Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

148372 June 27, 2005

CLARION PRINTING HOUSE, INC., and EULOGIO YUTINGCO, petitioners, vs. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (Third Division) and MICHELLE MICLAT,respondents. DECISION CARPIO-MORALES, J.:

Respondent Michelle Miclat (Miclat) was employed on April 21, 1997 on a probationary basis as marketing assistant with a month by its co-petitioner Eulogio Yutingco. At the time of her employment, she was not informed of the standards that would qualify her

On September 16, 1997, the EYCO Group of Companies of which CLARION formed part filed with the Securities and Exchange C Formation and Appointment of Rehabilitation Receiver/ Committee, Approval of Rehabilitation Plan with Alternative Prayer for Liq xxx

5. The situation was that since all these companies were sister companies and were operating under a unified a would normally be backed up or supported by one of the available fundings from the other companies.

6. The expansion exhausted the cash availability of Nikon, NKI, and 2000 because those fundings were absorbe real estate investments. However, at the time that those investments and expansions were made, there was no promising, hence, the decision of the management to implement the expansion.

7. The situation resulted in the cash position being spread thin. However, despite the thin cash positioning, the m expansion and the additional investments would result in a bigger real estate base which would be very credible be bigger cash procurement which would result in greater volume of production, profitability and other good resu

8. Unfortunately, factors beyond the control and anticipation of the management came into play which caught th

a) The glut in the real estate market which has resulted in the bubble economy for the real estate dem properties;

b) The economic interplay consisting of the inflation and the erratic changes in the peso-dollar e

c) Labor problems that has precipitated adverse company effect on the media and in the financial circu

d) Liberalization of the industry (GATT) which has resulted in flooding the market with imported good e) Other related adverse matters.

9. The inability of the EYCO Group of Companies to meet the obligations as they fall due on the schedule agree since the obligations would not be met within the scheduled due date, complications and problems would definit conglomerate comprising the EYCO Group of Companies. xxx

12. By virtue of this development, there is a need for suspension of all accounts o[r] obligations incurred by the p are working for the rehabilitation of the companies that would eventually redound to the benefit of these creditors

13. The foregoing notwithstanding, however, the present combined financial condition of the petitioners clearly in x x x (Emphasis and underscoring supplied)2 On September 19, 1997, the SEC issued an Order3 the pertinent portions of which read: xxx

It appearing that the petition is sufficient in form and substance, the corporate petitioners prayer for the creationof management or receivership committee and creditors approval of t 2:00 oclock in the afternoon at the SICD, SEC Bldg., EDSA, Greenhills, Mandaluyong City. xxx

Finally, the petitioners are hereby enjoined from disposing any and all of their properties in any manner, whatsoever, except in the legitimate business expenses during the pendency of the proceedings and as a consequence of the filing of the Petition, all action tribunal, office board and/or commission are deemed SUSPENDED until further orders from this Hearing Panel pursuant to the ru and BPI v. CA, 229 SCRA 223. (Underscoring supplied)

And on September 30, 1997, the SEC issued an Order4 approving the creation of an interim receiver for the EYCO Group of Com On October 10, 1997, the EYCO Group of Companies issued to its employees the following Memorandum:5

This is to formally announce the entry of the Interim Receiver Group represented by SGV from today until October 22, 1997 or un

This interim receiver groups function is to make sure that all assets of the company are secured and accounted for both for the p

Their function will involve familiarization with the different processes and controls in our organization & keeping physical track of o

Anything that would be required from you would need to be in writing and duly approved by the top management in order for us to We trust that this temporary inconvenience will benefit all of us in the spirit of goodwill. Lets extend our full cooperation to them. Thank you. (Underscoring supplied) On October 22, 1997, the Assistant Personnel Manager of CLARION informed Miclat by telephone that her employment contract termination.

The following day or on October 23, 1997, on reporting for work, Miclat was informed by the General Sales Manager that her term

On November 17, 1997, Miclat filed a complaint6 for illegal dismissal against CLARION and Yutingco (petitioners) before the Natio

In the meantime, or on January 7, 1998, the EYCO Group of Companies issued a Memorandum7 addressed to company manage Company" commencing on January 12, 1998 up to February 28, 1998:

In view of the numerous external factors such as slowdown in business and consumer demand and consistent with Art. 286 of the temporary partial shutdown of some operations of the Company.

