Title II WAGES Chapter I PRELIMINARY MATTERS Grn Key Questions: What is wage? What does it include? To det whether one’s wage meets the legal minim non-cash benefits be included in the computati 2. “Facilities” are wage-deductible, “supplements” How are they differentiated? 3. Whatestablishments may be exempted from observa of the minimum wage law? ART. 97. DEFINITION As used in this Title: (a) “Person” means an individual r association, corporation, business trust, legal re organized group of persons. : (b) “Employer” includes any person acting directly the interest of an employer in relation to an employee ant the Government and all its branches, subdivision and government-owned or -controlled corporations and non-profit private institutions, or organizations. ) (c) “Employee” includes any individual employed tPRELIMINARY MATTERS ART. 97 “ ” paid to any (f) “Weae™ pas 'y employee shall mean the aeaings however designated, capable o being expressed is wipether fixed or ascertained on a time, task, piece, or commission per ‘her method of calculating the same, : which is payabl employer ar an employee under a written or unwritten contract of a for zork done or to be done, or for services rendered or 1 Jpeludes the fair and reasonable value, as determined ty a see Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. “Fair and reasonable value” shall not includ any profit to the employer or to any person affiliated with the employer: COMMENTS AND CASES 1. “WAGE” AND “SALARY” DEFINED. The term “wages,” as distinguished from “salary,” applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while “salary” denotes a higher degree of employment, ora superior grade of services, and implies aposition or office; by contrast, the term “wages” indicates inconsiderable pay fora lower and less responsible character of employment, while “salary” is suggestive of a larger and more permanent or fixed compensation for more important service. By some of the authorities, ithas been noted that the word “wages” in its ordinary acceptance, has a less extensive meaning than the word “salary,” “wages” being ordinarily restricted to sums paid as hire or reward to domestic or menial servants and to sums paid to artisans, mechanics, laborers, and other employees of like class, as distinguished from the compensation of clerks, officers of public corporations, and public offices. In many situations, however, the words “wages” and “salary” are synonymous.! Our Supreme Court reached the same conclusion, i.e, the words “wages” and “salary” are in essence synonymous, 1.1 “Wage” includes Sales Commissions “Salary,” the etymology of which is the Latin word “Solarium, "is often used interchangeably with “wage,” the etymology of which is the Middle English word “wagen.” Both words generally refer to one and the same Meaning, thatis, a reward or recompense for services performed, hee “pay” is the synonym of “wages” and “salary.” Inasmuch as the words “wage,” 35 Am, Jur, Sec. 63, pp- 496497. “ieny ART. 97 CONDITIONS OF EMPLOYMENT ” have the same meaning, and commission isin £ “wage,” the logical conclusion is, in the com, “pay,” and “salary the salary base should include also theeaet in the definition o of the separation pay. commissions.’ 1.2. Wage Includes Facilities or Commodities ‘Article 9(f) further provides that “wage” includes the fair ang reasonable value of board, lodging, or other facilities customarily furnished by the employer to the employee. This means that an employer may provide, for instance, food and housing to his employees but he may deduct their values from the employees’ wages. But it is not always easy to decide what items are wage-deductible and how much should be their value. The employer's estimate may be so high that not much cash islet of the employees’ wages who, therefore, will complain of underpayment of wages. Because of this problem, the Article and its implementing rule authorize the Secretary of Labor and Employment to fix from time to time the fair and reasonable value of board, lodging, and other facilites customarily furnished by an employer. The Implementing Rule (Booklll, Rule VII, Section 4) states that, as regards meals and snacks, the employer may deduct from the wages not more than 70% of the value of the meals and snacks enjoyed by the employees, provided that such deduction authorized in writing by the employees. The remaining 30% of the value has to be subsidized by the employer. Fora lodging facility, its fair and reasonable value is determ the cost of operation and maintenance, including adequate depreciation plus reasonable allowance (but not more than 5 1/2% interest 08 depreciated amount of capital invested by the employer); provi the total so computed is more than the fair rental value (or the fait of the commodities or facilities offered for sale) the fair rental value be the reasonable cost of the operation and maintenance. The een eerie Biedeciadodtacexneh unting practices. (ees faaleihiich ixavehicen, ee acc shall not include account income tax purposes. The te a = by the Bureau of Internal Revenue | lepreciation” shalll include ined tobe er INGCO, et al. vs, Nati 51000, March 28, 1999, ‘onal Labor Relations Commission, G.R. NOS 5080 320PRELIMINARY MATTERS tn order that the cost of facilities furnishe qasged against an employee, his acceptance yoluntary. 9, “FACILITIES” DISTINGUISHED FROM «s Sometimes the issue is not the value of the facility but “falty” itself is legally chargeable to the wage or not. The Arti implementing Rules mention board, lodging, snacks, and “oth ta What can “facilities” include? The term facilities,” says eae Rule, shall include articles or services for the benefit of the emplo his family but shall not include tools of the trade or articles or se1 primarily for the benefit of the employer or necessary to the cond the employer’s business. Is work uniform a facility and therefore wage-deductible? or shoes? or raincoats? or a car? “Facilities” should be distinguish “supplements.” Facilities are wage-deductible, supplements are distinction is explained in the 1968 case of State Marine, quoting the case of Atok-Big Wedge, and in the 1997 case of Mabeza. State Marine Corporation and Royal Line, Inc. vs. Cebu Seamen's Inc., G.R, No. L-12444, February 28, 1963 Facts: Since the beginning of the operation of the petitioner's busin crew of their vessels have been signing “shipping articles” which conta ‘in others, a stipulation that “the said master hereby agrees to pay to the ‘Wages, the sum expressed in the contract; and to supply them with | ¥’ and “such daily subsistence as shall be mutually agreed upon or, subsistence the crew may reserve the right to demand adequate aily ‘Ore, apparent that, aside from the payment of the respective sala Set opposite the names of the crew members, the petitioners. Supply the crew with ship's provisions, daily subsistence or include food, This was the situation before August 4, 1951, when the M me effective. After this date, however, the companies began of meals from the wages or salaries of crew members; but no "ade from the salaries of the deck officers and engineers, The query converges on the legality of such a jputend that the deductions are legal; the respondent Mega, and reimbursement should be made, “Book Il, Rule Vil, Section 5.ART. 97 CONDITIONS OF EMPLOYMENT Ruling: We hold that such deductions are not authorized, In the in pushes ot transportation of passengers and freight, the men who COastsg complement of a vessel are provided with free meals by the shipowners "POSE the or agents. Pettey, Itis argued that the food or meals given to. the deck officers, marine, and unlicensed crew members in question were mere “facilities” which anne deducted from wages, and not “supplements” which, according to said Seta [R.A. No. 602, Minimum Wage Law] should not be deducted from such ded therein: “Nothing in this Act shall deprive an employee of therightst® Peas eso n ace supplements furnished on the date of ito In the case of Atok-Big Wedge Assn. vs. Atok-Big Wedge Co., 97 Phi 2a, the two terms are defined as follows— “Supplements” constitute extra remuneration or special privileges Benen pe to or received by the laborers over and above their ort, earnings or wages. “Facilities,” on the other hand, are items of necessary for the laborer’s and his family’s existence and subsistence, sth by express provision of law (Section 2{g]), they form part of the wage and when furnished by the employer are deductible therefrom, since ifthey ze not so furnished, the laborer would spend and pay for them just the same. In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or ordinary earning ot wage supplement; and when said benefit or privilege is part of the laborer's basic wages itis a facility. The criterion is not so much with the kind of the benefit or item {food lodging, bonus, or sick leave) given, but its purpose. - Considering, therefore, as definitely found by the respondent cour thatthe meals were freely given to crew members prior to August 4, 1951, while they were on the high seas “not as part of their wages but as a necessary maintenance of the health and efficiency of the crew personnel during the vO the deductions therein made for the meals given after August 4, 1951, should? returned to them, and the operator of the coastwise vessels affected should: giving the same benefit. Because the meals were viewed as benefits or supplements to the wages, their value therefore, is not deductible from the wages. 