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Midterm Case Digests

LABOR STANDARDS
Compiled by: Alexandra Nicole M. Baring, LLBII-
EH402
SUBMITTED TO:
Atty. Jefferson M. Marquez



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Table of Contents
BASIC PRINCIPLES........................................................................................................... 6
SINGER SEWING MACHINE vs. NLRC .................................................................................................................... 6
MANILA GOLF & COUNTRY CLUB, INC. vs. IAC ............................................................................................... 7
ENCYCLOPEDIA BRITANNICA (Philippines), INC. vs. NLRC ...................................................................... 8
CARUNGCONG vs. SUNLIFE ........................................................................................................................................ 9
RAMOS vs. COURT OF APPEALS ............................................................................................................................ 10
JOSE Y. SONZA vs. ABS-CBN BROADCASTING CORPORATION ....................................................... 11
ANGELITO LAZARO vs. SOCIAL SECURITY COMMISSION ..................................................................... 13
PHILIPPINE GLOBAL COMMUNICATIONS vs. DE VERA ........................................................................... 14
ABS-CBN vs. NAZARENO .............................................................................................................................................. 15
FRANCISCO vs. NATIONAL LABOR RELATIONS COMMISSION .......................................................... 16
NOGALES ET AL., vs. CAPITOL MEDICAL CENTER ET. AL. ................................................................... 17
COCA COLA BOTTLERS vs. DR. CLIMACO ....................................................................................................... 19
CALAMBA MEDICAL CENTER vs. NATIONAL LABOR RELATIONS COMMISSION .................... 20
ESCASIAS, ET. AL. vs. SHANGRILA-LAS MACTAN ISLAND RESORT, ET. AL .......................... 21
TONGCO vs. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. ET. AL. ............. 22
CAONG, JR. vs. BEGUALOS ........................................................................................................................................ 23
ATOK BIG WEDGE COMPANY, INC. vs. JESUS P. GISON ....................................................................... 24
SEMBLANTE ET AL. vs. COURT OF APPEALS ET AL. ................................................................................ 25
BERNARTE vs. PHIL. BASKETBALL ASSOCIATION ET AL., .................................................................... 27
LIRIO vs. GENOVIA............................................................................................................................................................ 29
CHARLIE JAO vs. BCC PRODUCTS SALES, INC ............................................................................................ 31
LEGEND HOTEL vs. REALUYO .................................................................................................................................. 33
THE NEW PHILIPPINE SKYLANDERS, INC., vs. DAKILA ........................................................................... 35
TESORO ET AL. vs. METRO MANILA RETREADERS INC. ET AL......................................................... 37
HIRING OF EMPLOYEE ................................................................................................... 38
OLLENDORF vs. ABRAHANSON ............................................................................................................................... 38
DEL CASTILLO vs. RICHMOND.................................................................................................................................. 39
PT & T vs. NATIONAL LABOR RELATIONS COMMISSION ...................................................................... 40
DUNCAN ASSO. OF DETAILMAN-PTGWO vs. GLAXO WELLCOME PHILS. .................................. 41
CITY OF MANILA vs. LAGUIO...................................................................................................................................... 43
STAR PAPER CORP. vs. SIMBOL ............................................................................................................................. 45
DEL MONTE PHILIPPINES vs. VELASCO ............................................................................................................ 46
YRASUEGUI vs. PHILIPPINE AIRLINES ................................................................................................................ 47
WAGE AND THE WAGE RATIONALIZATION ACT ...................................................... 48
ILAW AT BUKLOD MANGGAGAWA vs. NATIONAL LABOR RELATIONS COMMISSION ......... 48
EMPLOYERS CONFEDERATION OF THE PHILS vs. NATIONAL WAGES AND
PRODUCTIVITY COMMISSION .................................................................................................................................. 49
MABEZA vs. NATIONAL LABOR RELATIONS COMMISSION ................................................................... 50
JOY BROTHERS, INC. vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION ............... 51
PRUBANKERS ASSOCIATION vs. PRUDENTIAL BANK ............................................................................. 52
LIDUVINO M. MILLARES vs. NATIONAL LABOR RELATIONS COMMISSION ................................ 53
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS vs. QUISUMBING .................................. 54
BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS vs. NATIONAL
LABOR RELATIONS COMMISSION ......................................................................................................................... 55
ODANGO VS. NATIONAL LABOR RELATIONS COMMISSION................................................................ 57
C. PLANAS COMMERCIAL vs. NATIONAL LABOR RELATIONS COMMISSION ........................... 58
EJR CRAFTS CORP. vs. COURT OF APPEALS ............................................................................................... 59
PAG ASA STEEL WORKS VS COURT OF APPEALS .................................................................................... 60

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METROPOLITAN BANK vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION ............ 61
EQUITABLE BANK vs. SADAC .................................................................................................................................... 63
S.I.P FOOD HOUSE ET. AL vs. BATOLINA .......................................................................................................... 64
SLL INTERNATIONAL CABLES SPECIALIST vs. NATIONAL LABOR RELATIONS
COMMISSION ....................................................................................................................................................................... 65
VERGARA, JR. vs. COCA-COLA BOTTLERS PHILS INC. ........................................................................... 67
ROYAL PLANT WORKERS UNION vs. COCA-COLA BOTTLERS PHILIPPINES INC. ................ 69
THE NATIONAL WAGES AND PRODUCTIVITY COMMISSION ET. AL. vs. THE ALLIANCE OF
PROGRESSIVE LABOR ET. AL. ................................................................................................................................. 71
WAGE ENFORCEMENT AND RECOVERY ................................................................... 73
RAJAH HUMABON HOTEL vs. TRAJANO ............................................................................................................ 73
GUICO vs. SECRETARY OF LABOR ....................................................................................................................... 75
EX-BATAAN VETRERANS SECURITY AGENCY vs. SEC. OF LABOR, ET AL. .............................. 76
SAPIO vs. UNDALOC CONSTRUCTION ET. AL. .............................................................................................. 77
HON. SECRETARY OF LABOR vs. PANAY VETERANS SECURITY AND INVESTIGATION
AGENCY, ................................................................................................................................................................................. 78
NATIONAL MINES AND ALLIED WORKERS UNION vs. MARCOPPER MINING CORP., ........ 79
JETHRO INTELLIGENCE & SECURITY CORP. vs. SOLE, ET AL., ........................................................ 80
PHILIPPINE HOTELIERS INC. vs. NATIONAL UNION OF WORKERS IN HOTEL
RESTAURANT & ALLIED INDUSTRIES DUSIT HOTEL NIKKO CHAPTER ................................... 82
TIGER CONSTRUCTION AND DEVELOPMENT CORPORATION vs. ABAY ET. AL. .................. 84
PEOPLES BROADCASTING (BOMBO RADYO PHILS) VS. SEC OF DOLE ET AL. .................... 86
SUPERIOR PACKAGING CORP. VS. BALAGSAY ET AL. ........................................................................... 88
WAGE PROTECTION PROVISIONS AND PROHIBITIONS REGARDING WAGES ... 90
GAA vs. COURT OF APPEALS ................................................................................................................................... 90
NESTLE PHILIPPINES vs. NATIONAL LABOR RELATIONS COMMISSION ..................................... 91
FIVE J TAXI vs. NATIONAL LABOR RELATIONS COMMISSION ............................................................ 92
PHILIPPINE VETERANS BANK vs. NATIONAL LABOR RELATIONS COMMISSION .................. 93
PHILIPPINE APPLIANCES CORP. vs. COURT OF APPEALS ................................................................... 94
AGABON vs. NATIONAL LABOR RELATIONS COMMISSION .................................................................. 95
AMERICAN WIRE & CABLE DAILY RATED EMPLOYEES vs. AMERICAN WIRE ......................... 97
HONDA PHILIPPINES vs. SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA ................. 98
PRODUCERS BANK vs. NATIONAL LABOR RELATIONS COMMISSION ......................................... 99
JARDIN vs. NATIONAL LABOR RELATIONS COMMISSION .................................................................. 101
MANILA JOCKEYS CLUB EMPLOYEES LABOR UNION vs. MANILA JOCKEY CLUB ........... 103
SAN MIGUEL CORP ET AL. vs. LAYOC, JR. ET AL. .................................................................................... 104
SAN MIGUEL CORP. vs. PONTILLAS .................................................................................................................. 105
. ................................................................................................................................................................................................... 105
ARCO METAL PRODUCTS CO. INC. ET AL. vs. SAMAHAN NG MGA MANGGAGAWA SA
ARCO METAL-NAFLU ................................................................................................................................................... 106
AGUANZA vs. ASIAN TERMINAL INC., ET AL. ............................................................................................... 107
GENESIS TRANSPORT SERVICE INC ET AL. vs. UNYON NG MALAYANG MANGGAGAWA
NG GENESIS TRANSPORT ET AL. ....................................................................................................................... 108
CENTRAL AZUCARERA DE TARLAC vs. CENTRAL AZUCARERA DE TARLAC LABOR
UNION-NLU ......................................................................................................................................................................... 109
SHS PERFORATED MATERIALS, INC. ET AL., vs. DIAZ ......................................................................... 111
NINA JEWELRY MANUFACTURING OF METAL ARTS INC. vs. MONTECILLO .......................... 112
LOCSIN II vs. MEKENI FOOD CORP. ................................................................................................................... 113
TH SHOPFITTERS CORP. ET AL. vs. T&H SHOPFITTERS CORP. UNION................................... 114
WESLEYAN UNIVERSITY-PHILS., vs. WESLEYAN UNIVERSITY-PHILS., FACULTY & STAFF
ASSO. ..................................................................................................................................................................................... 116

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BLUER THAN BLUE JOINT VENTURES CO. vs. ESTEBAN ................................................................... 117
PAYMENT OF WAGES .................................................................................................. 118
CONGSON vs. NATIONAL LABOR RELATIONS COMMISSION ........................................................... 118
NORTH DAVAO MINING vs. NATIONAL LABOR RELATIONS COMMISSION ............................. 119
NATIONAL FEDERATION OF LABOR vs. COURT OF APPEALS ........................................................ 120
HEIRS OF SARA LEE vs. REY ................................................................................................................................. 121
CONDITIONS OF EMPLOYMENT ................................................................................. 123
SAN JUAN DE DIOS HOSPITAL vs. NATIONAL LABOR RELATIONS COMMISSION ............. 123
SIMEDARBY vs. NATIONAL LABOR RELATIONS COMMISSION ....................................................... 124
PHILIPPINE AIRLINES vs. NATIONAL LABOR RELATIONS COMMISSION .................................. 125
BISIG MANGGAGAWA SA TRYCO vs. NATIONAL LABOR RELATIONS COMMISSION ....... 128
MINIMUM LABOR STANDARD BENEFITS ................................................................. 130
UNION OF FILIPRO EMPLOYEES vs. VICAR .................................................................................................. 130
NATIONAL SUGAR REFINERY CORP. vs. NATIONAL LABOR RELATIONS COMMISSION
.................................................................................................................................................................................................... 132
SALAZAR vs. NATIONAL LABOR RELATIONS COMMISSION .............................................................. 134
LABOR CONGRESS OF THE PHILIPPINES vs. NATIONAL LABOR RELATIONS
COMMISSION .................................................................................................................................................................... 135
MERCIDAR FISHING CORP. vs. NATIONAL LABOR RELATIONS COMMISSION .................... 137
SAN MIGUEL CORP. vs. COURT OF APPEALS ............................................................................................ 138
TAN VS. LAGRAMA ........................................................................................................................................................ 140
LAMBO vs. NATIONAL LABOR RELATIONS COMMISSION ................................................................... 141
R&E TRANSPORT vs. LATAG .................................................................................................................................. 142
ASIAN TRANSMISSION vs. COURT OF APPEALS ...................................................................................... 143
AUTOBUS TRANSPORT SYSTEM vs. BAUTISTA ........................................................................................ 144
SAN MIGUEL CORP. vs. DEL ROSARIO ............................................................................................................ 146
PENARANDA vs. BAGANGA PLYWOOD CORP. ........................................................................................... 148
LEYTE IV ELECTRIC COOPERATIVE INC vs. LEYECO IV EMPLOYEES UNION-ALU .......... 150
BAHIA SHIPPING SERVICES vs. CHUA ............................................................................................................. 151
PNCC SKYWAY TRAFFIC MANAGEMENT AND SECURITY DIVISION WORKERS
ORGANIZATION ............................................................................................................................................................... 152
RADIO MINDANAO NETWORK, INC. vs. YBAROLA ................................................................................... 153
OTHER SPECIAL BENEFITS ........................................................................................ 154
VILLUGA vs. NATIONAL LABOR RELATIONS COMMISSION ............................................................... 154
CJC TRADING vs. NATIONAL LABOR RELATIONS COMMISSION ................................................... 155
PANTRANCO NORTH EXPRESS, INC. vs. NATIONAL LABOR RELATIONS COMMISSION
.................................................................................................................................................................................................... 156
R&E TRANSPORT INC vs. AVELINA LATAG.................................................................................................. 158
STA CATALINA COLLEGE vs. NATIONAL LABOR RELATIONS COMMISSION ......................... 159
HONDA PHILIPPINES vs. SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA .............. 160
JACULBE vs. SILLIMAN UNIVERSITY ................................................................................................................. 162
INTERCONTINENTAL BROADCASTING CORP. vs. PANGANIBAN .................................................. 164
LETRAN CALAMBA FACULTY & EMPLOYEES ASSOCIATION vs. NATIONAL LABOR
RELATIONS COMMISSION ........................................................................................................................................ 165
REYES vs. NATIONAL LABOR RELATIONS COMMISSION ET. AL. .................................................. 166
ARCO METAL PRODUCTS vs. SAMAHAN NG MANGGAGAWA SA ARCO-METAL-NAFLU 168
LOURDES CERCADO vs. UNIPROM INC. ......................................................................................................... 169
RADIO MINDANAO NETWORK, INC. AND ERIC S. CANOY VS. DOMINGO Z. YBAROLA, JR.
AND ALFONSO E. RIVERA, JR. .............................................................................................................................. 170
UNIVERSAL ROBINA SUGAR MILLING CORP. vs. CABALLEDA ........................................................ 171

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ELEAZAR S. PADILLO vs. RURAL BANK OF NABUNTURAN, INC. AND MARK S. OROPEZA
.................................................................................................................................................................................................... 173
2011 NLRC RULES OF PROCEDURE ......................................................................... 174
UERM MEMORIAL MEDICAL CENTER vs. NATIONAL LABOR RELATIONS COMMISSION
.................................................................................................................................................................................................... 176
PHIL TRANCO SERVICES vs. NATIONAL LABOR RELATIONS COMMISSION ......................... 178
ST. MARTIN FUNERAL HOMES vs. NATIONAL LABOR RELATIONS COMMISSION ............. 179
LUDO & LUYM CORP. vs. SOARNIDO ............................................................................................................... 180
HANSIN ENGINEERING & CONSTRUCTION vs. COURT OF APPEALS ........................................ 181
BALAGTAS MULTI-PURPOSE COOP. vs. COURT OF APPEALS ....................................................... 183
PHILIPPINE JOURNALISTIC INC. vs. NATIONAL LABOR RELATIONS COMMISSION .......... 184
INTERCONTINENTAL BROADCASTING CORP. vs. AMARILLA .......................................................... 185
LOPEZ vs. Q.C. SPORTS CLUB .............................................................................................................................. 186
INTERCONTINENTAL BROADCASTING CORP. vs. AMARILLA .......................................................... 188
FAR EAST AGRICULTURAL SUPPLY, INC. vs. JIMMY LEBATIQUE ................................................. 190
DEPARTMENT OF LABOR AND EMPLOYMENT PHILIPPINES. vs. ESTEVA .............................. 192
LETRAN CALAMBA FACULTY AND EMPLOYEES ASSOCIATION vs. NATIONAL LABOR
RELATIONS COMMISSION ........................................................................................................................................ 194
METRO TRANSIT ORGANIZATION vs. PIGLAS NFWU-KMU ET AL. ................................................ 195
J.K. MERCADO & SONS AGRICULTURAL ENTERPRISES, INC., vs. STO. TOMAS, .............. 196
J. PHIL. MARINE INC. vs. NATIONAL LABOR RELATIONS COMMISSION ................................... 197
SY vs. ALC INDUSTRIES ............................................................................................................................................. 198
PCI TRAVEL CORP vs. NATIONAL LABOR RELATIONS COMMISSION ....................................... 199
LOCKHEED DETECTIVE AND WATCHMAN AGENCY, INC. vs. UNIVERSITY OF THE
PHILIPPINES ...................................................................................................................................................................... 200
PORTILLO vs. RUDOLF LIETZ ................................................................................................................................. 201
BUILDING CARE CORP. LEOPARD SECURITY AND INVESTIGATION AGENCY vs.
MACARAEG ........................................................................................................................................................................ 202



6

BASIC PRINCIPLES
SINGER SEWING MACHINE vs. NLRC
Facts
Private respondent Singer Machine Collectors Union-Baguio (SIMACUB) filed a petition for direct
certification as the sole and exclusive bargaining agent of all collectors of the Singer Sewing Machine
Company (Singer). Singer opposed the petition claiming that the collectors are not employees but are
independent contractors as evidenced by the Collection Agency Agreement (Agreement) between them.
The Med-Arbiter granted the petition. Aggrieved, Singer appealed to the Secretary of Labor. The
Secretary of Labor affirmed the Med-Arbiters Decision and denied Singers motion for reconsideration.
Hence, this petition for certiorari to review the order and resolution of the Secretary of Labor and
Employment.
Singer alleges that the collectors are not employees but independent contractors. It supported its
allegation by stating the following stipulations in the Agreement: (a) a collector is designated as a
collecting agent who is to be considered at all times as an independent contractor and not employee of
Singer, (b) collection are to be made monthly or oftener, (c) an agent is paid a commission of 6% of all
collections plus a bonus, xxx , (g) his services shall be terminated in case of failure to satisfy the required
performance required.
Private respondent, on the other hand, relies on other features of the same Agreement. Among which
are that an agent shall utilize only receipt forms authorized and issued by Singer; an agent has to submit
and deliver at least once a week or as often as required a report of all collections made using report forms
furnished by Singer; and the monthly collection quota, which quota they deemed as a control measure
over the means by which an agent is to perform his services. They also rely on Art. 280 of the Labor
Code and on Sec. 8 Rule 8, Book No. III of the Omnibus Rules defining job-contracting.
Issue
Whether or not collectors of Singer are employees and therefore are constitutionally granted the
right to join or form labor organization for purposes of collective bargaining.
Ruling
No, collectors of Singer are not employees. Hence, they are not entitled to the constitutional right to
join or form labor organization for purposes of collective bargaining. The Supreme Court mainly applied
the control test where the existence of employer-employee relationship is determined by the following
elements: (a) selection and engagement of the employee, (b) payment of wages, (c) power of dismissal
and (d) power to control the employees conduct although the latter is the most important element. In that
regard, it was ruled that the element on the power to control the employees conduct the most important
element was absent. The forms, schedule of delivery and quota were controls used only for the result of
the job, if they were really controls. There were also other circumstances uncontroverted in the pleadings
that made the Supreme Court rule that they are independent contractors like: (1) collectors are not
required to observe office hours nor report everyday; (2) they do not have to devote their time exclusively
for Singer; (3) the manner and method of effecting collections are left to their discretion xxx (5) they are
paid strictly on commission basis. This circumstances negate that Singer had any control as to the
manner by which collectors perform collections.
Art. 280 is not instructive because it only deals with casual and regular employees while the provision
in the Omnibus Rules was only relevant in ascertaining whether the employer is solidarily liable with the
contractor or subcontractor.

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MANILA GOLF & COUNTRY CLUB, INC. vs. IAC
Caddies of the Manila Golf & Country Club, Inc. (the Club) filed a petition with the Social Security
Commission for coverage and availment of benefits under the Social Security System. The caddies allege
that they are employees of the Club and thus entitled to SSS coverage, and that the Club has not
registered them in the SSS.
The caddies contend that the following connotes the Clubs control over the means and methods by
which a caddy performs caddying services, and thus supports the existence of employer-employee
relationship: (1) The Club promulgates no less than 24 rules and regulations in just about every aspect of
the conduct (conduct, dress,language, etc) that the caddy must observe, or avoid, when serving as such,
any violation of any which could subject him to disciplinary action, which may include suspending or
cutting off his access to the club premises. (2) The Club devises and enforces a group rotation system
whereby a caddy is assigned a number, which designates his turn to serve a player. (3) The Club
suggests to guests the rate of fees payable to the caddies.

Issue

Are persons performing caddying services for members of golf clubs and their guests in said
clubs courses or premises the employees of such clubs and therefore within the compulsory
coverage of the SSS?

Ruling
They are NOT employees of the Club as the latter has no control over the means and methods by
which they perform caddying services. Thus they are not entitled to compulsory coverage in the SSS. As
long as it is, the list detailing the various matters of conduct, dress, language, etc. covered by the
petitioners regulations, does not so circumscribe the actions or judgment of the caddies concerned as to
leave them little or no freedom of choice whatsoever in the manner of carrying out their services.
In the very nature of things, caddies must submit to some supervision of their conduct while
enjoying the privilege of pursuing their occupation within the premises and grounds of whatever club they
do their work in. They work for the club to which they attach themselves on sufference but, on the other
hand, also without having to observe any working hours, free to leave anytime they please, to stay away
for as long they like. It is not pretended that if found remiss in the observance of said rules, any discipline
may be meted them beyond barring them from the premises which, it may be supposed, the Club may do
in any case even absent any breach of the rules, and without violating any right to work on their part. All
these considerations clash frontally with the concept of employment.
On the rotation system enforced by the Club, this is less a measure of employer control than an
assurance that the work is fairly distributed. On the Clubs suggestion of rates to be paid, the suggesting
shows that the Club has not the measure of control over the incidents of the caddies work and
compensation that an employer would possess. It is the Clubs guests who decides how much they will
pay to the caddies, and even whether they will pay them or not.
Club has no means of compelling the presence of a caddy. A caddy is not required to exercise his
occupation in the premises of petitioner. He may work with any other golf club or he ay seek employment
as a caddy or otherwise with any entity or individual without restriction by the Club. The caddues are not
required to render a definite number of hours of work on a single day. Even the group rotation of caddies
is not absolute because a player is at liberty to choose a caddy of his preference regardless of the
caddys order in the rotation. A caddy who has rendered services to a player on one day may still find
sufficient time to work elsewhere. Under such circumstaces, he may then leave the premises of petitioner
and go to such other place of work that he wishes. Or a caddy who is on call for a particular day may
deliberately absent himself if he has more profitable caddying, or another, engagement in some other
place. These are things beyond petitioners control and for which it mposes no direct sanctions on the
caddies.

8

ENCYCLOPEDIA BRITANNICA (Philippines), INC. vs. NLRC

Facts
Limjoco was a Sales Division of Encyclopedia Britannica and was in charge of selling the
products through some sales representatives. As compensation, he would receive commissions from the
products sold by his agents. He was also allowed to use the petitioners name, goodwill and logo. It was
agreed that office expenses would be deducted from Limjocos commissions.
In 1974, Limjoco resigned to pursue his private business and filed a complaint against petitioner
for alleged non-payment of separation pay and other benefits and also illegal deduction from sales
commissions. Petitioner alleged that Limjoco was not an employee of the company but an independent
dealer authorized to promote and sell its products and in return, received commissions therein. Petitioner
also claims that it had no control and supervision over the complainant as to the manners and means he
conducted his business operations. Limjoco maintained otherwise. He alleged he was hired by the
petitioner and was assigned in the sales department.
The Labor Arbiter ruled that Limjoco was an employee of the company. NLRC also affirmed the
decision and opined that there was no evidence supporting allegation that Limjoco was an independent
contractor or dealer.

Issue

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

Ruling
There was no employee-employer relationship. In determining the relationship, the following
elements must be present: selection and engagement of the employee, payment of wages, power of
dismissal and power to control the employees conduct. The power of control is commonly regarded as
the most crucial and determinative indicator of the presence or absence of an employee-employer
relationship. Under the control test, an employee-employer relationship exists where the person for whom
the services are performed reserves a right to control not only the end to be achieved, but also the
manner and means to be employed in reaching that end.
The issuance of guidelines by the petitioner was merely guidelines on company policies which
sales managers follow and impose on their respective agents. Limjoco was not an employee of the
company since he had the free rein in the means and methods for conducting the marketing operations.
He was merely an agent or an independent dealer of the petitioner. He was free to conduct his work and
he was free to engage in other means of livelihood.
In ascertaining the employee-employer relationship, the factual circumstances must be
considered. The element of control is absent where a person who works for another does so more or less
at his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated
in according to the result of his efforts and not the amount thereof. Hence, there was no employee-
employer relationship.

9

CARUNGCONG vs. SUNLIFE

Facts
Susan Carungcong began as an agent of Sun Life in 1974, she signed an Agents Agreement
and was designated to solicit applications for insurance and annuity services. The contract set out in
detail the terms and conditions particularly those concerning the commissions payable to her under
which her relationship with the company would be governed. Five years later, said contract was
superseded by 2 new agreements: first, is the "Career Agent's (or Unit Manager's) Agreement," dealt with
such matters as the agent's commissions, his obligations, limitations on his authority, and termination of
the agreement by death, or by written notice "with or without cause." It declared that the "Agent shall be
an independent contractor and none of the terms of agreement shall be construed as creating an
employer-employee relationship; second, was titled, "MANAGER'S Supplementary Agreement." Making
explicit reference to the first agreement "which became effective on the 1st day of July, 1979" said second
contract explicitly described as a "further agreement" contained provisions regarding remuneration
(overriding commissions in accordance with a fixed schedule), limitation of authority, and termination of
the agreement inter alia by written notice "without cause."
Subsequently, Carungcong and Sun Life executed another Agreement - by which the former was
named New Business Manager with the function generally "to manage a New Business Office established
by her and to obtain applications for life insurance policies and other products offered by or distributed
through Sun Life and to perform such other duties in connection therewith as Sun Life may require from
time to time." This latest Agreement stressed that the "New Business Manager in performance of his
duties defined herein, shall be considered an independent contractor and not . . an employee of Sun Life,"
and that "under no circumstance shall the New Business Manager and/or his employees be considered
employees of Sun Life."
After receiving reports of anomalies in relation thereto from unit managers and agents by the
companys VP, the Manager of Sun Life's Internal Audit Department, commenced an inquiry into the
special fund availments of Carungcong and other New Business Managers which later prompted the
petitioners termination. She then instituted proceedings for vindication in the Arbitration Branch of the
National Labor Relations Commission where she succeeded in obtaining a favorable judgment finding
that there existed an employer-employee relationship between her and Sun Life; ruled that she had been
illegally dismissed, thus entitled to reinstatement without loss of seniority rights and other benefits.

Issue
Whether or not Carungcong should be considered as an employee of Sun Life?

Ruling

Carungcong was an independent contractor and not an employee of Sun Life. The contracts she
had willingly and knowingly signed with Sun Life repeatedly and clearly provided that said agreements
were terminable by either party by written notice with or without cause.Noteworthy is that this last
agreement, it was emphasized, like the "Career Agent's (or Unit Manager's) Agreement" first signed by
her, that in the performance of her duties defined herein. Carungcong would be considered an
independent contractor and not . . an employee of Sun Life," and that "(u)nder no circumstance shall the
New Business Manager and/or his employees be considered employees of Sun Life."

10

RAMOS vs. COURT OF APPEALS
Facts
Petitioner Erlinda Ramos was advised to undergo an operation for the removal of her stone
in the gall bladder. She was referred to Dr. Hosaka, a surgeon, who agreed to do the operation. The
operation was scheduled on June 17, 1985 in the De los Santos Medical Center. Erlinda was
admitted to the medical center the day before the operation. On the following day, she was ready for
operation as early as 7:30 am. Around 9:30, Dr. Hosaka has not yet arrived. By 10 am, Rogelio
wanted to pull out his wife from the operating room. Dr. Hosaka finally arrived at 12:10 pm more than
3 hours of the scheduled operation.
Dr. Guiterres tried to intubate Erlinda. The nail beds of Erlinda were bluish discoloration in
her left hand. At 3 pm, Erlinda was being wheeled to the Intensive care Unit and stayed there for a
month. Since the ill-fated operation, Erlinda remained in comatose condition until she died.
The family of Ramos sued them for damages.
Issue

Whether or not there was an employee-employer relationship that existed between the Medical
Center and Drs. Hosaka and Guiterrez.

Ruling

No employer-employee between the doctors and hospital. Private Hospitals hire, fire and exercise
real control over their attending and visiting consultant staff. While consultants are not technically
employees, the control exercised, the hiring and the right to terminate consultants fulfill the hallmarks of
an employer-employee relationship with the exception of payment of wages. The control test is
determining.
In applying the four fold test, DLSMC cannot be considered an employer of the respondent
doctors. It has been consistently held that in determining whether an employer-employee relationship
exists between the parties, the following elements must be present: (1) selection and engagement of
services; (2) payment of wages; (3) the power to hire and fire; and (4) the power to control not only the
end to be achieved, but the means to be used in reaching such an end.
The hospital does not hire consultants but it accredits and grants him the privilege of maintaining
a clinic and/or admitting patients. It is the patient who pays the consultants. The hospital cannot dismiss
the consultant but he may lose his privileges granted by the hospital. The hospitals obligation is limited to
providing the patient with the preferred room accommodation and other things that will ensure that the
doctors orders are carried out.
The court finds that there is no employer-employee relationship between the doctors and the
hospital.

11

JOSE Y. SONZA vs. ABS-CBN BROADCASTING CORPORATION
Facts
In May 1994, ABS-CBN signed an agreement with Mel & Jay Management and Development
Corp for a radio and television program. ABS-CBN agreed to pay for SONZAs services a monthly talent
fee of P310,000 for the first year and P317,000 for the second and third year of the Agreement. ABS-CBN
would pay the talent fees on the 10th and 25th days of the month. On April 1996, Sonza wrote a letter to
ABS-CBN President Eugenio Lopez III about a recent event concerning his programs and career, and
that the said violation of the company has breached the agreement, thus, the notice of rescission of
Agreement was sent. At the end of the same month, Sonza filed a complaint against ABS-CBN before the
DOLE for non-payment of salaries, separation pay, service incentive leave pay, 13th month pay, signing
bonus, travel allowance and amounts due under the Employees Stock Option Plan (ESOP) which was
opposed by ABS-CBN on the ground there was no employer-employee relationship existed between the
parties.
Issue
Whether Sonza was an employee or independent contractor.
Ruling
There was no employer-employee relationship that existed, but that of an independent contractor. Case
law has consistently held that the elements of an employer-employee relationship are:
(a) The selection and engagement of the employee - ABS-CBN engaged SONZAs services to co-
host its television and radio programs because of SONZAs peculiar skills, talent and celebrity
status. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
(b) The payment of wages - ABS-CBN directly paid SONZA his monthly talent fees with no part of his
fees going to MJMDC. All the talent fees and benefits paid to SONZA were the result of negotiations
that led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the
parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay" which the law
automatically incorporates into every employer-employee contract.
(c) The power of dismissal - For violation of any provision of the Agreement, either party may
terminate their relationship. During the life of the Agreement, ABS-CBN agreed to pay SONZAs
talent fees as long as "AGENT and Jay Sonza shall faithfully and completely perform each condition
of this Agreement." Even if it suffered severe business losses, ABS-CBN could not retrench SONZA
because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the Agreement.
(d) The employers power to control the employee on the means and methods by which the work
is accomplished - The control test is the most important test. This test is based on the extent of
control the hirer exercises over a worker. The greater the supervision and control the hirer exercises,
the more likely the worker is deemed an employee. The converse holds true as well the less
control the hirer exercises, the more likely the worker is considered an independent contractor.
First, ABS-CBN engaged SONZAs services specifically to co-host the "Mel & Jay" programs.
ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his
skills and talent. How SONZA delivered his lines, appeared on television, and sounded on radio
were outside ABS-CBNs control. SONZA did not have to render eight hours of work per day. The
Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and
post-production staff meetings. ABS-CBN could not dictate the contents of SONZAs script.
However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.
The clear implication is that SONZA had a free hand on what to say or discuss in his shows provided
he did not attack ABS-CBN or its interests.
Second, The Agreement stipulates that SONZA shall abide with the rules and standards of
performance "covering talents" of ABS-CBN. The Agreement does not require SONZA to comply
with the rules and standards of performance prescribed for employees of ABS-CBN. The code of
conduct imposed on SONZA under the Agreement refers to the "Television and Radio Code of the
Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY
(ABS-CBN) as its Code of Ethics." The KBP code applies to broadcasters, not to employees of radio
and television stations. Broadcasters are not necessarily employees of radio and television stations.
Clearly, the rules and standards of performance referred to in the Agreement are those applicable to
talents and not to employees of ABS-CBN.

12

Lastly, being an exclusive talent does not by itself mean that SONZA is an employee of ABS-
CBN. Even an independent contractor can validly provide his services exclusively to the hiring party.
In the broadcast industry, exclusivity is not necessarily the same as control. The hiring of exclusive
talents is a widespread and accepted practice in the entertainment industry. This practice is not
designed to control the means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally spends substantial amounts of
money, time and effort "in building up its talents as well as the programs they appear in and thus
expects that said talents remain exclusive with the station for a commensurate period of time."
Normally, a much higher fee is paid to talents who agree to work exclusively for a particular radio or
television station. In short, the huge talent fees partially compensates for exclusivity.

13

ANGELITO LAZARO vs. SOCIAL SECURITY COMMISSION
Facts
Rosalina Laudato filed a case against 3 of her employers including Royal Star Marketing for
remittance of her unpaid monthly SSC contributions. Despite her being a supervisor of sales agents for
Royal Star Marketing, said company failed to report her to SSC for compulsory coverage. As a defense,
Royal Star claims that Laudato was merely an agent paid on a commission basis and that she was not
subject to definite hours and conditions of work, hence, she is not even an employee of Royal Star.
Applying the control test, SSC ruled that Laudato was an employee of Royal Star, on the other hand,
Royal Star claims that they had no control over her activities and hence, she was not an employee.
Issue

Whether or not Laudato is considered employee of Royal Star Marketing

Ruling

Laudato is an employee of Royal Star and as such is entitled to the coverage of Social Security Law.
It is an accepted doctrine that for the purposes of coverage under the Social Security Act, the
determination of employer-employee relationship warrants the application of the control test, that is,
whether the employer controls or has reserved the right to control the employee, not only as to the result
of the work done, but also as to the means and methods by which the same is accomplished.
The fact that Laudato was paid by way of commission does not preclude the establishment of an
employer-employee relationship. In Grepalife v. Judico, the Court upheld the existence of an employer-
employee relationship between the insurance company and its agents, despite the fact that the
compensation that the agents on commission received was not paid by the company but by the investor
or the person insured. The relevant factor remains, as stated earlier, whether the "employer" controls or
has reserved the right to control the "employee" not only as to the result of the work to be done but also
as to the means and methods by which the same is to be accomplished. It should also be emphasized
that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales supervisor and not
a mere agent. As such, Laudato oversaw and supervised the sales agents of the company, and thus was
subject to the control of management as to how she implements its policies and its end results.
The finding of the SSC that Laudato was an employee of Royal Star is supported by substantial
evidence. The SSC examined the cash vouchers issued by Royal Star to Laudato, calling cards of Royal
Star denominating Laudato as a Sales Supervisor of the company, and Certificates of Appreciation
issued by Royal Star to Laudato in recognition of her unselfish and loyal efforts in promoting the
company.
A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980 of
Teresita Lazaro, General Manager of Royal Star, directing that no commissions were to be given on all
main office sales from walk-in customers and enjoining salesmen and sales supervisors to observe this
new policy. The Memorandum evinces the fact that Royal Star exercised control over its sales
supervisors or agents such as Laudato as to the means and methods through which these personnel
performed their work.


14

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

Issue

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

Supreme Court ruled that there was no such relationship existing between Dr. de Vera and Phil.
Com. Upon reading the contract dated September 6, 1982, signed by the complainant himself , it clearly
states that is a retainership contract. The retainer fee is indicated thereon and the duration of the contract
for one year is also clearly indicated in paragraph 5 of the Retainership Contract. The complainant
cannot claim that he was unaware that the contract was good only for one year, as he signed the same
without any objections. The complainant also accepted its renewal every year thereafter until 1994. As a
literate person and educated person, the complainant cannot claim that he does not know what contract
he signed and that it was renewed on a year to year basis. From the time respondent started to work with
petitioner, he never was included in its payroll; was never deducted any contribution for remittance to the
Social Security System (SSS); and was in fact subjected by petitioner to the ten (10%) percent
withholding tax for his professional fee, in accordance with the National Internal Revenue Code, matters
which are simply inconsistent with an employer-employee relationship.
The elements of an employer-employee relationship are wanting in this case. The record are
replete with evidence showing that respondent had to bill petitioner for his monthly professional fees. It
simply runs against the grain of common experience to imagine that an ordinary employee has yet to bill
his employer to receive his salary.The power to terminate the parties relationship was mutually vested on
both. Either may terminate the arrangement at will, with or without cause. Remarkably absent is the
element of control whereby the employer has reserved the right to control the employee not only as to the
result of the work done but also as to the means and methods by which the same is to be accomplished.
Petitioner had no control over the means and methods by which respondent went about performing his
work at the company premises. In fine, the parties themselves practically agreed on every terms and
conditions of the engagement, which thereby negates the element of control in their relationship.

15

ABS-CBN vs. NAZARENO
Facts

ABS-CBN employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production
assistants (PAs) on different dates. They were assigned at the news and public affairs, for various radio
programs in the Cebu Broadcasting Station, with a monthly compensation of P4,000. They were issued
ABS-CBN employees identification cards and were required to work for a minimum of eight hours a day,
including Sundays and holidays. They were made to: a) Prepare, arrange airing of commercial
broadcasting based on the daily operations log and digicart of respondent ABS-CBN; b) Coordinate,
arrange personalities for air interviews; c) Coordinate, prepare schedule of reporters for scheduled news
reporting and lead-in or incoming reports; d) Facilitate, prepare and arrange airtime schedule for public
service announcement and complaints; e) Assist, anchor program interview, etc; and f) Record, log
clerical reports, man based control radio.
Petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from Dec 11, 1996 to Dec 11, 1999. However, since
petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included to the
CBA. Due to a memorandum assigning PAs to non-drama programs, and that the DYAB studio
operations would be handled by the studio technician. There was a revision of the schedule and
assignments and that respondent Gerzon was assigned as the full-time PA of the TV News Department
reporting directly to Leo Lastimosa.
On Oct 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status,
Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and
13
th
Month Pay with Damages against the petitioner before the NLRC.
Issue
Whether or not the respondents are regular employees.
Ruling
Respondents are considered regular employees of ABS-CBN and are entitled to the benefits
granted to all regular employees. Where a person has rendered at least one year of service, regardless of
the nature of the activity performed, or where the work is continuous or intermittent, the employment is
considered regular as long as the activity exists. The reason being that a customary appointment is not
indispensable before one may be formally declared as having attained regular status.
Any employee who has rendered at least one year of service, whether continuous or intermittent,
is deemed regular with respect to the activity performed and while such activity actually exists. The fact
that respondents received pre-agreed talent fees instead of salaries, that they did not observe the
required office hours, and that they were permitted to join other productions during their free time are not
conclusive of the nature of their employment. They are regular employees who perform several different
duties under the control and direction of ABS-CBN executives and supervisors.
There are two kinds of regular employees under the law: (1) those engaged to perform activities
which are necessary or desirable in the usual business or trade of the employer; and (2) those casual
employees who have rendered at least one year of service, whether continuous or broken, with respect to
the activities in which they are employed.
What determines whether a certain employment is regular or otherwise is the character of the
activities performed in relation to the particular trade or business taking into account all the
circumstances, and in some cases the length of time of its performance and its continued existence.
The employer-employee relationship between petitioner and respondents has been proven by the ff:
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or
celebrity status was required from them because they were merely hired through petitioners
personnel department just like any ordinary employee.
Second. The so-called talent fees of respondents correspond to wages given as a result of an
employer-employee relationship. Respondents did not have the power to bargain for huge talent fees,
a circumstance negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and
respondents are highly dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through
its supervisors negates the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer
and when the worker, relative to the employer, does not furnish an independent business or professional
service, such work is a regular employment of such employee and not an independent contractor.

16

FRANCISCO vs. NATIONAL LABOR RELATIONS COMMISSION

Facts
In 1995, petitioner was hired by Kasei Corporation as Accountant and Corporate Secretary, and
as Liaison Officer to the City of Makati. In 1996, petitioner was designated as Acting Manager while her
old position as accountant was accorded to Gerry Nino, and she did so for five years.
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager and was allegedly
required to sign a prepared resolution for the replacement but was assured that she will still be connected
with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR
matters. Thereafter, Kasei Corporation reduced her salary. Petitioner made repeated follow-ups with the
company cashier but she was advised that the company was not earning well.
On October 15, 2001, petitioner asked for her salary but she was informed that she is no longer
connected with the company. 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.

Issue

Whether there was an employer-employee relationship between petitioner and private respondent
Kasei Corporation

Ruling

The answer is in the affirmative, and consquently, petitioner was illegally dismissed. The court
held that the better approach would therefore be to adopt a two-tiered test involving: (1) the putative
employers power to control the employee with respect to the means and methods by which the work is to
be accomplished; and (2) the underlying economic realities of the activity or relationship.
Hence, determination of such a relationship depends upon the circumstances of the whole
economic activity. 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.
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 corporations Technical
Consultant. It is therefore apparent that petitioner is economically dependent on the respondent
corporation for her continued employment in the latters line of business.
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. More importantly, Respondent
Corporation had the power to control petitioner with the means and methods by which the work is to be
accomplished.
The court stated 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 (Inc. v. Florendo-Flores). Hence, her
severance from the company was not of her own making and therefore amounted to an illegal termination
of employment.

17

NOGALES ET AL., vs. CAPITOL MEDICAL CENTER ET. AL.
Facts

Corazon was under the exclusive care of Dr Oscar Estrada beginning the fourth month of her
pregnancy. While on her last trimester of pregnancy, Dr Estrada noted an increase of her blood pressure
and development of leg edema indicating preeclampsia which is a dangerous complication of pregnancy.
Around midnight of 25 May 1976, Corazon started to experience mild labor pains prompting
Spouses Nogales to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada advised her
immediate admission to the Capitol Medical Center. Eventually, Corazon died after giving birth to the
child, which prompted the petitioners to file a complaint for damages against CMC, Dr. Estrada and other
physicians and a certain nurse for Corazons death. Petitioners mainly contended that defendant
physicians and CMC personnel were negligent in the treatment and management of Corazon's condition.
Petitioners charged CMC with negligence in the selection and supervision of defendant physicians and
hospital staff.

Issue
Whether or not CMC is vicariously liable for the negligence of Dr. Estrada.
Ruling
CMC is vicariously liable. In Ramos v. Court of Appeals, Court had the occasion to determine the
relationship between a hospital and a consultant or visiting physician and the liability of such hospital for
that physician's negligence. While the Court in Ramos did not expound on the control test, such test
essentially determines whether an employment relationship exists between a physician and a hospital
based on the exercise of control over the physician as to details. Specifically, the employer (or the
hospital) must have the right to control both the means and the details of the process by which the
employee (or the physician) is to accomplish his task
In the present case, the Court finds no single evidence pointing to CMC's exercise of control over
Dr. Estrada's treatment and management of Corazon's condition. It is undisputed that throughout
Corazon's pregnancy, she was under the exclusive prenatal care of Dr. Estrada. At the time of Corazon's
admission at CMC and during her delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended to
Corazon. There was no showing that CMC had a part in diagnosing Corazon's condition. While Dr.
Estrada enjoyed staff privileges at CMC, such fact alone did not make him an employee of CMC.

CMC
merely allowed Dr. Estrada to use its facilities

when Corazon was about to give birth, which CMC
considered an emergency. Considering these circumstances, Dr. Estrada is not an employee of CMC, but
an independent contractor.
In general, a hospital is not liable for the negligence of an independent contractor-physician.
There is, however, an exception to this principle. The hospital may be liable if the physician is the
"ostensible" agent of the hospital.

This exception is also known as the "doctrine of apparent
authority." The doctrine of apparent authority essentially involves two factors to determine the liability of
an independent-contractor physician.
The first factor focuses on the hospital's manifestations and is sometimes described as an inquiry
whether the hospital acted in a manner which would lead a reasonable person to conclude that the
individual who was alleged to be negligent was an employee or agent of the hospital. In this regard, the
hospital need not make express representations to the patient that the treating physician is an employee
of the hospital; rather a representation may be general and implied. In the instant case, CMC impliedly
held out Dr. Estrada as a member of its medical staff. Through CMC's acts, CMC clothed Dr. Estrada with
apparent authority thereby leading the Spouses Nogales to believe that Dr. Estrada was an employee or
agent of CMC. CMC cannot now repudiate such authority.
The second factor focuses on the patient's reliance. It is sometimes characterized as an inquiry
on whether the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with
ordinary care and prudence.
The records show that the Spouses Nogales relied upon a perceived employment relationship
with CMC in accepting Dr. Estrada's services. Rogelio testified that he and his wife specifically chose Dr.
Estrada to handle Corazon's delivery not only because of their friend's recommendation, but more
importantly because of Dr. Estrada's "connection with a reputable hospital, the [CMC]." In other words,
Dr. Estrada's relationship with CMC played a significant role in the Spouses Nogales' decision in
accepting Dr. Estrada's services as the obstetrician-gynecologist for Corazon's delivery. Moreover, as
earlier stated, there is no showing that before and during Corazon's confinement at CMC, the Spouses
Nogales knew or should have known that Dr. Estrada was not an employee of CMC.
Even simple negligence is not subject to blanket release in favor of establishments like hospitals
but may only mitigate liability depending on the circumstances.

When a person needing urgent medical
attention rushes to a hospital, he cannot bargain on equal footing with the hospital on the terms of
admission and operation. Such a person is literally at the mercy of the hospital. There can be no clearer

18

example of a contract of adhesion than one arising from such a dire situation. Thus, the release forms of
CMC cannot relieve CMC from liability for the negligent medical treatment of Corazon.

19

COCA COLA BOTTLERS vs. DR. CLIMACO

Facts

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

The retainer agreement expired after 1 year. However, despite the non-renewal of the agreement,
respondent continued to perform his functions as company doctor to petitioner until he received a letter
dated march 9, 1995 from the company ending their retainership agreement. Respondent thereafter filed
a complaint before the NLRC seeking recognition as a regular employee of petitioner and thus prayed
from payment of all the benefits of a regular employee including 13th month pay, COLA, holiday pay,
service incentive leave, and Christmas bonus. Also, respondent filed another complaint for illegal
dismissal against petitioner.
Issue

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

Ruling

The Court ruled that petitioner company lacked the power of control over the performance by
respondent of his duties.The Court citing the case of Neri vs. NLRC said, petitioner company, through the
Comprehensive Medical Plan, provided guidelines merely to ensure that the end result was achieved. In
other words, what was sought to be controlled by the petitioner company was actually the end result of
the task. The guidelines or the Comprehensive Medical Plan were laid down merely to ensure that the
desired end result was achieved but did not control the means and methods by which respondent
performed his assigned tasks.
The Supreme Court further held that, an employee is required to stay in the employers workplace
or proximately close thereto that he cannot utilize his time effectively and gainfully for his own purpose.
Such is not the prevailing situation here. The respondent does not dispute that fact that outside of the two
(2) hours that he is required to be at petitioner companys premises, he is not at all further required to just
sit around in the premises and wait for an emergency to occur so as to enable him from using such hours
for his own benefit and advantage. In fact, respondent maintains his own private clinic attending his
private practice in the city, where he services his patients and bills them accordingly.
The Court finds that the requirement to be on call for emergency cases do not amount to such
control, but are necessary incidents to the Retainership Agreement. The Supreme Court also notes that
the Agreement granted to both parties the power to terminate their relationship upon giving a 30-day
notice. Hence, petitioner company did not wield the sole power of dismissal or termination.

20

CALAMBA MEDICAL CENTER vs. NATIONAL LABOR RELATIONS
COMMISSION
Facts

Calamba Medical Center, engaged the services of medical doctors-spouses Dr. Ronaldo and Dr.
Merceditha Lanzanas as part of its team of resident physicians. Reporting at the hospital twice-a-week on
twenty-four-hour shifts, respondents were paid a monthly retainer of P4,800.00 each. Resident
physicians were also given a percentage share out of fees charged for out-patient treatments, operating
room assistance and discharge billings, in addition to their fixed monthly retainer.
The work schedules of the members of the team of resident physicians were fixed by petitioners
medical director Dr. Desipeda, and they were issued ID, enrolled in the SSS and withheld tax from them.
After an incident where Dr. Trinidad overheard a phone conversation between Dr. Ronaldo and a fellow
employee Diosdado Miscala, the former was given a preventive suspension and his wife Dr. Merceditha
was not given any schedule after sending the Memorandum. On March 1998, Dr. Ronaldo filed a
complaint for illegal suspension and Dr. Merceditha for illegal dismissal.

Issue

Whether or not there exists an employer-employee relationship between petitioner and the
spouses-respondents.

Ruling

Drs. Lanzanas were declared employees of the petitioner hospital. Under the control test, an
employment relationship exists between a physician and a hospital if the hospital controls both the means
and the details of the process by which the physician is to accomplish his task.
That petitioner exercised control over respondents gains light from the undisputed fact that in the
emergency room, the operating room, or any department or ward for that matter, respondents work is
monitored through its nursing supervisors, charge nurses and orderlies. Without the approval or consent
of petitioner or its medical director, no operations can be undertaken in those areas. For control test to
apply, it is not essential for the employer to actually supervise the performance of duties of the employee,
it being enough that it has the right to wield the power.
With respect to respondents sharing in some hospital fees, this scheme does not sever the
employment tie between them and petitioner as this merely mirrors additional form or another form of
compensation or incentive similar to what commission-based employees receive as contemplated in
Article 97 (f) of the Labor Code.
Moreover, respondents were made subject to petitioner-hospitals Code of Ethics,the provisions
of which cover administrative and disciplinary measures on negligence of duties, personnel conduct and
behavior, and offenses against persons, property and the hospitals interest.
More importantly, petitioner itself provided incontrovertible proof of the employment status of
respondents, namely, the identification cards it issued them, the payslips and BIR W-2 (now 2316) Forms
which reflect their status as employees, and the classification as salary of their remuneration. Moreover,
it enrolled respondents in the SSS and Medicare (Philhealth) program. It bears noting at this juncture that
mandatory coverage under the SSS Law is premised on the existence of an employer-employee
relationship, except in cases of compulsory coverage of the self-employed.


21

ESCASIAS, ET. AL. vs. SHANGRILA-LAS MACTAN ISLAND RESORT, ET.
AL
Facts
Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in
1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at
respondent Shangri-las Mactan Island Resort (Shangri-la) in Cebu of which she was a retained
physician. In late 2002, petitioners filed with the National Labor Relations Commission a complaint for
regularization, underpayment of wages, non-payment of holiday pay, night shift differential and 13
th
month
pay differential against respondents, claiming that they are regular employees of Shangri-la.
Shangri-la claimed, however, that petitioners were not its employees but of respondent doctor,
that Article 157 of the Labor Code, as amended, does not make it mandatory for a covered establishment
to employ health personnel, that the services of nurses is not germane nor indispensable to its
operations, and that respondent doctor is a legitimate individual contractor who has the power to hire, fire
and supervise the work of nurses under her.
Issue

Whether or not there exists an employer-employee relationship between Shangri-la and
petitioners.

Ruling
The Court holds that respondent doctor is a legitimate independent contractor. That Shangri-la
provides the clinic premises and medical supplies for use of its employees and guests do not necessarily
prove that respondent doctor lacks substantial capital and investment. Besides, the maintenance of a
clinic and provision of medical services to its employees is required under Art. 157, which are not directly
related to Shangri-las principal business operation of hotels and restaurants.
As to payment of wages, respondent doctor is the one who underwrites the following: salaries,
SSS contributions and other benefits of the staff; group life, group personal accident insurance and
life/death insurance for the staff with minimum benefit payable at 12 times the employees last drawn
salary, as well as value added taxes and withholding taxes, sourced from her P60,000.00 monthly
retainer fee and 70% share of the service charges from Shangri-las guests who avail of the clinic
services. It is unlikely that respondent doctor would report petitioners as workers, pay their SSS premium
as well as their wages if they were not indeed her employees.
With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a
document, Clinic Policies and Employee Manual claimed to have been prepared by respondent doctor
exists, to which petitioners gave their conformity and in which they acknowledged their co-terminus
employment status. It is thus presumed that said document, and not the employee manual being followed
by Shangri-las regular workers, governs how they perform their respective tasks and responsibilities.
In fine, as Shangri-la does not control how the work should be performed by petitioners, it is not
petitioners employer.

22

TONGCO vs. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC.
ET. AL.
Facts
This is a resolution of the petition to set aside the June 29, 2010 decision of the Supreme Court that
the petitioner was an insurance agent, not the employee, of the respondent The Manufacturers Life
Insurance Co. (Phils.), Inc. (Manulife).
In his motion for reconsideration, petitioner argues that for 19 years, he performed administrative
functions and exercised supervisory authority over employees and agents of Manulife, in addition to his
insurance agent functions. In these 19 years, he was designated as a Unit Manager, a Branch Manager
and a Regional Sales Manager, and now posits that he was not only an insurance agent for Manulife but
was its employee as well.

Issue
Whether or not petitioner Tongco can be considered an employee of Manulife.

Ruling
Petitioner failed to establish the presence of an employer-employee relationship. Based on the control
test, petitioner failed to show that the control Manulife exercised over him was the control required to exist
in an employer-employee relationship. It carried only the characteristic of the relationship between an
insurance company and its agents, as defined by the Insurance Code and by the law of agency under the
Civil Code. His assertions that labor law control was exercised by Manulife over him (1) when it set the
objectives and sales targets regarding production, recruitment and training programs; and (2) when it
prescribed the Code of Conduct for Agents and the Manulife Financial Code of Conduct to govern his
activities do not hold water. These are built-in elements of control specific to an insurance agency which
provides in the Insurance Code definite parameters in the way an agent negotiates for the sale of the
companys insurance products, his collection activities and his delivery of the insurance contract or policy.
The Civil Code also defines an agent as a person who binds himself to do something in behalf of another,
with the consent or authority of the latter. Article 1887 of the Civil Code also provides that in the execution
of the agency, the agent shall act in accordance with the instructions of the principal. Thus, it can be
gleaned that the activities carried out by Manulife as pointed out above cannot be considered control of
the means and manner of doing an assigned task as defined in the Labor Code. These controls are only
aimed at specific results in undertaking an insurance agency, and are, in fact, parameters set by law in
defining an insurance agency and the attendant duties and responsibilities an insurance agent must
observe and undertake.
Manulifes codes of conduct, likewise, do not necessarily intrude into the insurance agents means
and manner of conducting their sales. Codes of conduct are norms or standards of behavior rather than
employer directives into how specific tasks are to be done. These codes, as well as insurance industry
rules and regulations, are not per se indicative of labor law control under our jurisprudence.
With regards to the various titles petitioner held in Manulife, these do not support his claim that he is
Manulifes employee. The petitioners occupation was to sell Manulifes insurance policies and products
from 1977 until the termination of the Career Agents Agreement. Due to the nature of this job, Manulife
permitted him to exercise guiding authority over other agents who operate under their own agency
agreements with Manulife and whose commissions he shared. His designation also changed from unit
manager to branch manager and then to regional sales manager, to reflect the increase in the number of
agents he recruited and guided, as well as the increase in the area where these agents operated.
The titles and positions the petitioner held did not change his status from the insurance agent that he
had always been (as evidenced by the Agreement that governed his relationship with Manulife from the
start to its disagreeable end). Tongco simply progressed from his individual agency to being a lead agent
who could use other agents in selling insurance and share in the earnings of these other agents.

23

CAONG, JR. vs. BEGUALOS
Facts
Petitioners filed a complaint against the respondent on the grounds of illegal dismissal. Their
allegations are they were not availed of the due process of law when they were dismissed, there was no
just cause and the respondent disregarded that there are days that boundary could not be met due to the
scarcity of passengers. The respondent countered that they were not employees hence they are not
covered by the labor code, and that there is no such illegal dismissal since he only suspended them
because they have arrears to be paid which was resulted from the lack of payment of boundary.
The labor arbiter favored the respondents contention, that there was no illegal dismissal, the
respondent was just imposing sanction on the petitioners for not paying the full amount of boundary, thus
resulted to suspension. The petitioner appealed the case, however it was denied thus the case went up to
the Supreme Court.
Issue
Wether or not there was employee and employer relationship between the parties and there was
an illegal dismissal in case.
Ruling
Yes, there is employee and employer relationship. The Supreme Court held that in boundary
system, it shall not be treated as lessee and lessor relationship, the existence of boundary does not
negate the employee and employer relationship. However on the issue of illegal dismissal, the court
ruled that there is no illegal dismissal. Since the respondent was just exercising his prerogative as an
employer, thus he has the right to suspend them due to not paying the full amount of boundary.

24

ATOK BIG WEDGE COMPANY, INC. vs. JESUS P. GISON
Facts

Respondent was engaged as part-time consultant on retainer basis by petitioner. As a
consultant on retainer basis, respondent assisted petitioners retained legal counsel with matters
pertaining to the prosecution of cases against illegal surface occupants within the area covered
by the companys mineral claims. Respondent was likewise tasked to perform liaison work with
several government agencies, which he said was his expertise.Petitioner did not require
respondent to report to its office on a regular basis, except when occasionally requested by the
management to discuss matters needing his expertise as a consultant. As payment for his
services, respondent received a retainer fee of P3,000.00 a month. The said arrangement
continued for the next eleven years.
Sometime thereafter, since respondent was getting old, he requested that petitioner
cause his registration with the Social Security System (SSS), but petitioner did not accede to his
request. He later reiterated his request but it was ignored by petitioner considering that he was
only a retainer/consultant.
On the same date petitioner, issued a memorandum advising respondent that within 30
days from receipt thereof, petitioner is terminating his retainer contract with the company since
his services are no longer necessary. Respondent filed a complaint for illegal dismissal, unfair
labor practice, underpayment of wages, non-payment of 13
th
month pay, vacation pay, and sick
leave pay with the National Labor Relations Commission (NLRC).

Issue

Whether or not there existed an employer-employee relationship between the petitioner
and respondent.

Ruling

To ascertain the existence of an employer-employee relationship jurisprudence has
invariably adhered to the four-fold test, to wit:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the power to control the employees conduct, or the so-called control test.
Of these four, the last one is the most important. The so-called control test is commonly
regarded as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship. Under the control 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.
Applying the aforementioned test, an employer-employee relationship is apparently absent in
the case at bar. Among other things, respondent was not required to report everyday during
regular office hours of petitioner. Respondents monthly retainer fees were paid to him either at
his residence or a local restaurant. More importantly, petitioner did not prescribe the manner in
which respondent would accomplish any of the tasks in which his expertise as a liaison officer
was needed; respondent was left alone and given the freedom to accomplish the tasks using his
own means and method. Respondent was assigned tasks to perform, but petitioner did not
control the manner and methods by which respondent performed these tasks. Verily, the
absence of the element of control on the part of the petitioner engenders a conclusion that he is
not an employee of the petitioner.

25

SEMBLANTE ET AL. vs. COURT OF APPEALS ET AL.
Facts
Petitioners Marticio Semblante and Dubrick Pilar assert that they were hired by respondents-spouses
Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as the official masiador
and sentenciador, respectively, of the cockpit sometime in 1993.
As the masiador, Semblante calls and takes the bets from the gamecock owners and other bettors
and orders the start of the cockfight. He also distributes the winnings after deducting the arriba, or the
commission for the cockpit. Meanwhile, as the sentenciador, Pilar oversees the proper gaffing of fighting
cocks, determines the fighting cocks physical condition and capabilities to continue the cockfight, and
eventually declares the result of the cockfight.
For their services as masiador and sentenciador, Semblante receives PhP 2,000 per week or a total
of PhP 8,000 per month, while Pilar gets PhP 3,500 a week or PhP 14,000 per month. They work every
Tuesday, Wednesday, Saturday, and Sunday every week, excluding monthly derbies and cockfights held
on special holidays. Their working days start at 1:00 p.m. and last until 12:00 midnight, or until the early
hours of the morning depending on the needs of the cockpit. Petitioners had both been issued
employees identification cards that they wear every time they report for duty. They alleged never having
incurred any infraction and/or violation of the cockpit rules and regulations.
On November 14, 2003, however, petitioners were denied entry into the cockpit upon the instructions
of respondents, and were informed of the termination of their services effective that date. This prompted
petitioners to file a complaint for illegal dismissal against respondents.
Respondents denied that petitioners were their employees and alleged that they were associates of
respondents independent contractor, Tomas Vega. Respondents claimed that petitioners have no regular
working time or day and they are free to decide for themselves whether to report for work or not on any
cockfighting day. In times when there are few cockfights in Gallera de Mandaue, petitioners go to other
cockpits in the vicinity. Lastly, petitioners, so respondents assert, were only issued identification cards to
indicate that they were free from the normal entrance fee and to differentiate them from the general
public.
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners to be regular
employees of respondents as they performed work that was necessary and indispensable to the usual
trade or business of respondents for a number of years. The Labor Arbiter also ruled that petitioners were
illegally dismissed, and so ordered respondents to pay petitioners their backwages and separation pay.
Respondents counsel received the Labor Arbiters Decision on September 14, 2004. And within the
10-day appeal period, he filed the respondents appeal with the NLRC on September 24, 2004, but
without posting a cash or surety bond equivalent to the monetary award granted by the Labor Arbiter.
It was only on October 11, 2004 that respondents filed an appeal bond dated October 6, 2004. The
NLRC denied the appeal for its non-perfection but reversed its decision upon Motion for Reconsideration
postulating that their appeal was meritorious and the filing of an appeal bond, albeit belated, is a
substantial compliance with the rules. The NLRC held in its Resolution of October 18, 2006 that there
was no employer-employee relationship between petitioners and respondents, respondents having no
part in the selection and engagement of petitioners, and that no separate individual contract with
respondents was ever executed by petitioners.
The CA upheld the NLRC decision.

Issues
1. Whether or not the CA committed a reversible error in entertaining an appeal, which
was not perfected in the first place.
2. Whether or not there exists an employer/employee relationship between Semblante, et
al. and the spouses LOOT.

Ruling

1. Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases involving
monetary awards from the Decision of the Labor Arbiter. However, Supreme Court, considering the
substantial merits of the case, has relaxed this rule on, and excused the late posting of, the appeal
bond when there are strong and compelling reasons for the liberality, such as the prevention of
miscarriage of justice extant in the case or the special circumstances in the case combined with its
legal merits or the amount and the issue involved. After all, technical rules cannot prevent courts
from exercising their duties to determine and settle, equitably and completely, the rights and
obligations of the parties. This is one case where the exception to the general rule lies.
2. The petitioners are NOT employees of respondents, since their relationship fails to pass muster the
four-fold test of employment We have repeatedly mentioned in countless decisions: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employees conduct, which is the most important element.