To implement this measure, please submit to my office through your local HRAD the list of those whom you will require to report f list, all those not in the list will not receive any pay nor will it be credited against their VL. Please submit the listing no later than the morning of Friday, January 09, 1998. Shutdown shall commence on January 12, 1998 up to February 28, 1998, unless otherwise recalled at an earlier date. Implementation of th[ese] directives will be done through your HRAD departments. (Underscoring supplied)

In her Position Paper8 dated March 3, 1998 filed before the labor arbiter, Miclat claimed that she was never informed of the stand that she qualified as a regular employee since her immediate supervisor even submitted a written recommendation in her favor be

Respecting the alleged financial losses cited by petitioners as basis for her termination, Miclat disputed the same, she contending and conduct market surveys, a credible assessment on production and sales showed otherwise.

In any event, Miclat claimed that assuming that her termination was necessary, the manner in which it was carried out was illegal it only a day before it became effective.

Additionally, Miclat claimed that she did not receive separation pay, 13th month pay and salaries for October 21, 22 and 23, 1997

On the other hand, petitioners claimed that they could not be faulted for retrenching some of its employees including Miclat, they receivership, notice of which was sent to its supervisors and rank and file employees via a Memorandum of July 21, 1997; that in scheme for voluntary separation from employment with payment of severance pay; and that CLARION was only adopting the "LA new in the company.

Contending that Miclats termination was made with due process, petitioners referred to the EYCO Group of Companies abovesa with the notice requirement, it having been issued more than one month before Miclat was terminated on October 23, 1997.

By Decision9 of November 23, 1998, the labor arbiter found that Miclat was illegally dismissed and directed her reinstatement. The

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered ordering the respondent toreinstate complainant and to payher backwages, from the time of dismissal to actual reinstatement, proportionate 13th month pay and two (2) dayssala a.1) Backwages 10/23/97 to 11/30/98 P6,500.00 x 13.25 months = P86,125.00 a.2) Proportionate 13th month pay 1/12 of P86,125 = 7,177.08 b) 13th month pay - 1997

=P6,500 x 9.75 months/12 = 5,281.25 c) Two days salary =P6,500/26 x 2 days = 500.00 TOTAL P 99,083.33 (Emphasis and underscoring supplied). Before the National Labor Relations Commission (NLRC) to which petitioners appealed, they argued that: 10

1. [CLARION] was placed under receivership thereby evidencing the fact that it sustained business losses to wa

2. The dismissal of [Miclat] from her employment having been effected in accordance with the law and in good fa pay and two (2) days salary.

And petitioners pointed out that CLARION had expressed its decision to shutdown its operations by Memorandum 11 of January 7,

Appended to petitioners appeal before the NLRC were photocopies of their balance sheets from 1997 to November 1998 which t business reverses which were made the basis x x x in retrenching x x x."12

By Resolution13 of June 17, 1999, the NLRC affirmed the labor arbiters decision. The pertinent portion of the NLRC Resolution re

There are three (3) valid requisites for valid retrenchment: (1) the retrenchment is necessary to prevent losses and such losses ar and Employment at least one (1) month prior to the intended date of retrenchment; and (3) payment of separation pay equivalent whichever is higher. The two notices are mandatory. If the notice to the workers is later than the notices sent to DOLE, the date o workers.

In Lopez Sugar Corporation v. Federation of Free Workers Philippine Labor Union Association (PLUA-NACUSIP) and National La forth four standards which would justify retrenchment, being, firstly, - the losses expected should be substantial and not merely de retrenchment is clearly shown to be insubstantial and inconsequential in character, the bona fide nature of the retrenchment woul apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. T retrenchment, which is after all a drastic course with serious consequences for the livelihood of the employees retired or otherwis be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures p costs; and lastly, - the alleged losses if already realized and the expected imminent losses sought to be forestalled, must be prove

The records show that these requirements were not substantially complied with. And proofs presented by respondents-appellants position must therefore fail. The reason is simple. Evidences on record presented fall short of the requirement of substantial, suffi validity of retrenchment espoused by respondents-appellants. The petition before the Securit[ies] and Exchange Commission for justifying retrenchment. In fact, the petition itself lends credence to the fact that retrenchment was not actually reinstated under th however, the present combined financial condition of the petitioners clearly indicates that their assets are more than enough to pa disregard the fact that the petition merely seeks to suspend payments of their obligation from creditor banks and other financing in account, We take note of paragraph 7 of the petition which stated: "The situation resulted in cash position being spread thin. How saw a very viable proposition since the expansion and the additional investments would result in a bigger real estate base which w in the end, there would a bigger cash procurement which would result in greater volume of production, profitability and other good Admittedly, this does not create a picture of retrenchable business atmosphere pursuant to Article 283 of the Labor Code.