2.1 Requirements for Deducting Value of Facilities In the 1997 case of Mabeza vs. NLRC (discussed also 258), one of the issues is underpayment of wages to the. employee who stays in the premises of the employer hotel. denies the alleged underpayment by claiming that the em ae the cost of board and lodging that he provides. legation, according to the labor arbiter, there was no und Wages. But the Supreme Court sharply reversed the 322ART. 97 CONDITIONS OF EMPLOYMENT 3. SALARY DISTINGUISHED FROM GRATUITY AA gratuity is something given freely, or without reeq something voluntarily given in return for a favor or services; g tip. It is that which is paid to the beneficiary for past services rely out of the generosity of the giver or grantor. The very term differs from the word “salary” or “compensation” in leaving the thereof, within the limits of reason, to the arvitrament [sic] of, Gratuity pay is not intended to pay a worker for actual se rendered. It is a money benefit given to the workers whose reward employees or laborers who have rendered satisfactory and, service to the company.” While it may be enforced once it ficen contractual undertaking, the grant of such benefit is not as to be considered a part of labor standard law unlike the salary, living allowances, holiday pay, leave benefits, etc., which are the Labor Code* omy 4, FAIR DAY'S WAGE FOR FAIR DAY'S LABOR A fair day's wage for a fair day's labor continues to govern the between labor and capital and remains a basic factor in employees’ wages. If there is no work performed by the employee therecas be no wage or pay unless the laborer was able, willing and ready tow butwas prevented by management or was illegally locked out, suspended or dismissed, Where the employee's dismissal was for a just cause, itwould neither be fair nor just to allow the employee to recover something hebs not earned and could not have earned.’ Thus, where the failure of workers to work was not due employer's fault, the burden of economic loss suffered by the, should not be shifted to the employer. Each party must bear his: * * Plastic Town Center Ci i ; ORNe gee “orporation ys, National Labor Relations! * Mid. ril 19, 1989, citing various cases. *Philiy oer) 5 : ery tiippine Alines ys. National Labor Relations Commission, GJ Durahit a 8SSupervisors’ Union-CUGCO, G.R. No. L-SI8S% Recapping Plant and Co, vs. NLRC, G.R, No, 176746, 324that have been or will be Protection of employees. Accordingly, the School hires both foreign and local teachers its faculty, classifying the same into two: (1) foreign-hires and (2) The School grants foreign-hires certain benefits not accorded oc: include housing, transportation, shipping costs taxes, and home leave allov Foreign-hires are also paid a salary rate twenty-five percent (25%) more of local-hires. The School justifies the difference on two “significant disadvantages” that foreign-hires have to endure, namely: (a) the “disloc: and (b) limited tenure. Petitioner union claims that the point-of-hire classification School is discriminatory to Filipinos and that the grant of higher hires constitutes racial discrimination. 7 When the CBA negotiation reached a deadlock, tl 2 Se assumed jurisdiction. . The Acting Secretary upheld the point-of-hire clas 1 in salary rates, as he said: i The principle “equal pay for equal work” does in the meee eee The international character of the hiring of foreign personnel to deal with different natio Cultures, among the student population. ¢ Issue: Is the ruling of the Acting Secretary of Labor justified? Ruling: 1f an employer accords employees the same Presumption is that these employees perform equal work, q There is no evidence that foreign-hires perform 25% more or effectively than the local-hires. Both groups have simil ‘esponsibilities, which they perform under similar working While the need of the School to attract foreign-hires is Should not be used as an enticement to the prejudice of loc 24 ttART. 98 (CONDITIONS OF EMPLOYMENT ART. 98, APPLICATION OF TITLE ooOverview/Key Questions: 1. Minimum wage rates are among the regions. How is this 9, What is the rule on nondiminution. it apply to benefits negotiated thro bargaining agreement (CBA) or to co such as bonus? - . What is the thirteenth-month pay and who to it? On what basis is it computed? part of the pay? . Wages calculated aoe towork oART. 99 CONDITIONS OF EMPLOYMENT Article 99 recognizes that there are minimum wage me is agricultural and for non-agricultural employees, and these are: Y for each region by the regional wage boards. “termine In sustaining minimum wage legislation, the U.S, Supreme Cou) made an observation that equally applies to the Philippine setting. es ‘The legislature was entitled to adopt measures to reduce evils of the “sweating system,” the exploiting of workers at waye® low as to be insufficient to meet the bare cost of living, thus 0 their very helplessness the occasion of a most injurious compete? The legislature had the right to consider that its minimum requirements would be an important aid in carrying out its poly of protection. Minimum wage determination is discussed in Chapter V, this Tide which embodies the amendments made by R.A. No. 6727, 1.1 Minimum Wage; Need for Margin Over the Minimum Wage A person's needs increase as his means increase. This is true not only as to food but as to everything else—education, clothing, entertainment, tc, The law guarantees the laborer a fair and just wage. The minimum ust be fair and just. The “minimum wage” can by no means imply only ¢ actual minimum. Some margin or leeway must be provided, overand bove the minimum, to take care of contingencies, such as increase of prices of commodities and increase in wants, and to provide means fore desirable improvement in his mode of living.” Py The establishment of the minimum wage benefits directly paid employees, who now receive inadequate wages on which to themselves and their families. It benefits all wage earners indi setting a floor below which their remuneration cannot fall. Itt standard of competition among employers, since it would prote minded employer... from the competition of the employer his workers a wage below subsistence. 1.2. “Minimum wage” vs. “living wage” A pioneer institutional economist, John R. Commons’ book Principles of Labor Legislation (1936): ; —_ * See Article 122. * Atok Big Wedge Mini ne Ige Mining Co., Inc. vs. Wei Amociation, CR. No, L6276, March 8° 1068. in dge 330How adequate is the m and, ifso, is account taken only of or isallowance also made for the req welfare? Is provision made for th probable periods of unemployment? On wh fix the pay of young, inexperienced, and Our Constitution specifies the workers? age but to “living wage.” 9, ABILITY TO PAY IMMATERIAL i ‘The employer cannot exempt himself from li wages because of poor financial condition of the. of minimum wages not being dependent on the em Thus, in one case, the heirs ofa market. cleaner of the sued for underpayments under the Minimum raised the defense that it was not liable for lack of fu excuse the latter from paying the minimum such wage is a mandatory statutory oblis one’s ability to pay. If, in fact, the employer cannot pay a otherwise, the employer is material resources used in the emp! Progressive and fair-minded man Wage go hand in hand.* 3. EMPLOYEES NOT ESTOPE AMOUNT OF WAGES __ The acceptance by an objection does not give rise toheees CONDITIONS OF EMPLOYMENT received pursuant to a valid minimum wage ne Joes Not spp that the employer changed his position to his own prejudice, A laborer who accepts a lower wage than what the law; ai “enti wage for laborers shall be entitled to receive the deficiency: 4. EXEMPTIONS , 4.1 Exceptions under the Implementing Rules ; The Implementing Rules contains the following exceptions tg the coverage of the Rule on minimum wages: ' i a. household or domestic helpers, including family drivers ang persons in the personal service of another;? b. _homeworkers engaged in needle-work; c. _ workers employed in any establishment duly registered with the National Cottage Industries and Development Authority in accordance with R.A. No. 8470 provided that such workers perform the work in ther respective homes; d, _ workersinany duly registered cooperative when so recommended by the Bureau of Cooperative Development and upon approval of ‘the Secretary of Labor and Employment; Provided, however, That such recommendation shall be given only for the purpose of making the cooperative viable and upon finding and certification of said Bureau supported by adequate proof, that the cooperative cannot resort to other remedial measures without serious loss or prejudice to its operation except through its exemption from the requirements of the Rules. The exemption shall be subject to such terms and conditions and for such period oftime as the Secretary of Labor and Employment may prescribe.! ‘ The law on cooperatives (R.A. No. 9520) and its implementing Tules contain no provision superseding or contradicting the exceptions Trentioned above. Therefore, the Labor Code’s implementing rules? this matter still stands, 4-12 Cooperatives May Still Be Exempted from Minimum Wage &* Dawg ne ligibilty of cooperatives for exemption from minimum: i vscognized not only in the Rules Implementing the Labor Code! a 481. palin J8 Sec. 811, p, 986, * See Article 141 wit + Sector MAL with comment, : Rule VII, Book III, Rules to Implement the Labor 32jn an Opinion dated January 18, 1990 of the meinen states: We find no such irreconcilable in special law on cooperatives and the manifests unequivocally a legislative intent to r special law. The exemption granted to coop as amended, can be enforced without ses of the later minimum wage laws or any of their provisions. Besides, the said es character but may be availed of only in ap and Employment. In view of the foregoing, we hold that exempted from the statutory minimum wage. 4.2 Exemption of BMBEs A minimum wage law or order is essentially a measure. But, ironically, it can also harm the int people, particularly those in small and medium sc setting up businesses for fear of being unable to that case, the minimum wage law discourages rat creation of jobs. This is one reason behind the or the “BMBE Act of 2002,” approved on N (BMBE) to serve as seedbeds for d integrate the informal with the formal s this, certain incentives and benefits areART. 99 CONDITIONS OF EMPLOYMENT trading and services, whose total assets including those arising, we but exclusive of the land on which the particular business cmt plant and equipment are situated, shall not be more than Three Mii? Pesos (P3,000,000.00).” This category, according to governments comprises no less than ninety percent (90%) of Philippine employers, Under Section 5(b) of RA. No. 10644 (2014), the Go N the Department of Trade and Industry, through the Negosyo Centerin y, city or municipat level, shall have the sole power to issue the Certificate op Authority for BMBEs to avail themselves of the benefits provided bya, No. 9178. 