26

As found by both the NLRC and the CA, respondents had no part in petitioners selection and
management; petitioners compensation was paid out of the arriba (which is a percentage deducted from
the total bets), not by petitioners; and petitioners performed their functions as masiador and sentenciador
free from the direction and control of respondents. In the conduct of their work, petitioners relied mainly
on their expertise that is characteristic of the cockfight gambling, and were never given by respondents
any tool needed for the performance of their work.
Respondents, not being petitioners employers, could never have dismissed, legally or illegally,
petitioners, since respondents were without power or prerogative to do so in the first place.

27

BERNARTE vs. PHIL. BASKETBALL ASSOCIATION ET AL.,
Facts
Petitioner aver that they were invited to join the PBA as referees. During the leadership of
Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis. During the
term of Commissioner Eala, however, changes were made on the terms of their employment. Bernarte,
was not made to sign a contract during the first conference of the All-Filipino Cup which was from
February 23, 2003 to June 2003. It was only during the second conference when he was made to sign a
one and a half month contract for the period July 1 to August 5, 2003.
On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising
him that his contract would not be renewed citing his unsatisfactory performance on and off the court. It
was a total shock for Bernarte who was awarded Referee of the year in 2003. He felt that the dismissal
was caused by his refusal to fix a game upon order of Ernie De Leon.
Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On March
1, 2001, he signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C
referee. On May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing
dissatisfaction over his questioning on the assignment of referees officiating out-of-town games.
Beginning February 2004, he was no longer made to sign a contract.
Court of Appeals denied the motion for reconsideration. Complainants entered into two contracts
of retainer with the PBA in the year 2003. The first contract was for the period January 1, 2003 to July 15,
2003; and the second was for September 1 to December 2003. After the lapse of the latter period, PBA
decided not to renew their contracts. Complainants were not illegally dismissed because they were not
employees of the PBA. Their respective contracts of retainer were simply not renewed. PBA had the
prerogative of whether or not to renew their contracts, which they knew were fixed.
While the NLRC agreed that the PBA has no control over the referees acts of blowing the whistle
and making calls during basketball games, it, nevertheless, theorized that the said acts refer to the means
and methods employed by the referees in officiating basketball games for the illogical reason that said
acts refer only to the referees skills. How could a skilled referee perform his job without blowing a whistle
and making calls? Worse, how can the PBA control the performance of work of a referee without
controlling his acts of blowing the whistle and making calls?
Issues
1. Whether the Labor Arbiters decision has become final and executory for failure of respondents to
appeal with the NLRC within the reglementary period
2. Whether petitioner is an employee of respondents, which in turn determines whether petitioner
was illegally dismissed
Ruling
Petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt
of the three notices issued by the post office was made. There is no conclusive evidence showing that the
post office notices were actually received by respondents, negating petitioners claim of constructive
service of the Labor Arbiters decision on respondents. The Postmasters Certification does not
sufficiently prove that the three notices were delivered to and received by respondents; it only indicates
that the post office issued the three notices. Simply put, the issuance of the notices by the post office is
not equivalent to delivery to and receipt by the addressee of the registered mail. Thus, there is no proof of
completed constructive service of the Labor Arbiters decision on respondents.
At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision moot as
respondents appeal was considered in the interest of substantial justice. We agree with the NLRC. The
ends of justice will be better served if we resolve the instant case on the merits rather than allowing the
substantial issue of whether petitioner is an independent contractor or an employee linger and remain
unsettled due to procedural technicalities.
The existence of an employer-employee relationship is ultimately a question of fact. As a general rule,
factual issues are beyond the province of this Court. However, this rule admits of exceptions, one of
which is where there are conflicting findings of fact between the Court of Appeals, on one hand, and the
NLRC and Labor Arbiter, on the other, such as in the present case. To determine the existence of
an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employers power to control the employee on the means and methods by which the work is
accomplished. The so-called control test is the most important indicator of the presence or absence of
an employer-employee relationship.
Once in the playing court, the referees exercise their own independent judgment, based on the rules of
the game, as to when and how a call or decision is to be made. The referees decide whether an infraction

28

was committed, and the PBA cannot overrule them once the decision is made on the playing court. The
referees are the only, absolute, and final authority on the playing court. Respondents or any of the PBA
officers cannot and do not determine which calls to make or not to make and cannot control the referee
when he blows the whistle because such authority exclusively belongs to the referees. The very nature of
petitioners job of officiating a professional basketball game undoubtedly calls for freedom of control by
respondents.
Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the
referees are required to report for work only when PBA games are scheduled, which is three times a
week spread over an average of only 105 playing days a year, and they officiate games at an average of
two hours per game; and (2) the only deductions from the fees received by the referees are withholding
taxes.
In other words, unlike regular employees who ordinarily report for work eight hours per day for five
days a week, petitioner is required to report for work only when PBA games are scheduled or three times
a week at two hours per game. In addition, there are no deductions for contributions to the Social Security
System, Philhealth or Pag-Ibig, which are the usual deductions from employees salaries. These
undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an
employee of respondents.

29

LIRIO vs. GENOVIA
Facts:

Respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio and/or Celkor Ad
Sonicmix Recording Studio for illegal dismissal, non-payment of commission and award of moral and
exemplary damages.
Respondent Genovia alleged in his position paper that on August 15, 2001, he was hired as
studio manager by petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was
employed to manage and operate Celkor and to promote and sell the recording studio's services to music
enthusiasts and other prospective clients. He received a monthly salary of P7,000.00. They also agreed
that he was entitled to an additional commission of P100.00 per hour as recording technician whenever a
client uses the studio for recording, editing or any related work. He was made to report for work
from Monday toFriday from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work half-day only, but
most of the time, he still rendered eight hours of work or more. All the employees of petitioner, including
respondent, rendered overtime work almost everyday, but petitioner never kept a daily time record to
avoid paying the employees overtime pay.
He also alleged that petitioner approached him and told him about his project to produce an
album for his daughter, Celine Mei Lirio. Petitioner asked respondent to compose and arrange songs for
Celine and promised that he (Lirio) would draft a contract to assure respondent of his compensation for
such services. As agreed upon, the additional services that respondent would render included composing
and arranging musical scores only, while the technical aspect in producing the album, such as digital
editing, mixing and sound engineering would be performed by respondent in his capacity as studio
manager for which he was paid on a monthly basis. Petitioner instructed respondent that his work on the
album as composer and arranger would only be done during his spare time, since his other work as
studio manager was the priority. Respondent then started working on the album.
After the album was completed and released, respondent again reminded petitioner about the
contract on his compensation as composer and arranger of the album. Petitioner told respondent that
since he was practically a nobody and had proven nothing yet in the music industry, respondent did not
deserve a high compensation, and he should be thankful that he was given a job to feed his family.
Petitioner informed respondent that he was entitled only to 20% of the net profit, and not of the gross
sales of the album, and that the salaries he received and would continue to receive as studio manager of
Celkor would be deducted from the said 20% net profit share. Respondent objected and insisted that he
be properly compensated. On March 14, 2002, petitioner verbally terminated respondents services, and
he was instructed not to report for work.
Respondent asserts that he was illegally dismissed as he was terminated without any valid
grounds, and no hearing was conducted before he was terminated, in violation of his constitutional right to
due process. Having worked for more than six months, he was already a regular employee. Although he
was a so called studio manager, he had no managerial powers, but was merely an ordinary employee.
Respondents evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which
was certified correct by petitioner, and Petty Cash Voucher evidencing receipt of payroll payments by
respondent from Celkor.
In defense, petitioner stated in his Position Paper that respondent was not hired as studio
manager, composer, technician or as an employee in any other capacity of Celkor. Respondent could not
have been hired as a studio manager, since the recording studio has no personnel except petitioner.
According to petitioner, respondent had no track record as a composer, and he was not known in the field
of music. Nevertheless, after some discussion, respondent verbally agreed with petitioner to co-produce
the album. Petitioner asserted that his relationship with respondent is one of an informal partnership and
that he had no control over the time and manner by which respondent composed or arranged the songs,
except on the result thereof. Respondent reported to the recording studio between 10:00 a.m. and 12:00
noon. Hence, petitioner contended that no employer-employee relationship existed between him and the
respondent, and there was no illegal dismissal to speak of.


Issue

Whether respondent is an employee of the petitioner, which in turn determines whether
respondent was illegally dismissed.

Ruling

The Supreme Court affirmed the assailed decision of the Court of Appeals. Before a case for
illegal dismissal can prosper, it must first be established that an employer-employee relationship existed
between petitioner and respondent.
The elements to determine the existence of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the

30

employers power to control the employees conduct. The most important element is the employers
control of the employees conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.
It is settled that no particular form of evidence is required to prove the existence of an employer-
employee relationship. Any competent and relevant evidence to prove the relationship may be admitted.
In this case, the documentary evidence presented by respondent to prove that he was an
employee of petitioner are as follows: (a) a document denominated as "payroll" (dated July 31, 2001 to
March 15, 2002) certified correct by petitioner, which showed that respondent received a monthly salary
of P7,000.00 (P3,500.00 every 15th of the month and another P3,500.00 every 30th of the month) with
the corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash
vouchers, showing the amounts he received and signed for in the payrolls.
The said documents showed that petitioner hired respondent as an employee and he was paid
monthly wages of P7,000.00. Petitioner wielded the power to dismiss as respondent stated that he was
verbally dismissed by petitioner, and respondent, thereafter, filed an action for illegal dismissal against
petitioner. The power of control refers merely to the existence of the power. It is not essential for the
employer to actually supervise the performance of duties of the employee, as it is sufficient that the
former has a right to wield the power. Nevertheless, petitioner stated in his Position Paper that it was
agreed that he would help and teach respondent how to use the studio equipment. In such case,
petitioner certainly had the power to check on the progress and work of respondent.
On the other hand, petitioner failed to prove that his relationship with respondent was one of
partnership. Such claim was not supported by any written agreement. The Court notes that in the payroll
dated July 31, 2001 to March 15, 2002, there were deductions from the wages of respondent for his
absence from work, which negates petitioners claim that the wages paid were advances for respondents
work in the partnership.
The Court agrees with the Court of Appeals that the evidence presented by the parties showed
that an employer-employee relationship existed between petitioner and respondent.
In termination cases, the burden is upon the employer to show by substantial evidence that the
termination was for lawful cause and validly made.Article 277 (b) of the Labor Code puts the burden of
proving that the dismissal of an employee was for a valid or authorized cause on the employer, without
distinction whether the employer admits or does not admit the dismissal. For an employees dismissal to
be valid, (a) the dismissal must be for a valid cause, and (b) the employee must be afforded due process.
Procedural due process requires the employer to furnish an employee with two written notices before the
latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his
sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to
be issued after the employee has been given reasonable opportunity to answer and to be heard on his
defense. Petitioner failed to comply with these legal requirements; hence, the Court of Appeals correctly
affirmed the Labor Arbiters finding that respondent was illegally dismissed, and entitled to the payment of
backwages, and separation pay in lieu of reinstatement.

31

CHARLIE JAO vs. BCC PRODUCTS SALES, INC

Facts
Petitioner maintained that respondent BCC Product Sales, Inc. (BCC) and its President, respondent
Terrance Ty (Ty), employed him as comptroller starting from September 1995 with a monthly salary of
P20,000.00 to handle the financial aspect of BCCs business; that on October 19, 1995, the security
guards of BCC, acting upon the instruction of Ty, barred him from entering the premises of BCC where he
then worked; that his attempts to report to work in November and December 12, 1995 were frustrated
because he continued to be barred from entering the premises of BCC; and that he filed a complaint
dated December 28, 1995 for illegal dismissal, reinstatement with full backwages, non-payment of wages,
damages and attorneys fees.
Respondents countered that petitioner was not their employee but the employee of Sobien Food
Corporation (SFC), the major creditor and supplier of BCC; and that SFC had posted him as its
comptroller in BCC to oversee BCCs finances and business operations and to look after SFCs interests
or investments in BCC.; that their issuance of the ID to petitioner was only for the purpose of facilitating
his entry into the BCC premises in relation to his work of overseeing the financial operations of BCC for
SFC; that the ID should not be considered as evidence of petitioners employment in BCC; that petitioner
executed an affidavit in March 1996, 20 stating, among others, as follows:
1.I am a CPA (Certified Public Accountant) by profession but presently associated with, or employed
by, Sobien Food Corporation with the same business address as abovestated;
2.In the course of my association with, or employment by, Sobien Food Corporation (SFC, for short), I
have been entrusted by my employer to oversee and supervise collections on account of receivables due
SFC from its customers or clients; for instance, certain checks due and turned over by one of SFCs
customers is BCC Product Sales, Inc., operated or run by one Terrance L. Ty, (President and General
manager).
Petitioner counters, however, that the affidavit did not establish the absence of an employer-
employee relationship between him and respondents because it had been executed in March 1996, or
after his employment with respondents had been terminated on December 12, 1995; and that the affidavit
referred to his subsequent employment by SFC following the termination of his employment by BCC.

Issue
Whether or not an employer-employee relationship existed between petitioner and BCC.

Ruling

In determining the presence or absence of an employer-employee relationship, the Court has
consistently looked for the following incidents, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control
the employee on the means and methods by which the work is accomplished. The last element, the so-
called control test, is the most important element.
Petitioner presented no document setting forth the terms of his employment by BCC. The failure to
present such agreement on terms of employment may be understandable and expected if he was a
common or ordinary laborer who would not jeopardize his employment by demanding such document
from the employer, but may not square well with his actual status as a highly educated professional.
Petitioners admission that he did not receive his salary for the three months of his employment by
BCC, as his complaint for illegal dismissal and non-payment of wages and the criminal case for estafa he
later filed against the respondents for non-payment of wages indicated, further raised grave doubts about
his assertion of employment by BCC. If the assertion was true, we are puzzled how he could have
remained in BCCs employ in that period of time despite not being paid the first salary of
P20,000.00/month. Moreover, his name did not appear in the payroll of BCC despite him having approved
the payroll as comptroller.
Lastly, the confusion about the date of his alleged illegal dismissal provides another indicium of the
insincerity of petitioners assertion of employment by BCC. In the petition for review on certiorari, he
averred that he had been barred from entering the premises of BCC on October 19, 1995, 27 and thus
was illegally dismissed. Yet, his complaint for illegal dismissal stated that he had been illegally dismissed
on December 12, 1995 when respondents security guards barred him from entering the premises of
BCC, 28 causing him to bring his complaint only on December 29, 1995, and after BCC had already filed
the criminal complaint against him. The wide gap between October 19, 1995 and December 12, 1995
cannot be dismissed as a trivial inconsistency considering that the several incidents affecting the veracity
of his assertion of employment by BCC earlier noted herein transpired in that interval.
With all the grave doubts thus raised against petitioners claim, we need not dwell at length on the
other proofs he presented, like the affidavits of some of the employees of BCC, the ID, and the signed

32

checks, bills and receipts. Suffice it to be stated that such other proofs were easily explainable by
respondents and by the aforestated circumstances showing him to be the employee of SFC, not of BCC.

33

LEGEND HOTEL vs. REALUYO

Facts
This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a
hotel. On August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for alleged
unfair labor practice, constructive illegal dismissal, and the underpayment/nonpayment of his premium
pay for holidays, separation pay, service incentive leave pay, and 13111 month pay.
Respondent averred that he had worked as a pianist at the Legend Hotels Tanglaw Restaurant
from September 1992 with an initial rate of P400.00/night that was given to him after each nights
performance; that his rate had increased to P750.00/night; and that during his employment, he could not
choose the time of performance, which had been fixed from 7:00 pm to 10:00 pm for three to six
times/week. He added that the Legend Hotels restaurant manager had required him to conform with the
venues motif; that he had been subjected to the rules on employees representation checks and chits, a
privilege granted to other employees; that on July 9, 1999, the management had notified him that as a
cost-cutting measure his services as a pianist would no longer be required effective July 30, 1999; that he
disputed the excuse, insisting that Legend Hotel had been lucratively operating as of the filing of his
complaint; and that the loss of his employment made him bring his complaint.

Issue

Whether there exists an employer-employee relationship

Ruling
Employer-employee relationship existed between the parties. The issue of whether or not an
employer-employee relationship existed between petitioner and respondent is essentially a question of
fact. The factors that determine the issue include who has the power to select the employee, who pays
the employees wages, who has the power to dismiss the employee, and who exercises control of the
methods and results by which the work of the employee is accomplished.
10
Although no particular form of
evidence is required to prove the existence of the relationship, and any competent and relevant evidence
to prove the relationship may be admitted,

a finding that the relationship exists must nonetheless rest on
substantial evidence, which is that amount of relevant evidence that a reasonable mind might accept as
adequate to justify a conclusion
A review of the circumstances reveals that respondent was, indeed, petitioners employee. He
was undeniably employed as a pianist in petitioners Madison Coffee Shop/Tanglaw Restaurant from
September 1992 until his services were terminated on July 9, 1999.
First of all, petitioner actually wielded the power of selection at the time it entered into the service
contract dated September 1, 1992 with respondent. This is true, notwithstanding petitioners insistence
that respondent had only offered his services to provide live music at petitioners Tanglaw Restaurant,
and despite petitioners position that what had really transpired was a negotiation of his rate and time of
availability. The power of selection was firmly evidenced by, among others, the express written
recommendation dated January 12, 1998 by Christine Velazco, petitioners restaurant manager, for the
increase of his remuneration.
Secondly, petitioner argues that whatever remuneration was given to respondent were only his
talent fees that were not included in the definition of wage under the Labor Code. Respondent was paid
P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to six nights a week. Such rate
of remuneration was later increased to P750.00 upon restaurant manager Velazcos recommendation.
There is no denying that the remuneration denominated as talent fees was fixed on the basis of his talent
and skill and the quality of the music he played during the hours of performance each night, taking into
account the prevailing rate for similar talents in the entertainment industry
Respondents remuneration, albeit denominated as talent fees, was still considered as included in the
term wage in the sense and context of the Labor Code, regardless of how petitioner chose to designate
the remuneration.
Thirdly, the power of the employer to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee relationship. This is the so-called
control test, and is premised on whether the person for whom the services are performed reserves the
right to control both the end achieved and the manner and means used to achieve that end.
A review of the records shows, however, shows that respondent performed his work as a pianist under
petitioners supervision and control. Specifically, petitioners control of both the end achieved and the
manner and means used to achieve that end was demonstrated by the following, to wit:
a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00
pm, three to six times a week;
b. He could not choose the place of his performance;
c. The restaurants manager required him at certain times to perform only Tagalog songs or music, or
to wear barong Tagalog to conform to the Filipiniana motif; and

34

d. He was subjected to the rules on employees representation check and chits, a privilege granted to
other employees.

35

THE NEW PHILIPPINE SKYLANDERS, INC., vs. DAKILA
Facts

November 1993 the Philippine Skylanders Employees Association (PSEA), a local labor union
affiliated with the Philippine Association of Free Labor Unions (PAFLU) September (PAFLU), won in the
certification election conducted among the rank and file employees of Philippine Skylanders, Inc. (PSI).
Its rival union, Philippine Skylanders Employees Association-WATU (PSEA-WATU) immediately
protested the result of the election before the Secretary of Labor.
In settlement of the controversy, PSEA sent PAFLU a notice of disaffiliation citing as reason
PAFLUs supposed deliberate and habitual dereliction of duty toward its members. Attached to the notice
was a copy of the resolution adopted and signed by the officers and members of PSEA authorizing their
local union to disaffiliate from its mother federation.
PSEA subsequently affiliated itself with the National Congress of Workers (NCW), changed its
name to Philippine Skylanders Employees Association -National Congress of Workers (PSEA-NCW), and
to maintain continuity within the organization, allowed the former officers of PSEA-PAFLU to continue
occupying their positions as elected officers in the newly-forged PSEA-NCW. On 17 March, 1994, PSEA-
NCW entered into a collective bargaining agreement with PSI which was immediately registered with the
Department of Labor and Employment. PAFLU requested for the accounting. PSI through its personnel
manager Francisco Dakila denied the request.
PAFLU through Serafin Ayroso filed a complaint for unfair labor practice against PSI, its president
Mariles Romulo and personnel manager Francisco Dakila. PAFLU alleged that aside from PSIs refusal to
bargain collectively with its workers, the company through its president and personnel manager, was also
liable for interfering with its employees union activities
Ayroso filed another complaint in behalf of PAFLU for unfair labor practice against Francisco Dakila.
Through Ayroso PAFLU claimed that Dakila was present in PSEAs organizational meeting thereby
confirming his illicit participation in union activities. Ayroso added that the members of the local union had
unwittingly fallen into the manipulative machinations of PSI and were lured into endorsing a collective
bargaining agreement which was detrimental to their interests.
PAFLU amended its complaint by including the elected officers of PSEA-PAFLU as additional
party respondents. PAFLU averred that the local officers of PSEA-PAFLU, namely Macario Cabanias,
Pepito Rodillas, Sharon Castillo, Danilo Carbonel, Manuel Eda, Rolando Felix, Jocelyn Fronda, Ricardo
Lumba, Joseph Mirasol, Nerisa Mortel, Teofilo Quirong, Leonardo Reyes, Manuel Cadiente, and Herminia
Riosa, were equally guilty of unfair labor practice since they brazenly allowed themselves to be
manipulated and influenced by petitioner Francisco Dakila.
Dakila moved for the dismissal of the complaint on the ground that the issue of disaffiliation was
an inter-union conflict which lay beyond the jurisdiction of the Labor Arbiter. PSEA was no longer affiliated
with PAFLU, Ayroso or PAFLU for that matter had no personality to file the instant complaint.
Labor Arbiter declared PSEAs disaffiliation from PAFLU invalid and held PSI, PSEA-PAFLU and
their respective officers guilty of unfair labor practice. As PSEA-NCWs personality was not accorded
recognition, its collective bargaining agreement with PSI was struck down for being invalid. PSI, PSEA
and their respective officers appealed to the National Labor Relations Commission (NLRC). But the
NLRC upheld the Decision ofthe Labor Arbiter.

Issue

Whether or not there is an employee-empoyer relationship between the petitioner and
respondent.

Ruling

Local unions have a right to separate from their mother federation on the ground that as separate
and voluntary associations, local unions do not owe their creation and existence to the national federation
to which they are affiliated but, instead, to the will of their members. The sole essence of affiliation is to
increase, by collective action, the common bargaining power of local unions for the effective
enhancement and protection of their interests. Admittedly, there are times when without succor and
support local unions may find it hard, unaided by other support groups, to secure justice for themselves.
Yet the local unions remain the basic units of association, free to serve their own interests subject to the
restraints imposed by the constitution and by-laws of the national federation, and free also to renounce
the affiliation upon the terms laid down in the agreement which brought such affiliation into existence.
There is nothing shown in the records nor is it claimed by PAFLU that the local union was
expressly forbidden to disaffiliate from the federation nor were there any conditions imposed for a valid
breakaway. As such, the pendency of an election protest involving both the mother federation and the
local union did not constitute a bar to a valid disaffiliation. Neither was it disputed by PAFLU that 111
signatories out of the 120 members of the local union, or an equivalent of 92.5% of the total union
membership supported the claim of disaffiliation and had in fact disauthorized PAFLU from instituting any
complaint in their behalf.

36

It was entirely reasonable then for PSI to enter into a collective bargaining agreement with PSEA-
NCW. As PSEA had validly severed itself from PAFLU, there would be no restrictions which could validly
hinder it from subsequently affiliating with NCW and entering into a collective bargaining agreement in
behalf of its members.
The mere act of disaffiliation did not divest PSEA of its own personality; neither did it give PAFLU
the license to act independently of the local union.

37

TESORO ET AL. vs. METRO MANILA RETREADERS INC. ET AL.

Facts
On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro, Pedro Ang, and Gregorio
Sharp used to work as salesmen for respondents Metro Manila Retreaders, Inc., Northern Luzon
Retreaders, Inc., or Power Tire and Rubber Corporation. These are sister companies collectively called
Bandag. Bandag offered repair and retread services for used tires. In 1998, however, Bandag
developed a franchising scheme that would enable others to operate tire and retreading businesses using
its trade name and service system. Petitioners quit their jobs as salesmen and entered into separate
Service Franchise Agreements (SFAs) with Bandag for the operation of their respective franchises.
Under this SFA, Bandag would provide funding with the petitioners subject to regular liquidation of
revolving funds. The expenses of these funds will be deducted from their sale in order to determine their
income. After some time, petitioners began to default on their obligations to submit periodic liquidations of
their operational expenses in relation to the revolving funds Bandag provided them. Bandag terminated
their SFA.
Aggrieved, petitioners filed a complaint for constructive dismissal, nonpayment of wages, incentive
pay, 13
th
month pay and damages against Bandag with the National Labor Relations Commission
(NLRC). Petitioners contend that despite the SFA, they remained employees of Bandag. For its part,
Bandag pointed out that petitioners freely resigned from their employment and decided to avail
themselves of the opportunity to be independent entrepreneurs under the franchise scheme that Bandag
had. Thus, no employeremployee relationship existed between petitioners and Bandag.

Issue

Whether or not petitioners remained to be Bandags salesmen under the franchise scheme it entered
into with them.

Ruling

No, petitioners were no longer employees of Bandag the moment they entered into the SFA.
Franchising is a business method of expansion that allows an individual or group of individuals to market
a product or a service and to use of the patent, trademark, trade name and the systems prescribed by the
owner.
The tests for determining employeremployee relationship are: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employee with respect to the means and methods by which the work is to be accomplished.
The last is called the control test, the most important element.
When petitioners agreed to operate Bandags franchise branches in different parts of the country,
they knew that this substantially changed their former relationships. They were to cease working as
Bandags salesmen, the positions they occupied before they ventured into running separate Bandag
branches. They were to cease receiving salaries or commissions. Their incomes were to depend on the
profits they made. Yet, petitioners did not then complain of constructive dismissal. They took their
chances, ran their branches, Gregorio Sharp in La Union for several months and Ashmor Tesoro in
Baguio and Pedro Ang in Pangasinan for over a year. Clearly, their belated claim of constructive
dismissal is quite hollow.
It is pointed out that Bandag continued, like an employer, to exercise control over petitioners work. It
points out that Bandag: (a) retained the right to adjust the price rates of products and services; (b)
imposed minimum processed tire requirement (MPR); (c) reviewed and regulated credit applications; and
(d) retained the power to suspend petitioners services for failure to meet service standards. But
uniformity in prices, quality of services, and good business practices are the essence of all franchises. A
franchisee will damage the franchisors business if he sells at different prices, renders different or inferior
services, or engages in bad business practices. These business constraints are needed to maintain
collective responsibility for faultless and reliable service to the same class of customers for the same
prices.
This is not the control contemplated in employeremployee relationships. Control in such
relationships addresses the details of day to day work like assigning the particular task that has to be
done, monitoring the way tasks are done and their results, and determining the time during which the
employee must report for work or accomplish his assigned task.
Petitioners cannot use the revolving funds feature of the SFAs as evidence of their employer
employee relationship with Bandag. These funds do not represent wages. They are more in the nature of
capital advances for operations that Bandag conceptualized to attract prospective franchisees.
Petitioners incomes depended on the profits they make, controlled by their individual abilities to increase
sales and reduce operating costs.


38

HIRING OF EMPLOYEE
OLLENDORF vs. ABRAHANSON

Facts

The record discloses that Ollendorf is and for a long time past has been engaged in the city of Manila
and elsewhere in the Philippines in the business of manufacturing ladies embroidered underwear for
export. Ollendorf imports the material from which this underwear is made and adopts decorative designs
which are embroidered upon it by Filipino needle workers from patterns selected and supplied by him.
Most of the embroidery work is done in the homes of the workers. The embroiderers employed by plaintiff
are under contract to work for plaintiff exclusively.
Plaintiff and defendant entered into a contract. Under the terms of this, agreement defendant entered
the employ of plaintiff and worked for him until April 1916, when defendant, on account of ill health, left
plaintiffs employ and went to the United States. While in plaintiffs employ defendant had access to all
parts of plaintiffs establishment, and had full opportunity to acquaint himself with plaintiffs business
methods and business connections. The duties performed by him were such as to make it necessary that
he should have this knowledge of plaintiff s business. Defendant had a general knowledge of the
Philippine embroidery business before his employment by plaintiff, having been engaged in similar work
for several years.
Some months after his departure, defendant returned to Manila as the manager of the Philippine
Underwear Company, a corporation. This corporation does not maintain a factory in the Philippine
Islands, but sends material and embroidery designs from New York to its local representative here who
employs Filipino needle workers to embroider the designs and make up the garments in their homes. The
only difference between plaintiffs business and that of the firm by which the defendant is employed, is the
method of doing the finishing work the manufacture of the embroidered material into finished
garments.
Shortly after defendants return to Manila and the commencement by him of the discharge of the
duties of his position as local manager of the Philippine Embroidery Company, plaintiff commenced this
action, the principal purpose of which is to prevent, by injunction, any further breach of that part of
defendants contract of employment by plaintiff, by which he agreed that he would not enter into or
engage himself directly or indirectly . . . in a similar or competitive business to that of (plaintiff) anywhere
within the Philippine Islands for a period of five years . . . from the date of the agreement.

Issue

Whether or not the contract is valid.
Ruling
SC ruled that the contract is valid. The only limitation upon the freedom of contractual agreement is
that the pacts established shall not be contrary to law, morals or public order. (Civil Code, art. 1255.)
Public welfare is first considered, and if it be not involved, and the restraint upon one party is not greater
than protection that the other party requires, the contract may be sustained. The question is whether,
under the particular circumstances of the case and the nature of the particular contract involved in it the
contract is, or is not, unreasonable.
The Courts adopt the modern rule that the validity of restraints upon trade or employment is to be
determined by the intrinsic reasonableness of the restriction in each case, rather than by any fixed rule,
and that such restrictions may be upheld when not contrary to the public welfare and not greater than is
necessary to afford a fair and reasonable protection to the party in whose favor it is imposed.
A business enterprise may and often does depend for its success upon the owners relations with
other dealers, his skill in establishing favorable connections, his methods of buying and selling a
multitude of details, none vital if considered alone, but which in the aggregate constitute the sum total of
the advantages which are the result of the experience or individual aptitude and ability of the man or men
by whom the business has been built up. Failure or success may depend upon the possession of these
intangible but all-important assets, and it is natural that their possessor should seek to keep them from
falling into the hands of his competitors.
It is with this object in view that such restrictions as that now under consideration are written into
contracts of employment. Their purpose is the protection of the employer, and if they do not go beyond
what is reasonably necessary to effectuate this purpose they should be upheld. We are of the opinion,
and so hold, that in the light of the established facts the restraint imposed upon defendant by his contract
is not unreasonable.

39

DEL CASTILLO vs. RICHMOND

Facts

The case was instituted to declare the contract of services entered into by Alfonso del Castillo as null
and void. Del Castillo alleges that the provisions and conditions contained in the third paragraph of said
contract constitute an illegal and unreasonable restriction upon his liberty to contract, are contrary to
public policy, and are unnecessary in order to constitute a just and reasonable protection to the
defendant; and asked that the same be declared null and void and of no effect.
The said contract constituted an illegal and unreasonable restriction upon the right of the plaintiff to
contract and was contrary to public policy. It will be noted that the restrictions placed upon the plaintiff are
strictly limited (a) to a limited district or districts, and (b) during the time while the defendant or his heirs
may own or have open a drugstore, or have an interest in any other one within said limited district.

Issue

Whether or not the said restraint is reasonable.

Ruling

SC ruled that the restriction is reasonable and not contrary to public policy. The law concerning
contracts which tend to restrain business or trade has gone through a long series of changes from time to
time with the changing conditions of trade and commerce. With trifling exceptions, said changes have
been a continuous development of a general rule.
The early cases show plainly a disposition to avoid and annul all contracts which prohibited or
restrained any one from using lawful trade at any time or at any place, as being against the benefit of
the state. Later, however, the rule became well established that if the restraint was limited to a certain
time and within a certain place, such contracts were valid and not against the benefit of the state.
Later cases, and we think the rule is now well established, have held that a contract in restraint of trade is
valid provided there is a limitation upon either time or place. A contract, however, which restrains a man
entering into a business or trade without either a limitation as to time or place, will be held invalid.
As stated in the case of Ollendorf vs. Abrahamson, The public welfare of course must always be
considered, and if it be not involved and the restraint upon one party is not greater than protection to the
other requires, contracts like the one we are discussing will be sustained. The general tendency, we
believe, of modern authority, is to make the test whether the restraint is reasonably necessary for the
protection of the contracting parties. If the contract is reasonably necessary to protect the interest of the
parties, it will be upheld.
In that case we held that a contract by which an employee agrees to refrain at a given length of time,
after the expiration of the term of his employment, from engaging in business, competitive with that of his
employer, is not void as being in restraint of trade if the restraint imposed is not greater than that which is
necessary to afford a reasonable protection.

40

PT & T vs. NATIONAL LABOR RELATIONS COMMISSION

Facts
Grace de Guzman was initially hired by petitioner as a reliever for a fixed period from November 21,
1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave. Under the Reliever
Agreement which she signed with Petitioner Company, her employment was to be immediately
terminated upon expiration of the agreed period. Thereafter, from June 10, 1991 to July 1, 1991, and
from July 19, 1991 to August 8, 1991, private respondents services as reliever were again engaged by
petitioner, this time in replacement of one Erlinda F. Dizon who went on leave during both periods. After
August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated.
It now appears that private respondent had made the a representation that she was single even
though she contracted marriage months before, in the two successive reliever agreements which she
signed on June 10, 1991 and July 8, 1991. When petitioner supposedly learned about the same later, its
branch supervisor sent to private respondent a memorandum requiring her to explain the discrepancy. In
that memorandum, she was reminded about the companys policy of not accepting married women for
employment. Private respondent was dismissed from the company effective January 29, 1992, which she
readily contested by initiating a complaint for illegal dismissal. Labor Arbiter handed down a decision
declaring that private respondent, who had already gained the status of a regular employee, was illegally
dismissed by petitioner. On appeal to the National Labor Relations Commission (NLRC), said public
respondent upheld the labor arbiter and it ruled that private respondent had indeed been the subject of an
unjust and unlawful discrimination by her employer, PT&T.

Issue

Whether or not discrimination merely by reason of the marriage of a female employee is expressly
prohibited by Article 136.

Ruling

Supreme Court ruled that the stipulation is violative of Art. 136 of the Labor Code. An employer is free
to regulate, according to his discretion and best business judgment, all aspects of employment, from
hiring to firing, except in cases of unlawful discrimination or those which may be provided by law.
Petitioners policy of not accepting or considering as disqualified from work any woman worker who
contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all women
workers by our labor laws and by no less than the Constitution. Respondents act of concealing the true
nature of her status from PT&T could not be properly characterized as willful or in bad faith as she was
moved to act the way she did mainly because she wanted to retain a permanent job in a stable company.
The government, to repeat, abhors any stipulation or policy in the nature of that adopted by petitioner
PT&T. Job requirements which establish employer preference or conditions relating to the marital status
of an employee are categorized as a sex-plus discrimination where it is imposed on one sex and not on
the other. Further, the same should be evenly applied and must not inflict adverse effects on a racial or
sexual group which is protected by federal job discrimination laws. Petitioners policy is not only in
derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any
kind of stipulation against marriage in connection with her employment, but it likewise assaults good
morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a
privilege that by all accounts inheres in the individual as an intangible and inalienable right.
Hence, while it is true that the parties to a contract may establish any agreements, terms, and
conditions that they may deem convenient, the same should not be contrary to law, morals, good
customs, public order, or public policy. Carried to its logical consequences, it may even be said that
petitioners policy against legitimate marital bonds would encourage illicit or common-law relations and
subvert the sacrament of marriage.

41

DUNCAN ASSO. OF DETAILMAN-PTGWO vs. GLAXO WELLCOME PHILS.

Facts

Petitioner Pedro Tecson was hired by respondent Glaxo Wellcome Philppines(glaxo) as medical
representative on Oct.24,1994 thereafter signed a contract of employment which stipulates among others
that he agrees to study and abide existing company rules; to disclose to management any existing of
future relationship by consanguinity or affinity with co-employees or employees of competing drug
companies and if ever that such management find such conflict of interest,he must resign. The Employee
Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any
existing or future relationship by consanguinity or affinity with co-employees or employees of competing
drug companies. If management perceives a conflict of interest or a potential conflict between such
relationship and the employees employment with the company, the management and the employee will
explore the possibility of a transfer to another department in a non-counterchecking position or
preparation for employment outside the company after six months.
Reminders from Tecsons district manager did not stop him from marrying.Tecson married Bettsy, an
Astras Branch Coordinatior in Albay. She supervised the district managers and medical representatives
of her company and prepared marketing strategies for Astra in that area. Tecson was reassigned to
another place and was not given products that the Astra company has and he was not included in
products seminars and training.
Tecson requested for time in complying said policy by asking for a transfer in the Glaxos milk division
in which the other company had no counterpart. Thereafter, he bought the matter to Grievance
Committee but the parties failed to resolve such issue, Glaxo offered Tecson a separation pay of one-
half () month pay for every year of service, or a total of P50,000.00 but he declined the offer. On
November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered its Decision
declaring as valid Glaxos policy on relationships between its employees and persons employed with
competitor companies, and affirming Glaxos right to transfer Tecson to another sales territory.
Tecson filed for a petition for review on the CA and the CA promulgated that the NCMB did not err in
rendering its decision. A recon was filed in appellate court but it was denied. So hence this petition for
certiorari. Petitioners contention it was violative of constitutional law which is the equal protection clause
and he was constructively dismissed while the respondents contention that it is a valid exercise of it s
management prerogatives.

Issue
Whether or not the policy of a pharmaceutical company prohibiting its employees from marrying
employees of another pharmaceutical company is valid.

Ruling
This petition was denied. Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies and other confidential programs and information from competitors, especially so that
it and Astra are rival companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor companies
upon Glaxos employees is reasonable under the circumstances because relationships of that nature
might compromise the interests of the company. In laying down the assailed company policy, Glaxo only
aims to protect its interests against the possibility that a competitor company will gain access to its
secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the
Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to
reasonable returns on investments and to expansion and growth.
The challenged company policy does not violate the equal protection clause of the Constitution as
petitioners erroneously suggest. It is a settled principle that the commands of the equal protection clause
are addressed only to the state or those acting under color of its authority.
From the wordings of the contractual provision and the policy in its employee handbook, it is clear
that Glaxo does not impose an absolute prohibition against relationships between its employees and
those of competitor companies. Its employees are free to cultivate relationships with and marry persons
of their own choosing. What the company merely seeks to avoid is a conflict of interest between the
employee and the company that may arise out of such relationships.
There was no merit in Tecsons contention that he was constructively dismissed when he was
transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City-Agusan
del Sur sales area, and when he was excluded from attending the companys seminar on new products
which were directly competing with similar products manufactured by Astra. Constructive dismissal is
defined as a quitting, an involuntary resignation resorted to when continued employment becomes
impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a

42

clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee. The
record does not show that Tecson was demoted or unduly discriminated upon by reason of such transfer.

43

CITY OF MANILA vs. LAGUIO
Facts

Private respondent Malate Tourist Development Corporation (MTDC) is a corporation engaged in the
business of operating hotels, motels, hostels and lodging houses.
[5]
It built and opened Victoria Court in
Malate which was licensed as a motel although duly accredited with the Department of Tourism as a
hotel.
[6]
On 28 June 1993, MTDC filed a Petition for Declaratory Relief with Prayer for a Writ of Preliminary
Injunction and/or Temporary Restraining Order
[7]
(RTC Petition) with the lower court impleading as
defendants, herein petitioners City of Manila, Hon. Alfredo S. Lim (Lim), Hon. Joselito L. Atienza, and the
members of the City Council of Manila (City Council). MTDC prayed that the Ordinance, insofar as it
includes motels and inns as among its prohibited establishments, be declared invalid and
unconstitutional.
[8]

Enacted by the City Council
[9]
on 9 March 1993 and approved by petitioner City Mayor on 30 March
1993, the said Ordinance is entitled
AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION OF BUSINESSES
PROVIDING CERTAIN FORMS OF AMUSEMENT, ENTERTAINMENT, SERVICES AND FACILITIES IN
THE ERMITA-MALATE AREA, PRESCRIBING PENALTIES FOR VIOLATION THEREOF, AND FOR
OTHER PURPOSES.
SECTION 1. Any provision of existing laws and ordinances to the contrary notwithstanding, no person,
partnership, corporation or entity shall, in the Ermita-Malate area bounded by Teodoro M. Kalaw Sr.
Street in the North, Taft Avenue in the East, Vito Cruz Street in the South and Roxas Boulevard in the
West, pursuant to P.D. 499 be allowed or authorized to contract and engage in, any business providing
certain forms of amusement, entertainment, services and facilities where women are used as tools in
entertainment and which tend to disturb the community, annoy the inhabitants, and adversely affect the
social and moral welfare of the community, such as but not limited to:
1. Sauna Parlors
2. Massage Parlors
3. Karaoke Bars
4. Beerhouses
5. Night Clubs
6. Day Clubs
7. Super Clubs
8. Discotheques
9. Cabarets
10. Dance Halls
11. Motels
12. Inns


In the RTC Petition, MTDC argued that the Ordinance erroneously and improperly included in its
enumeration of prohibited establishments, motels and inns such as MTDCs Victoria Court
considering that these were not establishments for amusement or entertainment and they were not
services or facilities for entertainment, nor did they use women as tools for entertainment, and
neither did they disturb the community, annoy the inhabitants or adversely affect the social and
moral welfare of the community.
Issue
Whether or not Ordinance No. 7783 of City of Manila is a valid exercise of police power.
Ruling
It is undoubtedly one of the fundamental duties of the City of Manila to make all reasonable
regulations looking to the promotion of the moral and social values of the community. However, the
worthy aim of fostering public morals and the eradication of the communitys social ills can be
achieved through means less restrictive of private rights; it can be attained by reasonable restrictions
rather than by an absolute prohibition. The closing down and transfer of businesses or their
conversion into businesses allowed under the Ordinance have no reasonable relation to the
accomplishment of its purposes. Otherwise stated, the prohibition of the enumerated establishments
will not per se protect and promote the social and moral welfare of the community; it will not in itself
eradicate the alluded social ills of the prostitution, adultery, fornication nor will it arrest the spread of
sexual disease in Manila.
It is readily apparent that the means employed bu the Ordinance for the achievement of tis
purposes, the governmental interference itself, infringes on the constitutional guarantees of a persons
fundamental right to liberty and property. Persons desirous to own, operate and patronize the
enumerated establishments under Section 1 of the Ordinance may seek autonomy for these
purposes.
Motel patrons who are single and unmarried may invoke this right to autonomy to
consummate their bonds in intimate sexual conduct within the motels premises be it stressed that
their consensual sexual behavior does not contravene any fundamental state policy as contained in
the Constitution.

44

Adults have a right to choose to forge such relationships with others in the confines of their
own private lives and still retain their dignity as free persons. The liberty protected by the Constitution
allowd persons the right to make choice. Their right to liberty protected by the Constitution allows
persons the right to make this choice. Their right to liberty under the due process clause gives them
the full right to engage in their conduct without intervention of the government, as long as they do not
run afoul of the law. Liberty should be the rule and restraint the exception.
Liberty in the constitutional sense not only means freedom from unlawful government
restraint; it must include privacy as well, if it is to a repository of freedom. The right to be let alone is
the beginning of all freedom. It is the most comprehensive of rights and the right most valued by
civilized men.
All considered, the Ordinance invades fundamental personal and property rights and
impairs personal privileges. It is constitutionally infirm. The Ordinance contravenes statutes; it is
discriminatory and unreasonable in its operation; it is not sufficiently detailed and explicit that abuses
may attend the enforcement of its sanctions. And not to forgotten, the City Council under the Code
had no power to enact the Ordinance and is therefore ultra vires, null and void.

45

STAR PAPER CORP. vs. SIMBOL
Facts

Petitioner Star Paper Corporation is a corporation engaged in trading principally of paper
products. Josephine Ongsitco is its Manager of the Personnel and Administration Department
while Sebastian Chua is its Managing Director. Respondents Simbol, Comia and Estrella are
regular employees of the company. Simbol met Alma, Comia met Howard and Estrella got
pregnant by Zunga. All of their partners are employed on the same company. Prior to the
marriage of each respective couple, Ongsitco advised each of them that should they decide to get
married, one of either partner should resign pursuant to a company policy promulgated in 1995.
Thus, Simbol, Comia and Estrella resigned. Respondents signed a Release and Confirmation
Agreement which states that they have no money and property accountabilities in the company
and that they release the latter of any claim or demand of whatever nature.
However, the respondents, thereafter, filed a complaint for unfair labor practice, constructive
dismissal, separation pay and attornerys fees. They averred that the aforementioned company
policy is illegal and contravenes Art. 136 of the Labor Code. Petitioner, on the other hand, claims
it does not violate Art 136 as it is not the marital status of the employee, per se, that is being
discriminated. It is only intended to carry out its no-employment-for relatives-within-the-third-
degree policy which is within the ambit of the prerogatives of management.
The Labor Arbiter dismissed the complaint claiming that such company policy was a management
prerogative. On appeal to the NLRC, the commission affirmed the decision of the Labor Arbiter. In
its appeal via petition for Certiorari, CA reversed the NLRC decision stating that the dismissal of
respondents were illegal.
Issue

Whether the 1995 policy of the employer banning spouses from working in the same
company violates the rights of the employees under the Constitution and the Labor Code
or is it a valid exercise of management prerogative.

Ruling
The finding of a bona fide occupational qualification justifies an employers no-spouse rule,
the exception is interpreted strictly and narrowly by these state courts. There must be a
compelling business necessity for which no alternative exists other than the discriminatory
practice. To justify a bona fide occupational qualification, the employer must prove two factors:
(1) that the employment qualification is reasonably related to the essential operation of the job
involved; and, (2) that there is a factual basis for believing that all or substantially all persons
meeting the qualification would be unable to properly perform the duties of the job.
Though it is noted that the questioned policy may not facially violate Art. 136 of the Labor
Code but it create a disproportionate effect and under the disparate impact theory, the only way it
could pass judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit
disproportionate, effect.
Thus, in the case at bar, there is no reasonable business necessity due to petitioners failure
to present undisputed marital discrimination. Thus, the questioned policy is an invalid exercise of
management prerogative

46

DEL MONTE PHILIPPINES vs. VELASCO
Facts

Lolita Velasco was hired by Del Monte as seasonal employee and was subsequently
regularized by Del Monte. On June 1987, petitioner warned Velasco of its absences and was
repeatedly reminded that her absence without permission may result to forfeiture of her vacation
leave.
Another warning was sent due to her absences without permission which eventually led
to the forfeiture of her vacation entitlement. On September 1994, a notice of hearing was sent to
Velasco informing her of the charges filed against her for violating the Absence without leave rule.
On January 1995, after the hearing, Del Monte terminated the services of Velasco due to
excessive absence without leave. Feeling aggrieved, Velasco filed a case for illegal dismissal.
She asserted that she was absent since she was suffering urinary tract infection and she was
pregnant.
She sent an application for leave to the supervisor. Upon check up of the company
doctor, Velasco was advised to rest. On the following check-ups, she was again advised to rest
where this time, she was not able to get secure a leave.
The Labor Arbiter rendered decision that she was an incorrigible absentee. Respondent
appealed to the NLRC. NLRC vacated the decision of the Labor Arbiter. It decided that
respondent was illegally dismissed and was entitled to reinstatement. Petitioner appealed to CA
where it dismissed its claim and affirmed NLRC. Thus, this petition.

Issue

Whether or not the dismissal was illegal.

Ruling

Yes. In this case, by the measure of substantial evidence, what is controlling is the
finding of the NLRC and the CA that respondent was pregnant and suffered from related
ailments. It would be unreasonable to isolate such condition strictly to the dates stated in the
Medical Certificate or the Discharge Summary. It can be safely assumed that the absences that
are not covered by, but which nonetheless approximate, the dates stated in the Discharge
Summary and Medical Certificate, are due to the continuing condition of pregnancy and related
illnesses, and, hence, are justified absences.
The termination was illegal since it comes within the purview of the prohibited acts
provided in Article 137 of the Labor Code. Based on Art. 137, it shall be unlawful for any employer
(1) to deny any woman employee the benefits provided for in this Chapter or to discharge any
woman employed by him for the purpose of preventing her from enjoying any of the benefits
provided under this Code; (2) to discharge such woman on account of her pregnancy, or while on
leave or in confinement due to her pregnancy; and (3) to discharge or refuse the admission of
such woman upon returning to her work for fear that she may again be pregnant.
The respondent was illegally dismissed by the petitioner on account of her pregnancy.
The act of the employer is unlawful, it being contrary to law.

47

YRASUEGUI vs. PHILIPPINE AIRLINES
Facts
Petitioner Yrasuegui, an international flight steward of Philippine Airlines Inc. (PAL) was
dismissed because of his failure to adhere to the weight standards of the airline company.
In consequence thereof, petitioner filed a complaint for illegal dismissal against PAL
before the Labor Arbiter (LA). Te Labor Arbiter ruled that the petitioner was illegally dismissed. It
also issued a writ of execution directing the reinstatement of the petitioner without loss of seniority
and other benefits, and also the payment of backwages. Respondent PAL appealed to the NLRC
which affirmed the LAs decision. Respondent PAL appealed to the Court of Appeals. CA
reversed the NLRC case.

Issue

Whether the dismissal of the petitioner valid.

Ruling

The Court upheld the legality of the petitioners dismissal. Separation pay, however,
should be awarded in favor of the employee as an act of social justice or based on equity. This is
so because his dismissal is not serious misconduct. Neither is it reflective of his moral character.
The obesity of petitioner, when placed in the context of his work as flight attendant,
becomes an analogous cause under Article 282 (e) of the Labor ode. His obesity may not be
unintended, but is nonetheless voluntary. Voluntariness basically means that the just cause is
solely attributable to the employee without any external force influencing or controlling his actions.
This element runs through all just causes under Art. 282, whether they be in nature of a wrongful
action or omission. Gross and habitual neglect, a recognized just cause, is considered voluntary
although it lacks the element of intent found in Art. 282 (a), (c), and (d).
Employment in particular jobs may not be limited to persons of a particular sex, religion,
or national origin unless the employer can show that sex, religion, or national origin is an actual
qualification for performing the job. The qualification is called a bona fide occupational
qualification (BFOQ). In the United States, there are a few federal and many state job
discrimination laws that contain an exception allowing an employer to engage in an otherwise
unlawful form of prohibited discrimination when the action is based on a BFOQ necessary to the
normal operation of a business or enterprise.

48

WAGE AND THE WAGE RATIONALIZATION
ACT
ILAW AT BUKLOD MANGGAGAWA vs. NATIONAL LABOR
RELATIONS COMMISSION
Facts
The union known as Ilaw at Buklod Ng Manggagawa (IBM) said to represent 4,500
employees of San Miguel Corporation, more or less, working at the various plants, offices, and
warehouses located at the National Capital Region presented to the company a "demand" for
correction of the significant distortion in the workers' wages.
In that demand, the Union explicitly invoked Section 4 (d) of RA 6727 which reads as
follows: Where the application of the increases in the wage rates under this Section results in
distortions as defined under existing laws in the wage structure within an establishment and
gives rise to a dispute therein, such dispute shall first be settled voluntarily between the parties
and in the event of a deadlock, the same shall be finally resolved through compulsory arbitration
by the regional branches of the National Labor Relations Commission having jurisdiction over
the workplace. It shall be mandatory for the NLRC to conduct continuous hearings and decide
any dispute arising under this Section within twenty (20) calendar days from the time said
dispute is formally submitted to it for arbitration. The pendency of a dispute arising from a wage
distortion shall not in any way delay the applicability of the increase in the wage rates prescribed
under this Section.
Issue
Whether or not the strike is legal in the resolution of wage distortion.
Ruling

Strike is not legal as a means of resolving wage distortion. The strike involving the issue
of wage distortion is illegal as a means of resolving it. The legality of these activities is usually
dependent on the legality of the purposes sought to be attained and the means employed
therefore. It goes without saying that these joint or coordinated activities may be forbidden or
restricted by law or contract. In the instance of "distortions of the wage structure within an
establishment" resulting from "the application of any prescribed wage increase by virtue of a law
or wage order," Section 3 of Republic Act No. 6727 prescribes a specific, detailed and
comprehensive procedure for the correction thereof, thereby implicitly excluding strikes or
lockouts or other concerted activities as modes of settlement of the issue.
The provision states that the employer and the union shall negotiate to correct the
distortions. Any dispute arising from wage distortions shall be resolved through the grievance
procedure under their collective bargaining agreement and, if it remains unresolved, through
voluntary arbitration. Unless otherwise agreed by the parties in writing, such dispute shall be
decided by the voluntary arbitrator or panel of voluntary arbitrators within ten (10) calendar days
from the time said dispute was referred to voluntary arbitration. In cases where there are no
collective agreements or recognized labor unions, the employers and workers shall endeavor to
correct such distortions. Any dispute arising there from shall be settled through the National
Conciliation and Mediation Board and, if it remains unresolved after ten (10) calendar days of
conciliation, shall be referred to the appropriate branch of the National Labor Relations
Commission (NLRC). It shall be mandatory for the NLRC to conduct continuous hearings and
decide the dispute within twenty (20) calendar days from the time said dispute is submitted for
compulsory arbitration. The pendency of a dispute arising from a wage distortion shall not in any
way delay the applicability of any increase in prescribed wage rates pursuant to the provisions of
law or Wage Order.
The legislative intent that solution of the problem of wage distortions shall be sought by
voluntary negotiation or arbitration, and not by strikes, lockouts, or other concerted activities of
the employees or management, is made clear in the rules implementing RA 6727 issued by the
Secretary of Labor and Employment pursuant to the authority granted by Section 13 of the Act.
Section 16, Chapter I of these implementing rules, after reiterating the policy that wage distortions
be first settled voluntarily by the parties and eventually by compulsory arbitration, declares that,
"Any issue involving wage distortion shall not be a ground for a strike/lockout."

49

EMPLOYERS CONFEDERATION OF THE PHILS vs. NATIONAL
WAGES AND PRODUCTIVITY COMMISSION
Facts

ECOP questioned the validity of the wage order issued by the RTWPB dated October 23,
1990 pursuant to the authority granted by RA 6727. The wage order increased the minimum
wage by P17.00 daily in the National Capital Region.
The wage order is applied to all workers and employees in the private sector of an
increase of P 17.00 including those who are paid above the statutory wage rate. ECOP appealed
with the NWPC but dismissed the petition.
The Solicitor General in its comment posits that the Board upon the issuance of the wage
order fixed minimum wages according to the salary method. Petitioners insist that the power of
RTWPB was delegated, through RA 6727, to grant minimum wage adjustments and in the
absence of authority, it can only adjust floor wages.

Issue

Whether or not the wage order issues by RTWPB dated October 23, 1990 is valid.

Ruling

Wage order is valid. The Court agrees with the Solicitor General. It noted that there are
two ways in the determination of wage, these are floor wage method and salary ceiling method.
The floor wage method involves the fixing of determinate amount that would be added to the
prevailing statutory minimum wage while the salary ceiling method involves where the wage
adjustment is applied to employees receiving a certain denominated salary ceiling. RA 6727 gave
statutory standards for fixing the minimum wage.

ART. 124. Standards/Criteria for Minimum Wage Fixing The regional minimum wages
to be established by the Regional Board shall be as nearly adequate as is economically
feasible to maintain the minimum standards of living necessary for the health, efficiency
and general well-being of the employees within the framework of the national economic
and social development program. In the determination of such regional minimum wages,
the Regional Board shall, among other relevant factors, consider the following:
a. The demand for living wages
b. Wage adjustment vis--vis the consumer price index
c. The cost of living and changes or increases therein
d. The needs of workers and their families
e. The need to induce industries tp invest in the countryside
f. Improvements in standards of living
g. The prevailing wage levels
h. Fair return of the capital invested and capacity to pay of employers
i. Effects of employment generation and family income
j. The equitable distribution of income and wealth along the imperatives of economic
and social development
The wage order was not acted in excess of boards authority. The law gave reasonable
limitations to the delegated power of the board.

50

MABEZA vs. NATIONAL LABOR RELATIONS COMMISSION
Facts
Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her
co-employees at the Hotel Supreme in Baguio City were asked by the hotels management to
sign an instrument attesting to the latters compliance with minimum wage and other labor
standard provisions of law. The instrument provides among others: That we have no complaints
against the management of the Hotel Supreme as we are paid accordingl and that we are
executing this affidavit voluntarily without any force or intimidation and for the purpose of
informing the authorites concerned and to dispute the alleged report of the Labor Inspector of the
Department of Labor and Employment conducted on the said establishment of Februrary 2, 1991.
As gleaned from the affidavit, the same was drawn by management for the sole purpose
of refuting findings of the Labor Inspector of DOLE (in an inspection of respondents
establishment on February 2, 1991) apparently adverse to the private respondent.
After she refused to proceed to the City Prosecutors Office on the same day the
affidavit was submitted to the Cordillera Regional Office of DOLE petitioner avers that she was
ordered by the hotel management to turn over the keys to her living quarters and to remove her
belongings from the hotel premises.

Issue

Whether or not the dismissal by the private respondent of petitioner constitutes an unfair
labor practice.

Ruling
The pivotal question in any case where unfair labor practice on the part of the employer is
alleged is whether or not the employer has exerted pressure, in the form of restraint, interference
or coercion, against his employees right to institute concerted action for better terms and
conditions of employment. Without doubt, the act of compelling employees to sign an instrument
indicating that the employer observed labor standards provisions of law when he might have not,
together with the act of terminating or coercing those who refuse to cooperate with the employers
scheme constitutes unfair labor practice. The first act clearly preempts the right of the hotels
workers to seek better terms and conditions of employment through concerted action.
For refusing to cooperate with the private respondents scheme, petitioner was obviously
held up as an example to all of the hotels employees, that they could only cause trouble to
management at great personal inconvenience. Implicit in the act of petitioners termination and
the subsequent filing of charges against her was the warning that they would not only be deprived
of their means of livelihood, but also possibly, their personal liberty.

51

JOY BROTHERS, INC. vs. NATIONAL WAGES AND PRODUCTIVITY
COMMISSION

Facts

Wage Order No. NCR-03, providing for a twenty-seven peso wage increase for all private
sector workers and employees in the National Capital Region receiving one hundred fifty-four
pesos (P154.00) and below daily, was approved November 29, 1993. On February 14, 1994,
petitioner applied for exemption from said wage order on the ground that it was a distressed
establishment.
On June 7, 1994, the Regional Tripartite Wages and Productivity Board (hereinafter
referred to as the Board) denied petitioners application for exemption after holding that the
corporation accumulated profits amounting to P38,381.80 for the period under review. Petitioners
motion for reconsideration was likewise denied by the Wages and Productivity Board.
On appeal to the National Wages and Productivity Commission, (the NWPC or
respondent Commission) petitioner was again denied relief. Hence, this petition for certiorari
where an exemption as a distressed establishment is insisted upon.
More specifically, petitioner contends that the interim period to be reckoned with is from
January 1, 1993 to December 15, 1993 and not merely up to September 30, 1993 as held by
respondent Commission. Significantly, the period up to December 31, 1993 will reflect losses in
petitioner corporations books, but not if the covered interim period is only up to September 30,
1993.

Issue

Whether or not the interim period to be reckoned with is from January 1, 1993 to
December 15, 1993 and not merely up to September 30, 1993.
Ruling

No. Under Section 5 of Wage Order No. NCR-03, distressed firms, as defined in
the NWPC Revised Guidelines on Exemption may be exempted from the provisions of the Order
upon application with and due determination of the Board. 5 NWPC Guidelines No. 01, Series of
1992, providing for the Revised Guidelines on Exemption indicate the criteria to qualify for
exemption.
Section 8, paragraph a, of the Rules Implementing Wage Order No. NCR-03 provides that
exemption from compliance with the wage increase may be granted to distressed establishments
whose paid-up capital has been impaired by at least twenty-five percent (25%) or which registers
capital deficiency or negative net worth.
The last two full accounting periods here are 1991 and 1992, for which years petitioner
incurred net profits of P53,607.00 and P60,188.00, respectively. 7 If, as petitioner maintains, the
unaudited financial figures for the entire 1993 (up to December 31, 1993) are taken into
consideration, all of a sudden petitioner incurs a net loss of P5,260,273.00. Said loss impairs its
paid-up capital for the year 1993 (P15,142,531.00) by 34% or more than the 25% required by the
exemption provisions aforequoted. However, respondent Commission and the Board held that
using September 30, 1993 as the cut-off date for the interim period, petitioner even realizes a
profit amounting to P38,381.80.
Since Wage Order No. NCR-03 was published on December 1, 1993 and thus became
effective on December 16, 1993. The Revised Guidelines on Exemption expressly require interim
quarterly financial statements for the period immediately preceding December 16, 1993. It is clear
that the financial statements worthy of consideration are those of the three quarters prior to
December 16, 1993, the third quarter ending on September 30, 1993. Thus, petitioner manifestly
errs in claiming that said interim period is up to December 15, 1993 or December 31, 1993.

52

PRUBANKERS ASSOCIATION vs. PRUDENTIAL BANK
Facts
The RTWPB Region V issued Wage Order No. RB 05-03 which provided for a Cost of Living
Allowance (COLA) to workers in the private sector who had rendered service for at least three (3)
months before its effectivity, and for the same period thereafter, in the following categories:
P17.50 in the cities of Naga and Legaspi; P15.50 in the municipalities of Tabaco, Daraga, Pili
and the city of Iriga; and P10.00 for all other areas in the Bicol Region.
On November 1993, RTWPB Region VII issued Wage Order No. RB VII-03, which directed
the integration of the COLA mandated pursuant to Wage Order No. RO VII-02-A into the basic
pay of all workers. It also established an increase in the minimum wage rates for all workers and
employees in the private sector as follows: by Ten Pesos (P10.00) in the cities of Cebu, Mandaue
and Lapulapu; Five Pesos (P5.00) in the municipalities of Compostela, Liloan, Consolacion,
Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais, Canlaon,
and Tagbilaran. The bank granted a COLA of P17.50 to its employees at its Naga Branch, the
only branch covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA
into the basic pay of its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches,
the branches covered by Wage Order No. RB VII-03.
On June 7, 1994, Prubankers Association wrote the petitioner requesting that the Labor
Management Committee be immediately convened to discuss and resolve the alleged wage
distortion created in the salary structure upon the implementation of the said wage orders. It
demanded in the Labor Management Committee meetings that the petitioner extend the
application of the wage orders to its employees outside Regions V and VII, claiming that the
regional implementation of the said orders created a wage distortion in the wage rates of
petitioners employees nationwide. As the grievance could not be settled in the said meetings, the
parties agreed to submit the matter to voluntary arbitration.

