargaining agreement
executed between respondents Union and the School Administration in pursuance thereof."
[Rollo, p. 20].

F. VALMONTE CASE
This Petition was filed by parents with children studying at respondent school, Espiritu Santo
Parochial School to nullify the Order dated April 14, 1986 issued by public respondent, then
Minister of Labor and Employment, specifically paragraphs (e) and (f) thereof, quoted in the
Biscocho case.

The award contained in the said Order is the result of the assumption of jurisdiction by the
public respondent over a labor dispute involving the private respondents school and faculty
association, The latter had earlier filed a notice of strike because of a bargaining deadlock on the
demands of its members for additional economic benefits. After numerous conciliation
conferences held while the union was on strike, the parties voluntarily agreed that the public
respondent shall assume jurisdiction over all the disputes between them. As to the subject
matter of the instant case, the public respondent found that the latest proposals of the
respondent school was to give 85% of the proceeds from tuition fee increases for the school
years to be divided among the teachers and employees as salary adjustments. What the
respondent faculty association offered to accept was a package of 95% for school year 1985-
1986, 90% for school year 1986-1987. The respondent school offered to strike the middle of the
two positions, hence the Order complained of by the petitioners [See Annex "A", Petition; Rollo,
pp. 9, 14-15; Comment of the Respondent Faculty Association; Rollo, p. 26].
II. RESOLUTION OF THE COMMON LEGAL ISSUE
This long-drawn controversy has sadly placed on the balance diverse interests, opposed yet
intertwined, and all deserving, and demanding, the protection of the State. On one arm of the
balance hang the economic survival of private schools and the private school system, undeniably
performing a complementary role in the State's efforts to maintain an adequate educational
system in the country. Perched precariously on the other arm of the same balance is the much-
needed financial uplift of schoolteachers, extolled for all times as the molders of the minds of
youth, hence of every nation's future. Ranged with them with needs and claims as insistent are
other school personnel. And then, anxiously waiting at the sidelines, is the interest of the public
at large, and of the State, in the continued availability to all who desire it, high-standard
education consistent with national goals, at a reasonable and aff ordable price.

Amidst these opposing forces the task at hand becomes saddled with the resultant implications
that the interpretation of the law would bear upon such varied interests. But this Court can not
go beyond what the legislature has laid down. Its duty is to say what the law is as enacted by the
lawmaking body. That is not the same as saying what the law should be or what is the correct
rule in a given set of circumstances. It is not the province of the judiciary to look into the
wisdom of the law nor to question the policies adopted by the legislative branch. Nor is it the
business of this Tribunal to remedy every unjust situation that may arise from the application of
a particular law. It is for the legislature to enact remedial legislation if that be necessary in the
premises. But as always, with apt judicial caution and cold neutrality, the Court must carry out
the delicate function of interpreting the law, guided by the Constitution and existing legislation
and mindful of settled jurisprudence. The Court's function is therefore limited, and accordingly,
must confine itself to the judicial task of saying what the law is, as enacted by the lawmaking
body.

FIRST SUB-ISSUE

A.Whether or not allowances and other fringe benefits of employees may be charged against
the 60% portion of the incremental proceeds provided for in sec. 3(a) of Pres. Dec. No. 451.

1. Arguments raised in the Cebu Institute of Technology case

In maintaining its position that the salary increases it had paid to its employees should be
considered to have included the COLA, Cebu Institute of Technology (CIT) makes reference to
Pres. Dec. No. 451 and its Implementing Rules. The line of reasoning of the petitioner appears to
be based on the major premise that under said decree and rules, 60% of the incremental
proceeds from tuition fee increases may be applied to salaries, allowances and other benefits of
teachers and other school personnel. In support of this major premise, petitioner cites various
implementing rules and regulations of the then Minister of Education, Culture and Sports, to the
effect that 60% of the incremental proceeds may be applied to salaries, allowances and other
benefits for members of the faculty and other school personnel [Petition citing Implementing
Rules and Regulations of Pres. Dec. No. 451 of various dates; Rollo, pp. 318-320]. Petitioner
concludes that the salary increases it had granted the CIT teachers out of the 60% portion of the
incremental proceeds of its tuition fee increases from 1974-1980 pursuant to Pres. Dec. No. 451
and the MECS implementing rules and regulations must be deemed to have included the COLA
payable to said employees for those years [Rollo, pp. 9111.

With leave of Court, the Philippine Association of Colleges and Universities, filed its
Memorandum as Intervenor in support of the proposition that schools may pay the COLA to
faculty members and other employees out of the 60% of the increase in tuition fees. In addition
to the arguments already set forth in the memorandum of the petitioner CIT, intervenor PACU
attacks the Decision of this Court in University of the East v. University of the East Faculty
Association, et. al., G.R. No. 57387 as "not doctrinal" and inapplicable to the CIT case. The Court
held in the UE case, which was promulgated on September 30, 1982, during the pendency of
these cases, that:
. . . allowances and benefits should be chargeable to the return to investment referred to in Sec.
3(a), if the schools should happen to have no other resources than incremental proceeds of
authorized tuition fee increases. . . (See Dispositive Portion of the Decision)

Intervenor PACU alleges that the aforecited U.E. decision does not categorically rule that COLA
and other fringe benefits should not be charged against the 60% incremental proceeds of the
authorized tuition fee increase.

The Solicitor General, on the other hand, argues in support of the Order of the public
respondent that Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee increases
exclusively for salary increases of teachers and non-teaching supportive personnel of the school
concerned, and that the Decree does not provide that said salary increases would take the place
of the COLA [Rollo, p. 244-245], He cites as authority for this stance, two (2) memoranda of the
then President dated June 6, 1978 and March 30, 1979 both of which provide that the 60%
incremental proceeds of tuition fee increases "shall be allocated for the increase in the salaries
of teachers and supportive personnel." Anent the U.E. case, the Solicitor General states that the
Supreme Court in deciding said case took note of the stand of the Office of the President that
the 60% incremental proceeds shall be solely applied to salaries of faculty members and
employees.

On August 7, 1986, considering the supervening events, including the change of administration,
that have transpired during the pendency of these cases, the Court required the Solicitor
General to state whether or not he maintains the action and position taken by his predecessor-
in-office. In his Compliance with said Resolution, the Solicitor General Manifested the position
that:

a.If the tuition fee increase was collected during the effectivity of Presidential Decree No. 451,
60% thereof shall answer exclusively for salary increase of school personnel. Other employment
benefits shall be covered by the 12% allocated for return of investment, this is in accordance
with the ruling of this Honorable Court in University of the East vs. U.E. Faculty Association, et. al
(117 SCRA 554), x x x and reiterated in University of Pangasinan Faculty Union v. University of
Pangasinan, et. al. (127 SCRA 691) and St. Louis Faculty Club v. NLRC (132 SCRA 380).
b.If the salary increase was collected during the effectivity of Batas Pambansa Blg. (sic) 232, 60%
thereof shall answer not only for salary increase of school personnel but also for other
employment benefits.
(Rollo, at pp. 513-514)

2. Arguments raised in the Divine Word College Case

Petitioner Divine Word College of Legazpi (DWC) advances the theory that the COLA, 13th
month pay and other personnel benefits decreed by law, must be deemed chargeable against
the 60% portion allocated for increase of salaries or wages of faculty and all other school
employees. In support of this stance, petitioner points out that said personnel benefits are not
included in the enumeration of the items for which the balance (less 60%) or 40% portion of the
incremental proceeds may be alloted under section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30.
Petitioner likewise cites the interpretation of the respondent Minister of Education, Culture and
Sports [embodied in the Implementing Rules and Regulations of P.D. 451, DEC Issuance, May 13,
1987; Rollo, p. 30], that the 60% incremental proceeds of authorized tuition fee increases may
be applied to increases in emoluments and/or benefits for members of faculty, including staff
and administrative employees of the school as the valid interpretation of the law, as against that
made by the respondent Deputy Minister of Labor in the assailed Order. If the latter
interpretation is upheld, petitioner would go as far as questioning the constitutionality of Pres.
Dec. No. 451 upon the ground that the same discriminates against the petitioner and other
private schools as a class of employers. According to the petitioner, the discrimination takes the
form of requiring said class of employers to give 60% of their profits to their employees in
addition to the COLA mandated by law, while other employers have to contend only with salary
increases and COLA [Petition; Rollo, p. 46].
With regard to the Decision of this Court in the U.E. case, petitioner claims exemption therefrom
upon the ground that the Court's interpretation of a law cannot be applied retroactively to
parties who have relied upon the previous administrative interpretation which has not been
declared invalid or unconstitutional [Petition; Rollo, pp. 50-51]. Petitioner further argues on this
point that if the court had intended to invalidate the MECS interpretation of the Decree, it
should have positively stated so in the Decision [Petition; Rollo, p. 50].

The Comment of the public respondents cite as settled jurisprudence applicable to the case at
bar, the ruling of this Court in the U.E. case, supra, which was reiterated in the subsequent cases
of University of Pangasinan Faculty Union v. University of Pangasinan, et al, and St. Louis Faculty
Club v. NLRC, et al.

Public respondents Deputy Minister of Labor and Employment and Regional Director of the
MOLE (Region V) likewise attack the validity of the Revised Implementing Rules and Regulations
of Pres. Dec. No. 451 cited by the petitioner insofar as said rules direct the allotment of the 60%
of incremental proceeds from tuition fee hikes for retirement plan, faculty development and
allowances. They argue that said rules and regulations were invalid for having been promulgated
in excess of the rule-making authority of the then Minister of Education under Pres. Dec. No.
451 which mandates that the 60% of incremental proceeds from tuition fee hikes should be
allotted solely for salary increases [Comment; Rollo, pp. 184185]. Finally, with respect to the
issue on the alleged unconstitutionality of Pres. Dec. No. 451, the public respondents posit that
a legislation (such as Pres. Dec. No. 451) which affects a particular class does not infringe the
constitutional guarantee of equal protection of the law as long as it applies uniformly and
without discrimination to everyone of that class [Comment; Rollo, p. 14].

3. Arguments raised in the Far Eastern University case

It is the petitioner's contention that in respect of Pres. Dec. No. 451, the decision of the NLRC is
a defiance of the rulings of this Court in the cases of University of the East v. U.E. Faculty
Association, et al and of University of Pangasinan Faculty Union v. University of Pangasinan and
NLRC (supra). The Union submits that monetary benefits, other than increases in basic salary,
are not chargeable to the 60% incremental proceeds.

The respondent University in its Comment dated June 13, 1982 refers to Article 97(f) of the
Labor Code which provides a definition of the term "wages" to support its position that "salaries
or wages" as used in Pres. Dec. No. 451 should be interpreted to include other benefits in terms
of money.

As mentioned in the Cebu Institute of Technology case, the Solicitor General filed its Compliance
with this Court's resolution dated August 7, 1986 requiring him to manifest whether public
respondents maintain the position they have taken in these consolidated cases. The resolution
of September 25, 1986 required petitioners to Comment on said Compliance.

The Comment dated December 6,1986 was received by this Court after petitioner Union was
required to show cause why no disciplinary action should be taken against them for failure to
comply earlier. The Union agreed with the position taken by the Solicitor General that under
Pres. Dec. No. 451, 60% of the tuition fee increases, shall answer exclusively for salary increase.
However, it expressed disagreement with the opinion that during the effectivity of B.P. Blg. 232,
the 60% increment tal proceeds shall answer not only for salary increases but also for other
employment benefits. The Union argues that whereas "Pres. Dec. No. 451 is a law on a particular
subject, viz., increase of tuition fee by educational institutions and how such increase shall be
allocated, B.P. Blg. 232 is not a law on a particular subject of increase of tuition fee . . .; at most
it is a general legislation on tuition fee as it touches on such subject in general." [Comment on
Compliance; Rollo, p. 376], Suppletory to its argument that B.P. Blg. 232 did not impliedly repeal
Pres. Dec. No. 451, the Union also invokes the principle that a special or particular law cannot be
repealed by a general law.

RESOLUTION OF THE FIRST SUB-ISSUE

This Court has consistently held, beginning with the University of the East case, that if the
schools have no resources other than those derived from tuition fee increases, allowances and
benefits should be charged against the proceeds of tuition fee increases which the law allows
for return on investments under section 3(a) of Pres. Dec. No. 451, therefore, not against the
60% portion allocated for increases in salaries and wages (See 117 SCRA at 571). This ruling was
reiterated in the University of Pangasinan case and in the Saint Louis University case.

There is no cogent reason to reverse the Court's ruling in the aforecited cases. Section 3(a) of
Pres. Dec. No. 451 imposes among the conditions for the approval of tuition fee increases, the
allocation of 60% per cent of the incremental proceeds thereof for increases in salaries or wages
of school personnel, and not for any other item such as allowances or other fringe benefits. As
aptly put by the Court in University of Pangasinan Faculty Union v. University of Pangasinan,
supra:

x x x The sixty (60%) percent incremental proceeds from the tuition increase are to be devoted
entirely to wage or salary increases which means increases in basic salary. The law cannot be
construed to include allowances which are benefits over and above the basic salaries of the
employees. To charge such benefits to the 60% incremental proceeds would be to reduce the
increase in basic salary provided by law, an increase intended also to help the teachers and

This interpretation of the law is consistent with the legislative intent expressed in the Decree
itself, i.e., to alleviate the sad plight of private schools and that of their personnel wrought by
slump in enrollment and increasing operational costs on the part of the schools, and the
increasing costs of living on the part of the personnel (Preamble, Pres. Dec. No. 451). While
coming to the aid of the private school system by simplifying the procedure for increasing
tuition fees, the Decree imposes as a condition for the approval of any such increase in fees, the
allocation of 60% of the incremental proceeds thereof, to increases in salaries or wages of
school personnel. This condition makes for a quid pro quo of the approval of any tuition fee hike
by a school, thereby assuring the school personnel concerned, of a share in its proceeds. The
condition having been imposed to attain one of the main objectives of the Decree, which is to
help the school personnel cope with the increasing costs of living, the same cannot be
interpreted in a sense that would diminish the benef it granted said personnel.

In the light of existing laws which exclude allowances from the basic salary or wage in the
computation of the amount of retirement and other benefits payable to an employee, this Court
will not adopt a different meaning of the terms "salaries or wages" to mean the opposite, i.e. to
include allowances in the concept of salaries or wages.

As to the alleged implementing rules and regulations promulgated by the then MECS to the
effect that allowances and other benefits may be charged against the 60% portion of the
proceeds of tuition fee increases provided for in Section 3(a) of Pres. Dec. No. 451, suffice it to
say that these were issued ultra vires, and therefore not binding upon this Court.