4.3. Exemption of Retail and Service Establishments R.A. No. 6727, known as the Wage Rationalization Act (approved on June 9, 1989), amended Article 99 and incorporated in the Code Articles 120, 121, 122, 123, 124, 126, and 127. This Act provides for the statutory minimum wage rate of all workers and employees in the private sector ut its Section 4 exempts “retail and service establishments.” It reads; Retail/service establishments regularly employing not more than 1 to 10 workers may be exempted from the applicability ofthis Act upon application with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission. Whenever an application for exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-compliance with thi shall be deferred pending resolution of the application Pa by the appropriate Regional Board. si In the event that applications for exemptions are not gt employees shall receive the appropriate compensation due Provided for by this Act plus interest of 1% per month retro% the effectivity of this Act. The exem a e ption of “retail service establishments” in RA. Ne Similar to the exceptions stated in Articles 94 on holiday pay and 95 on service incenti hae ive leay fi qualifying number of. capi (SIL). Note, however, the d Ex ees. ‘emptions fy i employing “ess than ren t8Y PAY and SIL apply to est ‘an ten” employees, meaning one to nin 334hand, the minimum wage exem 7 oi loyees meaning one to 10. With nine o1 wt pshments exempt from holiday pay and SI employees the establishment is exempt from Noe further that the exemption from m In contrast, the exemptions from holiday pay service incentive leave (Article 95) are granted by the maybe availed of by the employer without need of a exemption. But, of course, if the claimed exemption is u employees may question it. 4.3a “Retail/Service,” Definitions Whatisa “retail/service establishment” that: Andwhat is meant by “regularly employing not monet The DOLE Manual has adopted explanations of pe the Federal Fair Labor Standards Act (FLSA) after minimum wage law (R.A. No. 602) was patterned. Sucl Manual also says, will guide the department “until itis byauthoritative decisions of the court, or concludes, ofan interpretation, that it is incorrect.” To qualify for exemption, the retail or service thatitis engaged in selling goods and services or 'sone engaged in the sale of goods that are com individuals for personal or household use and sales. A “service enterprise,” on the other hand in providing personal service to individuals. \se...The exemption has reference only to Performed by establishments that are Service establishments such as restaurants, tc. The intention of the Actis to exempt are recognized in the particular inde Typically, a retail or service establ of the community in which it is iness organization of thes pation asART. 99 CONDITIONS OF EMPLOYMENT of distribution, disposing in small quantities of the products such organization and does not take part in the manufacturing ple 4.3b “Regularly Employing” . The same DOLE Manual gives an interpretation of je.) employing not more than [10] workers.” The word “regulag Fula steady, uniform in course, practice or occurrence and “regular in a regular manner. As used in the Act, the term “regularly employ reference to the more or less uniform or usual number of emp) has employed by a retail or service enterprise during its normal ope Thus, it can be said that casual or seasonal employees (except when retail or service enterprise operates on a seasonal basis) are not: me employed within the meaning of the law. Accordingly, those regulary during certain seasons only, like Christmas and Holy Week, oF thay employed in order to meet an extraordinary or abnormal business demang should not be considered in determining the number of employee, regularly employed by a retail or service enterprise for purposes of the exemption. On the other hand, those employed on probational or those employed as learners or apprentices (with compensation) shallbe ‘onsidered in determining the exemption of the enterprise.” 4.3c Additional Exemptions The NWPC Guidelines on Exemption from wage orders adds categories of exemptible enterprises such as distressed establishment new business enterprises, and establishments adversely affected by natura calamities. Moreover, it allows the regional wage boards to add exemptile categories of employers, but the addition needs strong justification and is subject to review or approval by the NWPC. The Guidelines recognizes three reasons justifying exemptions. They are: (1) to assist cestablishimens experiencing temporary difficulties due to losses to maintain the finan viability of their businesses and continued employment of their works (2) to encourage the establishment of new business and their crea jobs particularly in areas outside the National Capital Region and Processing Zones, in line with the policy on industry dispersal to ease the burden of micro establishments, particularly in the service sector, that have a limited capacity to pay.’ * Sect Te 4312.02, DOLE Manual. * Section 2, NWPC Guidelines No. 01, Series of 1996. 336> F 44 Other Exemptions Wage Orders issued by the wage boards ( K and Productivity Board”) under Articles 99 and 122 may cxemptions from the minimum wage law. \wkea ART; 100. PROHIBITION AGAINST ELIMINATION OR Di oF BENEFITS si COMMENTS AND CASES. 1. NONDIMINUTION OF BENEFITS So that the rule against diminution of supplements or apply, it must be shown that: (1) the grant of the benefit is fou policy or has ripened into a practice over a long period; (2) is consistent and deliberate; (3) the practice is not due to construction or application of a doubtful or difficult question (4) the diminution or discontinuance is done unilaterally by the: In line with Article 100, it has been held that unused sick leave paid by the company to its interm tipened into a practice after three years and may no longer e or diminished by the employer unilaterally? a In another case, a managerial employee was cl nefits under a collective bargaining agreement employees, The Court sustained the denial of his claim t did not cover him and he failed to prove that to managers has been done over a long deliberately. He failed to show that the en siving the benefits knowing fully by the law requiring payment of such ben eo With regard to the length of time, 1 : been exercised for such a period as to Constita Practice which cannot be unilaterally ie ae aE ‘ TSPIC ys. TSPIC oe aa Integrated100 CONDITIONS OF EMPLOYMENT ART. isprudence has not laid [the Supreme Cour | hold a at of yeartslo Gane a ayy, requiring a specific vow ite company practice lasted for sats See ee Integrated Port Stevedoring Service vs, 4 ‘a another case, hree years and nine months, approved the Commuty tog employer, a Aenea portion of the sick leave with pay benefit ~ vas chara In Tiangeo vs. Leogardo, Jr, the employer : eencie of giving a fixed monthly emergency allowance from Novem, 1976 0 February 1980, or three years and four months. In all these ae this Court held that the grant of these benefits has ret into ; br or policy which cannot be peremptority withdrawn. In t ie at bat, petitions, Sevilla Trading kept the practice of including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the Computation of their 13th-month pay for atleast two years. This, we rule likewise, en voluntary employer practice which cannot be unilaterally withdrawn by the employer without violating Article 100 of the Labor Code. (Emphasis supplied! The extent of the “nondiminution rule” is illustrated further in the following cases. 1.1 Noncontributory Retirement Plan Nestlé Philippines, Inc. vs. National Labor Relations Commission, Gi. No 91231, February 4, 1991 isting benefits voluntarily granted to them by ther employer. The latter may not unilaterally withdraw, eliminate or diminish such benefits. The fact that the retirement plan is noncontributory, i.e., that the employees Canute nothing to the operation ofthe plan, does nox make it a non-issue inthe CBA negotiations. As a matter of fact, almost al of the benefits that the employers ranted to its employees under th e CBA—salary increase, rice allowances, midje! Bonuses, 13th- and 14th-month Pay, seniority pay, medical and hospitalization plans, health and dental Services, vacation, sick and other leaves with pay— noncontributory benefits, Though noncontributory, ested and those retirement benefits have become cannot be unilaterally disconti nued or diminished, * Sevilla Trading Co. vs, Se Honda Phils., Inc. vs. Samah, 15, 2005, os 338 ‘mana, G.R. No, 152456, April 28, 2004 su "6 Manggagawa sa Honda, G.R. No. 1451.2 Monthly ECOLA e and V. Tiangco ws. Hon. Vicente Leogardo, r etal. GR. No. L-57636, May 16, 1983 one facts: Mt. Ilustrisimo and 26 others were batillios x gents, 1 unload fishcatch from the vessels and take them to he fis eco these Datilios was limited to days of arrival of the ‘work only a few days in a month averaging four hours a day, In April 1980, Mr. llustrisimo, and others filed a complaint against {rit} nonpayment of legal holiday pay, (2) service incentive p 3) underpayment of emergency cost-of-living allowances, {ECOLA} pobe paid in full irrespective of their work days, ¢ The Tiangcos denied the laborers’ contentions. But as regards # emergency allowance differentials, they admitted that they disconti d pactce of paying a fixed monthly allowance, and allowances for non days. They invoked the principle of “No work, no pay.” Ruling: The workers’ claim is valid. Since the Tiangcos had been p workers a fixed monthly emergency allowance since November 1976. to! 1980, as a matter of practice and/or verbal agreement between the Gscontinuance of the practice and/or verbal agreement between the p the private respondents contravened the provisions of the Labor Code, Article 100. It prohibits the elimination or diminution of existing benefits st the ECOLA.’ bila 1.3 Full 13th-Month Pay ‘ In one case, the company has paid full instead of 18th-month pay to some employees who have not rendered service. The company “corrected” this “error” but the d complained of illegal diminution of benefits. The that the “error” could not be considered an established ithappened to only seven employees in a span of six, oversight. bet Milan: The Court disagrees and invokes con tional b Tondiminution rule in Article 100. The Court an Any benefit and spp ne a ee. cannot be reduced, ¢ iminution of Benefi employer. The principle of nor _ fie rights OE Constitutional mandate to protect iMENT | CONDITIONS OF EMPLO’ ART. 100 ir welfare,” and “to afford labor full protection.” Saiq eek ge batsoparticlow of the Labor Code which sue “all doubts in the implementation and interpretation Of this Code including its implementing rules and regulations shall be in favorolabor. Jurisprudence steplete with cases which rae the right of employees to benefits which were voluntarily Biven by the employer and which ripened into company practic 00 TO BENEFITS . CRITIQUE: WHY APPLY ARTICLE 1 é TANGLE PROMULGATION OF THE LABOR CODEp Article 100 prohibits elimination or diminution of supplement employment benefits being enjoyed as of May 1, 1974, the date the Lab, Code was promulgated. And yet the Supreme Court, as in Tiangeo case above, applied Article 100 to prohibit the discontinuance of mon allowance which the employer started giving in 1976. In Arco Ma the claimed benefit started in 1992. The rulings obviously extended o» expanded the coverage of Article 100 by referring even to benefits initiated after May 1, 1974. Those rulings do not conform to what it said in Ab Mining Co. us. NLRC, G.R. No. 86200, February 25, 1992: “Clearly, the prohibition against elimination or diminution of benefits set out in Article 100 of the Labor Code is specifically concerned with benefits already enjoyed at the time of the promulgation of the Labor Code. Article 100 does not, in other words, purport to apply to situations arising after the promulgation date of the Labor Code x x x.” There is strong reason to believe that Article 100 is really referring only to benefits being enjoyed as of May 1, 1974. It is intended, we believe, foprotect or preserve those benefits despite the Code’s introduction ofew Ginny benefits and imposition of minimura wage. Note that this not diminution provision comes next to Article 99 stating that the minimum fates shall be i A i lotion eae Prescribed by the regional wage boards. Arde Py mibas Complying with new weet re Leesan requit Bapeionng them for the benefits already in place at that dime. at that time mar) S'vice incentive leave was inmoduced by the Usually 10 days eng nePl°YeTS Were giving sick leave or vacatio® ‘each. Arte 100 means that the 10 VL or SL shoulda ane Samahan ng mga Manggagawa s1 AN? "Arco Metal Prod, lucts, et NAFLU, GR. No, 170734, isp "3008 340 _MINIMUM WAGE RATES ART. 100 fe reduced oF discontinued Just because the new Code (in Article 95) vires only SIL of five days. Without the anticipatory prohibition, there sould be compliance with the new Provision but existing benefits would jeeliminated or reduced. Such off-setting Article 100 wanted to prevent. similarly, service charge share was introduced by Article 96. Article 100 gid not want employers to discontinue, for instance, free meal benefit in Jace of share in the service charges under the new code. This prevention ofsubstitution or diminution explains why Article 100 categorically refers onlyto “benefits being enjoyed” when the Code was issued on May 1, 1974. Preservation of existing benefits when a law introduces a new benefit isnot an unusual safeguard. It is done in Section 10 of the Rules and Regulations Implementing PD. No. 851 (13th-Month Pay) dated December 9, 1975. The same anticipatory safeguard is repeated in Section 8 of the Revised Guidelines dated November 16, 1987. It states: “Nothing herein shall be construed to authorize any employer to eliminate or diminish in anyway, supplements or other employee benefits or favorable practice being enjoyed by the employee at the time of the promulgation of this issuance.” In Arco Metal, Mr. Justice Brion, a former labor secretary, confirms that, indeed, Article 100 refers only to benefits being enjoyed at the time of the promulgation of the Code. Nevertheless, he cites the “mutuality of contract” principle in Article 1308 of the Civil Code to justify non- diminution of employment benefits. He says: I concur separately to clarify that the basis for the prohibition against diminution of established benefits is not really Article 100 of the Labor Code as the respondents claimed and as the cases cited in the ponencia mentioned. Article 100 refers solely to the non-diminution of benefits enjoyed at the time of the promulgation of the Labor Code, Employeremployee relationship is contractual and is based on the Foyer SPP Il as on its implied express terms of the employment contract as we! f : ot expressly agreed upon but which the terms, among them, those note : : Jy, voluntarily and consistently extended to its employer has freely rinciple of mutuality of contracts embodied in employees. Under the FT, the terms of a contract—both Article 1808 of the ad withdrawn, except by mutual consent or and (inp ean eee parties. In the present case, the lack agreement of the i basis for the employees’ arcane or agreement was asm Ae complaint. : . Samahan ng mga Manggagawa sa Arco Meta | VArco Metal Products: @ 41, 2008. ie! - NAFLU, G.R. No. 170734 May — 341ART, 100 CONDITIONS OF EMPLOYMENT 3. EXCEPTIONS TO THE NONDIMINUTION RULE jurisprudence recognizes exceptions to the app cati 100, a illustrated in the following cases, indicatin (1) error; (2) negotiated benefits; (3) wage order compl on reimbursement basis; (5) reclassification of Position; (6) benefits or conditional bonus; and (7) productivity ine 3.1 Not Established Practice; Mistake in Application Globe Mackay Cable vs. National Labor Relations Co 74156, June 29, 1988— Facts: Wage Order No. 6, which took effect on October 30, 1 the cost-of-living allowance (COLA) of nonagricultural workers in sector. Globe Mackay complied with the said wage order by paying Paid employees the mandated P3.00 per day COLA. But, in comput Globe Mackay multiplied P3.00 per day COLA by 22 days, which was, of working days in the company. The Union disagreed with the computation, claiming that the should be multiplied by 30 days to arrive at the monthly COLA rate, further alleged that before Wage Order No. 6 took effect, the / computing and paying the monthly COLA based on 30 days per month,’ Union said, was an employer practice which should not be unilat Ruling: Payment in full by the employer of the COLA before the exec the Collective Bargaining Agreement in 1982 and in compliance with e Nos. 1 (March 26, 1981) to 5 (June 11, 1984) should not be construed as of voluntary employer practice, which cannot later be unilaterally with the employer. To be considered as such, it should have been practiced ov Period of time and must be shown to have been consistent and delib Absent clear administrative guidelines, the employer cannot ironeous application of the law. Payment may be said to have been ma ae mistake in the construction or application of a “doubtful or d law." ___ Hfitisa past error that is being corrected, no vested right ereen nor any diminution of benefit under Article 100 of the Said to have resulted by virtue of the correction. Samahang Manggagawa sa Top Form Manufactu Philippines (SMTFM-UWP) ys, NLRC, et al., G.R. No.1 7, 1998 Facts: The emy employees when the Ployer granted an across-the-board ‘minimum wage was raised by R.A. No. "Article 2155, Ciual Code, in relation to Article 2154, @ 342MINIMUM WAGE RATES the regional wage board issued W.O. No. 01 in October 1990 follo No.02in December of the same year, the union demanded that the we te implemented again across-the-board, ie,, the wage increase should al. even to those whose pay was above the minimum, When the empl to.doso, the union charged the company with ULP and violation gt the Labor Code. Ruling: The Supreme Court, through Justice Romero, of the complaint. It said: We agree with the Labor Arbiter and the NLRC that no privileges previously enjoyed by petitioner union and the other emy were withdrawn as a result of the manner by which private implemented the wage orders, Granted that private respondent had gre an across-the-board increase pursuant to Republic Act No, 6727, that si instance may not be considered an established company practice. This case of Top Form is related also to Article 272, rey interpretation of the CBA as a contract. 7 Change in Company Car Plan Benefit ey May the employer revise the company’s car plan? In one case, company gave the new employee her first service car which purchased at depreciated cost. Some five years later the same was again granted a second service vehicle without ‘ employer although with a specified maximum price limit. — For the third service vehicle the employer was employee to shoulder or share 40% of the acquisition price. complained about this 60%-40% cost-sharing scheme. Did the employer violate Article 100 of the Labor Labor Arbiter and the NLRC ruled thet what Fiona ractic ting of service vehicle, but aH oan eel ‘without violating Article 100, Appeals believed otherwise. The Supreme Court agreed with the labor tibus With the Court of Appeals. The SC ruled ts Soy third vehicle car, although not provided for 101 may no longer be stopped: It has become an ¢siab introduction of the 60%-40% of management right. There we at full company cost has FP of consistency and delit+ 100 CONDITIONS OF EMPLOYMENT S22 Nogotiated Benetits Benefits initiated through negotiation between emp employees, such as those contained in a collective barg ‘ Are not within the prohibition of Artdcle 100 because, bilateral contract, they can only be eliminated or diminish What the law forbids is elimination or modification done the employer, Moreover, under Article 263, 4 party to. CBA may py to the CBA within 60 days betore it expires, The changes m, be to add to but also to subtract from, or otherwise modify, benefits, The giving of a salary increase across-the-board to. CBA stipulation cannot be said to have 4 Article 100 is not violated if the gi of across-the-board p is discontinued when such provision is removed from the CBA} negotiation. 