Issue

Whether or not a wage distortion resulted from respondents implementation of the Wage
Orders.

Ruling

The court ruled that there is no wage distortion since the wage order implementation
covers all the branches of the bank. The hierarchy of positions was still preserved. The levels of
different pay classes was not eliminated. The statutory definition of wage distortion is found in
Article 124 of the Labor Code, as amended by Republic Act No. 6727, which reads:
Standards/Criteria for Minimum Wage Fixing. As used herein, a wage distortion shall mean a
situation where an increase in prescribed wage results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among employee groups
in an establishment as to effectively obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of differentiation.
Wage distortion involves four elements: (1) An existing hierarchy of positions with
corresponding salary rates; (2) A significant change in the salary rate of a lower pay class without
a concomitant increase in the salary rate of a higher one; (3)The elimination of the distinction
between the two levels and (4) The existence of the distortion in the same region of the country.
A disparity in wages between employees holding similar positions but in different regions
does not constitute wage distortion as contemplated by law. As stated, it is the hierarchy of
positions and the disparity of their corresponding wages and other emoluments that are sought to
be preserved by the concept of wage distortion.

53

LIDUVINO M. MILLARES vs. NATIONAL LABOR RELATIONS
COMMISSION

Facts

Petitioners numbering one hundred sixteen (116) occupied the positions of Technical Staff,
Unit Manager, Section Manager, Department Manager, Division Manager and Vice President in
the mill site of respondent Paper Industries Corporation of the Philippines (PICOP) in Bislig,
Surigao del Sur. In 1992 PICOP suffered a major financial setback allegedly brought about by
the joint impact of restrictive government regulations on logging and the economic crisis. To
avert further losses, it undertook a retrenchment program and terminated the services of
petitioners.
Accordingly, petitioners received separation pay computed at the rate of one (1) month basic
pay for every year of service. Believing however that the allowances they allegedly regularly
received on a monthly basis during their employment should have been included in the
computation thereof they lodged a complaint for separation pay differentials.
PICOP grants the following allowances: Staff allowance/managers allowance to those who
live in rented houses near the mill site which ceases whenever a vacancy occurs in the
companys free housing facilities. Transportation allowance in the form of advances for actual
transportation expenses subject to liquidation is given to key officers and managers who use their
own vehicles in the performance of their duties. This privilege is discontinued when the conditions
no longer obtain. Bislig allowance is given to managers and officers on account of the hostile
environment prevailing therein. Once the recipient is transferred elsewhere, the allowance
ceases.
Applying Art. 97, par. (f), of the Labor Code which defines wage, the Executive Labor Arbiter
opined that the subject allowances, being customarily furnished by respondent PICOP and
regularly received by petitioners, formed part of the latters wages.
On appeal, the National Labor Relations Commission (NLRC) did not view in favor of the
Executive Labor Arbiter. On 7 October 1994 it set aside the assailed decision by decreeing that
the allowances did not form part of the salary base used in computing separation pay.

Issue

Whether or not the allowances in question are considered facilities customarily furnished.

Ruling

The Staff/Managers allowance may fall under lodging but the transportation and Bislig
allowances are not embraced in facilities on the main consideration that they are granted as well
as the Staff/Managers allowance for respondent PICOPs benefit and convenience, i.e., to insure
that petitioners render quality performance. In determining whether a privilege is a facility, the
criterion is not so much its kind but its purpose. That the assailed allowances were for the benefit
and convenience of respondent company was supported by the circumstance that they were not
subjected to withholding tax.
In addition, the Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of
the Rules Implementing the Labor Code may from time to time fix in appropriate issuances the
fair and reasonable value of board, lodging and other facilities customarily furnished by an
employer to his employees. Petitioners allowances do not represent such fair and reasonable
value as determined by the proper authority simply because the Staff/Managers allowance and
transportation allowance were amounts given by respondent company in lieu of actual provisions
for housing and transportation needs whereas the Bislig allowance was given in consideration of
being assigned to the hostile environment then prevailing in Bislig.


54

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS vs.
QUISUMBING
Facts

International School, Inc., pursuant to PD 732, is a domestic educational institution
established primarily for dependents of foreign diplomatic personnel and other temporary
residents. To enable the School to continue carrying out its educational program and improve its
standard of instruction, Section 2 of the same decree authorizes the School to employ its own
teaching and management personnel selected by it either locally or abroad, from Philippine or
other nationalities, such personnel being exempt from otherwise applicable laws and regulations
attending their employment, except laws that have been or will be enacted for the protection of
employees.
The School hires both foreign and local teachers as members of its faculty, classifying
the same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to
determine whether a faculty member should be classified as a foreign-hire or a local hire: (a)
What is ones domicile? (b) Where is ones home economy? (c) To which country does one owe
economic allegiance? (d) Was the individual hired abroad specifically to work in the School and
was the School responsible for bringing that individual to the Philippines? Should the answer to
any of these queries point to the Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local- hires. These include
housing, transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires
are also paid a salary rate twenty-five percent (25%) more than local-hires. The School justifies
the difference on two significant economic disadvantages foreign-hires have to endure, namely:
(a) the dislocation factor and (b) limited tenure. The compensation scheme is simply the
Schools adaptive measure to remain competitive on an international level in terms of attracting
competent professionals in the field of international education.

Issue

Whether or not local hire teachers shall enjoy same salary as foreign hire teachers where
they perform the same work.

Ruling

Employees are entitled to same salary for performance of equal work. Notably, the
International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof,
provides: The States Parties to the present Covenant recognize the right of everyone to the
enjoyment of just and favorable conditions of work, which ensure, in particular: ( a) Remuneration
which provides all workers, as a minimum, with: (i) Fair wages and equal remuneration for
work of equal value without distinction of any kind, in particular women being guaranteed
conditions of work not inferior to those enjoyed by men, with equal pay for equal work; The
foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism
of equal pay for equal work. Persons who work with substantially equal qualifications, skill, effort
and responsibility, under similar conditions, should be paid similar salaries. This rule applies to
the School.
The School contends that petitioner has not adduced evidence that local-hires perform
work equal to that of foreign-hires. The Court finds this argument a little inconsiderate. If an
employer accords employees the same position and rank, the presumption is that these
employees perform equal work. If the employer pays one employee less than the rest, it is not for
that employee to explain why he receives less or why the others receive more. The employer has
discriminated against that employee; it is for the employer to explain why the employee is treated
unfairly.
In this case, the employer has failed to discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have
similar functions and responsibilities, which they perform under similar working conditions.

55

BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE
UNIONS vs. NATIONAL LABOR RELATIONS COMMISSION
Facts

Bankard, Inc. classifies its employees by levels: Level I, Level II, Level III, Level IV, and
Level V. On May 1993, its Board of Directors approved a New Salary Scale, made retroactive to
April 1, 1993, for the purpose of making its hiring rate competitive in the industrys labor market.
The New Salary Scale increased the hiring rates of new employees: Levels I and V by one
thousand pesos (P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00).
Accordingly, the salaries of employees who fell below the new minimum rates were also adjusted
to reach such rates under their levels.
This made Bankard Employees Union-WATU (petitioner), the duly certified exclusive
bargaining agent of the regular rank and file employees of Bankard, to request for the increase in
the salary of its old, regular employees. Bankard insisted that there was no obligation on the part
of the management to grant to all its employees the same increase in an across-the-board
manner.
Petioner filed two notices of strike. The first was treated by the National Conciliation and
Mediation Board a Preventive Mediation Case, and the second notice was certified by the
Secretary of Labor and Employment for compulsory arbitration. The NLRC no wage distortion
dismissed the case for lack of merit. Petitioners motion for reconsideration of the dismissal of the
case was denied. The Court of Appeals likewise denied the Bankard employees petition.

Issue

Whether the unilateral adoption by an employer of an upgraded salary resulted in wage
distortion within the contemplation of Article 124 of the Labor Code.

Held

There exists a wage distortion but the Court will not interfere in the management
prerogative of the petitioner. Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION
ACT, amending, among others, Article 124 of the Labor Code), the term wage distortion was
explicitly defined as... a situation where an increase in prescribed wage rates results in the
elimination or severe contraction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of service, or other logical
bases of differentiation.
In the case of Prubankers Association v. Prudential Bank and Trust Company, it laid
down the four elements of wage distortion, to wit: (1.) An existing hierarchy of positions with
corresponding salary rates; (2) A significant change in the salary rate of a lower pay class without
a concomitant increase in the salary rate of a higher one; (3) The elimination of the distinction
between the two levels; and (4) The existence of the distortion in the same region of the country.
Normally, a company has a wage structure or method of determining the wages of its
employees. In a problem dealing with wage distortion, the basic assumption is that there exists
a grouping or classification of employees that establishes distinctions among them on some
relevant or legitimate bases. Involved in the classification of employees are various factors such
as the degrees of responsibility, the skills and knowledge required, the complexity of the job, or
other logical basis of differentiation. The differing wage rate for each of the existing classes of
employees reflects this classification.
The Bankard Employees believe that the classification in the company is not one based
on levels or ranks but on two groups of employees, the newly hired and the old, in each and
every level, and not between and among the different levels or ranks in the salary structure.
However as found by the NLRC, the entry of new employees to the company ipso facto
places them under any of the levels mentioned in the new salary scale which Bankard adopted
retroactive to April 1, 1993. Bankard has a recognized management prerogative of formulating
a wage structure, based on levels (I to V). There is no hierarchy of positions between the newly
hired and regular employees of Bankard, The NLRC also found the other requisites for wage
distortion lacking.
Petitioner cannot legally obligate Bankard to correct the alleged wage distortion as the
increase in the wages and salaries of the newly-hired was not due to a prescribed law or wage
order. Article 124 is entitled Standards/Criteria for Minimum Wage Fixing. It is found in
CHAPTER V on WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION
which principally deals with the fixing of minimum wage. Article 124 should thus be construed and
correlated in relation to minimum wage fixing, the intention of the law being that in the event of an

56

increase in minimum wage, the distinctions embodied in the wage structure based on skills,
length of service, or other logical bases of differentiation will be preserved.
If the compulsory mandate under Article 124 to correct wage distortion is applied to
voluntary and unilateral increases by the employer in fixing hiring rates which is inherently a
business judgment prerogative, then the hands of the employer would be completely tied even in
cases where an increase in wages of a particular group is justified due to a re-evaluation of the
high productivity of a particular group, or as in the present case, the need to increase the
competitiveness of Bankards hiring rate. An employer would be discouraged from adjusting the
salary rates of a particular group of employees for fear that it would result to a demand by all
employees for a similar increase, especially if the financial conditions of the business cannot
address an across-the-board increase.
Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs,
and to adjust the rates of employees affected thereby is even embodied under Section 2, Article
V (Salary and Cost of Living Allowance) of the parties Collective Bargaining Agreement (CBA).
Wage distortion is a factual and economic condition that may be brought about by different
causes. The mere factual existence of wage distortion does not, however, ipso facto result to an
obligation to rectify it, absent a law or other source of obligation which requires its rectification.

57

ODANGO VS. NATIONAL LABOR RELATIONS COMMISSION
Facts

33 monthly-paid employees of Antique Electric Cooperative, Inc. (ANTECO) are asking
for wage differentials. Their work is from Monday to Friday and half day on Saturdays. The
controversy started with the routine inspection made by the Regional Branch of DOLE finding
ANTECO liable for underpayment of monthly salaries of its employees and directed it to pay.
Because of the failure of ANTECO to do so, the employees file complaints with the NLRC Sub-
regional Branch VI in Iloilo City. The Labor Arbiter granted all employees, except one, wage
differentials amounting to P1,017,507.73 and 10% attorneys fees. ANTECO appealed to the
NLRC. The NLRC reversed the Labor Arbiters Decision. Petitioners elevated it to the Supreme
Court through a petition for certiorari which referred the case to the Court of Appeals. The
Court of Appeals dismissed the case. Aggrieved, petitioners made the present petition.
Petitioners allege that ANTECO was underpaying them because ANTECO used only 304 as a
divisor for their leave credits. And since Section 2 Rule IV of the Implementing Rules and
Regulations of the Labor Code (Section 2) states that monthly-paid employees are considered
paid for all the days in a month, there are 61 days, the difference between 365 and 304, that they
were not paid. The Labor Arbiter sided with petitioners. The NLRC reversed the decision arguing
that applying the formula in Section 2 that Daily Wage = (Wage x 12) /365 and substituting wage
with the current monthly salary of the petitioners, their daily wage is still above the minimum
wage. Hence, ANTECO is not liable for any amount since it is still paying its employees above the
minimum wage. The Court of Appeals dismissed the case based on a procedural lapse since the
petition was not able to allege the specific instances where the actions of the NLRC amounted to
grave abuse of discretion. The petition only averred to sweeping generalizations. The Supreme
Court sided with the Court of Appeals dismissing the case because of the procedural lapse. Not
disregarding the procedural lapse, the Supreme Court went on to discuss the issues raised just
to illustrate the extent by which petitioners have haphazardly pursued their claim.

Issue

Wether or not petitioners are entitled to claim wage differentials.

Ruling

No, they are not entitled to claim differentials. The Supreme Court discussed that
petitioners basis for their claim Section 2 has long been declared void in the 1984 case of
Insular Bank Asia vs Inciong because it amended the Labor Codes provisions on holiday pay by
including monthly-paid employees to those who are excluded from the benefits of the holiday pay.
But even though Section 2 was valid, their claim would still fail because of the rule of no work, no
pay prevalent in the Philippines. An exception to this rule is the 10 legal holidays in a year. It is a
mistaken notion that Section 2 gives monthly employees the right to be paid for un-worked non-
legal-holiday days. It also creates unjust classification. It is clearly in violation of the no work, no
pay rule and of the equal protection clause because sustaining the claim would make monthly-
paid employees a privileged class who are paid even if they do not work.
Regarding the 304 days, the Supreme Court says the minimum allowable divisor is 287
(365 days less 52 Sundays less 26 Saturdays). Since they are using 304, they are not even
underpaying the employees for their leave credits.

58

C. PLANAS COMMERCIAL vs. NATIONAL LABOR RELATIONS
COMMISSION
Facts

C. Planas Commercial, owned by Cohu, (the petitioner) is engaged in the wholesale of
plastic products and fruits of different kinds in Divisoria. Morente, Allauigan, Ofialda and several
others (the employees) are its laborers who accompany the delivery trucks and helped in the
loading and unloading of merchandise being distributed to clients.
The employees filed a complaint with the Arbitration Branch of the NLRC against the
petitioner for underpayment of wages, nonpayment of overtime pay, holiday pay, service
incentive leave pay and premium pay for holiday and rest day. The employees alleged that
petitioner was obliged to pay these to them as petitioner is employing more than 24 employees,
and thus covered by the minimum wage law.
Petitioner, on the other hand, alleged that the employees were not entitled to their claims for they
were employed in a retail and service establishment regularly employing less than ten workers.
Two of the employees eventually executed quitclaims after receiving P3,000.00 and
P6,000.00 respectively, from petitioner.

Issues
1) Are the employees entitled to the salary differentials (difference between minimum and
actual wages), holiday pay and service incentive leave?
2) Are the employees entitled to overtime pay and premium pay for holidays and rest days?
3) Are the quitclaims executed by the two employees in favor of the petitioner valid?

Ruling

1. Yes, the employees are entitled to salary differentials, holiday pay and service incentive
leave. The petitioner is covered under RA 6727 which provides for these benefits. Clearly,
for a retail/service establishment to be exempted from the coverage of the minimum wage
law, it must be shown that the establishment is regularly employing not more than ten
workers and had applied for exemptions with and as determined by the appropriate
Regional Board in accordance with the applicable rules and regulations issued by the
Commission. Petitioners main defense in controverting the employees claim for
underpayment of wages is that they are exempted from the application of the minimum
wage law, thus the burden of proving such exemption rests on petitioners. Petitioners had
not shown any evidence to show that they had applied for such exemption and if they had
applied, the same was granted
2. No, the employees are not entitled to overtime pay and premium pay for holidays and rest
days. There is no sufficient factual basis to award the claims because the employees
failed to substantiate that they rendered overtime and worked during holidays and rest
days. These claims, unlike claims for underpayment and non-payment of fringe benefits
mandated by law, need to be proven by the employees.
3. Yes, the quitclaims executed by the two employees in favor of the petitioner are valid. It
has been held that not all quitclaims are per se invalid or against public policy, except (1)
where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or (2) where the terms of settlement are unconscionable on their face. In these
cases, the law will step in to annul the questionable transactions. These two instances are
not present in the case of the two employees who executed the quitclaims. They failed to
refute petitioners allegation that the settlement was voluntarily made as they had not filed
any pleadings before the CA. These employees were required by SC to file their
comment on the instant petition, however, they failed to do so. They were then required
to show cause why they should not be disciplinarily dealt with or held in contempt.
However, they still failed to file their comment, thus, they were imposed fines. The SC
then ordered the National Bureau of Investigation to arrest and detain these two
employees and for the latter to file their comment. However, they could not be located at
their given address and they are not known in their locality, so the order of arrest and
commitment was returned unserved. Such inaction on the part of these two employees
are an indication that they already relented in their claims and gives credence to
petitioners claim that they had voluntarily executed the release and quitclaim.

59

EJR CRAFTS CORP. vs. COURT OF APPEALS

Facts
In 1997, private respondents filed a complaint for underpayment of wages, regular
holiday pay, overtime pay, non-payment of 13
th
month pay and service incentive leave pay
against petitioner before the Regional Office, NCR of the Department of Labor and Employment
(DOLE). Acting on the complaint, Regional Director issued an inspection authority to Senior Labor
Enforcement Officer.
On August 1997, an inspection was conducted on the premises of petitioners offices
wherein the following violations of labor standards law were discovered, to wit: non-presentation
of employment records (payrolls and daily time records); underpayment of wages, regular holiday
pay, and overtime pay; and non-payment of 13
th
month pay and service incentive leave pay. On
the same day, the Notice of Inspection Result was received by and explained to the manager of
petitioner corporation Mr. Jae Kwan Lee, with the corresponding directive that necessary
restitution be effected within five days from said receipt.
As no restitution was made, the Regional Office thereafter conducted summary
investigations. However, despite due notice, petitioner failed to appear for two consecutive
scheduled hearings. Petitioner failed to question the findings of the Labor Inspector received by
and explained to the corporations manager. Petitioner then filed a Motion for Reconsideration of
said Order arguing that the Regional Director has no jurisdiction over the case as private
respondents were allegedly no longer connected with petitioner corporation at the time of the
filing of the complaint and when the inspection was conducted, and that private respondents
claims are within the exclusive and original jurisdiction of the Labor Arbiters.

Issue

Whether or not the Regional Director has jurisdiction over the claims of the private
respondents.

Ruling

Regional Director has jurisdiction to hear and decide the instant case. The Court favors
the respondents in the money claims against the petitioner company. It is admitted that for the
Regional Director to exercise the power to order compliance, or the so-called enforcement
power under Article 128(b) of P.D. No. 442 as amended, it is necessary that the employer-
employee relationship still exists.
In support of its contention that it is the Labor Arbiter and not the Regional Director who has
jurisdiction over the claims of herein private respondents, petitioner contends that at the time the
complaint was filed, the private respondents were no longer its employees. Considering thus that
there still exists an employer-employee relationship between petitioner and private respondents
and that the case involves violations of labor standard provisions of the Labor Code, we agree
with the Undersecretary of Labor and the appellate court that the Regional Director has
jurisdiction to hear and decide the instant case in conformity with Article 128(b) of the Labor Code
which states:
Art. 128. Visitorial and Enforcement Power. (b) Notwithstanding the provisions of
Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall issue writs of execution to
the appropriate authority for the enforcement of their orders, except in cases where the employer
contests the findings of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the course of inspection.

60

PAG ASA STEEL WORKS VS COURT OF APPEALS
Facts
Petitioner is engaged in the manufacture of steel bars and wire rods while Pag-Asa Steel
Workers Union is the duly authorized bargaining agent of the rank-and-file employees. RTWPB of
NCR issued a wage order which provided for a P 13.00 increase of the salaries receiving
minimum wages. The Petitioner and the union negotiated on the increase. Petitioner forwarded a
letter to the union with the list of adjustments involving rank and file employees. In September
1999, the petitioner and union entered into an collective bargaining agreement where it provided
wage adjustments namely P15, P25, P30 for three succeeding year. On the first year, the
increase provided were followed until RTWPB issued another wage order where it provided for a
P25.50 per day increase in the salary of employees receiving the minimum wage and increased
the minimum wage to P223.50 per day. Petitioner paid the P25.50 per day increase to all of its
rank-and-file employees.
On November 2000, Wage Order No. NCR-08 was issued where it provided the increase of
P26.50 per day. The union president asked that the wage order be implemented where petitioner
rejected the request claiming that there was no wage distortion and it was not obliged to grant the
wage increase. The union submitted the matter for voluntary arbitration where it favored the
position of the company and dismissed the complaint. The matter was elevated to CA where it
favored the respondents.
Issue

Whether or not the company was obliged to grant the wage increase under the Wage
Order as a matter of practice.

Ruling

Company is not obliged to grant the wage increase. It is submitted that employers unless
exempt are mandated to implement the said wage order but limited to those entitled thereto. A
perusal of the record shows that the lowest paid employee before the implementation of Wage
Order #8 is P250.00/day and none was receiving below P223.50 minimum. This could only mean
that the union can no longer demand for any wage distortion adjustment. The provision of wage
order #8 and its implementing rules are very clear as to who are entitled to the P26.50/day
increase, i.e., "private sector workers and employees in the National Capital Region receiving the
prescribed daily minimum wage rate of P223.50 shall receive an increase of Twenty-Six Pesos
and Fifty Centavos (P26.50) per day," and since the lowest paid is P250.00/day the company is
not obliged to adjust the wages of the workers.
The provision in the CBA that "Any Wage Order to be implemented by the Regional
Tripartite Wage and Productivity Board shall be in addition to the wage increase adverted above"
cannot be interpreted in support of an across-the-board increase. Wage Order No. NCR-08
clearly states that only those employees receiving salaries below the prescribed minimum wage
are entitled to the wage increase provided therein, and not all employees across-the-board as
respondent Union would want petitioner to do. Considering therefore that none of the members of
respondent Union are receiving salaries below the P250.00 minimum wage, petitioner is not
obliged to grant the wage increase to them. Moreover, to ripen into a company practice that is
demandable as a 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 to a CBA, the same would not automatically ripen into a company practice.

61

METROPOLITAN BANK vs. NATIONAL WAGES AND PRODUCTIVITY
COMMISSION
Facts

On October 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II,
Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise
known as the Wage Rationalization Act, issued Wage Order No. R02-03 (Wage Order), as
follows: Section 1. Upon effectivity of this Wage Order, all employees/workers in the private
sector throughout Region II, regardless of the status of employment are granted an across-the-
board increase of P15.00 daily.
The Wage Order was published in a newspaper of general circulation on December 2, 1995
and took effect on January 1, 1996. Its Implementing Rules were approved on February 14, 1996.
Per Section 13 of the Wage Order, any party aggrieved by the Wage Order may file an appeal
with the National Wages and Productivity Commission (NWPC) through the RTWPB within 10
calendar days from the publication of the Wage Order.
Bankers Council in a letter inquiry to NWPC requested for ruling to seek exemption from
coverage of the wage order since the members bank are paying more than the regular wage.
NWPC replied that the member banks are covered by the wage order and does not fall with the
exemptible categories.
In another letter inquiry, Metrobank asked for the interpretation of the applicability of the wage
order. NWPC referred it to RTWPB. RTWPB in return clarified that establishments in Region 2
are covered by the wage order. Petitioner filed a petition with the CA and denied the petition.

Issue

Whether or not the wage order is void thus it has no legal effect and the RTWPB acted in
excess of its jurisdiction.

Ruling

The Court finds that Section 1, Wage Order No. R02-03 is void insofar as it grants a wage
increase to employees earning more than the minimum wage rate; and pursuant to the
separability clause of the Wage Order, Section 1 is declared valid with respect to employees
earning the prevailing minimum wage rate.
The powers of NWPC are enumerated in ART. 121. Powers and Functions of the
Commission. - The Commission shall have the following powers and functions: (d) To review
regional wage levels set by the Regional Tripartite Wages and Productivity Boards to determine if
these are in accordance with prescribed guidelines and national development plans; (f) To review
plans and programs of the Regional Tripartite Wages and Productivity Boards to determine
whether these are consistent with national development plans; (g) To exercise technical and
administrative supervision over the Regional Tripartite Wages and Productivity Boards.
R.A. No. 6727 declared it a policy of the State to rationalize the fixing of minimum wages and
to promote productivity-improvement and gain-sharing measures to ensure a decent standard of
living for the workers and their families; to guarantee the rights of labor to its just share in the
fruits of production; to enhance employment generation in the countryside through industrial
dispersal; and to allow business and industry reasonable returns on investment, expansion and
growth.
In line with its declared policy, R.A. No. 6727 created the NWPC, vested with the power to
prescribe rules and guidelines for the determination of appropriate minimum wage and
productivity measures at the regional, provincial or industry levels; and authorized the RTWPB to
determine and fix the minimum wage rates applicable in their respective regions, provinces, or
industries therein and issue the corresponding wage orders, subject to the guidelines issued by
the NWPC. Pursuant to its wage fixing authority, the RTWPB may issue wage orders which set
the daily minimum wage rates, based on the standards or criteria set by Article 124 of the Labor
Code.
The Court declared that there are two ways of fixing the minimum wage: the floor-wage
method and the salary-ceiling method. The floor-wage method involves the fixing of a
determinate amount to be added to the prevailing statutory minimum wage rates. On the other
hand, in the salary-ceiling method, the wage adjustment was to be applied to employees
receiving a certain denominated salary ceiling. In other words, workers already being paid more
than the existing minimum wage (up to a certain amount stated in the Wage Order) are also to be
given a wage increase.
In the present case, the RTWPB did not determine or fix the minimum wage rate by the floor-
wage method or the salary-ceiling method in issuing the Wage Order. The RTWPB did not set
a wage level nor a range to which a wage adjustment or increase shall be added. Instead, it

62

granted an across-the-board wage increase of P15.00 to all employees and workers of Region 2.
In doing so, the RTWPB exceeded its authority by extending the coverage of the Wage Order to
wage earners receiving more than the prevailing minimum wage rate, without a denominated
salary ceiling. As correctly pointed out by the OSG, the Wage Order granted additional benefits
not contemplated by R.A. No. 6727.


63

EQUITABLE BANK vs. SADAC


Facts

Ricardo Sadac was appointed Vice President of the Legal Department of petitioner Bank
effective 1 August 1981, and subsequently General Counsel thereof on 8 December 1981. On
June 1989, nine lawyers of petitioner Banks Legal Department, in a letter-petition to the
Chairman of the Board of Directors, accused respondent Sadac of abusive conduct and
ultimately, petitioned for a change in leadership of the department. On the ground of lack of
confidence in Sadac, under the rules of client and lawyer relationship, petitioner Bank instructed
respondent Sadac to deliver all materials in his custody in all cases in which the latter was
appearing as its counsel of record. In reaction thereto, Sadac requested for a full hearing and
formal investigation but the same remained unheeded. On 9 November 1989, respondent Sadac
filed a complaint for illegal dismissal with damages against petitioner Bank and individual
members of the Board of Directors thereof. After learning of the filing of the complaint, petitioner
Bank terminated the services of respondent Sadac. Finally, on 10 August 1989, Sadac was
removed from his office
Labor Arbiter rendered decision that Sadacs termination was illegal and entitled to
reinstatement and payment of full back wages. NLRC affirmed the decision upon appeal by the
Bank. Sadac filed for execution of judgment where it gave its computation which amounted to P
6.03 M representing his back wages and the increases he should have received during the time
he was illegally dismissed. The Bank opposed to Sadacs computation. The Labor Arbiter favor
Sadacs computation. NLRC, upon appeal by the bank, reversed the decision. CA reversed the
decision of NLRC. Hence, this petition.

Issue

Whether or not the computation of back wages shall include the general increases.

Ruling

To resolve the issue, the court revisits its pronouncements on the interpretation of the term
backwages. Backwages in general are granted on grounds of equity for earnings which a worker
or employee has lost due to his illegal dismissal. It is not private compensation or damages but is
awarded in furtherance and effectuation of the public objective of the Labor Code. Nor is it a
redress of a private right but rather in the nature of a command to the employer to make public
reparation for dismissing an employee either due to the formers unlawful act or bad faith.
In the case of Bustamante v. National Labor Relations Commission, It said that the Court
deems it appropriate to reconsider such earlier ruling on the computation of back wages by now
holding that conformably with the evident legislative intent as expressed in Rep. Act No. 6715,
back wages to be awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived by him elsewhere during the period of his illegal
dismissal. The underlying reason for this ruling is that the employee, while litigating the legality
(illegality) of his dismissal, must still earn a living to support himself and family, while full
backwages have to be paid by the employer as part of the price or penalty he has to pay for
illegally dismissing his employee. The clear legislative intent of the amendment in Rep. Act No.
6715 is to give more benefits to workers than was previously given them. Thus, a closer
adherence to the legislative policy behind Rep. Act No. 6715 points to full backwages as
meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere by
the concerned employee during the period of his illegal dismissal.
There is no vested right to salary increases. Sadac may have received salary increases in the
past only proves fact of receipt but does not establish a degree of assuredness that is inherent in
backwages. The conclusion is that Sadacs computation of his full backwages which includes his
prospective salary increases cannot be permitted.

64

S.I.P FOOD HOUSE ET. AL vs. BATOLINA
Facts
The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by the employees of
the Government Service Insurance System (GSIS). Incidental to its purpose, GMPC wanted to
operate a canteen in the new GSIS Building, but had no capability and expertise in this
area. Thus, it engaged the services of the petitioner S.I.P. Food House (SIP), owned by the
spouses Alejandro and Esther Pablo, as concessionaire. The respondents Restituto Batolina and
nine (9) others (the respondents) worked as waiters and waitresses in the canteen
In February 2004, GMPC terminated SIPs contract as GMPC concessionaire, because
of GMPCs decision to take direct investment in and management of the GMPC canteen; SIPs
continued refusal to heed GMPCs directives for service improvement; and the alleged
interference of the Pablos two sons with the operation of the canteen. The termination of the
concession contract caused the termination of the respondents employment, prompting them to
file a complaint for illegal dismissal, with money claims, against SIP and the spouses Pablo.
The employer of the respondents claimed that it was merely a labor-only contractor of
GMPC. Hence, it could not be liable.

Issue

Whether or not there exist an employer-employee relationship.

Ruling
Respondents have been the concessionaire of GMPC canteen for nine (9) years. During this
period, complainants were employed at the said canteen. On February 29, 2004, respondents
concession with GMPC was terminated. When respondents were prevented from entering the
premises as a result of the termination of their concession, they sent a protest letter dated April
14, 2004 to GMPC thru their counsel. Pertinent portion of the letter:
We write this letter in behalf of our client Mr. & Mrs. Alejandro C. Pablo, the concessionaires
who used to occupy and/or rent the area for a cafeteria/canteen at the 2
nd
Floor of
the GSIS Building for the past several years.
Last March 12, 2004, without any court writ or order, and with the aid of your armed agents,
you physically barred our clients & their employees/helpers from entering the said premises and
from performing their usual duties of serving the food requirements of GSIS personnel and
others.
Clearly, no less than respondents, thru their counsel, admitted that complainants herein were
their employees.
That complainants were employees of respondents is further bolstered by the fact that
respondents do not deny that they were the ones who paid complainants salary. When
complainants charged them of underpayment, respondents even interposed the defense of file
(sic) board and lodging given to complainants.
The CA ruled out SIPs claim that it was a labor-only contractor or a mere agent of
GMPC. We agree with the CA; SIP and its proprietors could not be considered as mere agents of
GMPC because they exercised the essential elements of an employment relationship with the
respondents such as hiring, payment of wages and the power of control, not to mention that SIP
operated the canteen on its own account as it paid a fee for the use of the building and for the
privilege of running the canteen. The fact that the respondents applied with GMPC in February
2004 when it terminated its contract with SIP, is another clear indication that the two entities were
separate and distinct from each other. We thus see no reason to disturb the CAs findings.

65

SLL INTERNATIONAL CABLES SPECIALIST vs. NATIONAL LABOR
RELATIONS COMMISSION

Facts
Sometime in 1996, and January 1997, private respondents were hired by petitioner
Lagon as apprentice or trainee cable/lineman. The three were paid the full minimum wage and
other benefits but since they were only trainees, they did not report for work regularly but came in
as substitutes to the regular workers or in undertakings that needed extra workers to expedite
completion of work. Soon after they were engaged as private employees for their Islacom project
in Bohol. Private respondents started on March 15, 1997 until December 1997. Upon the
completion of their project, their employment was also terminated. Private respondents received
the amount of P145.00, the minimum prescribed daily wage for Region VII. In July 1997, the
amount of P145 was increased to P150.00 and in October of the same year, the latter was
increased to P155.00.
On May 21, 1999, private respondents for the 4
th
time worked with Lagons project in
Camarin, Caloocan City with Furukawa Corporation as the general contractor. Their contract
would expire on February 28, 2000, the period of completion of the project. From May 21, 1997-
December 1999, private respondents received the wage of P145.00. At this time, the minimum
prescribed rate for Manila was P198.00. In January to February 28, the three received the wage
of P165.00. The existing rate at that time was P213.00.
For reasons of delay on the delivery of imported materials from Furukawa Corporation,
the Camarin project was not completed on the scheduled date of completion. Face[d] with
economic problem[s], Lagon was constrained to cut down the overtime work of its worker[s][,]
including private respondents. Thus, when requested by private respondents on February 28,
2000 to work overtime, Lagon refused and told private respondents that if they insist, they would
have to go home at their own expense and that they would not be given anymore time nor
allowed to stay in the quarters. This prompted private respondents to leave their work and went
home to Cebu. On March 3, 2000, private respondents filed a complaint for illegal dismissal, non-
payment of wages, holiday pay, 13
th
month pay for 1997 and 1998 and service incentive leave
pay as well as damages and attorneys fees.

Issues

1. Whether or not the respondent should be allowed to recover the differential due to the
failure of the petitioner to pay the minimum wage.
2. Whether or not value of the facilities that the private respondents enjoyed should be
included in the computation of the wages received by them.

Ruling

As a general rule, on payment of wages, a party who alleges payment as a defense has
the burden of proving it. Specifically with respect to labor cases, the burden of proving payment of
monetary claims rests on the employer, the rationale being that the pertinent personnel files,
payrolls, records, remittances and other similar documentswhich will show that overtime,
differentials, service incentive leave and other claims of workers have been paidare not in the
possession of the worker but in the custody and absolute control of the employer.
In this case, petitioners, aside from bare allegations that private respondents received
wages higher than the prescribed minimum, failed to present any evidence, such as payroll or
payslips, to support their defense of payment. Thus, petitioners utterly failed to discharge the
onus probandi.
On whether the value of the facilities should be included in the computation of the
wages received by private respondents, Section 1 of DOLE Memorandum Circular No. 2
provides that an employer may provide subsidized meals and snacks to his employees provided
that the subsidy shall not be less that 30% of the fair and reasonable value of such facilities. In
such cases, the employer may deduct from the wages of the employees not more than 70% of
the value of the meals and snacks enjoyed by the latter, provided that such deduction is with the
written authorization of the employees concerned.
Moreover, before the value of facilities can be deducted from the employees wages, the
following requisites must all be attendant: first, proof must be shown that such facilities are
customarily furnished by the trade; second, the provision of deductible facilities must be
voluntarily accepted in writing by the employee; and finally, facilities must be charged at
reasonable value.
[]
Mere availment is not sufficient to allow deductions from employees wages.
[]

These requirements, however, have not been met in this case. SLL failed to present any
company policy or guideline showing that provisions for meals and lodging were part of the

66

employees salaries. It also failed to provide proof of the employees written authorization, much
less show how they arrived at their valuations. At any rate, it is not even clear whether private
respondents actually enjoyed said facilities.
In short, the benefit or privilege given to the employee which constitutes an extra
remuneration above and over his basic or ordinary earning or wage is supplement; and when said
benefit or privilege is part of the laborers basic wages, it is a facility. The distinction lies not so
much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose
for which it is given. In the case at bench, the items provided were given freely by SLL for the
purpose of maintaining the efficiency and health of its workers while they were working at their
respective projects.
For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any
rate, these were cases of dismissal with just and authorized causes. The present case involves
the matter of the failure of the petitioners to comply with the payment of the prescribed minimum
wage.
The Court sustains the deletion of the award of differentials with respect to respondent Roldan
Lopez. As correctly pointed out by the CA, he did not work for the project in Antipolo.


67

VERGARA, JR. vs. COCA-COLA BOTTLERS PHILS INC.

Facts
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola Bottlers
Philippines, Inc. from May 1968 until he retired on January 31, 2002 as a District Sales
Supervisor (DSS) for Las Pias City, Metro Manila.
As stipulated in respondents existing Retirement Plan Rules and Regulations at the time, the
Annual Performance Incentive Pay of RSMs, DSSs, and SSSs shall be considered in the
computation of retirement benefits, as follows: Basic Monthly Salary + Monthly Average
Performance Incentive (which is the total performance incentive earned during the year
immediately preceding 12 months) No. of Years in Service.
Claiming his entitlement to an additional PhP474,600.00 as Sales Management Incentives
(SMI) and to the amount of PhP496,016.67 which respondent allegedly deducted illegally,
representing the unpaid accounts of two dealers within his jurisdiction, petitioner filed a complaint
before the NLRC on June 11, 2002 for the payment of his Full Retirement Benefits, Merit
Increase, Commission/Incentives, Length of Service, Actual, Moral and Exemplary Damages, and
Attorneys Fees.
Apparently, Petitioner argued that the granting of SMI to all retired DSSs regardless of
whether or not they qualify to the same had ripened into company practice. The only two pieces
of evidence that he stubbornly presented throughout the entirety of this case are the sworn
statements of Renato C. Hidalgo (Hidalgo) and Ramon V. Velazquez (Velasquez), former DSSs
of respondent who retired in 2000 and 1998, respectively. They claimed that the SMI was
included in their retirement package even if they did not meet the sales and collection qualifiers.
Therefore, the failure of employer to grant him his SMI is a violation on the principle of non-
diminution of benefits.)

Issue
Whether or not the granting of SMI to all retired DSSs regardless of whether or not they
qualify to the same had ripened into company practice

Ruling
Generally, employees have a vested right over existing benefits voluntarily granted to them
by their employer. Thus, any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution
of benefits is actually founded on the Constitutional mandate to protect the rights of workers, to
promote their welfare, and to afford them full protection. In turn, said mandate is the basis of
Article 4 of the Labor Code which states that all doubts in the implementation and interpretation
of this Code, including its implementing rules and regulations, shall be rendered in favor of labor.
Chanroblesvirtualawlibrary.
There is diminution of benefits when the following requisites are present: (1) the grant or
benefit is founded on a policy or has ripened into a practice over a long period of time; (2) the
practice is consistent and deliberate; (3) the practice is not due to error in the construction or
application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is
done unilaterally by the employer.
To be considered as a regular company practice, the employee must prove by substantial
evidence that the giving of the benefit is done over a long period of time, and that it has been
made consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to
the length of time that company practice should have been exercised in order to constitute
voluntary employer practice. The common denominator in previously decided cases appears to
be the regularity and deliberateness of the grant of benefits over a significant period of time. It
requires an indubitable showing that the employer agreed to continue giving the benefit knowing
fully well that the employees are not covered by any provision of the law or agreement requiring
payment thereof. In sum, the benefit must be characterized by regularity, voluntary and deliberate
intent of the employer to grant the benefit over a considerable period of time.blesvirtualawlibrary
Upon review of the entire case records, We find no substantial evidence to prove that the
grant of SMI to all retired DSSs regardless of whether or not they qualify to the same had ripened
into company practice.
The granting of the SMI in the retirement package of Velazquez was an isolated incident and
could hardly be classified as a company practice that may be considered an enforceable
obligation. To repeat, the principle against diminution of benefits is applicable only if the grant or
benefit is founded on an express policy or has ripened into a practice over a long period of time
which is consistent and deliberate; it presupposes that a company practice, policy and tradition

68

favorable to the employees has been clearly established; and that the payments made by the
company pursuant to it have ripened into benefits enjoyed by them. Certainly, a practice or
custom is, as a general rule, not a source of a legally demandable or enforceable right. Company
practice, just like any other fact, habits, customs, usage or patterns of conduct, must be proven
by the offering party who must allege and establish specific, repetitive conduct that might
constitute evidence of habit or company practice.

69

ROYAL PLANT WORKERS UNION vs. COCA-COLA BOTTLERS
PHILIPPINES INC.

Facts:
Under the employ of each bottling plant of Coca-Cola are bottling operators. In the case
of the plant in Cebu City, there are 20 bottling operators who work for its Bottling Line 1 while
there are 12-14 bottling operators who man its Bottling Line 2. All of them are male and they are
members of herein respondent Royal Plant Workers Union (ROPWU).
In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon their
request. In 1988, the bottling operators of then Bottling Line 1 followed suit and asked to be
provided also with chairs. Their request was likewise granted. Sometime in September 2008, the
chairs provided for the operators were removed pursuant to a national directive of petitioner. This
directive is in line with the I Operate, I Maintain, I Clean program of petitioner for bottling
operators, wherein every bottling operator is given the responsibility to keep the machinery and
equipment assigned to him clean and safe. The program reinforces the task of bottling operators
to constantly move about in the performance of their duties and responsibilities.
With this task of moving constantly to check on the machinery and equipment assigned to
him, a bottling operator does not need a chair anymore, hence, petitioners directive to remove
them. Furthermore, CCBPI rationalized that the removal of the chairs is implemented so that the
bottling operators will avoid sleeping, thus, prevent injuries to their persons. As bottling operators
are working with machines which consist of moving parts, it is imperative that they should not fall
asleep as to do so would expose them to hazards and injuries. In addition, sleeping will hamper
the efficient flow of operations as the bottling operators would be unable to perform their duties
competently.

Issue

Whether or not the removal of the bottling operators chairs was a valid exercise of
management prerogative.

Ruling

Yes. According to the Union, such removal constitutes a violation of the 1) Occupational
Health and Safety Standards which provide that every worker is entitled to be provided by the
employer with appropriate seats, among others; 2) policy of the State to assure the right of
workers to a just and humane condition of work as provided for in Article 3 of the Labor Code;8 3)
Global Workplace Rights Policy of CCBPI which provides for a safe and healthy workplace by
maintaining a productive workplace and by minimizing the risk of accident, injury and exposure to
health risks; and 4) diminution of benefits provided in Article 100 of the Labor Code.
The Court has held that management is free to regulate, according to its own discretion
and judgment, all aspects of employment, including hiring, work assignments, working methods,
time, place, and manner of work, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of workers, and discipline, dismissal
and recall of workers. The exercise of management prerogative, however, is not absolute as it
must be exercised in good faith and with due regard to the rights of labor.
In the present controversy, it cannot be denied that CCBPI removed the operators chairs
pursuant to a national directive and in line with its I Operate, I Maintain, I Clean program,
launched to enable the Union to perform their duties and responsibilities more efficiently. The
chairs were not removed indiscriminately. They were carefully studied with due regard to the
welfare of the members of the Union. The removal of the chairs was compensated by: a) a
reduction of the operating hours of the bottling operators from a two-and-one-half (2 )-hour
rotation period to a one-and-a-half (1 ) hour rotation period; and b) an increase of the break
period from 15 to 30 minutes between rotations.
Apparently, the decision to remove the chairs was done with good intentions as CCBPI
wanted to avoid instances of operators sleeping on the job while in the performance of their
duties and responsibilities and because of the fact that the chairs were not necessary considering
that the operators constantly move about while working. In short, the removal of the chairs was
designed to increase work efficiency. Hence, CCBPIs exercise of its management prerogative
was made in good faith without doing any harm to the workers rights.
The rights of the Union under any labor law were not violated. There is no law that
requires employers to provide chairs for bottling operators. There was no violation either of the
Health, Safety and Social Welfare Benefit provisions under Book IV of the Labor Code of the
Philippines. As shown in the foregoing, the removal of the chairs was compensated by the

70

reduction of the working hours and increase in the rest period. The directive did not expose the
bottling operators to safety and health hazards.
The Union should not complain too much about standing and moving about for one and one-half
(1 ) hours because studies show that sitting in workplaces for a long time is hazardous to ones
health. The CBA between the Union and CCBPI contains no provision whatsoever requiring the
management to provide chairs for the operators in the production/manufacturing line while
performing their duties and responsibilities.
The Court completely agrees with the CA ruling that the removal of the chairs did not
violate the general principles of justice and fair play because the bottling operators working time
was considerably reduced from two and a half (2 ) hours to just one and a half (1 ) hours and
the break period, when they could sit down, was increased to 30 minutes between rotations. The
bottling operators new work schedule is certainly advantageous to them because it greatly
increases their rest period and significantly decreases their working time. A break time of thirty
(30) minutes after working for only one and a half (1 ) hours is a just and fair work schedule.
The operators chairs cannot be considered as one of the employee benefits covered in
Article 10016 of the Labor Code. In the Courts view, the term benefits mentioned in the non-
diminution rule refers to monetary benefits or privileges given to the employee with monetary
equivalents.
Such benefits or privileges form part of the employees wage, salary or compensation making
them enforceable obligations.
This Court has already decided several cases regarding the non-diminution rule where
the benefits or privileges involved in those cases mainly concern monetary considerations or
privileges with monetary equivalents. Without a doubt, equating the provision of chairs to the
bottling operators is something within the ambit of benefits in the context of Article 100 of the
Labor Code is unduly stretching the coverage of the law. The interpretations of Article 100 of the
Labor Code do not show even with the slightest hint that such provision of chairs for the bottling
operators may be sheltered under its mantle.

71

THE NATIONAL WAGES AND PRODUCTIVITY COMMISSION ET. AL.
vs. THE ALLIANCE OF PROGRESSIVE LABOR ET. AL.

Facts

On June 9, 1989, Republic Act No. 6727 was enacted into law. In order to rationalize
wages throughout the Philippines, Republic Act No. 6727 created the NWPC and the RTWPBs of
the different regions.
Article 121 of the Labor Code, as amended by Section 3 of Republic Act No. 6727,
empowered the NWPC to formulate policies and guidelines on wages, incomes and productivity
improvement at the enterprise, industry and national levels; to prescribe rules and guidelines for
the determination of appropriate minimum wage and productivity measures at the regional,
provincial or industry levels; and to review regional wage levels set by the RTWPBs to determine
whether the levels were in accordance with the prescribed guidelines and national development
plans, among others.
On the other hand, Article 122(b) of the Labor Code, also amended by Section 3 of Republic Act
No. 6727, tasked the RTWPBs to determine and fix minimum wage rates applicable in their
region, provinces or industries therein; and to issue the corresponding wage orders, subject to the
guidelines issued by the NWPC.
Consequently, the RTWPBNCR issued Wage Order No. NCR07 on October 14, 1999
imposing an increase of P25.50/day on the wages of all private sector workers and employees in
the NCR and pegging the minimum wage rate in the NCR at P223.50/day.
6
However, Section 2
and Section 9 of Wage Order No. NCR07 exempted certain sectors and industries from its
coverage.
Section 9. Upon application with and as determined by the Board, based on documentation
and other requirements in accordance with applicable rules and regulations issued by the
Commission, the following may be exempt from the applicability of this Order:
1. Distressed establishments as defined in the NPWC Guidelines No. 01, series of 1996;
2. Exporters including indirect exporters with at least 50% export sales and with forward
contracts with their foreign buyers/principals entered into on or twelve (12) months before
the date of publication of this Order may be exempt during the lifetime of said contract but
not to exceed twelve (12) months from the effectivity of this Order.
Feeling aggrieved by their noncoverage by the wage adjustment, the Alliance of Progressive
Labor (APL) and the Tunay na Nagkakaisang Manggagawa sa Royal (TNMR) filed an appeal with
the NWPC assailing Section 2(A) and Section 9(2) of Wage Order No. NCR07. They contended
that neither the NWPC nor the RTWPBNCR had the authority to expand the noncoverage and
exemptible categories under the wage order; hence, the assailed sections of the wage order
should be voided.
The NWPC upheld the validity of Section 2(A) and Section 9(2) of Wage Order No. NCR07. It
observed that the RTWPBs power to determine exemptible categories was adjunct to its wage
fixing function conferred by Article 122(e) of the Labor Code, as amended by Republic Act No.
6727; that such authority of the RTWPB was also recognized in NWPC Guidelines No. 01, Series
of 1996.
The APL and TNMR assailed the decisions of the NWPC on certiorari in the CA, contending that
the power of the RTWPBNCR to determine exemptible categories was not an adjunct to its
wage fixing function. CA favored the respondents and granted the petition for certiorari.

Issue

Whether or not the RTWPB-NCR had the authority to provide additional exemptions from
the minimum wage adjustments embodied in Wage Order No. NCR-07.


Ruling

The RTWPBNCR had the authority to provide additional exemptions from the minimum
wage adjustments embodied in Wage Order No. NCR07. The NWPC promulgated NWPC
Guidelines No. 00195 (Revised Rules of Procedure on Minimum Wage Fixing) to govern the
proceedings in the NWPC and the RTWPBs in the fixing of minimum wage rates by region,
province and industry. Section 1 of Rule VIII of NWPC Guidelines No. 00195 recognized the
power of the RTWPBs to issue exemptions from the application of the wage orders subject to the
guidelines issued by the NWPC.

72

Under the guidelines, the RTWPBs could issue exemptions from the application of the
wage orders as long as the exemptions complied with the rules of the NWPC. In its rules, the
NWPC enumerated four exemptible establishments, but the list was not exclusive. The RTWPBs
had the authority to include in the wage orders establishments that belonged to, or to exclude
from the four enumerated exemptible categories.
If the exemption was outside of the four exemptible categories, like here, the exemptible
category should be: (1) in accord with the rationale for exemption; (2) reviewed/approved by the
NWPC; and (3) upon review, the RTWPB issuing the wage order must submit a strong and
justifiable reason or reasons for the inclusion of such category. It is the compliance with the
second requisite that is at issue here.
The NWPC, in arriving at its decision, weighed the arguments of the parties and ruled that the
RTWPBNCR had substantial and justifiable reasons in exempting the sectors and
establishments enumerated in Section 2(A) and Section 9(2) based on the public hearings and
consultations, meetings, socialeconomic data and informations gathered prior to the issuance of
Wage Order No. NCR07. The very fact that the validity of the assailed sections of Wage Order
No. NCR07 had been already passed upon and upheld by the NWPC meant that the NWPC had
already given the wage order its necessary legal imprimatur. Accordingly, the requisite approval
or review was complied with.
The RTWPBs are the thinking group of men and women guided by statutory standards
and bound by the rules and guidelines prescribed by the NWPC. In the nature of their functions,
the RTWPBs investigate and study all the pertinent facts to ascertain the conditions in their
respective regions. Hence, they are logically vested with the competence to determine the
applicable minimum wages to be imposed as well as the industries and sectors to exempt from
the coverage of their wage orders.
Lastly, Wage Order No. NCR07 is presumed to be regularly issued in the absence of
any strong showing of grave abuse of discretion on the part of RTWPBNCR. The presumption of
validity is made stronger by the fact that its validity was upheld by the NWPC upon review.

73

WAGE ENFORCEMENT AND RECOVERY
RAJAH HUMABON HOTEL vs. TRAJANO

Facts
The respondent-employees filed a complaint before the regional director of the DOLE
against the petitioner-employer due to underpaid wages and non-payment of benefits. However,
the jurisdiction of the regional director was challenged by the petitioner-employee on the ground
that it was the Labor Arbiter who has the exclusive jurisdiction.
As a consequence of the complaint, the DOLE-region 7 instructed the petitioner
employer to allow its authorized representative to visit their premises and to conduct inspection of
the employment records of their employees. But during the scheduled visit, a picket was staged
by the other workers outside the premises of the petitioner-employer which prevented the
inspectors entry in the premises.
On april 16, 1989, the business of the petitioner-employer was closed. The petitioner filed a
motion to dismiss of the complaint on the ground that the regional director has no longer
jurisdiction over the case as the employer-employee relationship between the parties has been
terminated due to the closure of the business and also on the ground that the aggregate claims of
each of the employee exceeded P5,000 therefore it argued that the Labor Arbiter has the power
to hear and determine the case.
The regional director deny the petitioners motion to dismiss, the regional director ruled
that at the time the complaint was filed, the employer-employee relationship between the parties
still exist. The subsequent closure of the business or the subsequent termination of their
relationship did not divest the regional director of its authority to hear and decided the case.
The DOLE affirmed the decision of the Regional director in denying the motion to dismiss
filed by the petiotioner-employer. The DOLE affirmed that the latter has jurisdiction over the case
since the employer-employee relationship was still in exist when the complaint was instituted by
the respondents-employees. Also the DOLE found no merit on the petitioners contention that the
Labor Arbiter has the exclusive jurisdiction since the amount claim by the employees exceeded
P5,000.00, because the provision of par. 6, Art. 217, refers only to simple money claims of
domestic workers. In this case the DOLE held that respondents employers are not domestic
workers. Thus, the foregoing provision should not be made to apply to them. (note: that the
money claims of each employees of this case exceeded P5,000)

Issue
Who between the regional director and the labor arbiter has jurisdiction?

Ruling

The regional directors under Articles 129 and 217 of the Labor Code as amended by
Republic Act No. 6715, can try money claims only if the following requisites concur:
1. The claim is presented by an employee or person employed in domestic or household
service, or househelper under the code;
2. The claimant, no longer being employed, does not seek reinstatement; and
3. The aggregate money claim of the employee or housekeeper does not exceed five
thousand pesos (P5,000.00).
The aggregate claims of each of the employees of petitioner-employer are above the
amount of P5,000.00 fixed by Republic Act No. 6715. Therefore, the regional director had no
jurisdiction over the case. The exclusive jurisdiction to hear and decide employees claims arising
from employer-employee relations, exceeding the aggregate amount of P5,000.00 for each
employee, is vested in the Labor Arbiter (Article 217 (a) (6). This exclusive jurisdiction of the
Labor Arbiter is confirmed by the provisions of Article 129 which excludes from the jurisdiction of
the Regional Director or any hearing officer of the Department of Labor the power to hear and
decide claims of employees arising from employer-employee relations exceeding the amount of
P5,000.00 for each employee.
The provisions of Article 217 (a) (6) and Article 129 of the Labor Code which, as above-
pointed out, confer exclusive jurisdiction on the Labor Arbiter to hear and decide such employees
claims (exceeding P5,000.00 for each employee). To sustain the respondents-employees
position that Article 217 of the Labor Code which conferred to the labor arbiter the original and
exclusive jurisdiction over claims in excess of P5,000 does not operate to oust the regional
director of visitorial and enforcement powers vis-a-vis labor standard infractions under Article 128

74

(b) involving amounts exceeding such sum, would in effect, sanction a situation where all
employees claims, regardless of amount, can be heard and determined by the Secretary of
Labor under his visitorial power. This does not, however, appear to be the legislative intent.
The power to hear and decide employees claims exceeding P5,000.00 for each
employee should be left to the Labor Arbiter as the exclusive repository of the power to hear and
decide such claims. In other words, the inspection conducted by the Secretary of Labor, through
labor regulation officers or industrial safety engineers, may yield findings of violations of labor
standard under labor laws; the Secretary of Labor may order compliance with said labor
standards, if necessary, through appropriate writs of execution but when the findings disclose an
employee claim of over P5,000.00, the matter should be referred to the Labor Arbiter in
recognition of his exclusive jurisdiction over such claims.

75

GUICO vs. SECRETARY OF LABOR

Facts
The case started when the Office of the Regional Director, Department of Labor and
Employment (DOLE), Region I, San Fernando, La Union, received a letter-complaint dated April
25, 1995, requesting for an investigation of petitioners establishment, Copylandia Services &
Trading, for violation of labor standards laws. Pursuant to the visitorial and enforcement powers
of the Secretary of Labor and Employment or his duly authorized representative under Article 128
of the Labor Code, as amended, inspections were conducted at Copylandias outlets on April 27
and May 2, 1995. The inspections yielded the following violations involving twenty-one (21)
employees who are copier operators: (1) underpayment of wages; (2) underpayment of 13
th

month pay; and (3) no service incentive leave with pay.
On October 30, 1995, Regional Director Guerrero N. Cirilo issued an Orderfavorable to
the 21 employees. First, he ruled that the purported Receipt, Waiver and Quitclaim dated
December 21 and 22, 1994, could not cause the dismissal of the labor standards case against
the petitioner since the same were executed before the filing of the said case. Moreover, the
employees repudiated said waiver and quitclaim. Second, he held that despite the salary increase
granted by the petitioner, the daily salary of the employees was still below the minimum daily
wage rate of P119.00 under Wage Order No. RB-I-03. Thirdly, he held that the removal of the
commission and incentive schemes during the pendency of the case violated the prohibition
against elimination or diminution of benefits under Article 100 of the Labor Code, as amended.
The Regional Director awarded the claimants ONE MILLION EIGHTY ONE THOUSAND SEVEN
HUNDRED FIFTY SIX PESOS AND SEVENTY CENTAVOS (P1,081,756.70) representing their
backwages, well over P5,000.
On October 24, 1997, the respondent Secretary denied the Motion for Reconsideration.
He ruled that the Regional Director has jurisdiction over the case citing Article 128 (b) of the
Labor Code, as amended. He pointed out that Republic Act No. 7730 repealed the jurisdictional
limitations imposed by Article 129 on the visitorial and enforcement powers of the Secretary of
Labor and Employment or his duly authorized representatives. In addition, he held that petitioner
is now estopped from questioning the computation made by the Regional Director as a result of
the compromise agreement he entered into with the employees. Lastly, he reiterated his ruling
that the Receipt, Waiver and Quitclaim signed by the employees was not valid.

Issue

Whether or not the Regional Director of the Department of Labor and employment can
award claims even more than P5,000.

Ruling

Yes, the Regional Director can award claims of over P5,000. The visitorial power of the
Secretary of Labor to order and enforce compliance with labor standard laws cannot be exercised
where the individual claim exceeds P5,000.00, can no longer be applied in view of the enactment
of R.A. No. 7730 amending Article 128(b) of the Labor Code, viz:
Art. 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of the Code and other labor
legislation based on the findings of the labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate authority for the enforcement of
their orders, except in cases where the employer contests the findings of the labor employment
and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection.

76

EX-BATAAN VETRERANS SECURITY AGENCY vs. SEC. OF LABOR,
ET AL.
Facts
On 20 February 1996, private respondents led by Alexander Pocding (Pocding) instituted
a complaint

for underpayment of wages against EBVSAI before the Regional Office of the
Department of Labor and Employment (DOLE). On 7 March 1996, the Regional Office conducted
a complaint inspection at the Ambuklao Plant where the several violations were discovered.
On 19 August 1996, the Director of the Regional Office (Regional Director) issued an
Order. (Compliance Order). EBVSAI filed a motion for reconsideration

and alleged that the
Regional Director does not have jurisdiction over the subject matter of the case because the
money claim of each private respondent exceeded P5,000. EBVSAI pointed out that the
Regional Director should have endorsed the case to the Labor Arbiter.
Issues
Whether the Secretary of Labor or his duly authorized representatives have jurisdiction
over the money claims of private respondents which exceed P5,000.
Ruling
In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that: While it is true that
under Articles 129 and 217 of the Labor Code, the Labor Arbiter has jurisdiction to hear and
decide cases where the aggregate money claims of each employee exceedsP5,000.00, said
provisions of law do not contemplate nor cover the visitorial and enforcement powers of the
Secretary of Labor or his duly authorized representatives.
Art. 128 Visitorial and enforcement power. --- x x x (b) Notwithstanding the provisions of
Article[s] 129 and 217 of this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give effect to [the labor
standards provisions of this Code and other] labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall issue writs of execution to
the appropriate authority for the enforcement of their orders, except in cases where the employer
contests the findings of the labor employment and enforcement officer and
raises issues supported by documentary proofs which were not considered in the course of
inspection.
The aforequoted provision explicitly excludes from its coverage Articles 129 and 217 of
the Labor Code by the phrase (N)otwithstanding the provisions of Articles 129 and 217of this
Code to the contrary x x x thereby retaining and further strengthening the power of the Secretary
of Labor or his duly authorized representatives to issue compliance orders to give effect to the
labor standards provisions of said Code and other labor legislation based on the findings of labor
employment and enforcement officer or industrial safety engineer made in the course of
inspection.
However, if the labor standards case is covered by the exception clause in Article 128(b) of the
Labor Code, then the Regional Director will have to endorse the case to the appropriate
Arbitration Branch of the NLRC. In order to divest the Regional Director or his representatives of
jurisdiction, the following elements must be present: the employer contests the findings of the
labor regulations officer and raises issues thereon; in order to resolve such issues, there is a
need to examine evidentiary matters; and such matters are not verifiable in the normal course of
inspection.

The rules also provide that the employer shall raise such objections during the hearing of
the case or at any time after receipt of the notice of inspection results. In this case, the Regional
Director validly assumed jurisdiction over the money claims of private respondents even if the
claims exceeded P5,000 because such jurisdiction was exercised in accordance with Article
128(b) of the Labor Code and the case does not fall under the exception clause.

77

SAPIO vs. UNDALOC CONSTRUCTION ET. AL.
Facts
The controversy started with a complaint filed by petitioner against Undaloc Construction
and/or Engineer Cirilo Undaloc for illegal dismissal, underpayment of wages and nonpayment of
statutory benefits. Respondent Undaloc Construction, a single proprietorship owned by Cirilo
Undaloc, is engaged in road construction business in Cebu City.
Petitioner had been employed as watchman from 1 May 1995 to 30 May 1998 when he was
terminated on the ground that the project he was assigned to was already finished, he being
allegedly a project employee. He asserted that he is a regular employee having been engaged to
perform works which are usually necessary and desirable to respondents business. He also
contended that he received a daily wage lower than that mandated by the wage order. He further
alleged that he was made to sign two payroll sheets, the first bearing the actual amount he
received wherein his signature was affixed to the last column opposite his name, and the second
containing only his name and signature. He also averred that his salary from 18 to 30 May
1998 was withheld by respondents. Respondent on the other hand argued that petitioner was
hired as a project employee and that there was no underpayment of wages as evidenced by the
payrolls presented.
The Labor Arbiter in resolving this controversy ruled that the complainant was indeed a
project employee. However, it ordered the respondent to pay the Sapio his unpaid wage and
salary differential.