The rule-making authority granted by Pres. Dec. No. 451 is confined to the implementation of
the Decree and to the imposition of limitations upon the approval of tuition fee increases, to
wit:

SEC. 4. Rules and Regulations.—The Secretary of Education and Culture is hereby authorized,
empowered and directed to issue the requisite rules and regulations for the effective
implementation of this Decree. He may, in addition to the requirements and limitations
provided for under Sections 2 and 3 hereof, impose other requirements and limitations as he
may deem proper and reasonable.

The power does not allow the inclusion of other items in addition to those for which 60% of the
proceeds of tuition fee increases are allocated under Section 3(a) of the Decree. Rules and
regulations promulgated in accordance with the power conferred by law would have the force
and effect of law [Victorias Milling Company, Inc. v. Social Security Commission, 114 Phil. 555
(1962)] if the same are germane to the subjects of the legislation and if they conform with the
standards prescribed by the same law [People v. Maceren, G.R. No. L32166, October 18, 1977,
79 SCRA 450]. Since the implementing rules and regulations cited by the private schools adds
allowances and other benefits to the items included in the allocation of 60% of the proceeds of
tuition fee increases expressly provided for by law, the same were issued in excess of the rule-
making authority of said agency, and therefore without binding effect upon the courts. At best
the same may be treated as administrative interpretations of the law and as such, they may be
set aside by this Court in the final determination of what the law means.

SECOND SUB-ISSUE
B.Whether or not allowances and other fringe benefits may be charged against the 60% portion
of the incremental proceeds of tuition fee increases upon the effectivity of the Education Act of
1982 (B.P. Blg. 232).

1. Arguments raised in the Fabros case

In assailing MECS Order No. 25, s. 1985, petitioners argue that the matter of allocating the
proceeds from tuition fee increases is still governed by Pres. Dec. No. 451. It is their opinion that
section 42 of B.P. Blg. 232 did not repeal Pres. Dec. No. 451 for the following reasons: first, there
is no conflict between section 42 of B.P. Blg. 232 and section 3(a) of Pres. Dec. No. 451 or any
semblance of inconsistency to deduce a case of a repeal by implication: second, Pres. Dec. No.
451 is a specific law upon a particular subject—the purposes and distribution of the incremental
proceeds of tuition fee increases, while B.P. Blg. 232 is a general law on the educational system;
as such, a specific law is not repealed by a subsequent general law in the absence of a clear
intention; and third, Pres. Dec. No. 451 is still the only law on the subject of tuition fee increases
there being no prescription or provision in section 42 of B.P. Blg. 232 or elsewhere in the law.
They furthermore aver that the disputed MECS Order which imposed additional burdens against
the 60% incremental proceeds of tuition fee increases are not provided in either Pres. Dec. No.
451 or B.P. Blg. 232. The logical result as intimated by petitioners is that the inclusion of
paragraph 7.4 and related paragraphs 7 to 7.3 and 7.5 in the questioned MECS order
contravenes the statutory authority granted to the public respondent, and the same are theref
ore, void.

Respondent PACU takes the contrary view contending that MECS Order No. 25, s. 1985,
complies with the mandate of section 42 of B.P. Blg. 232 which law had already repealed Pres.
Dec. No. 451. PACU notes that the University of the East case invoked by petitioners is not
applicable because the issue in that case does not involve the effect of B.P. Blg. 232 on Pres.
Dec. No. 451.

The Solicitor General, representing the public respondent, after giving a summary of the matters
raised by petitioner and respondent PACU, points out that the decisive issue in this case is
whether B.P. Blg. 232 has repealed Pres. Dec. No. 451 because on the answer to this question
depends the validity of MECS Order No. 25, s. 1985. Public respondent holds the view consistent
with that of PACU on the matter of B.P. Blg. 232 having repealed Pres. Dec. No. 451. To support
this contention, the Solicitor General compared the respective provisions of the two laws to
show the inconsistency and incompatibility which would result in a repeal by implication.

RESOLUTION OF THE SECOND SUB-ISSUE

On the matter of tuition fee increases section 42 of B.P. Blg. 232 provides:

SEC. 42. Tuition and Other School Fees.—Each private school shall determine its rate of tuition
and other school fees or charges. The rates and charges adopted by schools pursuant to this
provision shall be collectible and their application or use authorized, subject to rules and
regulations promulgated by the Ministry of Education, Culture and Sports. (Italics supplied).

The enactment of B.P. Blg. 232 and the subsequent issuance of MECS Order No. 25, s. 1985
revived the old controversy on the application and use of the incremental proceeds from tuition
fee increases. As can be gleaned from the pleadings and arguments of the parties in these cases,
one side, composed of the teachers and other employees of the private schools, insist on the
applicability of section 3(a) of Pres. Dec. No. 451 as interpreted and applied in the University of
the East, University of Pangasinan and St. Louis University cases, while the private schools
uphold the view that the matter of allocating the incremental proceeds from tuition fee
increases is governed by section 42 of B.P. Blg. 232 as implemented by the MECS Rules and
Regulations. As stated, the latter's argument is premised on the allegation that B.P. Blg. 232
impliedly repealed Pres. Dec. No. 451.

On the second sub-issue, therefore, this Court upholds the view taken by the Solicitor General in
the Fabros case, that the decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec. No. 451.

In recognition of the vital role of private schools in the country's educational system, the
government has provided measures to regulate their activities. As early as March 10, 1917, the
power to inspect private schools, to regulate their activities, to give them official permits to
operate under certain conditions and to revoke such permits for cause was granted to the then
Secretary of Public Instruction by Act No. 2706 as amended by Act No. 3075 and Commonwealth
Act No. 180. Republic Act No. 6139, enacted on August 31, 1970, provided for the regulation of
tuition and other fees charged by private schools in order to discourage the collection of
exorbitant and unreasonable fees. In an effort to simplify the "cumbersome and time
consuming" procedure prescribed under Rep. Act No. 6139 and "to alleviate the sad plight of
private schools," Pres, Dec. No. 451 was enacted on May 11, 1974. While this later statute was
being implemented, the legislative body envisioned a comprehensive legislation which would
introduce changes and chart directions in the educational system, hence, the enactment of B.P.
Blg. 232. What then was the effect of B.P. Blg. 232 on Pres. Dec. No. 451?

The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly section
3(a) thereof, finds evident irreconcilable differences.

Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other school
fees or charges by private schools is lodged with the Secretary of Education and Culture (Sec. 1),
where section 42 of B.P. Blg. 232 liberalized the procedure by empowering each private school
to determine its rate of tuition and other school fees or charges.

Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee increases shall
be applied or used to augment the salaries and wages of members of the faculty and other
employees of the school, while B.P. Blg. 232 provides that the increment shall be applied or
used in accordance with the regulations promulgated by the MECS.

A closer look at these differences leads the Court to resolve the question in favor of repeal. As
pointed out by the Solicitor General, three aspects of the disputed provisions of law support the
above conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to
apportion the incremental proceeds of the tuition fee increases; such power is delegated to the
Ministry of Education and Culture under B.P. Blg. 232. Second, Pres. Dec. No. 451 limits the
application or use of the increment to salary or wage increase, institutional development,
student assistance and extension services and return on investment, whereas B.P. Blg. 232 gives
the MECS discretion to determine the application or use of the increments. Third, the extent of
the application or use of the increment under Pres. Dec. No. 451 is fixed at the pre-determined
percentage allocations; 60% for wage and salary increases, 12% for return in investment and the
balance of 28% to institutional development, student assistance and extension services, while
under B.P; Blg. 232, the extent of the allocation or use of the increment is likewise left to the
discretion of the MECS.

The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451 is
apparent in the second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42
of B.P. Blg. 232 which cover the same subject matter, are so clearly inconsistent and
incompatible with each other that there is no other conclusion but that the latter repeals the
former in accordance with section 72 of B.P. Blg. 232 to wit:

Sec. 72. Repealing clause.—All laws or parts thereof inconsistent with any provision of this Act
shall be deemed repealed or modified, as the case may be.

Opinion No. 16 of the Ministry of Justice dated January 29, 1985, quoted below, supports the
above conclusion:

Both P.D. No. 451 and B.P. Blg. 232 deal with the imposition of tuition and other school fees or
charges and their use and application, although the latter is broader in scope as it covers other
aspects of the education system. We note substantial differences or inconsistencies between
the provisions of the two laws. P.D. No. 451 prescribes certain limitations in the increase of
tuition and other school fees and their application, whereas the latter law, B.P. Blg. 232 is silent
on the matter. Under P.D. 451, rates of tuition/school fees need prior approval of the Secretary
of Education, Culture (now Minister of Education, Culture and Sports), who also determines the
reasonable rates for new school fees, whereas under B.P. Blg. 232, each private school
determines its rate of tuition and other school fees or charges. P.D. No. 451 authorizes the
Secretary of Education and Culture to issue requisite rules and regulations to implement the said
Decree and for that purpose, he is empowered to impose other requirements and limitations as
he may deem proper and reasonable in addition to the limitations prescribed by the Decree for
increases in tuition fees and school charges, particularly, the limitations imposed in the
allocation of increases in fees and charges, whereas under B.P. Blg. 232, the collection and
application or use of rates and charges adopted by the school are subject to rules and
regulations promulgated by the Ministry of Education, Culture and Sports without any mention
of the statutory limitations on the application or use of the fees or charges. The authority
granted to private schools to determine its rates of tuition and unconditional authority vested in
the Ministry of Education, Culture and Sports to determine by rules and regulations the
collection and application or use of tuition or fees rates and charges under B.P. Blg. 232
constitute substantial and irreconcilable incompatibility with the provisions of P.D. No. 451,
which should be for that reason deemed to have been abrogated by the subsequent legislation.

Moreover, B.P. Blg. 232 is a comprehensive legislation dealing with the establishment and
maintenance of an integrated system of education and as such, covers the entire subject matter
of the earlier law, P.D. No. 451. The omission of the limitations or conditions imposed in P.D. No.
451 for increases in tuition fees and school charges is an indication of a legislative intent to do
away with the said limitations or conditions. (Crawford, supra, p. 674). It has also been said that
—

an act which purports to set out in full all that it intends to contain, operates as a repeal of
anything omitted which was contained in the old act and not included in the amendatory act."
(People vs. Almuete, 69 SCRA 410; People vs. Adillo, 68 SCRA 90) (Ministry of Justice, Op. No. 16,
s. 1985).

Having concluded that under B.P. Blg. 232 the collection and application or use of tuition and
other school fees are subject only to the limitations under the rules and regulations issued by
the Ministry, the crucial point now shifts to the said implementing rules.

The guidelines and regulations on tuition and other school fees issued after the enactment of
B.P. Blg. 232 consistently permit the charging of allowances and other benefits against the 60%
incremental proceeds. Such was the tenor in the MECS Order No. 23, s. 1983; MECS Order No.
15, s. 1984; MECS Order No. 25, s. 1985; MECS Order No. 22, s. 1986; and DECS Order No. 37, s.
1987. The pertinent portion of the latest order reads thus:

In any case of increase at least sixty percent (60%) of the incremental proceeds should be
allocated for increases in or provisions for salaries or wages, allowances and fringe benefits of
faculty and other staff, including accruals to cost of living allowance, 13th month pay, social
security, medicare and retirement contribution and increases as may be provided in mandated
wage orders, collective bargaining agreements or voluntary employer practices.

The validity of these orders, particularly MECS Order No. 25, s. 1985, is attacked on the ground
that the additional burdens charged against "... the 60% of the proceeds of the increases in
tuition fees constitute both as [sic] an excess of statutory authority and as (sic) a substantial
impairment of the accrued, existing and protected rights and benefits of the members of faculty
and non-academic personnel of private schools." [Memorandum for Petitioners; Rollo, p. 191].
Petitioners allege that these additional burdens under the MECS Order are not provided in the
law itself, either in section 42 of B.P. Blg. 232 or section 3(a) of Pres. Dec. No. 451, except
increases in salaries in the latter provision.

Section 42 of B.P. Blg. 232 grants to the Minister of Education (now Secretary of Education) rule-
making authority to fill in the details on the application or use of tuition fees and other school
charges. In the same vein is section 70 of the same law which states:

SEC. 70. Rule-making Authority.—The Minister of Education, Culture and Sports charged with
the administration and enforcement of this Act, shall promulgate the necessary implementing
rules and regulations.

Contrary to the petitioners' insistence that the questioned rules and regulations contravene the
statutory authority granted to the Minister of Education, this Court finds that there was a valid
exercise of rule-making authority.

The statutory grant of rule-making power to administrative agencies like the Secretary of
Education is a valid exception to the rule on non-delegation of legislative power provided two
conditions concur, namely: 1) the statute is complete in itself, setting forth the policy to be
executed by the agency, and 2) said statute fixes a standard to which the latter must conform
[Vigan Electric Light Co., Inc. v. Public Service Commission, G.R. No. L-19850, January 30, 1964,
and Pelaez v. Auditor General, G.R. No. L-23825, December 24, 1965].

The Education Act of 1982 is "an act providing for the establishment and maintenance of an
integrated system for education'' with the f ollowing basic policy:

It is the policy of the State to establish and maintain a complete, adequate and integrated
system of education relevant to the goals of national development. Toward this end, the
government shall ensure, within the context of a free and democratic system, maximum
contribution of the educational system to the attainment of the following national development
goals:

1.To achieve and maintain an accelerating rate of economic development and social progress;
2.To assure the maximum participation of all the people in the attainment and enjoyment of the
benefits of such growth; and
3.To achieve and strengthen national unity and consciousness and preserve, develop and
promote desirable cultural, moral and spiritual values in a changing world.
The State shall promote the right of every individual to relevant quality education, regardless of
sex, age, creed, socio-economic status, physical and mental conditions, racial or ethnic origin,
political or other affiliation. The State shall therefore promote and maintain equality of access to
education as well as the enjoyment of the benefits of education by all its citizens.

The State shall promote the right of the nation's cultural communities in the exercise of their
right to develop themselves within the context of their cultures, customs, traditions, interests
and belief, and recognizes education as an instrument for their maximum participation in
national development and in ensuring their involvement in achieving national unity. (Section 3,
Declaration of Basic Policy).
With the foregoing basic policy as well as specific policies clearly set forth in its various
provisions, the Act is complete in itself and does not leave any part of the policy-making, a
strictly legislative function, to any administrative agency.