We cannot disregard the fact that respondent-appellants failed in almost all of the criteria set by law and jurisprudence in justifying supposed notice to the DOLE (Annex "4," List of Employees on Shutdown) is of no moment, the same having no bearing in this c receipt by DOLE, that is, January 18, 1999, was way out of time in relation to this case. And no proof was adduced to evidence co separation pay had been awarded to complainant-appellee.

WHEREFORE, premises considered, and finding no grave abuse of discretion on the findings of Labor Arbiter Nieves V. De Cast

The decision appealed from is AFFIRMED in toto. (Italics in the original; underscoring supplied; citations omitted)

Petitioners Motion for Reconsideration of the NLRC resolution having been denied by Resolution 14 of July 29, 1999, petitioners fil following arguments:

1. PETITIONER CLARION WAS PLACED UNDER RECEIVERSHIP THEREBY EVIDENCING THE FACT THAT PRIVATE RESPONDENT MICLAT FROM HER EMPLOYMENT.

2. THE DISMISSAL OF PRIVATE RESPONDENT MICLAT FROM HER EMPLOYMENT HAVING BEENEFFEC RESPONDENT DOES NOT DESERVE TO BE REINSTATED AND PAID BACKWAGES, 13th MONTH PAY AN By Decision16 of November 24, 2000, the CA sustained the resolutions of the NLRC in this wise:

In the instant case, Clarion failed to prove its ground for retrenchment as well as compliance with the mandated procedure of fur DOLE) with one (1) month written notice and payment of separation pay to the employee. Clarions failure to discharge its burden

First, Clarion presented no evidence whatsoever before the Labor Arbiter. To prove serious business losses, Cla the Creation of an Interim Receiver, for the first time on appeal before the NLRC. The Supreme Court has con submission of evidence had satisfactorily explained the delay. In the instant case, said financial statements are n

Second, even if such financial statements were admitted in evidence, they would not alter the outcome of the ca such case is the presentation of financial statements prepared by independent auditors and not merely by comp Third, even audited financial statements are

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 159577 May 3, 2006

CHARLITO PEARANDA, Petitioner, vs. BAGANGA PLYWOOD CORPORATION and HUDSON CHUA, Respondents. DECISION PANGANIBAN, CJ:

Managerial employees and members of the managerial staff are exempted from the provisions of the Labor Code on labor standa overtime pay and premium pay for working on rest days. The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 27, 20032 and July 4, 20033 Resolut Resolution disposed as follows: "WHEREFORE, premises considered, the instant petition is hereby DISMISSED."4

The latter Resolution denied reconsideration. On the other hand, the Decision of the National Labor Relations Commission (NLRC) challenged in the CA disposed as follows:

"WHEREFORE, premises considered, the decision of the Labor Arbiter below awarding overtime pay and premium pay for rest da the above-entitled case dismissed for lack of merit.5 The Facts

Sometime in June 1999, Petitioner Charlito Pearanda was hired as an employee of Baganga Plywood Corporation (BPC) to take 2001, Pearanda filed a Complaint for illegal dismissal with money claims against BPC and its general manager, Hudson Chua, b

After the parties failed to settle amicably, the labor arbiter8 directed the parties to file their position papers and submit supporting d follows:

"[Pearanda] through counsel in his position paper alleges that he was employed by respondent [Baganga] on March 15, 1999 w he was illegally terminated on December 19, 2000. Further, [he] alleges that his services [were] terminated without the benefit of paid his overtime pay, premium pay for working during holidays/rest days, night shift differentials and finally claims for payment of complaint.

"Upon the other hand, respondent [BPC] is a domestic corporation duly organized and existing under Philippine laws and is repre respondent. Respondents thru counsel allege that complainants separation from service was done pursuant to Art. 283 of the La general maintenance and it applied for clearance with the Department of Labor and Employment, Regional Office No. XI to shut d insistence of herein complainant he was paid his separation benefits (Annexes C and D, ibid). Consequently, when respondent [B he was not terminated from employment much less illegally. He opted to severe employment when he insisted payment of his sep to overtime pay and if ever he rendered services beyond the normal hours of work, [there] was no office order/or authorization for legal and factual basis and that the instant complaint must necessarily fail for lack of merit." 10

The labor arbiter ruled that there was no illegal dismissal and that petitioners Complaint was premature because he was still emp employment, hence, he need not reapply when the plant reopened.