Issue
Whether or not Petitioner is entitled to the Salary Differential

Ruling
Yes. He is entitled to the salary differential. Petitioners claim of salary differential represents
the difference between the daily wage he actually received and the statutory minimum. To
counter petitioners assertions, respondents submitted typewritten and signed payroll sheets from
2 September to 8 December 1996, from 26 May to 15 June 1997, and from 12 January to 31 May
1998. These payroll sheets clearly indicate that petitioner did receive a daily salary
of P141.00.
In turn, petitioner presented the December 1995 payroll sheet written in pencil in tandem with
the assertion that he, together with his co-employees, was required to sign two sets of payroll
sheets in different colors: white, which bears the actual amount he received with his signature
affixed in the last column opposite his name, and yellow, where only his name appears thereon
with his signature also affixed in the last column opposite his name. In the December 1995
payroll sheet, petitioner appears to have received P90.00 only as his daily salary but he did not
sign the same.
Banking on the fact that the December 1995 payroll sheet was written in pencil, the Labor
Arbiter concluded that the entries were susceptible to change or erasure and that that
susceptibility in turn rendered the other payroll sheets though typewritten less credible. The
appellate court however, ruled on the contrary. It contended that the allegations of fraud in the
preparation of payroll sheets must be substantiated by evidence and not by mere suspicions or
conjectures, which the petitioner failed to do. There being no evidence that there was an
alteration in his payroll sheet dated December 1995.
The Supreme Court subscribed to the findings of the appellate court but it nonetheless found
that the petitioner is still entitled to a salary differential. The Court found that from 1 January to 30
August 1996 and 1 July 1997 to 31 May 1998, petitioner had received a wage less than the
minimum mandated by law. The total salary differential that petitioner is lawfully entitled to
amounts to P6,578.00 However, pursuant to Section 12 of Republic Act (R.A.) No. 6727, as
amended by R.A. No. 8188. Respondents are required to pay double the amount owed to
petitioner, bringing their total liability to P13,156.00.

78

HON. SECRETARY OF LABOR vs. PANAY VETERANS SECURITY
AND INVESTIGATION AGENCY,

Facts

Petitioners Edgardo M. Agapay and Samillano A. Alonso, Jr. were hired by respondent
Panay Veterans Security and Investigation Agency, Inc. as security guards sometime in 1988.
They were stationed at the plant site of Food Industries, Inc. (FII) in Sta. Rosa, Laguna until FII
terminated its contract with respondent security agency on July 6, 2000. They were not given new
assignments and their benefits (including 13
th
month pay, overtime pay and holiday pay as well
as wage differentials due to underpayment of wages) were withheld by respondent security
agency. This prompted them to file a complaint for violation of labor standards in the regional
office of the Department of Labor and Employment in the National Capital Region (DOLE-NCR).
A labor inspector acted on the complaint, Manuel M. Cayabyab. He conducted an
inspection on October 3, 2000. His assessment is that the respondents should comply with the
labor standards through payment or question in it to the DOLE-NCR within 5 days.
Respondents neither paid the claims of petitioners Agapay and Alonso, Jr. nor questioned the
labor employment officers findings. Thus, in his May 10, 2001 order, the Regional Director of the
DOLE-NCR adopted the findings and computation of Cayabyab as to the unpaid benefits due to
petitioners Agapay and Alonso, Jr.
Respondents moved for reconsideration but the DOLE-NCR Regional Director denied it.
Undeterred, respondents filed an appeal (with motion to reduce cash or surety bond) to the
Secretary of Labor and Employment. In his July 9, 2002 order, the Secretary of Labor and
Employment found that respondents failed to perfect their appeal since they did not post a cash
or surety bond equivalent to the monetary award. Thus, the appeal was dismissed and the DOLE-
NCR Regional Directors May 10, 2001 order was declared final and executory. The Secretary of
Labor and Employment denied reconsideration.
Respondents elevated the case to the CA, at first the CA dismissed their appeal and upheld the
DOLEs decision. But the CA granted their reconsideration and modified DOLEs decision,
Invoking the case of Star Angel Handicraft v. National Labor Relations Commission.
Issue

Whether or not the CA was right in granting the appeal.
Ruling

No, the employers motion to reduce the appeal the bond was no in accordance with the
art. 128 of Labor code, the last paragraph of the said provision provides:an order issued by the
duly authorized representative of the Secretary of Labor and Employment under this Article may
be appealed to the latter. In case said order involves a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Secretary of Labor and Employment in the amount
equivalent to the monetary award in the order appealed from
Clearly the respondents did not post bail, when they appealed the case at the DOLE-
NCR.
The CAs amended decision also contradicted the spirit that animates all labor laws, the
promotion of social justice and the protection of workers. The posting of a cash or surety bond to
perfect an appeal of an order involving a monetary award has a two-fold purpose: (1) to assure
the employee that, if he finally prevails in the case, the monetary award will be given to him upon
dismissal of the employers appeal and (2) to discourage the employer from using the appeal to
delay or evade payment of his obligations to the employee.[17] The CA disregarded these pro-
labor objectives when it treated respondents failure to post the required bond with undue
leniency. The CA should have resolved any doubt in the implementation and interpretation of the
Labor Code and its implementing rules in favor of labor.
Moreover, Star Angel Handicraft permitted the filing of a motion for reduction of the
appeal bond because the Court recognized the NLRCs existing practice at that time to allow the
reduction of the appeal bond upon motion of appellant and on meritorious grounds. In fact, the
practice was subsequently institutionalized in the rules of procedure of the NLRC which now allow
the reduction of the amount of the bond in justifiable cases and upon motion of the appellant.

79

NATIONAL MINES AND ALLIED WORKERS UNION vs. MARCOPPER
MINING CORP.,

Facts
DENR ordered the indefinite suspension of MARCOPPERs operations for causing damage
to the environment of the Province of Marinduque by spilling the companys mine waste or tailings
from an old underground impounding area into the Boac River, in violation of its ECC. NAMAWU
was the exclusive bargaining representative of the rank-and-file workers of MARCOPPER. It filed
a complaint with the NLRC against MARCOPPER for nonpayment of wages, separation pay,
damages, and attorneys fees.
NAMAWU claimed that due to the indefinite suspension of MARCOPPERs operations, its
members were not paid the wages due them for six months. It further claimed that its members
are also entitled to be paid their separation pay pursuant to their collective bargaining agreement
with MARCOPPER and under existing implementing rules of the Labor Code. There had been an
illegal strike which occurred.

Issue

Whether or not it is necessary that MARCOPPER file an appeal bond

Ruling

In the context of the NLRC appeal bond that is directly at issue, MARCOPPER had every
reason to claim in its April 10, 2000 appeal to the NLRC that it should be excused from filing an
appeal bond with respect to the NAMAWU members who were no longer company employees.
The CA decision decreeing the termination of employment of those involved in the illegal strike
case had already been issued at that time. We subsequently ruled on the same issue during the
time the environmental incident case was pending before the NLRC. Thus, when the NLRC
dismissed MARCOPPERs appeal for failure to file the requisite appeal bond corresponding to the
615 NAMAWU members, the termination of employment of these NAMAWU members was
already a settled matter that the NLRC was in no position to disregard. In this light, the CA was
correct in reversing the dismissal of MARCOPPERs appeal for failure to file an appeal bond.
Pursued to its logical end, the CA conclusions should lead to the dismissal of NAMAWUs
complaint with respect to its 615 previously dismissed members.


80

JETHRO INTELLIGENCE & SECURITY CORP. vs. SOLE, ET AL.,

Facts
Jethro Intelligence and Security Corporation is a security service contractor with a security
service contract agreement with co-petitioner Yakult Phils., Inc. On the basis of a complaint filed
by Frederick Garcia, one of the security guards deployed by Jethro, for underpayment of wages,
legal/special holiday pay, premium pay for rest day, 13
th
month pay, and night shift differential,
the DOLE-Regional Office No. IV conducted an inspection at Yakults premises in Calamba,
Laguna in the course of which several labor standards violations were noted, including keeping of
payrolls and daily time records in the main office, underpayment of wages, overtime pay and
other benefits, and non-registration with the DOLE as required under Department Order No. 18-
02.
Hearings on Garcias complaint and on the subsequent complaints of his co-respondents Gil
Cordero et al. were conducted during which Jethro submitted copies of payrolls covering June 16
to 30, 2003, February to May 16-31, 2004, June 16-30, 2003, and February 1-15, 2004. Jethro
failed to submit daily time records of the claimants from 2002 to June 2004, however, despite the
order for it to do so.
By Order of September 9, 2004, the DOLE Regional Director, noting petitioners failure to
rectify the violations noted during the above-stated inspection within the period given for the
purpose, found them jointly and severally liable to herein respondents for the aggregate amount
of EIGHT HUNDRED NINE THOUSAND TWO HUNDRED TEN AND 16/100 PESOS
(P809,210.16) representing their wage differentials, regular holiday pay, special day premium
pay, 13
th
month pay, overtime pay, service incentive leave pay, night shift differential premium
and rest day premium. Petitioners were also ordered to submit proof of payment to the claimants
within ten calendar days, failing which the entire award would be doubled, pursuant to Republic
Act No. 8188, and the corresponding writs of execution and garnishment would be issued.
Jethro appealed to the Secretary of Labor and Employment (SOLE), faulting the Regional
Director for, among other things, basing the computation of the judgment award on Garcias
affidavit instead of on the data reflected in the payrolls for 2001 to 2004.
By Decision dated May 27, 2005, then SOLE Patricia A. Sto. Tomas partially granted
petitioner Jethros appeal by affirming with modification the Regional Directors Order dated
September 9, 2004 by deleting the penalty of double indemnity and setting aside the writs of
execution and garnishment, without prejudice to the subsequent issuance by the Regional
Director of the writs necessary to implement the said Decision.
Petitioners Motion for Reconsideration of the SOLE Decision having been denied, they filed
a petition for certiorari before the Court of Appeals, insisting that the affidavit of Garcia should not
have been given evidentiary weight in computing the judgment award.

Issue

Whether or not the SOLE has jurisdiction over the case since, following Article 129 of the
Labor Code, the aggregate money claim of each employee exceeded P5,000.00.

Ruling

While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has
jurisdiction to hear and decide cases where the aggregate money claims of each employee
exceeds P5,000.00, said provisions do not contemplate nor cover the visitorial and enforcement
powers of the Secretary of Labor or his duly authorized representatives. Said powers are defined
and set forth in Article 128 of the Labor Code (as amended by R.A. No. 7730).
Art 128 explicitly excludes from its coverage Articles 129 and 217 of the Labor Code by the
phrase (N)otwithstanding the provisions of Articles 129 and 217 of this Code to the contrary xxx
thereby retaining and further strengthening the power of the Secretary of Labor or his duly
authorized representative to issue compliance orders to give effect to the labor standards
provisions of said Code and other labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of inspection.
x x x if the labor standards case is covered by the exception clause in Article 128(b) of
the Labor Code, then the Regional Director will have to endorse the case to the appropriate
Arbitration Branch of the NLRC. In order to divest the Regional Director or his
representatives of jurisdiction, the following elements must be present: (a) that the employer
contests the findings of the labor regulations officer and raises issues therein; (b) that in order
to resolve such issues, there is a need to examine evidentiary matters; and (c) that such
matters are not verifiable in the normal course of inspection. The rules also provide that the

81

employer shall raise such objections during the hearing of the case or at any time after
receipt of the notice of inspection results.
In the case at bar, the Secretary of Labor correctly assumed jurisdiction over the case as it
does not come under the exception clause in Art. 128(b) of the Labor Code. While petitioner
Jethro appealed the inspection results and there is a need to examine evidentiary matters to
resolve the issues raised, the payrolls presented by it were considered in the ordinary course of
inspection. While the employment records of the employees could not be expected to be found in
Yakults premises in Calamba, as Jethros offices are in Quezon City, the records show that
Jethro was given ample opportunity to present its payrolls and other pertinent documents during
the hearings and to rectify the violations noted during the ocular inspection. It, however, failed to
do so, more particularly to submit competent proof that it was giving its security guards the wages
and benefits mandated by law.
(Note on execution and garnishment of funds) It bears emphasis that the SOLE, under Article
106 of the Labor Code, as amended, exercises quasi-judicial power, at least to the extent
necessary to determine violations of labor standards provisions of the Code and other labor
legislation. He/she or the Regional Directors can issue compliance orders and writs of execution
for the enforcement thereof. The significance of and binding effect of the compliance orders of
the DOLE Secretary is enunciated in Article 128 of the Labor Code
And Sec. 5, Rule V (Execution) of the Rules on Disposition of Labor Standards Cases in
Regional Offices provides that the filing of a petition for certiorari shall not stay the execution of
the appealed order or decision, unless the aggrieved party secures a temporary restraining order
(TRO) from the Court. In the case at bar, no TRO or injunction was issued, hence, the issuance
of the questioned writs of execution and garnishment by the DOLE-Regional Director was in
order.

82

PHILIPPINE HOTELIERS INC. vs. NATIONAL UNION OF WORKERS IN
HOTEL RESTAURANT & ALLIED INDUSTRIES DUSIT HOTEL NIKKO
CHAPTER
Facts

Wage Order No. 9, approved by the Regional Tripartite Wages and Productivity Board
(RTWPB) of the National Capital Region (NCR), took effect on 5 November 2001. It grants
P30.00 ECOLA to particular employees and workers of all private sectors, identified as follows in
Section 1 thereof:
Section 1. Upon the effectivity of this Wage Order, all private sector workers and
employees in the National Capital Region receiving daily wage rates of TWO HUNDRED FIFTY
PESOS (P250.00) up to TWO HUNDRED NINETY PESOS (P290.00) shall receive an
emergency cost of living allowance in the amount of THIRTY PESOS (P30.00) per day payable in
two tranches as follows:
Amount of ECOLA Effectivity
P15.00 5 November 2001
P15.00 1 February 2002
On 20 March 2002, respondent National Union of Workers in Hotel, Restaurant and Allied
Industries-Dusit Hotel Nikko Chapter (Union), through its President, Reynaldo C. Rasing
(Rasing), sent a letter 4 to Director Alex Maraan (Dir. Maraan) of the Department of Labor and
Employment-National Capital Region (DOLE-NCR), reporting the non-compliance of Dusit Hotel
with WO No. 9, while there was an on-going compulsory arbitration before the National Labor
Relations Commission (NLRC) due to a bargaining deadlock between the Union and Dusit Hotel;
and requesting immediate assistance on this matter. On 24 May 2002, Rasing sent Dir. Maraan
another letter following-up his previous request for assistance.
Acting on Rasing's letters, the DOLE-NCR sent Labor Standards Officer Estrellita
Natividad (LSO Natividad) to conduct an inspection of Dusit Hotel premises on 24 April 2002. In
the first Inspection, the report showed that Dusit Hotel is exempt from complying with WO no. 9.
Due to the Second request for inspection, DOLE representative conducted another round of
inspection and the Labor Standards Officer noted the following in her inspection report:

* Non-presentation of records/payrolls
* Based on submitted payrolls & list of union members by NUWHRAIN-DUSIT HOTEL
NIKKO Chapter, there are one hundred forty-four (144) affected in the implementation of
Wage Order No. NCR-09-> ECOLA covering the periods from Nov. 5/01 to present.

Accordingly, the DOLE-NCR issued a Notice of Inspection Result directing Dusit Hotel to
effect restitution and/or correction of the noted violations within five days from receipt of the
Notice, and to submit any question on the findings of the labor inspector within the same period,
otherwise, an order of compliance would be issued. The Notice of Inspection Result was duly
received by Dusit Hotel Assistant Personnel Manager Rogelio Santos.
In the meantime, the NLRC rendered a Decision 9 dated 9 October 2002 in NLRC-NCR-
CC No. 000215-02 the compulsory arbitration involving the Collective Bargaining Agreement
(CBA) deadlock between Dusit Hotel and the Union granting the hotel employees the following
wage increases, in accord with the CBA:

Effective January 1, 2001 - P500.00/month
Effective January 1, 2002 - P550.00/month
Effective January 1, 2003 - P600.00/month

On 22 October 2002, based on the results of the second inspection of Dusit Hotel
premises, DOLE-NCR, through Dir. Maraan, issued the Order 10 directing Dusit Hotel to pay 144
of its employees the total amount of P1,218,240.00, corresponding to their unpaid ECOLA under
WO No. 9; plus, the penalty of double indemnity, pursuant to Section 12 of Republic Act No.
6727, 11 as amended by Republic Act No. 8188.
Dusit Hotel filed a Motion for Reconsideration 13 of the DOLE-NCR Order dated 22
October 2002, arguing that the NLRC Decision dated 9 October 2002, resolving the bargaining
deadlock between Dusit Hotel and the Union, and awarding salary increases under the CBA to
hotel employees retroactive to 1 January 2001, already rendered the DOLE-NCR Order moot and
academic. With the increase in the salaries of the hotel employees ordered by the NLRC Decision
of 9 October 2002, along with the hotel employees' share in the service charges, the 144 hotel
employees, covered by the DOLE-NCR Order of 22 October 2002, would already be receiving
salaries beyond the coverage of WO No.
Acting on the Motion for Reconsideration of Dusit Hotel, DOLE-NCR issued a Resolution
14 on 27 December 2002, setting aside its earlier Order dated 22 October 2002 for being moot

83

and academic, in consideration of the NLRC Decision dated 9 October 2002; and dismissing the
complaint of the Union against Dusit Hotel, for non-compliance with WO No. 9, for lack of merit.


Issues

Whether the 144 hotel employees were still entitled to ECOLA granted by WO No. 9
despite the increases in their salaries, retroactive to 1 January 2001, ordered by NLRC in
the latter's Decision dated 9 October 2002. Whether Dusit Hotel is liable for the double
indemnity for violation of the wage order.

Ruling

The Court rules in the negative. It must be noted that the hotel employees have a right to
their share in the service charges collected by Dusit Hotel, pursuant to Article 96 of the Labor
Code of 1991, to wit:
Article 96. Service charges. All service charges collected by hotels, restaurants and
similar establishments shall be distributed at the rate of eighty-five percent (85%) for all
covered employees and fifteen percent (15%) for management. The share of employees
shall be equally distributed among them. In case the service charge is abolished, the
share of the covered employees shall be considered integrated in their wages.

Since Dusit Hotel is explicitly mandated by the afore-quoted statutory provision to pay its
employees and management their respective shares in the service charges collected, the hotel
cannot claim that payment thereof to its 82 employees constitute substantial compliance with the
payment of ECOLA under WO No. 9. Undoubtedly, the hotel employees' right to their shares in
the service charges collected by Dusit Hotel is distinct and separate from their right to ECOLA;
gratification by the hotel of one does not result in the satisfaction of the other.
The Court, however, finds no basis to hold Dusit Hotel liable for double indemnity. Under
Section 2 (m) of DOLE Department Order No. 10, Series of 1998, 30 the Notice of Inspection
Result "shall specify the violations discovered, if any, together with the officer's recommendation
and computation of the unpaid benefits due each worker with an advice that the employer shall
be liable for double indemnity in case of refusal or failure to correct the violation within five
calendar days from receipt of notice". A careful review of the Notice of Inspection Result dated 29
May 2002, issued herein by the DOLE-NCR to Dusit Hotel, reveals that the said Notice did not
contain such an advice. Although the Notice directed Dusit Hotel to correct its noted violations
within five days from receipt thereof, it was not sufficiently apprised that failure to do so within the
given period would already result in its liability for double indemnity. The lack of advice deprived
Dusit Hotel of the opportunity to decide and act accordingly within the five-day period, as to avoid
the penalty of double indemnity. By 22 October 2002, the DOLE-NCR, through Dir. Maraan,
already issued its Order directing Dusit Hotel to pay 144 of its employees the total amount of
P1,218,240.00, corresponding to their unpaid ECOLA under WO No. 9; plus the penalty of double
indemnity, pursuant to Section 12 of Republic Act No. 6727, as amended by Republic Act No.
8188.
Although the Court is mindful of the fact that labor embraces individuals with a weaker
and unlettered position as against capital, it is equally mindful of the protection that the law
accords to capital. 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.

84

TIGER CONSTRUCTION AND DEVELOPMENT CORPORATION vs.
ABAY ET. AL.

Facts
On the basis of a complaint filed by respondents Reynaldo Abay and fifty-nine (59) others
before the Regional Office of the Department of Labor and Employment (DOLE), an inspection
was conducted by DOLE officials at the premises of petitioner TCDC. Several labor standard
violations were noted, such as deficiencies in record keeping, non-compliance with various wage
orders, non-payment of holiday pay, and underpayment of 13
th
month pay. The case was then
set for summary hearing.
However, before the hearing could take place, the Director of Regional Office No. V, Ma.
Glenda A. Manalo (Director Manalo), issued an Order on July 25, 2002, referring the instant case
back to the NLRC ,pursuant with Article 129 of LC in relation to Article 217, on the ground that the
aggregate money claim of each worker execeeds the jurisdictional amoun of her office which is
Five Thousand Pesos.
Before the NLRC could take any action, DOLE Secretary Patricia A. Sto. Tomas (Secretary
Sto. Tomas), in an apparent reversal of Director Manalos endorsement, issued another
inspection authority on August 2, 2002 in the same case. Pursuant to such authority, DOLE
officials conducted another investigation of petitioners premises and the same violations were
discovered.
The DOLE officials issued a Notice of Inspection Results to petitioner directing it to rectify the
violations within five days from notice. For failure to comply with the directive, the case was set
for summary hearing on August 19, 2002. On even date, petitioner allegedly questioned the
inspectors findings and argued that the proceedings before the regional office had been rendered
moot by the issuance of the July 25, 2002 Order endorsing the case to the NLRC. According to
petitioner, this July 25, 2002 Order was tantamount to a dismissal on the ground of lack of
jurisdiction, which dismissal had attained finality; hence, all proceedings before the DOLE
regional office after July 25, 2002 were null and void for want of jurisdiction.
On September 30, 2002, Director Manalo issued an Order directing TCDC to
pay P2,123,235.90 to its employees representing underpayment of salaries, 13
th
month pay, and
underpayment of service incentive leave pay and regular holiday pay. TCDC filed a Motion for
Reconsideration on October 17, 2002 and a Supplemental Pleading to the Motion for
Reconsideration on November 21, 2002, reiterating the argument that Director Manalo had lost
jurisdiction over the matter. Apparently convinced by petitioners arguments, Director Manalo
again endorsed the case to the NLRC Regional Arbitration Branch V (Legaspi City). On January
27, 2003, the NLRC returned the entire records of the case to Director Manalo on the ground that
the NLRC does not have jurisdiction over the complaint.
Having the case in her office once more, Director Manalo finally issued an Order
dated January 29, 2003 denying petitioners motion for reconsideration for lack of merit.
Since TCDC did not interpose an appeal within the prescribed period, Director Manalo issued
forthwith a Writ of Execution on February 12, 2003.
On May 14, 2003, while the sheriff was in the process of enforcing the Writ of Execution, and
more than three months after the denial of its motion for reconsideration, TCDC filed an
admittedly belated appeal with the DOLE Secretary. There it reiterated its argument that,
subsequent to the July 25, 2002 Order, all of Director Manalos actions concerning the case are
null and void for having been issued without jurisdiction.
Acting on the ill-timed appeal, Secretary Sto. Tomas issued an Order dated January 19,
2004 dismissing petitioners appeal for lack of merit. Citing Guico v. Quisumbing Secretary Sto.
Tomas held that jurisdiction over the case properly belongs with the regional director; hence,
Director Manalos endorsement to the NLRC was a clear error. Such mistakes of its agents
cannot bind the State, thus Director Manalo was not prevented from continuing to exercise
jurisdiction over the case.
Undaunted, TCDC filed a Motion for Reconsideration insisting that the CA erred in dismissing
its petition for certiorari on a mere technicality. Petitioner argues that the strict application of the
rule on verification and certification of non-forum shopping will result in a patent denial of
substantial justice.
Since respondents did not file a comment on the motion for reconsideration, we resolved to
grant the same and to reinstate the petition.

Issue
Whether or not petitioner can still assail the January 29, 2003 Order of Director Manalo allegedly
on the ground of lack of jurisdiction, after said Order has attained finality and is already in the
execution stage.

85


Ruling
While it is true that orders issued without jurisdiction are considered null and void and, as a
general rule, may be assailed at any time, the fact of the matter is that in this case, Director
Manalo acted within her jurisdiction. Under Article128 (b) of the Labor Code, as amended by
Republic Act (RA) No. 7730, the DOLE Secretary and her representatives, the regional directors,
have jurisdiction over labor standards violations based on findings made in the course of
inspection of an employers premises. The said jurisdiction is not affected by the amount of
claim involved, as RA 7730 had effectively removed the jurisdictional limitations found in Articles
129 and 217 of the Labor Code insofar as inspection cases, pursuant to the visitorial and
enforcement powers of the DOLE Secretary, are concerned. The last sentence of Article 128(b)
of the Labor Code recognizes an exception to the jurisdiction of the DOLE Secretary and her
representatives, but such exception is neither an issue nor applicable here.
Director Manalos initial endorsement of the case to the NLRC, on the mistaken opinion that
the claim was within the latters jurisdiction, did not oust or deprive her of jurisdiction over the
case. She therefore retained the jurisdiction to decide the case when it was eventually returned
to her office by the DOLE Secretary. Jurisdiction or authority to try a certain case is conferred by
law and not by the interested parties, much less by one of them, and should be exercised
precisely by the person in authority or body in whose hands it has been placed by the law.
We also cannot accept petitioners theory that Director Manalos initial endorsement of the
case to the NLRC served as a dismissal of the case, which prevented her from subsequently
assuming jurisdiction over the same. The said endorsement was evidently not meant as a final
disposition of the case; it was a mere referral to another agency, the NLRC, on the mistaken
belief that jurisdiction was lodged with the latter. It cannot preclude the regional director from
subsequently deciding the case after the mistake was rectified and the case was returned to her
by the DOLE Secretary, particularly since it was a labor case where procedural lapses may be
disregarded in the interest of substantial justice.

86

PEOPLES BROADCASTING (BOMBO RADYO PHILS) VS. SEC OF
DOLE ET AL.
Facts
Jandeleon Juezan (Juezan) filed a complaint before the DOLE against Bombo Radyo
Phils. (Bombo Radyo) for illegal deduction, non-payment of service incentive leave, 13
th
month
pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of
wages and non-coverage of SSS, PAG-IBIG and Philhealth. On the basis of the complaint, the
DOLE conducted a plant level inspection. The Labor Inspector in his report wrote,
Management representative informed that (Juezan) complainant is a drama talent hired
on a per drama participation basis hence no employer-employer relationship existed between
them. As proof of this, management presented photocopies of cash vouchers, billing statement,
employments of specific undertaking, etc. The management has no control of the talent if he
ventures into another contract with other broadcasting industries.

Issue

Whether or not the Secretary of Labor has the power to determine the existence of an
employer-employee relationship.

Ruling
Yes. No limitation in the law was placed upon the power of the DOLE to determine the
existence of an employer-employee relationship. No procedure was laid down where the DOLE
would only make a preliminary finding, that the power was primarily held by the NLRC. The law
did not say that the DOLE would first seek the NLRCs determination of the existence of an
employer-employee relationship, or that should the existence of the employer-employee
relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must have
the power to determine whether or not an employer-employee relationship exists, and from there
to decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor
Code, as amended by RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has a ready
set of guidelines to follow, the same guide the courts themselves use. The elements to determine
the existence of an employment relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; (4) the employers power to
control the employees conduct. The use of this test is not solely limited to the NLRC. The DOLE
Secretary, or his or her representatives, can utilize the same test, even in the course of
inspection, making use of the same evidence that would have been presented before the NLRC.
The determination of the existence of an employer-employee relationship by the DOLE must
be respected. The expanded visitorial and enforcement power of the DOLE granted by RA 7730
would be rendered nugatory if the alleged employer could, by the simple expedient of disputing
the employer-employee relationship, force the referral of the matter to the NLRC. The Court
issued the declaration that at least a prima facie showing of the absence of an employer-
employee relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE that
will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same does
successfully refute the existence of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it takes
cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no jurisdiction
only if the employer-employee relationship has already been terminated, or it appears, upon
review, that no employer-employee relationship existed in the first place.
It must also be remembered that the power of the DOLE to determine the existence of an
employer-employee relationship need not necessarily result in an affirmative finding. The DOLE
may well make the determination that no employer-employee relationship exists, thus divesting
itself of jurisdiction over the case. It must not be precluded from being able to reach its own
conclusions, not by the parties, and certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered
to make a determination as to the existence of an employer-employee relationship in the exercise
of its visitorial and enforcement power, subject to judicial review, not review by the NLRC.
To recapitulate, if a complaint is brought before the DOLE to give effect to the labor
standards provisions of the Labor Code or other labor legislation, and there is a finding by the
DOLE that there is an existing employer-employee relationship, the DOLE exercises jurisdiction
to the exclusion of the NLRC. If the DOLE finds that there is no employer-employee relationship,
the jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE, and it is
accompanied by a claim for reinstatement, the jurisdiction is properly with the Labor Arbiter,
under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and other

87

terms and conditions of employment, if accompanied by a claim for reinstatement. If a complaint
is filed with the NLRC, and there is still an existing employer-employee relationship, the
jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of the Rules of Court.

88

SUPERIOR PACKAGING CORP. VS. BALAGSAY ET AL.

Facts

The petitioner engaged the services of Lancer to provide reliever services to its business,
which involves the manufacture and sale of commercial and industrial corrugated boxes.
According to petitioner, the respondents were engaged for four (4) months from February to June
1998 and their tasks included loading, unloading and segregation of corrugated boxes.
Thereafter, respondents filed complaint against the petitioner and President, Cesar Luz (Luz),
for underpayment of wages, non-payment of premium pay for worked rest, overtime pay and non-
payment of salary. Upon receipt Department of Labor and Employment (DOLE) conducted an
inspection of the petitioners premises and found several violations, to wit:
(1) Non-presentation of payrolls and daily time records;
(2) Non-submission of annual report of safety organization;
(3) Medical and accident/illness reports;
(4) Non-registration of establishment under Rule 1020 of Occupational and Health
Standards;
(5) No trained first aide.ll.
Due to the petitioners failure to appear in the summary investigations conducted by the
DOLE, an Order

was issued on June 18, 2003 finding in favor of the respondents and adopting
the computation of the claims submitted. Petitioner and Luz were ordered, among others, to pay
respondents their total claims in the amount of Eight Hundred Forty Thousand Four Hundred
Sixty-Three Pesos and 38/100 (P 840,463.38).
Petitioner filed a motion for reconsideration on the ground that respondents are not its
employees but of Lancer and that they pay Lancer in lump sum for the services rendered. The
DOLE, however, denied its motion because petitioner failed to support its claim that the
respondents are not its employees, and even assuming that they were employed by Lancer, the
petitioner still cannot escape liability as Section 13 of the Department Order No. 10, Series of
1997, makes a principal jointly and severally liable with the contractor to contractual employees to
the extent of the work performed when the contractor fails to pay its employees wages.
Their appeal to the Secretary of DOLE was dismissed thus, l petitioner and Luz filed a
petition for certiorari with the Court of Appeals (CA). On November 17, 2006, the CA affirmed the
Secretary of DOLEs orders, with the modification in that Luz was absolved of any personal
liability under the award.

Issue

Whether or not DOLE has authority to determine the existence of an employer-employee
relationship.
Whether or not Superior Packaging Corporation may be held solidarily liable with Lancer
Staffing & Services Network, Inc. (Lancer) for respondents unpaid money claims.

Ruling
The petition is bereft of merit.
The DOLE clearly acted within its authority when it determined the existence of an employer-
employee relationship between the petitioner and respondents as it falls within the purview of its
visitorial and enforcement power under Article 128(b) of the Labor Code. The determination of the
existence of an employer-employee relationship by the DOLE must be respected.
With regard to the contention that there is no evidence to support the finding that the
respondents rendered overtime work and that they worked on their rest day, the resolution of this
argument requires a review of the factual findings and the evidence presented, Court said that it
is not a trier of facts and it applies with greater force in labor cases. Hence, where the factual
findings of the labor tribunals or agencies conform to, and are affirmed by, the CA, the same are
accorded respect and finality, and are binding to Supreme Court.
It was the consistent conclusion of the DOLE and the CA that Lancer was not an independent
contractor but was engaged in labor-only contracting; hence, the petitioner was considered an
indirect employer of respondents and liable to the latter for their unpaid money claims.
At the time of the respondents employment in 1998, the applicable regulation was DOLE
Department Order No. 10, Series of 1997. Under said Department Order, labor-only contracting
was defined as follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and

89

(2) The workers recruited and placed by such persons are performing activities which are
directly related to the principal business or operations of the employer in which workers are
habitually employed.
Labor-only contracting is prohibited and the person acting as contractor shall be considered
merely as an agent or intermediary 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.
According to the CA, the totality of the facts and surrounding circumstances of this case point
to such conclusion that Lancer was, indeed, a labor-only contractor. Aside from these is the
undisputed fact that the petitioner failed to produce any written service contract that might serve
as proof of its alleged agreement with Lancer.
Finally, a finding that a contractor is a labor-only contractor is equivalent to declaring that
there is an employer-employee relationship between the principal and the employees of the
supposed contractor, and the labor only contractor is considered as a mere agent of the
principal, the real employer. The former becomes solidarily liable for all the rightful claims of the
employees.
Petitioner therefore, being the principal employer and Lancer, being the labor-only contractor,
are solidarily liable for respondents unpaid money claims.


90

WAGE PROTECTION PROVISIONS AND
PROHIBITIONS REGARDING WAGES
GAA vs. COURT OF APPEALS
Facts

It appears that respondent Europhil Industries Corporation was formerly one of the
tenants in Trinity Building at T.M. Kalaw Street, Manila, while petitioner Rosario A. Gaa was then
the building administrator.
On December 12, 1973, Europhil Industries commenced an action (in the Court of First
Instance of Manila for damages against petitioner for having perpetrated certain acts that Europhil
Industries considered a trespass upon its rights, namely, cutting of its electricity, and removing its
name from the building directory and gate passes of its officials and employees", On June 28,
1974, said court rendered judgment in favor of respondent Europhil Industries, ordering petitioner
to pay the former the sum of P10,000.00 as actual damages, P5,000.00 as moral damages,
P5,000.00 as exemplary damages and to pay the costs.
The said decision having become final and executory, a writ of garnishment was issued
pursuant to which Deputy Sheriff Cesar A. Roxas on August 1, 1975 served a Notice of
Garnishment upon El Grande Hotel, where petitioner was then employed, garnishing her "salary,
commission and/or remuneration." Petitioner then filed with the Court of First Instance of Manila a
motion to lift said garnishment on the ground that her "salaries, commission and or remuneration"
are exempted from execution under Article 1708 of the New Civil Code. Said motion was denied
by the lower Court.
Court of Appeals dismissed the petition. In dismissing the petition, the Court of Appeals
held that petitioner is not a mere laborer as contemplated under Article 1708 as the term laborer
does not apply to one who holds a managerial or supervisory position like that of petitioner, but
only to those laborers occupying the lower strata.

Issue

Whether or not the Petitioner is covered by Article 1708 of the New Civil Code.

Ruling

Petitioner is not covered by Article 1708 since she does not fall within the criteria of
laborer.
Article 1708 of the Civil Code provides: The laborer's wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and medical attendance."
It is beyond dispute that petitioner is not an ordinary or rank and file laborer but a
responsibly place employee, of El Grande Hotel, responsible for planning, directing, controlling,
and coordinating the activities of all housekeeping personnel so as to ensure the cleanliness,
maintenance and orderliness of all guest rooms, function rooms, public areas, and the
surroundings of the hotel. Considering the importance of petitioner's function in El Grande Hotel,
it is undeniable that petitioner is occupying a position equivalent to that of a managerial or
supervisory position.
We do not think that the legislature intended the exemption in Article 1708 of the New Civil
Code to operate in favor of any but those who are laboring men or women in the sense that their
work is manual. Persons belonging to this class usually look to the reward of a day's labor for
immediate or present support, and such persons are more in need of the exemption than any
others. Petitioner is definitely not within that class.

91

NESTLE PHILIPPINES vs. NATIONAL LABOR RELATIONS
COMMISSION
Facts

The private respondents were employed by the petitioner either as sales representatives or
medical representatives. By reason of the nature of their work they were each allowed to avail of
the companys car loan policy. Under that policy, the company advances the purchase price of a
car to be paid back by the employee through monthly deductions from his salary, the company
retaining the ownership of the motor vehicle until it shall have been fully paid for. All of the private
respondents availed of the petitioners car loan policy.
Respondents were dismissed from service because of their participation in the strike/ certain
irregularities. As such, they filed a case of illegal dismissal before the NLRC. In the Notices of
Dismissal, they were asked by the Company to settle the accounts payable of their car loans or
return the car for proper disposition. The Company filed a civil suit to recover possession of the
cars. Private respondents sought a temporary restraining order in the NLRC to stop the company
from cancelling their car loans and collecting their monthly amortizations pending the final
resolution of their appeals in the illegal dismissal case. NLRC granted the TRO.

Issue

Whether or not NLRC is correct in granting the TRO in favor of the respondents pending
the case of illegal dismissal.

Ruling

Nestls demand for payment of the private respondents amortizations on their car loans,
or, in the alternative, the return of the cars to the company, is not a labor, but a civil, dispute. It
involves debtor-creditor relations, rather than employee-employer relations. The NLRC gravely
abused its discretion and exceeded its jurisdiction by issuing the writ of injunction to stop the
company from enforcing the civil obligation of the private respondents under the car loan
agreements and from protecting its interest in the cars which, by the terms of those agreements,
belong to it (the company) until their purchase price shall have been fully paid by the employee.
The terms of the car loan agreements are not in issue in the labor case. The rights and
obligations of the parties under those contracts may be enforced by a separate civil action in the
regular courts, not in the NLRC.

92

FIVE J TAXI vs. NATIONAL LABOR RELATIONS COMMISSION

Facts

`\ Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the
petitioners as taxi drivers and, as such, they worked for 4 days weekly on a 24-hour shifting
schedule. Aside from the daily boundary of P700.00 for air-conditioned taxi or P450.00 for non-
air-conditioned taxi, they were also required to pay P20.00 for car washing, and to further make a
P15.00 deposit to answer for any deficiency in their boundary, for every actual working day.
In less than 4 months after Maldigan was hired as an extra driver by the petitioners, he
already failed to report for work for unknown reasons. Petitioners learned that he was working for
Mine of Gold Taxi Company. With respect to Sabsalon, while driving a taxicab of petitioners on
September 1983, he was held up by his armed passenger who took all his money and thereafter
stabbed him. He was hospitalized and after his discharge, he went to this home province to
recuperate.
In January, 1987, Sabsalon was re-admitted by petitioners as a taxi driver under the
same terms and conditions as when he was first employed, but his working schedule was made
on an alternative basis where he drove only every other day. However, on several occasions, he
failed to report for work during his schedule. On September 22, 1991, Sabsalon failed to remit his
boundary of P700.00 for the previous day. Also, he abandoned his taxicab in Makati without fuel
refill worth P300.00. Despite repeated requests of petitioners for him to report for work, he
adamantly refused. Afterwards it was revealed that he was driving a taxi for Bulaklak Company.
Sometime in 1989, Maldigan requested petitioners for the reimbursement of his daily
cash deposits for 2 years, but herein petitioners told him that not a single centavo was left of his
deposits as these were not even enough to cover the amount spent for the repairs of the taxi he
was driving. This was allegedly the practice adopted by petitioners to recoup the expenses
incurred in the repair of their taxicab units. When Maldigan insisted on the refund of his deposit,
petitioners terminated his services. Sabsalon, on his part, claimed that his termination from
employment was effected when he refused to pay for the washing of his taxi seat covers.
On November 27, 1991, private respondents filed a complaint with the manila Arbitration
Office of the National Labor Relations Commission charging petitioners with illegal dismissal and
illegal deductions.

Issue

Whether or not the deductions made were illegal and if illegal, considered a prohibition
regarding wages.
Ruling
The Court declares that the deposits made, amounts to the prohibition provided by law.
The deposits made were illegal and the respondents must be refunded. Article 114 of the Labor
Code provides as follows: Deposits for loss or damage. No employer shall require his worker
to make deposits from which deductions shall be made for the reimbursement of loss of or
damage to tools, materials, or equipment supplied by the employer, except when the employer is
engaged in such trades, occupations or business where the practice of making deposits is a
recognized one, or is necessary or desirable as determined by the Secretary of Labor in
appropriate rules and regulations.
It can be deduced that the said article provides the rule on deposits for loss or damage to
tools, materials or equipments supplied by the employer. Clearly, the same does not apply to or
permit deposits to defray any deficiency which the taxi driver may incur in the remittance of his
boundary.
On the matter of the car wash payments, the labor arbiter had this to say in his decision:
"Anent the issue of illegal deductions, there is no dispute that as a matter of practice in the taxi
industry, after a tour of duty, it is incumbent upon the driver to restore the unit he has given to the
same clean condition when he took it out, and as claimed by the respondents (petitioners in the
present case), complainant(s) (private respondents herein) were made to shoulder the expenses
for washing, the amount doled out was paid directly to the person who washed the unit, thus we
find nothing illegal in this practice, much more (sic) to consider the amount paid by the driver as
illegal deduction in the context of the law."
Consequently, private respondents are not entitled to the refund of the P20.00 car wash
payments they made. It will be noted that there was nothing to prevent private respondents from
cleaning the taxi units themselves, if they wanted to save their P20.00. Also, as the Solicitor
General correctly noted, car washing after a tour of duty is a practice in the taxi industry, and is, in
fact, dictated by fair play.

93

PHILIPPINE VETERANS BANK vs. NATIONAL LABOR RELATIONS
COMMISSION
Facts
In 1983, petitioner Philippine Veterans Bank was placed under receivership by the
Central Bank (now Bangko Sentral). Petitioner was subsequently placed under liquidation on 15
June 1985. Consequently, its employees, including private respondent Dr. Jose Teodorico V.
Molina, were terminated from work and given their respective separation pay and other benefits.
To assist in the liquidation, some of petitioners former employees were rehired, among them
Molina, whose re-employment commenced on 15 June 1985. On 11 May 1991, MOLINA filed a
complaint

against members of the liquidation team. The complaint demanded the implementation
of Wage Orders Nos. NCR-01 and NCR-02 (hereafter W.O. 1 and W.O. 2) as well as moral
damages and attorneys fees in the amount of P300,000.
Meanwhile, W.O. 1 took effect on November 1990, prescribing a P17-increase in the
daily wage of employees whose monthly salary did not exceed P3,802.08. On the other hand,
W.O. 2 became mandated a P12-increase in the daily wage of employees whose monthly salary
did not exceed P4,319.16. Molina claimed that his salary should have been adjusted in
compliance with said wage orders. The liquidation team countered that MOLINA was not entitled
to any salary increase because he was already receiving a monthly salary of P6,654.60.
Labor Arbiter rejected the 26.16 factor used by the liquidators in computing the daily
wage of MOLINA, adopting instead the factor of 365 days. Consequently, they were ordered to
pay Molina the wage differentials due him under W.O. 1 and W.O. 2. On appeal, the NLRC
sustained the labor arbiters ruling after concluding that Molina was a regular employee of
petitioner with a basic monthly salary of P3,754.60 at the time of his dismissal on 31 January
1992. He was, therefore, entitled to the wage increases mandated by the aforesaid wage orders.

Issue

Whether Molina is entitled to wage increase computation that used the 365 days factor.

Ruling

Molina is entitled to the wage increase computation using the 365 days as factor. The
documents attached show that the Bank has been consistently using the factor of 365 days in
computing your equivalent monthly salary prior to its being placed under receivership by the
Central Bank. This is evident in the wage and allowance increases granted under previous
Presidential Decrees and Wage Orders, which were given by the Bank on monthly basis, i.e.,
where the rest days are unworked but paid. This is also indicated in the appointment and service
records of bank personnel who started out as daily paid employees and were eventually
promoted as permanent employees with fixed monthly salaries. However, when R.A. 6640 went
into force, the Bank unilaterally reduced the factor to 262 instead of maintaining factor 365 as was
the practice/policy long before the effectivity of the Act. And when R.A 6727 took effect, the Bank
reverted to the old practice/policy of using factor 365 days in computing your equivalent monthly
rate salary.
May we add that the old practice of the bank in using factor 365 days in a year in
determining equivalent monthly salary cannot unilaterally be changed by your employer without
the consent of the employees, such practice being now a part of the terms and conditions of your
employment. An employment agreement, whether written or unwritten, is a bilateral contract and
as such either party thereto cannot change or amend the terms thereof without the consent of the
other party thereto.
It is clear that respondent is entitled to the wage increase under R.A. 6440 computed on
the basis of 365 paid days and to the corresponding salary differentials as a result of the
application of this factor. Evidently, the use of the 365 factor is binding and conclusive, forming
as it did part of the employment contract. To abandon such policy and revert to its old practice of
using the 26.16 factor would be a diminution of a labor benefit, which is prohibited by the Labor
Code. It cannot be doubted that the 365 factor favors petitioners employees because it results in
a higher determination of their monthly salary.

94

PHILIPPINE APPLIANCES CORP. vs. COURT OF APPEALS
Facts

Petitioner is a domestic corporation engaged in the business of manufacturing
refrigerators, freezers and washing machines. Respondent United Philacor Workers Union-
NAFLU is the duly elected collective bargaining representative of the rank-and-file employees of
petitioner. During the collective bargaining negotiations between petitioner and respondent union
in 1997 (for the last two years of the collective bargaining agreement covering the period of July
1, 1997 to August 31, 1999), petitioner offered the amount of four thousand pesos (P4,000.00) to
each employee as an early conclusion bonus. Upon conclusion of the CBA negotiations,
petitioner accordingly gave this early signing bonus. After the expiration of the CBA, both parties
negotiated for a new CBA. However, it resulted to a deadlock. The respondent union filed before
the NCMB a notice of strike due to bargaining deadlock. The Department of Labor and
Employment took cognizance of the case and ordered, among other things, herein petitioner to
award signing bonus. Petitioner argued that the award of the signing bonus was patently
erroneous since it was not part of the employees salaries or benefits or of the collective
bargaining agreement. It is not demandable or enforceable since it is in the nature of an incentive.

Issue

Whether or not the award of a signing bonus by the Secretary of Labor is correct.

Ruling

Supreme Court held that the signing bonus must not be awarded.
The CBA negotiation between petitioner and respondent union failed notwithstanding the
intervention of the NCMB. Respondent union went on strike for eleven days and blocked the
ingress to and egress from petitioners two work plants. The labor dispute had to be referred to
the Secretary of Labor and Employment because neither of the parties was willing to compromise
their respective positions regarding the four remaining items which stood unresolved. While we
do not fault any one party for the failure of the negotiations, it is apparent that there was no more
goodwill between the parties and that the CBA was clearly not signed through their mutual efforts
alone. Hence, the payment of the signing bonus is no longer justified and to order such payment
would be unfair and unreasonable for petitioner.
Furthermore, we have consistently ruled that a bonus is not a demandable and enforceable
obligation.

95

AGABON vs. NATIONAL LABOR RELATIONS COMMISSION
Facts

Private Respondent Riviera Home improvements Inc. is engaged in the business of
selling and installing ornamental and construction materials. It employed petitioner Virgilio
Agabon and Jenny Agabon as gypsum board and cornice installers on Jan. 2.1992 until February
23,1999 when they were dismissed for abandonment of work.
Petitioners filed a complaint for illegal dismissal and payments of money claims and the
LA rendered in favor of the petitioners ordering the private respondents to pay the monetary
claims.
On appeal, NLRC reversed the decision because it found that petitioners abandoned their work
and not entitled to backwages so the petitioners filed for a petition for certiorari in CA.
CA ruled that the dismissal was not illegal because they had abandoned their
employment but ordered the payment of money claims including their holiday pay and incentives.
Petitioners assert that they were dismissed because private respondent refused to give
them assignments unless they agreed to work on pakyawbasis and that private respondent did
not comply with the twin requirements of notice and hearing.
Private respondent said that it sent two letters to petitioners advising them to report for
work and talked over the phone about the cornice installation at Pacific Plaza Towers.However,
petitioners did not report for work because they had subcontracted another installation from
another company.

Issue

Whether or not the petitioners illegally dismissed and WON they are entitled to benefits?

Ruling

Dismissal was legal and they are entitled to benefits. In February 1999, petitioners were
frequently absent having subcontracted for an installation work for another company.
Subcontracting for another company clearly showed the intention to sever the employer-
employee relationship with private respondent. This was not the first time they did this. In
January 1996, they did not report for work because they were working for another company.
Private respondent at that time warned petitioners that they would be dismissed if this happened
again. Petitioners disregarded the warning and exhibited a clear intention to sever their
employer-employee relationship. The record of an employee is a relevant consideration in
determining the penalty that should be meted out to him.
Dismissals based on just causes contemplate acts or omissions attributable to the employee
while dismissals based on authorized causes involve grounds under the Labor Code which allow
the employer to terminate employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no longer possible where the
dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer
must give the employee two written notices and a hearing or opportunity to be heard if requested
by the employee before terminating the employment: a notice specifying the grounds for which
dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be
heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes
under Articles 283 and 284, the employer must give the employee and the Department of Labor
and Employment written notices 30 days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is for a
just cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for
health reasons under Article 284, and due process was observed; (2) the dismissal is without just
or authorized cause but due process was observed; (3) the dismissal is without just or authorized
cause and there was no due process; and (4) the dismissal is for just or authorized cause but due
process was not observed.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot
be cured, it should not invalidate the dismissal. However, the employer should be held liable for
non-compliance with the procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be upheld
because it was established that the petitioners abandoned their jobs to work for another
company. Private respondent, however, did not follow the notice requirements and instead
argued that sending notices to the last known addresses would have been useless because they
did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse
because the law mandates the twin notice requirements to the employees last known address.

96

Thus, it should be held liable for non-compliance with the procedural requirements of due
process.
As a general rule, one who pleads payment has the burden of proving it. Even where the
employee must allege non-payment, the general rule is that the burden rests on the employer to
prove payment, rather than on the employee to prove non-payment. The reason for the rule is
that the pertinent personnel files, payrolls, records, remittances and other similar documents
which will show that overtime, differentials, service incentive leave and other claims of workers
have been paid are not in the possession of the worker but in the custody and absolute control
of the employer.
In the case at bar, if private respondent indeed paid petitioners holiday pay and service
incentive leave pay, it could have easily presented documentary proofs of such monetary benefits
to disprove the claims of the petitioners. But it did not, except with respect to the 13
th
month pay
wherein it presented cash vouchers showing payments of the benefit in the years
disputed. Allegations by private respondent that it does not operate during holidays and that it
allows its employees 10 days leave with pay, other than being self-serving, do not constitute proof
of payment. Consequently, it failed to discharge the onus probandi thereby making it liable for
such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabons
13
th
month pay, we find the same to be unauthorized. The evident intention of Presidential
Decree No. 851 is to grant an additional income in the form of the 13
th
month pay to employees
not already receiving the same so as to further protect the level of real wages from the ravages
of world-wide inflation. Clearly, as additional income, the 13
th
month pay is included in the
definition of wage under Article 97(f) of the Labor Code
The Court ruled that respondent is liable for petitioners holiday pay, service incentive leave
pay and 13
th
month pay without deductions. The evident intention of Presidential Decree No. 851
is to grant an additional income in the form of the 13
th
month pay to employees not already
receiving the same so as to further protect the level of real wages from the ravages of world-wide
inflation. Clearly, as additional income, the 13
th
month pay is included in the definition of wage
under Article 97(f) of the Labor Code.


97

AMERICAN WIRE & CABLE DAILY RATED EMPLOYEES vs.
AMERICAN WIRE

Facts

American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires
and cables. There are two unions in this company, the American Wire and Cable Monthly-Rated
Employees Union and the American Wire and Cable Daily-Rated Employees Union.
On 16 February 2001, an original action was filed before the NCMB of the Department of
Labor and Employment by the two unions for voluntary arbitration. They alleged that the private
respondent, without valid cause, suddenly and unilaterally withdrew and denied certain benefits
and entitlements which they have long enjoyed. These are Service Award, 35% premium pay of
an employees basic pay for the work rendered during Holy Monday, Holy Tuesday, Holy
Wednesday, December 23, 26, 27, 28 and 29, Christmas Party and Promotional Increase.

Issue

Whether or not the respondent company violated Article 100 of the Labor Code.

Ruling

The company is not guilty of violating Art. 100 of the Labor Code. Article 100 of the Labor
Code provides: PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS.
Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this Code.
The certain benefits and entitlements are considered bonuses. A bonus can only be
enforceable and demandable if it has ripened into a company practice. It must also be expressly
agreed by the employer and employee or it must be on a fixed amount.
The assailed benefits were never subjects of any agreement between the union and the
company. It was never incorporated in the CBA. Since all these benefits are in the form of
bonuses, it is neither enforceable nor demandable.

98

HONDA PHILIPPINES vs. SAMAHAN NG MALAYANG MANGGAGAWA
SA HONDA

Facts

Petitioner Honda and Respondent union forged a Collective Bargaining Agreement which
averred that Honda shall maintain the present practice in the implementation of the 13
th
and 14
th

month pay. Such CBA is effective until 2000. In the later part of 1998, the parties started re-
negotiations.
However, when the talk between the parties did not go well, respondent union filed a Notice to
Strike on the ground of bargaining deadlock. Honda then filed a notice of Lockout in which the
DOLE ordered the party to cease and desist from committing acts.
The union filed a second Notice of Strike on ground of unfair labor, in which they went
into pocketing of the premises of Honda. DOLE then assumed jurisdiction and subjected the
issue to the NLRC for compulsory arbitration for which the employees were ordered to return to
work.
The management of Honda, on 22 Nov. 1999, then issued a memorandum announcing
its new computation of the 13
th
and 14
th
month pay to be granted to employees whereby the 31-
day strike shall be considered unworked days for purposes of computing said benefits.
Thus, the union opposed the pro-rated computation of the bonuses and the matter was
brought before the Grievance Machinery. The Labor Arbiter ordered Honda to compute each
provision in full month basic pay. Ca affirmed the decision of the labor arbiter.

Issue

Whether or not the pro-rated computation of the 13
th
month pay and the other bonuses in
question is valid and lawfull.

Ruling

Such pro-rated computation is invalid. It is well noted that the CBA refers to the
negotiated contract between a legitimate labor organization and the employer. It is the law
between the parties and compliance therewith is mandated by express policy of the law.
Honda did not adduce evidence to show that the 13
th
month, 14
th
month and financial
assistance benefits were previously subject to pro-rating. Thus, such was an implicit acceptance
that prior to the strike, a full month basic pay computation was the present practice intended to
be maintained in the CBA.
Lastly, to allow pro-ration of the 13
th
month pay is to undermine the wisdom behind the
law and the mandate that the workingmans welfare should be the primordial and paramount
consideration.

99

PRODUCERS BANK vs. NATIONAL LABOR RELATIONS
COMMISSION

Facts

Private respondent filed a complaint on 11 February 1988 with the Arbitration Branch,
National Capital Region, National Labor Relations Commission (NLRC), charging petitioner with
diminution of benefits and non-payment of holiday pay. In addition, private respondent prayed for
damages.
On 31 March 1989, Labor Arbiter found private respondents claims to be unmeritorious and
dismissed its complaint. In a complete reversal, however, the NLRC granted all of private
respondents claims, except for damages.
Petitioner argued that it cannot be compelled to pay the alleged bonus differentials due to
its depressed financial condition, as evidenced by the fact that in 1984 it was placed under
conservatorship by the Monetary Board. According to petitioner, it sustained losses in the millions
of pesos from 1984 to 1988, an assertion which was affirmed by the labor arbiter. Moreover, the
collective bargaining agreement of the parties does not provide for the payment of any mid-year
or Christmas bonus. Petitioer also contended that it is not covered by PD 851 since the mid-year
and Christmas bonuses it has been giving its employees from 1984 to 1988 exceeds the basic
salary for one month (except for 1985 where a total of one month basic salary was given). Hence,
this amount should be applied towards the satisfaction of the 13
th
month pay, pursuant to Section
2 of PD 851.
The respondent, however, argued that the mid-year and Christmas bonuses, by reason
of their having been given for thirteen consecutive years, have ripened into a vested right and, as
such, can no longer be unilaterally withdrawn by petitioner without violating Article 100 of
Presidential Decree No. 4429 which prohibits the diminution or elimination of benefits already
being enjoyed by the employees. Although private respondent concedes that the grant of a bonus
is discretionary on the part of the employer, it argues that, by reason of its long and regular
concession, it may become part of the employees regular compensation. Moreover, they
contended that the conservator was not justified in diminishing or not paying the 13
th
month pay
and that petitioner should have instead applied for an exemption, in accordance with section 7 of
Presidential Decree No. 851, as amended by Presidential Decree No. 1364, but that it did not do
so. The actions of the conservator ran counter to the provisions of PD 851.

Issue

Whether or not petitioner is entitled to pay the bonuses and 13
th
month pay.

Ruling

No, they are not. A bonus is an amount granted and paid to an employee for his industry
and loyalty which contributed to the success of the employers business and made possible the
realization of profits. It is an act of generosity granted by an enlightened employer to spur the
employee to greater efforts for the success of the business and realization of bigger profits. The
granting of a bonus is a management prerogative, something given in addition to what is
ordinarily received by or strictly due the recipient. Thus, a bonus is not a demandable and
enforceable obligation, except when it is made part of the wage, salary or compensation of the
employee.
However, an employer cannot be forced to distribute bonuses which it can no longer
afford to pay. To hold otherwise would be to penalize the employer for his past generosity.
Private respondents contention, that the decrease in the mid-year and year-end bonuses
constituted a diminution of the employees salaries, is not correct, for bonuses are not part of
labor standards in the same class as salaries, cost of living allowances, holiday pay, and leave
benefits, which are provided by the Labor Code.
Petitioner was placed under conservatorship by the Monetary Board, pursuant to its
authority under Section 28-A of Republic Act No. 265,21 as amended by Presidential Decree No.
72. Under Section 28-A, the Monetary Board may place a bank under the control of a conservator
when it finds that the bank is continuously unable or unwilling to maintain a condition of solvency
or liquidity.
Petitioner was not only experiencing a decline in its profits, but was reeling from
tremendous losses triggered by a bank-run which began in 1983. In such a depressed financial
condition, petitioner cannot be legally compelled to continue paying the same amount of bonuses
to its employees. Thus, the conservator was justified in reducing the mid-year and Christmas
bonuses of petitioners employees. To hold otherwise would be to defeat the reason for the
conservatorship which is to preserve the assets and restore the viability of the financially

100

precarious bank. Ultimately, it is to the employees advantage that the conservatorship achieve its
purposes for the alternative would be petitioners closure whereby employees would lose not only
their benefits, but their jobs as well.
With regard to 13
th
month pay, PD 851, which was issued by President Marcos on 16
December 1975, requires all employers to pay their employees receiving a basic salary of not
more than P 1,000 a month, regardless of the nature of the employment, a 13
th
month pay, not
later than December 24 of every year. However, employers already paying their employees a
13
th
month pay or its equivalent are not covered by the law. Under the Revised Guidelines on the
Implementation of the 13
th
-Month Pay Law, the term equivalent shall be construed to include
Christmas bonus, mid-year bonus, cash bonuses and other payments amounting to not less than
1/12 of the basic salary. The intention of the law was to grant some relief - not to all workers - but
only to those not actually paid a 13
th
month salary or what amounts to it, by whatever name
called. It was not envisioned that a double burden would be imposed on the employer already
paying his employees a 13
th
month pay or its equivalent whether out of pure generosity or on the
basis of a binding agreement. To impose upon an employer already giving his employees the
equivalent of a 13
th
month pay would be to penalize him for his liberality and in all probability, the
employer would react by withdrawing 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.
In the case at bar, even assuming the truth of private respondents claims as contained in
its position paper or Memorandum regarding the payments received by its members in the form of
13
th
month pay, mid-year bonus and Christmas bonus, it is noted that, for each and every year
involved, the total amount given by petitioner would still exceed, or at least be equal to, one
month basic salary and thus, may be considered as an equivalent of the 13
th
month pay
mandated by PD 851.
Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as part of the
13
th
month pay.


101

JARDIN vs. NATIONAL LABOR RELATIONS COMMISSION
Facts

Petitioners were drivers of respondent, a domestic corporation engaged in the operation
of Goodman Taxi. Petitioners used to drive respondents taxicabs every other day on a 24
hour work schedule under the boundary system. Under this arrangement, petitioners earned an
average of P400 daily. Nevertheless, respondent admittedly regularly deducts from petitioners,
daily earnings the amount of P30 supposedly for the washing of the taxi units. Believing that the
deduction is illegal, petitioners decided to form a labor union to protect their rights and interests.
Upon learning about the plan of petitioners, respondent refused to let petitioners drive
their taxicabs when they reported for work. Petitioners suspected that they were singled out
because they were the leaders and active members of the proposed union. Aggrieved, petitioners
filed with the labor arbiter a complaint against respondent for unfair labor practice, illegal
dismissal and illegal deduction of washing fees. In a decision, the labor arbiter dismissed the
complaint for lack of merit.
On appeal, the NLRC, in a decision, reversed and set aside the judgment of the labor arbiter. The
labor tribunal declared that petitioners are employees of respondent and, as such, their dismissal
must be for just cause and after due process.
Respondents first motion for reconsideration was denied. Respondent filed another
motion for reconsideration. The NLRC, in its decision, granted the second motion for
reconsideration. It ruled that it lacks jurisdiction over the case as petitioners and respondent have
no employer employee relationship. It held that the relationship of the parties is leasehold which
is covered by the Civil Code rather than the Labor Code.

Issue

Whether or not there is an employer employee relationship so as to entitle them to
payment of backwages.

Ruling

The 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. The court has 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 management of the business is in the owners hands. The owner as holder of the
certificate of public convenience must see to it that the driver follows the route prescribed by the
franchising authority and the rules promulgated as regards its operation. Now, 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 court has applied by analogy the doctrine to the relationships
between bus owner/ operator and bus conductor, auto-calesa owner/ operator and driver and
between taxi owners/ operators and taxi drivers. Hence, petitioners are undoubtedly employees
of respondent because as taxi drivers they perform activities which are usually necessary or
desirable in the usual business or trade of their employer.
As consistently held by the court, termination of employment must be effected in
accordance with law. The just and authorized causes for termination of employment are
enumerated under Articles 282, 283 and 284 of the Labor Code. The requirement of notice and
hearing is set-out in Article 277 of the said Code. Hence, petitioners, being employees of
respondent, can be dismissed only for just and authorized cause and after affording them notice
and hearing prior to termination. In the instant case, respondent had no valid cause to terminate
the employment of petitioners. Neither were there two written notices sent by respondent
informing each of the petitioners that they had been dismissed from work. These lack of valid
cause and failure on the part of respondent to comply with the twin-notice requirement
underscored the illegality surrounding petitioners dismissal.
Under the law, 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. It must
be emphasized though that recent judicial pronouncements distinguish between employees
illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989 and those
whose illegal dismissals were effected after such date. Thus, employees illegally dismissed prior
to March 21, 1989, are entitled to backwages up to three years without deduction or qualification,
while those illegally dismissed after that date are granted full backwages inclusive of allowances

102

and other benefits or their monetary equivalent from the time their actual compensation was
withheld from them up to the time of their actual reinstatement. The legislative policy behind
Republic Act No. 6715 points to full backwages as meaning exactly that, i.e., without deducting
from backwages the earnings derived elsewhere by the concerned employee during the period of
his illegal dismissal. Considering that petitioners were terminated from work on August 1, 1991,
they are entitled to full backwages on the basis of their last daily earnings.
With regard to the amount deducted daily by respondent from petitioners for washing of
the taxi units, the court is of the view that the same is not illegal in the context of the law. The
court notes that after a tour of duty, it is incumbent upon the driver to restore the unit he has
driven to the same clean condition when he took it out. Car washing after a tour of duty is indeed
a practice in the taxi industry and is in fact dictated by fair play. Hence, the drivers are not entitled
to reimbursement of washing charges.