Coming now to the presence or absence of standards to guide the Minister of Education in the
exercise of rule-making power, the pronouncement in Edu v. Ericta [G.R. No. L-32096, October
24, 1970, 35 SCRA 481, 497] is relevant:

The standard may be either expressed or implied. If the former, the non-delegation objection is
easily met. The standard though does not have to be spelled out specifically. It could be implied
from the policy and purpose of the act considered as a whole. In the Reflector Law, clearly the
legislative objective is public safety. What is sought to be attained as in Calalang v. Williams is
"safe transit upon the roads." (Italics supplied).

Thus, in the recent case of Tablarin, et al v. Hon. Gutierrez, et al, {G.R. No. 78164, July 31, 1987],
the Court held that the necessary standards are set forth in Section 1 of the 1959 Medical Act,
i.e., "the standardization and regulation of medical education" as well as in other provisions of
the Act. Similarly, the standards to be complied with by Minister of Education in this case may
be found in the various policies set forth in the Education Act of 1982.

MECS Order No. 25, s. 1985 touches upon the economic relationship between some members
and elements of the educational community, i.e., the private schools and their faculty and
support staff. In prescribing the minimum percentage of tuition fee increments to be applied to
the salaries, allowances and fringe benefits of the faculty and support staff, the Act affects the
economic status and the living and working conditions of school personnel, as well as the
funding of the private schools.

The policies and objectives on the welfare and interests of the various members of the
educational community are found in section 5 of B.P. Blg. 232. which states:

SEC. 5. Declaration of Policy and Objectives.—It is likewise declared government policy to foster,
at all times, a spirit of shared purposes and cooperation among the members and elements of
the educational community, and between the community and other sectors of society, in the
realization that only in such an atmosphere can the true goals and objectives of education be
fulfilled.

Moreover, the State shall:

1.Aid and support the natural right and duty of parents in the rearing of the youth through the
educational system.
2.Promote and safeguard the welfare and interests of the students by defining their rights and
obligations, according them privileges, and encouraging the establishment of sound
relationships between them and the other members of the school community
3.Promote the social and economic status of all school personnel, uphold their rights, define
their obligations, and improve their living and working conditions and career prospects.
4.Extend support to promote the viability of those institutions through which parents, students
and school personnel seek to attain their educational goals.
On the other hand, the policy on the funding of schools in general, are laid down in section 33:

SEC. 33. Declaration of Policy—It is hereby declared to be a policy of the State that the national
government shall contribute to the financial support of educational programs pursuant to the
goals of education as declared in the Constitution. Towards this end, the government shall:

1.Adopt measures to broaden access to education through financial assistance and other forms
of incentives to schools, teachers, pupils and students; and
2.Encourage and stimulate private support to education through, inter alia, fiscal and other
assistance measures.
Given the abovementioned policies and objectives, there are sufficient standards to guide the
Minister of Education in promulgating rules and regulations to implement the provisions of the
Education Act of 1982. As in the Ericta and Tablarin cases, there is sufficient compliance with the
requirements of the non-delegation principle.

THIRD SUB-ISSUE
C.Whether or not schools and their employees may enter into a collective bargaining agreement
allocating more than 60% of said incremental proceeds for salary increases and other benefits of
said employees.
1. Arguments raised in the Biscocho and Valmonte cases
Assailed by the petitioners in the Biscocho and the Valmonte cases is the Order of the
respondent Minister of Labor directing the execution of a CBA A between the school and the
respondent Espiritu Santo Parochial School Faculty Association which provides for an economic
package equivalent to 90% of the proceeds of tuition fee increases for school year 1985-1986,
another 90% for school year 1986-1987 and 85% for school year 1987-1988. Pursuant to said
Order, petitioners in the Biscocho case allege that the parties had agreed to incorporate in their
CBA a provision which allocates one-half (1/2) of the 90% portion of the proceeds or 45% to
increases in the monthly basic salaries and the other one-half (1/2) or 45% to increases in
monthly living allowance.

The petitioners in the two cases seek the nullification of the MOLE Order for exactly opposite
reasons. In the Biscocho case, the controversy springs from what petitioners perceive to be a
diminution of the benefits to be received by the school employees insofar as the CBA allocates
only 45% for salary increases instead of 60%, which petitioners claim to be the portion set aside
by Pres. Dec. No. 451 for that purpose. Parenthetically, the case questions the allocation of the
remaining 45% of the 90% economic package under the CBA, to allowances. Stripped down to
its essentials, the question is whether or not the 90% portion of the proceeds of tuition fee
increases alloted for the economic package may be allocated for both salary increases and
allowances.

On the other hand, petitioners in the Valmonte case believe that the MOLE cannot order the
execution of a CBA which would allocate more than 60% of the proceeds of tuition fee increases
for salary increases of school employees. Furthermore, petitioners question the authority of the
then Minister of Labor and Employment to issue the aforequoted Order insofar as this allocates
the tuition fee increases of the respondent private school. According to them, only the Minister
of Education, Culture and Sports has the authority to promulgate rules and regulations on the
use of tuition fees and increases thereto, pursuant to the provisions of B.P. Blg. 232. They
further argue that the assailed Order collides with the provisions of Pres. Dec. No. 451 insofar as
it allocates 90% of the tuition fee increases for salary adjustments of the members of the
bargaining unit which exceeds the 60% of the said increases allocated by the Decree f or the
same purpose.

Before delving further into the questions raised, this Court notes that in the Valmonte case,
respondent Minister and respondent Faculty Association raise a procedural objection to the
filing of the Petition: the standing of the petitioners to bring this suit. Both respondents decry
the petitioners' lack of the interest required in Rule 65 of the Rules of Court for the filing of the
Petition for Certiorari and Prohibition, since the latter do not appear to be in any way aggrieved
by the enforcement of the Order. Petitioners-parents did not even participate in the
proceedings below which led to the issuance of the assailed Order.

This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of Court (Secs. 1
and 2), only a person aggrieved by the act or proceeding in question may file a petition for
certiorari and/or prohibition. The Valmonte petition fails to indicate how the petitioners would
be aggrieved by the assailed Order. It appears that the petitioners are not parties and never at
any time intervened in the conciliation conferences and arbitration proceedings before the
respondent Minister. The parties therein, who stand to be directly affected by the Order of the
respondent Minister, do not contest the validity of said Order. The petition does not even state
that petitioners act as representative of the parents' association in the School or in behalf of
other parents similarly situated.

If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they should have
intervened and moved for a reconsideration of respondent Minister's Order before filing the
instant petition. Petitioners failed to show that the case falls under any one of the recognized
exceptions to the rule that a motion for reconsideration should first be availed of bef ore f iling a
petition f or certiorari and prohibition.

In view of the foregoing, the resolution of the third sub-issue will be based mainly on the
arguments raised in the Biscocho case.

RESOLUTION OF THE THIRD SUB-ISSUE

The Biscocho case involves the issue on the allocation of the incremental proceeds of the tuition
fee increases applied for by the respondent Espiritu Santo Parochial School for school years
1985-1986, 1986-1987, and 1987-1988. With the repeal of Pres. Dec. No. 451 by B.P. Blg. 232,
the allocation of the proceeds of any authorized tuition fee increase must be governed by
specific rules and regulations issued by the Minister (now Secretary) of Education pursuant to
his broadened rulemaking authority under section 42 of the new law. Thus, insofar as the
proceeds of the authorized tuition fee increases for school year 1985-1986 are concerned, the
allocation must conform with the pertinent section of MECS Order No. 25, s. 1985, to wit:

7. Application or Use of Tuition and Other School Fees or Charges.

x      x      x

7.4 Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries
or wages, allowances and fringe benefits of faculty and support staff, including cost of living
allowance, imputed costs of contributed services, thirteenth (13th) month pay, retirement fund
contributions, social security, medicare, unpaid school personnel claims, and payments as may
be prescribed by mandated wage orders, collective bargaining agreements and voluntary
employer practices: Provided, That increases in fees specifically authorized for the purposes
listed in paragraph 4.3.3 hereof shall be used entirely for those purposes.

x      x      x

With regard to the proceeds of the tuition fee increases for school year 1986-1987, the
applicable rules are those embodied in MECS Order No. 22, s. 1986 which made reference to
MECS Order No. 25, s. 1985, the pertinent portion of which is quoted above.

Finally, as to the proceeds of the tuition fee increases for school year 1987-1988, DECS Order
No. 37, s. 1987 must apply:

c. Allocation of Incremental Proceeds

(1)In any case of increase at least sixty percent (60%) of the incremental proceeds should be
allocated for increases in or provisions for salaries or wages, allowances and fringe benefits of
faculty and other staff, including accruals to cost of living allowance, 13th month pay, social
security, medicare and retirement contributions and increases as may be provided in mandated
wage orders, collective bargaining agreements or voluntary employer practices.
(2)Provided, that in all cases of increase the allocation of the incremental proceeds shall be
without prejudice to the Supreme Court cases on the interpretation and applicability of existing
legislations on tuition and other fees especially on the allocation and use of any incremental
proceeds of tuition and other fees increases. (Italics supplied).
x      x      x

Based on the aforequoted MECS and DECS rules and regulations which implement BP Blg. 232,
the 60% portion of the proceeds of tuition fee increases may now be allotted for both salaries
and allowances and other benefits. The 60% figure is, however, a minimum which means that
schools and their employees may agree on a larger portion, or in this case, as much as 90% for
salaries and allowances and other benefits. This is not in anyway to allow diminution or loss of
the portion allotted for institutional development of the school concerned. Thus, paragraph 7.5
of MECS Order No. 25, series of 1985 specifically provides that other student fees and charges
like registration, library, laboratory or athletic fees shall be used exclusively for the purposes
indicated.

III. RESOLUTION OF THE SPECIFIC ISSUES

CEBU INSTITUTE OF TECHNOLOGY CASE
Petitioner assigns three other errors in the petition for certiorari:

RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND EMPLOYMENT COMMITTED GRAVE

ABUSE OF DISCRETION AMOUNTING TO A DENIAL OF DUE PROCESS OF LAW IN DIRECTLY
ISSUING THE ORDER DATED SEPTEMBER 29, 1981 WITHOUT CONDUCTING A FORMAL
INVESTIGATION ATION AND ARBITRATION PROCEEDINGS.

PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PETITIONER IS EXEMPTED AND/OR NOT
OBLIGED TO PAY SERVICE INCENTIVE LEAVE.

PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PRIVATE RESPONDENTS' CLAIMS FOR
COLA AND SERVICE INCENTIVE LEAVE ARE FULLY BARRED BY LACHES AND/OR EXTINGUISHED BY
PRESCRIPTION.

1.Petitioner assails the Order of the Minister of Labor on the ground that the same was issued
without the benefit of a hearing and was merely based on the report of the labormanagement
committee which is allegedly without power to pass upon the issues raised. On this premise,
petitioner claims that it was denied its right to due process.
Petitioner's contention is without merit. The LaborManagement Committee was empowered to
investigate the complaint against the petitioner for non-payment of the cost of living allowance,
13th month pay and service incentive leave from 1974-1981 [Annex "F"; Rollo, p. 37]. In the
committee, petitioner was represented by its counsel, registrar and assistant accountant and in
the conferences that were held, the representatives of the petitioner were present.
Furthermore, the petitioner's position paper submitted to the committee reflects that in all the
deliberations, it was never denied the right to present evidence and be heard on all the issues
raised, particularly to demonstrate that it had complied with the various COLA, 13th month pay
and service incentive leave decrees. The evidence presented during the conferences and the
position paper of the parties were made the basis of the committee's report and
recommendation which in turn became the basis of the order of the Minister of Labor directing
the petitioner to pay the complainants their COLA and service incentive leave benefits.

It could not therefore be contended that the petitioner was deprived of his right to be heard
when it appears on the record that it was permitted to ventilate its side of the issues. There was
sufficient compliance with the requirements of due process. In the face of the well-settled
principle that administrative agencies are not strictly bound by the technical rules of procedure,
this Court dismisses the petitioner's claim that formal investigative and arbitration proceedings
should be conducted. "While a day in court is a matter of right in judicial proceedings, in
administrative proceedings it is otherwise since they rest upon different principles." [Cornejo v.
Gabriel and Provincial Board of Rizal, 41 Phil. 188 (1920); Tajonera v. Lamaroza, G.R. Nos. L-
48907 and L-49035, December 19,1981,110 SCRA 438].
2.Going now to the matter of service incentive leave benefits, petitioner claims that private
respondents are engaged by the school on a contract basis as shown by the individual teachers
contract which defines the nature, scope and period of their employment; hence, they are not
entitled to the said benefit according to Rule V of the Implementing Rules and Regulations of the
Labor Code to wit:
SEC. 1. Coverage.—This rule [on Service Incentive Leave] shall apply to all employees, except:

x      x      x

(d)Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those
who are paid in a fixed amount for performing work irrespective of the time consumed in the
performance thereof; (MOLE Rules and Regulations, Rule V, Book III).
The phrase "those who are engaged on task or contract basis" 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, [Vera v. Cuevas, G.R. No. L-
33693, May 31, 1979, 90 SCRA 379]. 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.

3.As a last ditch effort to bar private respondents' claims, petitioner asserts that the same are
barred by laches and/or extinguished by prescription according to Article 291 of the Labor Code
which provides:
Art. 291. Money claims.—All money claims arising from employer-employee relations accruing
during the effectivity of this Code shall be filed within three (3) years from the time the cause of
action accrued; otherwise, they shall be forever barred.

x      x      x

All money claims accruing prior to the effectivity of this Code shall be filed with the appropriate
entities established under this Code within one (1) year from the date of effectivity, and shall be
processed or determined in accordance with implementing rules and regulations of the Code;
otherwise, they shall be forever barred.

Considering that the complaint alleging non-payment of benefits was filed only on February 11,
1981, petitioner argues that prescription has already set in.