3.2a Diminution Suggested by Employees To save their employer from total closure because of ‘employees’ union in Waterfront Insular E Jotel in Davao 0 management not only to suspend for 10 years their collective ba agreement but also to waive some benefits and privileges the CBA, It was a self-sacrificin, management and the w Court, finding that the maj its legality." enn’ Tibened into a company practice. He salary distortion to cure, the previous across-the-board demanded as if it Were a legal obligation, In Pageasa Steel Works vs, the Court observed:MINIMUM WAGE RATES The only instance when petitioner [employer] implemented ee the fact that the employe were not receiving salaries below the mini under beeen wage Order No. NCRO7, Petitioner, however, ria itdid so because it was agreed upon in the CBA that should a wage increase be ordered within six months from its signing, petitioner would give the increase to the employees in addition to the CBA-mandated increases. Respondent's [sic] isolated act could hardly be classified asa “company practice” or company usage that may be considered an enforceable obligation, Moreover, to ripen into a company practice that is demandable as- matter of right, the giving of the increase should not be by reason of a strict legal or contractual obligation, but by reason of an act of liberality on the part of the employer. Hence, even if the company continuously grants a wage increase as mandated by a wage order or pursuant toa CBA, the same would not automatically ripen into a company practice. In this case, petitioner granted the increase under Wage Order No. NCR-07 on itsbelief that it was obliged to do so under the CBA. ‘The union's demand for salary increase even ifits members’ salaries vere above the minimum level mandated by the Wage Order was therefore denied. Its invocation of “company practice” has no factual or legal basis. 3.4 Benefit on Reimbursement Basis Another exception to the non-diminution rule of Article 100 pertains to reimbursement benefits. For example, per diem is a daily allowance given for each day when an officer or employee is away on official travel. itis intended to cover the cost of lodging and subsistence of officers and employees on duty outside of their permanent station. Therefore, if the employee did not leave his permanent station and spent nothing for meals and lodging, then he js not entitled to per diemas there is nothing toreimburse.' onthly ration of gasoline given to certain art of the employee’s basic salary. The n does not constitute a diminution of the quences of the suspension By the same token, the ™ Managerial employees is not P: temporary revocation of the ratio employee's fringe benefits. The adverse conse trial Relations, ¢¢ al., 1-24632, October Lexal Laboratories vs. Court of Indus 26, 1968, 345)YMENT CONDITIONS OF EMPLO’ ART. 100 of the ration is negated by the Central’s undertakiny ig the pent ployee actual consumpuion of fuel durin nt a suspension." ‘The elimination better one does not viol 3.5 Reclassification of Positions Promotion Still another exception to Article 100 is reclassification of, from rank-and-file to supervisory OF managerial. Because of the reclassification, the position holders in the case given below lost theip overtime pay and other benefits. This effect, says the Court, is nota Violation of Article 100. Promotion produces the same effect. But promotion and position reclassification must be done in good faith, The personnel movement should not be intended to circumventthe law to deprive employees of the benefits they used to receive. of an existing benefit in exchange for an eqy ate Article 100.4 Fal National Sugar Refineries Corporation vs. NLRC and NBSR Supervisoy Union, (PACIWU) TUCP, G.R. No. 101761, March 24, 1993— ¥ Facts: The petitioner employer implemented a Job Evaluation (JE) Progam ting all employees, from rank-and-file to department heads. Jobs were ranked according to effort, responsibility, training and working conditions and relative worth of the jobs. All positions were re-evaluated, and all employees including the members of respondent union were granted salary adjustments and increase in benefits commensurate to their actual duties and functions. . For about 10 years prior to the JE Program, the members of respond supervisors’ union were treated in the same manner as rank-and-file They used to be paid overtime, rest day and holiday pay pursuant to Articles! and 94 of the Labor Code. They lost these benefits because through the their positions were reclassified from rank-and-file to supervisory OF But it was also shown that they received upward adjustments in basic allowances. The members of the union filed a complai overtime: ae inion filed a complaint to recover The labor arbiter ruled that the long period during whi The riod during which those beeing paid tothe supervisors has caused the payment to ripen int @ obligation, He also ruled thatthe P100,00 special allowance given OY fell short of what the supervisors ought to receive had the overtime P and holiday pay not been disconti e ae rena pay Tek been discontinued, which arrangement, i fr of Labor, G.R. Nos, 58004.95, March 15, 1989:suing We do not subscribe tothe finding te questioned benefits to the union members has ripened 7 cart the JE Program, the union while being ; sereits similar to those of the rank-and-file employees such as ove nd holiday pay. The members of respondent union were pai ‘anageral staff considering that tsrank-and-fle. After the JE Program, there was an ascent in positi sala esexceis a promotion which is defined as the advance nea ha another with an increase in duties and responsibilities as authorized by ually accompanied by an increase in salary, Quintessentially, with the promotion ofthe union members, they are! enitled tothe benefits which attach and pertain exclusively to their 3.6 Contingent or Conditional Benefits; Bonus Neither does the rule under Article 100 apply toa benefit depends on the existence of certain conditions, so that the bei demandable if those preconditions are absent. An example of giving of bonus which is not part of the employee's regular: Y Asa rule, a bonus is an amount granted and paid to an emi for his industry and loyalty which contributed to the si employer’s business and made possible the realization of profits act of generosity. It is granted by an enlightened employer to employee to greater efforts for the success of the business ofbigger profits. From the legal point of view, a bonusis nota and enforceable obligation. But it is so when it is m: wage, salary, or compensation. In such a case, the la amount and the former would be a contingent one tealization of profit. Whether or not bonus forms part of wage’ C8 Circumstances and conditions for its Seeuan Compensation which the employer . conditions imposed for its payments Production or output, then itis dee only if profits are realized oF @ ee it cannot be s. partART. 100 CONDITIONS OF EMPLOYMENT laborer becomes more ef but only to laborers and only when the 9 : more productive, it is only an inducement for efficiency, a prize ype tot not a part of the wage." 7 tho, In Philippine Duplicators, In. vs. NLRC, 311 Phil. 407 (1995), the accordingly held that if the desired goal of production is not of a the bonus does not accrue. Only when the employer promises anq to give without any conditions imposed for its payment, such as Sue of business or greater production or output, does the bonus become i of the wage.” Thus, if there is no agreement that bonus forms part of the employee's compensation, then bonus would depend on the profit to be Teal Hence, if there is no profit, there would be no bonus and if profi reduced, bonus would also be reduced. Consequently, the Supreme Coun observed that the reduced 1958 Christmas bonus in the case Of Luzon Stevedoring Corporation was a necessary consequence of a reduced profit in that year and there being no clear showing that the reduction of the bonus was aimed to discriminate against union members, the trial courts finding that such reduction constituted no anti-union activity should not be disturbed. An employer cannot be forced to distribute bonuses which itcanno longer afford to pay. To hold otherwise would be to penalize the employer for his past generosity.* American Wire and Cable Daily Rated Employees Union vs. American Wire and Cable Co,, Inc. and the Court of Appeals, G.R. No. 155059, April 29, 2005— Facts: The union contends that the withdrawal of the 35% premium pay for selected days during the Holy Week and Christmas season, the holding ofthe Christmas Party and its incidental benefits, and the giving of benefits were custom Practices that can no longer be unilaterally withdrawn. In answer, the corporation (employ nt of al those t yer] avers that the grat Cia has not ipened ito practice and thatthe employees concemed ct claim a demandable right over them. It explains that the grant of these | Atok-Big Wedge Minin, i ual Benefit 25 & Co., Inc. ys, ] -dge Mut Mediation, GR. No. L52%6, March 8, 1osg,° NO BIB Wedge * Protacio vs, Laya Manan, haya & Co., G.R. No, 168654, March 25, 200 * Luzon Stevedori 4 " GRMN LAMAN, Decent ae 8. Court of Industrial Relations, ae “Prod 8 lucers Bank ofthe Phil, vs, NLRG, et al, G.R.No. 100701, 348MINIMUM WAGE RATES ART, 100° sas conditioned upon the financial performance of the company and that the tonitons/ircumstances had indeed substantially Bee edieneen changed thereby justiying the Ruling: It is obvious that the benefits/er {ase ate all bonuses which were given by the mnificence. The additional 35% premium p ithe Holy Week and Christmas season, and the cash incentives given together what the law requires... Since they ntitlements subjects of the instant lemployer] out of its generosity and ‘ay for work done during selected days the holding of Christmas parties with raffle, with the service awards are all in excess of are above what is strictly due to the members of petitioner-union, the granting of the same was a management prerogative, which, whenever management sees necessary, may be withdrawn, unless they have been made a part of the wage or salary or compensation of the employees. For a bonus to be enforceable, it must have been promised by the employer and expressly agreed by the parties, or it must have had a fixed amount and had been a long and regular practice on the part of the employer. ‘The benefits/entitlements in question were never subject of any express agreement between the parties. They were never incorporated in the Collective Bargaining Agreements (CBA). 