103

MANILA JOCKEYS CLUB EMPLOYEES LABOR UNION vs. MANILA
JOCKEY CLUB

Facts

Manila Jockey Club, Inc., a corporation with a legislative franchise to conduct, operate
and maintain horse races, entered into a Collective Bargaining Agreement (CBA) with Manila
Jockey Club Employees Labor Union-PTGWO. Under Section 1 Article IV of their CBA, the
parties agreed to a 7-hour work schedule from 9:00 a.m. to 12:00 noon and from 1:00 p.m. to
5:00 p.m. on a work week of Monday to Saturday. All work performed in excess of seven (7)
hours work schedule and on days not included within the work week shall be considered overtime
and paid as such with exception to those monthly compensation which includes work performed
during Saturday, Sunday, and Holiday when races are held at the Club. The CBA likewise
reserved in management prerogatives including the determination of the work schedule. An inter-
office memorandum was later issued declaring that the hours of work of regular monthly-paid
employees shall be from 1:00 p.m. to 8:00 p.m. when horse races are held, that is, every
Tuesday and Thursday. The memorandum, however, sustained the 9:00 a.m. to 5:00 p.m.
schedule for non-race days.
Before the voluntary arbitrators of the National Conciliation and Mediation Board,
petitioners questioned the memorandum as violative of the prohibition against non-diminution of
wages and benefits guaranteed the CBA which specified the work schedule of respondents
employees to be from 9:00 a.m. to 5:00 p.m. They claimed that as a result of the memorandum,
the employees are precluded from rendering their usual overtime work from 5:00 p.m. to 9:00
p.m.

Issue

Whether or not the change in the work schedule violated Article 100 of the Labor Code
on the non-diminution of wages and benefits guaranteed under the parties CBA.

Ruling

No. It was evident that the change in work schedule was justified, it being a management
prerogative. Respondent, as employer, cited the change in the program of horse races as reason
for the adjustment of the employees work schedule. It rationalized that when the CBA was
signed, the horse races started at 10:00 a.m. When the races were moved to 2:00 p.m., there
was no other choice for management but to change the employees work schedule as there was
no work to be done in the morning. It is true that Section 1, Article IV of the CBA provides for a 7-
hour work schedule from 9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays
to Saturdays. However, Section 2, Article XI expressly reserves on respondent the prerogative to
change existing methods or facilities to change the schedules of work.
Moreover, Manila Jockey Club was not obliged to allow all its employees to render
overtime work everyday for the whole year, but only those employees whose services were
needed after their regular working hours and only upon the instructions of management. The
overtime pay was not given to each employee consistently, deliberately and unconditionally, but
as a compensation for additional services rendered. Thus, overtime pay does not fall within the
definition of benefits under Article 100 of the Labor Code on prohibition against elimination or
diminution of benefits.


104

SAN MIGUEL CORP ET AL. vs. LAYOC, JR. ET AL.
Facts

Respondents were among the Supervisory Security Guards of the Beer Division of the
San Miguel Corporation. From the commencement of their employment, the private respondents
were required to punch their time cards for purposes of determining the time they would come in
and out of the companys work place. As such, the private respondents were availing the benefits
for overtime, holiday and night premium duty through time card punching. However, in the early
1990s, the San Miguel Corporation embarked on a Decentralization Program.
The Beer Division of the San Miguel Corporation implemented no time card policy
whereby the supervising security guards of the Beer Division were no longer required to punch
their time cards. However, in lieu of the overtime pay and the premium pay, the personnel of the
Beer Division of the petitioner San Miguel Corporation affected by the No Time Card Policy
were given a 10% across-the-board increase on their basic pay while the supervisors who were
assigned in the night shift (6:00 p.m. to 6:00 a.m.) were given night shift allowance ranging from
P2,000.00 to P2,500.00 a month.
Aggrieved, respondents filed a complaint for unfair labor practice, violation of Article 100
of the Labor Code of the Philippines, and violation of the equal protection clause and due process
of law in relation to paragraphs 6 and 8 of Article 32 of the New Civil Code of the Philippines.

Issue

Whether or not the No Time Card Policy constitutes a violation of Article 100 of the
Labor Code.

Ruling

Supreme Court ruled in favor of the petitioners. Petitioners exercised management
prerogative in the implementation of the No Time Card Policy.
As a general rule, managerial employees are not entitled to overtime pay for services
rendered in excess of eight hours a day. Respondents failed to show that the circumstances of
the present case constitute an exception to this general rule.
Respondents assert that Article 100 of the Labor Code prohibits the elimination or
diminution of benefits. However, contrary to the nature of benefits, petitioners did not freely give
the payment for overtime work to respondents. Petitioners paid respondents overtime pay as
compensation for services rendered in addition to the regular work hours. Respondents rendered
overtime work only when their services were needed after their regular working hours and only
upon the instructions of their superiors. Respondents even differ as to the amount of overtime
pay received on account of the difference in the additional hours of services rendered.
Aside from their allegations, respondents were not able to present anything to prove that
petitioners were obliged to permit respondents to render overtime work and give them the
corresponding overtime pay. Even if petitioners did not institute a no time card policy,
respondents could not demand overtime pay from petitioners if respondents did not render
overtime work. The requirement of rendering additional service differentiates overtime pay from
benefits such as thirteenth month pay or yearly merit increase. These benefits do not require any
additional service from their beneficiaries. Thus, overtime pay does not fall within the definition of
benefits under Article 100 of the Labor Code.


105

SAN MIGUEL CORP. vs. PONTILLAS

Facts
On October 24, 1980, San Miguel Corporation (petitioner) employed Angel C.
Pontillas(respondent) as a daily-wage company guard and on 1984 respondent became a
monthly-paid employee which entitled him to yearly increase in the salary.On October 19, 1993,
respondent filed an action for recovery of damages due to discrimination under Article 100 of the
labor Code of the Philippines against the company security commander, Capt. Segundino D.
Fortich (Capt. Fortich), and Francisco Manzon, VP Brewery Director. He alleged that the
increases in his salary were only percentage of what the other security guard received. On
December 6, 1993, a memorandum ordering the transfer of responsibility of the Oro Verde
warehouse to the newly- organized VisMin Logistics Operation, in effect, transferring the security
guards of the Oro Verde warehouse to Vismin Logistics Operations. However, respondent
continued to report at Oro Verde Warehouse, alleging that he was not notified by the transfer by
his direct superior (Capt. Fortich).
Petitioner alleged that respondent was properly notified of the transfer but he refused to
receive 14 memoranda issued by Major Enriquez from 14-27 February 1994. Petitioner also
alleged that respondent was given notices of Guard Detail dated 9 February 1994 and 15
February 1994 but he still refused to report for duty at the VisMin Logistics Operations. After the
administrative investigation, respondent was terminated for violating company rules and
regulations, particularly for insubordination of willful disobedience in carrying out reasonable
instructions of his superior. Respondent filed an amended complaint against petitioner for illegal
dismissal. The Labor Arbiter found nothing prejudicial, unjust, or unreasonable to petitioners
decision on petitioners transfer of materials and security guard assignments. Respondent
appealed. The NLRC ruled that respondent was not informed of his transfer from Oro Verde
Warehouse to VisMin Logistics Operations. The notices allegedly sent to respondent did not
indicate any receipt from respondent. The NLRC further ruled that respondent was a victim of
discrimination. The NLRC declared that petitioner failed to justify why respondent was not entitled
to the full rate of salary increases enjoyed by other security guards. The CA affirmed the decision
of the NLRC.

Issue

Whether there was an illegal dismissal of Pontillas by San Miguel Corporation

Ruling

Petition was granted. The issue about the alleged violation of Article 100 of the LCP was
not discussed by Supreme Court. An employer may terminate an employment for serious
misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work. Willful disobedience requires the concurrence of two
elements: (1) the employees assailed conduct must have been willful, that is, characterized by a
wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful,
made known to the employee, and must pertain to the duties which he had been engaged to
discharge. As early as 9 February 1994, Major Enriquez, the head of the VisMin Logistics
Operations issued several notice and successive memoranda to respondent officially informing
him of his transfer to the VisMin Logistics Operations but respondent refused to sign all the
notices.The employer exercises the prerogative to transfer an employee for valid reasons and
according to the requirements of its business, provided the transfer does not result in demotion in
rank or diminution of the employees salary, benefits, and other privileges.
In this case, SC found that the order of transfer was reasonable and lawful considering
the integration of Oro Verde Warehouse with VisMin Logistics Operations. Respondent was
properly informed of the transfer but he refused to receive the notices on the pretext that he was
wary because of his pending case against petitioner. Respondent failed to prove that petitioner
was acting in bad faith in effecting the transfer. There was no demotion involved, or even a
diminution of his salary, benefits, and other privileges. Respondents persistent refusal to obey
petitioners lawful order amounts to willful disobedience under Article 282 of the Labor Code
.

106

ARCO METAL PRODUCTS CO. INC. ET AL. vs. SAMAHAN NG MGA
MANGGAGAWA SA ARCO METAL-NAFLU
Facts
Petitioner is a company engaged in the manufacture of metal products, whereas
respondent is the labor union of petitioners rank and file employees. Sometime in December
2003, petitioner paid the 13
th
month pay, bonus, and leave encashment of three union members
in amounts proportional to the service they actually rendered in a year, which is less than a full
twelve (12) months. Respondent protested the prorated scheme, claiming that on several
occasions petitioner did not prorate the payment of the same benefits to seven (7) employees
who had not served for the full 12 months. According to respondent, the prorated payment
violates the rule against diminution of benefits under Article 100 of the Labor Code. Thus, they
filed a complaint before the National Conciliation and Mediation Board (NCMB). The parties
submitted the case for voluntary arbitration.
The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that
the giving of the contested benefits in full, irrespective of the actual service rendered within one
year has not ripened into a practice. He also interpreted the phrase for each year of service
found in the pertinent CBA provisions to mean that an employee must have rendered one year of
service in order to be entitled to the full benefits provided in the CBA.
Respondent filed a Petition for Review before the Court of Appeals. The appellate court
found that petitioner had an existing voluntary practice of paying the aforesaid benefits in full to its
employees; thereby rejecting the claim that petitioner erred in paying full benefits to its seven
employees. The appellate court noted that aside from the affidavit of petitioners officer, it has not
presented any evidence in support of its position that it has no voluntary practice of granting the
contested benefits in full and without regard to the service actually rendered within the year.

Issues

1. Whether or not the petitioners should grant 13
th
month pay, bonus and leave encashment in full
regardless of actual service rendered.
2. Whether or not the prorated payment of the said benefits constitutes diminution of benefits
under Article 100 of the Labor Code.

Ruling

On the first issue, according to petitioner, there is a one-year cutoff in the entitlement to
the benefits provided in the CBA, which is evident from the wording of its pertinent provisions as
well as of the existing law. There is no doubt that in order to be entitled to the full monetization of
sixteen (16) days of vacation and sick leave, one must have rendered at least one year of
service. The clear wording of the provisions does not allow any other interpretation. Anent the
13
th
month pay and bonus, the CBA provisions did not give any meaning different from that given
by the law, thus it should be computed at 1/12 of the total compensation, which an employee
receives for the whole calendar year. The bonus is also equivalent to the amount of the 13
th

month pay given, or in proportion to the actual service rendered by an employee within the year.
On the second issue, it is a settled rule that any benefit and supplement being enjoyed by
employees cannot be reduced, diminished, discontinued or eliminated by the employer. The
principle of non-diminution of benefits is founded on the Constitutional mandate to protect the
rights of workers and promote their welfare, and to afford labor full protection. Said mandate in
turn is the basis of Article 4 of the Labor Code which states that all doubts in the implementation
and interpretation of this Code, including its implementing rules and regulations shall be rendered
in favor of labor.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of
freely, voluntarily and consistently granting full benefits to its employees regardless of the length
of service rendered. Petitioner claims that its full payment of benefits regardless of the length of
service to the company does not constitute voluntary employer practice. It points out that the
payments had been erroneously made and they occurred in isolated cases in the years 1992,
1993, 1994, 1999, 2002 and 2003. According to petitioner, it was only in 2003 that the accounting
department discovered the error. Petitioner further argues that for a grant of a benefit to be
considered a practice, it should have been practiced over a long period of time and must be
shown to be consistent, deliberate and intentional, which is not what happened in this case.
True, there were only a total of seven employees who benefited from such a practice, but
it was an established practice nonetheless. Jurisprudence has not laid down any rule specifying a
minimum number of years within which a company practice must be exercised in order to
constitute voluntary company practice. Petitioner cannot shirk away from its responsibility by
merely claiming that it was a mistake or an error, supported only by an affidavit of its
manufacturing group.

107

AGUANZA vs. ASIAN TERMINAL INC., ET AL.

Facts
Petitioner GualbertoAguanza was employed with respondent company Asian Terminal,
Inc. from April 15, 1989 to October 1997. He was initially employed as Derickman or Crane
Operator and was assigned as such aboard Bismark IV, a floating crane barge owned by Asian
Terminals, Inc. based at the port of Manila. Aside from his basic pay, he received meal
allowance, fixed overtime pay and out-of port allowance [when the barge is assigned outside
Metro Manila].
Sometime in September 1997, the Bismark IV, together with its crew, was temporarily
assigned at the Mariveles Grains Terminal in Mariveles, Bataan. Then, on October 20, 1997,
respondent James Keith issued a memo to the crew of Bismark IV stating that the barge had
been permanently transferred to the Mariveles Grains terminal beginning October 1, 1997 and
because of that, its crew would no longer be entitled to out of port benefits of 16 hours overtime
and P200 a day out-of port allowance.
Due to the said development, Aguanza questioned the diminution of his benefits. Aguanza
insisted on reporting to work in Manila although his barge, Bismark IV, and its other crew were
already permanently based in Mariveles, Bataan. Aguanza was not allowed to time in in Manila
because his work was in Mariveles, Bataan. He therefore was not able to render his services, and
was accordingly not paid for doing nothing.
Because of private respondents refusal to give him any work assignment and pay his
salary, Aguanza filed a complaint for illegal dismissal against respondents.

Issue
Was Aguanza constructively dismissed?

Ruling

No. The transfer of operations is a valid exercise of management prerogative. Aguanza
asserts that his transfer constituted constructive dismissal, while ATI asserts that Aguanzas
transfer was a valid exercise of management prerogative.
ATIs transfer of Bismark IVs base from Manila to Bataan was, contrary to Aguanzas
assertions, a valid exercise of management prerogative. The transfer of employees has been
traditionally among the acts identified as a management prerogative subject only to limitations
found in law, collective bargaining agreement, and general principles of fair play and justice. Even
as the law is solicitous of the welfare of employees, it must also protect the right of an employer
to exercise what are clearly management prerogatives. The free will of management to conduct
its own business affairs to achieve its purpose cannot be denied. On the other hand, the transfer
of an employee may constitute constructive dismissal when continued employment is rendered
impossible, unreasonable or unlikely; when there is a demotion in rank and/or a diminution in pay;
or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the
employee. Aguanzas situation is not within the purview of this discussion.
When ATI transferred Bismark IVs operations to Bataan, ATI offered Aguanza similar terms:
basic pay for 40 hours of work from Monday to Friday, overtime pay for work done in excess of
eight hours per day, overtime pay for work done on Saturdays and Sundays, no additional
allowance and no transportation for working in Bataan. The circumstances of the case made no
mention of the salary structure in case Bismark IV being assigned work outside of Bataan;
however, we surmise that it would not be any different from the salary structure applied for work
done out-of-port. We, thus, agree with the NLRC and the appellate court when they stated that
the fixed overtime of 16 hours, out-of-port allowance and meal allowance previously granted to
Aguanza were merely supplements or employment benefits given on condition that Aguanzas
assignment was out-of-port. The fixed overtime and allowances were not part of Aguanzas basic
salary. Aguanzas basic salary was not reduced; hence, there was no violation of the rule against
diminution of pay


108

GENESIS TRANSPORT SERVICE INC ET AL. vs. UNYON NG
MALAYANG MANGGAGAWA NG GENESIS TRANSPORT ET AL.

Facts

Respondent Juan Taroy was hired by petitioner Genesis Transport as driver on
commission basis at 9% of the gross revenue per trip. He, after due notice and hearing,
terminated from employment after an accident on April 20, 2002 where he was deemed to have
been driving recklessly. He then filed a complaint for illegal dismissal and payment of service
incentive leave pay, claiming that he was singled out for termination because of his union
activities, other drivers who had met accidents not having been dismissed from employment. He
later amended his complaint to implead his co-respondent union and add as grounds unfair labor
practice and reimbursement of illegal deductions on tollgate fees, and payment of service
incentive leave pay.
Upon appeal, with respect to Taroys claim for refund, the Labor Arbiter ruled in his favor
for if, as contended by Genesis Transport, tollgate fees form part of overhead expense, why were
not expenses for fuel and maintenance also charged to overhead expense. The Labor Arbiter
thus concluded that it would appear that the tollgate fees are deducted from the gross revenues
and not from the salaries of drivers and conductors, but certainly the deduction thereof diminishes
the take home pay of the employees.

Issue

Whether or not the tollgate fee deductions which resulted to an underpayment given to
Taroy is illegal.

Ruling

The deduction is considered illegal. The amounts representing tollgate fees were
deducted from gross revenues and not directly from Taroys commissions, the labor tribunal and
the appellate court correctly held that the withholding of those amounts reduced the amount from
which Taroys 9% commission would be computed. Such a computation not only marks a change
in the method of payment of wages, resulting in a diminution of Taroys wages in violation of
Article 113 vis--vis Article 100 of the Labor Code, as amended. It need not be underlined that
without Taroys written consent or authorization, the deduction is considered illegal.
Besides, the invocation of the rule on company practice is generally used with respect
to the grant of additional benefits to employees, not on issues involving diminution of benefits.

109

CENTRAL AZUCARERA DE TARLAC vs. CENTRAL AZUCARERA DE
TARLAC LABOR UNION-NLU

Facts

In compliance with Presidential Decree (P.D.) No. 851, petitioner-employer granted its
employees the mandatory (13
th
) - month pay since 1975. The formula used by petitioner in
computing the
13
th
-month pay was: Total Basic Annual Salary divided by twelve (12). Included in petitioners
computation of the Total Basic Annual Salary were the following: basic monthly salary; first eight
(8) hours overtime pay on Sunday and legal/special holiday; night premium pay; and vacation and
sick leaves for each year. Throughout the years, petitioner used this computation until 2006.
On November 6, 2004, respondent-union staged a strike. During the pendency of the
strike, petitioner declared a temporary cessation of operations but it was only on December 2005,
all the striking union members were allowed to return to work. Subsequently, petitioner declared
another temporary cessation of operations for the months of April and May 2006. Which was later
on lifted on June 2006, but the rank-and-file employees were allowed to report for work on a
fifteen (15) day-per-month rotation basis that lasted until September 2006. In December 2006,
petitioner gave the employees their 13
th
-month pay based on the employees total earnings
during the year divided by 12.
However, the respondent union objected to this computation. It averred that petitioner did
not adhere to the usual computation of the 13
th
-month pay. It claimed that the divisor should
have been eight (8) instead of 12, because the employees worked for only 8 months in 2006. It
likewise asserted that petitioner did not observe the company practice of giving its employees the
guaranteed amount equivalent to their one month pay, in instances where the computed 13
th
-
month pay was less than their basic monthly pay.
Petitioner explained that the change in the computation of the 13
th
-month pay was
intended to rectify an error in the computation, particularly the concept of basic pay which should
have included only the basic monthly pay of the employees.

Issue

Whether petitioners interpretation of the term basic pay, essential in the computation of
the 13
th
-month pay, is correct

Ruling

No. It is not correct. The Rules and Regulations Implementing P.D. No. 851, promulgated
on December 22, 1975, defines 13
th
-month pay and basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this issuance:
(a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an
employee within a calendar year;
(b) Basic salary shall include all remunerations or earnings paid by an employer to
an employee for services rendered but may not include cost-of-living allowances granted
pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing
payments, and all allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No.
851 was issued. The Supplementary Rules clarifies that overtime pay, earnings, and other
remuneration that are not part of the basic salary shall not be included in the computation of the
13
th
-month pay.
On November 16, 1987, the Revised Guidelines on the Implementation of the 13
th
-Month
Pay Law was issued. Significantly, under this Revised Guidelines, it was specifically stated that
the minimum 13
th
-month pay required by law shall not be less than one-twelfth (1/12) of the total
basic salary earned by an employee within a calendar year.
Furthermore, the term basic salary of an employee for the purpose of computing the
13
th
month pay was interpreted to include all remuneration or earnings paid by the employer for
services rendered, but does not include allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation
and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living
allowances. However, these salary-related benefits should be included as part of the basic salary

110

in the computation of the 13
th
- month pay if, by individual or collective agreement, company
practice or policy, the same are treated as part of the basic salary of the employees.
The guidelines set by the law are not difficult to decipher. The voluntariness of the grant
of the benefit was manifested by the number of years the employer had paid the benefit to its
employees. Petitioner only changed the formula in the computation of the 13
th
-month pay after
almost 30 years and only after the dispute between the management and employees erupted.
This act of petitioner in changing the formula at this time cannot be sanctioned, as it indicates a
badge of bad faith.

111

SHS PERFORATED MATERIALS, INC. ET AL., vs. DIAZ
Facts

Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation organized and
existing under the laws of the Republic of the Philippines and registered with the Philippine
Economic Zone Authority. Petitioner Winfried Hartmannshenn (Hartmannshenn), a German
national, is its president. Thus, the wages of SHS employees are paid out by ECCP, through its
Accounting Services Department headed by Juliet Taguiang (Taguiang). Manuel F. Diaz
(respondent) was hired by petitioner SHS as Manager for Business Development on probationary
status
During respondents employment, Hartmannshenn was often abroad and, because of
business exigencies, his instructions to respondent were either sent by electronic mail or relayed
through telephone or mobile phone. During meetings with the respondent, Hartmannshenn
expressed his dissatisfaction over respondents poor performance. respondent acknowledged his
poor performance and offered to resign from the company.
On November 18, 2005, Hartmannshenn arrived in the Philippines from Germany, and on
November 22 and 24, 2005, notified respondent of his arrival through electronic mail messages
and advised him to get in touch with him. Respondent claimed that he never received the
messages. Hartmannshenn instructed Taguiang not to release respondents salary.
Respondent served on SHS a demand letter and a resignation letter. It is precisely
because of illegal and unfair labor practices such as these that I offer my resignation with neither
regret nor remorse. Appealing for the release of his salary respondent filed a Complaint against
the petitioners for illegal dismissal; non-payment of salaries/wages and 13
th
month pay with
prayer for reinstatement and full backwages; exemplary damages, and attorneys fees, costs of
suit, and legal interest.

Issue

Whether or not the temporary withholding of respondents salary/wages by petitioners
was a valid exercise of management prerogative.

Ruling

Withholding respondents salary was not a valid exercise of management prerogative.
Management prerogative refers to the right of an employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods, processes to
be followed, regulation regarding transfer of employees, supervision of their work, lay-off and
discipline, and dismissal and recall of work. Although management prerogative refers to the
right to regulate all aspects of employment, it cannot be understood to include the right to
temporarily withhold salary/wages without the consent of the employee.
Any withholding of an employees wages by an employer may only be allowed in the form of
wage deductions under the circumstances provided in Article 113 of the Labor Code, as set forth
below:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person,
shall make any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on the
insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker concerned;
and
( In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.
There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an
employer becomes so unbearable on the part of the employee that it would foreclose any choice
by him except to forego his continued employment. It exists where there is cessation of work
because continued employment is rendered impossible, unreasonable or unlikely, as an offer
involving a demotion in rank and a diminution in pay.
In this case, the withholding of respondents salary does not fall under any of the
circumstances provided under Article 113. Neither was it established with certainty that
respondent did not work from November 16 to November 30, 2005. Hence, the Court agrees with
the LA and the CA that the unlawful withholding of respondents salary amounts to constructive
dismissal.

112

NINA JEWELRY MANUFACTURING OF METAL ARTS INC. vs.
MONTECILLO
Facts

Respondents were employed as goldsmiths by the petitioner Nia Jewelry Manufacturing
of Metal Arts, Inc.There were incidents of theft involving goldsmiths in Nia Jewelrys employ. The
petitioner imposed a policy for goldsmiths, which were intended to answer for any loss or damage
which Nia Jewelry may sustain by reason of the goldsmiths fault or negligence in handling the
gold entrusted to them, requiring them to post cash bonds or deposits in varying amounts but in
no case exceeding 15% of the latters salaries per week.
The petitioner alleged that the goldsmiths were given the option not to post deposits, but
to sign authorizations allowing the former to deduct from the latters salaries amounts not
exceeding 15% of their take home pay should it be found that they lost the gold entrusted to
them. The deposits shall be returned upon completion of the goldsmiths work and after an
accounting of the gold received.
The respondents claimed otherwise insisting that petitioner left the goldsmiths with no
option but to post the deposits The next day after the policy was imposed, the respondents no
longer reported for work and signified their defiance against the new policy which at that point had
not even been implemented yet.
The respondents alleged that they were constructively dismissed by the petitioner as their
continued employments were made dependent on their readiness to post the required deposits.
The respondents then filed a complaint for illegal dismissal and for the award of separation pay
against the petitioner, and later filed their amended complaint which excluded their earlier prayer
for separation pay but sought reinstatement and payment of backwages, attorneys fees and 13
th

month pay.

Issues

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

Ruling

1) NO, the Nia Jewelry may not impose the policy. Articles 113 and 114 of the Labor Code are
clear as to what are the exceptions to the general prohibition against requiring deposits and
effecting deductions from the employees salaries.
ART. 113. Wage Deduction No employer, in his own behalf or in behalf of any person, shall
make any deduction from the wages of his employees, except: (a)In cases where the worker is
insured with his consent by the employer, and the deduction is to recompense the employer for
the amount paid by him as premium on the insurance; (b)For union dues, in cases where the right
of the worker or his union to check-off has been recognized by the employer or authorized in
writing by the individual worker concerned; and (c) In cases where the employer is authorized by
law or regulations issued by the Secretary of Labor.
Article 114.Deposits for loss or damage No employer shall require his worker to make deposits
from which deductions shall be made for the reimbursement of loss of or damage to tools,
materials, or equipment supplied by the employer, except when the employer is engaged in such
trades, occupations or business where the practice of making deposits is a recognized one, or is
necessary or desirable as determined by the Secretary of Labor in appropriate rules and
regulations.
The petitioners should first establish that the making of deductions from the salaries is
authorized by law, or regulations issued by the Secretary of Labor. The petitioners failed to prove
that their imposition of the new policy upon the goldsmiths under Nia Jewelrys employ falls
under the exceptions specified in Articles 113 and 114 of the Labor Code.
2) There is NO constructive dismissal. Constructive dismissal occurs when there is cessation of
work because continued employment is rendered impossible, unreasonable or unlikely; when
there is a demotion in rank or diminution in pay or both; or when a clear discrimination,
insensibility, or disdain by an employer becomes unbearable to the employee.
The petitioners did not whimsically or arbitrarily impose the policy to post cash bonds or
make deductions from the workers salaries. As attested to by the respondents fellow goldsmiths
in their Joint Affidavit, the workers were convened and informed of the reason behind the
implementation of the new policy. Instead of airing their concerns, the respondents just promptly
stopped reporting for work.

113

LOCSIN II vs. MEKENI FOOD CORP.

Facts

Petitioner Antonio Locsin II was the Regional Sales Manager of respondent Mekeni Food
Corporation. He was hired on February 2004 to oversee the NCR and Luzon operation. In
addition to his compensation and benefit package, a car was offered to him under which one-half
of the cost of the vehicle is to be paid by the company and the other half to be deducted from
petitioners salary. The car valued at 280,000 which Locsin paid through salary deductions of
5,000 per month.
On February 2006, Locsin resigned. A total of 112,500.00 had already been deducted
from his monthly salary and applied as part of his share in the car plan. Upon resignation,
petitioner made personal and written follow-ups regarding his unpaid salaries, commissions,
benefits, and offer to purchase his service vehicle. Mekeni replied that the company car plan
benefit applied only to employees who have been with the company for five years; for this reason,
the balance that petitioner should pay on his service vehicle stood at P116,380.00 if he opts to
purchase the same.
On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S. Garcia,
a Complaint for the recovery of monetary claims consisting of unpaid salaries, commissions,
sick/vacation leave benefits, and recovery of monthly salary deductions which were earmarked
for his cost-sharing in the car plan.

Issue

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

Ruling

Any benefit or privilege enjoyed by petitioner from using the service vehicle was merely
incidental and insignificant, because for the most part the vehicle was under Mekenis control and
supervision. Free and complete disposal is given to the petitioner only after the vehicles cost is
covered or paid in full. Until then, the vehicle remains at the beck and call of Mekeni. Given the
vast territory petitioner had to cover to be able to perform his work effectively and generate
business for his employer, the service vehicle was an absolute necessity, or else Mekenis
business would suffer adversely. Thus, it is clear that while petitioner was paying for half of the
vehicles value, Mekeni was reaping the full benefits from the use thereof.
Under Article 22 of the Civil Code, every person who through an act of performance by
another, or any other means, acquires or comes into possession of something at the expense of
the latter without just or legal ground, shall return the same to him. Article 2142 of the same
Code likewise clarifies that there are certain lawful, voluntary and unilateral acts which give rise to
the juridical relation of quasi-contract, to the end that no one shall be unjustly enriched or
benefited at the expense of another. In the absence of specific terms and conditions governing
the car plan arrangement between the petitioner and Mekeni, a quasi-contractual relation was
created between them. Consequently, Mekeni may not enrich itself by charging petitioner for the
use of its vehicle which is otherwise absolutely necessary to the full and effective promotion of its
business. It may not, under the claim that petitioners payments constitute rents for the use of the
company vehicle, refuse to refund what petitioner had paid, for the reasons that the car plan did
not carry such a condition; the subject vehicle is an old car that is substantially, if not fully,
depreciated; the car plan arrangement benefited Mekeni for the most part; and any personal
benefit obtained by petitioner from using the vehicle was merely incidental.
Conversely, petitioner cannot recover the monetary value of Mekenis counterpart
contribution to the cost of the vehicle; that is not property or money that belongs to him, nor was it
intended to be given to him in lieu of the car plan. Mekenis share of the vehicles cost was not
part of petitioners compensation package. The vehicle is an asset that belonged to Mekeni. Just
as Mekeni is unjustly enriched by failing to refund petitioners payments, so should petitioner not
be awarded the value of Mekenis counterpart contribution to the car plan, as this would unjustly
enrich him at Mekenis expense.
Thus, Mekeni Food Corporation should refund petitioner Antonio Locsin IIs payments
under the car plan agreement amounting only to the extent of the contribution Locsin made,
totalling to the amount of P112,500.00.


114

TH SHOPFITTERS CORP. ET AL. vs. T&H SHOPFITTERS CORP.
UNION
Facts

On September 7, 2004, the T&H Shopfitters Corporation/ Gin Queen Corporation workers
union (THS-GQ Union) filed their Complaint for Unfair Labor Practice (ULP) by way of union
busting, and Illegal Lockout, with moral and exemplary damages and attorneys fees, against
T&H Shopfitters Corporation (T&H Shopfitters) and Gin Queen Corporation before the Labor
Arbiter (LA).
1
st
CAUSE: In their desire to improve their working conditions, respondents and other
employees of held their first formal meeting on November 23, 2003 to discuss the formation of a
union. The following day, seventeen (17) employees were barred from entering petitioners
factory premises located in Castillejos, Zambales, and ordered to transfer to T&H Shopfitters
warehouse at Subic Bay Freeport Zone (SBFZ) purportedly because of its expansion. Afterwards,
the said seventeen (17) employees were repeatedly ordered to go on forced leave due to the
unavailability of work.
Respondents contended that the affected employees were not given regular work
assignments, while subcontractors were continuously hired to perform their functions.
Respondents sought the assistance of the National Conciliation and Mediation Board.
Subsequently, an agreement between petitioners and THS-GQ Union was reached. Petitioners
agreed to give priority to regular employees in the distribution of work assignments. Respondents
averred, however, that petitioners never complied with its commitment but instead hired
contractual workers. Instead, Respondents claimed that the work weeks of those employees in
the SBFZ plant were drastically reduced to only three (3) days in a month.
2
nd
CAUSE: On March 24, 2004, THS-GQ Union filed a petition for certification election
and an order was issued to hold the certification election in both T&H Shopfitters and Gin Queen.
On October 10, 2004, petitioners sponsored a field trip to Iba, Zambales, for its employees. The
officers and members of the THS-GQ Union were purportedly excluded from the field trip. On the
evening of the field trip, a certain Angel Madriaga, a sales officer of petitioners, campaigned
against the union in the forthcoming certification election.
When the certification election was scheduled on October 11, 2004, the employees were
escorted from the field trip to the polling center in Zambales to cast their votes. The remaining
employees situated at the SBFZ plant cast their votes as well. Due to the heavy pressure exerted
by petitioners, the votes for no union prevailed.
3
rD
CAUSE: A memorandum was issued by petitioner Ben Huang (Huang), Director for
Gin Queen, informed its employees of the expiration of the lease contract between Gin Queen
and its lessor in Castillejos, Zambales and announced the relocation of its office and workers to
Cabangan, Zambales.
When the respondents, visited the site in Cabangan, discovered that it was a talahiban or
grassland. The said union officers and members were made to work as grass cutters in
Cabangan, under the supervision of a certain Barangay Captain Greg Pangan. Due to these
circumstances, the employees assigned in Cabangan did not report for work. The other
employees who likewise failed to report in Cabangan were meted out with suspension.
In its defense, Petitioners also stress that they cannot be held liable for ULP for the
reason that there is no employer-employee relationship between the former and respondents.
Further, Gin Queen avers that its decision to implement an enforced rotation of work assignments
for respondents was a management prerogative permitted by law, justified due to the decrease in
orders from its customers, they had to resort to cost cutting measures to avoid anticipated
financial losses. Thus, it assigned work on a rotational basis. It explains that its failure to present
concrete proof of its decreasing orders was due to the impossibility of proving a negative
assertion. It also asserts that the transfer from Castillejos to Cabangan was made in good faith
and solely because of the expiration of its lease contract in Castillejos. It was of the impression
that the employees, who opposed its economic measures, were merely motivated by spite in filing
the complaint for ULP against it.

Issue

Whether or not ULP acts were committed by petitioners against respondents.

Ruling

ULP were committed by petitioners against respondents.Petitioners are being accused of
violations of paragraphs (a), (c), and (e) of Article 257 (formerly Article 248) of the Labor Code,13
to wit:

115

Article 257. Unfair labor practices of employers.It shall be unlawful for an employer to
commit any of the following unfair labor practices:
(a) To interfere with, restrain or coerce employees in the exercise of their right to self-
organization;
x x x x
To contract out services or functions being performed by union members when such
will interfere with, restrain, or coerce employees in the exercise of their right to self-
organization;
x x x x
(e) To discriminate in regard to wages, hours of work, and other terms and conditions of
employment in order to encourage or discourage membership in any labor organization. x x x
The questioned acts of petitioners, namely: 1) sponsoring a field trip to Zambales for its
employees, to the exclusion of union members, before the scheduled certification election; 2) the
active campaign by the sales officer of petitioners against the union prevailing as a bargaining
agent during the field trip; 3) escorting its employees after the field trip to the polling center; 4) the
continuous hiring of subcontractors performing respondents functions; 5) assigning union
members to the Cabangan site to work as grass cutters; and 6) the enforcement of work on a
rotational basis for union members, taken together, reasonably support an inference that, indeed,
such were all orchestrated to restrict respondents free exercise of their right to self-organization.
The Court is of the considered view that petitioners undisputed actions prior and immediately
before the scheduled certification election, while seemingly innocuous, unduly meddled in the
affairs of its employees in selecting their exclusive bargaining representative.


116

WESLEYAN UNIVERSITY-PHILS., vs. WESLEYAN UNIVERSITY-
PHILS., FACULTY & STAFF ASSO.

Facts

Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational
institution duly organized and existing under the laws of the Philippines. Respondent Wesleyan
University-Philippines Faculty and Staff Association, on the other hand, is a duly registered labor
organization acting as the sole and exclusive bargaining agent of all rank-and-file faculty and staff
employees of petitioner.
In December 2003, the parties signed a 5-year CBA effective June 1, 2003 until May 31,
2008. On August 16, 2005, petitioner, through its President, Atty. Maglaya , issued a
Memorandum providing guidelines on the implementation of vacation and sick leave credits as
well as vacation leave commutation which states that vacation and sick leave credits are not
automatic as leave credits would be earned on a month-to-month and only vacation leave is
commuted or monetized to cash which is effected after the second year of continuous service of
an employee.
Respondents questioned the guidelines for being violative of existing practices and the
CBA which provide that all covered employees are entitled to 15 days sick leave and 15 days
vacation leave with pay every year and that after the second year of service, all unused vacation
leave shall be converted to cash and paid to the employee at the end of each school year, not
later than August 30 of each year.
Respondent file a grievance complaint on the implementation of the vacation and sick
leave policy. Petitioner also announced its plan of implementing a one-retirement policy which
was unacceptable to respondent. Respondent submitted affidavits to prove that there is an
established practice of giving two retirement benefits, one from the Private Education Retirement
Annuity Association (PERAA) Plan and another from the CBA Retirement Plan.
The Voluntary Arbitrator rendered a Decision declaring the one-retirement policy and the
Memorandum dated August 16, 2005 contrary to law. CA also affirmed the ruling of the Voluntary
Arbitrator.
Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and
the PERAA Plan are one and the same. It maintains that there is no established company
practice or policy of giving two retirement benefits to its employees. Respondent belies the claims
of petitioner and asserts that there are two retirement plans as the PERAA Retirement Plan,
which has been implemented for more than 30 years, is different from the CBA Retirement Plan.
Respondent further avers that it has always been a practice of petitioner to give two retirement
benefits and that this practice was established by substantial evidence as found by both the
Voluntary Arbitrator and the CA.

Issue

Whether or not the respondents are entitled to two retirement plans.

Ruling

The Non-Diminution Rule found in Article 100 of the Labor Code explicitly prohibits
employers from eliminating or reducing the benefits received by their employees. This rule,
however, applies only if the benefit is based on an express policy, a written contract, or has
ripened into a practice. To be considered a practice, it must be consistently and deliberately
made by the employer over a long period of time. Respondent was able to present substantial
evidence in the form of affidavits to support its claim that there are two retirement plans. Based
on the affidavits, petitioner has been giving two retirement benefits as early as 1997. Petitioner,
on the other hand, failed to present any evidence to refute the veracity of these affidavits.
Petitioners assertion that there is only one retirement plan as the CBA Retirement Plan and the
PERAA Plan are one and the same is not supported by any evidence.
The Memorandum dated August 16, 2005 is contrary to the existing CBA. It limits the
available leave credits of an employee at the start of the school year. The Memorandum dated
imposes a limitation not agreed upon by the parties nor stated in the CBA, so it must be struck
down.


117

BLUER THAN BLUE JOINT VENTURES CO. vs. ESTEBAN
Facts

The respondent was employed as a sales clerk and assigned at the petitioners boutique.
Her primary tasks were attending to all customer needs, ensuring efficient inventory, coordinating
orders from clients, cashiering and reporting to the accounting department. The petitioner learned
that some of their employees had access to their POS system with the use of a universal
password given to them by a certain Elmer Flores, who in turn learned of the password from the
respondent. The petitioner then conducted an investigation and asked the petitioner to explain
why she should not be disciplinarily dealt with. During the investigation the respondent was
placed under preventive suspension. After investigation the petitioner terminated the respondent
on the grounds of loss of trust or confidence. This respondent was given her final wage and
benefits less the inventory variance incurred by the store. This urged the respondent to file a
complaint for illegal dismissal, illegal suspension, holiday pay, rest day and separation pay. The
labor arbiter ruled in her favour awarding her backwages. The petitioner appealed the decision in
the NLRC and the decision was reversed. However, upon the respondents petition for certiorari
in the court of appeals the decision was reinstated. Hence, this petition.

Issue

Whether or not the negative sales variance could be validly deducted from the
respondents wage.

Held

No, it cannot be deducted in this case. Article 113 of the Labor Code provides that no
employer, in his own behalf or in behalf of any person, shall make any deduction from the wages
of his employees, except in cases where the employer is authorized by law or regulations issued
by the Secretary of Labor and Employment, among others. The Omnibus Rules Implementing the
Labor Code, meanwhile, provides: SECTION 14. Deduction for loss or damage. Where the
employer is engaged in a trade, occupation or business where the practice of making deductions
or requiring deposits is recognized to answer for the reimbursement of loss or damage to tools,
materials, or equipment supplied by the employer to the employee, the employer may make wage
deductions or require the employees to make deposits from which deductions shall be made,
subject to the following conditions: (a) That the employee concerned is clearly shown to be
responsible for the loss or damage;(b) That the employee is given reasonable opportunity to
show cause why deduction should not be made; (c) That the amount of such deduction is fair and
reasonable and shall not exceed the actual loss or damage; and (d) That the deduction from the
wages of the employee does not exceed 20 percent of the employees wages in a week.
In this case, the petitioner failed to sufficiently establish that Esteban was responsible for the
negative variance it had in its sales for the year 2005 to 2006 and that Esteban was given the
opportunity to show cause the deduction from her last salary should not be made.
Furthermore, the court ruled, in Nina Jewelry Marketing of Metal Arts, Inc. v. Montecillo, that:
[T]he petitioners should first establish that the making of deductions from the salaries is
authorized by law, or regulations issued by the Secretary of Labor. Further, the posting of cash
bonds should be proven as a recognized practice in the jewelry manufacturing business, or
alternatively, the petitioners should seek for the determination by the Secretary of Labor through
the issuance of appropriate rules and regulations that the policy the former seeks to implement is
necessary or desirable in the conduct of business. The petitioners failed in this respect. It bears
stressing that without proofs that requiring deposits and effecting deductions are recognized
practices, or without securing the Secretary of Labors determination of the necessity or
desirability of the same, the imposition of new policies relative to deductions and deposits can be
made subject to abuse by the employers. This is not what the law intends.


118

PAYMENT OF WAGES
CONGSON vs. NATIONAL LABOR RELATIONS COMMISSION
Facts

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

Issue

Whether or not the form of payment by Congson is valid pursuant to Article 102 of the
Labor Code.

Ruling

Petitioners practice of paying the private respondents the minimum wage by means of
legal tender combined with tuna liver and intestines runs counter to the above cited provision of
the Labor Code. The fact that said method of paying the minimum wage was not only agreed
upon by both parties in the employment agreement but even expressly requested by private
respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall be
paid only by means of legal tender. The only instance when an employer is permitted to pay
wages informs other than legal tender, that is, by checks or money order, is when the
circumstances prescribed in the second paragraph of Article 102 are present.

119

NORTH DAVAO MINING vs. NATIONAL LABOR RELATIONS
COMMISSION

Facts
Respondent Wilfredo Guillema is one among several employees of North Davao who
were separated by reason of the companys closure on May 31, 1992, and who were the
complainants in the cases before the respondent labor arbiter. On May 31, 1992, petitioner North
Davao completely ceased operations due to serious business reverses. From 1988 until its
closure in 1992, North Davao suffered net losses averaging three billion pesos per year, for each
of the five years prior to its closure. All told five months prior to its closure, its total liabilities had
exceeded its assets by 20.392 billion pesos. When it ceased operations, its remaining
employees were separated and given the equivalent of 12.5 days pay for every year of service,
computed on their basic monthly pay, in addition to the commutation to cash of their unused
vacation and sick leaves. However, it appears that, during the life of the petitioner corporation,
from the beginning of its operations in 1981 until its closure in 1992, it had been giving separation
pay equivalent to thirty days pay for every year of service. Moreover, the employees had to
collect their salaries at a bank in Tagum, Davao del Norte, some 58 kilometers from their
workplace and about 2 hours travel time by public transportation; this arrangement lasted from
1981 up to 1990.
Subsequently, a complaint was filed with respondent labor arbiter by respondent Wilfredo
Guillema and 271 other seperated employees for additional separation pay; back wages;
transportation allowance; hazard pay; etc., amounting to P58,022,878.31.
Issue

Whether or not the time spent in collecting wages in a place other than the place of
employment is compensable notwithstanding that the same is done during official time.
Ruling

Hours spent by complainants in collecting salaries shall be considered compensable
hours worked. It is undisputed that because of security reasons, from the time of its operations,
petitioner NDMC maintained its policy of paying its workers at a bank in Tagum, Davao del Norte,
which usually took the workers about two and a half (2 1/2) hours of travel from the place of work
and such travel time is not official. Records also show that on February 12,1992, when an
inspection was conducted by the Department of Labor and Employment at the premises of
petitioner NDMC at Amacan, Maco, Davao del Norte, it was found out that petitioners had
violated labor standards law, one of which is the place of payment of wages. Section 4, Rule VIII,
Book III of the Omnibus Rules Implementing the Labor Code provides that: Place of payment. -
(a) As a general rule, the place of payment shall be at or near the place of undertaking. Payment
in a place other than the workplace shall be permissible only under the following circumstances:
(1) When payment cannot be effected at or near the place of work by reason of the deterioration
of peace and order conditions, or by reason of actual or impending emergencies caused by fire,
flood, epidemic or other calamity rendering payment thereat impossible; (2) When the employer
provides free transportation to the employees back and forth; and (3) Under any analogous
circumstances; provided that the time spent by the employees in collecting their wages shall be
considered as compensable hours worked.
Considering further the distance between Amacan, Maco to Tagum which is 2 hours by
travel and the risks in commuting all the time in collecting complainants salaries, would justify the
granting of backwages equivalent to 2 days in a month.

120

NATIONAL FEDERATION OF LABOR vs. COURT OF APPEALS
Facts

American Rubber Company, Inc. (ARCI) entered into a Farm Management Agreement
(FMA) with Sime Darby Pilipinas, Inc. (SDPI) to manage, administer, develop, cultivate and
improve the rubber plantation in Latuan, Isabela, Basilan. However, SDPI decided to terminate
the FMA with ARCI and cease operation of the rubber plantation in Latuan, Isabela, Basilan
effective January 17, 1998. Thus on December 17, 1997, SDPI served formal notices of
termination to all employees of the plantation effective January 17, 1997. In complaince with the
collective bargaining agreement of the National Federation of Labor (NFL), which was the duly
registered bargaining agent of SDPI, and SDPI, the separation pay of the employees was
computed in accordance with the provisions of the Labor Code. On January 17, 1998, each of the
herein petitioners received their separation pay which was equivalent to one-half pay for every
year of service, and other benefits which were all lumped in one check. However, the petitioners
filed a complaint for deficiency in separation pay raising the issue of non-payment of the exact
computation of separation pay. They contended that the private respondents is bound by its
policy of granting separation pay equivalent to one-month pay for every year of service to its
retrenched employees.

Issue

Whether or not the petitioners are entitled to separation pay equivalent to one month pay
for every year of employment with private respondents.

Ruling

According to the Supreme Court, Article 283 of the Labor Code provides that employees
who are dismissed due to closures that are not due to business insolvency should be paid
separation pay equivalent to one-month pay or at least one-half month pay for every year of
service, whichever is higher. In the case at bar, the petitioners had served the respondent SDPI
for a period longer than six months. Hence, their separation pay computed at one-half month pay
per year of service is more than the minimum one month pay. Also, the court emphasized that the
collective bargaining agreement should prevail as a contract governing the employer and the
employees respecting the terms of employment, which in this case, they agreed on the terms of
termination pay should be in accordance with the provisions of the Labor Code. Consequently,
Artcle 283 of the Labor Code, which grants separation pay equivalent to one-month pay or one-
half month pay for every year of service, whichever is higher, to the employees retrenched due to
business closures, should apply.

121

HEIRS OF SARA LEE vs. REY
Facts
The Heir of Sara Lee is engaged in the direct selling of a variety of product lines for men
and women, including cosmetics, intimate apparels, perfumes, ready to wear clothes and other
novelty items, through its various outlets nationwide. In the pursuit of its business, the petitioner
engages and contracts with dealers to sell the aforementioned merchandise. These dealers,
known either as Independent Business Managers (IBMs) or Independent Group Supervisors
(IGSs), depending on whether they sell individually or through their own group, would obtain at
discounted rates the merchandise from the petitioner on credit or then sell the same products to
their own customers at fixed prices also determined by the petitioner.
In turn, the dealers are paid Services Fees, or sales commissions, the amount of which
depends on the volume and value of their sales. Under existing company policy, the dealers
must remit to the petitioner the proceeds of their sales within a designated credit period, which
would either be 38 days for IGSs or 52 days for IBMs, counted from the day the said dealers
acquired the merchandise from the petitioner. To discourage late remittances, the petitioner
imposes a Credit Administration Charge, or simply, a penalty charge, on the value of the
unremitted payment.
The dealers under this system earn income through a profit margin between the
discounted purchase price they pay on credit to the petitioner and the fixed selling price their
customers will have to pay. On top of this margin, the dealer is given the Service Fee, a sales
commission, based on the volume of sales generated by him or her. Due to the sheer volume of
sales generated by all of its outlets, the petitioner has found the need to strictly monitor the 38- or
52-day rolling due date of each of its IBMs and IGSs through the employment of Credit
Administration Supervisors (CAS) for each branch. The primary duty of the CAS is to strictly
monitor each of these deadlines, to supervise the credit and collection of payments and
outstanding accounts due to the petitioner from its independent dealers and various customers,
and to screen prospective IBMs. To discharge these responsibilities, the CAS is provided with a
computer equipped with control systems through which data is readily generated. Under this
organizational setup, the CAS is under the direct and immediate supervision of the Branch
Operations Manager (BOM).
Cynthia Rey at the time of her dismissal from employment, held the position of Credit
Administration Supervisor or CAS at the Cagayan de Oro City branch of the petitioner. She was
first employed by the petitioner as an Accounts Receivable Clerk at its Caloocan City branch. In
November 1993, respondent was transferred to the Cagayan de Oro City branch retaining the
same position. In January 1994, respondent was elevated to the position of CAS. At that time,
the Branch Operations Manager or BOM of the Cagayan de Oro City branch was a certain Mr.
Jeremiah Villagracia. In March 1995, respondent was temporarily assigned to the Butuan City
branch.
Sometime in June 1995, while respondent was still working in Butuan City, she allegedly
instructed the Accounts Receivable Clerk of the Cagayan de Oro outlet to change the credit term
of one of the IBMs of the petitioner who happens to be respondents sister-in-law, from the 52-day
limit to an unauthorized term of 60 days. The respondent made the instruction just before the
computer data for the computation of the Service Fee accruing to Ms. Rey-Petilla was about to be
generated. Ms. Mendoza then reported this allegedly unauthorized act of respondent to her
Branch Operations Manager, Mr. Villagracia. Acting on the report, as the petitioner alleges, BOM
Villagracia discreetly verified the records and discovered that it was not only the 52-day credit
term of IBM Rey-Petilla that had been extended by the respondent, but there were several other
IBMs whose credit terms had been similarly extended beyond the periods allowed by company
policy. BOM Villagracia then summoned the respondent and required her to explain the
unauthorized credit extensions.

Issue

Whether or not the respondent is entitled to 13
th
month pay.


Ruling

The award of 13
th
month pay must be deleted. Respondent is not a rank-and-file
employee and is, therefore, not entitled to thirteenth-month pay. However, the NLRC and the CA
are correct in refusing to award 14
th
and 15
th
month pay as well as the monthly salary increase of
10 percent per year for two years based on her latest salary rate. The respondent must show
that these benefits are due to her as a matter of right. Mere allegations by the respondent do not
suffice in the absence of proof supporting the same. With respect to salary increases in

122

particular, the respondent must likewise show that she has a vested right to the same, such that
her salary increases can be made a component in the computation of backwages. What is
evident is that salary increases are a mere expectancy. They are by nature volatile and
dependent on numerous variables, including the companys fiscal situation, the employees future
performance on the job, or the employees continued stay in a position. In short, absent any
proof, there is no vested right to salary increases.



123

CONDITIONS OF EMPLOYMENT
SAN JUAN DE DIOS HOSPITAL vs. NATIONAL LABOR RELATIONS
COMMISSION
Facts

Petitioners, the rank-and-file employee-union officers and members of San Juan De Dios
Hospital Employees Association, sent a letter requesting for the expeditious implementation and
payment by respondent, San Juan De Dios Hospital, of the 40-hours/5-day workweek with
compensable weekly two (2) days off provided for by Policy Instruction No. 54 issued by the
Secretary of Labor. Said policy instruction purports to implement R.A. No. 5901, otherwise known
as An Act Prescribing Forty Hours A Week of Labor For Government and Private Hospitals Or
Clinic Personnel. Respondent hospital failed to give a favorable response; thus, petitioners filed
a complaint regarding their claims for statutory benefits under the above-cited law and policy
issuance. However, the Labor Arbiter and, subsequently, NLRC dismissed the complaint. Hence,
this petition ascribing grave abuse of discretion on the part of NLRC in concluding that Policy
Instructions No. 54 proceeds from a wrong interpretation of R.A. 5901 and Article 83 of the Labor
Code.

Issue

Whether or not Policy Instruction No. 54, entitling a full weekly wage of 7 days upon
completion of 40-hour/5-day workweek, is valid based on existing labor laws.

Ruling

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

124

SIMEDARBY vs. NATIONAL LABOR RELATIONS COMMISSION
Facts

Prior to the present controversy, the factory employees of Sime Darby Pilipinas, Inc.
enjoyed a 30-minute paid on call lunch break in their daily work schedule of 7:45 am to 3:45 pm.
The petitioner company passed a memorandum dated Aug 12 1992 advising all factory-based
workers, except those in the Warehouse and Quality Assurance Department, of a change in work
schedule that discontinued the 30-minute paid on call lunch break and set an uninterrupted 1
hour lunch break in lieu thereof.
Private respondents then filed a complaint for unfair labor practice, discrimination, and
evasion of liability with the Labor Arbiter who dismissed the complaint, ruling that the elimination
of the 30-minute lunch break was a valid exercise of management prerogative. Appeal was made
to respondent NLRC who reversed the decision of the Labor Arbiter, declaring that the new work
schedule deprived the employees of the benefits of a time-honored company practice and that
such change also resulted in an unjust diminution of employee benefits.
The OSG recommended the present petition to be granted, alleging that the new
memorandum containing the work schedule was not discriminatory not did it constitute unfair
labor practice.

Issue

Whether or not the memorandum dated Aug 14 1992 discontinuing the 30-minute paid
on call lunch break constituted unfair labor practice and diminution of benefits

Ruling

The Supreme Court sustained petitioner, holding that it is clearly a management
prerogative to fix the work schedules of company employees. Under the old schedule, the
employees are compensated during their 30-minute lunch break, but in essence it is still working
time since the workers could be called upon to work. Whereas in the new schedule, the
employees are given a longer break of 1 hour, though uncompensated, it is uninterrupted as
workers on their break are no longer on call. The change in schedule would improve company
productivity as well as enhance the comfort of workers who could enjoy an uninterrupted break.
The Supreme Court also reiterated the policy that while social justice and the protection
of the working class is ensured by the Constitution, the same fundamental law also protects the
right of the management to regulate all aspects of employment as well as to retain the prerogative
of changing work schedules according to the exigencies of the enterprise. So long as this
prerogative is exercised in good faith, the Court upholds such exercise.

125

PHILIPPINE AIRLINES vs. NATIONAL LABOR RELATIONS
COMMISSION

Facts

Private respondent (Dr. Herminio A. Fabros) was employed as flight surgeon at petitioner
company ( PAL). He was assigned at (PAL Medical Clinic at Nichols) and was on duty from 4:00
in the afternoon until 12:00 midnight.
On February 17, 1994, at around 7:00 in the evening, private respondent left the clinic to
have his dinner at his residence, which was about five-minute drive away. A few minutes later,
the clinic received an emergency call from the PAL Cargo Services. One of its employees, Mr.
Manuel Acosta, had suffered a heart attack. Upon receiving the call the nurse on duty, Mr.
Merlino Eusebio, called private respondent at home to inform him of the emergency. The patient
arrived at the clinic at 7:50 in the evening and was rushed by Mr. Eusebio to the hospital. When
private respondent reached the clinic at around 7:51 in the evening, Mr. Eusebio had already left
with the patient. Mr. Acosta died the following day.
Upon learning about the incident, PAL Medical Director Dr. Godofredo B. Banzon ordered
the Chief Flight Surgeon to conduct an investigation. The Chief Flight Surgeon, in turn, required
private respondent to explain why no disciplinary sanction should be taken against him.
In his explanation, private respondent asserted that he was entitled to a thirty-minute
meal break; that he immediately left his residence upon being informed by Mr. Eusebio about the
emergency and he arrived at the clinic a few minutes later; that Mr. Eusebio panicked and
brought the patient to the hospital without waiting for him.
Finding private respondents explanation unacceptable, the management charged private
respondent with abandonment of post while on duty. Petitioner argues that being a full-time
employee, private respondent is obliged to stay in the company premises for not less than eight
(8) hours. Hence, he may not leave the company premises during such time, even to take his
meals.

Issue

Whether or not being a full-time employee, private respondent is obliged to stay in the company
premises for not less than eight (8) hours.

Ruling
NO. Employees are not prohibited from going out of the premises as long as they return
to their post on time. Articles 83 and 85 of the Labor Code read:
Art. 83. Normal hours of work.The normal hours of work of any employee shall not exceed
eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least one million
(1,000,000) or in hospitals and clinics with a bed capacity of at least one hundred (100) shall
hold regular office hours for eight (8) hours a day, for five (5) days a week, exclusive of time
for meals, except where the exigencies of the service require that such personnel work for six
(6) days or forty-eight (48) hours, in which case they shall be entitled to an additional
compensation of at least thirty per cent (30%) of their regular wage for work on the sixth day.
For purposes of this Article, health personnel shall include: resident physicians, nurses,
nutritionists, dieticians, pharmacists, social workers, laboratory technicians, paramedical
technicians, psychologists, midwives, attendants and all other hospital or clinic personnel.
(emphasis supplied)
Art. 85. Meal periods.Subject to such regulations as the Secretary of Labor may
prescribe, it shall be the duty of every employer to give his employees not less than sixty (60)
minutes time-off for their regular meals.
Section 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further states:
Sec. 7. Meal and Rest Periods.Every employer shall give his employees, regardless of
sex, not less than one (1) hour time-off for regular meals, except in the following cases when
a meal period of not less than twenty (20) minutes may be given by the employer provided
that such shorter meal period is credited as compensable hours worked of the employee;
(a) Where the work is non-manual work in nature or does not involve strenuous physical
exertion;
(b) Where the establishment regularly operates not less than sixteen hours a day;

126

In cases of actual or impending emergencies or there is urgent work to be performed
on machineries, equipment or installations to avoid serious loss which the employer would
otherwise suffer; and
(d) Where the work is necessary to prevent serious loss of perishable goods.
Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be
considered as compensable working time.
Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it
be inferred that employees must take their meals within the company premises. Employees are
not prohibited from going out of the premises as long as they return to their posts on time.
Private respondents act, therefore, of going home to take his dinner does not constitute
abandonment.

127

LINTON COMMERCIAL CO. INC. vs. HELLERA ET AL.

Facts

On 17 December 1997, Linton issued a memorandum addressed to its employees
informing them of the companys decision to suspend its operations from December 18, 1997 to
January 5, 1998 due to the currency crisis that affected its business operations. Linton submitted
an establishment termination report to the Department of Labor and Employment (DOLE)
regarding the temporary closure of the establishment covering the said period. The companys
operation was to resume on January 6, 1998. On January 7, 1997, Linton issued another
memorandum informing them that effective January 12, 1998, it would implement a new
compressed workweek of three (3) days on a rotation basis. In other words, each worker would
be working on a rotation basis for three working days only instead for six days a week. On the
same day, Linton submitted an establishment termination report concerning the rotation of its
workers. Linton proceeded with the implementation of the new policy without waiting for its
approval by DOLE. Aggrieved, sixty-eight (68) workers (workers) filed a Complaint for illegal
reduction of workdays.

Issue

Whether or not there was an illegal reduction of work when Linton implemented a
compressed workweek by reducing from six to three the number of working days with the
employees working on a rotation basis.

Ruling
The compressed workweek arrangement was unjustified and illegal. The Bureau of
Working Conditions of the DOLE, moreover, released a bulletin providing for in determining when
an employer can validly reduce the regular number of working days. The said bulletin states that
a reduction of the number of regular working days is valid where the arrangement is resorted to
by the employer to prevent serious losses due to causes beyond his control, such as when there
is a substantial slump in the demand for his goods or services or when there is lack of raw
materials. Although the bulletin stands more as a set of directory guidelines than a binding set of
implementing rules, it has one main consideration, consistent with the ruling in Philippine Graphic
Arts Inc., in determining the validity of reduction of working hours that the company was
suffering from losses.
Certainly, management has the prerogative to come up with measures to ensure
profitability or loss minimization. However, such privilege is not absolute. Management
prerogative must be exercised in good faith and with due regard to the rights of labor. As
previously stated, financial losses must be shown before a company can validly opt to reduce the
work hours of its employees. However, to date, no definite guidelines have yet been set to
determine whether the alleged losses are sufficient to justify the reduction of work hours. If the
standards set in determining the justifiability of financial losses under Article 283 (i.e.,
retrenchment) or Article 286 (i.e., suspension of work) of the Labor Code were to be considered,
petitioners would end up failing to meet the standards. On the one hand, Article 286 applies only
when there is a bona fide suspension of the employers operation of a business or undertaking for
a period not exceeding six (6) months.
Records show that Linton continued its business operations during the effectivity of the
compressed workweek, which spanned more than the maximum period. On the other hand, for
retrenchment to be justified, any claim of actual or potential business losses must satisfy the
following standards: (1) the losses incurred are substantial and not de minimis; (2) the losses are
actual or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be
effective in preventing the expected losses; and (4) the alleged losses, if already incurred, or the
expected imminent losses sought to be forestalled, are proven by sufficient and convincing
evidence. Linton failed to comply with these standards.