From the aforequoted provision, it is not fully accurate to conclude that the entire claims for
COLA and service incentive leave are no longer recoverable. This Court finds no reason to
disturb the following pronouncement of the Minister of Labor:

x      x      x

Simply stated, claims for COLA under P.D. 525, which took effect on August 1, 1974, for the
months of August, September and October 1974 must be filed within one (1) year from
November 1, 1974, otherwise they shall be considered prescribed; claims under the same
decree that accrued on or after November 1,1974 should be initiated within three (3) years from
the date of accrual thereof, otherwise the same shall be deemed extinguished. Although this
particular claim was filed on February 11, 1981, petitioners herein are entitled to COLA under
P.D. 525 from February 1978 up to the present since the COLA that accrued in February 1978
has not yet prescribed at the time that the claim was filed in February 1981. In the same vein,
petitioners herein should be granted COLA under P.D. 1123 from February 1978 up to 1981
inasmuch as said decree became effective only on May 11, 1977. Further, petitioners are
entitled to the full amount of COLA provided under P.D.'s 1614, 1634, 1678 and 1713. It must be
pointed out that the earliest of the just cited four (4) decrees, i.e., P.D. 1614, just took effect on
April 1, 1979. Thus, the prescriptive period under Art. 292 of the Labor Code, as amended, does
not as yet apply to money claims under the just mentioned decrees.

DIVINE WORD COLLEGE CASE

In assailing the disputed Order, petitioner contends that the public respondents acted with
grave and patent abuse of discretion amounting to lack of jurisdiction in that:

1.The Regional Director has no jurisdiction over money claims arising f from employer-employee
relationship; and
2.The Regional Director and Deputy Minister of Labor adopted the report of the Labor Standards
Division without affording the petitioner the opportunity to be heard.
1.Petitioner school claims that the case at bar is a money claim and should therefore be within
the original and exclusive jurisdiction of the Labor Arbiter pursuant to article 217 of the Labor
Code, as amended.
It appears from the record, however, that the original complaint filed by ten (10) faculty
members of the Divine Word College was for non-compliance with Pres. Dec. No. 451 and with
Labor Code provisions on service incentive leave, holiday and rest day pay and which complaint
specifically prayed that an inspection of the College be conducted.

Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly
authorized representatives (which includes Regional Directors) are accorded the power to
investigate complaints for non-compliance with labor laws, particularly those which deal with
labor standards such as payment of wages and other forms of compensation, working hours,
industrial safety, etc.. This is provided for in article 128 of the Labor Code, as amended:

Art. 128. Visitorial and enforcement power.—

(a)The Secretary of Labor or his duly authorized representatives, including labor regulation
officers, shall have access to employers' records and premises at any time of the day or night,
whenever work is being undertaken therein, and the right to copy therefrom, to question any
employee and investigate any fact, condition or matter which may be necessary to determine
violations or which may aid in the enforcement of this Code and of any labor law, wage order or
rules and regulations issued pursuant thereto.
(b)The Secretary of Labor or his duly authorized representatives shall have the power to order
and administer, after due notice and hearing, compliance with the labor standards provisions of
this Code based on the findings of labor regulation officers or industrial safety engineers made in
the course of inspection, and to issue writs of execution to the appropriate authority for the
enforcement of their order, except in cases where the employer contests the findings of the
labor regulations officer and raises issues which cannot be resolved without considering
evidentiary matters that are not verifiable in the normal course of inspection. (Italics supplied).
Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction over labor
cases restates inter alia that "(L)abor standards cases arising from violation of labor standards
laws discovered in the course of inspection or complaints where employer-employee relations
still exist" are under the exclusive original jurisdiction of the Regional Director.

Even assuming that respondent Regional Director was without jurisdiction to entertain the case
at bar, petitioner is now barred at this stage to claim lack of jurisdiction having actively
participated in the proceedings below. Petitioner never questioned the jurisdiction of the
respondent Regional Director.

2.The petitioner claims that it was never afforded the opportunity to be heard and was
therefore denied due process.
There is no dispute that an inspection of the College was conducted after a complaint by some
faculty members was filed with the Regional Office of the Ministry of Labor and Employment. A
report was submitted on the basis of the findings contained therein. Petitioner was furnished a
copy of said report to which it filed a comment. Finding this to be without merit, the Regional
Director issued an order giving petitioner ten (10) days to manifest its compliance with the
findings, otherwise, another would be issued to enforce payment. Petitioner appealed but
instead of resolving the memorandum of appeal, which the Regional Director treated as a
motion for reconsideration, said Director issued another Order dated August 2, 1983 directing
the payment of the employees' share in the sixty (60%) percent incremental proceeds.
Petitioner moved for a reconsideration of the latest order which the Regional Director, however,
denied, thereby elevating the case to the Office of the Minister of Labor and Employment.

The foregoing facts demonstrate that petitioner had the opportunity to refute the report on the
inspection conducted. It submitted a comment thereto, which was in effect its position paper.
The arguments therein and evidence attached thereto were considered by respondent Regional
Director in the order issued subsequently. They, therefore, had ample opportunity to present
their side of the controversy.

What due process contemplates is not merely the existence of an actual hearing. The "right to
be heard" focuses more on the substance rather than the form. In the case at bar, petitioner
was actually heard through the pleadings that it filed with the Regional Office V. As it itself
admitted in its petition that it was afforded the right to be heard on appeal [See Rollo, p. 58],
petitioner cannot therefore insist that it was denied due process.

FAR EASTERN UNIVERSITY CASE

1

Two other issues are raised in this petition, to wit: WHETHER OR NOT 'TRANSPORTATION
ALLOWANCE' SHOULD BE CONSIDERED AS 'EQUIVALENT' TO 13THMONTH PAY UNDER PRES.
DEC. NO. 851.

WHETHER OR NOT LEGAL-HOLIDAY PAY BENEFIT COULD

BE VALIDLY WITHDRAWN AFTER BEING PRACTICED CONTINUOUSLY FOR EIGHT (8) MONTHS.

1. The issue on the thirteenth (13th) month pay involves an interpretation of the provisions of
Pres. Dec. No. 851 which requires all employers "to pay all their employees receiving a basic
salary of not more than P 1,000 a month, regardless of the nature of the employment, a 13th-
month pay" (Sec. 1). However, "employer[s] already paying their employees a 13thmonth pay or
its equivalent are not covered" (Sec. 2). (Italics supplied)
The Rules and Regulations Implementing Pres. Dec. No. 851 provide the following:

SEC. 3. Employees—The Decree shall apply to all employers except to:

x       x       x

c)Employers already paying their employees 13th-month or more in a calendar year or its
equivalent at the time of this issuance;
x      x      x

The term "its equivalent" as used in paragraph (c) hereof shall include Christmas bonus, mid-
year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th
of the basic salary but shall not include cash and stock dividends, cost of living allowances and
all other allowances regularly enjoyed by the employer, as well as non-monetary benefits.
Where an employer pays less than 1/12th of the employees basic salary, the employer shall pay
the difference.

In the case at bar, the 13th month pay is paid in the following manner:

FOR REGULAR EMPLOYEES:

Transportation Allowance (TA)

50% of basic for the first year of service plus additional 5% every year thereafter but not to
exceed 100% of basic salary

Christmas Bonus (CB)

50% of basic salary for the first year of service plus additional

679

VOL. 156, DECEMBER 18, 1987

679

Cebu Institute of Technology (CIT) vs. Ople

5% every year thereafter but not to exceed 100% of basic salary.

For employees who have served the University for more than 10 years, the University pays them
emoluments equivalent to the 14 months salaries.

13th Month Pay Formula:

     Monthly Rate x No. of

     months served for the year

     __________________Less TA/CB = 13th Mo. pay

     12 months

FOR CASU AL EMPLOYEES:

13th Month Pay Formula:

Add salaries from 16 December of previous year to 15th December of present year [and] divide
by 12 months = 13th Mo. Pay (Rollo, pp. 60, 72).

The University's answer to the Union's claim of underpayment of the 13th month pay is that the
"transportation allowance" paid to its employees partakes the nature of a midyear bonus which
under section 2 of Pres. Dec. No. 851 and section 3(c) of the Implementing Rules and
Regulations is equivalent to the 13th month pay.

The Labor Arbiter ordered FEU to pay the 13th month pay differentials of the complainants
reasoning that:

CLEARLY, transportation allowance cannot be considered as "equivalent" of 13th month pay as

it is neither a Christmas bonus, midyear bonus, profit sharing payment, or other cash bonuses,
pursuant to paragraphs (c) and (e), Section 3 of PD 851. The regularity of its payment further
cements this proposition.

PERFORCE, complainants are underpaid of their 13th month pay in an amount equivalent to 50%
of their basic salary for the 1st year of service, plus additional 5% every year thereafter but not
to exceed 100% of their basic salary which, per respondent's formula, corresponds to their
transportation allowance. (Rollo, p. 61).
On appeal, the Third Division of the National Labor Relations Commission reversed the Labor
Arbiter's ruling by dismissing the complainant's claim for underpayment of the 13th month pay
for lack of merit. The NLRC ruled that:

From the above findings and conclusion, it is clear that insofar as employees with ten (10) years
of service or more are concerned, they receive the equivalent of one (1) month pay for
Christmas bonus and another one (1) month pay as transportation allowance or a total of
fourteen (14) months salary in a year. Obviously, this group of employees are fully paid of their
13th month pay and are not therefore subject to the instant claim. As it is only those with less
than ten (10) years of service are included or encompassed by the Labor Arbiter's resolution on
this particular issue. With this clarification, we shall now proceed to discuss the crux of the
controversy, that is, the determination of whether or not the so designated "transportation
allowance" being paid to the employees should be considered among those deemed equivalent
to 13th month pay. As adverted earlier, the Labor Arbiter opined that it cannot be so considered
as the equivalent of 13th month pay.

x      x      x

In passing upon the issue, we deemed it best to delve deeper into the nature and intendment of
the transportation allowances as designated by both the complainants and the respondent.
Complainants claim that the transportation allowance they enjoy has always been called and
termed allowance and never as bonus since the time the same was given to them. They assert
that it simply was intended as an allowance and not a bonus. It would appear however that
complainants do not dispute respondent's stand that transportation allowance is being paid only
every March of each year as distinguished from other allowances that are being paid on a
monthly basis or on a bi-monthly basis; that the amount of transportation allowance to be paid
is dependent on the length of service of the employee concerned (i.e. 50% basic in the first year
and additional 5% for each succeeding years, etc.); that the said method of computing the
amount of the transportation allowance to be paid the complainants is identical to that used in
determining Christmas bonus (respondent's exhibit 8) that the reason behind said
transportation allowance is to financially assist employees in meeting their tax obligations as the
same become due on or about the month of March of each year.

x       x       x

We are inclined to believe and so hold that by the manner by which said transportation
allowance is being paid (only once a year) as well as the method in determining the amount to
be paid (similar to Christmas bonus) and considering further the reason behind said payment
(easing the burden of taxpayer-employee), the said transportation allowance given out by
respondent while designating as such, partakes the nature of a mid-year bonus. It bears to note
in passing that in providing for transportation allowance, respondent was not compelled by law
nor by the CBA (Annex "A" of respondent's Appeal) as nowhere in the CBA nor in the Labor Code
can be found any provision on transportation allowance. It was therefore a benefit that
stemmed out purely from the voluntary act and generosity of the respondent FEU. Moreover,
said transportation allowance is only being paid once a year. On the other hand, regular
allowances not considered as 13th month pay equivalent under P.D. 851, to our mind, refer to
those paid on regular intervals and catering for specific employees' needs and requirements that
recur on a regular basis. Verily, if the intendment behind the disputed transportation allowance
is to answer for the daily recurring transportation expenses of the employees, the same should
have been paid to employees on regular periodic intervals. All indications, as we see it, point out
to conclusion that the disputed transportation allowance, while dominated as such apparently
for lack of better term, is in fact a form of bonus doled out by the respondent during the month
of March every year.

Hence, we hold that it is one of those that can very well be considered as equivalent to the 13th
month pay (Rollo, pp. 73, 74, 75, 76).
This Court sustains the aforequoted view of public respondent. The benefit herein designated as
"transportation allowance" is a form of bonus equivalent to the 13th month pay. Nevertheless,
where this does not amount to 1/12 of the employees basic salary, the employer shall pay the
dif ference.

The evident intention of the law was to grant an additional income in the form of a 13th month
pay to employees not already receiving the same. This Court ruled in National Federation of
Sugar Workers (NFSW) v. Ovejera: [G.R. No. 59743, May 31, 1982, 114 SCRA 354].

Otherwise put, the intention was to grant some relief—not to all workers—but only to the
unfortunate ones not actually paid a 13th month salary or what amounts to it, by whatever
name called: but it was not envisioned that a double burden would be imposed on the employer
already paying his employees a 13th month pay or its equivalent—whether out of pure
generosity or on the basis of a binding agreement and, in the latter case, regardless of the
conditional character of the grant (such as making the payment dependent on profit), so long as
there is actual payment. Otherwise, what was conceived to be a 13th month salary would in
effect become a 14th or possibly 15th month pay.

x       x       x

Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual
bonuses for the purpose of determining liability for the 13th month pay. To require employers
(already giving their employees a 13th month salary or its equivalent) to give a second 13th
month pay would be unfair and productive of undesirable results. To the employer who had
acceded and is already bound to give bonuses to his employees, the additional burden of a 13th
month pay would amount to a penalty for his munificence or liberality. The probable reaction of
one so circumstanced would be to withdraw the bonuses or resist further voluntary grants for
fear that if and when a law is passed giving the same benefits, his prior concessions might not be
given due credit; and this negative attitude would have an adverse impact on the employees
(pp. 369, 370).

The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, October 23, 1982, 117 SCRA 938
(1982)], citing the ruling in the above case also pointed out that:

To hold otherwise would be to impose an unreasonable and undue burden upon those
employers who had demonstrated their sensitivity and concern for the welfare of their
employees. A contrary stance would indeed create an absurd situation whereby an employer
who started giving his employees the 13th month pay only because of the unmistakable force of
the law would be in a far better position than another who, by his own magnanimity or by
mutual agreement, had long been extending his employees the benefits contemplated under PD
No. 851, by whatever nomenclature these benefits have come to be known. Indeed, PD No. 851,
a legislation benevolent in its purpose, never intended to bring about such oppressive situation.
(p. 944)

2.Presidential Decree No. 570-A was issued on November 1, 1974 amending certain articles of
Presidential Decree No. 442 (Labor Code of the Philippines promulgated on May 1, 1974 which
took effect six months thereafter). Section 28 thereof provides that: Section 28. A new provision
is hereby substituted in lieu of the original provision of Article 258 of the same Code to read as
follows:

Art. 258. Right to holiday pay—

(a)Every worker shall be paid his regular holidays, except in retail and service establishments
regularly employing less than ten (10) workers;
(b)The term 'holiday' as used in this Chapter, shall include: New Year's day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July, the
thirtieth of November, the twenty fifth and thirtieth of December and the day designated by law
f or holding a general election.
(c)When employer may require work on holidays. The employer may require an employee to
work on any holiday but such employee shall be paid a compensation equivalent twice his
regular rate.
Presidential Decree No. 850 issued on December 16, 1975 also amending certain articles of Pres.
Dec. No. 442 adopted the aforequoted provision. Two months later, on February 16, 1976, the
Rules and Regulations Implementing the Labor Code, as amended, was released the pertinent
portion of which states that:

Section 2. Status of employees paid by the month—Employees who are uniformly paid by the
month, irrespective of the number of working days therein, with a salary of not less than the
statutory or established minimum wage shall be presumed to be paid for all days in the month
whether worked or not.