3.6a Bonus Stipulated in CBA Eastern Telecommunications Phil., Inc, vs. Eastern Telecoms Employees Union, G.R. No. 185665, February 8, 2012— In the case at bench, it is indubitable ci olan ae Ea on i inclusion of a provision for the grant of 14th, 15th, and 16th month bonuses in the 1998-2001 CBA Side Agreement, as well as in the 2001-2004 CBA Side Agreement, which was signed on September 3, 2001. The provision, which was similarly worded, states: The Company confirms that the 14th, 15th, and 16th month bonuses (other than the 13th month pay) are granted. ision reveals that the same provides for the giving of 14 fu aha ef Seth bones: without qualification. The wording of the th, 15th, an i \ditions ified G interpretation. There were no conditions speci Beg tal fa lmfao ecm ide. i \e company. Terse bate there are profits earn . ttn i on ene et a ‘ a lear, the sai jay financial standing or that their payment was otis © depend on the ETPI’s Tits, Neither does it state that ifthe company derives no es the realization of ay given to the employees. In fine, Sete of these pone chee re tothe profitability of business opera ache nuses was not relal roof that ETPI's consent was vitiat ey rau ; pi 5 In the absence othe ‘tentered into the Side Agreement voluntarily, that it Or duress, it is presume 349 gehenART. 100 (CONDITIONS OF EMPLOYMENT he contents thereof and that it was away i rat by virtue of its incorporation in the CBA Seeing, the grant of 14th, 15th, and 16th month bonuses has become more thane of generasity on the part of ETPI buta contractual obligation it has untae From the foregoing, ETP! cannot insist on business losses asa co disregarding its undertaking. in 3.6b Equity or Long Practice as Basis of Bonus Even iffa bonus is not demandable for not being part of the of the employee or not stipulated in a CBA, the bonus may never be granted on equitable consideration. In Philippine Education Co Ine. us. Court of Industrial Relations, 92 SCRA 381, the Court ruled: Taking into consideration the facts and circumstances of, case—that bonuses had been given to the employees at leas three previous years; that the amount of P90,706.36 has been se, aside for payment as bonus to its employees and laborers and the reason for withholding the payment thereof was the strike the employees and laborers for more favorable working conditions which was declared legal by the respondent court—justice and equity demand that bonus already set aside for its employees and laborers be paid to them. The award would still be within the ambit of the respondent court’s power and function which is mainly to prevent further disputes and perhaps strikes which are so detrimental toboth labor and management and to the public weal. Furthermore, while normally discretionary, the grant of a gratuity or bonus by reason of its long and regular concession, may be regarded as part of regular compensation. For instance, in Heacock Co. us. NLU, et al., 95 Phil. 558, the Court ruled: It appears herein that for the year 1947 the Company paid bonus of one month salary to all its employees, and for the yeals 1048 and 1949, realizing necessary profits, it also paid a bonus (oi io executives and heads of departments, omitting only the lowssalarie employees, The Payment of the bonus i the minds ofall the employees the fixed tere Cee oe oyees the fixed hope of receiving the same ss ica : No Lasoo fo Pr Ta? G02 Ine. v8. Court of Industrial Relations, «1,68 Court oftndisut ie 28 SCRA 1105, 1216; National Dexclopment cio ‘ons, etal, G.R. No, L-25390, June 27, 1958, 23 SCRA! 350CONDITIONS OF EMPLOYMENT " ART. 100 Respondent Court stated the following considera; % believe justify the award: ions, hie he i hat the respondent's Wie There is no question u ; te Jaborers have been enjoying the benefit of Christmas bonus gt denied that even during the operation of the corporation i defunct Metropolitan Water District and since its adminj under th. operation by the respondent Authority, the employees and jap have been continuously given such benefit. And even while thi ae was pending, the NWSA gran ted Christmas bonus in December 1%, In the 1995 case of Marcos, tal. vs. NLRC and Insular Life Assuran GR.No. 111744, September 8, 1995, the Court quoted authorities h that if one enters into a contract of employment under an agreement thay he shall be paid a certain salary by the week or some other stated perio and, in addition, a bonus, in case he serves for a specified length of there is no reason for refusing to enforce the promise to pay the bonus on the ground that it was a promise of a mere gratuity. The Court further said: This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonusis made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in service under an offer of a bonusif he remains therein for a certain time, his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee. 3.6c Services Rendered as Basis of Bonus Employees whose employment has been terminated may still demand Payment of service award under company policy and, proportionately, the anniversary and performance bonuses, considering that they: had rendered the service required. The right is not defeated by “releas® and quitclaim,” LG. Marcos, etal. vs. NLRC and Insular Life Assurance oe 111744, September 8, 1995 isthe . eal Facts: Petitior until November Pest net employees of insular Life Assurance Co. Ud n their positic speci eis h Positions were declared redundant. A fancy benefit was paid to them, equivalent to three months’ salary for 352MINIMUM WAGE RATES ART. 100 rice, and additional cash benefits, in lieu of other benefits provided by yer Ary or required by law. ym ¢ ination of their services, petitioners h; the termination of Petitioners had been employed with venist for more than 20 years. whe itioners, particularly J. Lopez, wrote respondent company questioning the erey package. She also claimed that they should receive hall oa ss wards and other prorated bonuses, which they had earned at the time “were dismissed. ot ! The company required petitioners to execute a “Release and Quitclaim,” and stioners complied but with a written Protest reiterating their previous demand they were entitled to receive their service awards, , Meanwhile, in the same year [1990] the coy aniversary, approved the grant of an anniversary bonus equivalent to one month ‘lary to permanent and probationary employees as of November 15, 1990. Furthermore, on March 26, 1991, the company announced the grant of performance bonus to rank-and-file employees, Supervisory specialists, and managerial staff equivalent to about two months salary. The performance bonus, however, would be given only to permanent employees as of March 30, 1991, The company refused to pay petitioners’ service awards, prompting the latter tofile a consolidated complaint for payment of their service awards, Petitioners also contended that they were entitled to the performance and anniversary bonuses because, at the time the performance bonus was announced, they were only short of two months service to be entitled to the full amount. Also, they lacked only 15 days to be entitled to the full amount of the anniversary bonus when it was announced to be given to employees as of November 15, 1990. Ruling: Under prevailing jurisprudence, the fact that an employee has signed satisfaction receipt for his claims does not necessarily result in the waiver thereof. Thelaw does not consider as valid any agreement whereby a worker agrees to receive les compensation than what he is entitled to recover. A deed of release or quitclaim Cannot bar an employee from demanding benefits to which he is legally entitled, 'n the instant case, it is an undisputed os oat Oa ee insttument of release and quitclaim, they made a written manit reserving their right to demand the nage of their service awards. The element of total ‘oluntariness in executing that instrument is negated by the fact that “tated therein their claim for the service awards, a manifestation uiva Protest and a disavowal of any waiver thereof. We have pointed out in Veloso, et al. oat OO Of labor and "nployment, et al, G.R. No. 87297, August 5, 1991, that: While rights may be waived, the same must not be ce mpany, celebrating its 80th toa sad ee Public order, public policy, ' morals %. B98 customs or prejudicial to a! Person with a right recognized by law. 353an CONDITIONS OF EMPLOYMENT i Civil Code renders a quite} i ae eee obligates the workers ‘ Leen while at the same time exempting the employer that it may choose to reject. This runs counter to Article 29 which provides that no one shall be unjustly enriched at rr a ee likewise in accord with the findings of the labor arbite are indeed entitled to receive service awards and other benefits, th Since each of the complaloants have [sic] re iny] in multiple(s) of five years prior to ¢} ir Se [the employees] should be paid their service ee We cannot see any cogent reason why an anniversary bonus which reg gives only once in every five years wlas] given to all employees of ree as of November 15, 1990 (pro rata even to probationary employees) complainants who have rendered service to respondent for most of cycle. This is also true in the case of performance bonus which permanent employees of respondent as of March 30, 1991 and Not to eg \who have been connected with respondent for most of 1990 but were Prior to March 30, 1991 xx x. The grant of service awards in favor of petitioners is more ir Lnderscored in the precedent case of Insular Life Assurance Co,, id, NIRG etal, G.R. No. 74191, December 21, 1987, where this Court rules to the service award differentials claimed by some respondent union company policy shall likewise prevail, the same being based on the em Contracts or collective bargaining agreements between the parties. As the pe had explained, pursuant to their Policies on the matter, the service award: pees on end of the year to an employee who has completed years isible xXx” However, in the case a anniversary bonuses should actually served t bar, equity demands that the perfo be prorated to the number of months that, respondent Company in the year 1990. 