128

BISIG MANGGAGAWA SA TRYCO vs. NATIONAL LABOR RELATIONS
COMMISSION
Facts

Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its
principal office is located in Caloocan City. Petitioners are its regular employees, occupying the
positions of helper, shipment helper and factory workers, assigned to the Production Department.
They are members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining
representative of the rank-and-file employees.
Tryco and the petitioners signed a Memorandum of Agreement (MOA), providing for a
compressed workweek schedule to be implemented in the company effective May 20, 1996. As
provided, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be considered as the regular
working hours, and no overtime pay shall be due and payable to the employee for work rendered
during those hours. The MOA specifically stated that the employee waives the right to claim
overtime pay for work rendered after 5:00 p.m. until 6:12 p.m. from Monday to Friday considering
that the compressed workweek schedule is adopted in lieu of the regular workweek schedule
which also consists of 46 hours. However, should an employee be permitted or required to work
beyond 6:12 p.m., such employee shall be entitled to overtime pay. On a letter dated March 26,
1997, the Bureau of Animal Industry of the Department of Agriculture reminded Tryco that its
production should be conducted in San Rafael, Bulacan, not in Caloocan City.
Accordingly, Tryco issued a Memorandum dated April 7, 1997 which directed petitioner
Aya-ay to report to the companys plant site in Bulacan. When petitioner Aya-ay refused to obey,
Tryco reiterated the order on April 18, 1997. Subsequently, through a Memorandum dated May
9, 1997, Tryco also directed the other petitioners Egera, Lario and Barte to report to the
companys plant site in Bulacan.
BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it constitutes
unfair labor practice. In protest, BMT declared a strike on May 26, 1997.
In August 1997, petitioners filed their separate complaints for illegal dismissal,
underpayment of wages, nonpayment of overtime pay and service incentive leave, and refusal to
bargain against Tryco and its President, Wilfredo C. Rivera. Petitioners alleged that the company
acted in bad faith during the CBA negotiations because it sent representatives without authority to
bind the company, and this was the reason why the negotiations failed. Also, the management
transferred petitioners from Caloocan to San Rafael, Bulacan to paralyze the union. They prayed
for the company to pay them their salaries from May 26 to 31, 1997, service incentive leave, and
overtime pay, and to implement Wage Order No. 4.

Issue

Whether or not the company committed Unfair Labor Practices.

Ruling:

No. Petitioners mainly contend that the transfer orders amount to a constructive
dismissal. They maintain that the letter of the Bureau of Animal Industry is not credible because it
is not authenticated; it is only a ploy, solicited by respondents to give them an excuse to effect a
massive transfer of employees. There is not proof to support this claim. Absent any evidence, the
allegation is not only highly irresponsible but is grossly unfair to the government agency
concerned.
Also, Trycos decision to transfer its production activities to San Rafael, Bulacan,
regardless of whether it was made pursuant to the letter of the Bureau of Animal Industry, was
within the scope of its inherent right to control and manage its enterprise effectively.
When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee,
and it does not involve a demotion in rank or diminution of salaries, benefits, and other privileges,
the employee may not complain that it amounts to a constructive dismissal. In this case, the
transfer orders do not entail a demotion in rank or diminution of salaries, benefits and other
privileges of the petitioners. Petitioners, therefore, anchor their objection solely on the ground that
it would cause them great inconvenience since they are all residents of Metro Manila and they
would incur additional expenses to travel daily from Manila to Bulacan. Such contention is
untenable because the Court has previously declared that mere incidental inconvenience is not
sufficient to warrant a claim of constructive dismissal. The distance from Caloocan to San Rafael,
Bulacan is not considerably great so as to compel petitioners to seek living accommodations in
the area and prevent them from commuting to Metro Manila daily to be with their families.
Finally, MOA is enforceable and binding against the petitioners. Where it is shown that
the person making the waiver did so voluntarily, with full understanding of what he was doing, and
the consideration for the quitclaim is credible and reasonable, the transaction must be recognized

129

as a valid and binding undertaking. In addition, D.O. No. 21 sanctions the waiver of overtime pay
in consideration of the benefits that the employees will derive from the adoption of a compressed
workweek scheme. Moreover, the adoption of a compressed workweek scheme in the company
will help temper any inconvenience that will be caused the petitioners by their transfer to a farther
workplace. Notably, the MOA complied with the following conditions set by the DOLE, under D.O.
No. 21, to protect the interest of the employees in the implementation of a compressed workweek
scheme
Considering that the MOA clearly states that the employee waives the payment of
overtime pay in exchange of a five-day workweek, there is no room for interpretation and its terms
should be implemented as they are written.



130

MINIMUM LABOR STANDARD BENEFITS
UNION OF FILIPRO EMPLOYEES vs. VICAR
Facts

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the
NLRC a petition for declaratory relief seeking a ruling on its rights and obligations respecting
claims of its monthly paid employees for holiday pay.
Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for
voluntary arbitration with respondent Vivar as the voluntary arbitrator. Vivar rendered a decision
directing Filipro to pay its monthly paid employees holiday pay pursuant to Article 94 of the Code,
subject only to the exclusions and limitations specified in Article 82 and such other legal
restrictions as are provided for in the Code.
Filipro filed a motion for clarification seeking (1) the limitation of the award to three years,
(2) the exclusion of salesmen, sales representatives, truck drivers, merchandisers and medical
representatives (hereinafter referred to as sales personnel) from the award of the holiday pay,
and (3) deduction from the holiday pay award of overpayment for overtime, night differential,
vacation and sick leave benefits due to the use of 251 divisor.
Petitioner UFE answered that the award should be made effective from the date of
effectivity of the Labor Code, that their sales personnel are not field personnel and are therefore
entitled to holiday pay, and that the use of 251 as divisor is an established employee benefit
which cannot be diminished.
Respondent Vivar issued an order declaring that:
1. the effectivity of the holiday pay award shall retroact to November 1, 1974, the
date of effectivity of the Labor Code
2. the companys sales personnel are field personnel and, as such, are not entitled
to holiday pay
3. with the grant of 10 days holiday pay, the divisor should be changed from 251 to
261 and ordered the reimbursement of overpayment for overtime, night differential,
vacation and sick leave pay due to the use of 251 days as divisor
Both parties filed motions for partial reconsideration but Vivar forwarded the case to the
NLRC which issued a resolution remanding the case to the respondent arbitrator on the ground
that it has no jurisdiction to review decisions in voluntary arbitration. However, Vivar refused to
take cognizance of the case reasoning that he had resigned from service.

Issue

Whether or not Nestles sales personnel are entitled to holiday pay.

Ruling

The Court ruled that the companys sales personnel are not entitled to holiday pay. Under
Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as
non-agritultural 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.
The controversy centers on the interpretation of the clause whose actual hours of work
in the field cannot be determined with reasonable certainty. 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.
As disposed by the respondent arbitrator, the period between 8:00 a.m. and 4:00 or 4:30
p.m. comprises their hours of work in the field, the extent or scope and result of which are subject
to their individual capacity and industry and which cannot be determined with reasonable
certainty. This is the reason why effective supervision over field work of salesmen and medical
representatives, truck drivers and merchandisers is practically a physical impossibility.
Consequently, they are excluded from the ten holidays with pay award.
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:

131

Sec. 1. Coverage This rule shall apply to all employees except:
xxx xxx xxx
(e) Field personnel and other employees whose time and performance is unsupervised
by the employer . . .
Contrary to the contention of the petitioner that the rule added another element not found in
the law, 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. Hence, in deciding
whether or not an employees actual working hours in the field can be determined with
reasonable certainty, query must be made as to whether or not such employees time and
performance is constantly supervised by the employer.


132

NATIONAL SUGAR REFINERY CORP. vs. NATIONAL LABOR
RELATIONS COMMISSION
Facts

Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is
fully owned and controlled by the Government, operates three (3) sugar refineries located at
Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant
to Proclamation No. 50.
Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar
Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations
Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor,
Community Development Officer, Employment and Training Supervisor, Assistant Safety and
Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor,
Head of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and
Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all
employees, from rank-and-file to department heads which was designed to rationalized the duties
and functions of all positions, reestablish levels of responsibility, and recognize both wage and
operational structures. Jobs were ranked according to effort, responsibility, training and working
conditions and relative worth of the job. As a result, all positions were re-evaluated, and all
employees including the members of respondent union were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions.
The Courts glean from the records that for about ten years prior to the JE Program, the
members of respondent union were treated in the same manner as rank-and file employees. As
such, they used to be paid overtime, rest day and holiday pay pursuant to the provisions of
Articles 87, 93 and 94 of the Labor Code as amended. On May 11, 1990, petitioner NASUREFCO
recognized herein respondent union, which was organized pursuant to Republic Act NO. 6715
allowing supervisory employees to form their own unions, as the bargaining representative of all
the supervisory employees at the NASUREFCO Batangas Sugar Refinery. Two years after the
implementation of the JE Program, specifically on June 20, 1990, the members of herein
respondent union filed a complainant with the executive labor arbiter for non-payment of
overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.

Issue

Whether or not the members of respondent union are entitled to overtime, rest day and
holiday pay.

Ruling

The members of the union are not entitled to overtime, rest and holiday pay since they
fall within the classification of managerial employees which makes them a part of the exempted
employees.
It must of necessity be ascertained first whether or not the union members, as supervisory
employees, are to be considered as officers or members of the managerial staff who are exempt
from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees, as
defined employees, as defined under Article 212(m), Book V of the Labor Code on Labor
Relations, which reads: Managerial employee is one who is vested with powers or prerogatives
to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall,
discharged, assign or discipline employees. Supervisory employees are those who, in the interest
of the employer effectively recommend such managerial actions if the exercise of such authority
is not merely routinary or clerical in nature but requires the use of independent judgment. All
employees not falling within any of those above definitions are considered rank-and-file
employees of this Book.
Article 82 of the Labor Code states: The provisions of this title 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.

133

As used herein, managerial employees refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff.
They are clearly officers or members of the managerial staff because they meet all the
conditions prescribed by law and, hence, they are not entitled to overtime, rest day and
supervisory employees under Article 212 (m) should be made to apply only to the provisions on
Labor Relations, while the right of said employees to the questioned benefits should be
considered in the light of the meaning of a managerial employee and of the officers or members
of the managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book
III of the implementing rules.
In other words, for purposes of forming and joining unions, certification elections,
collective bargaining, and so forth, the union members are supervisory employees. In terms of
working conditions and rest periods and entitlement to the questioned benefits, however, they are
officers or members of the managerial staff, hence they are not entitled thereto.
The union members will readily show that these supervisory employees are under the
direct supervision of their respective department superintendents and that generally they assist
the latter in planning, organizing, staffing, directing, controlling communicating and in making
decisions in attaining the companys set goals and objectives. These supervisory employees are
likewise responsible for the effective and efficient operation of their respective departments.
It is apparent that the members of respondent union discharge duties and responsibilities which
ineluctably qualify them as officers or members of the managerial staff, as defined in Section 2,
Rule I Book III of the aforestated Rules to Implement the Labor Code
Under the facts obtaining in this case, The Court is constrained to agree with petitioner
that the union members should be considered as officers and members of the managerial staff
and are, therefore, exempt from the coverage of Article 82. Perforce, they are not entitled to
overtime, rest day and holiday.


134

SALAZAR vs. NATIONAL LABOR RELATIONS COMMISSION
Facts
On April 1990, private respondent employed petitioner as construction/project engineer
for the construction of the Monte de Piedad building in Cubao, Quezon City. Allegedly, by virtue
of an oral contract, petitioner would also receive a share in the profits after completion of the
project and that petitioner's services in excess of eight (8) hours on regular days and services
rendered on weekends and legal holidays shall be compensable overtime at the rate of P27.85
per hour.
On 16 April 1991, petitioner received a memorandum issued by private respondent's
project manager, Engr. Nestor A. Delantar informing him of the termination of his services
effective on 30 April 1991.
On 13 September 1991, petitioner filed a complaint against private respondent for illegal
dismissal, unfair labor practice, illegal deduction, non-payment of wages, overtime rendered,
service incentive leave pay, commission, allowances, profit-sharing and separation pay with the
NLRC-NCR Arbitration Branch, Manila.

Issue

Whether or not petitioner is entitled to separation pay.

Ruling

The petitioner is not entitled to separation pay. Petitioner admitted that his job was to
supervise the laborers in the construction project. Hence, although petitioner cannot strictly be
classified as a managerial employee under Art. 82 of the Labor Code, and sec. 2(b), Rule 1, Book
III of the Omnibus Rules Implementing the Labor Code, nonetheless he is still not entitled to
payment of the aforestated benefits because he falls squarely under another exempt category
"officers or members of a managerial staff" as defined under sec. 2(c) of the abovementioned
implementing rules:
SECTION 2. Exemption. The provisions of this Rule shall not apply to the following
persons if they qualify for exemption under the condition set forth herein:
(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities:
(1) The primary duty consists of the performance of work directly related to management
policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) [i] Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is employed or
subdivision thereof; or
[ii] execute under general supervision work along specialized or technical lines
requiring special training, experience, or knowledge; or
[iii] execute under general supervision special assignments and tasks; and
(4) who do not devote more than 20 percent of their hours worked in a work-week to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2), and (3) above.
The petitioner was paid overtime benefits does not automatically and necessarily denote
that petitioner is entitled to such benefits. Art. 82 of the Labor Code specifically delineates who
are entitled to the overtime premiums and service incentive leave pay provided under Art. 87, 93,
94 and 95 of the Labor Code and the exemptions thereto. As previously determined petitioner
falls under the exemptions and therefore has no legal claim to the said benefits. It is well and
good that petitioner was compensated for his overtime services. However, this does not translate
into a right on the part of petitioner to demand additional payment when, under the law, petitioner
is clearly exempted there from.

135

LABOR CONGRESS OF THE PHILIPPINES vs. NATIONAL LABOR
RELATIONS COMMISSION

Facts

The 99 persons named as petitioners in this proceeding were rank-and-file employees of
respondent Empire Food Products, which hired them on various dates. Petitioners filed against
private respondents a complaint for payment of money claims and for violation of labor standards
laws They also filed a petition for direct certification of petitioner Labor Congress of the
Philippines as their bargaining representative. In an Order dated October 24, 1990, Mediator
Arbiter approved the memorandum of agreement and certified LCP "as the sole and exclusive
bargaining agent among the rank-and-file employees of Empire Food Products for purposes of
collective bargaining with respect to wages, hours of work and other terms and conditions of
employment".
On November 1990, petitioners through LCP President Navarro submitted to private
respondents a proposal for collective bargaining. On January 1991, petitioners filed a complaint
against private respondents for Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;
Union busting thru Harassments [sic], threats, and interfering with the rights of employees to self-
organization; Violation of the Memorandum of Agreement dated October 23, 1990;
Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727, such as Wages
promulgated by the Regional Wage Board; Actual, Moral and Exemplary Damages."

Issue

Whether or not the petitioners are entitled to labor standard benefits considering they are
paid by piece rate worker.

Ruling

The petitioners are so entitled to these benefits namely, holiday pay, premium pay, 13th
month pay and service incentive leave.
Three (3) factors lead us to conclude that petitioners, although piece-rate workers, were
regular employees of private respondents. First, as to the nature of petitioners' tasks were
necessary or desirable in the usual business of private respondents, who were engaged in the
manufacture and selling of such food products; second, petitioners worked for private
respondents throughout the year, and third, the length of time that petitioners worked for private
respondents. Thus, while petitioners' mode of compensation was on a "per piece basis," the
status and nature of their employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees from receiving
benefits such as nighttime pay, holiday pay, service incentive leave and 13th month pay, "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."
Plainly, petitioners as piece-rate workers do not fall within this group. As mentioned earlier, not
only did petitioners labor under the control of private respondents as their employer, likewise did
petitioners toil throughout the year with the fulfillment of their quota as supposed basis for
compensation.
Further, in Section 8(b), Rule IV, Book III which we quote hereunder, piece workers are
specifically mentioned as being entitled to holiday pay.
SEC. 8. Holiday pay of certain employees.
(b) Where a covered employee is paid by results or output, such as payment on
piece work, his holiday pay shall not be less than his average daily earnings for the last
seven (7) actual working days preceding the regular holiday: Provided, however, that in
no case shall the holiday pay be less than the applicable statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13th Month Pay Law, in
view of the modifications to P.D. No. 851 19 by Memorandum Order No. 28, clearly exclude the
employer of piece rate workers from those exempted from paying 13th month pay, to wit: The
following employers are still not covered by P.D. No. 851: (d) Employers of those who are paid on
purely commission, boundary or task basis, and those who are paid a fixed amount for performing
specific work, irrespective of the time consumed in the performance thereof, except where the
workers are paid on piece-rate basis in which case the employer shall grant the required 13th
month pay to such workers.

136

The Revised Guidelines as well as the Rules and Regulations identify those workers who
fall under the piece-rate category as those who are paid a standard amount for every piece or unit
of work produced that is more or less regularly replicated, without regard to the time spent in
producing the same.
As to overtime pay, the rules, however, are different. According to Sec 2(e), Rule I, Book III of the
Implementing Rules, workers who are paid by results including those who are paid on piece-work,
takay, pakiao, or task basis, if their output rates are in accordance with the standards prescribed
under Sec. 8, Rule VII, Book III, of these regulations, or where such rates have been fixed by the
Secretary of Labor in accordance with the aforesaid section, are not entitled to receive overtime
pay. As such, petitioners are beyond the ambit of exempted persons and are therefore entitled to
overtime pay.

137

MERCIDAR FISHING CORP. vs. NATIONAL LABOR RELATIONS
COMMISSION
Facts
This case originated from a complaint filed on September 20, 1990 by private respondent
Fermin Agao, Jr. against petitioner for illegal dismissal, violatiion 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 ships quartermaster on February 12, 1998. He complained that he had been
constructively dismissed by the petitioner when the latter refused him assignments aboard its
after he had reported to work on May 28, 1990.
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 enf 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 certificateon 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. Petitioner, on the
other hand, alleged that it was private respondent who actually abandoned his work.

Issue

Whether or not the fishing crew members are considered field personnel as classified in
Art. 82 of the Labor Code.

Ruling

Art. 82 of the Labor Code provides: The provisions of this title[Working Conditions and Rest
Periods] shall apply to all eployees in all establishments and undertakings whether to profit or not,
but not to govenrment employees, field personnel, members of the family of the employer who
are dependent on him for support, domestic helpers, persons in 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 ofiice of the employer and whose actual
hours of workin the field cannot be determined with reasonable certatinty.
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 petitioners businessoffices, the fact remains that throughout the
duration of their work they are under the effective control and supervision of petitioner through the
vessels patron or master.

138

SAN MIGUEL CORP. vs. COURT OF APPEALS
Facts

On 17 October 1992, the Department of Labor and Employment (DOLE), Iligan District
Office, conducted a routine inspection in the premises of San Miguel Corporation (SMC) in Sta.
Filomena, Iligan City. It was discovered that there was underpayment by SMC of regular Muslim
holiday pay to its employees. DOLE sent a copy of the inspection result to SMC and it was
received by and explained to its personnel officer Elena dela Puerta. SMC contested the findings
and DOLE conducted summary hearings on 19 November 1992, 28 May 1993 and 4 and 5
October 1993. Still, SMC failed to submit proof that it was paying regular Muslim holiday pay to its
employees. Hence, Alan M. Macaraya, Director IV of DOLE Iligan District Office issued a
compliance order, dated 17 December 1993, directing SMC to consider Muslim holidays as
regular holidays and to pay both its Muslim and non-Muslim employees holiday pay within thirty
(30) days from the receipt of the order.
SMC appealed to the DOLE main office in Manila. However, the appeal was dismissed
for lack of merit and the order of Director Macaraya was affirmed. SMC went to SC for relief via a
petition for certiorari, which the Court referred to the Court of Appeals. The appellate court
modified the order with regards the payment of Muslim holiday pay from 200% to 150% of the
employees basic salary. Its motion for reconsideration having been denied for lack of merit, SMC
filed a petition for certiorari before the SC

Issues

(a) Whether or not public respondents seriously erred and committed grave abuse of discretion
when they granted Muslim Holiday Pay to non-Muslim employees of SMC.
(b) Whether or not SMC was not accorded with due process of law in the issuance of the
compliance order.

Ruling

The Court ruled the issuance on the negative. Muslim holidays are provided under Articles
169 and 170, Title I, Book V, of Presidential Decree No. 1083, otherwise known as the Code of
Muslim Personal Laws, which states:
Art. 169. Official Muslim holidays. - The following are hereby recognized as legal Muslim
holidays:
(a) Amun Jadd (New Year), which falls on the first day of the first lunar month of
Muharram;
(b) Maulid-un-Nab (Birthday of the Prophet Muhammad), which falls on the twelfth day of
the third lunar month of Rabi-ul-Awwal;
Lailatul Isr Wal Mirj (Nocturnal Journey and Ascension of the Prophet Muhammad),
which falls on the twenty-seventh day of the seventh lunar month of Rajab;
(d) d-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth lunar month of
Shawwal, commemorating the end of the fasting season; and
(e) d-l-Adh (Hari Raya Haji),which falls on the tenth day of the twelfth lunar month of
Dhl-Hijja.
Art. 170. Provinces and cities where officially observed. - (1) Muslim holidays shall be
officially observed in the Provinces of Basilan, Lanao del Norte, Lanao del Sur, Maguindanao,
North Cotabato, Iligan, Marawi, Pagadian, and Zamboanga and in such other Muslim
provinces and cities as may hereafter be created;
(2) Upon proclamation by the President of the Philippines, Muslim holidays may also be
officially observed in other provinces and cities.
The foregoing provisions should be read in conjunction with Article 94 of the Labor Code,
which provides: Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly employing less than
ten (10) workers; (b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate.
Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that the
provisions of this Code shall be applicable only to Muslims. However, there should be no
distinction between Muslims and non-Muslims as regards payment of benefits for Muslim
holidays. Wages and other emoluments granted by law to the working man are determined on the
basis of the criteria laid down by laws and certainly not on the basis of the workers faith or
religion. In addition, the 1999 Handbook on Workers Statutory Benefits, categorically stated:
Considering that all private corporations, offices, agencies, and entities or establishments

139

operating within the designated Muslim provinces and cities are required to observe Muslim
holidays, both Muslim and Christians working within the Muslim areas may not report for work on
the days designated by law as Muslim holidays.
In this case, Regional Director Macaraya acted as the duly authorized representative of the
Secretary of Labor and Employment and it was within his power to issue the compliance order to
SMC. In addition, the Court agrees with the Solicitor General that the petitioner did not deny that
it was not paying Muslim holiday pay to its non-Muslim employees. Indeed, petitioner merely
contends that its non-Muslim employees are not entitled to Muslim holiday pay. Hence, the issue
could be resolved even without documentary proofs. In any case, there was no indication that
Regional Director Macaraya failed to consider any documentary proof presented by SMC in the
course of the inspection.
Anent the allegation that petitioner was not accorded due process, the court finds that SMC
was furnished a copy of the inspection order and it was received by and explained to its
Personnel Officer. Further, a series of summary hearings were conducted by DOLE on 19
November 1992, 28 May 1993 and 4 and 5 October 1993. Thus, SMC could not claim that it was
not given an opportunity to defend itself.

140

TAN VS. LAGRAMA
Facts

Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general
manager of Crown and Empire Theaters in Butuan City. Private respondent Leovigildo Lagrama
is a painter, making ad billboards and murals for the motion pictures shown at the Empress,
Supreme, and Crown Theaters for more than 10 years, from September 1, 1988 to October 17,
1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided:
Nangihi na naman ka sulod sa imong drawinganan. (You again urinated inside your work
area.) When Lagrama asked what Tan was saying, Tan told him, Ayaw daghang estorya. Dili ko
gusto nga mo-drawing ka pa. Guikan karon, wala nay drawing. Gawas. (Dont say anything
further. I dont want you to draw anymore. From now on, no more drawing. Get out.)
Lagrama denied the charge against him. He claimed that he was not the only one who
entered the drawing area and that, even if the charge was true, it was a minor infraction to
warrant his dismissal. However, everytime he spoke, Tan shouted Gawas (Get out), leaving
him with no other choice but to leave the premises. Lagrama filed a complaint with the National
Labor Relations Commission (NLRC) in Butuan City. He alleged that he had been illegally
dismissed and sought reinvestigation and payment of 13
th
month pay, service incentive leave
pay, salary differential, and damages.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the
parties to file their position papers. It declared that the dismissal illegal and order the payment of
monetary benefits. Tan appealed to the NLRC and reversing the decision of the Labor Arbiter.

Issue

Whether or not the respondent was illegally dismissed and thus entitled to payment of
benefits provided by law.

Ruling

The respondent was illegally dismissed and entitled to benefits. The Implementing Rules of
the Labor Code provide that no worker shall be dismissed except for a just or authorized cause
provided by law and after due process. This provision has two aspects: (1) the legality of the act
of dismissal, that is, dismissal under the grounds provided for under Article 282 of the Labor Code
and (2) the legality in the manner of dismissal. The illegality of the act of dismissal constitutes
discharge without just cause, while illegality in the manner of dismissal is dismissal without due
process.
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his
sight as the latter tried to explain his side, petitioner made it plain that Lagrama was dismissed.
Urinating in a work place other than the one designated for the purpose by the employer
constitutes violation of reasonable regulations intended to promote a healthy environment under
Art. 282(1) of the Labor Code for purposes of terminating employment, but the same must be
shown by evidence. Here there is no evidence that Lagrama did urinate in a place other than a
rest room in the premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor
Arbiter found that the relationship between the employer and employee has been so strained that
the latters reinstatement would no longer serve any purpose. The parties do not dispute this
finding. Hence, the grant of separation pay in lieu of reinstatement is appropriate.
This is of course in addition to the payment of backwages which, in accordance with the
ruling in Bustamante v. NLRC should be computed from the time of Lagramas dismissal up to the
time of the finality of this decision, without any deduction or qualification.
The Bureau of Working Conditions 32 classifies workers paid by results into two groups,
namely; (1) those whose time and performance is supervised by the employer, and (2) those
whose time and performance is unsupervised by the employer. The first involves an element of
control and supervision over the manner the work is to be performed, while the second does not.
If a piece worker is supervised, there is an employer-employee relationship, as in this case.
However, such an employee is not entitled to service incentive leave pay since, as pointed out in
Makati Haberdashery v. NLRC 33 and Mark Roche International v. NLRC, 34 he is paid a fixed
amount for work done, regardless of the time he spent in accomplishing such work.

141

LAMBO vs. NATIONAL LABOR RELATIONS COMMISSION

Facts

Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private
respondents J.C. Tailor Shop and/or Johnny Co on September 10, 1985 and March 3, 1985,
respectively. They worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. As
in the case of the other 100 employees of private respondents, petitioners were paid on a piece-
work basis, according to the style of suits they made. Regardless of the number of pieces they
finished in a day, they were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for illegal
dismissal and sought recovery of overtime pay, holiday pay, premium pay on holiday and rest
day, service incentive leave pay, separation pay, 13
th
month pay, and attorneys fees. After
hearing, Labor Arbiter found private respondents guilty of illegal dismissal and accordingly
ordered them to pay petitioners claims. On appeal, the NLRC reversed the decision of the Labor
Arbiter. The NLRC held petitioners guilty of abandonment of work and accordingly dismissed their
claims except that for 13
th
month pay.
Petitioners allege that they were dismissed by private respondents as they were about to file
a petition with the Department of Labor and Employment (DOLE) for the payment of benefits such
as Social Security System (SSS) coverage, sick leave and vacation leave. They deny that they
abandoned their work.

Issue

Whether or not the petitioners are entitled to the minimum benefits provided by law.

Ruling

The petitioners are entitled to the minimum benefits provided by law. There is no dispute that
petitioners were employees of private respondents although they were paid not on the basis of
time spent on the job but according to the quantity and the quality of work produced by them.
There are two categories of employees paid by results: (1) those whose time and performance
are supervised by the employer. (Here, there is an element of control and supervision over the
manner as to how the work is to be performed. A piece-rate worker belongs to this category
especially if he performs his work in the company premises.); and (2) those whose time and
performance are unsupervised. (Here, the employers control is over the result of the work.
Workers on pakyao and takay basis belong to this group.) Both classes of workers are paid per
unit accomplished.
Piece-rate payment is generally practiced in garment factories where work is done in the
company premises, while payment on pakyao and takay basis is commonly observed in the
agricultural industry, such as in sugar plantations where the work is performed in bulk or in
volumes difficult to quantify. 4 Petitioners belong to the first category, i.e., supervised employees.
In this case, private respondents exercised control over the work of petitioners. As tailors,
petitioners worked in the companys premises from 8:00 a.m. to 7:00 p.m. daily, including
Sundays and holidays. The mere fact that they were paid on a piece-rate basis does not negate
their status as regular employees of private respondents. The term wage is broadly defined in
Art. 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of
money whether fixed or ascertained on a time, task, piece or commission basis. Payment by the
piece is just a method of compensation and does not define the essence of the relations. Nor
does the fact that petitioners are not covered by the SSS affect the employer-employee
relationship.
As petitioners were illegally dismissed, they are entitled to reinstatement with back wages.
The Arbiter applied the rule in the Mercury Drug case, according to which the recovery of back
wages should be limited to three years without qualifications or deductions. Any award in excess
of three years is null and void as to the excess. The Labor Arbiter correctly ordered private
respondents to give separation pay.
Considerable time has lapsed since petitioners dismissal, so that reinstatement would now
be impractical and hardly in the best interest of the parties. In lieu of reinstatement, separation
pay should be awarded to petitioners at the rate of one month salary for every year of service,
with a fraction of at least six (6) months of service being considered as one (1) year. The awards
for overtime pay, holiday pay and 13
th
month pay are in accordance with our finding that
petitioners are regular employees, although paid on a piece-rate basis.

142

R&E TRANSPORT vs. LATAG

Facts

Pedro Latag was a regular employee of La Mallorca Taxi since March 1, 1961. However,
he was transferred to the petitioner R & E Transport, Inc. upon cessation of La Mallorcas
business operations. In January 1995, he got sick and was forced to apply for partial disability
with the SSS, which was then granted. Upon recovery, he reported back to work in September
1998 but was no longer allowed on account of his old age. Latag asked the petitioner, through its
administrative officer for his retirement pay pursuant to Republic Act 7641 but he was ignored.
Latag filed a case for payment of his retirement pay before the NLRC.
Upon Pedro Latags death on April 30, 1999, he was substituted by his wife, the
respondent Avelina Latag. Labor Arbiter rendered a decision in favour of Latag. Petitioner filed
the quitclaim and motion to dismiss where the Labor Arbiter issued an order for Writ of Execution.
Petitioners interposed an appeal before NLRC. Appeal was dismissed for failure to post a cash or
surety bond, as mandated by law.

Issue

Whether or not Latag is entitled to retirement benefits considering she signed a waiver of
quitclaim.

Ruling

The Supreme Court ruled that the respondent is entitled to retirement benefits despite of
the waiver of quitclaims. As to the Quitclaim and Waiver signed by Respondent Latag, the CA
committed no error when it ruled that the document was invalid and could not bar her from
demanding the benefits legally due her husband. This is not say that all quitclaims are invalid per
se. Courts, however, are wary of schemes that frustrate workers rights and benefits, and look
with disfavor upon quitclaims and waivers that bargain these away.
Undisputably, Pedro M. Latag was credited with 14 years of service with R & E Transport,
Inc. Article 287 of the Labor Code, as amended by Republic Act No. 7641, 30 provides:
Retirement. In the absence of a retirement plan or agreement providing for retirement benefits
of employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement
age, who has served at least five (5) years in said establishment, may retire and shall be entitled
to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year. Unless the parties provide
for broader inclusions, the term one half-month salary shall mean fifteen (15) days plus one-
twelfth (1/12) of the 13
th
month pay and the cash equivalent of not more than five (5) days of
service incentive leaves.
The rules implementing the New Retirement Law similarly provide the above-mentioned
formula for computing the one-half month salary. Since Pedro was paid according to the
boundary system, he is not entitled to the 13
th
month 32 and the service incentive pay; hence,
his retirement pay should be computed on the sole basis of his salary.
It is accepted that taxi drivers do not receive fixed wages, but retain only those sums in
excess of the boundary or fee they pay to the owners or operators of their vehicles. Thus, the
basis for computing their benefits should be the average daily income. In this case, the CA found
that Pedro was earning an average of five hundred pesos (P500) per day. We thus compute his
retirement pay as follows: P500 x 15 days x 14 years of service equals P105,000. Hence, it is
clear that the late Pedro M. Latag is entitled to retirement benefits.


143

ASIAN TRANSMISSION vs. COURT OF APPEALS

Facts

The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano
B. Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia,
that employees are entitled to 200% of their basic wage on April 9, 1993, whether unworked,
which[,] apart from being Good Friday [and, therefore, a legal holiday], is also Araw ng Kagitingan
[which is also a legal holiday].
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy
Thursday and Araw ng Kagitingan.
Despite the explanatory bulletin, petitioner, Asian Transmission Corporation, opted to pay
its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent Bisig ng
Asian Transmission Labor Union (BATLU) protested.
The Voluntary Arbitrator favored the Bisig ng Asian Transmission Labor Union (BATLU),
and held that Article 94 of the Labor Code provides for holiday pay for every regular holiday, the
computation of which is determined by a legal formula which is not changed by the fact that there
are two holidays falling on one day, like on April 9, 1998 when it was Araw ng Kagitingan and at
the same time was Maundy Thursday.
In the assailed decision, the Court of Appeals upheld the findings of the Voluntary
Arbitrator.

Issue

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

Ruling

The Court dismissed the petition and ruled that petitioners should pay its employees
200% and not just 100% of their regular daily wages for the unworked April 9, 1998 which covers
two regular holidays, namely, Araw ng Kagitingan and Maundy Thursday.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that
the State shall afford protection to labor. Its purpose is not merely to prevent diminution of the
monthly income of the workers on account of work interruptions. In other words, although the
worker is forced to take a rest, he earns what he should earn, that is, his holiday pay.
The provision is mandatory, regardless of whether an employee is paid on a monthly or
daily basis. Unlike a bonus, which is a management prerogative, holiday pay is a statutory benefit
demandable under the law.


144

AUTOBUS TRANSPORT SYSTEM vs. BAUTISTA
Facts

Respondent Antonio Bautista has been employed by petitioner Auto Bus Transport
Systems, Inc., since May 1995, 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 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 respondents 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 13
th
month pay
and service incentive leave pay against Autobus.
On 29 September 2000, based on the pleadings and supporting evidence presented by
the parties, Labor Arbiter decided that the complaint be dismissed where the respondent must
pay to the complainant

Issue

Whether or not respondent is entitled to service incentive leave.

Ruling

The respondent is entitled to service incentive leave. The disposition of the issue
revolves around the proper interpretation of Article 95 of the Labor Code vis--vis Section 1(D),
Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:
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.
Moreover, Book III, Rule V: SERVICE INCENTIVE LEAVE also states that 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 examination 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.
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 10 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,

145

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.
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 employees 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
employees time and performance are constantly supervised by the employer. Respondent is not
a field personnel but a regular employee who performs tasks usually necessary and desirable to
the usual trade of petitioners business. Accordingly, respondent is entitled to the grant of service
incentive leave.
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 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.
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.

146

SAN MIGUEL CORP. vs. DEL ROSARIO
Facts

On April 17, 2000, respondent was employed by petitioner as key account specialist. On
March 9, 2001, petitioner informed respondent that her probationary employment will be severed
at the close of the business hours of March 12, 2001. On March 13, 2001, respondent was
refused entry to petitioners premises. On June 24, 2002, respondent filed a complaint against
petitioner for illegal dismissal and underpayment/non-payment of monetary benefits.

Issue

Whether or not respondent is a regular employee of petitioner.

Ruling

Respondent is a regular employee of petitioner. In termination cases, like the present
controversy, the burden of proving the circumstances that would justify the employees dismissal
rests with the employer. The best proof that petitioner should have presented to prove the
probationary status of respondent is her employment contract. None, having been presented, the
continuous employment of respondent as an account specialist for almost 11 months, from April
17, 2000 to March 12, 2001, means that she was a regular employee and not a temporary
reliever or a probationary employee.
And while it is true that by way of exception, the period of probationary employment may
exceed six months when the parties so agree, such as when the same is established by company
policy, or when it is required by the nature of the work, none of these exceptional circumstance
were proven in the present case. Hence, respondent whose employment exceeded six months is
undoubtedly a regular employee of petitioner.
Moreover, even assuming that the employment of respondent from April 7, 2000 to
September 3, 2000, is only temporary, and that the reckoning period of her probationary
employment is September 4, 2000, she should still be declared a regular employee because by
the time she was dismissed on March 12, 2001, her alleged probationary employment already
exceeded six months, i.e., six months and eight days to be precise. A worker was found to be a
regular employee notwithstanding the presentation by the employer of a Payroll Authority
indicating that said employee was hired on probation, since it was shown that he was terminated
four days after the 6
th
month of his purported probationary employment.
Neither will petitioners belated claim that respondent became a probationary employee starting
October 1, 2000 work against respondent. As earlier stated, the payroll authorities indicating that
respondents probationary status became effective as of such date are of scant evidentiary value
since it does not show the conformity of respondent. At any rate, in the interpretation of
employment contracts, whether oral or written, all doubts must be resolved in favor of labor.
Hence, the contract of employment in the instant case, which appears to be an oral
agreement since no written form was presented by petitioner, should be construed as one vesting
respondent with a regular status and security of tenure.
Regarding the argument of redundancy, Redundancy, for purposes of the Labor Code,
exists where the services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of factors,
such as overhiring of workers, decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by the enterprise.
The determination that the employees services are no longer necessary or sustainable
and, therefore, properly terminable is an exercise of business judgment of the employer. The
wisdom or soundness of this judgment is not subject to discretionary review of the Labor Arbiter
and the NLRC, provided there is no violation of law and no showing that it was prompted by an
arbitrary or malicious act. In other words, it is not enough for a company to merely declare that it
has become overmanned. It must produce adequate proof of such redundancy to justify the
dismissal of the affected employees.
The following evidence may be proffered to substantiate redundancy: the new staffing
pattern, feasibility studies/proposal, on the viability of the newly created positions, job description
and the approval by the management of the restructuring.
In the case at bar, petitioner presented an affidavit of its Sales Manager and a
memorandum of the company both to the effect that there is a need to redeploy its regular
employees and terminate the employment of temporary employees, in view of an excess in
manpower. These documents, however, do not satisfy the requirement of substantial evidence
that a reasonable mind might accept as adequate to support a conclusion.
Moreover, the lingering doubt as to the existence of redundancy or of petitioners so
called restructuring, realignment or reorganization which resulted in the dismissal of not only

147

probationary employees but also of regular employees, is highlighted by the non-presentation by
petitioner of the required notice to the DOLE and to the separated employees. If there was
indeed a valid redundancy effected by petitioner, these notices and the proof of payment of
separation pay to the dismissed regular employees should have been offered to establish that
there was excess manpower in petitioners GMA-KAG caused by a decline in the sales volume.
In balancing the interest between labor and capital, the prudent recourse in termination
cases is to safeguard the prized security of tenure of employees and to require employers to
present the best evidence obtainable, especially so because in most cases, the documents or
proof needed to resolve the validity of the termination, are in the possession of employers. A
contrary ruling would encourage employers to prevent the regularization of an employee by
simply invoking a feigned or unsubstantiated redundancy program.
Granting that petitioner was able to substantiate the validity of its reorganization or
restructuring, it nevertheless, failed to effect a fair and reasonable criterion in dismissing
respondent. The criteria in implementing a redundancy are: (a) less preferred status, e.g.
temporary employee; (b) efficiency; and (c) seniority.
It is evident from the foregoing that the criterion allegedly used by petitioner in
reorganizing its sales unit was the employment status of the employee. However, in the
implementation thereof, petitioner erroneously classified respondent as a probationary employee,
resulting in the dismissal of the latter. Verily, the absence of criteria and the erroneous
implementation of the criterion selected, both render invalid the redundancy because both have
the ultimate effect of illegally dismissing an employee.
.Considering that respondent was illegally dismissed, she is entitled not only to reinstatement but
also to payment of full backwages, computed from the time her compensation was actually
withheld from her on March 13, 2001, up to her actual reinstatement. As a regular employee of
petitioner from the date of her employment on April 17, 2000, she is likewise entitled to other
benefits, i.e., service incentive leave pay and 13
th
month pay computed from such date also up to
her actual reinstatement.
Respondent is not, however, entitled to holiday pay because the records reveal that she
is a monthly paid regular employee. Under Section 2, Rule IV, Book III of the Omnibus Rules
Implementing the Labor Code, employees who are uniformly paid by the month, irrespective of
the number of working days therein, shall be presumed to be paid for all the days in the month
whether worked or not.
Anent attorneys fees, in actions for recovery of wages or where an employee was forced
to litigate and thus incurred expenses to protect his rights and interests, a maximum of 10% of the
total monetary award by way of attorneys fees is justifiable under Article 111 of the Labor Code,
Section 8, Rule VIII, Book III of its Implementing Rules, and paragraph 7, Article 2208 of the Civil
Code. The award of attorneys fees is proper and there need not be any showing that the
employer acted maliciously or in bad faith when it withheld the wages. There need only be a
showing that the lawful wages were not paid accordingly, as in the instant controversy.

148

PENARANDA vs. BAGANGA PLYWOOD CORP.

Facts

Sometime in June 1999, Petitioner Charlito Pearanda was hired as an employee of
Baganga Plywood Corporation (BPC) to take charge of the operations and maintenance of its
steam plant boiler. In May 2001, Pearanda filed a Complaint for illegal dismissal with money
claims against BPC and its general manager, Hudson Chua, before the NLRC.
After the parties failed to settle amicably, the labor arbiter directed the parties to file their
position papers and submit supporting documents.
Pearanda alleges that he was employed by respondent Banganga on March 15, 1999
with a monthly salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer until he was illegally
terminated on December 19, 2000. he alleges that his services were terminated without the
benefit of due process and valid grounds in accordance with law. Furthermore, he was not paid
his overtime pay, premium pay for working during holidays/rest days, night shift differentials and
finally claimed for payment of damages and attorneys fees having been forced to litigate the
present complaint.
Respondent BPC is a domestic corporation duly organized and existing under Philippine
laws and is represented herein by its General Manager HUDSON CHUA, the individual
respondent. Respondents allege that complainants separation from service was done pursuant
to Art. 283 of the Labor Code. The respondent BPC was on temporary closure due to repair and
general maintenance and it applied for clearance with the Department of Labor and Employment,
Regional Office No. XI, to shut down and to dismiss employees. And due to the insistence of
herein complainant he was paid his separation benefits.
Consequently, when respondent BPC partially reopened in January 2001, Pearanda
failed to reapply. The labor arbiter ruled that there was no illegal dismissal and that petitioners
Complaint was premature because he was still employed by BPC. Petitioners money claims for
illegal dismissal was also weakened by his quitclaim and admission during the clarificatory
conference that he accepted separation benefits, sick and vacation leave conversions and
thirteenth month pay.

Issue

Whether or not Pearanda is a regular, common employee entitled to monetary benefits
under Art. 82 of the Labor Code and is entitled to the payment of overtime pay and other
monetary benefits.

Ruling

The petitioner is not entitled to overtime pay and other monetary benefits. The Court
disagrees with the NLRCs finding that petitioner was a managerial employee. However,
petitioner was a member of the managerial staff, which also takes him out of the coverage of
labor standards. Like managerial employees, officers and member of the managerial staff are not
entitled to the provisions of law on labor standards.
The Implementing Rules of the Labor Code define members of a managerial staff as
those with the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to
management policies of the employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is employed or
subdivision thereof; or (ii) execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge; or (iii) execute under
general supervision special assignments and tasks; and
(4) who do not devote more than 20 percent of their hours worked in a workweek to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2), and (3) above.
The petitioners work involves:
1. To supply the required and continuous steam to all consuming units at minimum
cost.
2. To supervise, check and monitor manpower workmanship as well as operation of
boiler and accessories.

149

3. To evaluate performance of machinery and manpower.
4. To follow-up supply of waste and other materials for fuel.
5. To train new employees for effective and safety white working.
6. Recommend parts and suppliers purchases. acEHSI
7. To recommend personnel actions such as: promotion, or disciplinary action.
8. To check water from the boiler, feedwater and softener, regenerate softener if
beyond hardness limit.
9. Implement Chemical Dosing.
10. Perform other task as required by the superior from time to time. 34
The foregoing enumeration, particularly items, 1, 2, 3, 5 and 7 illustrates that petitioner
was a member of the managerial staff. His duties and responsibilities conform to the definition of
a member of a managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved
overseeing the operation of the machines and the performance of the workers in the engineering
section. This work necessarily required the use of discretion and independent judgment to ensure
the proper functioning of the steam plant boiler. As supervisor, petitioner is deemed a member of
the managerial staff.
Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he
stated that he was the foreman responsible for the operation of the boiler. The term foreman
implies that he was the representative of management over the workers and the operation of the
department. Petitioners evidence also showed that he was the supervisor of the steam plant.
His classification as supervisors is further evident from the manner his salary was paid. He
belonged to the 10% of respondents 354 employees who were paid on a monthly basis; the
others were paid only on a daily basis.



150

LEYTE IV ELECTRIC COOPERATIVE INC vs. LEYECO IV EMPLOYEES
UNION-ALU

Facts

On April 6, 1998, Leyte IV Electric Cooperative, Inc. (petitioner) and Leyeco IV
Employees Union-ALU (respondent) entered into a Collective Bargaining Agreement (CBA)
covering petitioner rank-and-file employees, for a period of five (5) years effective January 1,
1998. On June 7, 2000, respondent, through its Regional Vice-President, Vicente P. Casilan, sent
a letter to petitioner demanding holiday pay for all employees, as provided for in the CBA.
Petitioner, on the other hand, in its Position Paper, insisted payment of the holiday pay in
compliance with the CBA provisions, stating that payment was presumed since the formula used
in determining the daily rate of pay of the covered employees is Basic Monthly Salary divided by
30 days or Basic Monthly Salary multiplied by 12 divided by 360 days, thus with said formula, the
employees are already paid their regular and special days, the days when no work is done, the
51 un-worked Sundays and the 51 un-worked Saturdays.

Issue

Whether or not Leyte IV Electric Cooperative is liable for underpayment of holiday pay.

Ruling

Leyte IV Electric Cooperative is not liable for underpayment of holiday pay. The Voluntary
Arbitrator gravely abused its discretion in giving a strict or literal interpretation of the CBA
provisions that the holiday pay be reflected in the payroll slips. Such literal interpretation ignores
the admission of respondent in its Position Paper that the employees were paid all the days of the
month even if not worked. In light of such admission, petitioners submission of its 360 divisor in
the computation of employees salaries gains significance.
This ruling was applied in Wellington Investment and Manufacturing Corporation v.
Trajano, 43 Producers Bank of the Philippines v. National Labor Relations Commission. In this
case, the monthly salary was fixed by Wellington to provide for compensation for every working
day of the year including the holidays specified by law and excluding only Sundays. In fixing
the salary, Wellington used what it called the 314 factor; that is, it simply deducted 51 Sundays
from the 365 days normally comprising a year and used the difference, 314, as basis for
determining the monthly salary. The monthly salary thus fixed actually covered payment for 314
days of the year, including regular and special holidays, as well as days when no work was done
by reason of fortuitous cause, such as transportation strike, riot, or typhoon or other natural
calamity, or cause not attributable to the employees.
It was also applied in Odango v. National Labor Relations Commission, where Court
ruled that the use of a divisor that was less than 365 days cannot make the employer
automatically liable for underpayment of holiday pay. In said case, the employees were required
to work only from Monday to Friday and half of Saturday. Thus, the minimum allowable divisor is
287, which is the result of 365 days, less 52 Sundays and less 26 Saturdays (or 52 half
Saturdays). Any divisor below 287 days meant that the employees were deprived of their holiday
pay for some or all of the ten legal holidays. The 304-day divisor used by the employer was
clearly above the minimum of 287 days.
In this case, the employees are required to work only from Monday to Friday. Thus, the
minimum allowable divisor is 263, which is arrived at by deducting 51 un-worked Sundays and 51
un-worked Saturdays from 365 days. Considering that petitioner used the 360-day divisor, which
is clearly above the minimum, indubitably, petitioners employees are being given their holiday
pay. Thus, the Voluntary Arbitrator should not have simply brushed aside petitioners divisor
formula. In granting respondents claim of non-payment of holiday pay, a double burden was
imposed upon petitioner because it was being made to pay twice for its employees holiday pay
when payment thereof had already been included in the computation of their monthly salaries.

151

BAHIA SHIPPING SERVICES vs. CHUA

Facts

Reynaldo Chua, herein respondent, was under the employ of Bahia Shipping Services,
Inc., herein petitioner, as a restaurant waiter on board the M/S Black Watch , a luxury cruise ship
liner. His employment is pursuant to a Philippine Overseas Employment Administration (POEA)
approved employment contract dated October 9, 1996 for a period of nine (9) months from
October 18, 1996 to July 17, 1997.
On October 18, 1996, respondent, on board the cruise ship, left Manila for Heathrow,
England. About four months into his employment, or on February 15, 1997, responded reported
to work an hour and a half (1 ) late. Due to the incident, respondent was issued a warning-
termination form by the master of the cruise ship, Thor Fleten on February 17, 1997, who likewise
conducted an inquisitorial hearing to investigate the incident on March 8, 1997.
Thereafter, on March 9, 1997, respondent was dismissed from service on the strength of an
unsigned and undated notice of dismissal. Attached to the dismissal notice is the alleged minutes
or records of the investigation and hearing.
On March 24, 1997, respondent filed a complaint for illegal dismissal and other monetary
claims. He claims that he was underpaid in the amount of US$110.00 per month for a period of
five (5) months, since he was only paid US$300.00 per month, instead of US$410.00 per month,
which was stipulated in his contract. Aside from underpayment, he alleged that US$20.00 per
month was also deducted from his salary by petitioner for union dues.

Issue

In the computation of the award, should the guaranteed overtime pay per month be
included as part of his salary?

Ruling

There is no factual or legal basis in the inclusion of his guaranteed overtime pay into his
monthly salary computation for the entire unexpired period of his contract.
The Court ruled in Cagampan v. National Labor Relations Commission, that although an
overseas employment contract may guarantee the right to overtime pay, entitlement to such
benefit must first be established, otherwise the same cannot be allowed.
Petitioners contention that there is no factual or legal basis for the inclusion of said
amount since respondents repatriation is well-taken.

152

PNCC SKYWAY TRAFFIC MANAGEMENT AND SECURITY DIVISION
WORKERS ORGANIZATION
Facts

Petitioner PNCC Skyway Corporation Traffic Management and Security Division Workers
Organization (PSTMSDWO) is a labor union duly registered with the Department of Labor and
Employment (DOLE). Respondent PNCC Skyway Corporation is a corporation duly organized
and operating under and by virtue of the laws of the Philippines. On November 15, 2002,
petitioner and respondent entered into a Collective Bargaining Agreement (CBA) incorporating
the terms and conditions of their agreement which included vacation leave and expenses for
security license provisions.
A memorandum was passed by the respondents scheduling the leaves of the laborers.
Petitioner objected to the implementation of this memorandum and contended that their union
members have the preference in scheduling their vacation leave. On the other hand, respondent
argued that Article VIII, Section 1 (b) gives the management the final say regarding the vacation
leave schedule of its employees. Respondent may take into consideration the employees
preferred schedule, but the same is not controlling.

Issue

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

Ruling

Yes. The rule is that where the language of a contract is plain and unambiguous, its
meaning should be determined without reference to extrinsic facts or aids. The intention of the
parties must be gathered from that language, and from that language alone. Stated differently,
where the language of a written contract is clear and unambiguous, the contract must be taken to
mean that which, on its face, it purports to mean, unless some good reason can be assigned to
show that the words used should be understood in a different sense.
In the case at bar, the contested provision of the CBA is clear and unequivocal. Article
VIII, Section 1 (b) of the CBA categorically provides that the scheduling of vacation leave shall be
under the option of the employer. The preference requested by the employees is not controlling
because respondent retains its power and prerogative to consider or to ignore said request. Thus,
if the terms of a CBA are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulation shall prevail. In fine, the CBA must be strictly adhered to and
respected if its ends have to be achieved, being the law between the parties.


153

RADIO MINDANAO NETWORK, INC. vs. YBAROLA

Facts

Respondents Domingo Z. Ybarola, Jr. and Alfonso E. Rivera, Jr. were hired on June 15,
1977 and June 1, 1983, respectively, by RMN. They eventually became account managers,
soliciting advertisements and servicing various clients of RMN.
The respondents services were terminated as a result of RMNs
reorganization/restructuring; they were given their separation pay P 631,250.00 for Ybarola,
and P 481,250.00 for Rivera. Sometime in December 2002, they executed release/quitclaim
affidavits.
Dissatisfied with their separation pay, the respondents filed separate complaints (which were later
consolidated) against RMN and its President, Eric S. Canoy, for illegal dismissal with several
money claims, including attorneys fees. They indicated that their monthly salary rates were P
60,000.00 for Ybarola and P 40,000.00 for Rivera.
The respondents argued that the release/quitclaim they executed should not be a bar to
the recovery of the full benefits due them; while they admitted that they signed release
documents, they did so due to dire necessity.
The petitioners denied liability, contending that the amounts the respondents received
represented a fair and reasonable settlement of their claims, as attested to by the
release/quitclaim affidavits which they executed freely and voluntarily. They belied the
respondents claimed salary rates, alleging that they each received a monthly salary of P
9,177.00, as shown by the payrolls.
The Labor Arbiter Patricio Libo-on dismissed the illegal dismissal complaint, but ordered
the payment of additional separation pay to the respondents P 490,066.00 for Ybarola and P
429,517.55 for Rivera.
On appeal by the petitioners to the National Labor Relations Commission (NLRC), the
NLRC set aside the labor arbiters decision and dismissed the complaint for lack of merit. It ruled
that the withholding tax certificate cannot be the basis of the computation of the respondents
separation pay as the tax document included the respondents cost-of-living allowance and
commissions; as a general rule, commissions cannot be included in the base figure for the
computation of the separation pay because they have to be earned by actual market transactions
attributable to the respondents From the NLRC, the respondents sought relief from the CA
through a petition for certiorari under Rule 65 of the Rules of Court.
The CA granted the petition and set aside the assailed NLRC dispositions. It reinstated the labor
arbiters separation pay award, rejecting the NLRCs ruling that the respondents commissions
are not included in the computation of their separation pay. It pointed out that in the present case,
the respondents earned their commissions through actual market transactions attributable to
them; these commissions, therefore, were part of their salary.
The appellate court declared the release/quitclaim affidavits executed by the respondents
invalid for being against public policy, citing two reasons: (1) the terms of the settlement are
unconscionable; the separation pay the respondents received was deficient by at least P
400,000.00 for each of them; and (2) the absence of voluntariness when the respondents signed
the document, it was their dire circumstances and inability to support their families that finally
drove them to accept the amount the petitioners offered. Significantly, they dallied and it took
them three months to sign the release/quitclaim affidavits.

Issue

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

Ruling

Release/Quitclaim; Separation pay. The release/quitclaim affidavits are invalid for being
against public policy for two reasons: (1) the terms of the settlement are unconscionable; the
separation pay for termination due to reorganization/restructuring was deficient by Php400,000.00
for each employee; they were given only half of the amount they were legally entitled to; and (2)
the absence of voluntariness when the employees signed the document, it was their dire
circumstances and inability to support their families that finally drove them to accept the amount
offered. Without jobs and with families to support, they dallied in executing the quitclaim
instrument, but were eventually forced to sign given their circumstances. To be sure, a settlement
under these terms is not and cannot be a reasonable one, given especially the respondents
length of service 25 years for Ybarola and 19 years for Rivera. Radio Mindanao Network, Inc.
and Eric S. Canoy vs. Domingo Z. Ybarola, et al. G.R. No. 198662. September 12, 2012.


154

OTHER SPECIAL BENEFITS
VILLUGA vs. NATIONAL LABOR RELATIONS COMMISSION

Facts
Petitioner Elias Villuga was employed as cutter in the Broad Street Tailoring owned by
privaterespondent Rodolfo Zapanta. He was paid a fixed monthly salary of P840.00 and a
monthly transportation allowance of P40.00. In addition, Villuga was assigned the chore of
distributing work to the shops tailors or sewers when both the shops manager and assistant
manager would be absent. The other petitioners were either ironers, repairmen and sewers. They
were paid a fixed amount for every item ironed, repaired or sewn, regardless of the time
consumed in accomplishing the task. Petitioners did not fill up any time record since they did not
observe regular or fixed hours of work.
From February 17 to 22, 1978, Villuga failed to report for work allegedly due to illness.
For not properly notifying his employer, he was considered to have abandoned his work. Villuga
claimed that he was refused admittance when he reported for work after his absence, allegedly
due to his active participation in the union organized by private respondents tailors. He further
claimed that he was not paid overtime pay, holiday pay, premium pay for work done on rest days
and holidays, service incentive leave pay and 13
th
month pay. Petitioners Abistado, Mendoza,
Brizuela and Oro also claimed that they were dismissed from their employment because they
joined the Philippine Social
Security Labor Union (PSSLU). The other petitioners claimed that they stopped working
because private respondents gave them few pieces of work to do after learning of their
membership with PSSLU.
The Labor Arbiter rendered a decision ordering the dismissal of the complaint for unfair labor
practices, illegal dismissal and other money claims except petitioner Villugas claim for 13
th
month
pay for the years 1976, 1977 and 1980. The NLRC affirmed the questioned decision.

Issue

Whether an employer-employee relationship exists and whether such employment is
managerial in character or that of a rank and file employee are primordial considerations
before extending labor benefits.

Ruling

Under Rule I, Section 2, Book III of the Implementing Rules of the Labor Code, to be
amember of a managerial staff, the following elements must concur or co-exist, to wit: (1) that his
primary duty consists of the performance of work directly related to management policies; (2) that
he customarily and regularly exercises discretion and independent judgment in the performance
of his functions; (3) that he regularly and directly assists in the management of the establishment;
and (4) that he does not devote twenty per cent of his time to work other than those described
above

155

CJC TRADING vs. NATIONAL LABOR RELATIONS COMMISSION

Facts

Private respondents Ricardo Ausan, Jr. and Ernesto Alanan were employed by petitioner
since 1983 and 1978 as truck drivers and were paid on a per trip or task basis. They filed
separate complaints on against petitioner CJC Trading, Incorporated and/or Ms. Celia J. Carlos
for illegal dismissal and non-payment of premium pay for holiday and rest day, service incentive
leave pay and thirteenth month pay. These cases were consolidated.
On 22 July 1993, a decision was rendered by the Labor Arbiter dismissing the complaints
and were not entitled to the labor standards benefits claimed by them because they were paid on
a per trip or per task basis. On appeal, NLRC affirmed in toto the decision of the Labor Arbiter.

Issue

Whether or not the respondents are entitled to the benefits provided by law.

Ruling

The employees are granted to retirement benefits. An employee who voluntarily resigns
is not entitled to separation pay unless otherwise stipulated in an employment contract or
collective bargaining agreement, or sanctioned by established employer practice or policy. The
Labor Code is devoid of any provision which grants separation pay to employees who voluntarily
resign. Neither was there anything in the record that shows that, in the instant case, there is a
collective bargaining agreement or any other agreement or established company policy
concerning the payment of separation pay to employees who resign.
Considering that private respondents were close to the age of sixty (60) at the time they
stopped working for petitioner and that they had been in the employ of petitioner for several
years, the Court, considers that this could be deemed to be in effect a prayer for the grant of
retirement benefits.
The pertinent law is Article 287 of the Labor Code, as amended by R.A. No. 7641, which
reads: Retirement. Any employee may be retired upon reaching the retirement age established
in the collective bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits
as he may have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employees retirement benefits under any collective
bargaining and other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or more,
but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who
has served at least five (5) years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.
R.A. No. 7641 may be given effect where (1) the claimant for retirement benefits was still
the employee of the employer at the time the statute took effect; and (2) the claimant was in
compliance with the requirements for eligibility under the statute for such retirement benefits. It
appears that private respondents did not qualify for the benefits of R.A. No. 7641 under the terms
of this law itself. Since the record does not show any retirement plan or collective bargaining
agreement providing for retirement benefits to petitioners employees, the applicable retirement
benefits to petitioners employees, the applicable retirement age is the optional retirement age of
sixty (60) years according to Article 287, which would qualify the retiree to retirement benefits
equivalent to one-half (1/2) months salary for every year of service. Unfortunately, at the time
private respondent stopped working for petitioner, they had not yet reached the age of sixty (60)
years. The Court stresses that there is nothing to prevent petitioners from

156

PANTRANCO NORTH EXPRESS, INC. vs. NATIONAL LABOR
RELATIONS COMMISSION

Facts
Urbano Suiga was hired by Pantranco North Express Inc. in 1964 as a bus conductor. He
eventually joined the Pantranco Employees Association-PTGWO. He continued in petitioners
employ until August 12, 1989, when he was retired at the age of fifty-two (52) after having
rendered twenty five years service. The basis of his retirement was the compulsory retirement
provision of the collective bargaining agreement between the petitioner and the aforenamed
union. Private respondent received P49,300.00 as retirement pay.
On February 15, 1990, private respondent filed a complaint for illegal dismissal against
petitioner with the Sub-Regional Arbitration Branch of the respondent Commission in Dagupan
City. The complaint was consolidated with two other cases of illegal dismissal having similar
facts and issues, filed by other employees, non-union members.
Collective Bargaining Agreement between petitioner company and the union states: Upon
reaching the age of sixty (60) years or upon completing twenty-five (25) years of service to the
COMPANY, whichever comes first, and the employee shall be compulsory retired and paid the
retirement benefits herein provided.
After hearings were held and position papers submitted, on March 26, 1990, Labor Arbiter
Olairez rendered his decision that the three complainants illegally and unjustly dismissed and
ordered the respondent to reinstate them to their former or substantially equivalent positions
without loss of seniority rights with full backwages and other benefits with a total of P31,618.12
plus additional backwages and other benefits but not to exceed 3 years and the corresponding
attorneys fees. The amounts already received by complainants shall be considered as advanced
payment of their retirement pay which shall be deducted when they shall actually retire or (be)
separated from the service. The order of reinstatement is immediately executory even pending
appeal. Petitioner appealed to public respondent, which issued the questioned Resolution
affirming the labor arbiters decision in toto. Hence, this petition.