For this purpose, the monthly minimum wage shall not be less than the statutory minimum
wage multiplied by 365 days divided by twelve.

Section 3. Holiday Pay—Every employer shall pay his employees their regular daily wage for any
unworked regular holiday.

As used in the Rule, the term 'holiday' shall exclusively refer to: New Year's Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July,
the thirtieth of November, the twenty-fifth and thirtieth of December and the day designated by
law for a general election or national referendum or plebiscite (MOLE Rules and Reg. Book III,
Rule IV, sec. 2 (1976).

After one week, on February 23, 1976, the Minister of Labor issued Policy Instruction No. 9, to
clarify further the right to holiday pay, thus:

The Rules Implementing PD 850 have clarified the policy in the implementation of the ten (10)
paid legal holidays. Before PD 850, the number of working days a year in a firm was considered
important in determining entitlement to the benefit. Thus, where an employee was working for
at least 313 days, he was definitely already paid. If he was working for less than 313, there was
no certainty whether the ten (10) paid legal holidays were already paid to him or not.

The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily
employees. In the case of monthly, only those whose monthly salary did not yet include
payment for the ten (10) paid legal holidays are entitled to the benefit.

Under the rules implementing PD 850, this policy has been fully clarified to eliminate
controversies on the entitlement of monthly paid employees. The new determining rule is this:
If the monthly paid employee is receiving not less than P240, the maximum monthly minimum
wage, and his monthly pay is uniform from January to December, he is presumed to be already
paid the ten (10) paid legal holidays. However, if deductions are made from his monthly salary
on account of holidays in months where they occur, then he is entitled to the ten (10) legal
holidays.

These new interpretations must be uniformly and consistently upheld.

This issuance shall take effect immediately.

In the meantime, respondent University paid its employees holiday pay for the following days:

     DATE

     HOLIDAYS PAID
June 9, 1975

for the previous nine legal holidays

August, 1975

for the previous June 12 and July 4

Jan. 14, 1976

for the previous Nov. 30, Dec. 25 and

     30 and Jan. 1

After January 14, 1976, however, the University ceased paying the holiday pay allegedly by
reason of Policy Instruction No. 9. Specifically, the University claimed that the monthly salary of
its employees was, as of 1976, more than P240.00 without deductions from their monthly salary
on account of holidays in months where they occurred and that therefore, by virtue of Policy
Instruction No. 9, they were no longer entitled to the ten paid legal holidays.

Petitioners, upon the other hand, contend that Policy Instruction No. 9 could not have possibly
been the reason that prompted the University to withdraw such benefits from its faculty and
employees because said implementing rule was issued only on April 23, 1976 or four months
later.

The Labor Arbiter ruled in favor of the complainant Union for the reason that ". . . the payment
of the 10-paid legal holiday benefits from June 8, 1975 up to January 14, 1976 is considered an
employer practice that can no longer be withdrawn." [Decision; Rollo, p. 59].

As in the case of the 13th month pay, the NLRC reversed the Labor Arbiter's ruling. The NLRC
held that:

Apparently, Arbiter Ruben Aquino concluded that payment by the respondent of the legal
holiday pay preceded the eff ectivity of the Rules and Regulations Implementing P.D. 850 and
which rules took effect on February 16, 1976. Hence, his conclusion that the payment of the
legal holiday pay stemmed out from company practice and not from law. Tracing back, however,
the payments made by respondent of said holiday pay will show that, if ever, the same was
made pursuant to P.D. 570-A which took effect on November 1, 1974. Noteworthy is the
undisputed fact that respondent first paid its employees legal holiday pay in June 1975
corresponding to nine (9) legal holidays. It bears to note that from the time of the effectivity of
P.D. 570-A which was in November of 1974 up to June of 1975, the time respondent first paid
legal holiday pay for nine (9) legal holidays, there, were indeed more or less nine legal holidays
that transpired to wit: November 30, 1974, December 25, 1974, December 30, 1974, January 1,
1975, February 27, 1975 (Referendum Day), Maundy Thursday of 1975, Good Friday of 1975,
April 9, 1975 and finally, May 1st of 1975. We are therefore inclined to lend credence to
respondent's claim that the payment of legal holiday pay was in fact made pursuant to law, P.D.
570-A in particular, it is not one that arose out of company practice or policy.

Finding that said payment was made based on an honest although erroneous interpretation of
law, which interpretation was later on corrected by the issuance (sic) of Policy Instruction No. 9
and which issuance prompted respondent to withdraw the holiday pay benefits extended to the
employees who were paid on a regular monthly basis, and finding further that under Policy
Instructions No. 9, said subject employees are deemed paid their holiday pay as they were paid
on a monthly basis at a wage rate presumably above the statutory minimum, we believe and so
hold that the withdrawal of said holiday pay benefit was valid and justifiable under the
circumstances (Rollo, pp. 33-4).

This Court cannot sustain the foregoing decision of public respondent. Said decision relied on
Section 2, Rule IV, Book III of the implementing rules and on Policy Instruction No. 9 which were
declared by this Court to be null and void in Insular Bank of Asia and America Employee's Union
(IBAAEU) v. Inciong (G.R. No. 52415, October 23, 1984, 132 SCRA 663]. In disposing of the issue
at hand, this Court reiterates the ruling in that case, to wit:

WE agree with the petitioner's contention that Section 2, Rule IV, Book III of the implementing
rules and Policy Instruction No. 9 issued by the then Secretary of Labor are null and void since in
the guise of clarifying the Labor Code's provision on holiday pay, they in f act amended them by
enlarging the scope of their exclusion.

x      x      x

It is elementary in the rules of statutory construction that when the language of the law is clear
and unequivocal the law must be taken to mean exactly what it says. In the case at bar, the
provisions of the Labor Code on the entitlement to the benefits of holiday pay are clear and
explicit—it provides for both the coverage of and exclusion from the benefits. In Policy
Instruction No. 9, the then Secretary of Labor went as far as to categorically state that the
benefit is principally intended for daily paid employees, when the law clearly states that every
worker shall be paid their regular holiday pay. This is a flagrant violation of the mandatory
directive of Article 4 of the Labor Code, which states that "All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and regulations,
shall be resolved in favor of labor." Moreover, it shall always be presumed that the legislature
intended to enact a valid and permanent statute which would have the most beneficial effect
that its language permits (Orlosky vs. Haskell, 155 A. 112). (pp. 673-4).

BISCOCHO CASE
At issue also in this petition is whether the 60% incremental proceeds may be subjected to
attorney's fees, negotiation fees, agency fees and the like.

The Court notes the fact that there are two classes of employees among the petitioners: (1)
those who are members s of the bargaining unit and (2) those who are not members of the
bargaining unit. The first class may be further subdivided into two: those who are members of
the collective bargaining agent and those who are not.

It is clear that the questioned Order of the respondent Minister applies only to members of the
bargaining unit. The CBA prepared pursuant to said Order, however, covered employees who
are not members of the bargaining unit, although said CBA had not yet been signed at the time
this petition was filed on November 24, 1986. Assuming it was signed thereafter, the inclusion of
employees outside the bargaining unit should be nullified as this does not conform to said order
which directed private respondents to execute a CBA covering only members of the bargaining
unit.

Being outside the coverage of respondent Minister's order, and thus, not entitled to the
economic package involved therein, employees who are non-members of the bargaining unit
should not be assessed negotiation fees, attorney's fees, agency fees and the like, for the simple
reason that the resulting collective bargaining agreement does not apply to them. It should be
clear, however, that while non-members of the bargaining unit are not entitled to the economic
package provided by said order, they are, in lieu thereof, still entitled to their share in the 60%
incremental proceeds of increases in tuition or other school fees or charges.

As far as assessment of fees against employees of the collective bargaining unit who are not
members of the collective bargaining agent is concerned, Article 249 of the Labor Code, as
amended by B.P. Blg. 70, provides the rule:

Art. 249. Unfair labor practices of employers.—

x      x      x      x

(e)x x x Employees of an appropriate collective bargaining unit who are not members of the
recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues
and other fees paid by members of the recognized collective bargaining agent, if such non-union
members accept the benefits under the collective agreement. . .
Employees of the collective bargaining unit who are not members of the collective bargaining
agent have to pay the foregoing fees if they accept the benefits under the collective bargaining
agreement and if such fees are not unreasonable. Petitioners who are members of the
bargaining unit failed to show that the equivalent of ten (10%) percent of their backwages
sought to be deducted is unreasonable.

WHEREFORE, the Court rules:

CEBU INSTITUTE OF TECHNOLOGY CASE

In G.R. No. 58870, the Order of respondent Minister of Labor and Employment dated September
29, 1981 is SUSTAINED insofar as it ordered petitioner Cebu Institute of Technology to pay its
teaching staff the following:

(1)Cost of living allowance under Pres. Dec. Nos. 525 and 1123 from February 1978 up to 1981;
(2)Cost of living allowance under Pres. Dec. Nos. 1614, 1634, 1678 and 1713; and
(3)Service incentive leave due them from 1978.
The Temporary Restraining Order issued by this Court on December 7, 1981 is hereby LIFTED
and SET ASIDE. No costs.

DIVINE WORD COLLEGE CASE

The petition in G.R. No. 68345 is DENIED for lack of merit. The questioned Orders of respondent
Deputy Minister of Labor and Employment, dated December 19, 1983 and July 4, 1984 are
SUSTAINED insofar as said Orders denied the payment of the emergency cost of living
allowances of private respondents faculty teachers of the Divine Word College of Legazpi out of
the sixty (60%) incremental proceeds of tuition and other school fee increases collected during
the effectivity of Pres. Dec. No. 451. The Rules and Regulations implementing Pres. Dec. No. 451
are hereby declared invalid for being ultra vires. No costs.

FAR E ASTERN UNIVERSITY CASE

The Decision of public respondent National Labor Relations Commission dated September
18,1984 is REVERSED insofar as it affirmed in toto the dismissal of petitioner Far Eastern
University Employee Labor Union's claim under Pres. Dec. No. 451 and its claim for payment of
holiday pay, Private respondent Far Eastern University is therefore ordered to pay its employees
the following:

(1)Their sixty (60) percent share in the increases in tuition and other school fees or charges
which shall be allocated exclusively for increase in salaries or wages if the tuition or other school
fee increase was collected during the effectivity of Pres. Dec. No. 451;
(2)Their claim for holiday pay which was withdrawn since January 14, 1976 up to the present.
The Decision of respondent National Labor Relations Commission, however, is SUSTAINED
insofar as it denied petitioner's claim for thirteenth (13th) month pay. No costs.

FABROS CASE
In G.R. No. 70832, the Petition for Certiorari and Prohibition is DISMISSED. MECS Order No. 25.
s. 1985, particularly paragraphs 7.0 to 7.5 thereof, which provide for the use and application of
sixty (60%) percent of the increases in tuition and other school fees or charges, having been
issued pursuant to B.P. Blg. 232 which repealed Pres. Dec. No. 451, is hereby declared VALID.
The Temporary Restraining Order issued by this Court dated May 29, 1985 is LIFTED and SET
ASIDE. No costs.

BISCOCHO CASE
The assailed portions of the Order of the Minister of Labor and Employment dated April 14,
1986 are AFFIRMED. The collective bargaining agreement prepared pursuant thereto should,
however, be MODIFIED to cover only members of the bargaining unit. Only petitioners who are
members of the collective bargaining unit, if they accept the benefits under the resulting
collective bargaining agreement, shall be charged ten (10%) percent of the payable backwages
as negotiation fees. The Temporary Restraining Order dated November 25, 1986 is LIFTED and
SET ASIDE. No costs.

VALMONTE CASE
The petition in G.R. No. 76596 is DISMISSED for lack of merit.

Effective September 11, 1982, the application and use of the proceeds from increases in tuition
fees and other schools fees or charges shall be governed by section 42 of B.P. Blg. 232 as
implemented by the Rules and Regulations issued by the then Ministry, now Department of
Education, Culture and Sports.

SO ORDERED.

Notes.—Mandamus to compel payment of back salary does not lie, unless right of petition to
backpay is well-defined. (Sales vs. Mathay, 129 SCRA 180.)
Regular professors and teachers are entitled to ECOLA during the semestral breaks, their
"absence" from work not being of their own will. (University of Pangasinan Faculty Union us.
University of Pangasinan, 127 SCRA 691.)

——o0o—— Cebu Institute of Technology (CIT) vs. Ople, 156 SCRA 629, No. L-58870, No. L-
68345, Nos. L-69224-5, No. L-70832, No. L-76521, No. L-76596 December 18, 1987
G.R. No. 222980. March 20, 2017.*
LOURDES C. RODRIGUEZ, petitioner, vs. PARK N RIDE, INC./VICEST (PHILS.), INC./GRAND LEISURE
CORP./SPS. VICENTE & ESTELITA B. JAVIER, respondents.

Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari; Only questions of law
may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court.—At the
onset, we stress that only questions of law may be raised in a petition for review on certiorari
under Rule 45 of the Rules of Court. Factual findings of the Labor Arbiter and the National Labor
Relations Commission, if supported by substantial evidence and when upheld by the Court of
Appeals, are binding and conclusive upon this Court when there is no cogent reason to disturb
the same. In the present case, due to lack of any palpable error, mistake, or misappreciation of
facts, this Court discerns no compelling reason to reverse the consistent findings of the appellate
court and the labor tribunals.

Labor Law; Termination of Employment; Constructive Dismissal; There is constructive dismissal

when an employer’s act of clear discrimination, insensibility or disdain becomes so unbearable
on the part of the employee so as to foreclose any choice on his part except to resign from such
employment.—There is constructive dismissal when an employer’s act of clear discrimination,
insensibility or disdain becomes so unbearable on the part of the employee so as to foreclose any
choice on his part except to resign from such employment. It exists where there is involuntary
resignation because of the harsh, hostile and unfavorable conditions set by the employer. We
have held that the standard for constructive dismissal is “whether a reasonable person in the
employee’s position would have felt compelled to give up his employment under the
circumstances.” The unreasonably harsh conditions that compel resignation on the part of an
employee must be way beyond the occasional discomforts brought about by the
misunderstandings between the employer and employee. Strong words may sometimes be
exchanged as the employer describes her expectations or as the employee narrates the
conditions of her work environment and the obstacles she encounters as she accomplishes her
assigned tasks. As in every human relationship, there are bound to be disagreements.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

   Celino, Celino and Celino Law Office for petitioner.

