1.

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,

vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR
ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.

ARTICLE XIV Retirement Gratuity

Section l(a)-Any employee, who is separated from
employment due to old age, sickness, death or
permanent lay-off not due to the fault of said employee
shall receive from the company a retirement gratuity in
an amount equivalent to one (1) month's salary per
year of service. One month of salaryas used in this
paragraph shall be deemed equivalent to the salary at
date of retirement; years of service shall be deemed
equivalent to total service credits, a fraction of at least
six months being considered one year, including
probationary employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:

MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National Labor
Relations Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco
and Romeo Cipres, Complainants-Appellants, v. F.E. Zuellig (M), Inc., RespondentAppellee" and NLRC Case No. RN- IV-20855-78-T entitled, "Amancio Manuel,
Complainant-Appellant, v. F.E. Zuellig (M), Inc., Respondent-Appellee," which
dismissed the appeal of petitioners herein and in effect affirmed the decision of the
Labor Arbiter ordering private respondent to pay petitioners separation pay equivalent
to their one month salary (exclusive of commissions, allowances, etc.) for every year
of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with
the Department of Labor (Regional Office No. 4) an application seeking clearance to
terminate the services of petitioners Jose Songco, Romeo Cipres, and Amancio
Manuel (hereinafter referred to as petitioners) allegedly on the ground of retrenchment
due to financial losses. This application was seasonably opposed by petitioners
alleging that the company is not suffering from any losses. They alleged further that
they are being dismissed because of their membership in the union. At the last
hearing of the case, however, petitioners manifested that they are no longer
contesting their dismissal. The parties then agreed that the sole issue to be resolved is
the basis of the separation pay due to petitioners. Petitioners, who were in the sales
force of Zuellig received monthly salaries of at least P40,000. In addition, they
received commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig
Employees Association, of which petitioners are members, contains the following
provision (p. 71, Rollo):

Art. 284. Reduction of personnel. The termination of

employment of any employee due to the installation of
labor saving-devices, redundancy, retrenchment to
prevent losses, and other similar causes, shall entitle
the employee affected thereby to separation pay. In
case of termination due to the installation of laborsaving devices or redundancy, the separation pay shall
be equivalent to one (1) month pay or to at least one (1)
month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and
other similar causes, the separation pay shall be
equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the
Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is due
to retrechment initiated by the employer to prevent
losses or other similar causes, or where the employee
suffers from a disease and his continued employment is
prohibited by law or is prejudicial to his health or to the
health of his co-employees, the employee shall be
entitled to termination pay equivalent at least to his one
month salary, or to one-half month pay for every year of
service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year.

xxx
Sec. 10. Basis of termination pay. The computation
of the termination pay of an employee as provided
herein shall be based on his latest salary rate, unless
the same was reduced by the employer to defeat the
intention of the Code, in which case the basis of
computation shall be the rate before its deduction.
(Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of
which reads (p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent
should be as it is hereby, ordered to pay the
complainants separation pay equivalent to their one
month salary (exclusive of commissions, allowances,
etc.) for every year of service that they have worked
with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was dismissed
for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment
and Withdrawal of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based
on the ground that he wants "to abide by the decision appealed from" since he had
"received, to his full and complete satisfaction, his separation pay," resolved to dismiss
the petition as to him.
The issue is whether or not earned sales commissions and allowances should be
included in the monthly salary of petitioners for the purpose of computation of their
separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount of separation
pay due them, whether under the Labor Code or the CBA, their basic salary, earned
sales commissions and allowances should be added together. They cited Article 97(f)
of the Labor Code which includes commission as part on one's salary, to wit;

(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. 'Fair reasonable value' shall not
include any profit to the employer or to any person
affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its
implementing rules to include commission in the computation of separation pay, it
could have explicitly said so in clear and unequivocal terms. Furthermore, in the
definition of the term "wage", "commission" is used only as one of the features or
designations attached to the word remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in the monthly
salary of petitioners for the purpose of computation of their separation pay is
concerned, this has been settled in the case of Santos v. NLRC, et al., G.R. No.
76721, September 21, 1987, 154 SCRA 166, where We ruled that "in the computation
of backwages and separation pay, account must be taken not only of the basic salary
of petitioner but also of her transportation and emergency living allowances." This
ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987,
155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No.
78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales
commission should be included in the monthly salary of petitioner for the purpose of
computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of the term
"wage". It has been repeatedly declared by the courts that where the law speaks in
clear and categorical language, there is no room for interpretation or construction;
there is only room for application (Cebu Portland Cement Co. v. Municipality of Naga,
G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals,
G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous statute
speaks for itself, and any attempt to make it clearer is vain labor and tends only to
obscurity. How ever, it may be argued that if We correlate Article 97(f) with Article XIV
of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections
9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In this
regard, the Labor Arbiter rationalized his decision in this manner (pp. 74-76, Rollo):