Issues

1. The National Labor Relations Commission gravely abused its discretion in holding that
the Labor Arbiter has jurisdiction over the case.
2. The National Labor Relations Commission gravely abused its discretion in affirming the
Labor Arbiters decision that private respondent Urbano Zuiga (sic) was illegally dismissed.
Ruling
Article 261 of the Labor Code provides that violations of a Collective Bargaining Agreement,
except those which are gross in character, shall no longer be treated as unfair labor practice and
shall be resolved as grievances under the Collective Bargaining Agreement. For purposes of the
Article, gross violations of a Collective Bargaining agreement shall mean flagrant and/or malicious
refusal to comply with the economic provisions of such agreement. The Commission, its Regional
Offices and the Regional Directors of the Department of Labor and Employment shall not
entertain disputes, grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately dispose and refer the
same to the Grievance Machinery or Voluntary Arbitration provided in the Collective Bargaining
Agreement.
The complaint of illegal dismissal of which original and exclusive jurisdiction under Article 217
has been conferred to the Labor Arbiters. The interpretation of the CBA or enforcement of the
company policy is only corollary to the complaint of illegal dismissal. Otherwise, an employee
who was on AWOL, or who committed offenses contrary to the personnel polices can no longer
file a case of illegal dismissal because the discharge is premised on the interpretation or
enforcement of the company polices.
Respondent voluntarily submitted the case to the jurisdiction of this labor tribunal. It adduced
arguments to the legality of its act, whether such act may be retirement and/or dismissal, and
prayed for reliefs on the merits of the case. A litigant cannot pray for reliefs on the merits and at
the same time attacks the jurisdiction of the tribunal.
In Sanyo Philippines Workers Union PSSLU vs. Caizares, the petitioner, the court
ruled: Only disputes involving the union and the company shall be referred to the grievance
machinery or voluntary arbitrators.In the instant case, both the union and the company are united
or have come to an agreement regarding the dismissal of private respondents. No grievance
between them exists which could be brought to a grievance machinery. The dispute has to be

157

settled before an impartial body. The grievance machinery with members designated by the
union and the company cannot be expected to be impartial against the dismissed employees.
Since there has already been an actual termination, the matter falls within the jurisdiction of the
Labor Arbiter.
Applying the same rationale to the case at bar, it cannot be said that the dispute is between
the union and petitioner company because both have previously agreed upon the provision on
compulsory retirement as embodied in the CBA. Also, it was only private respondent on his
own who questioned the compulsory retirement. Thus, the case is properly denominated as a
termination dispute which comes under the jurisdiction of labor arbiters. Public respondent did
not commit a grave abuse of discretion in upholding the jurisdiction of the labor arbiter over this
case.
Private Respondents Compulsory Retirement Is Not Illegal Dismissal. Art. 287 of the Labor
Code permits employers and employees to fix the applicable retirement age at below 60 years.
Moreover, providing for early retirement does not constitute diminution of benefits. In almost all
countries today, early retirement is considered a reward for services rendered since it enables an
employee to reap the fruits of his labor at an earlier age, when said employee, in presumably
better physical and mental condition, can enjoy them better and longer. As a matter of fact, one
of the advantages of early retirement is that the corresponding retirement benefits, usually
consisting of a substantial cash windfall, can early on be put to productive and profitable uses by
way of income-generating investments, thereby affording a more significant measure of financial
security and independence for the retiree who, up till then, had to contend with lifes vicissitudes
within the parameters of his fortnightly or weekly wages. Thus we are now seeing many CBAs
with such early retirement provisions. And the same cannot be considered a diminution of
employment benefits.
A CBA incorporates the agreement reached after negotiations between employer and
bargaining agent with respect to terms and conditions of employment. A CBA is not an ordinary
contract. It is a labor contract within the contemplation of Article 1700 of the Civil Code of the
Philippines which governs the relations between labor and capital, it is not merely contractual in
nature but impressed with public interest, thus it must yield to the common good. As such, it must
be construed liberally rather than narrowly and technically, and the courts must place a practical
and realistic construction upon it, giving due consideration to the context in which it is negotiated
and purpose which it is intended to serve.
Being a product of negotiation, the CBA between the petitioner and the union intended the
provision on compulsory retirement to be beneficial to the employees-union members, including
herein private respondent. When private respondent ratified the CBA with the union, he not only
agreed to the CBA but also agreed to conform to and abide by its provisions. Thus, it cannot be
said that he was illegally dismissed when the CBA provision on compulsory retirement was
applied to his case.
Incidentally, The Retirement Pay Law, said statute sheds light on the present discussion
when it amended Art. 287 of the Labor Code worded that Any employee may be retired upon
reaching the retirement age establish in the collective bargaining agreement or other applicable
employment contract.
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or more,
but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who
has served at least five (5) years in the said establishment may retire.
The provision makes clear the intention and spirit of the law to give employers and
employees a free hand to determine and agree upon the terms and conditions of retirement.
Providing in a CBA for compulsory retirement of employees after twenty-five (25) years of service
is legal and enforceable so long as the parties agree to be governed by such CBA. Public
respondent committed a grave abuse of discretion in affirming the decision of the labor arbiter.
The compulsory retirement of private respondent effected in accordance with the CBA is legal
and binding.


158

R&E TRANSPORT INC vs. AVELINA LATAG

Facts

Pedro Latag was a regular employee of La Mallorca Taxi since March 1, 1961. When La
Mallorca ceased from business operations, Latag transferred to R & E Transport, Inc. He was
receiving an average daily salary of five hundred pesos (P500.00) as a taxi driver. Latag got sick
in January 1995 and was forced to apply for partial disability with the SSS, which was granted.
When he recovered, he reported for work in September 1998 but was no longer allowed to
continue working on account of his old age. Latag thus asked Felix Fabros, the administrative
officer of [petitioners], for his retirement pay pursuant to Republic Act 7641 but he was ignored.
On December 21, 1998, Latag filed a case for payment of his retirement pay before the
NLRC. Latag however died on April 30, 1999. Subsequently, his wife, Avelina Latag, substituted
him. On January 10, 2000, the Labor Arbiter rendered a decision in favor of Latag.

Issue

Whether or not Latag is entitled to retirement benefits considering she signed a waiver of
quitclaim.

Ruling
Yes, the respondent is entitled to retirement benefits despite of the waiver of quitclaims. The
Supreme Court upheld that the CA committed no error when it ruled that the Quitclaim and
Waiver was invalid and could not bar respondent Latag from demanding the benefits legally due
her husband despite the former having signed the document. This is not to say that all quitclaims
are invalid per se. Courts, however, are wary of schemes that frustrate workers rights and
benefits, and look with disfavor upon quitclaims and waivers that bargain these away.
Undisputably, Pedro M. Latag was credited with 14 years of service with R & E Transport,
Inc. Article 287 of the Labor Code, as amended by Republic Act No. 7641, 30 provides: In the
absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond
sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at
least five (5) years in said establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six
(6) months being considered as one whole year. Unless the parties provide for broader
inclusions, the term one half-month salary shall mean fifteen (15) days plus one-twelfth (1/12) of
the 13
th
month pay and the cash equivalent of not more than five (5) days of service incentive
leaves. xxx xxx xxx
The rules implementing the New Retirement Law similarly provide the above-mentioned
formula for computing the one-half month salary. Since Pedro was paid according to the
boundary system, he is not entitled to the 13
th
month 32 and the service incentive pay; hence,
his retirement pay should be computed on the sole basis of his salary.
It is accepted that taxi drivers do not receive fixed wages, but retain only those sums in
excess of the boundary or fee they pay to the owners or operators of their vehicles. Thus, the
basis for computing their benefits should be the average daily income.

159

STA CATALINA COLLEGE vs. NATIONAL LABOR RELATIONS
COMMISSION

Facts

Hilaria was hired as an elementary teacher in petitioner school in 1955 until 1970. In
1970, she applied for and was granted 1 year leave of absence without pay on account of her
mothers illness. In the meantime, she was employed as a teacher in another school. In 1982, she
applied anew at petitioner school. When she reached the compulsory retirement age of 65,
petitioner school pegged her retirement benefits at P59,038.35,computed on the basis of fifteen
years of service from 1982 to 1997. Her service from 1955 to 1970 was excluded in the
computation, petitioner school having asserted that she had, in 1971, abandoned her
employment.

Issue

Whether or not Hilaria should be credited for her services from 1955 6o 1970.

Ruling

No, she should not. Hilaria abandoned her work, for which reason, she could not be
credited for her services from 1955 to 1970 in determining her retirements benefits for after 1 year
of leave of absence in 1971 without her requesting for extension thereof as in fact she had not
been heard from until she resurfaces in 1982 when she reapplied, she abandoned her teaching
position as in fact she was employed elsewhere and effectively relinquished the retirement
benefits that accumulated during said period.
Abandonment of work being a just cause for terminating the services of Hilaria, petitioner
school was under no obligation to serve a written notice to her.
That Hilaria was in 1997 given a plaque of appreciation for thirty years of service to the
school and awarded P12,000.00 as gratuity pay should not be taken against petitioners, for
acknowledgment of the total number of years of her service, which was discontinuous, should not
obliterate the fact that she abandoned her employment in 1971, albeit she was rehired in 1982.
As Hilaria was considered a new employee when she rejoined petitioner school upon re-
applying in 1982, her retirement benefits should thus be computed only on the basis of her years
of service from 1982 to 1997.

160

HONDA PHILIPPINES vs. SAMAHAN NG MALAYANG MANGGAGAWA SA
HONDA

Facts

Honda Phils, Inc (company) and Samahan ng Malayang Manggagawa sa Honda (union)
started renegotiations of their CBA. When there was a bargaining deadlock, the union filed a
notice of strike. The company likewise filed a notice of lockout. SOLE assumed jurisdiction and
ordered both parties to desist from their strike and lockout.
However, the union subsequently filed a second notice of strike onthe ground of unfair
labor practice, alleging that the company illegally contracted out work to the detriment of
the workers. The union went on strike. SOLE assumed jurisdiction and certified the case to NLRC
for compulsory arbitration. The striking employees were ordered to return to work and
management accepted them back.
Honda then issued a memorandum announcing its new computationof the 13
th
and 14
th

month pay whereby the 31-day strike shall be considered unworked days for the purpose of
computing said benefits. The amount equivalent to 1/12 of the employees basic salary shall be
deducted from the bonuses (because they did not work for 1 month). Furthermore, Honda wanted
a pro-rata payment of the 13
th
month pay.
The union opposed said computation because it was contrary to the Sections 3 and 6 in
their current CBA which mandates that the company shall maintain the present practice in the
implementation of the 13
th
month pay and that the 14
th
month pay shall be computed in the same
way as the former.
The Bureau of Working Conditions (BWC) sided with the company. But the issue was unresolved
by the grievance machinery, so it wassubmitted for voluntary arbitration. The Voluntary Arbiter
invalidated Hondas computation and ordered the computation of the benefits based on the full
month basic pay.
CA affirmed, hence this petition.

Issues

(1) Whether or not there is ambiguity in the CBA provisions concerning the 13
th
and 14
th
month
pay
(2) Whether or not the proposed computation of Honda deducting 1/12 of the employees basic
salary from the 13
th
and 14
th
month pay and its pro-rata payment are valid

Ruling

(1) YES. A collective bargaining agreement refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work and all other
terms and conditions of employment in a bargaining unit. The parties in a CBA may establish
such stipulations, clauses, terms and conditions as they may deem convenient as long as they
are not contrary to law, morals, good customs, public order or public policy. Where the CBA is
clear and unambiguous, it becomes the law between the parties.
However, there are times when the CBA provisions may become contentious. In this
case, Honda wanted to implement a pro-ratedcomputation based on the no work, no pay rule.
Honda argues that the phrase present practice in the CBA refers to the manner of payment of
the bonuses (50% in May and 50% in December). The union, on the other hand, insists that the
CBA provisions necessarily relate to the computation of the benefits.
As the voluntary arbitrator has correctly observed, there is ambiguity in the assailed CBA
provisions because they did not categorically state whether the computation of the 13
th
and 14
th

month pay would be based on a one full months basic salary of the employees, or pro-rated
based on the compensation actually received.
(2) NO. The ambiguity in the CBA provisions was correctly resolved by the arbitrator by
relying on Article 1702 of the Civil Code, which provides that in case of doubt, all labor legislation
and all labor contracts shall be construed in favor of the safety and decent living of the laborer.
CA is also correct in ruling that the computation of the 13
th
month pay should be based on the
length of service and not on the actual wage earned by the worker.
PD 851 or the 13
th
Month Pay Law was issued to protect the level of wages of workers from
worldwide inflation. Under the IRR of said law, the minimum 13
th
month pay shall not be less than
1/12 of the total basic salary earned by an employee within a calendar year.The Court has
interpreted basic salary to mean, NOT the amount actually received by an employee, but 1/12 of
their standard monthly wage multiplied by their length of service within a given calendar year.

161

The IRR also provide for a pro-ration of this benefit ONLY in cases of resignation or
separation from work. In the present case, there being no resignation/separation,
the computation of the 13
th
month pay should not be pro-rated but should be given in full.
Moreover, it has not been proven that Honda has been implementing pro-rating of the
13
th
month pay before the present case. It is not a company practice. In fact, there was an implicit
acceptance that prior to the strike, a full month basic pay computation was the present practice
intended in the CBA. It was the second strike that prompted the company to adopt the pro-
rata computation.

162

JACULBE vs. SILLIMAN UNIVERSITY
Facts

Sometime in 1958, petitioner began working for respondents university medical center as
a nurse. In a letter in December 1992, respondent, through its Human Resources Development
Office, informed petitioner that she was approaching her 35
th
year of service with the university
and was due for automatic retirement on November 18, 1993, at which time she would be 57
years old. This was pursuant to respondents retirement plan for its employees which provided
that its members could be automatically retired upon reaching the age of 65 or after 35 years of
uninterrupted service to the university. Respondent required certain documents in connection
with petitioners impending retirement.
A brief exchange of letters between petitioner and respondent followed. Petitioner
emphatically insisted that the compulsory retirement under the plan was tantamount to a
dismissal and pleaded with respondent to be allowed to work until the age of 60 because this was
the minimum age at which she could qualify for SSS pension. But respondent stood pat on its
decision to retire her, citing company policy.
On November 15, 1993, petitioner filed a complaint in the National Labor Relations
Commission (NLRC) for termination of service with preliminary injunction and/or restraining
order. On November 18, 1993, respondent compulsorily retired petitioner. The labor arbiter
rendered a decision finding respondent guilty of illegal dismissal and ordered that petitioner be
reinstated and paid full back wages. On appeal, the NLRC reversed the labor arbiters decision
and dismissed the complaint. the CA affirmed the NLRC.

Issue

Whether or not the respondents retirement plan imposing automatic retirement after 35
years of service contravenes the security of tenure clause in the 1987 Constitution and
the Labor Code.

Ruling

Retirement plans allowing employers to retire employees who are less than the
compulsory retirement age of 65 are not per se repugnant to the constitutional guaranty of
security of tenure. Article 287 of the Labor Code provides: Retirement - Any employee may be
retired upon reaching the retirement age established in the collective bargaining agreement or
other applicable employment contract. By its express language, the Labor Code permits
employers and employees to fix the applicable retirement age at below 60 years.
The rules and regulations of the plan show that participation therein was not voluntary at
all. Rule III of the plan, on membership, stated:
SECTION 1 MEMBERSHIP, All full-time Filipino employees of the University will
automatically become members of the Plan, provided, however, that those who have retired from
the University, even if rehired, are no longer eligible for membership in the Plan. A member who
continues to serve the University cannot withdraw from the Plan.
SECTION 2 EFFECTIVITY OF MEMBERSHIP, Membership in the Plan starts on the
day a person is hired on a full-time basis by the University.
SECTION 3 TERMINATION OF MEMBERSHIP, Termination of membership in the
Plan shall be upon the death of the member, resignation or termination of employees contract by
the University, or retirement from the University.
Meanwhile, Rule IV, on contributions, stated: The Plan is contributory. The University
shall set aside an amount equivalent to 3% of the basic salaries of the faculty and staff. To this
shall be added a 5% deduction from the basic salaries of the faculty and staff. A member on
leave with the University approval shall continue paying, based on his pay while on leave, his
leave without pay should pay his contributions to the Plan. However, a member, who has been on
leave without pay should pay his contributions based on his salary plus the Universitys
contributions while on leave or the full amount within one month immediately after the date of his
reinstatement. Provided, further that if a member has no sufficient source of income while on
leave may pay within six months after his reinstatement.
It was through no voluntary act of her own that petitioner became a member of the plan.
In fact, the only way she could have ceased to be a member thereof was if she stopped working
for respondent altogether. Furthermore, in the rule on contributions, the repeated use of the word
shall ineluctably pointed to the conclusion that employees had no choice but to contribute to the
plan (even when they were on leave).
Retirement is the result of a bilateral act of the parties, a voluntary agreement between
the employer and the employee whereby the latter, after reaching a certain age agrees to sever
his or her employment with the former. The truth was that petitioner had no choice but to
participate in the plan, given that the only way she could refrain from doing so was to resign or

163

lose her job. It is axiomatic that employer and employee do not stand on equal footing, a situation
which often causes an employee to act out of need instead of any genuine acquiescence to the
employer. This was clearly just such an instance.
An employer is free to impose a retirement age less than 65 for as long as it has the
employees consent. Stated conversely, employees are free to accept the employers offer to
lower the retirement age if they feel they can get a better deal with the retirement plan presented
by the employer. Thus, having terminated petitioner solely on the basis of a provision of a
retirement plan which was not freely assented to by her, respondent was guilty of illegal
dismissal.

164

INTERCONTINENTAL BROADCASTING CORP. vs. PANGANIBAN

Facts

Ireneo Panganiban (respondent) was employed as Assistant General Manager of the
Intercontinental Broadcasting Corporation (petitioner) from May 1986 until his preventive
suspension on August 26, 1988. Respondent resigned from his employment on September 2,
1988.
On April 12, 1989, respondent filed a civil case with the RTC of Quezon City, Branch 93
against the members of the Board of Administrators (BOA) of petitioner alleging, among others,
non-payment of his unpaid commissions. A motion to dismiss was filed by Joselito Santiago, one
of the defendants, on the ground of lack of jurisdiction, as respondents claim was a labor money
claim, but this was denied by the RTC. Thus, Santiago filed a petition for certiorari with the CA
which granted Santiagos petition for lack of jurisdiction and set aside the RTCs Orders.
Thereafter, respondent was elected by the BOA as Vice-President for Marketing in July
1992. He resigned in April 1993. On July 24, 1996, respondent filed against petitioner a complaint
for illegal dismissal, separation pay, retirement benefits, unpaid commissions, and damages. The
Labor Arbiter (LA) ordered respondents reinstatement with full backwages, and the payment of
his unpaid commission, damages and attorneys fees. Petitioner appealed to the NLRC but due to
petitioners failure to post a bond, the appeal was dismissed. The decision was deemed final and
executory.

Issue

Whether or not respondents claim for unpaid commissions has already prescribed.

Ruling

Yes. Respondents claim had already prescribed as of September 1991. In addition, the
claims of private respondent for reinstatement, backwages and benefits in conjunction with his
employment from 1986 to 1988 have prescribed.
The applicable law in this case is Article 291 of the Labor Code which provides that 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.
The term money claims covers all money claims arising from an employer-employee relation the
prescription of an action is interrupted by (a) the filing of an action, (b) a written extrajudicial
demand by the creditor, and (c) a written acknowledgment of the debt by the debtor.
On this point, the Court ruled that although the commencement of a civil action stops the
running of the statute of prescription or limitations, its dismissal or voluntary abandonment by
plaintiff leaves the parties in exactly the same position as though no action had been commenced
at all. Hence, while the filing of Civil Case could have interrupted the running of the three-year
prescriptive period, its consequent dismissal by the CA due to lack of jurisdiction effectively
canceled the tolling of the prescriptive period within which to file his money claim, leaving
respondent in exactly the same position as though no civil case had been filed at all. The running
of the three-year prescriptive period not having been interrupted by the filing of Civil Case
respondents cause of action had already prescribed on September 2, 1991, three years after his
cessation of employment on September 2, 1988. Consequently, when respondent filed his
complaint for illegal dismissal, separation pay, retirement benefits, and damages in July 24, 1996,
his claim, clearly, had already been barred by prescription.

165

LETRAN CALAMBA FACULTY & EMPLOYEES ASSOCIATION vs.
NATIONAL LABOR RELATIONS COMMISSION

Facts

Three cases were consolidated involving petitioner Letran Calamba Faculty and
Employees Association and Colegio de San Juan de Letran, Calamba, for money claims and a
petition to declare the subject strike illegal filed by respondent.
On July 28, 1999, the NLRC promulgated its Decision dismissing both appeals. Petitioner
filed a Motion for Reconsideration but the same was denied by the NLRC in its Resolution dated
June 21, 2000.Petitioner then filed a special civil action for certiorari with the CA assailing the
above-mentioned NLRC Decision and Resolution.
On May 14, 2002, the CA rendered the presently assailed judgment dismissing the
petition. Petitioner filed a Motion for Reconsideration but the CA denied it in its Resolution
promulgated on November 28, 2002. Citing Agustilo v. Court of Appeals, petitioner contends that
in a special civil action for certiorari brought before the CA, the appellate court can review the
factual findings and the legal conclusions of the NLRC.
Petitioner avers that the CA, in concluding that the NLRC Decision was supported by
substantial evidence, failed to specify what constituted said evidence. Thus, petitioner asserts
that the CA acted arbitrarily in affirming the Decision of the NLRC.

Issue

Whether or not the Court of Appeals erred in holding that the factual findings of the NLRC
cannot be reviewed in certiorari proceedings.

Ruling

Court finds no error in the ruling of the CA that since nowhere in the petition is there any
acceptable demonstration that the LA or the NLRC acted either with grave abuse of discretion or
without or in excess of its jurisdiction, the appellate court has no reason to look into the
correctness of the evaluation of evidence which supports the labor tribunals findings of fact.
Settled is the rule that the findings of the LA, when affirmed by the NLRC and the CA, are
binding on the Supreme Court, unless patently erroneous. It is not the function of the Supreme
Court to analyze or weigh all over again the evidence already considered in the proceedings
below. In a petition for review on certiorari, this Courts jurisdiction is limited to reviewing errors of
law in the absence of any showing that the factual findings complained of are devoid of support in
the records or are glaringly erroneous. Firm is the doctrine that this Court is not a trier of facts,
and this applies with greater force in labor cases. Findings of fact of administrative agencies and
quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to
specific matters, are generally accorded not only great respect but even finality. They are binding
upon this Court unless there is a showing of grave abuse of discretion or where it is clearly shown
that they were arrived at arbitrarily or in utter disregard of the evidence on record. We find none of
these exceptions in the present case.
In petitions for review on certiorari like the instant case, the Court invariably sustains the
unanimous factual findings of the LA, the NLRC and the CA, specially when such findings are
supported by substantial evidence and there is no cogent basis to reverse the same, as in this
case.

166

REYES vs. NATIONAL LABOR RELATIONS COMMISSION ET. AL.
Facts

Petitioner was employed as a salesman at private respondents Grocery Division in
Davao City on August 12, 1977. He was eventually appointed as unit manager of Sales
Department-South Mindanao District, a position he held until his retirement on November 30,
1997. Thereafter, he received a letter regarding the computation of his separation pay. Insisting
that his retirement benefits and 13
th
month pay must be based on the average monthly salary of
P42,766.19, which consists of P10,919.22 basic salary and P31,846.97 average monthly
commission, petitioner refused to accept the check issued by private respondent in the amount of
P200,322.21. Instead, he filed a complaint before the arbitration branch of the NLRC for
retirement benefits, 13
th
month pay, tax refund, earned sick and vacation leaves, financial
assistance, service incentive leave pay, damages and attorneys fees.
Petitioner contends that the commissions form part of the basic salary, citing the case of
Philippine Duplicators, Inc. v. National Labor Relations Commission, wherein the Court held that
commissions earned by salesmen form part of their basic salary. Private respondent counters
that petitioner knew that the overriding commission is not included in the basic salary because it
had not been considered as such for a long time in the computation of the 13
th
month pay, leave
commissions, absences and tardiness.

Issue

Whether or not the average monthly sales commission of thirty one thousand eight
hundred forty six and 97/100 (Php31,846.97) should be included in the computation of his
retirement benefits and 13
th
month pay.

Ruling

This Court has held, in Philippine Duplicators that, the salesmens 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 13
th
month pay.
The salesmens commission 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.
Contrarily, in Boie-Takeda, the so-called commissions paid to or received by medical
representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji
Xerox Co., were excluded from the term basic salary because these were paid to the medical
representatives and rank-and-file employees as productivity bonuses, which are generally tied to
the productivity, or capacity for revenue production, of a corporation and such bonuses closely
resemble profit-sharing payments and have no clear direct or necessary relation to the amount of
work actually done by each individual employee. Further, commissions paid by the Boie-Takeda
Company to its medical representatives could not have been sales commissions in the same
sense that Philippine Duplicators paid the salesmen their sales commissions. Medical
representatives are not salesmen; they do not effect any sale of any article at all.
In fine, whether or not a commission forms part of the basic salary depends upon the
circumstances or conditions for its payment, which indubitably are factual in nature for they will
require a re-examination and calibration of the evidence on record.
As to the main issue whether petitioners commissions be considered in the computation
of his retirement benefits and 13
th
month pay, we rule in the negative. Article 287 of the Labor
Code, as amended by Republic Act No. 7641, otherwise known as The New Retirement Law, 22
provides: Retirement. Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract In
the absence of a retirement plan or agreement providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of sixty (60) years or more, but not
beyond sixty five (65) years which is hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year. Unless the parties provide
for broader inclusions, the term one half (1/2) month salary shall mean fifteen (15) days plus one
twelfth (1/12) of the 13
th
month pay and the cash equivalent of not more than five (5) days of
service incentive leaves.
Petitioner filed for optional retirement upon reaching the age of 60. However, the basis in
computing his retirement benefits is his latest salary rate of P10,919.22 as the commissions he
received are in the form of profit-sharing payments specifically excluded by the foregoing rules.
Case law has it that when these earnings and remuneration are closely akin to fringe benefits,
overtime pay or profit-sharing statements, they are properly excluded in computing retirement

167

pay. However, sales commissions which are effectively an integral portion of the basic salary
structure of an employee, shall be included in determining the retirement pay.
At bar, petitioner Rogelio J. Reyes was receiving a monthly sum of P10,919.22 as salary
corresponding to his position as Unit Manager. Thus, as correctly ruled by public respondent
NLRC, the overriding commissions paid to him by Universal Robina Corp. could not have been
sales commissions in the same sense that Philippine Duplicators paid its salesmen sales
commissions. Unit Managers are not salesmen; they do not effect any sale of article at all.
Therefore, any commission which they receive is certainly not the basic salary which measures
the standard or amount of work of complainant as Unit Manager. Accordingly, the additional
payments made to petitioner were not in fact sales commissions but rather partook of the nature
of profit-sharing business. Certainly, from the foregoing, the doctrine in Boie-Takeda Chemicals
and Philippine Fuji Xerox Corporation, which pronounced that commissions are additional pay
that does not form part of the basic salary, applies to the present case. Aside from the fact that as
unit manager petitioner did not enter into actual sale transactions, but merely supervised the
salesmen under his control, the disputed commissions were not regularly received by him. Only
when the salesmen were able to collect from the sale transactions can petitioner receive the
commissions. Conversely, if no collections were made by the salesmen, then petitioner would
receive no commissions at all. In fine, the commissions which petitioner received were not part of
his salary structure but were profit-sharing payments and had no clear, direct or necessary
relation to the amount of work he actually performed. The collection made by the salesmen from
the sale transactions was the profit of private respondent from which petitioner had a share in the
form of a commission. Hence, petition is denied.

168

ARCO METAL PRODUCTS vs. SAMAHAN NG MANGGAGAWA SA
ARCO-METAL-NAFLU

Facts

Petitioner is a company engaged in the manufacture of metal products, whereas
respondent is the labor union of petitioners rank and file employees. Sometime in December
2003, petitioner paid the 13
th
month pay, bonus, and leave encashment of three union members
in amounts proportional to the service they actually rendered in a year, which is less than a full
twelve (12) months. Respondent protested the prorated scheme, claiming that on several
occasions petitioner did not prorate the payment of the same benefits to seven (7) employees
who had not served for the full 12 months. According to respondent, the prorated payment
violates the rule against diminution of benefits under Article 100 of the Labor Code. Thus, they
filed a complaint before the National Conciliation and Mediation Board (NCMB). The parties
submitted the case for voluntary arbitration.

Issue

Whether or not the prorated payment of the benefits constitute a violation under Art. 100
of the Labor Code.

Ruling

SC ruled in favor of the respondents. The voluntary grant of the benefits has been an
established company practice. It has been a company practice which grants full benefits to its
employees regardless of the length of service rendered.
There is no doubt that in order to be entitled to the full monetization of sixteen (16) days
of vacation and sick leave, one must have rendered at least one year of service. The clear
wording of the provisions does not allow any other interpretation. Anent the 13
th
month pay and
bonus, we agree with the findings of Labor Arbiter Mangabat that the CBA provisions did not give
any meaning different from that given by the law, thus it should be computed at 1/12 of the total
compensation which an employee receives for the whole calendar year. The bonus is also
equivalent to the amount of the 13
th
month pay given, or in proportion to the actual service
rendered by an employee within the year.
Any benefit and supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded
on the Constitutional mandate to protect the rights of workers and promote their welfare,
and to afford labor full protection. Said mandate in turn is the basis of Article 4 of the Labor
Code which states that all doubts in the implementation and interpretation of this Code, including
its implementing rules and regulations shall be rendered in favor of labor. Jurisprudence is
replete with cases which recognize the right of employees to benefits which were voluntarily given
by the employer and which ripened into company practice. Thus in Davao Fruits Corporation
v. Associated Labor Unions, et al. where an employer had freely and continuously included in the
computation of the 13
th
month pay those items that were expressly excluded by the law, we held
that the act which was favorable to the employees though not conforming to law had thus
ripened into a practice and could not be withdrawn, reduced, diminished, discontinued or
eliminated. In Sevilla Trading Company v. Semana, we ruled that the employers act of including
non-basic benefits in the computation of the 13
th
month pay was a voluntary act and had ripened
into a company practice which cannot be peremptorily withdrawn. Meanwhile in Davao
Integrated Port Stevedoring Services v. Abarquez, the Court ordered the payment of the cash
equivalent of the unenjoyed sick leave benefits to its intermittent workers after finding that said
workers had received these benefits for almost four years until the grant was stopped due to a
different interpretation of the CBA provisions. We held that the employer cannot
unilaterally withdraw the existing privilege of commutation or conversion to cash given to said
workers, and as also noted that the employer had in fact granted and paid said cash equivalent of
the unenjoyed portion of the sick leave benefits to some intermittent workers.

169

LOURDES CERCADO vs. UNIPROM INC.
Facts

Petitioner Lourdes cerdaco was an employee of UNIPROM Inc. for 22 years since
December 15, 1978. When respondent came up with a retirement plan, sometime in 1980 and
then amended in 2001, which provides that any employee with a minimum of 20 years of service,
regardless of age, may be retired at the option of the employer. In December 2000, UNIPROM
implemented a company-wide retirement program, including herein petitioner. She was offered an
early retirement package amounting to P171, 982.90 but Cercado rejected the offer. UNIPROM
exercised its option under the retirement plan and decided to retire petitioner effective February
15, 2001 so she was no longer given any work assignment after the said date. This prompted the
petitioner to file a complaint for illegal dismissal before the Labor Arbiter, alleging that UNIPROM
did not have abona fide retirement plan, and even if there was, she didnt consent thereto.
Respondent averred that Cercado was automatically covered by the retirement plan when she
agreed to the companys rules and regulations, and that her retirement was an exercise of
management prerogative.
Issues

1. Whether or not UNIPROM has a bona fide retirement plan
2. Whether or not petitioner was validly retired pursuant thereto
Ruling
Retirement is the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter, after reaching a certain age, agrees to sever his
or her employment with the former.
1. Yes, UNIPROM had a bona fide retirement plan. Article 287 of the Labor Code, as
amended by R.A 7641, pegs the age for compulsory retirement at 65 years old, while the
minimum age for optional retirement is set at 60 years. However, an employer is free to impose a
retirement age earlier than the foregoing mandates. This has been upheld in numerous cases as
a valid exercise of management prerogative.
In this case, petitioner was retired by UNIPROM at the age of 47, after having served the
company for 22 years, pursuant to the companys retirement plan, which provides that employees
who have rendered at least 20 years of service can be retired at the option of the copany.
Respondents retirement plan can be expediently stamped with validity and justified under the all
encompassing phrase management prerogative.
2. No, petitioner was not validly retired. Jurisprudence has upheld that it is axiomatic that a
retirement plan giving the employer the option to retire its employees below below the ages
provided by law must be assented to and accepted by the latter, otherwise its adhesive imposition
will amount to a deprivation of property without due process. In decided cases, the retirement
plans were either embodied in the CBA, or established after consultations and negotiations with
the emplyees bargaining representative. The cnsent of the employees to be retired even before
the statutory retirement age of 65 years was thus clear and unequivocal. Acceptance by the
employees of an early retirement age must be explicit, voluntary, free and uncompelled.

170

RADIO MINDANAO NETWORK, INC. AND ERIC S. CANOY VS.
DOMINGO Z. YBAROLA, JR. AND ALFONSO E. RIVERA, JR.

Facts

Respondents Domingo Z. Ybarola, Jr. and Alfonso E. Rivera, Jr. were hired on June 15,
1977 and June 1, 1983, respectively, by Radio Mindanao Network (RMN). They eventually
became account managers, soliciting advertisements and servicing various clients of RMN.
On September 15, 2002, the respondents services were terminated as a result of RMNs
reorganization/restructuring; they were given their separation pay P631,250.00 for Ybarola,
and P481,250.00 for Rivera. Sometime in December 2002, they executed release/quitclaim
affidavits.
Dissatisfied with their separation pay, the respondents filed separate complaints (which
were later consolidated) against RMN and its President, Eric S. Canoy, for illegal dismissal with
several money claims, including attorneys fees. They indicated that their monthly salary rates
were P60,000.00 for Ybarola and P40,000.00 for Rivera.

Issue

Whether the amounts the respondents received represented a fair and reasonable
settlement of their claims

Ruling

The petitioners insist that the respondents commissions were not part of their salaries,
because they failed to present proof that they earned the commission due to actual market
transactions attributable to them. They submit that the commissions are profit-sharing payments
which do not form part of their salaries. If these commissions had been really profit-sharing
bonuses to the respondents, they should have received the same amounts, yet, as the NLRC
itself noted, Ybarola and Rivera received P372,173.11 and P586,998.50 commissions,
respectively, in 2002. The variance in amounts the respondents received as commissions
supports the CAs finding that the salary structure of the respondents was such that they only
received a minimal amount as guaranteed wage; a greater part of their income was derived from
the commissions they get from soliciting advertisements; these advertisements are the products
they sell. As the CA aptly noted, this kind of salary structure does not detract from the character
of the commissions being part of the salary or wage paid to the employees for services rendered
to the company, as the Court held in Philippine Duplicators, Inc. v. NLRC.
The petitioners reliance on our ruling in Talam v. National Labor Relations
Commission, regarding the proper appreciation of quitclaims, as they put it, is misplaced. While
Talam, in the cited case, and Ybarola and Rivera, in this case, are not unlettered employees, their
situations differ in all other respects.
In Talam, the employee received a valuable consideration for his less than two years of
service with the company; he was not shortchanged and no essential unfairness took place. In
this case, as the CA noted, the separation pay the respondents each received was deficient by at
least P400,000.00; thus, they were given only half of the amount they were legally entitled to. To
be sure, a settlement under these terms is not and cannot be a reasonable one, given especially
the respondents length of service 25 years for Ybarola and 19 years for Rivera. The CA was
correct when it opined that the respondents were in dire straits when they executed the
release/quitclaim affidavits. Without jobs and with families to support, they dallied in executing the
quitclaim instrument, but were eventually forced to sign given their circumstances.

171

UNIVERSAL ROBINA SUGAR MILLING CORP. vs. CABALLEDA

Facts

Agripino Caballeda worked as welder for URSUMCO from March 1989 until June 23,
1997 while Alejandro Cadalin worked for URSUMCO as crane operation from 1976 up to June
15, 1997.
John Gokongwei, Jr. President of URSUMCO issued a memorandum establishing the
company policy on Compulsory Retirement. All employees corporate-wide who attain 60 years of
age on or before April 30, 1991 shall be considered retired on May 31, 1991. Subsequently, on
December 9, 1992, Republic Act No. 7641 was enacted into law and it took effect on January 7,
1993, amending Article 287 of the Labor Code.
Agripino and Alejandro having reached the age of 60, were allegedly forced to retire by
URSUMCO. They both accepted their retirement benefits. Later on, Agripino filed a complaint for
illegal dismissal because his compulsory retirement was in violation of the provisions of RA 7641
and, was in effect, a form of illegal dismissal.

Issues

1. Whether or not RA 7641 can be given retroactive effect.
2. Whether or not Agripino Caballeda and Alejandro Cadalin voluntarily retired from the
service.

Ruling

The issue of retroactivity has long been settled in the case of Enriquez Security Services, Inc.
vs. Cabotaje. RA 7641 is undoubtedly a social legislation. The law has been enacted as a labor
protection measure and as a curative statute that absent a retirement plan devised by, an
agreement with, or a voluntary grant from, an employer can respond, in part at least, to the
financial wellbeing of workers during their twilight years soon following their life of labor. There
should be little doubt about the fact that the law can apply to labor contracts still existing at the
time the statute has taken effect, and that its benefits can be reckoned not only from the date of
the laws enactment but retroactively to the time said employment contracts have started.
This doctrine has been repeatedly upheld and clarified in several cases. Pursuant thereto,
this Court imposed two (2) essential requisites in order that R.A. 7641 may be given retroactive
effect: (1) the claimant for retirement benefits was still in the employ of the employer at the time
the statute took effect; and (2) the claimant had complied with the requirements for eligibility for
such retirement benefits under the statute.
When respondents were compulsorily retired from the service, RA 7641 was already in full
force and effect. The petitioners failed to prove that the respondents did not comply with the
requirements for eligibility under the law for such retirement benefits. In sum, the aforementioned
requisites were adequately satisfied, thus, warranting the retroactive application of R.A. 7641 in
this case.
Retirement is the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter, after reaching a certain age, agrees to sever his
or her employment with the former. The age of retirement is primarily determined by the existing
agreement between the employer and the employees. However, in the absence of such
agreement, the retirement age shall be fixed by law. Under Art. 287 of the Labor Code as
amended, the legally mandated age for compulsory retirement is 65 years, while the set minimum
age for optional retirement is 60 years.
In this case, it may be stressed that the CBA does not per se specifically provide for the
compulsory retirement age nor does it provide for an optional retirement plan. It merely provides
that the retirement benefits accorded to an employee shall be in accordance with law. Thus, we
must apply Art. 287 of the Labor Code which provides for two types of retirement: (a) compulsory
and (b) optional. The first takes place at age 65, while the second is primarily determined by the
collective bargaining agreement or other employment contract or employers retirement plan. In
the absence of any provision on optional retirement in a collective bargaining agreement, other
employment contract, or employers retirement plan, an employee may optionally retire upon
reaching the age of 60 years or more, but not beyond 65 years, provided he has served at least
five years in the establishment concerned. That prerogative is exclusively lodged in the
employee.
Indubitably, the voluntariness of the respondents retirement is the meat of the instant
controversy. Generally, the law looks with disfavor on quitclaims and releases by employees who
have been inveigled or pressured into signing them by unscrupulous employers seeking to evade
their legal responsibilities and frustrate just claims of employees. They are frowned upon as

172

contrary to public policy. A quitclaim is ineffective in barring recovery of the full measure of a
workers rights, and the acceptance of benefits therefrom does not amount to estoppel.
In exceptional cases, the Court has accepted the validity of quitclaims executed by
employees if the employer is able to prove the following requisites: (1) the employee executes a
deed of quitclaim voluntarily; (2) there is no fraud or deceit on the part of any of the parties; (3)
the consideration of the quitclaim is credible and reasonable; and (4) the contract is not contrary
to law, public order, public policy, morals or good customs or prejudicial to a third person with a
right recognized by law. In this case, petitioners failed to establish all the foregoing requisites.
To be precise, only Alejandro was able to claim a partial amount of his retirement benefit.
Thus, it is clear from the decisions of the LA, NLRC and CA that petitioners are still liable to pay
Alejandro the differential on his retirement benefits. On the other hand, Agripino was actually and
totally deprived of his retirement benefit. In Becton Dickinson Phils., Inc. v. National Labor
Relations Commission, we held: There is no nexus between intelligence, or even the position
which the employee held in the company when it concerns the pressure which the employer may
exert upon the free will of the employee who is asked to sign a release and quitclaim. The
employee is confronted with the same dilemma of whether signing a release and quitclaim and
accept what the company offers them, or refusing to sign and walk out without receiving anything,
may do succumb to the same pressure, being very well aware that it is going to take quite a while
before he can recover whatever he is entitled to, because it is only after a protracted legal battle
starting from the labor arbiter level, all the way to this Court, can he receive anything at all. The
Court understands that such a risk of not receiving anything whatsoever, coupled with the
probability of not immediately getting any gainful employment or means of livelihood in the
meantime, constitutes enough pressure upon anyone who is asked to sign a release and
quitclaim in exchange of some amount of money which may be way below what he may be
entitled to based on company practice and policy or by law.
Absent any convincing proof of voluntariness in the submission of the documentary
requirements and the execution of the quitclaim, we cannot simply assume that respondents were
not subjected to the very same pressure. Respondents vigorously pursued this case all the way
up to the Supreme Court. Without doubt, this is a manifestation that respondents had no intention
of relinquishing their employment, wholly incompatible to petitioners assertion that respondents
voluntarily retired. Respondents did not voluntarily retire but were forced to retire, tantamount to
illegal dismissal.

173

ELEAZAR S. PADILLO vs. RURAL BANK OF NABUNTURAN, INC.
AND MARK S. OROPEZA

Facts

On October 1, 1977, petitioner, the late Eleazar Padillo (Padillo), was employed by
respondent Rural Bank of Nabunturan, Inc. (Bank) as its SA Bookkeeper. Due to liquidity
problems which arose sometime in 2003, the Bank took out retirement/insurance plans with
Philippine American Life and General Insurance Company (Philam Life) for all its employees in
anticipation of its possible closure and the concomitant severance of its personnel. In this regard,
the Bank procured Philam Plan Certificate of Full Payment No. 88204, Plan Type 02FP10SC,
Agreement No. PP98013771 (Philam Life Plan) in favor of Padillo for a benefit amount of
P100,000.00 and which was set to mature on July 11, 2009. .During the latter part of 2007,
Padillo suffered a mild stroke due to hypertension which consequently impaired his ability to
effectively pursue his work.On September 10, 2007, he wrote a letter addressed to respondent
Oropeza, the president of the bank, expressing his intention to avail of an early retirement
package. Despite several follow-ups, his request remained unheeded. On October 3, 2007,
Padillo was separated from employment due to his poor and failing health as reflected in a
Certification dated December 4, 2007 issued by the Bank. Not having received his claimed
retirement benefits, Padillo filed with the NLRC a complaint for the recovery of unpaid retirement
benefits.

Issue

Can Padillo claim the unpaid benefits?

Held

The Labor Code provision on termination on the ground of disease under Article 297
does not apply in this case, considering that it was the petitioner and not the Bank who severed
the employment relations. It was Padillo who voluntarily retired and that he was not terminated by
the Bank.
Under article 300 of the labor code, in the absence of any applicable agreement, an
employee must (1) retire when he is at least sixty (60) years of age and (2) serve at least (5)
years in the company to entitle him/her to a retirement benefit of at least one-half (1/2) month
salary for every year of service, with a fraction of at least six (6) months being considered as one
whole year. Notably, these age and tenure requirements are cumulative and non-compliance with
one negates the employees entitlement to the retirement benefits under Article 300 of the Labor
Code.
In this case, it is undisputed that there exists no retirement plan, collective bargaining
agreement or any other equivalent contract between the parties which set out the terms and
condition for the retirement of employees, with the sole exception of the Philam Life Plan which
premiums had already been paid by the Bank. In the absence of any applicable contract or any
evolved company policy, Padillo should have met the age and tenure requirements set forth
under Article 300 of the Labor Code to be entitled to the retirement benefits provided therein.
Unfortunately, while Padillo was able to comply with the five (5) year tenure requirement as he
served for twenty-nine (29) years he, however, fell short with respect to the sixty (60) year age
requirement given that he was only fifty-five (55) years old when he retired. Therefore, without
prejudice to the proceeds due under the Philam Life Plan, petitioners claim for retirement benefits
must be denied.


174

2011 NLRC RULES OF PROCEDURE
T/SGP LARKINS vs. NATIONAL LABOR RELATIONS COMMISSION

Facts
Petitioner was a member of the United States Air Force (USAF) assigned to oversee the
dormitories of the Third Aircraft Generation Squadron (3 AGS) at Clark Air Base, Pampanga.
On August 10, 1988, 3 AGS terminated the contract for the maintenance and upkeep of
the dormitories with the De Guzman Custodial Services. The employees thereof, including private
respondents, were allowed to continue working for 3 AGS. It was left to the new contractor, the
JAC Maintenance Services owned by Joselito Cunanan, to decide whether it would retain their
services. Joselito Cunanan, however, chose to bring in his own workers. As a result, the workers
of the De Guzman Custodial Services were requested to surrender their base passes to Lt. Col.
Frankhauser or to petitioner.
It is petitioners contention that the questioned resolutions are null and void because
respondent Labor Arbiter did not acquire jurisdiction to entertain and decide the case. Petitioner
alleges that she never received nor was served, any summons or copies of the original and
amended complaints, and therefore the Labor Arbiter had no jurisdiction over her person under
Article XIV of the R.P. ? U.S. Military Bases Agreement.

Issue

Whether or not the Labor Arbiter acquires jurisdiction over the respondent.

Ruling

The Agreement Between the Republic of the Philippines and the United States of
America Concerning Military Bases, governed the rights, duties, authority, and the exercise
thereof by Philippine and American nationals inside the U.S. military bases in the country. Article
XIV thereof, governing the procedure for service of summons on persons inside U.S. military
bases, provides that: . . . [N]o process, civil or criminal, shall be served within any base except
with the permission of the commanding officer of such base; but should the commanding officer
refuse to grant such permission he shall forthwith take the necessary steps . . . . to serve such
process, as the case may be, and to provide the attendance of the server of such process before
the appropriate court in the Philippines or procure such server to make the necessary affidavit or
declaration to prove such service as the case may require.
Summonses and other processes issued by Philippine courts and administrative
agencies for United States Armed Forces personnel within any U.S. base in the Philippines could
be served therein only with the permission of the Base Commander. If he withholds giving his
permission, he should instead designate another person to serve the process, and obtain the
servers affidavit for filing with the appropriate court. Respondent Labor Arbiter did not follow said
procedure. He instead, addressed the summons to Lt. Col. Frankhauser and not the Base
Commander. Respondents do not dispute petitioners claim that no summons was ever issued
and served on her. They contend, however, that they sent notices of the hearings to her.
Notices of hearing are not summonses. The provisions and prevailing jurisprudence in
Civil Procedure may be applied by analogy to NLRC proceedings. It is basic that the Labor Arbiter
cannot acquire jurisdiction over the person of the respondent without the latter being served with
summons. In the absence of service of summons or a valid waiver thereof, the hearings and
judgment rendered by the Labor Arbiter are null and void.
Petitioner, in the case at bench, appealed to the NLRC and participated in the oral
argument before the said body. This, however, does not constitute a waiver of the lack of
summons and a voluntary submission of her person to the jurisdiction of the Labor Arbiter.
Be that as it may, on the assumption that petitioner validly waived service of summons on
her, still the case could not prosper. There is no allegation from the pleadings filed that Lt. Col.
Frankhauser and petitioner were being sued in their personal capacities for tortious acts.
However, private respondents named 3 AGS as one of the respondents in their complaint.
Under the Agreement Between the Government of the Republic of the Philippines and
the Government of the United States of America Relating to the Employment of Philippine
Nationals in the United States Military Bases in the Philippines otherwise known as the Base
Labor Agreement of May 27, 1968, any dispute or disagreement between the United States
Armed Forces and Filipino employees should be settled under grievance or labor relations
procedures established therein (Art. II) or by the arbitration process provided in the Romualdez-
Bosworth Memorandum of Agreement dated September 5, 1985. If no agreement was reached or

175

if the grievance procedure failed, the dispute was appealable by either party to a Joint Labor
Committee established in Article III of the Base Labor Agreement.
Unquestionably therefore, no jurisdiction was ever acquired by the Labor Arbiter over the case
and the person of petitioner and the judgment rendered is null and void

176

UERM MEMORIAL MEDICAL CENTER vs. NATIONAL LABOR
RELATIONS COMMISSION
Facts

On December 14, 1987, RA 6640 took effect mandating a 10-peso increase on the
prevailing daily minimum wage (DMW) resulting to a 95-peso difference in the salaries of rank-
and-file employees (union members) and faculty members (non-union). On July 1, 1989, RA 6727
took effect again increasing the DMW by 25 pesos resulting in a difference of P237.42 between
the salaries of the 2 employee groups. In September 1987, petitioners increased the hiring rate to
P188.00 per month. On 12 April 1988, Policy Instruction No. 54 was issued by the then Secretary
of Labor Franklin Drilon providing that the personnel in subject hospitals and clinics are entitled to
a full weekly wage of seven days if they have completed the 40-hour/5-day workweek in any
given workweek.
Consequently, a complaint was filed by the private respondents, represented by the
Federation of Free Workers (FFW), claiming salary differentials under Republic Act Nos. 6640
and 6727, correction of the wage distortion and the payment of salaries for Saturdays and
Sundays under Policy Instruction No. 54. Labor Arbiter Nieves de Castro sustained the private
respondents except for their claim of wage distortion and directed petitioner to pay
P17,082,448.56 as salary differentials and P2,000.00 each as exemplary damages. Within the
reglementary period for appeal, the petitioners filed their Notice and Memorandum of Appeal with
a Real Estate Bond consisting of land and various improvements therein worth P102,345,650.
The private respondents moved to dismiss the appeal on the ground that Article 223 of
the Labor Code, as amended, requires the posting of a cash or surety bond. The NLRC directed
petitioners to post a cash or surety bond of P17,082,448.56 with a warning that failure to do so
would cause the dismissal of the appeal.
The petitioners filed a Motion for Reconsideration alleging it is not in a viable financial
condition to post a cash bond nor to pay the annual premium of P700,000.00 for a surety bond.
On 6 October 1992, the NLRC dismissed petitioners appeal. Petitioners MR was also denied by
the NLRC in a resolution dated 7 June 1993.

Issue

Whether or not in perfecting an appeal to the National Labor Relations Commission
(NLRC) a property bond is excluded by the two forms of appeal bond cash or surety
as enumerated in Article 223 of the Labor Code.

Ruling

The applicable law is Article 223 of the Labor Code, as amended by Republic Act No. 6715,
which provides: In case of a judgment involving a monetary award, an appeal by the employer
may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary award in
the judgment appealed from.
We have given a liberal interpretation to this provision. In YBL (Your Bus Line) v. NLRC we
ruled: x x x that while Article 223 of the Labor Code, as amended by Republic Act No. 6715,
requiring a cash or surety bond in the amount equivalent to the monetary award in the judgment
appealed from for the appeal to be perfected, may be considered a jurisdictional requirement,
nevertheless, adhering to the principle that substantial justice is better served by allowing the
appeal on the merits threshed out by the NLRC, the Court finds and so holds that the foregoing
requirement of the law should be given a liberal interpretation.
Then too, in Oriental Mindoro Electric Cooperative, Inc. v. National Labor Relations
Commission we held: The intention of the lawmakers to make the bond an indispensable
requisite for the perfection of an appeal by the employer is underscored by the provision that an
appeal by the employer may be perfected only upon the posting of a cash or surety bond. The
word only makes it perfectly clear, that the lawmakers intended the posting of a cash or surety
bond by the employer to be the exclusive means by which an employers appeal may be
perfected. The requirement is intended to discourage employers from using an appeal to delay, or
even evade, their obligation to satisfy their employees just and lawful claims. Considering,
however, that the current policy is not to strictly follow technical rules but rather to take into
account the spirit and intention of the Labor Code, it would be prudent for us to look into the
merits of the case, especially since petitioner disputes the allegation that private respondent was
illegally dismissed.
We reiterate this policy which stresses the importance of deciding cases on the basis of their
substantive merit and not on strict technical rules. In the case at bar, the judgment involved is
more than P17 million and its precipitate execution can adversely affect the existence of petitioner

177

medical center. Likewise, the issues involved are not insignificant and they deserve a full
discourse by our quasi-judicial and judicial authorities. We are also confident that the real
property bond posted by the petitioners sufficiently protects the interests of private respondents
should they finally prevail. It is not disputed that the real property offered by petitioners is worth
P102,345,650. The judgment in favor of private respondents is only a little more than P17 million.
Case remanded to NLRC for continuation of proceedings.

178

PHIL TRANCO SERVICES vs. NATIONAL LABOR RELATIONS
COMMISSION

Facts

Nieva was employed as a driver by petitioner assigned to the Legaspi City-Pasay City
route. Nieva sideswiped an owner-type jeep and a criminal complaint was filed against him.
Philtranco posted a bail bond for Nieva. After having been suspended for thirty days, he tried to
report to work but was told to wait until his case was settled. The case was finally settled, he
again reported to work but was requested to file a new application as he was no longer
considered an employee of Philtranco, allegedly for being absent without leave from October 19
to November 20, 1989.
Nieva filed a complaint for illegal dismissal and demanded for Thirteenth-Month Pay with the
NLRCs National Capital Region Arbitration Branch in Manila. Philtranco filed a motion to dismiss
on the ground of improper venue, stating that the complaint should have been lodged with the
NLRCs Regional Arbitration Branch in Legaspi City, not only because Nieva was a resident
thereof, but also because the latter was hired, assigned, and based in Legaspi City.

Issue

Whether or not NLRCs NCR Arbitration Branch in Manila was the proper venue for the
filing of Nievas complaint for illegal dismissal

Ruling
Yes, the NLRCs NCR Arbitration Branch was the proper venue for the filing of the
complaint. The question of venue essentially pertains to the trial and relates more to the
convenience of the parties rather than upon the substance and merits of the case. Provisions on
venue are intended to assure convenience for the plaintiff and his witnesses and to promote the
ends of justice. In fact, Section 1 (a), Rule IV of the New Rules of Procedure of the NLRC, cited
by Philtranco in support of its contention that venue of the illegal dismissal case filed by Nieva is
improperly laid, speaks of the complainant/petitioners workplace, evidently showing that the rule
is intended for the exclusive benefit of the worker. This being the case, the worker may waive
said benefit. Furthermore, the aforesaid Section has been declared by this Court to be merely
permissive. Moreover, Nieva, as a driver of Philtranco, was assigned to the Legazpi City-Pasay
City route. Sulpicio Lines, Inc. vs. NLRC is exactly in point. In said case, we held that: Section 1,
Rule IV of the 1990 NLRC Rules additionally provides that, for purposes of venue, workplace
shall be understood as the place or locality where the employer is regularly assigned when the
cause of action arose. From the foregoing, it is obvious that the filing of the complaint with the
National Capital Region Arbitration Branch was proper, Manila being considered as part of
Nievas workplace by reason of his plying the Legazpi City-Pasay City route.

179

ST. MARTIN FUNERAL HOMES vs. NATIONAL LABOR RELATIONS
COMMISSION

Facts

On September 16, 1998, the Supreme Court rendered the landmark decision in G.R. No.
130866, holding for the first time that all petitions for certiorari under Rule 65 assailing the
decisions of the NLRC should henceforth be filed with the CA, thus all references in the amended
section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme Court are
interpreted and refer to petitions for certiorari under Rule 65. Consequently, all such petitions
should henceforth be initially filed in the Court of Appeals in strict observance of the doctrine on
the hierarchy of courts as the appropriate forum for the relief desired.
Thus, the petition was remanded to the CA and redocketed as CA-G.R. SP No. 49183.
Subsequently, the CA rendered the assailed September 30, 1999 Decision, dismissing
petitioners appeal for lack of merit with the finding that respondent NLRC did not commit grave
abuse of discretion, in its pronouncement that the Labor Arbiter did not make any finding on the
alleged employer-employee relationship between the parties, reasoning this way:
Actually the Labor Arbiter did not determine whether there is an employer-employee
relation between the parties because according to him, such issue should be resolved by the
regular court pursuant to the ruling of the Supreme Court in De la Salle University vs. NLRC .
For its part, respondent NLRC, is remanding the case to the Labor Arbiter, reminded the
latter that he is authorized by the NLRC Rules to determine, in an appropriate proceeding the
existence of an employer-employee relationship.

Issue

Whether or not the Labor Arbiter made a determination of the presence of an employer-
employee relationship.

Ruling

At the outset, it is clear that the issue submitted for resolution is a question of fact which
is proscribed by the rule disallowing factual issues in appeal by certiorari to the Supreme Court
under Rule 45. This is explicit in Rule 45, Section 1 that petitions of this nature shall raise only
questions of law which must be distinctly set forth. Petitioner St. Martin would like the Court to
examine the pleadings and documentary evidence extant on the records of the Labor Arbiter to
determine if said official indeed made a finding on the existence of the alleged employer-
employee nexus between the parties based on the facts contained in said pleadings and
evidence. Evidently this issue is embraced by the circumscription.
Even if we would like to relax the rule and allow the examination of the documentary
evidence as an exception to the general rule, we are precluded by the abject failure of petitioner
to attach to the petition important and material portions of the records as would support the
petition prescribed by Rule 45, Section 4. St. Martin asks us to find out if the Labor Arbiter was
correct in concluding that respondent Aricayos was not in its employ; but committed the blunder
of not attaching to the petition even the Decision of the Labor Arbiter sought to be reviewed, the
NLRC Decision, the position papers and memoranda of the parties filed with the Labor Arbiter,
the affidavits of petitioners employees, and other pieces of evidence that we can consider in
resolving the factual issue on employment. Without these vital documents, petitioner cannot be
given the relief prayed for.

180

LUDO & LUYM CORP. vs. SOARNIDO

Facts

LUDO engaged the arrastre services of Cresencio Lu Arrastre Services (CLAS) for the
loading and unloading of its finished products at the wharf. Accordingly, several arrastre workers
were deployed by CLAS to perform the services needed by LUDO. These arrastre workers were
subsequently hired, on different dates, as regular rank-and-file employees of LUDO every time
the latter needed additional manpower services. Said employees thereafter joined respondent
union, the LUDO Employees Union (LEU), which acted as the exclusive bargaining agent of the
rank-and-file employees. Respondent union entered into a collective bargaining agreement with
LUDO which provides certain benefits to the employees, the amount of which vary according to
the length of service rendered by the availing employee. Thereafter, the union requested LUDO
to include in its members period of service the time during which they rendered arrastre services
to LUDO through the CLAS so that they could get higher benefits. LUDO failed to act on the
request. Thus, the matter was submitted for voluntary arbitration. Voluntary Arbitrator ruled that:
(1) the respondent employees were engaged in activities necessary and desirable to the business
of petitioner, and (2) CLAS is a labor-only contractor of petitioner. The Court of Appeals affirmed
in toto the decision of the Voluntary Arbitrator. Petitioner contends that the appellate court erred
when it upheld the award of benefits which were beyond the terms of submission agreement and
that the arbitrator must confine its adjudication to those issues submitted by the parties for
arbitration, which in this case is the sole issue of the date of regularization of the workers. Hence,
the award of benefits by the arbitrator was done in excess of jurisdiction.

Issue

Whether or not the appellate court gravely erred when it upheld the award of benefits
which were beyond the terms of submission agreement.

Ruling

Generally, the arbitrator is expected to decide only those questions expressly delineated
by the submission agreement. Nevertheless, the arbitrator can assume that he has the necessary
power to make a final settlement since arbitration is the final resort for the adjudication of
disputes.13 The succinct reasoning enunciated by the CA in support of its holding, that the
Voluntary Arbitrator in a labor controversy has jurisdiction to render the questioned arbitral
awards, deserves our concurrence, thus: In general, the arbitrator is expected to decide those
questions expressly stated and limited in the submission agreement. However, since arbitration is
the final resort for the adjudication of disputes, the arbitrator can assume that he has the power to
make a final settlement. Thus, assuming that the submission empowers the arbitrator to decide
whether an employee was discharged for just cause, the arbitrator in this instance can
reasonable assume that his powers extended beyond giving a yes-or-no answer and included the
power to reinstate him with or without back pay.

181

HANSIN ENGINEERING & CONSTRUCTION vs. COURT OF APPEALS
Facts

On October 18, 1991 and August 21, 1992, Hanjin and the Philippine Government, through
the National Irrigation Administration (NIA), executed contracts for the construction of the Malinao
Dam at Pilar, Bohol, with a projected completion period of 1,050 calendar days, including main
canal and lateral projects for 750 days.

From August 1995 to August 1996, Hanjin contracted the
services of 712 carpenters, masons, truck drivers, helpers, laborers, heavy equipment operators,
leadmen, engineers, steelmen, mechanics, electricians and others.
In April 1998, 712 employees filed complaints for illegal dismissal and for payment of benefits
against Hanjin and Nam Hyun Kim, the officer-in-charge of the project (herein petitioners), before
the National Labor Relations Commission (NLRC). The complainants averred that they were
regular employees of Hanjin and that they were separated from employment without any lawful or
just cause. Only 521 of the complainants affixed their signatures in the complaints.
Petitioners alleged that the complainants were mere project employees in its Bohol Irrigation
Project.
On May 12, 1998, the Labor Arbiter rendered judgment in favor of the 428 complainants,
granting separation pay and attorneys fees to each of them. According to the Labor Arbiter, the
complainants were regular employees of petitioner Hanjin, and their claims for underpayment,
holiday pay, premium pay for holiday and rest day, 13
th
month pay, and service incentive leave
would be computed after sufficient data were made available.
Petitioners appealed the decision to the NLRC, which affirmed with modification the Labor
Arbiters ruling on January 28, 2000. Petitioners filed a Motion for the Reconsideration of the
decision (with a motion to conduct clarificatory hearings). On July 20, 2001, the NLRC issued a
Resolution partially granting petitioners motion. Unsatisfied, petitioners filed a Petition
for Certiorari under Rule 65 of the Revised Rules of Court in the CA.
On March 18, 2004, the CA dismissed the petition and affirmed the NLRCs ruling that the
dismissed employees (respondents) were regular employees. The CA stressed that petitioners
failed to refute the claim of the respondents that they were regular employees. Petitioners moved
to reconsider the decision, which the CA denied.

Issue

Whether or not respondents regular employees entitled to their moneys.