   De Leon Law Office for respondents.

LEONEN, J.:

Natural expressions of an employer do not automatically make for a hostile work atmosphere.
The totality of circumstances in this case negates petitioner Lourdes C. Rodriguez’s claim of
constructive dismissal.

This resolves a Petition for Review1 assailing the Court of Appeals’ December 15, 2015 Decision2
and February 17, 2016 Resolution.3 The Court of Appeals held that there was no illegal
dismissal, but ordered respondents Park N Ride, Incorporated (Park N Ride), Vicest Philippines,
Incorporated (Vicest Phils.), Grand Leisure Corporation (Grand Leisure), and Spouses Vicente
and Estelita B. Javier (Javier Spouses) to pay Lourdes C. Rodriguez (Rodriguez) service incentive
leave pay and 13th month pay for 2006 to 2009, with legalinterest of six percent (6%) per
annum, from date of finality of the decision until full payment.4

On October 7, 2009, Rodriguez filed a Complaint5 for constructive illegal dismissal, nonpayment
of service incentive leave pay and 13th month pay, including claims for moral and exemplary
damages and attorney’s fees against Park N Ride, Vicest Phils., Grand Leisure, and the Javier
Spouses.

In her Position Paper,6 Rodriguez alleged that she was employed on January 30, 1984 as
Restaurant Supervisor at Vicest Phils.7 Four (4) years later, the restaurant business closed.
Rodriguez was transferred to office work and became an Administrative and Finance Assistant to
Estelita Javier (Estelita).8 One of Rodriguez’s duties was to open the office in Makati City at 8:00
a.m. daily.9

The Javier Spouses established other companies, namely: Buildmore Development and
Construction Corporation, Asset Resources Development Corporation, and Grand Leisure.10
Rodriguez was also required to handle the personnel and administrative matters of these
companies without additional compensation.11 She likewise took care of the household
concerns of the Javier Spouses, such as preparing payrolls of drivers and helpers, shopping for
household needs, and looking after the spouses’ house whenever they travelled abroad.12

Sometime in 2000, the Javier Spouses established Park N Ride, a business that provided terminal
parking and leasing.13

Although the company’s main business was in Lawton, Manila, its personnel and administrative
department remained in Makati City.14 Rodriguez handled the administrative, finance, and
warehousing departments of Park N Ride.15 Every Saturday, after opening the Makati office at
8:00 a.m., Rodriguez was required to report at the Lawton office at 11:00 a.m. to substitute the
Head Cashier, who would be on day-off.16

She allegedly worked from 8:00 a.m. to 7:00 p.m., Mondays to Saturdays; was on call on
Sundays; and worked during Christmas and other holidays.17 She was deducted an equivalent of
two (2) days’ wage for every day of absence and was not paid any service incentive leave pay.18
On one occasion, Rodriguez asked the Javier Spouses if she could go home by 10:00 a.m. to
attend a family reunion, but her request was denied.19

The Javier Spouses’ treatment of Rodriguez became unbearable; thus, on March 25, 2009, she
filed her resignation letter effective April 25, 2009.20 The Javier Spouses allegedly did not accept
her resignation and convinced her to reconsider and stay on.21 However, her experience
became worse.22 Rodriguez claimed that toward the end of her employment, Estelita was
always unreasonable and hot-headed, and would belittle and embarrass her in the presence of
co-workers.23

On September 22, 2009, Rodriguez went on her usual “pamalengke” for the Spouses.24 Later,
she proceeded to open the Makati office.25 Estelita was mad at her when they finally talked
over the phone, berating her for opening the office late.26 She allegedly told her that if she did
not want to continue with her work, the company could manage without her.27

Thus, Rodriguez did not report for work the next day, and on September 26, 2009, she wrote the
Javier Spouses a letter28 expressing her gripes at them. She intimated that they were always
finding fault with her to push her to resign.29

On October 6, 2009, the Javier Spouses replied to her letter, allegedly accepting her
resignation.30

Rodriguez prayed for separation pay in lieu of reinstatement; full backwages; service incentive
leave pay; proportional 13th month pay; moral damages of P100,000.00; exemplary damages of
P100,000.00; and attorney’s fees.31

In their Position Paper,32 Javier Spouses stated that they were the directors and officers of Park
N Ride, Vicest Phils., and Grand Leisure.33 In 1984, they hired Rodriguez as a nutritionist in their
fast food business.34 Vicest (Phils) Inc., the spouses’ construction business, hired Rodriguez as
an employee when the fast food business closed.35 When the construction business became
slow, Park N Ride hired Rodriguez as Administrative Officer.36

Javier Spouses trusted Rodriguez with both their businesses and personal affairs, and this made
her more senior than any of her colleagues at work.37 She was the custodian of 201 employee
files, representative to courts and agencies, and had access and information on the Javier
Spouses’ finances. She was given authority to transact with business and banking institutions
and became a signatory to their bank accounts.38 She was also given custody over the deeds
and titles of ownership over properties of the Javier Spouses.39

However, Rodriguez was allegedly emotionally sensitive and prone to occasional “tampo” when
she would be reprimanded or cited for tasks unaccomplished.40 She would then be absent after
such reprimands and would eventually return after a few days.41 For instance, in the second
quarter of 2008, Rodriguez tendered her resignation letter.42 Three (3) days later, however, she
returned to work.43 In the first quarter of 2009, she resigned again but did not push through
with it.44

On September 22, 2009, the Javier Spouses inquired from Rodriguez about an overdue contract
with a vendor.45 Rodriguez offered no explanation for the delay, and other employees heard
her say that she was going to resign.46

On September 23, 2009, Rodriguez did not report for work.47 On September 26, 2009, when
she still has not reported for work after three days, a letter48 was sent to her citing her
continued and unauthorized absence. “She was told that her resignation could not be processed
because she had not completed her employment clearance and she was unable to properly
turnover her tasks to her assistant.”49 She was asked to report on September 30, 2009 or, at
the very least, to reply in writing on or before October 7, 2009.50 Rodriguez neither reported for
work on September 30, 2009 nor submitted any reply to the letter sent to her.51

Rodriguez allegedly continued to ignore the requests for her to complete the turnover of her
tasks and responsibilities and refused to cooperate in tracing the documents in her custody.
Corollary to this, it was discovered that the company check books were missing; that Rodriguez
had unliquidated cash advances of not less than P500,000.00; and that two (2) checks were
deposited in her personal account amounting to P936,000.00.52

The Javier Spouses claimed that Rodriguez was not entitled to service incentive leave pay, moral
and exemplary damages, attorney’s fees and director’s fee.53 They averred that they were
willing to pay Rodriguez the 13th month pay differentials, as soon as Rodriguez completed her
clearance.54

On May 26, 2010, Labor Arbiter Antonio R. Macam (Labor Arbiter Macam) rendered a
Decision55 dismissing Rodriguez’s Complaint for lack of merit. According to the Decision, the
summary of evidence pointed to the voluntariness of Rodriguez’s resignation rather than the
existence of a hostile and frustrating working environment.56 The Javier Spouses were ordered
to pay Rodriguez her proportionate 13th month pay for 2009 in the amount of P19,892.55.57

Rodriguez appealed to the National Labor Relations Commission. The Commission, in its
Decision58 dated May 30, 2011, granted Rodriguez’s appeal and modified Labor Arbiter
Macam’s Decision. The Commission ruled that Rodriguez was illegally dismissed and awarded
her backwages, separation pay, 13th month pay differentials, moral and exemplary damages,
and attorney’s fees.

However, on the Javier Spouses’ Motion for Reconsideration,59 the Commission set aside its
May 30, 2011 Decision and reinstated Labor Arbiter Macam’s May 26, 2010 Decision.

Rodriguez filed a Motion for Reconsideration, which was denied by the Commission in its
Resolution60 dated April 20, 2012.
Rodriguez filed a Rule 65 Petition61 before the Court of Appeals imputing grave abuse of
discretion on the National Labor Relations Commission.

In the Decision dated December 15, 2015, the Court of Appeals held that there was no
constructive dismissal, but rather Rodriguez voluntarily resigned from her employment. The
Decision disposed as follows:

We SET ASIDE the Resolution dated 15 December 2011 of the National Labor Relations
Commission, and instead we rule that there was no illegal dismissal, and we ORDER private
respondents to pay petitioner Rodriguez the following: 1) service incentive leave pay and 13th
month pay for the years 2006 to 2009; and 2) attorney’s fees equivalent to ten percent of the
wages awarded. All amounts awarded shall be subject to interest of 6% per annum, from the
date of finality of this Decision, until fully paid.62 (Emphasis in the original)

 
Rodriguez sought reconsideration.63 The Court of Appeals denied the motion in its Resolution
dated February 17, 2016.64

Hence, this Petition65 was filed, revolving around the following issues:

First, whether petitioner was constructively dismissed;

And lastly, whether petitioner was entitled to full service incentive leave pay and damages.

Petitioner maintains that she has been constructively dismissed. She points to the Affidavits66
of six (6) of her former co-workers allegedly supporting her claim of unbearable working
conditions; and Estelita’s statement on September 22, 2009, “Kung ayaw mo na ng ginagawa
mo, we can manage!”67 Petitioner further claims that she is entitled to service incentive leave
pay for her entire 25 years of service, and not only up to three (3) years.68 Finally, she adds that
she should be awarded moral and exemplary damages because of the inhumane treatment of
her employers.

We partly grant the Petition.

I

At the onset, we stress that only questions of law may be raised in a petition for review on
certiorari under Rule 45 of the Rules of Court.69 Factual findings of the Labor Arbiter and the
National Labor Relations Commission, if supported by substantial evidence and when upheld by
the Court of Appeals, are binding and conclusive upon this Court when there is no cogent reason
to disturb the same.70 In the present case, due to lack of any palpable error, mistake, or
misappreciation of facts, this Court discerns no compelling reason to reverse the consistent
findings of the appellate court and the labor tribunals.

There is constructive dismissal when an employer’s act of clear discrimination, insensibility or

disdain becomes so unbearable on the part of the employee so as to foreclose any choice on his
part except to resign from such employment.71 It exists where there is involuntary resignation
because of the harsh, hostile and unfavorable conditions set by the employer. We have held
that the standard for constructive dismissal is “whether a reasonable person in the employee’s
position would have felt compelled to give up his employment under the circumstances.”72
The unreasonably harsh conditions that compel resignation on the part of an employee must be
way beyond the occasional discomforts brought about by the misunderstandings between the
employer and employee. Strong words may sometimes be exchanged as the employer describes
her expectations or as the employee narrates the conditions of her work environment and the
obstacles she encounters as she accomplishes her assigned tasks. As in every human
relationship, there are bound to be disagreements.
However, when these strong words from the employer happen without palpable reason or are
expressed only for the purpose of degrading the dignity of the employee, then a hostile work
environment will be created. In a sense, the doctrine of constructive dismissal has been a
consistent vehicle by this Court to assert the dignity of labor.

However, this is not the situation in this case.

The National Labor Relations Commission did not commit a grave abuse of discretion in finding
that petitioner was not constructively dismissed but that she voluntarily resigned from
employment.

The affidavits of petitioner’s former co-workers were mere narrations of petitioner’s various
duties. Far from showing the alleged harsh treatment that petitioner suffered, the affidavits
rather reveal the full trust and confidence reposed by respondents on petitioner. Petitioner was
entrusted with respondents’ assets, the care and safeguarding of their house during their trips
abroad, custody of company files and papers, and delicate matters such as the release, deposit,
and withdrawals of checks from their personal accounts as well as accounts of their companies.
Indeed, it was alleged that petitioner was treated by the respondents as part of the family.

Petitioner’s unequivocal intent to relinquish her position was manifest when she submitted her
letters of resignation.

The resignation letters dated May 1, 200873 and March 25, 200974 contained words of
gratitude, which could hardly come from an employee forced to resign. These letters were
reinforced by petitioner’s very own act of not reporting for work despite respondents’ directive.

As correctly appreciated by Labor Arbiter Macam:

Complainant was not pressured into resigning. It seems that the complainant was not
comfortable anymore with the fact that she was always at the beck and call of the respondent
Javier spouses. Her supervisory and managerial functions appear to be impeding her time with
her family to such extent that she was always complaining of her extended hours with the
company. It is of no moment that respondent spouses in many occasions reprimanded
complainant as long as it was reasonably connected and an offshoot of the work or business of
respondents. . . Keeping in mind that she enjoyed the privilege of working closely with
respondents and had their full trust and confidence, the summary of evidence points to the
existence of voluntariness in complainant’s resignation, more for personal reasons rather than
the existence of a hostile and frustrating working environment.75

From the representation of petitioner, what triggered her resignation was the incident on
September 22, 2009 when Estelita told her “Kung ayaw mo na ng ginagawa mo, we can
manage!”76 These words, however, are not sufficient to make the continued employment of
petitioner impossible, unreasonable, or unlikely.

The Court of Appeals correctly observed that the utterance of Estelita was more a consequence
of her spontaneous outburst of feelings resulting from petitioner’s failure to perform a task that
was long overdue, rather than an act to force petitioner to resign from work.77 It appears that
petitioner was asked to finish assigned tasks and liquidate cash advances. The affidavit of
Estelita was unrebutted, and further corroborated by Rhea Sienna L. Padrid, Accounting
Assistant II of Park N Ride, in her Affidavit with Cash Advances Report.78 Estelita’s affidavit read
in part:

(2) During the middle part of December 2008, when the Accounting Division (Mrs. Rhea Padrin)
audited the company books, report showed that the unliquidated Cash Advances of Lourdes
Rodriguez had already ballooned to less than P7,000,000.00 some dating as early as year 2004. I
repeatedly requested her to liquidate them even removing some of her daily duties so she could
focus on her Cash Advances. Inspite of my repeated requests for her to focus on the liquidation
of these Cash Advances, Lourdes Rodriguez failed to liquidate them before Christmas. Due to
this, I requested her to go with us to Pansol after Christmas so I could help her in her liquidation.

