THIRD DIVISION

[G.R. No. 94825. September 4, 1992.]

PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, Petitioner, v. NATIONAL LABOR
RELATIONS COMMISSION, and ODIN SECURITY AGENCY, as representative of its
Security Guards, Respondents.

however, does not mean that the principal, PTSI in this case, would directly pay the security guards the
wage and allowance increases because there is no privity of contract between them. The security
guards contractual relationship is with their immediate employer, EAGLE. As an employer, EAGLE is
tasked, among others, with the payment of their wages [See Article VII Sec. 3 of the Contract for
Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA
556]. . . . The Wage Orders are statutory and mandatory and can not be waived. The petitioner can not
escape liability since the law provides the joint and solidary liability of the principal and the contractor
for the protection of the laborers.

Franklin J. Andrada for Petitioner.

Ramon Encarnacion and Reynato V. Siozon for Private Respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATIONS; PRINCIPAL AND CONTRACTOR; JOINTLY AND
SEVERALLY LIABLE FOR PAYMENT OF UNPAID WAGES; TERM EMPLOYER
CONSTRUED. Notwithstanding that the petitioner is a government agency, its liabilities, which are
joint and solidary with that of the contractor, are provided in Articles 106, 107 and 109 of the Labor
Code. This places the petitioners liabilities under the scope of the NLRC. Moreover, Book Three, Title
II on Wages specifically provides that the term "employer" includes any person acting directly or
indirectly in the interest of an employer in relation to an employee and shall include the Government
and all its branches, subdivisions and instrumentalities, all government-owned or controlled
corporation and institutions as well as non-profit private institutions, or organizations (Art. 97 [b],
Labor Code; Eagle Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago v. NLRC, 200
SCRA 158 [1991]). Settled is the rule that in job contracting, the petitioner as principal is jointly and
severally liable with the contractor for the payment of unpaid wages. The statutory basis for the joint
and several liability is set forth in Articles 107, and 109 in relation to Article 106 of the Labor Code.
2. ID.; ID.; ID.; WAGE ORDERS, MANDATORY AND CANNOT BE WAIVED. In the case at
bar, the action instituted by the private respondent was for the payment of unpaid wage differentials
under Wage Order No. 6. The liabilities of the parties were very well explained in the case of Eagle
Security v. NLRC, supra where the court held: . . . "The solidary liability of PTSI and EAGLE,
however, does not preclude the right of reimbursement from his co-debtor by the one who paid [See
Article 1217, Civil Code]. It is with respect to this right of reimbursement that petitioners can find
support in the aforecited contractual stipulation and Wage Order provision. "That Wage Orders are
explicit that payment of the increases are `to be borne by the principal or client.To be borne,

1 | Page

3. ID.; ID.; ID.; DUE PROCESS OBSERVED IN CASE AT BAR. The contention that it was
deprived due process because no hearing was conducted does not deserve merit. A decision on the
merits is proper where the issues raised by the parties did not involve intricate questions of law. (See
Blue Bar Coconut Phils. Inc. v. Minister of Labor, 174 SCRA 25 [1989]) There can be no question that
the security guards are entitled to wage adjustments. The computation of the amount due to each
individual guard can be made during the execution of the decision where hearings can be held. (See
Section 3, Rule VIII of the New Rules of Procedure of the NLRC).
4. ID.; INDIRECT EMPLOYER; ESTOPPED FROM ASSAILING CONTRACT. Petitioner assail
the contract for security services for being void ab initio on the ground that it did not comply with the
bidding requirements set by law. Undeniably, services were rendered already and the petitioner
benefitted from said contract for two (2) years now. The petitioner is therefore estopped from assailing
the contract.
5. ID.; PHIL. ASSOCIATION OF DETECTIVE AND PROTECTIVE AGENCY OPERATORS
(PADPAO); PURPOSE FOR ITS CREATION. In the complaint filed, the private respondent
alleged that it requested the Regional Director, NCR Region of the Department of Labor and
Employment for their intercession in connection with the illegal bidding and award made by the
petitioner in favor of Triad Security Agency which was below the minimum wage law. Undeniably, the
private respondent is equally guilty when it entered into the contract with the petitioner without
considering Wage Order No. 6. The private respondent tries to explain that the Philippine Association
of Detective and Protective Agency Operators (PADPAO) which fixes the contract rate of the security
agencies was unable to fix the new contract rate until May 12, 1986. We, however, agree with the
posture that the setting of wages under PADPAO is of no moment. The PADPAO memorandum was
not necessary to make Wage Order No. 6 effective. The PADPAO memo was merely an internal
agreement among the operators to set the ceiling of the contract rates. It was aimed to curb the practice

of security agencies which were in cutthroat competition to request for wage adjustments after
proposals were accepted in good faith to the prejudice of the parties.
6. ID.; SECURITY AGENCY; CANNOT ESCAPE LIABILITY FOR PAYMENT OF UNPAID
WAGES; PAYMENT OF WAGES TO EMPLOYEES GUARANTEED UNDER THE
CONSTITUTION. it bears emphasis that it was the private respondent which first deprived the
security personnel of their rightful wage under Wage Order No. 6. The private respondent is the
employer of the security guards and as the employer, it is charged with knowledge of labor laws and
the adequacy of the compensation that it demands for contractual services is its principal concern and
not any others (Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]).
Given this peculiar circumstance, the private respondent should also be faulted for the unpaid wage
differentials of the security guards. By filing the complaint in its own behalf and in behalf of the
security guards, the private respondent wishes to exculpate itself from liability on the strength of the
ruling in the Eagle case that the ultimate liability rests with the principal. Nonetheless, the inescapable
fact is that the employees must be guaranteed payment of the wages due them for the performance of
any work, task, job or project. They must be given ample protection as mandated by the Constitution
(See Article II, Section 18 and Article XIII, Section 3). Thus, to assure compliance with the provisions
of the Labor Code including the statutory minimum wage, the joint and several liability of the
contractor and the principal is mandated.
7. ID.; SOLIDARY LIABILITY OF PRINCIPAL AND CONTRACTOR; WITHOUT PREJUDICE TO
THE RIGHT OF REIMBURSEMENT TO EITHER PRINCIPAL OR DIRECT EMPLOYER AS
WARRANTED. We hold the petitioner and the private respondent jointly and severally liable to the
security guards for the unpaid wage differentials under Wage Order No. 6. As held in the Eagle case,
the security guards immediate recourse is with their direct employer, private respondent Odin Security
Agency. The solidary liability is, however, without prejudice to a claim for reimbursement by the
private respondent against the petitioner for only one-half of the amount due considering that the
private respondent is also at fault for entering into the contract without taking into consideration the
minimum wage rates under Wage Order No. 6.
DECISION

GUTIERREZ, JR., J.:

2 | Page

The petitioner questions the resolution of the National Labor Relations Commission (NLRC) dated
January 17, 1983 setting aside the order of dismissal issued by the Labor Arbiter and the resolution
dated June 25, 1990 denying petitioners motion for reconsideration.
The facts are as follows:chanrob1es virtual 1aw library
The petitioner is a government-owned or controlled corporation created by P.D. No. 977.
On November 11, 1985, it entered into a contract with the Odin Security Agency for security services
of its Iloilo Fishing Port Complex in Iloilo City. The pertinent provision of the contract
provides:chanrobles.com : virtual law library
OBLIGATION OF THE FISHING PORT COMPLEX:chanrob1es virtual 1aw library
1. For and in consideration of the services to be rendered by the AGENCY to the FISHING PORT
COMPLEX, the latter shall pay to the former per month for eight (8) hours work daily as
follows:chanrob1es virtual 1aw library
OUTSIDE METRO MANILA
Security Guard P1,990.00
Security Supervisor 2,090.00
Det. Commander 2,190.00.
The Security Group of the AGENCY will be headed by a detachment commander whose main function
shall consist of the administration and supervision control of the AGENCYs personnel in the
FISHING PORT COMPLEX. There shall be one supervisor per shift who shall supervise the guards on
duty during a particular shift.
The above schedule of compensation includes among others, the following:chanrob1es virtual 1aw

library
(a) Minimum wage (Wage Order No. 5)
(b) Rest Day Pay
(c) Night Differential Pay

SECTION 9. In the case of contracts for construction projects and for security, janitorial and similar
services, the increases in the minimum wage and allowance rates of the workers shall be borne by the
principal or client of the construction/service contractor and the contracts shall be deemed amended
accordingly, subject to the provisions of Section 3(c) of this Order. (Rollo, p. 49)
Section 7, par. c of the Security Services Contract which calls for an automatic escalation of the rate
per guard in case of wage increase also reads:chanrob1es virtual 1aw library

(d) Incentive Leave Pay

(e) 13th Month Pay

The terms and conditions herein set forth shall be modified by the applicable provisions of subsequent
laws or decrees, especially as they pertain to increases in the minimum wage and occupational benefits
to workers. (Rollo, p. 46)

(f) Emergency Cost of Living Allowance (up to Wage Order No. 5)

(g) 4% Contractors Tax
(h) Operational Expenses
(i) Overhead (Rollo, pp. 197-198)
The contract for security services also provided for a one year renewable period unless terminated by
either of the parties. It reads:chanrob1es virtual 1aw library
9. This agreement shall take effect upon approval for a period of one (1) year unless sooner terminated
upon notice of one party to the other provided, that should there be no notice of renewal within thirty
(30) days before the expiry date, the same shall be deemed renewed, and provided further, that the
party desiring to terminate the contract before the expiry date shall give thirty (30) days written
advance notice to the other party. (Rollo, p. 198)

Requests for adjustment of the contract price were reiterated on January 14, 1988 and February 19,
1988 but were ignored by the petitioner.
Thus on June 7, 1988, the private respondent filed with the Office of the Sub-Regional Arbitrator in
Region VI, Iloilo City a complaint for unpaid amount of re-adjustment rate under Wage Order No. 6
together with wage salary differentials arising from the integration of the cost of living allowance
under Wage Order No. 1, 2, 3 and 5 pursuant to Executive Order No. 178 plus the amount of
P25,000.00 as attorneys fees and cost of litigation.
On July 29, 1988, the petitioner filed a Motion to Dismiss on the following grounds:chanrob1es virtual
1aw library
(1) The Commission has no jurisdiction to hear and try the case;
(2) Assuming it has jurisdiction, the security guards of Odin Security Agency have no legal personality
to sue or be sued; and

On October 24, 1987, and during the effectivity of the said Security Agreement, the private respondent
requested the petitioner to adjust the contract rate in view of the implementation of Wage Order No. 6
which took effect on November 1, 1984.chanroblesvirtualawlibrary

(3) Assuming the individual guards have legal personality the action involves interpretation of contract
over which it has no authority. (Rollo, p. 75)

The private respondents request for adjustment was anchored on the provision of Wage Order No. 6
which states:chanrob1es virtual 1aw library

On August 19, 1988, the Labor Arbiter issued an Order dismissing the complaint stating that the
petitioners being a government-owned or controlled corporation would place it under the scope and

3 | Page

jurisdiction of the Civil Service Commission and not within the ambit of the NLRC.
This Order of dismissal was raised on Appeal to the NLRC and on January 17, 1989 the NLRC issued
the questioned resolution setting aside the order and entered a decision granting reliefs to the
privateRespondent.
A motion for reconsideration was subsequently filed raising among others that the resolution
is:chanroblesvirtualawlibrary
(1) In violation of the right of the respondent to due process under the Constitution;
(2) Granting arguendo that the due process clause was observed, the resolution granting relief is
without any legal basis; and
(3) Granting arguendo that there is legal basis for the award, the stipulation under the contract allowing
an increase of wage rate is void ab initio. (Rollo, p. 86)

There being no employer-employee relationship between the petitioner and the security guards, the
jurisdiction of the Civil Service Commission may not be invoked in this case.
The contract entered into by the petitioner which is merely job contracting makes the petitioner an
indirect employer. The issue, therefore, is whether or not an indirect employer is bound by the rulings
of the NLRC.
Notwithstanding that the petitioner is a government agency, its liabilities, which are joint and solidary
with that of the contractor, are provided in Articles 106, 107 and 109 of the Labor Code. This places
the petitioners liabilities under the scope of the NLRC. Moreover, Book Three, Title II on Wages
specifically provides that the term "employer" includes any person acting directly or indirectly in the
interest of an employer in relation to an employee and shall include the Government and all its
branches, subdivisions and instrumentalities, all government-owned or controlled corporation and
institutions as well as non-profit private institutions, or organizations (Art. 97 [b], Labor Code; Eagle
Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago v. NLRC, 200 SCRA 158 [1991]). The
NLRC, therefore, did not commit grave abuse of discretion in assuming jurisdiction to set aside the
Order of dismissal by the Labor Arbiter.chanrobles virtual lawlibrary

On June 25, 1990, the motion for reconsideration was denied.