According to the labor arbiter, petitioners money claims for illegal dismissal was also weakened by his quitclaim and admission d vacation leave conversions and thirteenth month pay.12

Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for working on rest days, and attorneys fee Ruling of the NLRC

Respondents filed an appeal to the NLRC, which deleted the award of overtime pay and premium pay for working on rest days. A because he was a managerial employee.14 Ruling of the Court of Appeals

In its Resolution dated January 27, 2003, the CA dismissed Pearandas Petition for Certiorari. The appellate court held that he fa NLRC; and 2) explain why the filing and service of the Petition was not done by personal service. 15

In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that petitioner still failed to submit the plea Hence this Petition.17 The Issues Petitioner states the issues in this wise:

"The [NLRC] committed grave abuse of discretion amounting to excess or lack of jurisdiction when it entertained the APPEAL of t

"The [NLRC] committed grave abuse of discretion amounting to an excess or lack of jurisdiction when it rendered the assailed RE SETTING ASIDE the FACTUAL AND LEGAL FINDINGS of the [labor arbiter] with respect to the following:

"I. The finding of the [labor arbiter] that [Pearanda] is a regular, common employee entitled to monetary benefits under A "II. The finding that [Pearanda] is entitled to the payment of OVERTIME PAY and OTHER MONETARY BENEFITS." 18 The Courts Ruling The Petition is not meritorious. Preliminary Issue: Resolution on the Merits

The CA dismissed Pearandas Petition on purely technical grounds, particularly with regard to the failure to submit supporting do

In Atillo v. Bombay,19 the Court held that the crucial issue is whether the documents accompanying the petition before the CA suff NLRC20 stayed the dismissal of an appeal in the exercise of its equity jurisdiction to order the adjudication on the merits.

The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to challenge the finding that he was a m submitted the pleadings before the labor arbiter in an attempt to comply with the CA rules.22 Evidently, the CA could have ruled on substantial compliance with the procedural requirements.

Under these extenuating circumstances, the Court does not hesitate to grant liberality in favor of petitioner and to tackle his subst help promote, not frustrate, substantial justice.23 The Court frowns upon the practice of dismissing cases purely on procedural gro interpretation of procedural rules in this labor case is more in keeping with the constitutional mandate to secure social justice.26 First Issue: Timeliness of Appeal

Under the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter should be filed within 10 days from re

Petitioners claim that respondents filed their appeal beyond the required period is not substantiated. In the pleadings before us, p arbiter. Neither did the petitioner attach a copy of the challenged appeal. Thus, this Court has no means to determine from the rec utterly failed to support his claim that respondents appeal was filed out of time, we need not belabor that point. The parties allegin Second Issue: Nature of Employment Petitioner claims that he was not a managerial employee, and therefore, entitled to the award granted by the labor arbiter.

Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards. Labor standards provide the w premium pay for working on rest days.29 Under this provision, managerial employees are "those whose primary duty consists of th department or subdivision."30 The Implementing Rules of the Labor Code state that managerial employees are those who meet the following conditions:

"(1) Their primary duty consists of the management of the establishment in which they are employed or of a department o

"(2) They customarily and regularly direct the work of two or more employees therein;

"(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as t other employees are given particular weight."31

The Court disagrees with the NLRCs finding that petitioner was a managerial employee. However, petitioner was a member of th Like managerial employees, officers and members of the managerial staff are not entitled to the provisions of law on labor standa 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 manageme execute under general supervision work along specialized or technical lines requiring special training, experience, or kno 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 and (3) above."33 As shift engineer, petitioners duties and responsibilities were as follows: "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. "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 while working. "6. Recommend parts and supplies purchases. "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 managerial staff under the Implementing Rules.

Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing the operation of the machine necessarily required the use of discretion and independent judgment to ensure the proper functioning of the steam plant boiler. A

Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated that he was the foreman responsi representative of management over the workers and the operation of the department.37 Petitioners evidence also showed that he further evident from the manner his salary was paid. He belonged to the 10% of respondents 354 employees who were paid on a On the basis of the foregoing, the Court finds no justification to award overtime pay and premium pay for rest days to petitioner.