. . . I also wanted to get all the cash left and unused that I left with her when the family left for
the United States. I also wanted to get my salary from her which I entrusted for her to claim. I
could not find any reason why Lourdes Rodriguez could not liquidate her Cash Advances.

(3) Lourdes Rodriguez also had two checks in the amount of P936,000.00 which she deposited to
her personal account contrary to company policy.

(4) Because of said actions of Lourdes Rodriguez, I had lost trust and confidence in her ability to
perform her job faithfully, especially in her duties which would involve money matters, and had
thus initiated an investigation in relation thereto.

(5) When year 2009 started and Lourdes Rodriguez could not liquidate her Cash Advances, I
started getting the company passbooks and personal passbooks from her. I also started getting
the certificates of time deposits and titles with her. I started having other staff do the deposits
and withdrawals for the company and for me. I started handling the treasury functions of the
company. I started talking to the officers of our banks.

(6) It was after I had commenced queries into her activities and stopped entrusting her with
money, deposits and cash withdrawals that she had tendered her resignation last March 25,
2009.

(7) After Lourdes Rodriguez submitted her resignation, I talked to her and accepted her
resignation and instructed her to transfer all the Admin files of the company under her custody
to my house. Lourdes Rodriguez had all the important files of the company with her.

(8) Inspite of the acceptance of resignation which was to take effect 25 April 2009, Lourdes
Rodriguez stayed on, slowly and reluctantly liquidating her Cash Advances. I allowed her to stay
on because I wanted her to liquidate all her Cash Advances. Up to this date, Lourdes Rodriguez
has failed to liquidate her Cash Advances amounting to Php6,314,641.24.79

 
Petitioner was neither terminated on September 22, 2009 nor was she constructively dismissed.
There was no showing of bad faith or malicious design by the respondents that would make her
work conditions unbearable.80 On the other hand, it is a fact that petitioner enjoyed the
privilege of working closely with the Javier Spouses and having their full trust and confidence.
Spontaneous expressions of an employer do not automatically render a hostile work
atmosphere. The circumstances in this case negate its presence.

 
II

On the monetary claims, petitioner is not entitled to moral and exemplary damages considering
that she was not illegally dismissed.81

On the other hand, with respect to service incentive leave pay, the Court of Appeals limited the
award thereof to three (3) years (2006 to 2009) only due to the prescriptive period under Article
291 of the Labor Code. It held:

Article 95 of the Labor Code provides that every employee who has rendered at least one year
of service shall be entitled to a yearly service incentive leave pay of five days with pay, subject to
exceptions (i.e., when the employee is already enjoying vacation leave with pay of at least five
days; and when the employee is employed in an establishment regularly employing less than ten
employees).
It was not shown here that petitioner Rodriguez was enjoying vacation leave with pay of at least
five days while being employed by private respondents Spouses Javier; it was not shown that
private respondents Spouses Javier were merely employing less than 10 employees (on the
contrary, private respondent spouses Javier stated that they were employing less than 15
employees). Hence, the award of service incentive leave pay to petitioner Rodriguez was proper.

Private respondents Spouses Javier employed petitioner Rodriguez for 25 years. Applying the
prescriptive period for money claims under Article 291 of the Labor Code however, petitioner
Rodriguez should only be entitled to the three years’ worth of service incentive pay for the years
2006 to 2009.

However, Auto Bus Transport System, Inc. v. Bautista82 clarified the correct reckoning of the
prescriptive period for service incentive leave pay:

It is essential at this point, however, to recognize that the service incentive leave is a curious
animal in relation to other benefits granted by the law to every employee. In the case of service
incentive leave, the employee may choose to either use his leave credits or commute it to its
monetary equivalent if not exhausted at the end of the year. Furthermore, if the employee
entitled to service incentive leave does not use or commute the same, he is entitled upon his
resignation or separation from work to the commutation of his accrued service incentive leave.
As enunciated by the Court in Fernandez v. NLRC:

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations provides that “[e]very employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay.” Service
incentive leave is a right which accrues to every employee who has served “within 12 months,
whether continuous or broken reckoned from the date the employee started working, including
authorized absences and paid regular holidays unless the working days in the establishment as a
matter of practice or policy, or that provided in the employment contracts, is less than 12
months, in which case said period shall be considered as one year.” It is also “commutable to its
money equivalent if not used or exhausted at the end of the year.” In other words, an employee
who has served for one year is entitled to it. He may use it as leave days or he may collect its
monetary value. To limit the award to three years, as the solicitor general recommends, is to
unduly restrict such right.

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled

employee to claim his service incentive leave pay accrues from the moment the employer
refuses to remunerate its monetary equivalent if the employee did not make use of said leave
credits but instead chose to avail of its commutation. Accordingly, if the employee wishes to
accumulate his leave credits and opts for its commutation upon his resignation or separation
from employment, his cause of action to claim the whole amount of his accumulated service
incentive leave shall arise when the employer fails to pay such amount at the time of his
resignation or separation from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave,
we can conclude that the three (3)-year prescriptive period commences, not at the end of the
year when the employee becomes entitled to the commutation of his service incentive leave,
but from the time when the employer refuses to pay its monetary equivalent after demand of
commutation or upon termination of the employee’s services, as the case may be.

The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with
the rudimentary principle that in the implementation and interpretation of the provisions of the
Labor Code and its implementing regulations, the workingman’s welfare should be the
primordial and paramount consideration. The policy is to extend the applicability of the decree
to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection to labor.83
(Emphasis supplied)

Thus, the prescriptive period with respect to petitioner’s claim for her entire service incentive
leave pay commenced only from the time of her resignation or separation from employment.
Since petitioner had filed her complaint on October 7, 2009, or a few days after her resignation
in September 2009, her claim for service incentive leave pay has not prescribed. Accordingly,
petitioner must be awarded service incentive leave pay for her entire 25 years of service — from
1984 to 2009 — and not only three (3) years’ worth (2006 to 2009) as determined by the Court
of Appeals.

Finally, we modify the portion of the fallo pertaining to the award of the 13th month pay to
conform to the body of the Court of Appeals’ Decision.

WHEREFORE, the Petition is PARTIALLY GRANTED. The Court of Appeals’ Decision dated
December 15, 2015 in C.A.-G.R. S.P. No. 125440 is AFFIRMED with MODIFICATION as to the
amounts awarded. Respondents are ORDERED to pay Lourdes C. Rodriguez the following:

1) Service incentive leave pay for the years 1984 to 2009;

2) 13th month pay differential for the years 2006 to 2008;

3) Proportionate 13th month pay for the year 2009; and

4) Attorney’s fees equivalent to ten percent (10%) of the wages awarded.

All amounts awarded shall be subject to interest of six percent (6%) per annum, from the date of
finality of this Decision, until fully paid.

SO ORDERED.

Carpio (Chairperson), Velasco, Jr.,** Mendoza and Martires, JJ., concur.

Petition partially granted, judgment affirmed with modification.

Notes.—Constructive dismissal is defined as “quitting when continued employment is rendered

impossible, unreasonable, or unlikely as the offer of employment involves a demotion in rank
and diminution of pay.” (Rural Bank of Cantilan, Inc. vs. Julve, 517 SCRA 17 [2007])

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. (Duldulao vs. Court of Appeals, 517
SCRA 191 [2007])

——o0o—— Rodriguez vs. Park N Ride, Inc., 821 SCRA 160, G.R. No. 222980 March 20, 2017
G.R. No. 205278. June 11, 2014.*

PHILIPPINE SPRING WATER RESOURCES, INC./DANILO Y. LUA, petitioners, vs. COURT OF APPEALS
and JUVENSTEIN B. MAHILUM, respondents. 

Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari; It is well-settled that in
assailing a decision of the Court of Appeals (CA), the available remedy is to file a petition for
review under Rule 45 and not the extraordinary writ of certiorari under Rule 65; The special civil
action of certiorari under Rule 65 is not, and cannot be, a substitute for a lost remedy of appeal.
—It is well-settled that in assailing a decision of the CA, the available remedy is to file a petition
for review under Rule 45 and not the extraordinary writ of certiorari under Rule 65. The proper
remedy is to file a petition for review on certiorari under the Rules of Court which should be
instituted within fifteen (15) days from receipt of the assailed decision or resolution. In a long
line of cases, the Court has consistently emphasized that after the lapse of the 15-day period to
file a petition for review on certiorari the special civil action of certiorari under Rule 65 is not,
and cannot be, a substitute for a lost remedy of appeal.

Labor Law; Termination of Employment; Probationary Employees; Security of Tenure; A

probationary employee, like a regular employee, enjoys security of tenure; 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.—Contrary to
the claims of the petitioners, Mahilum was correctly considered by the NLRC and CA as a regular
employee. No grave abuse of discretion may be attributed for the application of Article 279 of
the Labor Code in determining the legality of Mahilum’s dismissal. A probationary employee, like
a regular employee, enjoys security of tenure. In cases of probationary employment, however,
aside from just or authorized causes of termination, an additional ground is provided under
Article 281 of the Labor Code, that is, the probationary employee may also be terminated for
failure to qualify as a regular employee in accordance with reasonable standards made known
by the employer to the employee at the time of the engagement. 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.

Same; Same; Same; Having been allowed to work after the lapse of the probationary period,
Mahilum became a regular employee; 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.—The Court cannot subscribe to the premise that Mahilum failed to qualify as a
regular employee when he failed to perform at par with the standards made known by the
company to him. In this case, it is clear that the primary cause of Mahilum’s dismissal from his
employment was borne out of his alleged lapses as chairman for the inauguration of the Bulacan
plant company’s Christmas party. In fact, the termination letter to him cited “loss of trust and
confidence” as a ground for his dismissal. 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, 385 SCRA 479 (2002), 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.

Remedial Law; Civil Procedure; Appeals; The well-entrenched rule, especially in labor cases, is
that findings of fact of quasi-judicial bodies, like the National Labor Relations Commission
(NLRC), are accorded with respect, even finality, if supported by substantial evidence.—The well-
entrenched rule, especially in labor cases, is that findings of fact of quasi-judicial bodies, like the
NLRC, are accorded with respect, even finality, if supported by substantial evidence. Particularly
when passed upon and upheld by the CA, they are binding and conclusive upon the Court and
will not normally be disturbed. Although this doctrine is not without exceptions, the Court finds
that none is applicable to the present case. Here, the CA affirmed the ruling of the NLRC and
adopted as its own the latter’s factual findings as to Mahilum’s illegal dismissal. Consequently,
the Court finds no reason to depart from the finding that Mahilum’s failure to effectively
discharge his assignment as the overall chairman of the festivities was due to mere inadvertence
and the mistaken belief that he had properly delegated the details of the program to another
officer.

Labor Law; Termination of Employment; Loss of Trust and Confidence; The charge of loss of trust
and confidence had no leg to stand on, as the act complained of was not work-related.—His
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.
Verily, 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.

Same; Same; Backwages; Reinstatement; Article 279 of the Labor Code provides that an
employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges, to full backwages, inclusive of allowances, and to other
benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.—Article 279 of the Labor Code provides
that an employee who is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges, to full backwages, inclusive of allowances, and to
other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement. 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. On the one hand, such payment liberates
the employee from what could be a highly oppressive work environment. On the other, the
payment releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust. Thus, as an illegally or constructively dismissed
employee, the respondent is entitled to: (1) either reinstatement, if viable, or separation pay, if
reinstatement is no longer viable; and (2) backwages. These two reliefs are separate and distinct
from each other and are awarded conjunctively.

Same; Same; Same; Backwages 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.—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.

Same; Commissions; It is well-established in jurisprudence that the determination of whether or

not a commission forms part of the basic salary depends upon the circumstances or conditions
for its payment.—It is well-established in jurisprudence that 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, 227 SCRA 747 (1993), 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, 228 SCRA 329 (1993), 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.

Same; Termination of Employment; Backwages; Mahilum’s backwages must be pegged at his

basic salary, excluding the commissions mentioned by the National Labor Relations Commission
(NLRC), to be computed from the time of his dismissal up to the finality of this decision.—For said
reason, Mahilum’s backwages must be pegged at his basic salary, excluding the commissions
mentioned by the NLRC, to be computed from the time of his dismissal up to the finality of this
decision. Nonetheless, the award of backwages shall earn legal interest at the rate of six percent
(6%) per annum in accordance with prevailing jurisprudence.

MENDOZA, J.:

This petition for certiorari under Rule 65 of the 1997 Rules or Civil Procedure assails the July 23,
2010 Amended Decision1 and the October 31, 2012 Resolution2 of the Court of Appeals (CA) in
C.A.-G.R. S.P. No. 02636, which reversed its own September 30, 2008 Decision3 on
reconsideration by respondent Juvenstein B. Mahilum (Mahilum).

The Facts

Petitioner Philippine Spring Water Resources, Inc. (PSWRI), 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, for a monthly salary of P15,000.00
plus 0.25% commission on every cash on delivery and another 0.25% on new accounts from July
to August, 2004.

Sometime in November 2004, the inauguration of PSWRI’s Bulacan plant would be celebrated at
the same time with the company’s Christmas party. Mahilum was designated as over-all
chairman of the affair to be held on December 19, 2004. A few days after his designation,
Mahilum called all committee chairpersons to a meeting for the program of action and budget
plan. The meeting, however, was reset to the following day as some visitors arrived without
prior appointment. Mahilum and his guests discussed sensitive legal issues relative to PSWRI’s
water drilling inside the plant over the protest of nearby residents and the local water district.

The next day, Mahilum requested Ms. Vicky Evangelista (Evangelista), Vice President for
Administration and Finance, to take charge of the meeting for the inauguration should he fail to
come back on time. He attended a prior appointment with major clients in Makati City. Later,
Mahilum learned that Evangelista postponed the meetings because she accompanied the
daughter of petitioner Danilo Lua (Lua), President and Chief Executive Officer (CEO), to Bulacan.

Thereafter, meetings on the program of activities for the inauguration and Christmas party were
conducted without Mahilum’s presence. Evangelista took charge and assumed the lead role
until the day of the affair.

On the inaugural day, Mahilum was not seen around to supervise the program proper as he
entertained some visitors of the company. According to him, he delegated the task to
Evangelista.

Mahilum’s attention was, however, called when Lua got furious because he was not recognized
during the program. He was not mentioned in the opening remarks or called to deliver his
inaugural speech. Upon inquiry from the emcees of the program, Mahilum learned that they
were not apprised of Lua’s decision to deliver the speech considering that he previously declined
to have a part in the program as he would be very busy during the affair. Thus, Lua’s speech
appeared to be “optional” in the printed program during the affair.