The underlying issue in this case is who should carry the burden of the wage increases.
The petitioner now comes to this Court reiterating substantially the same grounds it raised in its motion
for reconsideration, to wit:chanrob1es virtual 1aw library
(1) The National Labor Relations Commission failed to observe due process.
(2) Granting the award of the National Labor Relations Commission is valid, reliefs granted are not
legal.
(3) Assuming the award complies with the requirements of due process, the National Labor Relations
Commission erred when it failed to declare the contract for security services void. (Rollo, pp. 201-202)
The petitioner is a government-owned or controlled corporation with a special charter. This places it
under the scope of the civil service (Art. XI [B] [1] and [2], 1987 Constitution); Boy Scouts of the
Philippines v. NLRC, 196 SCRA 176 [1991]; PNOC-Energy Development Corp. v. NLRC, 201 SCRA
487 [1991]). However, the guards are not employees of the petitioner. The contract of services
explicitly states that the security guards are not considered employees of the petitioner (Rollo, p. 45).

4 | Page

Settled is the rule that in job contracting, the petitioner as principal is jointly and severally liable with
the contractor for the payment of unpaid wages. The statutory basis for the joint and several liability is
set forth in Articles 107, and 109 in relation to Article 106 of the Labor Code. (Del Rosario and Sons
Logging Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]; Baguio v. NLRC, 202 SCRA 465 [1991];
Ecal v. NLRC, 195 SCRA 224 [1991]). In the case at bar, the action instituted by the private
respondent was for the payment of unpaid wage differentials under Wage Order No. 6. The liabilities
of the parties were very well explained in the case of Eagle Security v. NLRC, supra where the court
held:chanrob1es virtual 1aw library
x

"The solidary liability of PTSI and EAGLE, however, does not preclude the right of reimbursement
from his co-debtor by the one who paid [See Article 1217, Civil Code]. It is with respect to this right of
reimbursement that petitioners can find support in the aforecited contractual stipulation and Wage

Order provision.
"The Wage Orders are explicit that payment of the increases are `to be borne by the principal or
client.To be borne, however, does not mean that the principal, PTSI in this case, would directly pay
the security guards the wage and allowance increases because there is no privity of contract between
them. The security guards contractual relationship is with their immediate employer, EAGLE. As an
employer, EAGLE is tasked, among others, with the payment of their wages [See Article VII Sec. 3 of
the Contract for Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988,
158 SCRA 556].
"Premises considered, the security guards immediate recourse for the payment of the increases is with
their direct employer, EAGLE. However, in order for the security agency to comply with the new wage
and allowance rates it has to pay the security guards, the Wage Order made specific provision to amend
existing contracts for security services by allowing the adjustment of the consideration paid by the
principal to the security agency concerned. What the Wage Orders require, therefore, is the amendment
of the contract as to the consideration to cover the service contractors payment of the increases
mandated. In the end, therefore, ultimate liability for the payment of the increases rests with the
principal."cralaw virtua1aw library
The Wage Orders are statutory and mandatory and can not be waived. The petitioner can not escape
liability since the law provides the joint and solidary liability of the principal and the contractor for the
protection of the laborers. The contention that it was deprived due process because no hearing was
conducted does not deserve merit. A decision on the merits is proper where the issues raised by the
parties did not involve intricate questions of law. (See Blue Bar Coconut Phils. Inc. v. Minister of
Labor, 174 SCRA 25 [1989]) There can be no question that the security guards are entitled to wage
adjustments. The computation of the amount due to each individual guard can be made during the
execution of the decision where hearings can be held. (See Section 3, Rule VIII of the New Rules of
Procedure of the NLRC) Neither can the petitioner assail the contract for security services for being
void ab initio on the ground that it did not comply with the bidding requirements set by law.
Undeniably, services were rendered already and the petitioner benefitted from said contract for two (2)
years now. The petitioner is therefore estopped from assailing the contract.chanrobles law library : red
Quite noteworthy is the fact that the private respondent entered into the contract when Wage Order No.
6 had already been in force. The contract was entered into in November 11, 1985 one year after the
effectivity of Wage Order No. 6 which was on November 1, 1984. The rates of the security guards as

5 | Page

stipulated in the contract did not consider the increases in the minimum wage mandated by Wage Order
No. 6. Two years after, the private respondent is now asking for an adjustment in the contract price
pursuant to the wage order provision.
Such action of the private respondent is rather disturbing and must not remain unchecked. In the
complaint filed, the private respondent alleged that it requested the Regional Director, NCR Region of
the Department of Labor and Employment for their intercession in connection with the illegal bidding
and award made by the petitioner in favor of Triad Security Agency which was below the minimum
wage law. Undeniably, the private respondent is equally guilty when it entered into the contract with
the petitioner without considering Wage Order No. 6.
The private respondent tries to explain that the Philippine Association of Detective and Protective
Agency Operators (PADPAO) which fixes the contract rate of the security agencies was unable to fix
the new contract rate until May 12, 1986.
We, however, agree with the posture that the setting of wages under PADPAO is of no moment. The
PADPAO memorandum was not necessary to make Wage Order No. 6 effective. The PADPAO memo
was merely an internal agreement among the operators to set the ceiling of the contract rates. It was
aimed to curb the practice of security agencies which were in cutthroat competition to request for wage
adjustments after proposals were accepted in good faith to the prejudice of the
parties.chanrobles.com.ph : virtual law library
While it is true that security personnel should not be deprived of what is lawfully due them, it bears
emphasis that it was the private respondent which first deprived the security personnel of their rightful
wage under Wage Order No. 6. The private respondent is the employer of the security guards and as
the employer, it is charged with knowledge of labor laws and the adequacy of the compensation that it
demands for contractual services is its principal concern and not any others (Del Rosario & Sons
Logging Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]).
Given this peculiar circumstance, the private respondent should also be faulted for the unpaid wage
differentials of the security guards. By filing the complaint in its own behalf and in behalf of the
security guards, the private respondent wishes to exculpate itself from liability on the strength of the
ruling in the Eagle case that the ultimate liability rests with the principal. Nonetheless, the inescapable
fact is that the employees must be guaranteed payment of the wages due them for the performance of
any work, task, job or project. They must be given ample protection as mandated by the Constitution

(See Article II, Section 18 and Article XIII, Section 3). Thus, to assure compliance with the provisions
of the Labor Code including the statutory minimum wage, the joint and several liability of the
contractor and the principal is mandated.
We, therefore, hold the petitioner and the private respondent jointly and severally liable to the security
guards for the unpaid wage differentials under Wage Order No. 6. As held in the Eagle case, the
security guards immediate recourse is with their direct employer, private respondent Odin Security
Agency. The solidary liability is, however, without prejudice to a claim for reimbursement by the
private respondent against the petitioner for only one-half of the amount due considering that the
private respondent is also at fault for entering into the contract without taking into consideration the
minimum wage rates under Wage Order No. 6.chanrobles lawlibrary : rednad

NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), RODOLFO M. RETISO

and 165 OTHERS,1respondents.
GONZAGA-REYES, J.:
In his petition for certiorari and prohibition with prayer for writ of preliminary injunction and/or
temporary restraining order, petitioner assails (a) the decision dated April 20, 1995, of public
respondent National Labor Relations Commission (NLRC), Fourth (4th) Division, Cebu City, in
NLRC Case No. V-0143-94 reversing the February 25, 1994 decision of Labor Arbiter Dennis D.
Juanon and ordering petitioner to pay wages in the aggregate amount of P6,485,767.90 to private
respondents, and (b) the resolution dated July 28, 1995 denying petitioner's motion for reconsideration,
for having been issued with grave abuse of discretion.

WHEREFORE, the questioned resolutions of the National Labor Relations Commission are hereby
AFFIRMED with the modification that both the petitioner and the private respondent are ORDERED
to pay jointly and severally the unpaid wage differentials under Wage Order No. 6 without prejudice to
the right of reimbursement for one-half of the amount which either the petitioner or the private
respondent may have to pay to the security guards. Costs against the petitioner.

A temporary restraining order was issued by this Court on October 9, 1995 enjoining public respondent
from executing the questioned decision upon a surety bond posted by petitioner in the amount of
P6,400,000.00.2

SO ORDERED.

These are consolidated cases/claims for non-payment of salaries and wages, 13th month pay, ECOLA
and other fringe benefits as rice, medical and clothing allowances, submitted by complainant Rodolfo
M. Retiso and 163 others, Lyn E. Banilla and Wilson B. Sallador against respondents Aklan Electric
Cooperative, Inc. (AKELCO), Atty. Leovigildo Mationg in his capacity as General Manager; Manuel
Calizo, in his capacity as Acting Board President, Board of Directors, AKELCO.

Bidin, Davide, Jr. and Romero, JJ., concur.

Felciano, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 121439

January 25, 2000

AKLAN ELECTRIC COOPERATIVE INCORPORATED (AKELCO), petitioner,

vs.

6 | Page

The facts as found by the Labor Arbiter are as follows:3

Complainants alleged that prior to the temporary transfer of the office of AKELCO from Lezo Aklan to
Amon Theater, Kalibo, Aklan, complainants were continuously performing their task and were duly
paid of their salaries at their main office located at Lezo, Aklan.
That on January 22, 1992, by way of resolution of the Board of Directors of AKELCO allowed the
temporary transfer holding of office at Amon Theater, Kalibo, Aklan per information by their Project
Supervisor, Atty. Leovigildo Mationg, that their head office is closed and that it is dangerous to hold
office thereat;
Nevertheless, majority of the employees including herein complainants continued to report for work at
Lezo Aklan and were paid of their salaries.

That on February 6, 1992, the administrator of NEA, Rodrigo Cabrera, wrote a letter addressed to the
Board of AKELCO, that he is not interposing any objections to the action taken by respondent
Mationg. . .
That on February 11, 1992, unnumbered resolution was passed by the Board of AKELCO withdrawing
the temporary designation of office at Kalibo, Aklan, and that the daily operations must be held again
at the main office of Lezo, Aklan;4
That complainants who were then reporting at the Lezo office from January 1992 up to May 1992 were
duly paid of their salaries, while in the meantime some of the employees through the instigation of
respondent Mationg continued to remain and work at Kalibo, Aklan;
That from June 1992 up to March 18, 1993, complainants who continuously reported for work at Lezo,
Aklan in compliance with the aforementioned resolution were not paid their salaries;
That on March 19, 1993 up to the present, complainants were again allowed to draw their salaries; with
the exception of a few complainants who were not paid their salaries for the months of April and May
1993;
Per allegations of the respondents, the following are the facts:
1. That these complainants voluntarily abandoned their respective work/job assignments, without any
justifiable reason and without notifying the management of the Aklan Electric Cooperative, Inc.
(AKELCO), hence the cooperative suffered damages and systems loss;
2. That the complainants herein defied the lawful orders and other issuances by the General Manager
and the Board of Directors of the AKELCO. These complainants were requested to report to work at
the Kalibo office . . . but despite these lawful orders of the General Manager, the complainants did not
follow and wilfully and maliciously defied said orders and issuance of the General Manager; that the
Board of Directors passed a Resolution resisting and denying the claims of these complainants, . . .
under the principle of "no work no pay" which is legally justified; That these complainants have "mass
leave" from their customary work on June 1992 up to March 18, 1993 and had a "sit-down" stance for
these periods of time in their alleged protest of the appointment of respondent Atty. Leovigildo
Mationg as the new General Manager of the Aklan Electric Cooperative, Inc. (AKELCO) by the Board
of Directors and confirmed by the Administrator of the National Electrification Administration (NEA),
Quezon City; That they engaged in ". . . slowdown mass leaves, sit downs, attempts to damage, destroy
or sabotage plant equipment and facilities of the Aklan Electric Cooperative, Inc. (AKELCO).