Ruling

The CA, for its part, affirmed the findings of the Labor Arbiter and the NLRC, and held that
respondents were regular employees of petitioner Hanjin:
In the instant case, petitioners belatedly submitted copies of Appointment(s) as Contract
Worker(s) allegedly signed by private respondents at the time they commenced work, and which
provided for an employment of six (6) months only, a period applicable for probationary
employment. While it may be allowed that in the instant case the workers were initially hired for
specific projects or undertakings for a period of six (6) months or less, the repeated re-hiring and
the continuing need for their services over a long span of time (from 1991 to 1995) have
undeniably made them regular employees. Thus, we held that where the employment of project
employees is extended long after the supposed appointments has been finished, the employees
are removed from the scope of project employees and considered regular employees. How can
one properly explain private respondents continuous employment from 1991 to 1996 when their
appointment was for a measly period of six months? It is clear, therefore, that as aptly established
by the NLRC, these piecemeal appointments have been imposed to preclude the acquisition of
tenurial security. While length of time may not be a controlling test for project employment, it can
be a strong factor in determining whether the employee was hired for a specific undertaking or in
fact tasked to perform functions which are vital, necessary and indispensable to the usual
business or trade of the employer.
Furthermore, it is noteworthy to emphasize that these appointments were submitted only as
attachments to petitioners motion for reconsideration. As borne out by the records and even
mentioned in the decision of the Labor Arbiter, petitioners were already required during the initial
hearings before the Labor Arbiter to submit additional documents in their possession necessary
to support their case. Instead of complying, petitioners still had to wait for the adverse decision of
the NLRC before they submitted the same. Likewise, in the NLRCs assailed decision, petitioners
failure to present these appointments were adverted to, thus, the NLRC ruled that nowhere in
the records can the said contracts be found. Despite sufficient time, from the time they were
required by the Labor Arbiter to present additional evidence up to the time the appeal was

182

resolved by the NLRC, petitioners were not able to present said employment contracts.
Petitioners hesitation to submit the same is well-founded. It is a well-settled rule that when the
evidence tends to prove a material fact which imposes a liability on a party, and he has it in his
power to produce evidence which from its very nature must overthrow the case made against him
if it is not founded on fact, and he refuses to produce such evidence, the presumption arises that
the evidence, if produced, would operate to his prejudice, and support the case of his adversary.
Moreover, it is required under Policy Instruction No. 20, Series of 1993, that in case of project
employees, the termination of their employment in the particular project or undertaking must be
reported to the Department of Labor and Employment (DOLE) Regional Office having jurisdiction
over the workplace within thirty (30) days following the date of his separation from
work. In Ochoco v. National Labor Relations Commission, the failure of the employer to report to
the nearest employment office the termination of employment of workers everytime it completed a
project was considered by this Court as proof that the dismissed employees were not project
employees but regular employees. On this requirement, petitioners were silent, until the Decision
of the NLRC reminded them. To prove that petitioners allegedly complied with said requirement,
they again belatedly submitted machine copies of reports allegedly made to the DOLE of Bohol.
To explain away their failure to produce certified true copies of the same, petitioners allege that
the NLRC should have given evidentiary weight to the machine copies which are for all legal
intents and purposes already public records in the custody of the DOLE duly recorded in a public
office. The same argument can be taken against herein petitioners in that, for all the time it took
them to produce said machine copies, it would have been more prudent for them to have it
certified by the DOLE in Bohol. Under the Rules of Evidence, and as stated by petitioners, the
original document need not be produced when the same is a public record in the custody of a
public office or is recorded in a public office. Thus, proof of such documents may be made by a
duly authenticated copy of the original document or record. It is essential, furthermore, that the
copies be made in the manner provided by the rules and that all requirements in connection
therewith be complied with before such copy be properly admissible in evidence. Considering that
the documents submitted by petitioners are mere machine copies, the NLRC cannot be
compelled to give them evidentiary weight.
The appellate court, the NLRC and the Labor Arbiter are thus one in finding that respondents
were not project employees, and in sustaining respondents claim of illegal dismissal due to
petitioners failure to adduce contrary evidence. Well-settled is the rule that findings of fact of
quasi-judicial agencies, like the NLRC, are accorded not only respect but at times even finality if
such findings are supported by substantial evidence. Such findings of facts can only be set aside
upon showing of grave abuse of discretion, fraud or error of law,none of which have been shown
in this case.

183

BALAGTAS MULTI-PURPOSE COOP. vs. COURT OF APPEALS

Facts

Balagtas Multi-Purpose Cooperative, Inc. is a duly organized and existing cooperative
under the laws of the Philippines. Sometime in April 1991, Balagtas hired Josefina G. Hipolito-
Herrero, as part time manager in its office. Subsequently, Josefina made known of her intention
to take a leave of absence. Her proposal was immediately approved. However, after the lapse of
her leave of absence, Josefina did not report for work anymore. Later on, she filed her
resignation.
Consequently Josefina filed a complaint with the Provincial Office of the Department of
Labor in Malolos, Bulacan for illegal dismissal, and non-payment of 13
th
month pay or Christmas
Bonus. She also prayed for reinstatement and paid backwages as well as moral damages.
The Labor Arbiter rendered judgment in favor of complainant and against respondents
and ordered the latter to pay the former 13
th
month pay, backwages and separation pay.
Aggrieved, herein petitioners appealed the decision to NLRC but failed to post either a cash or
surety bond as required by Article 223 of the Labor Code. They filed a manifestation and motion
instead, stating, that under Republic Act No. 6938, Article 62(7) of the Cooperative Code of the
Philippines, petitioners are exempt from putting up a bond in an appeal from the decision of the
inferior court. NLRC ordered respondents to post a cash or surety bond in the amount of
P218,000.00, within 10 inextendible days from receipt of the Order, failure of which shall
constitute a waiver and non-perfection of the appeal. Balagtas appealed to CA, which dismissed
the petition holding that the exemption from putting up a bond by a cooperative applies to cases
decided by inferior courts only.

Issue

1. Whether or not cooperatives are exempted from filing a cash or surety bond required to perfect
an employers appeal under Section 223 of Presidential Decree No. 442 (the Labor Code);
2. Whether or not a certification issued by the Cooperative Development Authority constitutes
substantial compliance with the requirement for the posting of a bond.

Ruling

1. No. Petitioners argue that there are certain benefits and privileges expressly granted to
cooperative under the Cooperative Code. It invoked the provision on Article 62 regarding the
exemption from payment of an appeal bond, to wit: (7)All cooperatives shall be exempt from
putting up a bond for bringing an appeal against the decision of an inferior court or for seeking to
set aside any third party claim: Provided, That a certification of the Authority showing that the net
assets of the cooperative are in excess of the amount of the bond required by the court in similar
cases shall be accepted by the court as a sufficient bond. However, it is only one among a
number of such privileges which appear under the article entitled Tax and Other Exemptions of
the code. The provision cited by petitioners cannot be taken in isolation and must be interpreted
in relation to the Cooperative Code in its entirety. Exceptions are to be strictly but reasonably
construed; they extend only so far as their language warrants, and all doubts should be resolved
in favor of the general provision rather than the exceptions.
2. No. Article 119 of the Cooperative Code itself expressly embodies the legislative
intention to extend the coverage of labor statutes to cooperatives. For this reason, petitioners
must comply with the requirement set forth in Article 223 of the Labor Code in order to perfect
their appeal to the NLRC. It must be pointed out that the right to appeal is not a constitutional,
natural or inherent right. It is a privilege of statutory origin and, therefore, available only if granted
or provided by statute. The law may validly provide limitations or qualifications thereto or relief to
the prevailing party in the event an appeal is interposed by the losing party. In this case, the
obvious and logical purpose of an appeal bond is to insure, during the period of appeal, against
any occurrence that would defeat or diminish recovery by the employee under the judgment if the
latter is subsequently affirmed.

184

PHILIPPINE JOURNALISTIC INC. vs. NATIONAL LABOR RELATIONS
COMMISSION
Facts

In NLRC

s Resolution dated May 31, 2001, petitioner Philippine Journalists, Inc. (PJI) was
adjudged liable in the total amount of P6,447,008.57 for illegally dismissing 31 complainants-
employees and that there was no basis for the implementation of petitioners retrenchment
program. Thereafter, the parties executed a Compromise Agreement dated July 9, 2001, where
PJI undertook to reinstate the 31 complainant-employees effective July 1, 2001 without loss of
seniority rights and benefits; 17 of them who were previously retrenched were agreed to be given
full and complete payment of their respective monetary claims, while 14 others would be paid
their monetary claims minus what they received by way of separation pay.
The compromise agreement was submitted to the NLRC for approval. All the employees
mentioned in the agreement and in the NLRC Resolution affixed their signatures thereon. They
likewise signed the Joint Manifesto and Declaration of Mutual Support and Cooperation which
had also been submitted for the consideration of the labor tribunal. The NLRC forthwith issued
another Resolution on July 25, 2002, which among others declared that the compromise
agreement was approved and NCMB-NCR-NS-03-087-00 was deemed closed and terminated.
In the meantime, however, the Union filed another Notice of Strike on July 1, 2002. In an
Order dated September 16, 2002, the DOLE Secretary certified the case to the Commission for
compulsory arbitration. The case was docketed as NCMB-NCR- NS-07-251-02. In its Resolution
dated July 31, 2003, the NLRC ruled that the complainants were not illegally dismissed. The May
31, 2001 Resolution declaring the retrenchment program illegal did not attain finality as it had
been academically mooted by the compromise agreement entered into between both parties on
July 9, 2001. The Union assailed the ruling of the NLRC before the CA via petition for certiorari
under Rule 65. In its Decision dated August 17, 2004, the appellate court held that the NLRC
gravely abused its discretion in ruling for PJI. The compromise agreement referred only to the
award given by the NLRC to the complainants in the said case, that is, the obligation of the
employer to the complainants.

Issue
Whether or not the petitioner s petition for certiorari under Rule 65 of the Revised Rules of
Civil Procedure is a proper remedy in this case.

Ruling

At the outset, we note that this case was brought before us via petition for certiorari under
Rule 65 of the Revised Rules of Civil Procedure. The proper remedy, however, was to file a
petition under Rule 45. It must be stressed that certiorari under Rule 65 is a remedy narrow in
scope and inflexible in character. It is not a general utility tool in the legal workshop. Moreover,
the special civil action for certiorari will lie only when a court has acted without or in excess of
jurisdiction or with grave abuse of discretion.
Be that as it may, a petition for certiorari may be treated as a petition for review under
Rule 45. Such move is in accordance with the liberal spirit pervading the Rules of Court and in
the interest of substantial justice. As the instant petition was filed within the prescribed fifteen-day
period, and in view of the substantial issues raised, the Court resolves to give due course to the
petition and treat the same as a petition for review on certiorari.

185

INTERCONTINENTAL BROADCASTING CORP. vs. AMARILLA
Facts

Petitioner employed persons as Studio Technician, Collector, Traffic Clerk in its Cebu
branch.The government sequestered the station, including its properties, funds and other assets,
and took over its management and operations from its owner, Roberto Benedicto. However, The
government and Benedicto entered into a temporary agreement under which the latter would
retain its management and operation.
Presidential Commission on Good Government (PCGG) and Benedicto executed a
Compromise Agreement, where Benedicto transferred and assigned all his rights, shares and
interests in petitioner station to the government. In the meantime, the four employees retired from
the company and received on staggered basis their retirement benefits under the 1993 Collective
Bargaining Agreement between petitioner and the bargaining unit of its employees.
P1,500.00 salary increase was given to all employees of the company (current and retired)
effective July 1994. However, when the four retirees demanded theirs, petitioner refused and
instead informed them via a letter that their differentials would be used to offset the tax due on
their retirement benefits in accordance with the National Internal Revenue Code (NIRC).
The four retirees filed separate complaints against IBC TV-13 Cebu and Station Manager
Louella F. Cabaero for unfair labor practice and non-payment of backwages before the NLRC.

Issue

Whether or not the retirement benefits of respondents are taxable.

Ruling

The Court agrees with petitioner that under the CBA, it is not obliged to pay for the taxes
on the respondents retirement benefits. CBA did not provide a provision where petitioner obliged
itself to pay the taxes on the retirement benefits of its employees. The Court also agrees with
petitioner that, under the NIRC, the retirement benefits of respondents are part of their gross
income subject to taxes.
For the retirement benefits to be exempt from the withholding tax, the taxpayer is
burdened to prove the concurrence of the following elements: (1) a reasonable private benefit
plan is maintained by the employer (2) the retiring official or employee has been in the service of
the same employer for at least 10 years (3) the retiring official or employee is not less than 50
years of age at the time of his retirement (4) the benefit had been availed of only once.
Article VIII of the 1993 COLLECTIVE BARGAINING AGREEMENT provides for two kinds of
retirement plans - compulsory and optional.
Section 1: Compulsory Retirement Any employee who has reached the age of Fifty Five (55)
years shall be retired from the COMPANY and shall be paid a retirement.
Section 2: Optional Retirement Any covered employee, regardless of age, who has rendered
at least five (5) years of service to the COMPANY may voluntarily retire and the COMPANY
agrees to pay Long Service Pay to said covered employee.
Section 3: Fraction of a Year In computing the retirement under Section 1 and 2 of this Article,
a fraction of at least six (6) months shall be considered as one whole year.
Respondents were qualified to retire optionally from their employment with petitioner.
There is no record that the 1993 CBA had been approved or was ever presented to the BIR.
Hence, the retirement benefits of respondents are taxable.

186

LOPEZ vs. Q.C. SPORTS CLUB
Facts

Claiming that it is a registered independent labor organization and the incumbent collective
bargaining agent of Quezon City Sports Club (QCSC), the Kasapiang Manggagawa sa Quezon
City Sports Club (union) filed a complaint for unfair labor practice against QCSC on 12
November 1997.
The Union averred that it was ordered to submit a new information sheet. It immediately
wrote a letter addressed to the general manager, Angel Sadang, to inquire about the information
sheet, only to be insulted by the latter. The members of the union were not paid their salaries on
30 June 1997. A board member, Antonio Chua allegedly harassed one of the employees and
told him not to join the strike and even promised a promotion. On 4 July 1997, the union wrote a
letter to the management for the release of the members salaries for the period 16-30 June 1997,
implementation of Wage Order No. 5, and granting of wage increases mandated by the Collective
Bargaining Agreement (CBA). When its letter went unanswered, the union filed a notice of strike
on 10 July 1997 for violation of Article 248 (a)(c)(e) of the Labor Code, nonpayment of overtime
pay, refusal to hear its grievances, and malicious refusal to comply with the economic provisions
of the CBA. After conducting a strike vote, it staged a strike on 12 August 1997. On 16 August
1997, the QCSC placed some of its employees under temporary lay-off status due to redundancy.
It appears that on 22 December 1997, QCSC also filed a petition for cancellation of registration
against the union.
The Labor Arbiter (Lustria) found QCSC guilty of unfair labor practice. QCSC appealed from
the labor arbiters decision. It also filed a motion for reduction of the appeal bond to
P4,000,000.00. The NLRC ordered the posting of an additional P6,000,000.00) .QCSC filed a
supplement to its appeal, citing a decision (Dinopol decision) dated 9 October 1998 of Labor
Arbiter Ernesto Dinopol declaring the strike of the union illegal.
Meanwhile, the National Labor Relations Commission (NLRC) rendered a decision granting
the appeal and reversing the Lustria decision. The other complainants (petitioners) meanwhile
filed a motion for reconsideration which was denied by the NLRC. They filed a petition for
certiorari under Rule 65 before the Court of Appeals but was denied.
Issues
1. Do the simultaneous filing of the motion to reduce the appeal bond and posting of the reduced
amount of bond within the reglementary period for appeal constitute substantial compliance with
Article 223 of the Labor Code?
2. Whether the NLRC erred in declaring them to have lost their employment contrary to the
Dinopol decision which only affected a few of the employees who were union members.
Ruling

1. Under the Rules, appeals involving monetary awards are perfected only upon compliance
with the following mandatory requisites, namely: (1) payment of the appeal fees; (2) filing of the
memorandum of appeal; and (3) payment of the required cash or surety bond.
Thus, the posting of a bond is indispensable to the perfection of an appeal in cases involving
monetary awards from the decision of the labor arbiter. The filing of the bond is not only
mandatory but also a jurisdictional requirement that must be complied with in order to confer
jurisdiction upon the NLRC. Non-compliance with the requirement renders the decision of the
labor arbiter final and executory. This requirement is intended to assure the workers that if they
prevail in the case, they will receive the money judgment in their favor upon the dismissal of the
employers appeal. It is intended to discourage employers from using an appeal to delay or evade
their obligation to satisfy their employees just and lawful claims.
However, Section 6 of the New Rules of Procedure of the NLRC also mandates, among
others, that no motion to reduce bond shall be entertained except on meritorious grounds and
upon the posting of a bond in a reasonable amount in relation to the monetary award. Hence, the
NLRC has the full discretion to grant or deny the motion to reduce the amount of the appeal bond.
In the case of Nicol v. Footjoy Industrial Corporation ruled that the bond requirement on
appeals involving monetary awards had been and could be relaxed in meritorious cases such as:
(1) there was substantial compliance with the Rules; (2) the surrounding facts and circumstances
constitute meritorious grounds to reduce the bond; (3) a liberal interpretation of the requirement of
an appeal bond would serve the desired objective of resolving controversies on the merits; or (4)
the appellants, at the very least, exhibited their willingness and/or good faith by posting a partial
bond during the reglementary period. Applying these jurisprudential guidelines, we find and hold
that the NLRC did not err in reducing the amount of the appeal bond and considering the appeal
as having been filed within the reglementary period.

187

The posting of the amount of P4,000,000.00 simultaneously with the filing of the motion to
reduce the bond to that amount, as well as the filing of the memorandum of appeal, all within the
reglementary period, altogether constitute substantial compliance with the Rules.
2. Supreme Court ruled in favor of the petitioners. The assailed Dinopol decision involves a
complaint for illegal strike filed by QCSC on the ground of a no-strike no lockout provision in the
CBA. The challenged decision was rendered in accordance with law and is supported by factual
evidence on record. In the notice of strike, the union did not state in particular the acts which
allegedly constitute unfair labor practice. Moreover, by virtue of the no-strike no lockout
provision in the CBA, the union was prohibited from staging an economic strike, i.e., to force
wage or other concessions from the employer which he is not required by law to grant. However,
it should be noted that while the strike declared by the union was held illegal, only the union
officers were declared as having lost their employment status. In effect, there was a ruling only
with respect to some union members while the status of all others had remained disputed.
There is no conflict between the Dinopol and the Lustria decisions. While both rulings involve
the same parties and same issues, there is a distinction between the remedies sought by the
parties in these two cases. In the Dinopol decision, it was QCSC which filed a petition to declare
the illegality of the 12 August 1997 strike by the union. The consequence of the declaration of an
illegal strike is termination from employment, which the Labor Arbiter did so rule in said case.
However, not all union members were terminated. In fact, only a few union officers were validly
dismissed in accordance with Article 264 of the Labor Code. Corollarily, the other union members
who had merely participated in the strike but had not committed any illegal acts were not
dismissed from employment. Hence, the NLRC erred in declaring the employment status of all
employees as having been lost or forfeited by virtue of the Dinopol decision.
On the other hand, the Lustria decision involved the unfair labor practices alleged by the
union with particularity. In said case, Labor Arbiter Lustria sided with the Union and found QCSC
guilty of such practices. As a consequence, the affected employees were granted backwages and
separation pay. The grant of backwages and separation pay however was not premised on the
declaration of the illegality of the strike but on the finding that these affected employees were
constructively dismissed from work, as evidenced by the layoffs effected by the company.
Therefore, with respect to petitioners and union officers Alex J. Santiago, Ma. Cecilia
Pangan, Ronilo E. Lee, and Genaro Bando, who apparently had been substituted by present
petitioner Teresita Bando, the Dinopol decision declaring them as having lost their employment
status still stands.
To recapitulate, the NLRC erred in setting aside the Lustria decision, as well as in deleting
the award of backwages and separation pay, despite the finding that the affected employees had
been constructively dismissed.
Based on the foregoing, the Lustria decision should be upheld and therefore reinstated
except as regards the four petitioners.

188

INTERCONTINENTAL BROADCASTING CORP. vs. AMARILLA
Facts

On various dates, petitioner employed the following persons at its Cebu station: Candido
C. Quiones, Jr, Corsini R. Lagahit, as Studio Technician, Anatolio G. Otadoy, as Collector and
Noemi Amarilla, as Traffic Clerk. On March 1986, the government sequestered the station,
including its properties, funds and other assets, and took over its management and operations
from its owner, Roberto Benedicto. However, in December 1986, the government and Benedicto
entered into a temporary agreement under which the latter would retain its management and
operation. On November 1990, the Presidential Commission on Good Government (PCGG) and
Benedicto executed a Compromise Agreement, where Benedicto transferred and assigned all his
rights, shares and interests in petitioner station to the government.
In the meantime, the four employees retired from the company and received, on
staggered basis, their retirement benefits under the 1993 Collective Bargaining Agreement
between petitioner and the bargaining unit of its employees. In the meantime, a P1,500.00 salary
increase was given to all employees of the company, current and retired, effective July 1994.
However, when the four retirees demanded theirs, petitioner refused and instead informed them
via a letter that their differentials would be used to offset the tax due on their retirement benefits in
accordance with the National Internal Revenue Code (NIRC).
The four retirees filed separate complaints against IBC TV-13 Cebu and Station Manager
Louella F. Cabaero for unfair labor practice and non-payment of backwages before the NLRC.

Issue

Whether or not the retirement benefits of respondents are part of their gross income.

Ruling

The Court agrees with petitioner that under the CBA, it is not obliged to pay for the taxes
on the respondents retirement benefits. CBA did not provide a provision where petitioner obliged
itself to pay the taxes on the retirement benefits of its employees. The Court also agrees with
petitioner that, under the NIRC, the retirement benefits of respondents are part of their gross
income subject to taxes.
Section 28 (b) (7) (A) of the NIRC of 1986 23 provides: Gross Income. (b) Exclusions
from gross income. The following items shall not be included in gross income and shall be
exempt from taxation under this Title: (7) Retirement benefits, pensions, gratuities, etc. A.)
Retirement benefits received by officials and employees of private firms whether individuals or
corporate, in accordance with a reasonable private benefit plan maintained by the employer:
Provided, That the retiring official or employee has been in the service of the same employer for
at least ten (10) years and is not less than fifty years of age at the time of his retirement:
Provided, further, That the benefits granted under this subparagraph shall be availed of by an
official or employee only once. For purposes of this subsection, the term reasonable private
benefit plan means a pension, gratuity, stock bonus or profit-sharing plan maintained by an
employer for the benefit of some or all of his officials or employees, where contributions are made
by such employer for officials or employees, or both, for the purpose of distributing to such
officials and employees the earnings and principal of the fund thus accumulated, and wherein it is
provided in said plan that at no time shall any part of the corpus or income of the fund be used
for, or be diverted to, any purpose other than for the exclusive benefit of the said official and
employees.
Revenue Regulation No. 12-86, the implementing rules of the foregoing provisions,
provides: (b) Pensions, retirements and separation pay. Pensions, retirement and separation
pay constitute compensation subject to withholding tax, except the following: (1) Retirement
benefit received by official and employees of private firms under a reasonable private benefit plan
maintained by the employer, if the following requirements are met: (i) The retirement plan must be
approved by the Bureau of Internal Revenue; (ii) The retiring official or employees must have
been in the service of the same employer for at least ten (10) years and is not less than fifty (50)
years of age at the time of retirement; and (iii) The retiring official or employee shall not have
previously availed of the privilege under the retirement benefit plan of the same or another
employer.
Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is
burdened to prove the concurrence of the following elements: (1) a reasonable private benefit
plan is maintained by the employer; (2) the retiring official or employee has been in the service of
the same employer for at least 10 years; (3) the retiring official or employee is not less than 50
years of age at the time of his retirement; and (4) the benefit had been availed of only once.
Article VIII of the 1993 CBA provides for two kinds of retirement plans - compulsory and
optional. Thus: ARTICLE VIII RETIREMENTSection 1: Compulsory Retirement Any employee

189

who has reached the age of Fifty Five (55) years shall be retired from the COMPANY and shall
be paid a retirement pay in accordance with the following schedule:
LENGTH OF SERVICE RETIREMENT BENEFITS=
1 year-below 5 yrs. 15 days for every year of service
5 years-9 years 30 days for every year of service
10 years-14 years 50 days for every year of service
15 years-19 years 65 days for every year of service
20 years or more 80 days for every year of service
A supervisor who reached the age of Fifty (50) may at his/her option retire with the same
retirement benefits provided above. Section 2: Optional Retirement Any covered employee,
regardless of age, who has rendered at least five (5) years of service to the COMPANY may
voluntarily retire and the COMPANY agrees to pay Long Service Pay to said covered employee in
accordance with the following schedule:
LENGTH OF SERVICE RETIREMENT BENEFITS
5-9 years 15 days for every year of service
10-14 years 30 days for every year of service
15-19 years 50 days for every year of service
20 years or more 60 days for every year of service
Section 3: Fraction of a Year In computing the retirement under Section 1 and 2 of this Article,
a fraction of at least six (6) months shall be considered as one whole year. Moreover, the
COMPANY may exercise the option of extending the employment of an employee.
Section 4: Severance of Employment Due to Illness When a supervisor suffers from disease
and/or permanent disability and her/his continued employment is prohibited by law or prejudicial
to her/his health of the health of his co-employees, the COMPANY shall not terminate the
employment of the subject supervisor unless there is a certification by a competent public health
authority that the disease is of such a nature or at such stage that it can not be cured within a
period of six (6) months even with proper medical treatment. The supervisor may be separated
upon payment by the COMPANY of separation pay pursuant to law, unless the supervisor falls
within the purview of either Sections 1 or 2 hereof. In which case, the retirement benefits
indicated therein shall apply, whichever is higher.
Section 5: Loyalty Recognition The COMPANY shall recognize the services of the
supervisor/director who have reached the following number of years upon retirement by granting
him/her a plaque of appreciation and any lasting gift: 10 years but below 15 years (P3,000.00)
worth; 15 years but below 20 year (P7,000.00) worth; 20 years and more (P10,000.00) worth.
Respondents were qualified to retire optionally from their employment with petitioner. there is no
record that the 1993 CBA had been approved or was ever presented to the BIR. Hence, the
retirement benefits of respondents are taxable.
Under Section 80 of the NIRC, petitioner, as employer, was obliged to withhold the taxes on said
benefits and remit the same to the BIR. Section 80. Liability for Tax. (A) Employer. The
employer shall be liable for the withholding and remittance of the correct amount of tax required
to be deducted and withheld under this Chapter. If the employer fails to withhold and remit the
correct amount of tax as required to be withheld under the provision of this Chapter, such tax
shall be collected from the employer together with the penalties or additions to the tax otherwise
applicable in respect to such failure to withhold and remit.

190

FAR EAST AGRICULTURAL SUPPLY, INC. vs. JIMMY LEBATIQUE

Facts

On March 4, 1996, Far East hired Jimmy Lebatique as truck driver to animal feeds to the
companys clients. He had a daily wage of P223.50. On January 24, 2000, Lebatique complained
of nonpayment of overtime work particularly on January 22, 2000, when he was required to make
a second delivery in Novaliches, Quezon City. That same day Lebatique was suspended
apparently for illegal use of company vehicle. Even so, Lebatique reported for work the next day
but he was prohibited from entering the company premises.
On January 26, 2000, Lebatique sought the assistance of DOLE Public Assistance and
Complaints Unit concerning the nonpayment of his overtime pay. Lebatique explained that he had
never been paid for overtime work since he started working for the company. He also told
Alexander (general manager) that Manuel (Alexanders brother) had fired him. After talking to
Manuel, Alexander terminated Lebatique and told him to look for another job.
On March 20, 2000, Lebatique filed a complaint for illegal dismissal and nonpayment of
overtime pay. The Labor Arbiter found that Lebatique was illegally dismissed, and ordered his
reinstatement and the payment of his full back wages, 13
th
month pay, service incentive leave
pay, and overtime pay.
On appeal, the NLRC reversed the Labor Arbiter and dismissed the complaint for lack of merit.
The NLRC held that there was no dismissal to speak of since Lebatique was merely suspended.
Further, it found that Lebatique was a field personnel, hence, not entitled to overtime pay and
service incentive leave pay. Lebatique sought reconsideration but was denied.
The Court of Appeals, in reversing the NLRC decision, reasoned that Lebatique was
suspended on January 24, 2000 but was illegally dismissed on January 29, 2000 when Alexander
told him to look for another job. It also found that Lebatique was not a field personnel and
therefore entitled to payment of overtime pay, service incentive leave pay, and 13
th
month pay.
Issues

1. Whether or not Lebatique was illegally dismissed
2. Whether or not Lebatique was a field personnel, not entitled to overtime pay

Ruling

1. YES. It is well settled that in cases of illegal dismissal, the burden is on the employer to
prove that the termination was for a valid cause. In this case, petitioners failed to discharge such
burden. Petitioners aver that Lebatique was merely suspended for one day but he abandoned his
work thereafter. To constitute abandonment as a just cause for dismissal, there must be: (a)
absence without justifiable reason; and (b) a clear intention, as manifested by some overt act, to
sever the employer-employee relationship.
When Lebatique was verbally told by Alexander Uy, the companys General Manager, to look
for another job, Lebatique was in effect dismissed. Even assuming earlier he was merely
suspended for illegal use of company vehicle, the records do not show that he was afforded the
opportunity to explain his side. It is clear also from the sequence of the events leading to
Lebatiques dismissal that it was Lebatiques complaint for nonpayment of his overtime pay that
provoked the management to dismiss him, on the erroneous premise that a truck driver is a field
personnel not entitled to overtime pay.
2. NO. Lebatique is not a field personnel. Article 82 of the Labor Code is decisive on the
question of who are referred to by the term field personnel
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. 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 employees performance is unsupervised by the employer.
Lebatique is not a field personnel as defined above for the following reasons: (1) company
drivers, including Lebatique, are directed to deliver the goods at a specified time and place; (2)
they are not given the discretion to solicit, select and contact prospective clients; and (3) Far East
issued a directive that company drivers should stay at the clients premises during truck-ban
hours which is from 5:00 to 9:00 a.m. and 5:00 to 9:00 p.m. Lebatique, therefore, is a regular
employee whose tasks are usually necessary and desirable to the usual trade and business of
the company. Thus, he is entitled to the benefits accorded to regular employees of Far East,
including overtime pay and service incentive leave pay.

191

Note that all money claims arising from an employer-employee relationship shall be filed
within three years from the time the cause of action accrued; otherwise, they shall be forever
barred. Further, if it is established that the benefits being claimed have been withheld from the
employee for a period longer than three 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 years before the filing of the complaint.
Lebatique timely filed his claim for service incentive leave pay, considering that in this
situation, the prescriptive period commences at the time he was terminated. On the other hand,
his claim regarding nonpayment of overtime pay since he was hired in March 1996 is a different
matter. In the case of overtime pay, he can only demand for the overtime pay withheld for the
period within three years preceding the filing of the complaint on March 20, 2000. However, we
find insufficient the selected time records presented by petitioners to compute properly his
overtime pay. The Labor Arbiter should have required petitioners to present the daily time
records, payroll, or other documents in managements control to determine the correct overtime
pay due Lebatique.

192

DEPARTMENT OF LABOR AND EMPLOYMENT PHILIPPINES. vs.
ESTEVA
Facts
Anent the first assignment of error, petitioner argues that judicial review under Rule 65 of
the revised Rules of Civil Procedure is limited only to issues concerning want or excess or
jurisdiction or grave abuse of discretion. The special civil action for certiorari is a remedy
designed to correct errors of jurisdiction and not mere errors of judgment.
It is the contention of petitioner that the NLRC properly assumed jurisdiction over the parties and
subject matter of the instant case. The errors assigned by the respondents in their Petition for
Certiorari before the Court of Appeals do not pertain to the jurisdiction of the NLRC; they are
rather errors of judgment supposedly committed by the the NLRC, in its Resolution, dated 29
February 2000, and are thus not the proper subject of a petition for certiorari.
Petitioner also posits that the Petition for Certiorari filed by respondents with the Court of Appeals
raised questions of fact that would necessitate a review by the appellate court of the evidence
presented by the parties before the Labor Arbiter and the NLRC, and that questions of fact are
not a fit subject for a special civil action for certiorari.

Issue

Wheter or not questions of fact are not a fit subject for a special civil action for certiorari.

Ruling

There is no error on the CAs part when it made anew a factual determination of the
matters. It has long been settled in the landmark case of St. Martin Funeral Home v. NLRC, that
the mode for judicial review over decisions of the NLRC is by a petition for certiorari under Rule
65 of the revised Rules of Civil Procedure. The different modes of appeal, namely, writ of error
(Rule 41), petition for review (Rules 42 and 43), and petition for review on certiorari (Rule 45),
cannot be availed of because there is no provision on appellate review of NLRC decisions in the
Labor Code, as amended.
Although the same case recognizes that both the Court of Appeals and the Supreme
Court have original jurisdiction over such petitions, it has chosen to impose the strict observance
of the hierarchy of courts. Hence, a petition for certiorari of a decision or resolution of the NLRC
should first be filed with the Court of Appeals; direct resort to the Supreme Court shall not be
allowed unless the redress desired cannot be obtained in the appropriate courts or where
exceptional and compelling circumstances justify an availment of a remedy within and calling for
the exercise by the Supreme Court of its primary jurisdiction. The rule is settled that the original
and exclusive jurisdiction of this Court to review a decision of respondent NLRC (or Executive
Labor Arbiter as in this case) in a petition for certiorari under Rule 65 does not normally include
an inquiry into the correctness of its evaluation of the evidence. Errors of judgment, as
distinguished from errors of jurisdiction, are not within the province of a special civil action for
certiorari, which is merely confined to issues of jurisdiction or grave abuse of discretion. It is thus
incumbent upon petitioner to satisfactorily establish that respondent Commission or executive
labor arbiter acted capriciously and whimsically in total disregard of evidence material to or even
decisive of the controversy, in order that the extraordinary writ of certiorari will lie. By grave abuse
of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack
of jurisdiction, and it must be shown that the discretion was exercised arbitrarily or despotically.
For certiorari to lie, there must be capricious, arbitrary and whimsical exercise of power, the very
antithesis of the judicial prerogative in accordance with centuries of both civil law and common
law traditions.
The Court of Appeals, therefore, can grant the Petition for Certiorari if it finds that the
NLRC, in its assailed decision or resolution, committed grave abuse of discretion by capriciously,
whimsically, or arbitrarily disregarding evidence which is material or decisive of the controversy;
and the Court of Appeals cannot make this determination without looking into the evidence
presented by the parties. Necessarily, the appellate court can only evaluate the materiality or
significance of the evidence, which is alleged to have been capriciously, whimsically, or arbitrarily
disregarded by the NLRC, in relation to all other evidence on record.
As this Court elucidated in Garcia v. National Labor Relations Commission: In Ong v.
People, we ruled that certiorari can be properly resorted to where the factual findings complained
of are not supported by the evidence on record. Earlier, in Gutib v. Court of Appeals, we
emphasized thus: It has been said that a wide breadth of discretion is granted a court of justice
in certiorari proceedings. The cases in which certiorari will issue cannot be defined, because to
do so would be to destroy its comprehensiveness and usefulness. So wide is the discretion of the
court that authority is not wanting to show that certiorari is more discretionary than either

193

prohibition or mandamus. In the exercise of our superintending control over inferior courts, we are
to be guided by all the circumstances of each particular case "as the ends of justice may require."
So it is that the writ will be granted where necessary to prevent a substantial wrong or to do
substantial justice.
And in another case of recent vintage, we further held: In the review of an NLRC decision
through a special civil action for certiorari, resolution is confined only to issues of jurisdiction and
grave abuse of discretion on the part of the labor tribunal. Hence, the Court refrains from
reviewing factual assessments of lower courts and agencies exercising adjudicative functions,
such as the NLRC. Occasionally, however, the Court is constrained to delve into factual matters
where, as in the instant case, the findings of the NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the
records of the case and re-examine the questioned findings. As a corollary, this Court is clothed
with ample authority to review matters, even if they are not assigned as errors in their appeal, if it
finds that their consideration is necessary to arrive at a just decision of the case. The same
principles are now necessarily adhered to and are applied by the Court of Appeals in its
expanded jurisdiction over labor cases elevated through a petition for certiorari; thus, we see no
error on its part when it made anew a factual determination of the matters and on that basis
reversed the ruling of the NLRC.

194

LETRAN CALAMBA FACULTY AND EMPLOYEES ASSOCIATION vs.
NATIONAL LABOR RELATIONS COMMISSION
Facts

The Letran Calamba Faculty and Employees Association (petitioner) filed a complaint

against Colegio de San Juan de Letran, Calamba, Inc. (respondent) for collection of various
monetary claims due its members. One of the allegations that petitioner alleged in its Position
Paper is that: In the computation of the thirteenth month pay of its academic personnel,
respondent does not include as basis therefor their compensation for overloads. It only takes into
account the pay the faculty members receive for their teaching loads not exceeding eighteen (18)
units. The teaching overloads are rendered within eight (8) hours a day. The Labor Arbiter (LA)
handling the consolidated cases, denied and dismissed the respective complaints.

Issue

Whether or not the pay of the faculty members for teaching overloads should be included
as basis in the computation of their 13
th
month pay.

Ruling

Teaching overload may not be considered part of basic salary. Under the Rules and
Regulations Implementing PD 851, the following compensations are deemed not part of the basic
salary: a) cost-of-living allowances granted pursuant to PD 525 and Letter of Instruction No. 174;
b) profit sharing payments; c) all allowances and monetary benefits which are not considered or
integrated as part of the regular basic salary of the employee at the time of the promulgation of
the Decree on Dec 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing PD 851 issued
by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of the 13
th
-month pay.
The all-embracing phrase earnings and other remunerations which are deemed not part
of the basic salary includes within its meaning payments for sick, vacation, or maternity leaves,
premium for works performed on rest days and special holidays, pay for regular holidays and
night differentials. As such they are deemed not part of the basic salary and shall not be
considered in the computation of the 13
th
-month pay.
As provided for by Art 87 of the Labor Code, it is clear that overtime pay is an additional
compensation other than and added to the regular wage or basic salary, for reason of which such
is categorically excluded from the definition of basic salary under the Supplementary Rules and
Regulations Implementing PD 851.
In the same manner that payment for overtime work and work performed during special
holidays is considered as additional compensation apart and distinct from an employees regular
wage or basic salary, an overload pay, owing to its very nature and definition, may not be
considered as part of a teachers regular or basic salary, because it is being paid for additional
work performed in excess of the regular teaching load.

195

METRO TRANSIT ORGANIZATION vs. PIGLAS NFWU-KMU ET AL.

Facts

Petitioner MTO is a government owned and controlled corporation which entered into a
Management and Operations Agreement (MOA) with the Light Rail Transit Authority (LRTA) for
the operation of the Light Rail Transit (LRT) Baclaran-Monumento Line. Petitioner Jose L.
Cortez, Jr. was sued in his official capacity as then Undersecretary of the Department of
Transportation and Communications and Chairman of the Board of Directors of petitioner MTO.
Respondents filed with the Labor Arbiter Complaints against petitioners and the LRTA for the
following: (1) illegal dismissal; (2) unfair labor practice for union busting; (3) moral and exemplary
damages; and (4) attorneys fees.
On 13 September 2004, the Labor Arbiter rendered judgment in favor of respondents.
Petitioners appealed to the National Labor Relations Commission (NLRC). In a Resolution dated
19 May 2006, the NLRC dismissed petitioners appeal for non-perfection since it failed to post the
required bond. Without filing a Motion for Reconsideration of the afore-quoted NLRC Resolution,
petitioners filed a Petition for Certiorari with the Court of Appeals assailing the same. On 24
August 2006, the Court of Appeals issued a Resolution dismissing the Petition.

Issue

Whether or not petitioner can directly file the extraordinary remedy of certiorari without
filing first a motion for reconsideration with the NLRC.

Ruling

Petitioners failure to file a motion for reconsideration against the assailed Resolution of
the NLRC rendered its petition for certiorari before the appellate court as fatally defective.
It must be primarily established that petitioners contravened the procedural rule for the
extraordinary remedy of certiorari. The rule is, for the writ to issue, it must be shown that there is
no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law.
The settled rule is that a motion for reconsideration is a condition sine qua non for the
filing of a petition for certiorari. Its purpose is to grant an opportunity for the court to correct any
actual or perceived error attributed to it by the re-examination of the legal and factual
circumstances of the case. The rationale of the rule rests upon the presumption that the court or
administrative body which issued the assailed order or resolution may amend the same, if given
the chance to correct its mistake or error.
We have held that the plain, speedy, and adequate remedy referred to in Section 1,
Rule 65 of the Rules of Court is a motion for reconsideration of the questioned Order or
Resolution. As we consistently held in numerous cases, a motion for reconsideration is
indispensable for it affords the NLRC an opportunity to rectify errors or mistakes it might have
committed before resort to the courts can be had.
In the case at bar, petitioners directly went to the Court of Appeals on certiorari without filing a
motion for reconsideration with the NLRC. The motion for reconsideration would have aptly
furnished a plain, speedy, and adequate remedy. As a rule, the Court of Appeals, in the exercise
of its original jurisdiction, will not take cognizance of a petition for certiorari under Rule 65, unless
the lower court has been given the opportunity to correct the error imputed to it. The Court of
Appeals correctly ruled that petitioners failure to file a motion for reconsideration against the
assailed Resolution of the NLRC rendered its petition for certiorari before the appellate court as
fatally defective.
We agree in the Court of Appeals finding that petitioners case does not fall under any of
the recognized exceptions to the filing of a motion for reconsideration, to wit: (1) when the issue
raised is purely of law; (2) when public interest is involved; (3) in case of urgency; or when the
questions raised are the same as those that have already been squarely argued and exhaustively
passed upon by the lower court. As the Court of Appeals reasoned, the issue before the NLRC is
both factual and legal at the same time, involving as it does the requirements of the property bond
for the perfection of the appeal, as well as the finding that petitioners failed to perfect the same.
Evidently, the burden is on petitioners seeking exception to the rule to show sufficient justification
for dispensing with the requirement.
Certiorari cannot be resorted to as a shield from the adverse consequences of
petitioners own omission of the filing of the required motion for reconsideration. Nonetheless,
even if we are to disregard the petitioners procedural faux pas with the Court of Appeals, and
proceed to review the propriety of the 19 May 2006 NLRC Resolution, we still arrive at the
conclusion that the NLRC did not err in denying petitioners appeal for its failure to file a bond in
accordance with the Rules of Procedure of the NLRC.

196

J.K. MERCADO & SONS AGRICULTURAL ENTERPRISES, INC., vs.
STO. TOMAS,
Facts

On December 3, 1993, the RTWPB of Region IX issued Wage Order No. 3 granting a Cost of
Living Allowance to covered workers. J.K. Mercado & Sons Agricultural Enterprises, Inc.,
petitioner, filed for an exemption from the coverage of such order. Said application was denied
by the regional wage board for lack of merit.
Despite denial of such application, private respondents were still not given benefits due them
from said wage order. Private respondents filed a Writ of Execution and Writ of Garnishment
seeking for its enforcement. Petitioner filed a motion to Quash the Writ of Execution arguing that
the rights of the respondents already prescribed as per stated in Article 291 of the Labor Code
regarding any issue concerning a wage order.
The Motion to Quash was denied and held that unpaid benefits have not prescribed and that
the private respondents need not file a claim to be entitled thereto.
Petitioner filed a Notice of Appeal alleging that the Regional Director abused his discretion in
issuing the writ of execution in the absence of any motion filed by private respondents. Appeal
was then denied which prompted the petiotioner to file a Motion for Reconsideration.
The Motion for Reconsideration was also denied due to lack of merit.
Issues

1. Whether or not the Honorable Court of Appeals committed an error in holding that Article
291 of the Labor Code is not applicable to recovery of benefits under the subject Wage Order
No. RTWPB-XI-03, which entitled respondents to a cost of living allowance (COLA).
2. Whether or not the Court of Appeals committed an error in holding that the cost of living
allowance (COLA) granted by Wage Order No. RTWPB-XI-03 can be enforced without the
appropriate case having been filed by herein private respondents within the three (3) year
prescriptive period.
3. Whether or not the claim of the private respondents for cost of living allowance (COLA)
pursuant to Wage Order No. RTWPB-XI-03 has already prescribed because of the failure of
the respondents to make the appropriate claim within the three (3) year prescriptive period
provided by Article 291 of the Labor Code, as amended.
Ruling

The Court sees no error on the part of the Court of Appeals. Art. 291 of the Labor Code
applies to money claims in general and provides for a 3-year prescriptive period to file them.
On the other hand, respondent employees money claims in this case had been reduced
to a judgment, in the form of a Wage Order, which has become final and executory. The
prescription applicable, therefore, is not the general one that applies to money claims, but the
specific one applying to judgments. Thus, the right to enforce the judgment, having been
exercised within five years, has not yet prescribed. Stated otherwise, a claimant has three
years to press a money claim. Once judgment is rendered in her favor, she has five years to ask
for execution of the judgment, counted from its finality. This is consistent with the rule on
statutory construction that a general provision should yield to a specific one and with the mandate
of social justice that doubts should be resolved in favor of labor.

197

J. PHIL. MARINE INC. vs. NATIONAL LABOR RELATIONS
COMMISSION
Facts

The herein respondent, was a cook aboard vessels plying overseas, filed before the
National Labor Relations Commission(NLRC) a pro-forma complaint against petitioners for
unpaid money claims, moral and exemplary damages, and attorneys fees and thereafter filed two
amended pro forma complaints praying for the award of overtime pay, vacation leave pay, sick
leave pay, and disability/medical benefits, he having, by his claim, contracted enlargement of the
heart and severe thyroid enlargement in the discharge of his duties as cook which rendered him
disabled.
Labor Arbiter Fe Superiaso-Cellan dismissed respondents complaint for lack of merit but the
NLRC reversed the Labor Arbiters decision and awarded US$50,000.00 disability benefit to
respondent. The Court of Appeals dismissed petitioners petition for, inter alia, failure to attach to
the petition all material documents, and for defective verification and certification. Petitioners
Motion for Reconsideration of the appellate courts Resolution was denied; hence, they
filed the present Petition for Review on Certiorari.
During the pendency of the case, against the advice of his counsel, entered into a
compromise agreement with petitioners, he thereupon signed a Quitclaim and Release
subscribed and sworn to before the Labor Arbiter. Petitioners filed before this Court a
Manifestation dated May 7, 2007 informing that, inter alia, they and respondent had forged an
amicable settlement.
Respondents counsel also filed before this Court, purportedly on behalf of respondent, a
Comment on the present petition. The parties having forged a compromise agreement as
respondent in fact has executed a Quitclaim and Release, the Court dismisses the petition.


Issue

Whether or not the compromise agreement/deed of quit claim entered by the parties is
valid.

Ruling

Article 227 of the Labor Code provides: Any compromise settlement, including those
involving labor standard laws, voluntarily agreed upon by the parties with the assistance of the
Department of Labor, shall be final and binding upon the parties. The National Labor Relations
Commission or any court shall not assume jurisdiction over issues involved therein except in case
of non-compliance thereof or if there is prima facie evidence that the settlement was obtained
through fraud, misrepresentation, or coercion.
In Olaybar v. NLRC , the Court, recognizing the conclusiveness of compromise
settlements as a means to end labor disputes, held that Article 2037 of the Civil Code, which
provides that [a] compromise has upon the parties the effect and authority of res judicata,
applies suppletorily to labor cases even if the compromise is not judicially approved.
That respondent was not assisted by his counsel when he entered into the compromise
does not render it null and void. Eurotech Hair Systems, Inc. v. Go so enlightens: A compromise
agreement is valid as long as the consideration is reasonable and the employee signed the
waiver voluntarily, with a full understanding of what he was entering into. All that is required for
the compromise to be deemed voluntarily entered into is personal and specific individual consent.
Thus, contrary to respondents contention, the employees counsel need not be present at the
time of the signing of the compromise agreement.
It bears noting that, as reflected earlier, the Quitclaim and Waiver was subscribed and
sworn to before the Labor Arbiter.

198

SY vs. ALC INDUSTRIES

Facts

Ma. Gregorietta Leila C. Sy (Sy) was hired by ALC Industries, Inc.(ALCII) as a supervisor
in its purchasing office. She was thereafter assigned to ALCIIs construction project in Davao City
as business manager and supervisor of the Administrative Division from May 1997 to April 15,
1999. Sy filed a complaint before the labor arbiter alleging that ALCII refused to pay her salary
beginning August 1998 and allowances beginning June 1998. Despite several notices and
warnings, ALCII did not file a position paper to controvert Sys claims.
The labor arbiter ordered ALCII and/or Dexter Ceriales to pay petitioner P282,560
representing her unpaid salary and allowance. ALCII filed an appeal with the NLRC without
posting any cash or surety bond. NLRC dismissed respondents appeal. Thereafter ALCII filed a
motion for reconsideration which was also denied by NLRC. ALCII questioned the NLRCs denial
of their motion for clarification and reconsideration in the CA via a petition for certiorari. The CA
set aside the resolutions of the NLRC and the decision of the labor arbiter. Sy filed a Rule 45
petition in the Supreme Court questioning the CA decision and resolution on the ground that the
decision of the labor arbiter had become final and executory.

Issue

Can the employer file an appeal with the NLRC without posting a cash bond? (2) Did the CA
acquire jurisdiction over the labor case?

Ruling

Article 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten calendar days
from receipt of such decisions, awards, or orders In case of a judgment involving a monetary
award, an appeal by the employer may be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the Commission in the amount
equivalent to the monetary award in the judgment appealed from.
As the right to appeal is merely a statutory privilege, it must be exercised only in the
manner and in accordance with the provisions of the law. Otherwise, the right to appeal is lost.
Liberal construction of the NLRC rules is allowed only in meritorious cases, where there
is substantial compliance with the NLRC Rules of Procedure or where the party involved
demonstrates a willingness to abide by the rules by posting a partial bond. Failure to post an
appeal bond during the reglementary period was directly violative of Article 223 of the Labor
Code.
The payment of the appeal bond is a jurisdictional requisite for the perfection of an
appeal to the NLRC. The lawmakers intended to make the posting of a cash or surety bond by
the employer the exclusive means by which an employers appeal may be perfected. It is
intended to assure the workers that if they prevail in the case, they will receive the money
judgment in their favor upon the dismissal of the employers appeal. It was intended to discourage
employers from using an appeal to delay, or even evade, their obligation to satisfy their
employees just and lawful claims.
The filing of a joint undertaking/declaration, filed way beyond the ten-day reglementary
period for perfecting an appeal and as a substitute for the cash or surety bond, did not operate to
validate the lost appeal. The decision of the labor arbiter therefore became final and executory for
failure of respondents to perfect their appeal within the reglementary period. Clearly, the CA no
longer had jurisdiction to entertain respondents appeal from the labor arbiters decision.

199

PCI TRAVEL CORP vs. NATIONAL LABOR RELATIONS COMMISSION

Facts

Sometime in 1994, respondent PCI Travel Employees Union filed a Complaint for unfair
labor practice against petitioner PCI Travel Corporation. It claimed that petitioner had been filling
up positions left by regular rank-and-file with contractual employees, but were performing work
which were usually necessary and desirable in the usual business or trade of the petitioner.
Respondent prayed that the Labor Arbiter order the petitioner to pay the contractual employees
the differentials between the wages/benefits of regular employees and the actual wages/benefits
paid to them from the first day of their employment, plus moral and exemplary damages, and
attorneys fees of not less than P300,000.00 per employee.
Petitioner manifested that while it was ready and willing to prove that said employees
were provided by independent legitimate contractors and that it was not engaged in labor-only
contracting in a position paper yet to be submitted, petitioner prayed that the Labor Arbiter first
resolve the issues raised in their motion to dismiss.
Labor Arbiter rendered a decision on the merits dated October 16, 1998, in favor of the
respondent. On Appeal, the NLRC affirmed with modification the decision of the Labor Arbiter
deleting the awards of damages for lack of sufficient basis. On Appeal, the CA issued the
assailed Resolution dismissing the petition outright for petitioners failure to attach copies of
pleadings and documents relevant and pertinent to the petition. More importantly, the verification
and certification of non-forum shopping was signed by Elizabeth Legarda, President of the
petitioner-corporation, without submitting any proof that she was duly authorized to sign for, and
bind the petitioner-corporation in these proceedings.

Issue

Whether or not the president of the PCI Travel was not an authorized representative of
the petitioner to sign the verification and certification against forum shopping, without
need of a board resolution.

Ruling

It must be borne in mind that Sec. 23, in relation to Sec. 25, of the Corporation Code,
clearly enunciates that all corporate powers are exercised, all business conducted, and all
properties controlled by the board of directors. A corporation has a separate and distinct
personality from its directors and officers and can only exercise its corporate powers through the
board of directors. Thus, it is clear that an individual corporate officer cannot solely exercise any
corporate power pertaining to the corporation without authority from the board of directors. This
has been our constant holding in cases instituted by a corporation.
In a slew of cases, however, we have recognized the authority of some corporate officers
to sign the verification and certification against forum shopping. The SC has held that the
following officials or employees of the company can sign the verification and certification without
need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a
corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5)
an Employment Specialist in a labor case.
With this issue settled, that the President of the corporation can sign the verification and
certification without need of a board resolution, there thus exists a compelling reason for the
reinstatement of the petition before the Court of Appeals.

200

LOCKHEED DETECTIVE AND WATCHMAN AGENCY, INC. vs.
UNIVERSITY OF THE PHILIPPINES
Facts

The petition is for review on certiorari under Rule 45. Petitioner Lockheed entered into a
contract of security with the University of the Philippines. On 1998, several of the guards
assigned to UP filed a complaint for unpaid wages, 25% overtime pay, premium pay for rest days
and special holidays, holiday pay, service incentive leave pay, night shift differentials, 13
th
month
pay, refund of cash bond, refund of deductions for the Mutual Benefits Aids System (MBAS),
unpaid wages from December 16-31, 1998, and attorneys fees.
The Labor Arbiter declared UP solidarily liable. The decision was appealed but sustained
by the NLCR, albeit a few modifications. The parties motion to reconsider were likewise denied.
On July 25, 2005, a Notice of Garnishment 10 was issued to Philippine National Bank (PNB) UP
Diliman Branch for the satisfaction of the award of P12,142,522.69 (inclusive of execution fee).
On August 16, 2005, UP filed an Urgent Motion to Quash Garnishment. UP contended
that the funds being subjected to garnishment at PNB are government/public funds. However, the
execution of the garnishment was carried out. UP elevated their case to the court of appeals. On
reconsideration, however, the CA issued the assailed Amended Decision. It held that without
departing from its findings that the funds covered in the savings account sought to be garnished
do not fall within the classification of public funds, it reconsiders the dismissal of the petition in
light of the ruling in the case of National Electrification Administration v. Morales which mandates
that all money claims against the government must first be filed with the Commission on Audit
(COA).
Lockheed appealed this decision to the Supreme Court. Arguing mainly that the NEA
case should not apply and that UP could be both sued and held liable. And that the quashal of
garnishment sought was moot because it had already become fait accompli.

Issue

1. Whether or not the NEA Case applies and the funds be garnished directly bypassing the COA.
2. Whether or not the previous garnishment and withdrawal of funds was fait accompli.

Ruling

1. YES. This Court finds that the CA correctly applied the NEA case. Like NEA, UP is a
juridical personality separate and distinct from the government and has the capacity to sue and
be sued. Thus, also like NEA, it cannot evade execution, and its funds may be subject to
garnishment or levy. However, before execution may be had, a claim for payment of the judgment
award must first be filed with the COA. (suability does not immediately mean liability).
2. NO. As to the fait accompli argument of Lockheed, contrary to its claim that there is
nothing that can be done since the funds of UP had already been garnished, since the
garnishment was erroneously carried out and did not go through the proper procedure (the filing
of a claim with the COA), UP is entitled to reimbursement of the garnished funds plus interest of
6% per annum, to be computed from the time of judicial demand to be reckoned from the time UP
filed a petition for certiorari before the CA which occurred right after the withdrawal of the
garnished funds from PNB.

201

PORTILLO vs. RUDOLF LIETZ
Potillo was hired by Rudolf in Lietz Co. under the condition that Potillo will not engage in
any other gainful employment by himself or with any other company either directly or indirectly
without written consent of Lietz Inc., otherwise Potillo will be liable for liquidated damages. Upon
his promotion, Potillo signed another letter agreement containing a Goodwill Clause stating that:
on the termination of his employment and for a period of three (3) years thereafter, he shall not
engage directly or indirectly as employee, manager, proprietor, or solicitor for himself or others in
a similar or competitive business or the same character of work which he was employed by Lietz
Inc. to do and perform. Should he breach this good will clause of this Contract, he shall pay Lietz
Inc. as liquidated damages the amount of 100% of his gross compensation over the last 12
months.
Three (3) years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her
exit interview, Portillo declared that she intended to engage in businessa rice dealership, selling
rice in wholesale. On 15 June 2005, Lietz Inc. accepted Portillos resignation and reminded her of
the Goodwill Clause in the last letter agreement she had signed.
Subsequently, Lietz Inc. learned that Portillo had been hired by Ed Keller Philippines,
Limited to head its Pharma Raw Material Department. Ed Keller Limited is purportedly a direct
competitor of Lietz Inc. Meanwhile, Portillos demands from Lietz Inc. for the payment of her
remaining salaries and commissions went unheeded. Lietz Inc. gave Portillo the run around, on
the pretext that her salaries and commissions were still being computed. Subsequently, Portillo
filed a complaint with the National Labor Relations Commission (NLRC) for non-payment of 1
months salary, two (2) months commission, 13
th
month pay, plus moral, exemplary and actual
damages and attorneys fees.
In its position paper, Lietz Inc. admitted liability for Portillos money claims in the total
amount of P110,662.16. However, Lietz Inc. raised the defense of legal compensation: Portillos
money claims should be offset against her liability to Lietz Inc. for liquidated damages for Portillos
alleged breach of the Goodwill Clause in the employment contract when she became employed
with Ed Keller Philippines, Limited.
Issue
1. Who has jurisdiction over the present controversy?
2. Whether Portillos money claims for unpaid salaries may be offset against respondents
claim for liquidated damages.

Ruling

1. Jurisdiction belongs to the Civil Courts. Petitioner seeks protection under the civil laws
and claims no benefits under the Labor Code. The primary relief sought is for liquidated damages
for breach of a contractual obligation. The other items demanded are not labor benefits
demanded by workers generally taken cognizance of in labor disputes, such as payment of
wages, overtime compensation or separation pay. The items claimed are the natural
consequences flowing from breach of an obligation, intrinsically a civil dispute.
Furthermore, non-compete clause, as in the Goodwill Clause refers to post-employment
relations of the parties. The Goodwill Clause or the Non-Compete Clause is a contractual
undertaking effective after the cessation of the employment relationship between the parties. In
accordance with jurisprudence, breach of the undertaking is a civil law dispute, not a labor law
case.
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties contract of employment as redress for respondents
breach thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over the
controversy belongs to the regular courts. More so must this be in the present case, what with the
reality that the stipulation refers to the postemployment relations of the parties.
2. No, it may not be. Indeed, the application of compensation in this case is effectively
barred by Article 113 of the Labor Code which prohibits wage deductions except in three
circumstances: ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of
any person, shall make any deduction from wages of his employees, except: In cases where
the worker is insured with his consent by the employer, and the deduction is to recompense
the employer for the amount paid by him as premium on the insurance; For union dues, in
cases where the right of the worker or his union to check-off has been recognized by the
employer or authorized in writing by the individual worker concerned; and In cases where the
employer is authorized by law or regulations issued by the Secretary of Labor.

202

BUILDING CARE CORP. LEOPARD SECURITY AND INVESTIGATION
AGENCY vs. MACARAEG

Facts

Petitioners are in the business of providing security services to their clients. They hired
respondent as a security guard beginning August 25, 1996, assigning her at Genato Building in
Caloocan City. However, on March 9, 2008, respondent was relieved of her post. She was re-
assigned to Bayview Park Hotel from March 9-13, 2008, but after said period, she was allegedly
no longer given any assignment.
Thus, on September 9, 2008, respondent filed a complaint against petitioners for illegal
dismissal, underpayment of salaries, non-payment of separation pay and refund of cash bond.
Respondent claimed that petitioners failed to give her an assignment for more than nine months,
amounting to constructive dismissal, and this compelled her to file the complaint for illegal
dismissal.
On the other hand, petitioners alleged in their position paper that respondent was
relieved from her post as requested by the client because of her habitual tardiness, persistent
borrowing of money from employees and tenants of the client, and sleeping on the job.
On May 13, 2009, the Labor Arbiter rendered a Decision dismissing the charge of illegal
dismissal as wanting in merit but ordering the Respondents Leopard Security and Investigation
Agency and Rupert Protacio to pay complainant a financial assistance in the amount of
P5,000.00.
Respondent then filed a Notice of Appeal with the National Labor Relations Commission (NLRC),
but in a Decision dated October 23, 2009, the NLRC dismissed the appeal for having been filed
out of time, thereby declaring that the Labor Arbiters Decision had become final and executory
on June 16, 2009.
Upon elevating to the CA via a petition for certiorari, the court reversed and set aside the
Decision of the NLRC and in lieu thereof, a new judgment is entered declaring petitioner to have
been illegally dismissed.

Issue

Whether the CA erred in liberally applying the rules of procedure and ruling that
respondents appeal should be allowed and resolved on the merits despite having been
filed out of time.

Ruling

Yes, it erred. It should be emphasized that the resort to a liberal application, or
suspension of the application of procedural rules, must remain as the exception to the well-settled
principle that rules must be complied with for the orderly administration of justice.
The relaxation of procedural rules in the interest of justice was never intended to be a
license for erring litigants to violate the rules with impunity. Liberality in the interpretation and
application of the rules can be invoked only in proper cases and under justifiable causes and
circumstances.
The desired leniency cannot be accorded absent valid and compelling reasons for such a
procedural lapse.
Although the CA justified such a reversal of the NLRCs decision on the ground that the
belated filing of respondents appeal before the NLRC was the fault of respondents former
counsel, note, however, that neither respondent nor her former counsel gave any explanation or
reason citing extraordinary circumstances for her lawyers failure to abide by the rules for filing an
appeal. Respondent merely insisted that she had not been remiss in following up her case with
said lawyer. It is a basic rule that the negligence and mistakes of counsel bind the client.
It should also be borne in mind that the right of the winning party to enjoy the finality of
the resolution of the case is also an essential part of public policy and the orderly administration
of justice. Hence, such right is just as weighty or equally important as the right of the losing party
to appeal or seek reconsideration within the prescribed period.
When the Labor Arbiters Decision became final, petitioners attained a vested right to
said judgment. They had the right to fully rely on the immutability of said Decision.