On the following day, Mahilum was required to explain why Lua was not recognized and made
to deliver his speech. At the same time, he was placed under preventive suspension for thirty
(30) days. Mahilum submitted his written explanation. Subsequently, an investigation was
conducted.

When his 30-day suspension ended, Mahilum reported for work but was prevented from
entering the workplace. Sometime in the first week of March 2005, he received a copy of the
Memorandum, dated January 31, 2005, terminating his services effective the next day or on
February 1, 2005. On February 9, 2005, a clearance certificate was issued to Mahilum. He
received the amount of P43,998.56 and was made to execute the Release, Waiver and Quitclaim
in favor of the company and Lua.

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

On April 25, 2006, the Labor Arbiter (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. Being a person of sufficient aptitude and intellect Mahilum could not have
been forced to sign the document.4 The LA reasoned out:

We are not impressed by the submission of the complainant that he was merely forced to sign
the said Release, Waiver and Quitclaim because of sheer necessity in trying to justify that the
execution of the said document was involuntary on his part…It is our view that the said
document was voluntarily signed by the complainant and the same was also based on a
reasonable consideration hence binding between the parties.

Aggrieved, Mahilum appealed the decision to the National Labor Relations Commission (NLRC).
In its October 11, 2006 Decision,5 the NLRC ruled in his favor on the ground that the subject
quitclaim did not bar the institution of the case for illegal dismissal. It held that while not all
waivers and quitclaims were invalid as against public policy, the LA’s consideration of the waiver
did not constitute a reasonable settlement of his cause of action. The amount he received from
the company consisted of his 13th month pay, salaries for the period subsequent to his
preventive suspension and earned commissions. These were benefits which Mahilum had
earned by virtue of his employment and not in consideration of his separation from service.

Moreover, although Mahilum voluntarily signed the quitclaim, it was highly possible that he
might have been constrained to assent to its execution considering that he had not received any
salary for more than one (1) month due to his preventive suspension.

Anent the issue of illegal termination, the NLRC held that Mahilum was illegally dismissed by
PSWRI. While he may have failed to discharge his duties as chairman of the inauguration of the
Bulacan plant, the same was not sufficient to deprive him of his employment on the ground of
loss of confidence. Although he shared a substantial part of it, Mahilum could not be entirely
blamed for the fiasco. Loss of trust and confidence could not be indiscriminately used by
employers to justify almost every instance of termination of a managerial employee and as a
defense against claim of arbitrary dismissal. The dispositive portion of the NLRC decision reads:

WHEREFORE, premises considered, the appeal of complainant is hereby GRANTED. The Decision
dated 25 April 2006 of Executive Labor Arbiter Violeta Bantug is REVERSED and SET ASIDE.
Another one is entered declaring that the dismissal of complainant was illegal.

Respondent Philippine Spring Water Resources, Inc. is then directed to pay complainant’s
separation pay of Fifteen Thousand (P15,000.00) plus backwages, inclusive of salary and 0.25%
commission on cash on delivery from February 1, 2005 up to the finality of the Decision.

In addition, respondent should pay complainant of moral and exemplary damages in the amount
of P100,000.00.

SO ORDERED.6

With their motion for reconsideration denied,7 PSWRI and Lua filed a petition for certiorari with
the CA.

On September 30, 2008, the CA reversed the NLRC decision. It ruled that Mahilum’s conduct
during the inauguration did not constitute wilful disobedience or breach of trust, hence,
rendering his termination as illegal and without cause. However, it upheld the validity of the
executed quitclaim. As a top executive of the company, Mahilum could not have been an
unsuspecting or gullible person who misunderstood the import of the document. There was no
showing either that the execution of the quitclaim was tainted with deceit or coercion. Further,
the amount represented therein was the total amount of benefits owing to Mahilum at the time
of his termination and for his six-month stint with the company, which he received and
contested as he made a general allegation that he was not given remuneration arising from his
illegal discharge from service.

The rule is that only when termination is declared to be illegal that an employee is entitled to
claim separation pay in lieu of reinstatement. In this case, Mahilum, in effect, demanded for
such pay prior to a declaration of the illegality of dismissal. Had he refused to execute the
assailed document, he would have been entitled to receive what he bemoaned. Regrettably, he
unwittingly discharged the company from its liability as well as waived any recompense when he
signed the quitclaim.

In a motion for reconsideration, Mahilum argued that the ruling ran counter to the underlying
policy for the grant of the reliefs outlined in Article 279 of the Labor Code.8 Following the logic
espoused therein, no employee could ever expect any benefit from his complaint for illegal
dismissal because at the time of its filing, there was, as of yet, no declaration of the
termination’s illegality.

On July 23, 2010, the CA reconsidered and issued the assailed Amended Decision after finding
merit in Mahilum’s arguments. Finding Mahilum to have been indeed illegally dismissed from
employment, the CA ruled that he was entitled to full backwages and separation pay in lieu of
reinstatement, in view of the strained relations between Mahilum and Lua. With respect to the
quitclaim, the CA declared it to be void for having no consideration at all. All that Mahilum
received by virtue of the said document amounted to what he was legally entitled like salaries
and wages, 13th month pay and commissions. These could not be considered as reasonable and
credible consideration for a quitclaim. By receiving only what he was lawfully entitled to, there
was, in effect, no consideration at all for the quitclaim, rendering it void and ineffective to bar an
action for illegal dismissal.

PSWRI and Lua moved for reconsideration, but the motion was subsequently denied.9

Hence, this petition for certiorari under Rule 65.

ARGUMENTS:

1] The CA gravely abused its discretion when it applied Article 279 of the Labor Code in
determining the legality of Mahilum’s dismissal. 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 from
February 1, 2005 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.

The Court resolves the issues in seriatim.

The petitioners resorted to a wrong

mode of appeal; Rule and Exceptions

There is a patent error in the mode of appeal selected by the petitioners. It is well-settled that in
assailing a decision of the CA, the available remedy is to file a petition for review under Rule 45
and not the extraordinary writ of certiorari under Rule 65. The proper remedy is to file a petition
for review on certiorari under the Rules of Court which should be instituted within fifteen (15)
days from receipt of the assailed decision or resolution. In a long line of cases, the Court has
consistently emphasized that after the lapse of the 15-day period to file a petition for review on
certiorari, the special civil action of certiorari under Rule 65 is not, and cannot be, a substitute
for a lost remedy of appeal.10

In the case at bench, the petitioners received the assailed Resolution of the CA on December 17,
2012. The subject petition for certiorari was filed on February 5, 2013, evidently beyond the 15-
day period to file an appeal under Rule 45. In fact, even if a 30-day extension would be
considered, the petition for certiorari was still filed out of time.

Although the petitioners’ cause is purportedly grounded on grave abuse of discretion, they still
cannot avail of the Rule 65 remedy because an appeal is available under Rule 45. One of the
requisites of certiorari is that there be no available appeal or any plain, speedy and adequate
remedy. Where an appeal is available, certiorari will not prosper, even if the ground therefor is
grave abuse of discretion.

At any rate, in accordance with the liberal spirit pervading the Rules of Court and in the interest
of substantial justice, this Court has before treated a petition for certiorari as a petition for
review on certiorari, particularly (1) if the petition for certiorari was filed within the
reglementary period within which to file a petition for review on certiorari; (2) when errors of
judgment are averred; and (3) when there is sufficient reason to justify the relaxation of the
rules.11 In this case, considering the monetary awards to Mahilum, the Court opts to resolve
said issue.

Mahilum was a regular employee

In insisting that Mahilum was a contractual employee and that the period of probation
depended on the agreement of the parties, the petitioners proffer the Memorandum of
Agreement12 entered into by the parties which provides:

6. THAT SECOND PARTY upon appointment shall be in a Probationary status for the next six (6)
months and may be extended a permanent appointment only if he can satisfactorily perform his
duties and functions as defined in the Personnel’s Manual/Company House Rules on Discipline.

It is the petitioners’ theory that Mahilum, who was hired in June 2004, was not a regular
employee at the time of his dismissal because his probationary status would end only if he could
satisfactorily perform his duties and functions as defined in the Personnel’s Manual/Company
House Rules of Discipline. This suspensive condition failed to arise.
For his part, Mahilum insists that he was a regular employee entitled to security of tenure.
Having been hired in June 2004, he must be considered to have already served the company for
eight (8) months at the time of his dismissal on February 1, 2005. This fact calls for the
application of Article 281 of the Labor Code:

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. [Emphasis supplied]

Contrary to the claims of the petitioners, Mahilum was correctly considered by the NLRC and CA
as a regular employee. No grave abuse of discretion may be attributed for the application of
Article 279 of the Labor Code13 in determining the legality of Mahilum’s dismissal.

A probationary employee, like a regular employee, enjoys security of tenure. In cases of

probationary employment, however, aside from just or authorized causes of termination, an
additional ground is provided under Article 281 of the Labor Code, that is, the probationary
employee may also be terminated for failure to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at the time of the
engagement. 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.14

As applied to the petitioner’s arguments, it would seem that PSWRI and Lua now invoke the first
and third ground for Mahilum’s termination. The Court, however, cannot subscribe to the
premise that Mahilum failed to qualify as a regular employee when he failed to perform at par
with the standards made known by the company to him. In this case, it is clear that the primary
cause of Mahilum’s dismissal from his employment was borne out of his alleged lapses as
chairman for the inauguration of the Bulacan plant company’s Christmas party. In fact, the
termination letter to him cited “loss of trust and confidence” as a ground for his dismissal. 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,15 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.

Mahilum was illegally dismissed

According to the petitioners, Mahilum’s behavior during the inauguration/party was allegedly
tantamount to: 1] serious misconduct, as displayed by a drinking binge with his own visitors
causing the shame and humiliation of Lua; and 2] willful disobedience, as shown by his refusal to
carry out legitimate orders.

As previously explained, Mahilum was a regular employee who was entitled to security of
tenure. Thus, he could only be dismissed from service for causes provided in Article 282 of the
Labor Code.16 At this point, it bears stressing that the NLRC and the CA, in their decisions, both
found Mahilum to have been illegally dismissed.
The well-entrenched rule, especially in labor cases, is that findings of fact of quasi-judicial
bodies, like the NLRC, are accorded with respect, even finality, if supported by substantial
evidence. Particularly when passed upon and upheld by the CA, they are binding and conclusive
upon the Court and will not normally be disturbed. Although this doctrine is not without
exceptions, the Court finds that none is applicable to the present case. Here, the CA affirmed the
ruling of the NLRC and adopted as its own the latter’s factual findings as to Mahilum’s illegal
dismissal. Consequently, the Court finds no reason to depart from the finding that Mahilum’s
failure to effectively discharge his assignment as the over-all chairman of the festivities was due
to mere inadvertence and the mistaken belief that he had properly delegated the details of the
program to another officer.

Further, his 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. Verily, 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, warranting the agreement of the Court is the finding of the CA in its Amended Decision
that 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
indeed bolstered the fact that the quitclaim was executed without consideration. Suffice it to
say, the subject quitclaim may not be considered as a valid and binding undertaking.

Entitlement to monetary claims

Article 279 of the Labor Code provides that an employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges, to full
backwages, inclusive of allowances, and to other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement. 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. On the one hand, such payment liberates the employee from what could be a highly
oppressive work environment. On the other, the payment releases the employer from the
grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust.17
Thus, as an illegally or constructively dismissed employee, the respondent is entitled to: (1)
either reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and (2)
backwages. These two reliefs are separate and distinct from each other and are awarded
conjunctively.18

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,19 reinstatement is no longer viable considering the circumstances
of animosity between Mahilum and Lua.

Propriety of awarding commissions

and damages

Be that as it may, 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 are a 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 thus the degree of assuredness to
an employee that he would have had them as earnings had he not been illegally terminated
from his employment. [Emphasis supplied]

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.20

It is well-established in jurisprudence that 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,21 the Court held that commissions earned by salesmen form part
of their basic salary. The salesmen’s commissions, comprising a pre-determined 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,22 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.

In Mahilum’s case, Phil. Duplicator cannot be automatically applied without considering his
position as Vice President for sales and marketing of the PSWRI’s Bulacan-South Luzon Area.
This factor constrains the Court to hold that Mahilum’s 0.25% commission based on the monthly
sales and 0.25% commission for cash payments must be taken to come in the nature of
overriding commission, 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. Curiously,
Mahilum did not comment on the petitioners’ objection to the award. Not being 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. In fine, the alleged commissions were
profit-sharing payments and had no clear, direct or necessary relation to the amount of work he
actually performed.

For said reason, Mahilum’s backwages must be pegged at his basic salary, excluding the
commissions mentioned by the NLRC, to be computed from the time of his dismissal up to the
finality of this decision. Nonetheless, the award of backwages shall earn legal interest at the rate
of six percent (6%) per annum in accordance with prevailing jurisprudence.23

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.24 No evidence thereof was presented in this case.
Mahilum, however, is entitled to attorney’s fees in the amount of ten percent (10%) of his total
monetary award, having been forced to litigate in order to seek redress of his grievances, as
provided in Article 111 of the Labor Code,25 as amended, and existing jurisprudence.26

WHEREFORE, the petition is PARTIALLY GRANTED. The July 23, 2010 Amended Decision and the
October 31, 2012 Resolution of the Twentieth Division of the Court of Appeals in C.A.-G.R. S.P.
No. 02636 are AFFIRMED with MODIFICATION.

Accordingly, Philippine Spring Water Resources, Inc. is hereby ordered to pay Juvenstein B.
Mahilum, his separation pay, full backwages inclusive of his basic salary, proportionate 13th
month pay, and unused leave credits, to be computed based on his salary at the time of his
illegal termination and attorney’s fees.

These payments shall earn legal interest at the rate of six (6%) percent per annum reckoned
from their due date.

SO ORDERED.

Velasco, Jr. (Chairperson), Peralta, Villarama, Jr.*** and Leonen, JJ., concur.

Petition partially granted, amended decision and resolution affirmed with modification.

Notes.—While probationary employees do not enjoy permanent status, they enjoy the
constitutional protection of security of tenure. They can only be terminated for cause or when
they otherwise fail to meet the reasonable standards made known to them by the employer at
the time of their engagement. (Aliling vs. Feliciano, 671 SCRA 186 [2012])

The loss of trust and confidence must be based on willful breach of the trust reposed in the
employee by his employer. (Villanueva, Jr. vs. National Labor Relations Commission Third
Division, 672 SCRA 243 [2012])

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