7 | Page

On February 25, 1994, a decision was rendered by Labor Arbiter Dennis D. Juanon dismissing the
complaints.5
Dissatisfied with the decision, private respondents appealed to the respondent Commission.
On appeal, the NLRC's Fourth Division, Cebu City,6 reversed and set aside the Labor Arbiter's decision
and held that private respondents are entitled to unpaid wages from June 16, 1992 to March 18, 1993,
thus:7
The evidence on records, more specifically the evidence submitted by the complainants, which are: the
letter dated April 7, 1993 of Pedrito L. Leyson, Office Manager of AKELCO (Annex "C";
complainants' position paper; Rollo, p. 102) addressed to respondent Atty. Leovigildo T. Mationg;
respondent AKELCO General Manager; the memorandum of said Atty. Mationg dated 14 April 1993,
in answer to the letter of Pedrito Leyson (Annex "D" complainants' position paper); as well as the
computation of the unpaid wages due to complainants (Annexes "E" to "E-3"; complainants' position
paper, Rollo, pages 1024 to 1027) clearly show that complainants had rendered services during the
period-June 16, 1992 to March 18, 1993. The record is bereft of any showing that the respondents had
submitted any evidence, documentary or otherwise, to controvert this asseveration of the complainants
that services were rendered during this period. "Subjecting these evidences submitted by the
complainants to the crucible of scrutiny, We find that respondent Atty. Mationg responded to the
request of the Office Manager, Mr. Leyson, which We quote, to wit:
Rest assured that We shall recommend your aforesaid request to our Board of Directors for their
consideration and appropriate action. This payment, however, shall be subject, among others, to the
availability of funds.
This assurance is an admission that complainants are entitled to payment for services rendered from
June 16, 1992 to March 18, 1993, specially so that the recommendation and request comes from the
office manager himself who has direct knowledge regarding the services and performance of
employees under him. For how could one office manager recommend payment of wages, if no services
were rendered by employees under him. An office manager is the most qualified person to know the
performance of personnel under him. And therefore, any request coming from him for payment of
wages addressed to his superior as in the instant case shall be given weight.
Furthermore, the record is clear that complainants were paid of their wages and other fringe benefits
from January, 1992 to May, 1992 and from March 19, 1993 up to the time complainants filed the
instant cases. In the interegnum, from June 16, 1992 to March 18, 1993, complainants were not paid of

their salaries, hence these claims. We could see no rhyme nor reason in respondents' refusal to pay
complainants salaries during this period when complainants had worked and actually rendered service
to AKELCO.
While the respondents maintain that complainants were not paid during this interim period under the
principle of "no work, no pay", however, no proof was submitted by the respondents to substantiate
this allegation. The labor arbiter, therefore, erred in dismissing the claims of the complainants, when he
adopted the "no work, no pay" principle advanced by the respondents.1wphi1.nt
WHEREFORE, in view of the foregoing, the appealed decision dated February 25, 1994 is hereby
Reversed and Set Aside and a new one entered ordering respondent AKELCO to pay complainants
their claims amounting to P6,485,767.90 as shown in the computation (Annexes "E" to "E-3").
A motion for reconsideration was filed by petitioner but the same was denied by public respondent in a
resolution dated July 28, 1995.8
Petitioner brought the case to this Court alleging that respondent NLRC committed grave abuse of
discretion citing the following grounds:9
1. PUBLIC RESPONDENT COMMITTED GRAVE DISCRETION IN REVERSING THE
FACTUAL FINDINGS AND CONCLUSIONS OF THE LABOR ARBITER, AND DISREGARDING
THE EXPRESS ADMISSION OF PRIVATE RESPONDENTS THAT THEY DEFIED
PETITIONER'S ORDER TRANSFERRING THE PETITIONER'S OFFICIAL BUSINESS OFFICE
FROM LEZO TO KALIBO AND FOR THEM TO REPORT THEREAT.
2. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN CONCLUDING
THAT PRIVATE RESPONDENTS WERE REALLY WORKING OR RENDERING SERVICE ON
THE BASIS OF THE COMPUTATION OF WAGES AND THE BIASED RECOMMENDATION
SUBMITTED BY LEYSON WHO IS ONE OF THE PRIVATE RESPONDENTS WHO DEFIED
THE LAWFUL ORDERS OF PETITIONER.
3. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN CONSIDERING
THE ASSURANCE BY PETITIONER'S GENERAL MANAGER MATIONG TO RECOMMEND
THE PAYMENT OF THE CLAIMS OF PRIVATE RESPONDENTS AS AN ADMISSION OF
LIABILITY OR A RECOGNITION THAT COMPENSABLE SERVICES WERE ACTUALLY
RENDERED.

8 | Page

4. GRANTING THAT PRIVATE RESPONDENTS CONTINUED TO REPORT AT THE LEZO

OFFICE, IT IS STILL GRAVE ABUSE OF DISCRETION FOR PUBLIC RESPONDENT TO
CONSIDER THAT PETITIONER IS LEGALLY OBLIGATED TO RECOGNIZE SAID
CIRCUMSTANCE AS COMPENSABLE SERVICE AND PAY WAGES TO PRIVATE
RESPONDENTS FOR DEFYING THE ORDER FOR THEM TO REPORT FOR WORK AT THE
KALIBO OFFICE WHERE THE OFFICIAL BUSINESS AND OPERATIONS WERE
CONDUCTED.
5. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AND SERIOUS,
PATENT AND PALPABLE ERROR IN RULING THAT THE "NO WORK, NO PAY" PRINCIPLE
DOES NOT APPLY FOR LACK OF EVIDENTIARY SUPPORT WHEN PRIVATE RESPONDENTS
ALREADY ADMITTED THAT THEY DID NOT REPORT FOR WORK AT THE KALIBO OFFICE.
6. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN ACCORDING
WEIGHT AND CREDIBILITY TO THE SELF-SERVING AND BIASED ALLEGATIONS OF
PRIVATE RESPONDENTS, AND ACCEPTING THEM AS PROOF, DESPITE THE ESTABLISHED
FACT AND ADMISSION THAT PRIVATE RESPONDENTS DID NOT REPORT FOR WORK AT
THE KALIBO OFFICE, OR THAT THEY WERE NEVER PAID FOR ANY WAGES FROM THE
TIME THEY DEFIED PETITIONER'S ORDERS.
Petitioner contends that public respondent committed grave abuse of discretion in finding that private
respondents are entitled to their wages from June 16, 1992 to March 18, 1993, thus disregarding the
principle of "no work, no pay". It alleges that private respondents stated in their pleadings that they not
only objected to the transfer of petitioner's business office to Kalibo but they also defied the directive
to report thereat because they considered the transfer illegal. It further claims that private respondents
refused to recognize the authority of petitioner's lawful officers and agents resulting in the disruption
of petitioner's business operations in its official business office in Lezo, Aklan, forcing petitioner to
transfer its office from Lezo to Kalibo transferring all its equipments, records and facilities; that private
respondents cannot choose where to work, thus, when they defied the lawful orders of petitioner to
report at Kalibo, private respondents were considered dismissed as far as petitioner was concerned.
Petitioner also disputes private respondents' allegation that they were paid their salaries from January
to May 1992 and again from March 19, 1993 up to the present but not for the period from June 1992 to
March 18, 1993 saying that private respondents illegally collected fees and charges due petitioner and
appropriated the collections among themselves for which reason they are claiming salaries only for the
period from June 1992 to March 1993 and that private respondents were paid their salaries starting
only in April 1993 when petitioner's Board agreed to accept private respondents back to work at Kalibo

office out of compassion and not for the reason that they rendered service at the Lezo office. Petitioner
also adds that compensable service is best shown by timecards, payslips and other similar documents
and it was an error for public respondent to consider the computation of the claims for wages and
benefits submitted merely by private respondents as substantial evidence.
The Solicitor General filed its Manifestation in lieu of Comment praying that the decision of
respondent NLRC be set aside and payment of wages claimed by private respondents be denied for
lack of merit alleging that private respondents could not have worked for petitioner's office in Lezo
during the stated period since petitioner transferred its business operation in Kalibo where all its
records and equipments were brought; that computations of the claims for wages and benefits
submitted by private respondents to petitioner is not proof of rendition of work. Filing its own
Comment, public respondent NLRC claims that the original and exclusive jurisdiction of this Court to
review decisions or resolutions of respondent NLRC does not include a correction of its evaluation of
evidence as factual issues are not fit subject for certiorari.
Private respondents, in their Comment, allege that review of a decision of NLRC in a petition
for certiorari under Rule 65 does not include the correctness of its evaluation of the evidence but is
confined to issues of jurisdiction or grave abuse of discretion and that factual findings of
administrative bodies are entitled great weight, and accorded not only respect but even finality when
supported by substantial evidence. They claim that petitioner's Board of Directors passed an
unnumbered resolution on February 11, 1992 returning back the office to Lezo from Kalibo Aklan with
a directive for all employees to immediately report at Lezo; that the letter-reply of Atty. Mationg to the
letter of office manager Leyson that he will recommend the payment of the private respondents' salary
from June 16, 1992 to March 18, 1993 to the Board of Directors was an admission that private
respondent are entitled to such payment for services rendered. Private respondents state that in
appreciating the evidence in their favor, public respondent NLRC at most may be liable for errors of
judgment which, as differentiated from errors of jurisdiction, are not within the province of the special
civil action of certiorari.
Petitioner filed its Reply alleging that review of the decision of public respondent is proper if there is a
conflict in the factual findings of the labor arbiter and the NLRC and when the evidence is insufficient
and insubstantial to support NLRC's factual findings; that public respondent's findings that private
respondent rendered compensable services were merely based on private respondents' computation of
claims which is self-serving; that the alleged unnumbered board resolution dated February 11, 1992,
directing all employees to report to Lezo Officer was never implemented because it was not a valid
action of AKELCO's legitimate board.

9 | Page

The sole issue for determination is whether or not public respondent NLRC committed grave abuse of
discretion amounting to excess or want of jurisdiction when it reversed the finding of the Labor Arbiter
that private respondent refused to work under the lawful orders of the petitioner AKELCO
management; hence they are covered by the "no work, no pay" principle and are thus not entitled to the
claim for unpaid wages from June 16, 1992 to March 18, 1993.
We find merit in the petition.
At the outset, we reiterate the rule that in certiorari proceedings under Rule 65, this Court does not
assess and weigh the sufficiency of evidence upon which the labor arbiter and public respondent
NLRC based their resolutions. Our query is limited to the determination of whether or not public
respondent NLRC acted without or in excess of its jurisdiction or with grave abuse of discretion in
rendering the assailed resolutions.10 While administrative findings of fact are accorded great respect,
and even finality when supported by substantial evidence, nevertheless, when it can be shown that
administrative bodies grossly misappreciated evidence of such nature as to compel a contrary
conclusion, this court had not hesitated to reverse their factual findings. 11 Factual findings of
administrative agencies are not infallible and will be set aside when they fail the test of
arbitrariness.12Moreover, where the findings of NLRC contradict those of the labor arbiter, this Court,
in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the
questioned findings.13
We find cogent reason, as shown by the petitioner and the Solicitor General, not to affirm the factual
findings of public respondent NLRC.
We do not agree with the finding that private respondents had rendered services from June 16, 1992 to
March 18, 1993 so as to entitle them to payment of wages. Public respondent based its conclusion on
the following: (a) the letter dated April 7, 1993 of Pedrito L. Leyson, Office Manager of AKELCO
addressed to AKELCO's General Manager, Atty. Leovigildo T. Mationg, requesting for the payment of
private respondents' unpaid wages from June 16, 1992 to March 18, 1993; (b) the memorandum of said
Atty. Mationg dated 14 April 1993, in answer to the letter request of Pedrito Leyson where Atty.
Mationg made an assurance that he will recommend such request; (c) the private respondents' own
computation of their unpaid wages. We find that the foregoing does not constitute substantial evidence
to support the conclusion that private respondents are entitled to the payment of wages from June 16,
1992 to March 18, 1993. Substantial evidence is that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion.14 These evidences relied upon by public

respondent did not establish the fact that private respondents actually rendered services in the Kalibo
office during the stated period.
The letter of Pedrito Leyson to Atty. Mationg was considered by public respondent as evidence that
services were rendered by private respondents during the stated period, as the recommendation and
request came from the office manager who has direct knowledge regarding the services and
performance of employees under him. We are not convinced. Pedrito Leyson is one of the herein
private respondents who are claiming for unpaid wages and we find his actuation of requesting in
behalf of the other private respondents for the payment of their backwages to be biased and selfserving, thus not credible.
On the other hand, petitioner was able to show that private respondents did not render services during
the stated period. Petitioner's evidences show that on January 22, 1992, petitioner's Board of Directors
passed a resolution temporarily transferring the Office from Lezo, Aklan to Amon Theater, Kalibo,
Aklan upon the recommendation of Atty. Leovigildo Mationg, then project supervisor, on the ground
that the office at Lezo was dangerous and unsafe. Such transfer was approved by then NEA
Administrator, Rodrigo E. Cabrera, in a letter dated February 6, 1992 addressed to petitioner's Board of
Directors.15 Thus, the NEA Administrator, in the exercise of supervision and control over all electric
cooperatives, including petitioner, wrote a letter dated February 6, 1992 addressed to the Provincial
Director PC/INP Kalibo Aklan requesting for military assistance for the petitioner's team in retrieving
the electric cooperative's equipments and other removable facilities and/or fixtures consequential to the
transfer of its principal business address from Lezo to Kalibo and in maintaining peace and order in the
cooperative's coverage area.16 The foregoing establishes the fact that the continuous operation of the
petitioner's business office in Lezo Aklan would pose a serious and imminent threat to petitioner's
officials and other employees, hence the necessity of temporarily transferring the operation of its
business office from Lezo to Kalibo. Such transfer was done in the exercise of a management
prerogative and in the absence of contrary evidence is not unjustified. With the transfer of petitioner's
business office from its former office, Lezo, to Kalibo, Aklan, its equipments, records and facilities
were also removed from Lezo and brought to the Kalibo office where petitioner's official business was
being conducted; thus private respondents' allegations that they continued to report for work at Lezo to
support their claim for wages has no basis.
Moreover, private respondents in their position paper admitted that they did not report at the Kalibo
office, as Lezo remained to be their office where they continuously reported, to wit:17