WHEREFORE, the Petition is DENIED. Costs against petitioner. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-49774 February 24, 1981 SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner, vs. Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCA-COLA FREE WORKERS UNION,respondents.

DE CASTRO, J.:

Petition for certiorari and prohibition, with preliminary injunction to review the Order 1 dated December 19, 1978 rendered by the D Coca-Cola Free Workers Union vs. Cagayan Coca-Cola Plant, San Miguel Corporation, " which denied herein petitioner's motion Order 2 dated June 7, 1978.

On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent herein, filed a complaint against San Miguel C refusal of the latter to include in the computation of 13th- month pay such items as sick, vacation or maternity leaves, premium fo and night differentials.

An Order 3 dated February 15, 1977 was issued by Regional Office No. X where the complaint was filed requiring herein petitione whatever earnings and the amount actually received as 13th month pay excluding overtime premium and emergency cost of living

Herein petitioner appealed from that Order to the Minister of Labor in whose behalf the Deputy Minister of Labor Amado G. Incion No. X and dismissing the appeal for lack of merit. Petitioner's motion for reconsideration having been denied, it filed the instant pe

On February 14, 1979, this Court issued a Temporary Restraining Order 5 enjoining respondents from enforcing the Order dated D

The crux of the present controversy is whether or not in the computation of the 13th-month pay under Presidential Decree 851, pa days and special holidays, including pay for regular holidays and night differentials should be considered.

Public respondent's consistent stand on the matter since the effectivity of Presidential Decree 851 is that "payments for sick leave for work performed on rest days, special and regular holidays are included in the computation of the 13th-month pay. 6 On its part rendered by then Acting Labor Secretary Amado G. Inciong to the effect that, "in computing the mandatory bonus, the basis is the gross basic salary includes: (1) regular salary or wage; (2) payments for sick, vacation and maternity leaves; (3) premium for work regular holiday; and (5) emergency allowance if given in the form of a wage adjustment." 7

Petitioner, on the other hand, assails as erroneous the aforesaid order, ruling and opinions, vigorously contends that Presidential 13th-month pay; submits that payments for sick, vacation, or maternity leaves, night differential pay, as well as premium paid for w the basic salary; and concludes that the inclusion of those payments in the computation of the 13th-month pay is clearly not sanc The Court finds petitioner's contention meritorious. The provision in dispute is Section 1 of Presidential Decree 851 and provides:

All employers are hereby required to pay all their employees receiving a basic salary of not more than Pl,000 a m than December 24 of every year.

Section 2 of the Rules and Regulations for the implementation of Presidential Decree 851 provides: 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 on earnings paid by an employer to an employee for services ren Presidential Decree No. 525 or Letter of Instructions No. 174, profit sharing payments and all allowances and mo basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis in the determinat deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are deemed not part of the a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions No. 174; b) Profit sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic salar 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 issued by the then Labor Secre as part of the basic salary and in the computation of the 13th-month pay.

The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instructions No. 174, and profit sharing pa properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all allowances and monetary benefits which intention to strip basic salary of any and all additions which may be in the form of allowances or "fringe" benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more emphatic in declaring t shall not be included in the computation of the 13th-month pay.

While doubt may have been created by the prior Rules and Regulations Implementing Presidential Decree 851 which defines bas employee, this cloud is dissipated in the later and more controlling Supplementary Rules and Regulations which categorically, exc by employer to an employee. A cursory perusal of the two sets of Rules indicates that what has hitherto been the subject of a bro Regulations cure the seeming tendency of the former rules to include all remunerations and earnings within the definition of basic

The all-embracing phrase "earnings and other renumeration" which are deemed not part of the basic salary includes within its me works performed on rest days and special holidays pays for regular holidays and night differentials. As such they are deemed not 13th-month they, were not so excluded, it is hard to find any "earnings and other remunerations" expressly excluded in the compu be Idle and with no purpose. This conclusion finds strong support under the Labor Code of the Philippines. To cite a few provisions:

Art. 87. overtime work. Work may be performed beyond eight hours a day provided what the employee is paid plus at least twenty-five (25%) percent thereof.

It is clear that overtime pay is an additional compensation other than and added to the regular wage or basic salary, for reason of the Supplementary Rules and Regulations Implementing Presidential Decree 851. In Article 93 of the same Code, paragraph

c) work performed on any special holiday shall be paid an additional compensation of at least thirty percent (30% It is likewise clear that prernium for special holiday which is at least 30% of the regular wage is an additional compensation other not be considered in the computation of the 13th- month pay.

WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and December 19, 1978 are hereby set aside and a by this Court on February 14, 1979 is hereby made permanent. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 85073 August 24, 1993

DAVAO FRUITS CORPORATION, petitioner, vs. ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employees of DAVAO FRUITS CORPOR Dominguez & Paderna Law Offices for petitioners. The Solicitor General for public respondents.

QUIASON, J.: This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission (NLRC), dismissing for lack No. 1791-MC-X1-82.

On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rank-and-file workers and employe Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City, against petitioner, for "Payment of the Thirteenththirteenth month pay differential for 1982 of its rank-and-file employees, equivalent to their sick, vacation and maternity leaves, pr holidays which petitioner, allegedly in disregard of company practice since 1975, excluded from the computation of the thirteenth

In its answer, petitioner claimed that it erroneously included items subject of the complaint in the computation of the thirteenth mo According to petitioner, this mistake was discovered only in 1981 after the promulgation of the Supreme Court decision in the cas

A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent ALU. The dispositive portion

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered ordering respondent to p workers/employees herein represented by complainant Union (Rollo, p. 32).

Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision accordingly dismissed the app

Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised Rules of Court. This error notwith petition as a special civil action for certiorari under Rule 65 of the Revised Rules of Court (P.D. No. 1391, Sec. 5; Rules Implemen Commission, 189 SCRA 666 [1990]: Pearl S. Buck Foundation, Inc. v. National Labor Relations Commission, 182 SCRA 446 [199

The crux of the present controversy is whether in the computation of the thirteenth month pay given by employers to their employ No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay fo

regardless of long-standing company practice.

Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their employees a thirteenth m and Regulations Implementing Presidential Decree No. 851," thus: SECTION 2. . . .

(a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar ye

(b) "Basic Salary" shall include all renumerations or earnings paid by an employer to an employee for services re Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and m basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules and Regulations Implementing salary," thus:

4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not be included in

Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee, but excludes cost-of-living which have not been considered as part of the basic salary of the employee as of December 16, 1975. The exclusion of cost-of-liv salary" of payments which are otherwise considered as "fringe" benefits. This intention is emphasized in the catch all phrase "all a part of the basic salary." Basic salary, therefore does not merely exclude the benefits expressly mentioned but all payments which v. Inciong, supra, at 143-144). In fact, the Supplementary Rules and Regulations Implementing P.D. No. 851 are very emphatic in excluded in computing the thirteenth month pay.

In other words, whatever compensation an employee receives for an eight-hour work daily or the daily wage rate in the basic sala excluded. It follows therefore, that payments for sick, vacation and maternity leaves, premium for work done on rest days special the basic salary for the purpose of determining the thirteen month pay.

Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the opinions, orders and rulings rendered b subject items in computing the thirteenth month pay. The inclusion of these items is clearly not sanctioned under P.D. No. 851, th as the basis for determining the thirteenth month pay.

Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the Supplementary Rules and Regulations w As pointed out in San Miguel Corporation v. Inciong, (supra):

While doubt may have been created by the prior Rules and Regulations and Implementing Presidential Decree 8 an employer to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and earnings and other remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules subject of broad exclusion. The Supplementary Rules and Regulations cure the seeming tendency of the former salary.

The all-embracing phrase "earnings and other remunerations which are deemed not part of the basic salary inclu premium for work performed on rest days and special holidays, pay for regular holidays and night differentials. A in the computation of the 13th-month pay. If they were not so excluded, it is hard to find any "earnings and other Then the exclusionary provision would prove to be idle and with purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all doubts in the computation of the thi 16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed and pai 1981. Petitioner continued its practice in December 1981, after promulgation of the afore-quoted San Miguel decision on February

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees' thirteenth mo work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the questioned items h part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made pursuant thereto, ripened by the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10 of the Rule the Philippines, which prohibit the diminution or elimination by the employer of the employees' existing benefits (Tiangco v. Leoga

Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not applicable in Labor Law. Besides, in received from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner in the instant case, does not demand the re "rectify" the error it made over these years by excluding unilaterally from the thirteenth month pay in 1982 the items subject of litig

WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby DISMISSED, and the question Cruz, Grio-Aquino, Davide, Jr. and Bellosillo, JJ., concur.