3.6d No Profit, No Bonus Traders Royal Bank vs, National Labor Relations Commissio Royal Bank Union, G.R. No, 88168, August 30, 1 Facts: On November 18, 1986, the Union, through its p SaatPlaintagainstTraders Royal Bank about “diminution of us which the employees had enjoyed since “time imm Bross pay to two months basic pay for then 8F0SS to only two months for the yearendMINIMUM WAGE RATES the Bank, on the other hand, insisted that the praet uid depend on how profitable the operation of the | Ruling: The matter of giving the employees awl salaries and allowances is entirely dependent on th bythe Bank from its operations during the past year, from 1979-1985, the bonuses were less because decreased. In 1986, the income of the Bank was aa put the Bank still gave out the usual two months basic ‘xs yearend bonuses. The petitioner pointed out, Prakened considerably after 1986 on account of country. Suspected to be a Marcos-owned or -controlled | sequestration by the present [Aquino] administration and isn Presidential Commission on Good Government (PEGG). In the light of these submissions of the petitioner, the. thatthe granting of bonuses to the employees had ripened that may not be adjusted to the prevailing financial cond j legal and moral bases. Its fiscal condition having declined, the | forced to distribute bonuses which it can no longer afford to penalized for its past generosity to its employees. a Private respondent's contention that the decrease in th end bonuses constituted a diminution of the employees’ bonuses are not part of labor standards in the same class allowances, holiday pay, and leave benefits, which are p _ Abonus is “gratuity or act of liberality of the g no right to demand as a matter of right.” “It is somneth easioaly received by or strictly due to the recipi pail a management prerogative which cannot rn may not be obliged to assume the onerous benefits aside from the employee's basic 3.6e Reiteration in Manilabank a When the Manilabank was placed under: financial distress, the employment of about of the bank was terminated. They received benefits but they still filed complaints for add increases, Christmas bonuses, mid-year bonuses, Sitting en banc, the Supreme Court denied the that are in the nature of bonus. Through Justice Sant * Kamaya Point Ho! Free Workers and Nemia Quiambao, ©ART. 100 CONDITIONS OF EMPLOYMENT the Court, without mentioning the Traders Royal Bank ce) precedent in this fashion: Tepeate de Clearly then, a bonus is an amount, given & gratia to an by an employer on account of success in business or Te; Pla, profits. How then can an employer be made liable to pay aqit8Ot benefits in the nature of bonuses to its employees when i, leg operating on considerable net losses for a given period of 4 Records bear out that petitioner Manilabank was already dire financial straits in the mid-80's, As early as 1984, the Care Bank found that Manilabank has been suffering financial Presumably, the problems commenced even before their di in 1984, As earlier chronicled, the Central Bank placed petiony bank under comptrollership in 1984 because of liquidity problem and excessive interbank borrowings. In 1987, it was placed unde receivership and was ordered to close operation. In 1988, ity ordered liquidated, Itis evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985, and 1986, thus, resulting toix eventual closure in 1987 and liquidation in 1988. Clearly, there as no success in business or realization of profits to speak of that wold warrant the conferment of additional benefits sought by private respondents. No company should be compelled to act liberallyand confer upon its employees additional benefits over and above those mandated by law when it is plagued by economic difficulties ad financial losses. No act of enlightened generosity and selfinterest can be exacted from near empty, if not empty, coffers.! To this majority decision Mr. dissenting/separate opinion. He oversimplified and overlooked so consolidated cases, Justice Hermosisima registers a strong believes that the majority opinion his me of the various issues posited in the oa 1 E is dissent in this manner: “Truth (0! (1) The Manilabank is not bankrupt; (2) Its obligations to its 343 are legally demandable; and (3) The money for payment in the am OFP212 million has already been ser aside,” Justice Hermosisi by Justice Francisco, was crossin, 4 a though valiant, ree 8 swords with 12 others. It was of * Mani i " 29, 1997," PAMKiNG Cor. vs. NLRC, GR. Nos. 107487 and somes seme 356 aMR ERE RRA ARTS. 100-101 37 Productivity Incentives a jthe more common kind of bonus comes from profit, another kind. apes from productivity gain. RA. No. 6971, enacted on November 22, ofp aims (0 institute productivity at company level and the sharing of ~” ~ductivity gain beeween employer and employees, The law xuctivity Which refers, simplistically said, to improved output witho Freasing the amount of input, Ifa worker used to produce one pair of dippers in one hour but now can finish two pairs within the same amount aftime, the worker is said to have improved in productivity. If this happens company-wide, productivity gain will probably result. The monetary value of the productivity improvement should be shared with the workers. The law urges but does not mandate the formation of a labor management committee, with equal number of representatives from rank andile employees and the employer. The committee will plan, supervise, and monitor a productivity incentives program as well as the sharing of gains with the employees. ART. 101. PAYMENT BY Ri TS The Secretary of Labor shall regulate the payment of wages by results, including pakyao, piecework and other nontime work, in order to ensure the payment of fair and reasonable wage rates, preferably through time and motion studies or in consultation with representatives of workers and employer's organizations. COMMENTS AND CASES 1, WORKERS PAID BY RESULTS, IN GENERAL Article 101 speaks of workers whose pay is calculated not on the basis of time spent on the job but of the quantity and quality or the kind of work they turn out, In other words, they are paid by results; they do nontime work, According to advisory opinions rendered by the Bureau of Working Conditions, workers paid by results may be grouped into two: 1) ine | Whose time and performance is supervised by the employer and Whose time and performance is unsupervised by the ena . * ‘The first embodies an element of control and supervision over the manner of doing the work, while in the second there is no such element because the control, if any, is merely over the result of the work itself; A piece-rate worker usually belongs ome on DES) cna cae Performs his work in company premises. NEE 357 ane Ghiver }ART. 101 et pe yand takay basis are ually unsupervised by the ep therefore fall under the second group. Nonetheless, piece-work, pakyaw and takay are all simita determining the pay rate the basis is the unit of work 5 quantity thereof; a uniform amountis paid per unit accomp difference is that in piece-work, there usually is supervision generally done in the company premises as is practiced in shoes, handicag or garment factories. Payment on pakyaw and takay basis is common practiced in the agricultural industry, e.g., planting or harvesting pe, hectare of land. In some instances, the term pakyaw is used interch: piece-rate depending upon the locality where it is used. Pakyaw, however, is more aptly used where the job or work to be performed is in bulk o volumes which are difficult to quantify. Piece-rate is common where the output may easily be counted or measured.! 1.1 Ilustrative Case Payment by result isa method of compensation and doesnot define the essence of the relation. Itisa method of computing compensation, not a basis for determining the existence or absence of employer-employee relationship.? This matter has been taken up in comments to Article 82.Jn ‘one case, the worker paints movie billboards and murals to be displayedat three theatres. He finishes the paintings in three to four days a weekand receives as paymenta fixed amount of P1,475 per week. As piece ratenle is not an employee, contends the employer. Quoting the two classifications of workers who are paid by results explained above, the Court held that the painter is an employee, 4! rene That he worked on a fixed piece-work basis is of nO Sere pea rcatonship may exist even in a payment 2. BASIS OF OUTPUT PAy RATE ie The i i‘ is whether sat Point of disagreement in payment-by-result arrangers Outputto-pay ratio is fair and reasonable. In a game" i. B : firm of Niteored of the "reau of Working Conditions to the law a Letter. e oa Cres CR No, 151926. Aiut 383000 a“ , Tan. also Lambo 5" ion, G. . R.No. 111042, October 26, 1999.ART. 101 CONDITIONS OF EMPLOYMENT legal sufficiency ofa piece rate compensation, plecerate wap categorized into two. Re a Thase who are paid pice rates wiih are prescribed in py Orders isswed by DOLE. Ray Wages or earnings in this category are determined aa multiplying the number of pieces produced by the rate per piecg "PY These workers are not covered by the Rule on Hours of provides for premium and overtime payments, Whatever they p the end of the day shall determine their actual earnings even if thewoee”” exceeds eight hours. Rule I, Book Il, of the Implementing Rules prog! that the rule on hours of work does not apply to “Workers who arene by results, including those who are paid on piece-work, “takay," pgp’ or task basis, if their output rates are in accordance with the stan prescribed under Section 8, Rule VII, Book III, of these regulations where stch rates have been fixed by the Secretary of Labor in accordang with the aforesaid Section.” (2) Those who are paid output rates which are prescribed by the employe and are not yet approved by the DOLE. Here, the number of pieces produced is multiplied by the rate per piece as determined by the employer. If the resulting amounts equivalent to or more than the applicable statutory minimum daily rate in relation to the number of hours worked, the worker will receive such amount But if the amount is less than the applicable legal rate, it is possible that the rates per piece are not in accordance with the standards prescribed by the rules implementing the Labor Code; in that case, the employers required by law to pay the difference between the resulting amount and the applicable legal minimum rate. 5. ENTITLEMENT OF PIECE-RATE WORKERS TO NIGHT z AND SERVICE INCENTIVE LEAVE and ns Rules implementing the Labor Code on night sire See incentive leave do not apply to employees whose time ee engaged on tay cn ubTeised by the employers, including those ™9 are paid a fixed amon geass: Purely commission basis, oF Hos is unt for performiny ir ctive of eA heperfocmance thereapie eae e *BWCLetter tothe Di ; - ahah 360 Director NCR of the National Food Authority, JuneMINIMUM WAGE RATES ART. 101 can clearly infer that workers paid by results whose time and we nce are supervised by the employer are covered by said Rules, ied to the benefits. ne illustrate: If the work is given to homeworkers on piece-rate in there is no supervision since they perform their work in their SS they are not covered by said Rules. However, if the same work is er workers who perform their work in the company premises, they mrovered by the Rules and therefore entitled to night differential and vice incentive leave. This is so, because of the presence in the latter of the element of supervision over the manner by which the work is tobe performed.’ As regards the yearly commutation or cash conversion of the service incentive leave of piece-rate workers, the Bureau of Working Conditions jsof the view that the conversion should be based on their average daily earnings during the particular year of service which can be derived by dividing the amount earned during the year by the actual number of yorking days or the statutory minimum rate, whichever is higher. In the absence of any agreement which provides otherwise, the amount earned during the year may exclude COLA, overtime pay, and premium pay, holiday pay, night shift differential pay, and company fringe benefits.? How to compute the SIL of a piece-rate worker is illustrated in the following advisory letter from the Bureau of Working Conditions. its We gather from your letter that your laborers are paid on piece- rate basis and earning the basic salary of at least the minimum wage or more. They work an average of 11 to 12 days a month depending on the availability of the materials, receiving a basic salary of P439.20, amonth. In the computation of incentive leave pay, the formula used by the company is the total wages earned for one year divided by 12 to get the average monthly earning. The resulting figure is divided by 30 to get the daily earnings multiplied by five days to arrive at the five-day incentive pay. Opinion is sought on whether” the computation you are presently adopting is correct. firm of Nittoreda and Nasser, June 26, 1990, (CR of the National Food Authority, June EH, 1991, ~ 361 ‘BWC Letter to the law firm | 2 BWC Letter to the Directoryr MINIMUM WAGE RATES qiaNT JURISPRUDENCE ON PU 2 LAN TMENT TO STATUTORY B IN RERDASHERY CASE. (1989) qo integrate the discussion about piece-rate ry benefits, we need to review two Supreme torn 1989, the other in 1998, a | Bs rend ; Makati Haberdashery, Inc. vs. NLRC, et al., G.R. Nos. 15, 1989— AOR facts: The individual complainants have been worl | Haberdashery, Inc. as tailors, seamstresses, sewers, basters ansadoras. They were paid on a piece-rate basis except the two ¥ monthly basis. In addition to their piece-rate, they were given a On july 20, 1984, the Sandigan ng Manggagawang P organization of the respondent workers, filed a complaint for thebasic wage, nonpayment of overtime work, holiday pay, ser 13th-month pay, and benefits under Wage Orders. The Labor Arbiter dismissed the claims for underpayment ¢ wage but ruled that the haberdashery violated the decrees on t allowances, service incentive leave pay and the 13th-month pay, The employer appealed to the NLRC. Losing there again, it Court alleging the following errors: . (1) That an employer-employee relationship exi: petitioner haberdashery and respondent workers. ‘ (2) _ Thatrespondent workers are entitled to mor Ruling: [The High Court ruled that the workers are regular’ | paid on piece-rate basis. See discussion under Article 82.) | Coming now to the second issue, there is no dispute: | are entitled to the Minimum Wage as mandated by Instructions No. 829, Rules Implementing P.D. No. 1614 | 300, Rules implementing PD. No. 1713 which explicitly: |___ Paid by the result shall receive not less than the fates for eight (8) hours work a day, except where a pa established by the Secretary of Labor x x x.” No such, this case, ’ As a consequence of their status as regular em} can claim cost-of-living allowance. This is apparent employees entitled to said allowance, thus: *.. All Tegardless of their position, designation or status, by which their wages are paid.” 5 -_,ART. 101 CONDITIONS OF EMPLOYMENT vate respondents are also entitled to claim their 13th. x section Ne) ofthe Rules and Regulations Implementing Pty nent On the other hand, while private respondents are entitled to, COLA, and 13th-month pay, they are not entitled to service . ing N. because as piece-rate workers being paid at a fixed amount forentve i a irrespective of time consumed in the performance thereof, the exceptions stated in Section 1 (A), Rule, Implementing Real unde Labor Code. For the same reason, private respondents cannot also ions, ead pay. (Section Ife, Rule V, Implementing Regulations, Book I, tape comely " Critique of the Makati Haberdashery ruling written in this ' ae submitted, with due respect to the Court, that the enne 9) Makati Haberdashery case should not have been denied entitlement A PSE ty and service incentive leave. The Court found them as “piece-ate gol py the Haberdashery and are entitled to the minimum wage, COLA, aj RO} ay; yet, as regards the holiday pay and service incentive leave, the Court man th debunked their being piece-rate employees because the Court did nor applySene 8(b) of Rule TV that entitles piece-rate workers to holiday pay. Instead, ca disfranchised them by putting them under Section 1(e) of said Rute The refers to “those who are engaged on task or contract basis, purely Commission hat or those who are paid a fixed amount for performing work irrespective ofthe ting consumed in the performance thereo.” By putting the piece rate workerringetat M(e) and by not applying Section 8(b), the Court failed to distinguish between ge bakyaw or task-basis employees and the piece-rate workers. The former are unsupervised, the latter are usually supervised, like the employees in this Maly Haberdashery case. The law and the rules exclude the task: workers from entitlement but not the employed piece-raters. “The persons who are not entitled to holiday pay (Rule IV) or to service incentive leave (Rule V), or to night shift differential (Rule IL) are repeatedly and identically mentioned in these three Rules. They are (among others) “field personne and other employees whose time and performance is unsupervised by the employe, inchiding those who are engaged on task or contract basis, purely commission bas, or those who are paid a fixed amount for performing work irrespective of the time consumed in the performance thereof.” (Italics supplied) “This group of excluded employees does not include the piece-rate workers because they are, infact, entidled expressly to holiday pay. Section 8, Rule IV (Holiday ay of certain employees) states: “.. (b) where a covered employee is aid by em = output, a 48 payment on piece work, his holiday pay shall not be less ne ayerage daily earnings for the last seven (7) actual worki days regular holiday, Provided, hover, That in no cose shall oe holiday pay be les the applicable statutory minimum wage rate.” ‘ for ie Bs seven days — thai the bass fo he pee the court ruled in Makati Haberdashery ws. NLRC that ‘are not entitled to service incentive leaveand! court should reexamine its ruling that holiday pay, service incentive leave, and 364ART. 101 CONDITIONS OF EMPLOYMENT. petitioners prayed for in their complaint, we hold that petitio these benefits. x XX The Rules Implementing the Labor Code exclude certain receiving benefits such as nighttime pay, holiday pay, service j a 13th-month pay, inter alia, “field personnel and other employees performance is unsupervised by the employer, including those whe on task or contract basis, purely commission basis, or those who are amount for performing work irrespective of the time consumed in thereof” Plainly, petitioners as piece-rate workers do not fall with ‘As mentioned earlier, not only did petitioners labor under the respondents as their employer, likewise did petitioners tol throug the fulfillment of their quota as supposed basis for compensation, Furt 8(b), Rule IV, Book III which we quote hereunder, piece workers are mentioned as being entitled to holiday pay. esp Sec. 8. Holiday pay of certain employees. (b) Where a covered employee is paid by results or outp payment on piece work, his holiday pay shall not be less than daily earnings for the last seven (7) actual working days pr holiday: Provided, however, That in no case shall the holiday than the applicable statutory minimum wage rate. Z In addition, the Revised Guidelines on the Implementing of the Pay Law, in view of the modifications to P.D. No. 851 by Memorandum| 28, clearly exclude the employer of piece-rate workers from those exemple paying 13th-month pay, to wit: 2. Exempted Employers The following employers are still not covered by P.D. No. 8: d. Employers of those who are paid on purely boundary or task basis, and those who are paid a fixed amount specific work, irrespective of the time consumed in the p except where the workers are paid on piece-rate basis in employer shall grant the required 13th-month pay to such supplied.) The Revised Guidelines as well as the Rules and Regulations | Workers who fall under the piece-rate category as those who amour i " ene every Piece or unit of work produced that is[ q ART. 101 CONDITIONS OF EMPLOYMENT If DOLE approves the proposal it becomes quota). Because the DOLE-approved standard is ‘ reasonable, a piece-rater who does not reach ther than the legal minimum wage even if he has Arguably, the fault is with him and notwith the case the employer need not make up the differe minimum wage and the wage actually earned, On the other hand, if the output-and-pay scheme approved by DOLE, or does not conform with DO} then the employer may be required to pay the shortfall actual earning and the prescribed minimum wage, The piece-rate pay formula needs DOLE’s protect the worker's right to be paid or to earn at Teast the, wage, and at the same time, to help the employer ob corresponding work output. A fair two-way deal, FAILURE TO REACH QUOTA Failure to reach the validly determined less earnings for the paid-by-re mean demotion or loss of job. Pay: nce a quota does not only m sult worker, Persistent failures may ¢ We take this up in Article 997,