10 | P a g e

On January 22, 1991 by way of a resolution of the Board of Directors of AKELCO it allowed the
temporary holding of office at Amon Theater, Kalibo, Aklan, per information by their project
supervisor, Atty. Leovigildo Mationg that their head office is closed and that it is dangerous to hold
office thereat.
Nevertheless, majority of the employees including the herein complainants, continued to report for
work at Lezo, Aklan and were paid of their salaries.
xxx

xxx

xxx

The transfer of office from Lezo, Aklan to Kalibo, Aklan being illegal for failure to comply with the
legal requirements under P.D. 269, the complainants remained and continued to work at the Lezo
Office until they were illegally locked out therefrom by the respondents. Despite the illegal lock out
however, complainants continued to report daily to the location of the Lezo Office, prepared to
continue in the performance of their regular duties.
Complainants thus could not be considered to have abandoned their work as Lezo remained to be their
office and not Kalibo despite the temporary transfer thereto. Further the fact that they were allowed to
draw their salaries up to May, 1992 is an acknowledgment by the management that they are working
during the period.
xxx

xxx

xxx

It must be pointed out that complainants worked and continuously reported at Lezo office despite the
management holding office at Kalibo. In fact, they were paid their wages before it was withheld and
then were allowed to draw their salaries again on March 1993 while reporting at Lezo up to the
present.
Respondents' acts and payment of complainants' salaries and again from March 1993 is an unequivocal
recognition on the part of respondents that the work of complainants is continuing and uninterrupted
and they are therefore entitled to their unpaid wages for the period from June 1992 to March 1993.
The admission is detrimental to private respondents' cause. Their excuse is that the transfer to Kalibo
was illegal but we agree with the Labor Arbiter that it was not for private respondents to declare the
management's act of temporarily transferring the AKELCO office to Kalibo as an illegal act. There is
no allegation nor proof that the transfer was made in bad faith or with malice. The Labor Arbiter
correctly rationalized in its decision as follows:18

We do not subscribe to complainants theory and assertions. They, by their own allegations, have
unilaterally committed acts in violation of management's/respondents' directives purely classified as
management prerogative. They have taken amongst themselves declaring management's acts
oftemporarily transferring the holding of the AKELCO office from Lezo to Kalibo, Aklan as illegal. It
is never incumbent upon themselves to declare the same as such. It is lodged in another forum or body
legally mantled to do the same. What they should have done was first to follow management's
orders temporarilytransferring office for it has the first presumption of legality. Further, the transfer
was only temporary. For:
The employer as owner of the business, also has inherent rights, among which are the right to select the
persons to be hired and discharge them for just and valid cause; to promulgate and enforce reasonable
employment rules and regulations and to modify, amend or revoke the same; to designate the work as
well as the employee or employees to perform it; to transfer or promote employees; to schedule, direct,
curtail or control company operations; to introduce or install new or improved labor or money savings
methods, facilities or devices; to create, merge, divide, reclassify and abolish departments or positions
in the company and to sell or close the business.
xxx

xxx

xxx

Even as the law is solicitous of the welfare of the employees it must also protect the right of an
employer to exercise what are clearly management prerogatives. The free will of management to
conduct its own business affairs to achieve its purpose can not be denied. The transfer of assignment of
a medical representative from Manila to the province has therefore been held lawful where this was
demanded by the requirements of the drug company's marketing operations and the former had at the
time of his employment undertaken to accept assignment anywhere in the Philippines. (Abbot
Laboratories (Phils.), Inc., et al. vs. NLRC, et al., G.R. No. L-76959, Oct. 12, 1987).
It is the employer's prerogative to abolish a position which it deems no longer necessary, and the
courts, absent any findings of malice on the part of the management, cannot erase that initiative simply
to protect the person holding office (Great Pacific Life Assurance Corporation vs. NLRC, et al., G.R.
No. 88011, July 30, 1990).
Private respondents claim that petitioner's Board of Directors passed an unnumbered resolution dated
February 11, 1992 returning back the office from its temporary office in Kalibo to Lezo. Thus, they did
not defy any lawful order of petitioner and were justified in continuing to remain at Lezo office. This
allegation was controverted by petitioner in its Reply saying that such unnumbered resolution was

11 | P a g e

never implemented as it was not a valid act of petitioner's Board. We are convinced by petitioner's
argument that such unnumbered resolution was not a valid act of petitioners legitimate Board
considering the subsequent actions taken by the petitioner's Board of Directors decrying private
respondents inimical act and defiance, to wit (1) Resolution No. 411, s. of 1992 on September 9, 1992,
dismissing all AKELCO employees who were on illegal strike and who refused to return to work
effective January 31, 1992 despite the directive of the NEA project supervisor and petitioner's acting
general manager;19(2) Resolution No. 477, s. of 1993 dated March 10, 1993 accepting back private
respondents who staged illegal strike, defied legal orders and issuances, out of compassion,
reconciliation, Christian values and humanitarian reason subject to the condition of "no work, no
pay"20 (3) Resolution No. 496, s. of 1993 dated June 4, 1993, rejecting the demands of private
respondents for backwages from June 16, 1992 to March 1993 adopting the policy of "no work, no
pay" as such demand has no basis, and directing the COOP Legal Counsel to file criminal cases against
employees who misappropriated collections and officers who authorized disbursements of funds
without legal authority from the NEA and the AKELCO Board.21 If indeed there was a valid board
resolution transferring back petitioner's office to Lezo from its temporary office in Kalibo, there was
no need for the Board to pass the above-cited resolutions.
We are also unable to agree with public respondent NLRC when it held that the assurance made by
Atty. Mationg to the letter-request of office manager Leyson for the payment of private respondents'
wages from June 1992 to March 1993 was an admission on the part of general manager Mationg that
private respondents are indeed entitled to the same. The letter reply of Atty. Mationg to Leyson merely
stated that he will recommend the request for payment of backwages to the Board of Directors for their
consideration and appropriate action and nothing else, thus, the ultimate approval will come from the
Board of Directors. We find well-taken the argument advanced by the Solicitor General as follows: 22
The allegation of private respondents that petitioner had already approved payment of their wages is
without basis. Mationg's offer to recommend the payment of private respondents' wages is hardly
approval of their claim for wages. It is just an undertaking to recommend payment. Moreover, the offer
is conditional. It is subject to the condition that petitioner's Board of Directors will give its approval
and that funds were available. Mationg's reply to Leyson's letter for payment of wages did not
constitute approval or assurance of payment. The fact is that, the Board of Directors of petitioner
rejected private respondents demand for payment (Board Resolution No. 496, s. 1993).
We are accordingly constrained to overturn public respondent's findings that petitioner is not justified
in its refusal to pay private respondents' wages and other fringe benefits from June 16, 1992 to March
18, 1993; public respondents stated that private respondents were paid their salaries from January to

May 1992 and again from March 19, 1993 up to the present. As cited earlier, petitioner's Board in a
Resolution No. 411 dated September 9, 1992 dismissed private respondents who were on illegal strike
and who refused to report for work at Kalibo office effective January 31, 1992; since no services were
rendered by private respondents they were not paid their salaries. Private respondents never questioned
nor controverted the Resolution dismissing them and nowhere in their Comment is it stated that they
questioned such dismissal. Private respondents also have not rebutted petitioner's claim that private
respondents illegally collected fees and charges due petitioner and appropriated the collections among
themselves to satisfy their salaries from January to May 1992, for which reason, private respondents
are merely claiming salaries only for the period from June 16, 1992 to March 1993.

who asserts the affirmative allegation, the plaintiff or complainant has to prove his affirmative
allegations in the complaint and the defendant or the respondent has to prove the affirmative allegation
in his affirmative defenses and counterclaim.25

Private respondents were dismissed by petitioner effective January 31, 1992 and were accepted back
by petitioner, as an act of compassion, subject to the condition of "no work, no pay" effective March
1993 which explains why private respondents were allowed to draw their salaries again. Notably, the
letter-request of Mr. Leyson for the payment of backwages and other fringe benefits in behalf of
private respondents was made only in April 1993, after a Board Resolution accepting them back to
work out of compassion and humanitarian reason. It took private respondents about ten months before
they requested for the payment of their backwages, and the long inaction of private respondents to file
their claim for unpaid wages cast doubts as to the veracity of their claim.

SO ORDERED.

The age-old rule governing the relation between labor and capital, or management and employee of a
"fair day's wage for a fair day's labor" remains as the basic factor in determining employees' wages. If
there is no work performed by the employee there can be no wage or pay unless, of course, the laborer
was able, willing and ready to work but was illegally locked out, suspended or dismissed, 23 or
otherwise illegally prevented from working,24 a situation which we find is not present in the instant
case. It would neither be fair nor just to allow private respondents to recover something they have not
earned and could not have earned because they did not render services at the Kalibo office during the
stated period.
Finally, we hold that public respondent erred in merely relying on the computations of compensable
services submitted by private respondents. There must be competent proof such as time cards or office
records to show that they actually rendered compensable service during the stated period to entitle
them to wages. It has been established that the petitioner's business office was .transferred to Kalibo
and all its equipments, records and facilities were transferred thereat and that it conducted its official
business in Kalibo during the period in question. It was incumbent upon private respondents to prove
that they indeed rendered services for petitioner, which they failed to do. It is a basic rule in evidence
that each party must prove his affirmative allegation. Since the burden of evidence lies with the party

12 | P a g e

WHEREFORE, in view of the foregoing, the petition for CERTIORARI is GRANTED. Consequently
the decision of public respondent NLRC dated April 20, 1995 and the Resolution dated July 28, 1995
in NLRC Case No. V-0143-94 are hereby REVERSED and SET ASIDE for having been rendered with
grave abuse of discretion amounting to lack or excess of jurisdiction. Private respondents complaint for
payment of unpaid wages before the Labor Arbiter is DISMISSED.1wphi1.nt

Melo, Vitug, Panganiban and Purisima, JJ., concur.

FIRST DIVISION
[G.R. No. 128845. June 1, 2000]
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON.
LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and Employment;
HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and
Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of International
School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.
DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be given
equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a
principle that rests on fundamental notions of justice. That is the principle we uphold today.
Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents.[1] To enable the School to continue carrying out its

educational program and improve its standard of instruction, Section 2(c) 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.
Accordingly, 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 one's domicile?
b.....Where is one's 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?[2]
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 School explains:
A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path-all for the purpose of pursuing his
profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic
realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance
for the education of one's children, adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.

13 | P a g e

Because of a limited tenure, the foreign hire is confronted again with the same economic reality
after his term: that he will eventually and inevitably return to his home country where he will have to
confront the uncertainty of obtaining suitable employment after a long period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international education.
[3]

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members"[4] of the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included
in the appropriate bargaining unit, eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in
favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's
motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all,
with nationalities other than Filipino, who have been hired locally and classified as local hires. [5]The
Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the
Filipino local-hires:
The compensation package given to local-hires has been shown to apply to all, regardless of race.
Truth to tell, there are foreigners who have been hired locally and who are paid equally as Filipino
local hires.[6]
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:

The principle "equal pay for equal work" does not find application in the present case. The
international character of the School requires the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We agree that certain amenities have to be provided
to these people in order to entice them to render their services in the Philippines and in the process
remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the
local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would
also require parity in other terms and conditions of employment which include the employment
contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof
provided that the Superintendent of the School has the discretion to recruit and hire expatriate teachers
from abroad, under terms and conditions that are consistent with accepted international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary
schedule. The 25% differential is reflective of the agreed value of system displacement and contracted
status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two
types of employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an
established principle of constitutional law that the guarantee of equal protection of the laws is not
violated by legislation or private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all members of the same class. Verily,
there is a substantial distinction between foreign hires and local hires, the former enjoying only a
limited tenure, having no amenities of their own in the Philippines and have to be given a good
compensation package in order to attract them to join the teaching faculty of the School.[7]

14 | P a g e

We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and
laws reflect the policy against these evils. The Constitution[8] in the Article on Social Justice and
Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect and
enhance the right of all people to human dignity, reduce social, economic, and political inequalities."
The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in
the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and
good faith."
International law, which springs from general principles of law,[9] likewise proscribes discrimination.
General principles of law include principles of equity,[10] i.e., the general principles of fairness and
justice, based on the test of what is reasonable.[11] The Universal Declaration of Human Rights,[12] the
International Covenant on Economic, Social, and Cultural Rights,[13] the International Convention on
the Elimination of All Forms of Racial Discrimination,[14] the Convention against Discrimination in
Education,[15] the Convention (No. 111) Concerning Discrimination in Respect of Employment and
Occupation[16] - all embody the general principle against discrimination, the very antithesis of fairness
and justice. The Philippines, through its Constitution, has incorporated this principle as part of its
national laws.
In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.
The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace - the factory, the office or the field - but include
as well the manner by which employers treat their employees.
The Constitution[18] also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code[19] provides that the State shall "ensure equal work opportunities regardless
of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State,
in spite of its primordial obligation to promote and ensure equal employment opportunities, closes its
eyes to unequal and discriminatory terms and conditions of employment.[20]
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes[21] the payment of lesser compensation to a female employee as
against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an

employer to discriminate in regard to wages in order to encourage or discourage membership in any

labor organization.
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
favourable 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;
x x x.
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. [22] This rule applies to the
School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires.[23] The Court finds this argument a little cavalier. If an employer accords
employees the same position and rank, the presumption is that these employees perform equal work.
This presumption is borne by logic and human experience. 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.
That would be adding insult to injury. The employer has discriminated against that employee; it is for
the employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that foreignhires perform 25% more efficiently or effectively than the local-hires. Both groups have similar
functions and responsibilities, which they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.

15 | P a g e

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration
paid at regular intervals for the rendering of services." In Songco v. National Labor Relations
Commission,[24] we said that:
"salary" means a recompense or consideration made to a person for his pains or industry in another
man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of compensation for services
rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires
and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor"
and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates.
The dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain
benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare," [25] "to
afford labor full protection."[26] The State, therefore, has the right and duty to regulate the relations
between labor and capital.[27] These relations are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining agreements included, must yield to the
common good.[28] Should such contracts contain stipulations that are contrary to public policy, courts
will not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of
the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does
not deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the
entire body of employees, consistent with equity to the employer indicate to be the best suited to serve
the reciprocal rights and duties of the parties under the collective bargaining provisions of the
law."[29] The factors in determining the appropriate collective bargaining unit are (1) the will of the

employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial
similarity of work and duties, or similarity of compensation and working conditions (Substantial
Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status.
[30]
The basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the exercise of their collective bargaining rights.
[31]

It does not appear that foreign-hires have indicated their intention to be grouped together with localhires for purposes of collective bargaining. The collective bargaining history in the School also shows
that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar functions under the same working
conditions as the local-hires, foreign-hires are accorded certain benefits not granted to local-hires.
These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel allowance,
are reasonably related to their status as foreign-hires, and justify the exclusion of the former from the
latter. To include foreign-hires in a bargaining unit with local-hires would not assure either group the
exercise of their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART.
The Orders of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are
hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of
according foreign-hires higher salaries than local-hires.

DECISION
ROMERO, J.:
Whether or not commissions are included in determining compliance with the minimum wage
requirement is the principal issue presented in this petition.
Petitioner Antonio Iran is engaged in softdrinks merchandising and distribution in Mandaue City,
Cebu, employing truck drivers who double as salesmen, truck helpers, and non-field personnel in
pursuit thereof. Petitioner hired private respondents Godofredo Petralba, Moreno Cadalso, Celso
Labiaga and Fernando Colina as drivers/salesmen while private respondents Pepito Tecson, Apolinario
Gimena, Jesus Bandilao, Edwin Martin and Diosdado Gonzalgo were hired as truck helpers.
Drivers/salesmen drove petitioners delivery trucks and promoted, sold and delivered softdrinks to
various outlets in Mandaue City. The truck helpers assisted in the delivery of softdrinks to the different
outlets covered by the driver/salesmen.
As part of their compensation, the driver/salesmen and truck helpers of petitioner received
commissions per case of softdrinks sold at the following rates:
SALESMEN:
Ten Centavos (P0.10) per case of Regular softdrinks.

SO ORDERED.

Twelve Centavos (P0.12) per case of Family Size softdrinks.

Puno, and Pardo, JJ., concur.

TRUCK HELPERS:

Davide, Jr., C.J., (Chairman), on official leave. Ynares-Santiago, J., on leave.

Eight Centavos (P0.08) per case of Regular softdrinks.

THIRD DIVISION
[G.R. No. 121927. April 22, 1998]
ANTONIO W. IRAN (doing business under the name and style of Tones Iran
Enterprises), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Fourth
Division), GODOFREDO O. PETRALBA, MORENO CADALSO, PEPITO TECSON,
APOLINARIO GOTHONG GEMINA, JESUS BANDILAO, EDWIN MARTIN, CELSO
LABIAGA, DIOSDADO GONZALGO, FERNANDO M. COLINA, respondents.

16 | P a g e

Ten Centavos (P0.10) per case of Family Size softdrinks.

Sometime in June 1991, petitioner, while conducting an audit of his operations, discovered cash
shortages and irregularities allegedly committed by private respondents. Pending the investigation of
irregularities and settlement of the cash shortages, petitioner required private respondents to report for
work everyday. They were not allowed, however, to go on their respective routes. A few days
thereafter, despite aforesaid order, private respondents stopped reporting for work, prompting
petitioner to conclude that the former had abandoned their employment. Consequently, petitioner

terminated their services. He also filed on November 7, 1991, a complaint for estafa against private
respondents.
On the other hand, private respondents, on December 5, 1991, filed complaints against petitioner for
illegal dismissal, illegal deduction, underpayment of wages, premium pay for holiday and rest day,
holiday pay, service incentive leave pay, 13th month pay, allowances, separation pay, recovery of cash
bond, damages and attorneys fees. Said complaints were consolidated and docketed as Rab VII-121791-91, RAB VII-12-1825-91 and RAB VII-12-1826-91, and assigned to Labor Arbiter Ernesto F.
Carreon.
The labor arbiter found that petitioner had validly terminated private respondents, there being just
cause for the latters dismissal. Nevertheless, he also ruled that petitioner had not complied with
minimum wage requirements in compensating private respondents, and had failed to pay private
respondents their 13th month pay. The labor arbiter, thus, rendered a decision on February 18, 1993, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Antonio W.
Iran to pay the complainants the following:
1. Celso Labiaga P10,033.10
2. Godofredo Petralba 1,250.00
3. Fernando Colina 11,753.10
4. Moreno Cadalso 11,753.10
5. Diosdado Gonzalgo 7,159.04
6. Apolinario Gimena 8,312.24
7. Jesus Bandilao 14,729.50
8. Pepito Tecson 9,126.55
--------------74,116.63

17 | P a g e

Attorneys Fees (10%)

of the gross award 7,411.66
------------GRAND TOTAL AWARD P81,528.29
========
The other claims are dismissed for lack of merit.
SO ORDERED.[1]
Both parties seasonably appealed to the NLRC, with petitioner contesting the labor arbiters refusal to
include the commissions he paid to private respondents in determining compliance with the minimum
wage requirement. He also presented, for the first time on appeal, vouchers denominated as 13th month
pay signed by private respondents, as proof that petitioner had already paid the latter their 13 th month
pay. Private respondents, on the other hand, contested the findings of the labor arbiter holding that they
had not been illegally dismissed, as well as mathematical errors in computing Jesus Bandilaos wage
differentials. The NLRC, in its decision of December 21, 1994, affirmed the validity of private
respondents dismissal, but found that said dismissal did not comply with the procedural requirements
for dismissing employees. Furthermore, it corrected the labor arbiters award of wage differentials to
Jesus Bandilao. The dispositive portion of said decision reads:
WHEREFORE, premises considered, the decision is hereby MODIFIED in that complainant Jesus
Bandilaos computation for wage differential is corrected from P154.00 to P4,550.00. In addition to all
the monetary claim (sic) originally awarded by the Labor Arbiter a quo, P1,000.00 is hereby granted to
each complainants (sic)as indemnity fee for failure of respondents to observe procedural due process.
SO ORDERED.[2]
Petitioners motion for reconsideration of said decision was denied on July 31, 1995, prompting him to
elevate this case to this Court, raising the following issues:
1. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AND
CONTRARY TO LAW AND JURISPRUDENCE IN AFFIRMING THE DECISION OF THE LABOR

ARBITER A QUO EXCLUDING THE COMMISSIONS RECEIVED BY THE PRIVATE

RESPONDENTS IN COMPUTING THEIR WAGES;
2. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN
FINDING PETITIONER GUILTY OF PROCEDURAL LAPSES IN TERMINATING PRIVATE
RESPONDENTS AND IN AWARDING EACH OF THE LATTER P1,000.00 AS INDEMNITY FEE;
3. THE HONORABLE COMMISSION GRAVELY ERRED IN NOT CREDITING THE ADVANCE
AMOUNT RECEIVED BY THE PRIVATE RESPONDENTS AS PART OF THEIR 13THMONTH
PAY.
The petition is impressed with merit.
The NLRC, in denying petitioners claim that commissions be included in determining compliance with
the minimum wage ratiocinated thus:
Respondent (petitioner herein) insist assiduously that the commission should be included in the
computation of actual wages per agreement. We will not fall prey to this fallacious argument. An
employee should receive the minimum wage as mandated by law and that the attainment of the
minimum wage should not be dependent on the commission earned by an employee. A commission is
an incentive for an employee to work harder for a better production that will benefit both the employer
and the employee. To include the commission in the computation of wage in order to comply with
labor standard laws is to negate the practice that a commission is granted after an employee has already
earned the minimum wage or even beyond it.[3]
This holding is unsupported by law and jurisprudence. Article 97(f) of the Labor Code defines wage as
follows:
Art. 97(f) Wage paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece,
or commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee.
x x x x x x x x x. (Emphasis supplied)

18 | P a g e

This definition explicitly includes commissions as part of wages. While commissions are, indeed,
incentives or forms of encouragement to inspire employees to put a little more industry on the jobs
particularly assigned to them, still these commissions are direct remunerations for services rendered. In
fact, commissions have been defined as the recompense, compensation or reward of an agent,
salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a
percentage on the amount of his transactions or on the profit to the principal. The nature of the work of
a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that
commissions are part of a salesmans wage or salary.[4]
Thus, the commissions earned by private respondents in selling softdrinks constitute part of the
compensation or remuneration paid to drivers/salesmen and truck helpers for serving as such, and
hence, must be considered part of the wages paid them.
The NLRC asserts that the inclusion of commissions in the computation of wages would negate the
practice of granting commissions only after an employee has earned the minimum wage or over. While
such a practice does exist, the universality and prevalence of such a practice is questionable at best. In
truth, this Court has taken judicial notice of the fact that some salesmen do not receive any basic salary
but depend entirely on commissions and allowances or commissions alone, although an employeremployee relationship exists.[5] Undoubtedly, this salary structure is intended for the benefit of the
corporation establishing such, on the apparent assumption that thereby its salesmen would be moved to
greater enterprise and diligence and close more sales in the expectation of increasing their sales
commissions. This, however, does not detract from the character of such commissions as part of the
salary or wage paid to each of its salesmen for rendering services to the corporation.[6]
Likewise, there is no law mandating that commissions be paid only after the minimum wage has been
paid to the employee. Verily, the establishment of a minimum wage only sets a floor below which an
employees remuneration cannot fall, not that commissions are excluded from wages in determining
compliance with the minimum wage law. This conclusion is bolstered by Philippine Agricultural
Commercial and Industrial Workers Union vs. NLRC,[7] where this Court acknowledged that drivers
and conductors who are compensated purely on a commission basis are automatically entitled to the
basic minimum pay mandated by law should said commissions be less than their basic minimum for
eight hours work. It can, thus, be inferred that were said commissions equal to or even exceed the
minimum wage, the employer need not pay, in addition, the basic minimum pay prescribed by law. It
follows then that commissions are included in determining compliance with minimum wage
requirements.

With regard to the second issue, it is settled that in terminating employees, the employer must furnish
the worker with two written notices before the latter can be legally terminated: (a) a notice which
apprises the employee of the particular acts or omissions for which his dismissal is sought, and (b) the
subsequent notice which informs the employee of the employers decision to dismiss him. [8] (Italics
ours) Petitioner asseverates that no procedural lapses were committed by him in terminating private
respondents. In his own words:
when irregularities were discovered, that is, when the misappropriation of several thousands of pesos
was found out, the petitioner instructed private respondents to report back for work and settle their
accountabilities but the latter never reported for work. This instruction by the petitioner to report back
for work and settle their accountabilities served as notices to private respondents for the latter to
explain or account for the missing funds held in trust by them before they disappeared.[9]
Petitioner considers this return-to-work order as equivalent to the first notice apprising the employee of
the particular acts or omissions for which his dismissal is sought. But by petitioners own admission,
private respondents were never told in said notice that their dismissal was being sought, only that they
should settle their accountabilities. In petitioners incriminating words:
It should be emphasized here that at the time the misappropriation was discovered and subsequently
thereafter, the petitioners first concern was not effecting the dismissal of private respondents but the
recovery of the misappropriated funds thus the latter were advised to report back to work. [10]
As above-stated, the first notice should inform the employee that his dismissal is being sought. Its
absence in the present case makes the termination of private respondents defective, for which
petitioner must be sanctioned for his non-compliance with the requirements of or for failure to observe
due process.[11] The twin requirements of notice and hearing constitute the essential elements of due
process, and neither of these elements can be disregarded without running afoul of the constitutional
guarantee. Not being mere technicalities but the very essence of due process, to which every employee
is entitled so as to ensure that the employers prerogative to dismiss is not exercised arbitrarily,[12] these
requisites must be complied with strictly.
Petitioner makes much capital of private respondents failure to report to work, construing the same as
abandonment which thus authorized the latters dismissal. As correctly pointed out by the NLRC, to
which the Solicitor General agreed, Section 2 of Book V, Rule XIV of the Omnibus Rules
Implementing the Labor Code requires that in cases of abandonment of work, notice should be sent to
the workers last known address. If indeed private respondents had abandoned their jobs, it was

19 | P a g e

incumbent upon petitioner to comply with this requirement. This, petitioner failed to do, entitling
respondents to nominal damages in the amount of P5,000.00 each, in accordance with recent
jurisprudence,[13] to vindicate or recognize their right to procedural due process which was violated by
petitioner.
Lastly, petitioner argues that the NLRC gravely erred when it disregarded the vouchers presented by
the former as proof of his payment of 13th month pay to private respondents. While admitting that said
vouchers covered only a ten-day period, petitioner argues that the same should be credited as amounts
received by private respondents as part of their 13th month pay, Section 3(e) of the Rules and
Regulations Implementing P.D. No. 851 providing that the employer shall pay the difference when he
pays less than 1/12th of the employees basic salary.[14]
While it is true that the vouchers evidencing payments of 13th month pay were submitted only on
appeal, it would have been more in keeping with the directive of Article 221[15] of the Labor Code for
the NLRC to have taken the same into account.[16] Time and again, we have allowed evidence to be
submitted on appeal, emphasizing that, in labor cases, technical rules of evidence are not binding.
[17]
Labor officials should use every and all reasonable means to ascertain the facts in each case
speedily and objectively, without regard to technicalities of law or procedure.[18]
It must also be borne in mind that the intent of P.D. No. 851 is the granting of additional income in the
form of 13th month pay to employees not as yet receiving the same and not that a double burden should
be imposed on the employer who is already paying his employees a 13th month pay or its equivalent.
[19]
An employer who pays less than 1/12th of the employees basic salary as their 13th month pay is only
required to pay the difference.[20]
The foregoing notwithstanding, the vouchers presented by petitioner covers only a particular year. It
does not cover amounts for other years claimed by private respondents. It cannot be presumed that the
same amounts were given on said years. Hence, petitioner is entitled to credit only the amounts paid
for the particular year covered by said vouchers.
WHEREFORE, in view of the foregoing, the decision of the NLRC dated July 31, 1995, insofar as it
excludes the commissions received by private respondents in the determination of petitioners
compliance with the minimum wage law, as well as its exclusion of the particular amounts received by
private respondents as part of their 13th month pay is REVERSED andSET ASIDE. This case
is REMANDED to the Labor Arbiter for a recomputation of the alleged deficiencies. For nonobservance of procedural due process in effecting the dismissal of private respondents, said decision

is MODIFIED by increasing the award of nominal damages to private respondents from P1,000.00 to
P5,000.00 each. No costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Kapunan, and Purisima, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 172161

March 2, 2011

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON, Petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN LOPEZ,
EDGARDO ZUIGA and DANILO CAETE, Respondents.
DECISION
MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006 Decision1 and the March 31,
2006 Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with
modification the March 31, 2004 Decision3 and December 15, 2004 Resolution4 of the National Labor
Relations Commission (NLRC).The NLRC Decision found the petitioners, SLL International Cables
Specialist (SLL) and its manager, Sonny L. Lagon (petitioners), not liable for the illegal dismissal of
Roldan Lopez, Danilo Caete and Edgardo Zuiga(private respondents) but held them jointly and
severally liable for payment of certain monetary claims to said respondents.
A chronicle of the factual antecedents has been succinctly summarized by the CA as follows:
Sometime in 1996, and January 1997, private respondents Roldan Lopez (Lopez for brevity) and
Danilo Caete (Caete for brevity), and Edgardo Zuiga (Zuiga for brevity) respectively, were hired

20 | P a g e

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. After their training, Zuiga, Caete and Lopez were engaged as project employees
by the petitioners in 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 by the Regional Wage Board (RWB)
and in October of the same year, the latter was increased to P155.00. Sometime in March 1998, Zuiga
and Caete were engaged again by Lagon as project employees for its PLDT Antipolo, Rizal project,
which ended sometime in (sic) the late September 1998. As a consequence, Zuiga and Caetes
employment was terminated. For this project, Zuiga and Caete received only the wage of P145.00
daily. The minimum prescribed wage for Rizal at that time was P160.00.
Sometime in late November 1998, private respondents re-applied in the Racitelcom project of Lagon in
Bulacan. Zuiga and Caete were re-employed. Lopez was also hired for the said specific project. For
this, private respondents received the wage of P145.00. Again, after the completion of their project in
March 1999, private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th 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, 13th month
pay for 1997 and 1998 and service incentive leave pay as well as damages and attorneys fees.

In their answers, petitioners admit employment of private respondents but claimed that the latter were
only project employees[,] for their services were merely engaged for a specific project or undertaking
and the same were covered by contracts duly signed by private respondents. Petitioners further alleged
that the food allowance ofP63.00 per day as well as private respondents allowance for lodging house,
transportation, electricity, water and snacks allowance should be added to their basic pay. With these,
petitioners claimed that private respondents received higher wage rate than that prescribed in Rizal and
Manila.
Lastly, petitioners alleged that since the workplaces of private respondents were all in Manila, the
complaint should be filed there. Thus, petitioners prayed for the dismissal of the complaint for lack of
jurisdiction and utter lack of merit. (Citations omitted.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his decision5 declaring that his
office had jurisdiction to hear and decide the complaint filed by private respondents. Referring to Rule
IV, Sec. 1 (a) of the NLRC Rules of Procedure prevailing at that time,6 the LA ruled that it had
jurisdiction because the "workplace," as defined in the said rule, included the place where the
employee was supposed to report back after a temporary detail, assignment or travel, which in this case
was Cebu.
As to the status of their employment, the LA opined that private respondents were regular employees
because they were repeatedly hired by petitioners and they performed activities which were usual,
necessary and desirable in the business or trade of the employer.
With regard to the underpayment of wages, the LA found that private respondents were underpaid. It
ruled that the free board and lodging, electricity, water, and food enjoyed by them could not be
included in the computation of their wages because these were given without their written consent.
The LA, however, found that petitioners were not liable for illegal dismissal. The LA viewed private
respondents act of going home as an act of indifference when petitioners decided to prohibit overtime
work.7
In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In addition, the NLRC
noted that not a single report of project completion was filed with the nearest Public Employment
Office as required
by the Department of Labor and Employment (DOLE) Department Order No. 19, Series of 1993.8 The
NLRC later denied9 the motion for reconsideration10 subsequently filed by petitioners.

21 | P a g e

When the matter was elevated to the CA on a petition for certiorari, it affirmed the findings that the
private respondents were regular employees. It considered the fact that they performed functions which
were the regular and usual business of petitioners. According to the CA, they were clearly members of
a work pool from which petitioners drew their project employees.
The CA also stated that the failure of petitioners to comply with the simple but compulsory
requirement to submit a report of termination to the nearest Public Employment Office every time
private respondents employment was terminated was proof that the latter were not project employees
but regular employees.
The CA likewise found that the private respondents were underpaid. It ruled that the board and
lodging, electricity, water, and food enjoyed by the private respondents could not be included in the
computation of their wages because these were given without their written consent. The CA added that
the private respondents were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal dismissal. The CA opined that it was the
petitioners prerogative to grant or deny any request for overtime work and that the private
respondents act of leaving the workplace after their request was denied was an act of abandonment.
In modifying the decision of the labor tribunal, however, the CA noted that respondent Roldan Lopez
did not work in the Antipolo project and, thus, was not entitled to wage differentials. Also, in
computing the differentials for the period January and February 2000, the CA disagreed in the award of
differentials based on the minimum daily wage of P223.00, as the prevailing minimum daily wage then
was only P213.00. Petitioners sought reconsideration but the CA denied it in its March 31, 2006
Resolution.11
In this petition for review on certiorari,12 petitioners seek the reversal and setting aside of the CA
decision anchored on this lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW IN AWARDING
WAGE DIFFERENTIALS TO THE PRIVATE COMPLAINANTS ON THE BASES OF MERE
TECHNICALITIES, THAT IS, FOR LACK OF WRITTEN CONFORMITY x x x AND LACK OF
NOTICE TO THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)[,] AND THUS, THE
COURT OF APPEALS GRAVELY ERRED IN AFFIRMING WITH MODIFICATION THE NLRC
DECISION IN THE LIGHT OF THE RULING IN THE CASE OF JENNY M. AGABON and

VIRGILIO AGABON vs, NLRC, ET AL., GR NO. 158963, NOVEMBER 17, 2004, 442 SCRA 573,
[AND SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME PHILIPPINES, INC.
VS. NAGAKAKAISANG EMPLEYADO NG WELLCOME-DFA (NEW DFA), ET AL., GR NO.
149349, 11 MARCH 2005], WHICH FINDS APPLICATION IN THE INSTANT CASE BY
ANALOGY.13
Petitioners reiterated their position that the value of the facilities that the private respondents enjoyed
should be included in the computation of the "wages" received by them. They argued that the rulings in
Agabon v. NLRC14and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng WellcomeDFA15 should be applied by analogy, in the sense that the lack of written acceptance of the employees
of the facilities enjoyed by them should not mean that the value of the facilities could not be included
in the computation of the private respondents "wages."
On November 29, 2006, the Court resolved to issue a Temporary Restraining Order (TRO) enjoining
the public respondent from enforcing the NLRC and CA decisions until further orders from the Court.
After a thorough review of the records, however, the Court finds no merit in the petition.
This petition generally involves factual issues, such as, whether or not there is evidence on record to
support the findings of the LA, the NLRC and the CA that private respondents were project or regular
employees and that their salary differentials had been paid. This calls for a re-examination of the
evidence, which the Court cannot entertain. Settled is the rule that factual findings of labor officials,
who are deemed to have acquired expertise in matters within their respective jurisdiction, are generally
accorded not only respect but even finality, and bind the Court when supported by substantial
evidence. It is not the Courts function to assess and evaluate the evidence
all over again, particularly where the findings of both the Labor tribunals and the CA concur. 16
As a general rule, on payment of wages, a party who alleges payment as a defense has the burden of
proving it.17 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 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.18

22 | P a g e

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.
Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are
regular or non-regular employees.
Section 3, Rule VII of the Rules to Implement the Labor Code19 specifically enumerates those who are
not covered by the payment of minimum wage. Project employees are not among them.
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.20 Mere availment
is not sufficient to allow deductions from employees wages.21
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 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.
The Court, at this point, makes a distinction between "facilities" and "supplements." It is of the view
that the food and lodging, or the electricity and water allegedly consumed by private respondents in
this case were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge
Co.,22 the two terms were distinguished from one another in this wise:
"Supplements," therefore, constitute extra remuneration or special privileges or benefits given to or
received by the laborers over and above their ordinary earnings or wages. "Facilities," on the other
hand, are items of expense necessary for the laborer's and his family's existence and subsistence so that

by express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the
employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay
for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning 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. 23 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.1avvphi1
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.
WHEREFORE, the petition is DENIED. The temporary restraining order issued by the Court on
November 29, 2006 is deemed, as it is hereby ordered, DISSOLVED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 110068 February 15, 1995
PHILIPPINE DUPLICATORS, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS
EMPLOYEES UNION-TUPAS,respondents.
RESOLUTION

23 | P a g e

FELICIANO, J.:
On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the
Petition forCertiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068.
The Court upheld the decision of public respondent National Labor Relations Commission (NLRC),
which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month
pay to private respondent employees computed on the basis of their fixed wages plus sales
commissions. The Third Division also denied with finality on 15 December 1993 the Motion for
Reconsideration filed (on 12 December 1993) by petitioner.
On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for
Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the
decision handed down by this Court, through its Second Division, on 10 December 1993 in the two (2)
consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji
Xerox Corp. vs. Hon. Cresenciano B.Trajano, in G.R. Nos. 92174 and 102552, respectively. In its
decision, the Second Division inter alia declared null and void the second paragraph of Section 5
(a) 1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the
decision in the Duplicators case should now be considered as having been abandoned or reversed by
the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the
conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set aside
and another be entered directing the dismissal of the money claims of private respondent Philippine
Duplicators' Employees' Union.
In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's
Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for
Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation,
and inorder to settle the condition of the relevant case law, accepted G.R. No. 110068 as a banc case.
Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well
as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the
doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions
must fail.
The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis.
The Boie-Takeda decision was promulgated a month after this Court, (through its Third Division), had
rendered the decision in the instant case. Also, the petitioner's (first) Motion for Reconsideration of the

decision dated 10 November 1993 had already been denied, with finality, on 15 December
1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.

Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a year. We note
the following facts on record:

Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised
Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987, by then
Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for
Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity in
opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's
theory, at this late stage of the proceedings, cannot be allowed.

Salesmen's Total Earnings and 13th Month Pay

For the Year 1986 2

More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly opposite
or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the doctrines
enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases present quite
different factual situations (although the same word "commissions" was used or invoked) the legal
characterizations of which must accordingly differ.
The Third Division in Durplicators found that:
In the instant case, there is no question that the sales commission earned by the salesmen who make or
close a sale of duplicating machines distributed by petitioner corporation, constitute part of the
compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the
"wage" or salary of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small
fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the
sales or incentive commissions earned on actual sales closed by them. No doubt this particular galary
structure was intended for the benefit of the petitioner corporation, on the apparent assumption that
thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the
expectation of increasing their sales commissions. This, however, does not detract from the character
of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to
petitioner corporation.
In other words, the sales commissions received for every duplicating machine sold constituted part of
the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job.
The portion of the salary structure representing commissions simply comprised an automatic increment
to the monetary value initially assigned to each unit of work rendered by a salesman. Especially
significant here also is the fact that the fixed or guaranteed portion of the wages paid to the Philippine

24 | P a g e

Name of Total Amount Paid Montly Fixed

Salesman Earnings as 13th Month Pay Wages x 12 3
Baylon, P76,610.30 P1,350.00 P16,200.00
Benedicto
Bautista 90,780.85 1,182.00 14,184.00
Salvador
Brito, 64,382.75 1,238.00 14,856.00
Tomas
Bunagan, 89,287.75 1,266.00 15,192.00
Jorge
Canilan, 74,678.17 1,350.00 16,200.00
Rogelio
Dasig, 54,625.16 1,378,00 16,536.00
Jeordan
Centeno, 51,854.15 1,266.04 15,192.00
Melecio, Jr.
De los Santos 73,551.39 1,322.00 15,864.00
Ricardo
del Mundo, 108,230.35 1,406.00 16,872.00
Wilfredo
Garcia, 93,753.75 1,294.00 15,528.00
Delfin

Navarro, 98,618.71 1,266.00 15,192.00

Ma. Teresa

Baltazar, 15,681.35 323.00*

Carlito

Ochosa, 66,275.65 1,406.00 16,872.00

Rolano

Considering the above circumstances, the Third Division held, correctly, that the sales commissions
were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen. These
commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit.
Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the
goods sold by each salesman, were properly included in the term "basic salary" for purposes of
computing their 13th month pay.

Quisumbing, 101,065.75 1,406.00 16,872.00

Teofilo
Rubina, 42,209.73 1,266.00 15,192.00
Emma
Salazar, 64,643.65 1,238.00 14,856.00
Celso
Sopelario, 52,622.27 1,350.00 16,200.00
Ludivico
Tan, 30,127.50 1,238.00 14,856.00
Leynard
Talampas, 146,510.25 1,434.00 17,208.00
Pedro
Villarin, 41,888.10 1,434.00 17,208.00
Constancio
Carrasco, 50,201.20 403.75*
Cicero
Punzalan, 24,351.89 1,266.00 15,192.00
Reynaldo
Poblador, 25,516.75 323.00*
Alberto
Cruz, 32,950.45 323.00*
Danilo

25 | P a g e

In Boie-Takeda the so-called commissions "paid to or received by medical representatives of BoieTakeda 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." 4 The Second Division characterized these payments as
additional monetary benefits not properly included in the term "basic salary" in computing their 13th
month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for
revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have
no clear director necessary relation to the amount of work actually done by each individual employee.
More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment
constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than as
a demandable or enforceable obligation. In Philippine Education Co. Inc. (PECO) v. Court of
Industrial Relations, 5 the Court explained the nature of a bonus in the following general terms:
As a rule a bonus is an amount granted and paid to an employee for his industry loyalty which
contributed to the success of the employer's business and made possible the realization of profits. It is
an act of generosity of the employer for which the employee ought to be thankful and grateful. It is
also granted by an enlightened employer to spur the employee to greater efforts for the success of the
business and realization of bigger profits. . . . . From the legal point of view a bonus is not and
mandable and enforceable obligation. It is so when It is made part of the wage or salary or
compensation. In such a case the latter would be a fixed amount and the former would be a contingent
one dependent upon the realization of profits. . . . 6 (Emphasis supplied)
In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association, 7 the Court
amplified:

. . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances or conditions for
its payment. If it is an additional compensation which the employer promised and agreed to give
without any conditions imposed for its payment, such as success of business or greater production or
output, then it is part of the wage. But if it is paid only if profits are realized or a certain amount of
productivity achieved, it cannot be considered part of wages. . . . It is also paid on the basis of actual or
actual work accomplished. If the desired goal of production is not obtained, or the amount of actual
work accomplished, the bonus does not accrue. . . . 8 (Emphasis supplied)
More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal
Bank v.National Labor Relations Commission: 9
A bonus is a "gratuity or act of liberality of the giver which the recipient has no right to demand as a
matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). "It is something given in
addition to what is ordinarily received by or strictly due the recipient." The granting of a bonus is
basically a management prerogative which cannot be forced upon the employer "who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's
basic salaries or wages . . ." (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]). 10(Emphasis
supplied)
If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that
such productivity bonus, when given, should not be deemed to fall within the "basic salary" of
employees when the time comes to compute their 13th month pay.
It is also important to note that the purported "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 its salesmen Sales commissions. Medical representatives are not salesmen; they do
not effect any sale of any article at all. In common commercial practice, in the Philippines and
elsewhere, of which we take judicial notice, medical representatives are employees engaged in the
promotion of pharmaceutical products or medical devices manufactured by their employer. They
promote such products by visiting identified physicians and inform much physicians, orally and with
the aid of printed brochures, of the existence and chemical composition and virtues of particular
products of their company. They commonly leave medical samples with each physician visited; but
those samples are not "sold" to the physician and the physician is, as a matter of professional ethics,
prohibited from selling such samples to their patients. Thus, the additional payments made to BoieTakeda's medical representatives were not in fact sales commissions but rather partook of the nature of
profit-sharing bonuses.

26 | P a g e

The doctrine set out in the decision of the Second Division is, accordingly, that additional payments
made to employees, to the extent they partake of the nature of profit-sharing payments, are properly
excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due
to employees. Such additional payments are not "commissions" within the meaning of the second
paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.
The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former
Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th
month pay; viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall
not be included in the computation of the 13th month pay.
We observe that the third item excluded from the term "basic salary" is cast in open ended and
apparently circular terms: "other remunerations which are not part of the basic salary." However, what
particular types of earnings and remuneration are or are not properly included or integrated in the basic
salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts
of each case. In principle, where these earnings and remuneration are closely akin to fringe benefits,
overtime pay or profit-sharing payments, they are properly excluded in computing the 13th month pay.
However, sales commissions which are effectively an integral portion of the basic salary structure of an
employee, shall be included in determining his 13th month pay.
We recognize that both productivity bonuses and sales commissions may have an incentive effect. But
there is reason to distinguish one from the other here. Productivity bonuses are generally tied to the
productivity or profit generation of the employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts himself. A productivity bonus is something
extra for which no specific additional services are rendered by any particular employee and hence not
legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand,
such as those paid in Duplicators, are intimately related to or directly proportional to the extent or
energy of an employee's endeavors. Commissions are paid upon the specific results achieved by a
salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral part
of such salesman's basic pay.
Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second
paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by
former Labor Secretary Drilon, is properly understood as holding that that second paragraph provides

no legal basis for including within the term "commission" there used additional payments to employees
which are, as a matter of fact, in the nature of profit-sharing payments or bonuses. If and to the extent
that such second paragraph is so interpreted and applied, it must be regarded as invalid as having been
issued in excess of the statutory authority of the Secretary of Labor. That same second paragraph
however, correctly recognizes that commissions, like those paid inDuplicators, may constitute part of
the basic salary structure of salesmen and hence should be included in determining the 13th month pay;
to this extent, the second paragraph is and remains valid.

Monthly Fixed Wage x 12

Total Earnings

Republic of the Philippines

SUPREME COURT
Manila

ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b)
aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be
entertained.

THIRD DIVISION

Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug,
Kapunan, Mendoza and Francisco, JJ., concur.

Footnotes
1 The second paragraph of Section 5 (a) of the Revised Guidelines Implementing the 13th Month Pay
reads as follows:

G.R. No. 81176 April 19, 1989

PLASTIC TOWN CENTER CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND NAGKAKAISANG LAKAS NG
MANGGAGAWA (NLM)-KATIPUNAN, respondents.
Generosa R. Jacinto for petitioner.

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated
13th month pay, based on their total earnings during the calendar year, i.e., on both their fixed or
guaranteed wage and commission.

The Solicitor General for public respondent.

2 See Annex "A", Records of G.R. No. 110068, Philippine Duplicators, Inc. v. National Labor
Relations Commission.

GUTIERREZ, JR., J.:

3 This column is added by the Court. We have assumed that the amount paid as 13th month pay, as
shown in the preceding column, represented a full month's fixed wage, without any deductions for,e.g.,
absences, undertime, etc. In the items below marked with an asterisk, the amount of the 13th month
pay is so tiny as to give rise to the impression that some deduction therefrom was probably made; the
nature of such deduction is not here pertinent.
The 15%-30% range in the proportion of fixed wages to total earnings is obtained by the following
fraction:

27 | P a g e

An issue in this petition is the interpretation of certain provisions of the Collective Bargaining
Agreement (CBA) between Plastic Town Center Corporation and the respondent union.
On September 7,1984, the respondent Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan filed a
complaint dated August 30, 1984 charging the petitioner with:
a. Violation of Wage Order No. 5, by crediting the Pl.00 per day increase in the CBA as part of the
compliance with said Wage Order No. 5, and y instead of thirty (30) days equivalent to one (1) month
as gratuity pay to resigning employees. (p. 3, Rollo)

b. Unfair labor practice thru violation of the CBA by giving only twenty-six (26) days pay instead of
thirty (30) days equivalent to one (1) month as gratuity pay to resigning employees. (p. 3, Rollo)
On July 25,1985, Labor Arbiter Ruben Alberto ruled in favor of Plastic Town Center Corporation. The
pertinent portions of the decision read as follows:
... In this particular case, the P1.00 increase was ahead of the implementation of the CBA provision or
could be said was advantageous to complainant members, chronologically stated. For the above cogent
reason we can not fault respondent for its refusal to grant a second Pl.00 increase on July 1, 1984.

The motion for reconsideration of said decision was denied on December 7, 1987. Hence, this petition.
The applicable provisions of the CBA read as follows:
Section 1 -The company agrees to grant permanent regular rank and file workers covered by this
Agreement who have rendered at least one year of continuous service, across-the-board wage increases
as follows:
a. Effective 1 July, 1983-Pl.00 per worked day;

xxx xxx xxx

b Effective 1 July, 1984-Pl.00 per worked day;

Complainant sustains the view that a month salary pertains to salary for 30 days, citing the provision of
the Civil Code on the matter.

c. Effective 1 July, 1985-Pl.00 per worked day;

Upon the other hand, respondents understanding of the controverted provision is pragmatic or
practical. Since the workers are paid on daily basis, it computed the salary received by the worker in a
month as a month salary. In this case the salary of 26 days is a month salary.
We agree with the respondent's interpretation. As daily wage earner, there would be no instance that the
worker would work for 30 days a month since work does not include Sunday or rest days. In the mind
of the daily worker in a month he could not expect a month salary exceeding the equivalent of 26 days
service. To award the daily wage earner pay for more than 26 days is pay for days he does not work.
But as regards the monthly- paid workers he expects his monthly salary to be fixed which is a month
salary. Hence, a distinction separates him with the daily wages.
IN VIEW OF THE FOREGOING, the unfair labor practice charge should be, as it is hereby dismissed
for lack of legal and factual basis. (pp- 56-57, Rollo)

Section 3- It is agreed and understood by the parties herein that the aforementioned increase in pay
shall be credited against future allowances or wage orders hereinafter implemented or enforced by
virtue of Letters of Instructions, Decrees and other labor legislation. (pp. 36-37, Rollo)
Wage Order No. 4 provided for the integration of the mandatory emergency cost of living allowances
(ECOLA) under Presidential Decrees 1614,1634,1678 and 1713 into the basic pay of all covered
workers effective May 1, 1984. It further provided that after the integration, the applicable statutory
minimum daily wage rate must be complied with, which in this case is P32.00.
The petitioner incurred a deficiency of P1.00 in the wage rate after integrating the ECOLA with basic
pay. So the petitioner advanced to May 1, 1984 or two months earlier the implementation of the onepeso wage increase provided for in the CBA starting July 1, 1984 for the benefit of the workers.

On August 30, 1987, the respondent labor union appealed to the National Labor Relations
Commission.

The petitioner argues that it did not credit the Pl.00 per day across the board increase under the CBA as
compliance with Wage Order No. 5 implemented on June 16,1984 since it gave an additional P3.00 per
day to the basic salary pursuant to said order. It, however, credited the Pl.00 a day increase to the
requirement under Wage Order No. 4 to which the private respondents allegedly did not object.

On June 30, 1987, the NLRC rendered the questioned decision with the following dispositive portion:

The other controverted provision of the CBA reads:

WHEREFORE, the appealed decision is hereby reversed and the respondent is ordered to grant Pl.00
increase for July 1, 1984 and the equivalent of thirty days salary in gratuity pay, as required by its CBA
with the complainants. (p. 39, Rollo)

Section 2. It is the intention of both the COMPANY and the UNION, that the grant of gratuity pay by
the COMPANY herein set forth is to reward employees and laborers, who have rendered satisfactory
and efficient service with the COMPANY. THUS, in case of voluntary resignation, which is not

28 | P a g e

covered by Section 1 above, the COMPANY nevertheless agrees to grant a gratuity pay to the
resigning employee or laborer as follows:

petition (Dihiansan v. Court of Appeals, 153 SCRA 712 [1987]). Furthermore, we agree with the
NLRC as it held:

1. Two to Five years of service : 1 month salary

It is our finding that the respondent is bound by the CBA to grant an increase on July 1, 1984.

2. Six (6) to Ten (10) yrs. of : Two and One-half (21/2)service months salary

In this case, between July 1, 1983 and July 1, 1984, there were actually two increases mandated by
Wage Order No. 4 on May 1, 1984 and by Wage Order No. 5 on June 16,1984. The fact that the
respondent had complied with Wage Order No. 4 and Wage Order No. 5 does not relieve it of its
obligation to grant the P1.00 increase under the CBA. (pp. 37-38, Rollo)

3 Eleven (ll) to Fifteen yrs. of service : 4 months salary

4 Sixteen (16) to twenty yrs. of : 5 months
5 Twenty one yrs. of service and above : Twelve (12) months salary.
(p. 38, Rollo)
The petitioner alleges that one month salary for daily paid workers should be computed on the basis of
twenty-six (26) days and not thirty (30) days since daily wage workers do not work every day of the
month including Sundays and holidays.
The petition is devoid of merit.
The subject for interpretation in this petition for review is not the Labor Code or its implementing rules
and regulations but the provisions of the collective bargaining agreement entered into by management
and the labor union. As a contract, it constitutes the law between the parties (Fegurin v. National Labor
Relations Commission, 120 SCRA 910 [1983]) and in interpreting contracts, the rules on contract must
govern.
Contracts which are not ambiguous are to be interpreted according to their literal meaning and should
not be interpreted beyond their obvious intendment (Herrera v. Petrophil Corp., 146 SCRA 385
[1986]).
In the case at bar, the petitioner alleges that on May 1, 1984, it granted a Pl.00 increase pursuant to
Wage Order No. 4 which in consonance with Section 3 of the CBA was to be credited to the July 1,
1984 increase under the CBA. It was, therefore, a July increase. Section 3 of the CBA, however,
clearly states that CBA granted increases shall be credited against future allowances or wage orders.
Thus, the CBA increase to be effected on July 1, 1984 can not be retroactively applied to mean
compliance with Wage Order No. 4 which took effect on May 1, 1984. The words of the contract are
plain and readily understandable so we find no need for any further construction or interpretation

29 | P a g e

With regards to the second issue, the petitioner maintains that under the principle of "fair day's wage
for fair day's labor", gratuity pay should be computed on the basis of 26 days for one month salary
considering that the employees are daily paid.
We find no abuse of discretion on the part of the NLRC in granting gratuity pay equivalent to one
month or 30 days salary .
We quote with favor the NLRC decision which states:
xxx xxx xxx
... To say that awarding the daily wage earner salary for more than 26 days is paying him for days he
does not work misses the point entirely. The issue here is not payment for days worked but payment of
gratuity pay equivalent to one month or 30 days salary. (p. 29, Rollo)
Looking into the definition of gratuity, we find the following in Moreno's Philippine Law Dictionary,
to wit:
Something given freely, or without recompense; a gift; something voluntarily given in return for a
favor or services; a bounty; a tip. -Pirovano v. De la Rama Steamship Co., 96 Phil. 357.
That paid to the beneficiary for past services rendered purely out of the generosity of the giver or
grantor.-Peralta v. Auditor General, 100 Phil. 1054.
Salary or compensation. The very term 'gratuity' differs from the words 'salary' or 'compensation' in
leaving the amount thereof, within the limits of reason, to the arvitrament of the giver.-Herranz &
Garriz v. Barbudo,12 Phil. 9.

From the foregoing, gratuity pay is therefore, not intended to pay a worker for actual services rendered.
It is a money benefit given to the workers whose purpose is "to reward employees or laborers, who
have rendered satisfactory and efficient service to the company." (Sec. 2, CBA) While it may be
enforced once it forms part of a contractual undertaking, the grant of such benefit is not mandatory so
as to be considered a part of labor standard law unlike the salary, cost of living allowances, holiday
pay, leave benefits, etc., which are covered by the Labor Code. Nowhere has it ever been stated that
gratuity pay should be based on the actual number of days worked over the period of years forming its
basis. We see no point in counting the number of days worked over a ten-year period to determine the
meaning of "two and one- half months' gratuity." Moreover any doubts or ambiguity in the contract
between management and the union members should be resolved in the light of Article 1702 of the
Civil Code that:
In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety
and decent living for the laborer.
This is also in consonance with the principle enunciated in the Labor Code that all doubts should be
resolved in favor of the worker.
The Civil Code provides that when months are not designated by name, a month is understood to be
thirty (30) days. The provision applies under the circumstances of this case.
In view of the foregoing, the public respondent did not act with grave abuse of discretion when it
rendered the assailed decision which is in accordance with law and jurisprudence.
WHEREFORE, the petition is hereby DISMISSED for lack of merit.
SO ORDERED.
Fernan, C.J., Feliciano, Bidin and Cortes, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

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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 CORPORATION and NATIONAL LABOR RELATIONS
COMMISSION, respondents.
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 of merit petitioner's appeal from the decision of the Labor Arbiter in
NLRC Case No. 1791-MC-X1-82.
On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rankand-file workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82)
before the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City, against
petitioner, for "Payment of the Thirteenth-Month Pay Differentials." Respondent ALU sought to
recover from petitioner the thirteenth month pay differential for 1982 of its rank-and-file employees,
equivalent to their sick, vacation and maternity leaves, premium for work done on rest days and special
holidays, and pay for regular holidays which petitioner, allegedly in disregard of company practice
since 1975, excluded from the computation of the thirteenth month pay for 1982.
In its answer, petitioner claimed that it erroneously included items subject of the complaint in the
computation of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficult
question of law. According to petitioner, this mistake was discovered only in 1981 after the
promulgation of the Supreme Court decision in the case of San Miguel Corporation v. Inciong (103
SCRA 139).
A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent
ALU. The dispositive portion of the decision reads as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered ordering
respondent to pay the 1982 13th month pay differential to all its rank-and-file workers/employees
herein represented by complainant Union (Rollo, p. 32).

The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules and
Regulations Implementing P.D. No. 851" which in paragraph 4 thereof further defines the term "basic
salary," thus:

Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision
accordingly dismissed the appeal for lack of merit.

4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not be
included in the computation of the 13th month pay.

Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised Rules
of Court. This error notwithstanding and in the interest of justice, this Court resolved to treat the instant
petition as a special civil action for certiorari under Rule 65 of the Revised Rules of Court (P.D. No.
1391, Sec. 5; Rules Implementing P.D. No. 1391, Rule II, Sec. 7; Cando v. National Labor Relations
Commission, 189 SCRA 666 [1990]: Pearl S. Buck Foundation, Inc. v. National Labor Relations
Commission, 182 SCRA 446 [1990]).

Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee,
but excludes cost-of-living allowances, profit-sharing payments, and all allowances and monetary
benefits which have not been considered as part of the basic salary of the employee as of December 16,
1975. The exclusion of cost-of-living allowances and profit sharing payments shows the intention to
strip "basic salary" of payments which are otherwise considered as "fringe" benefits. This intention is
emphasized in the catch all phrase "all allowances and monetary benefits which are not considered or
integrated as part of the basic salary." Basic salary, therefore does not merely exclude the benefits
expressly mentioned but all payments which may be in the form of "fringe" benefits or allowances
(San Miguel Corporation v. Inciong, supra, at 143-144). In fact, the Supplementary Rules and
Regulations Implementing P.D. No. 851 are very emphatic in declaring that overtime pay, earnings and
other renumerations shall be excluded in computing the thirteenth month pay.

The crux of the present controversy is whether in the computation of the thirteenth month pay given by
employers to their employees under P.D.
No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days and
special holidays, and pay for regular holidays may be excluded in the computation and payment
thereof, regardless of long-standing company practice.
Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their
employees a thirteenth month pay. How this pay shall be computed is set forth in Section 2 of the
"Rules 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 year.
(b) "Basic Salary" shall include all renumerations 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.

In other words, whatever compensation an employee receives for an eight-hour work daily or the daily
wage rate in the basic salary. Any compensation or remuneration other than the daily wage rate is
excluded. It follows therefore, that payments for sick, vacation and maternity leaves, premium for
work done on rest days special holidays, as well as pay for regular holidays, are likewise excluded in
computing 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 by then Acting Labor Secretary Amado C. Inciong, expressly including the
subject items in computing the thirteenth month pay. The inclusion of these items is clearly not
sanctioned under P.D. No. 851, the governing law and its implementing rules, which speak only of
"basis salary" 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 which clarified the definition of "basic salary."
As pointed out in San Miguel Corporation v. Inciong, (supra):

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While doubt may have been created by the prior Rules and Regulations and Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to
an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates
that what has hitherto been the subject of broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming tendency of the former rules to include all
remunerations and earnings within the definition of basic salary.
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 work
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 13thmonth pay. If they were not so excluded, it is hard to find any "earnings and other remunerations"
expressly excluded in computation of the 13th month-pay. 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 thirteenth month pay, was issued by the Secretary of Labor as early as
January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules.
And yet, petitioner computed and paid the thirteenth month pay, without excluding the subject items
therein until 1981. Petitioner continued its practice in December 1981, after promulgation of the aforequoted San Miguel decision on February 24, 1981, when petitioner purportedly "discovered" its
mistake.

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From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of
its employees' thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums
for work done on rest days and special holidays, and pay for regular holidays. The considerable length
of time the questioned items had been included by petitioner indicates a unilateral and voluntary act on
its 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 into benefits enjoyed by them. And any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer,
by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of
the labor of the Philippines, which prohibit the diminution or elimination by the employer of the
employees' existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not
applicable in Labor Law. Besides, in solutio indebiti, the obligee is required to return to the obligor
whatever he received from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner in
the instant case, does not demand the return of what it paid respondent ALU from 1975 until 1981; it
merely wants to "rectify" the error it made over these years by excluding unilaterally from the
thirteenth month pay in 1982 the items subject of litigation. Solutio indebiti, therefore, is not applicable
to the instant case.
WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby
DISMISSED, and the questioned decision of respondent NLRC is AFFIRMED accordingly.
Cruz, Grio-Aquino, Davide, Jr. and Bellosillo, JJ., concur.