The definition of 'wage' provided in Article 96 (sic) of the

Code can be correctly be (sic) stated as a general
definition. It is 'wage ' in its generic sense. A careful
perusal of the same does not show any indication that
commission is part of salary. We can say that
commission by itself may be considered a wage. This is
not something novel for it cannot be gainsaid that
certain types of employees like agents, field personnel
and salesmen do not earn any regular daily, weekly or
monthly salaries, but rely mainly on commission
earned.
Upon the other hand, the provisions of Section 10, Rule
1, Book VI of the implementing rules in conjunction with
Articles 273 and 274 (sic) of the Code specifically
states that the basis of the termination pay due to one
who is sought to be legally separated from the service
is 'his latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly
pay or monthly salary'.
The above terms found in those Articles and the
particular Rules were intentionally used to express the
intent of the framers of the law that for purposes of
separation pay they mean to be specifically referring to
salary only.
.... Each particular benefit provided in the Code and
other Decrees on Labor has its own pecularities and
nuances and should be interpreted in that light. Thus,
for a specific provision, a specific meaning is attached
to simplify matters that may arise there from. The
general guidelines in (sic) the formation of specific rules
for particular purpose. Thus, that what should be
controlling in matters concerning termination pay should
be the specific provisions of both Book VI of the Code
and the Rules. At any rate, settled is the rule that in
matters of conflict between the general provision of law
and that of a particular- or specific provision, the latter
should prevail.
On its part, the NLRC ruled (p. 110, Rollo):

From the aforequoted provisions of the law and the

implementing rules, it could be deduced that wage is
used in its generic sense and obviously refers to the
basic wage rate to be ascertained on a time, task, piece
or commission basis or other method of calculating the
same. It does not, however, mean that commission,
allowances or analogous income necessarily forms part
of the employee's salary because to do so would lead
to anomalies (sic), if not absurd, construction of the
word "salary." For what will prevent the employee from
insisting that emergency living allowance, 13th month
pay, overtime, and premium pay, and other fringe
benefits should be added to the computation of their
separation pay. This situation, to our mind, is not the
real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage'
and Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code
and Sections 9(b) and 10 of the Implementing Rules, which mention the terms "pay"
and "salary", is more apparent than real. Broadly, the word "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. Indeed, there is eminent authority for holding that the words
"wages" and "salary" are in essence synonymous (Words and Phrases, Vol. 38
Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div.
481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word "salarium," is
often used interchangeably with "wage", the etymology of which is the Middle English
word "wagen". Both words generally refer to one and the same meaning, that is, a
reward or recompense for services performed. Likewise, "pay" is the synonym of
"wages" and "salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the words
"wages", "pay" and "salary" have the same meaning, and commission is included in
the definition of "wage", the logical conclusion, therefore, is, in the computation of the
separation pay of petitioners, their salary base should include also their earned sales
commissions.
The aforequoted provisions are not the only consideration for deciding the petition in
favor of the petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that the
commissions were in the form of incentives or encouragement, so that the petitioners
would be inspired to put a little more industry on the jobs particularly assigned to
them, still these commissions are direct remuneration services rendered which
contributed to the increase of income of Zuellig . Commission is the recompense,
compensation or reward of an agent, salesman, executor, trustees, 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 (Black's Law Dictionary, 5th Ed., citing
Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a
salesman and the reason for such type of remuneration for services rendered

demonstrate clearly that commission are part of petitioners' wage or salary. We take
judicial notice of the fact that some salesmen do not receive any basic salary but
depend on commissions and allowances or commissions alone, are part of petitioners'
wage or salary. We take judicial notice of the fact that some salesman do not received
any basic salary but depend on commissions and allowances or commissions alone,
although an employer-employee relationship exists. Bearing in mind the preceeding
dicussions, if we adopt the opposite view that commissions, do not form part of wage
or salary, then, in effect, We will be saying that this kind of salesmen do not receive
any salary and therefore, not entitled to separation pay in the event of discharge from
employment. Will this not be absurd? This narrow interpretation is not in accord with
the liberal spirit of our labor laws and considering the purpose of separation pay which
is, to alleviate the difficulties which confront a dismissed employee thrown the the
streets to face the harsh necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base
that should be used in computing the separation pay, We held that:
The commissions also claimed by petitioner ('override
commission' plus 'net deposit incentive') are not
properly includible in such base figure since such
commissions must be earned by actual market
transactions attributable to petitioner.
Applying this by analogy, since the commissions in the present case were earned by
actual market transactions attributable to petitioners, these should be included in their
separation pay. In the computation thereof, what should be taken into account is the
average commissions earned during their last year of employment.
The final consideration is, in carrying out and interpreting the Labor Code's provisions
and its implementing regulations, the workingman's welfare should be the primordial
and paramount consideration. This kind of interpretation gives meaning and substance
to the liberal and compassionate spirit of the law as provided for in Article 4 of the
Labor Code which states that "all doubts in the implementation and interpretation of
the provisions of the Labor Code including its implementing rules and regulations shall
be resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152
SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July 12,1989),
and Article 1702 of the Civil Code which provides that "in case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent
living for the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent
National Labor Relations Commission is MODIFIED by including allowances and
commissions in the separation pay of petitioners Jose Songco and Amancio Manuel.
The case is remanded to the Labor Arbiter for the proper computation of said
separation pay.
SO ORDERED.

Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ., concur.

2.

G.R. No. L-58870 December 18, 1987

CEBU
INSTITUTE
OF
TECHNOLOGY
(CIT), petitioner,
vs.
HON. BLAS OPLE, in his capacity as Minister, Ministry of Labor and
Employment, JULIUS ABELLA, ARSENIO ABELLANA, RODRIGO ALIWALAS,
ZOSIMO ALMOCERA, GERONIDES ANCOG, GREGORIO ASIA, ROGER
BAJARIAS, BERNARDO BALATAYO, JR., BASILIO CABALLES, DEMOCRITO
TEVES, VOLTAIRE DELA CERNA, ROBERTO COBARRUBIAS, VILMA GOMEZ
CHUA, RUBEN GALLITO, EDGARDO CONCEPCION, VICTOR COQUILLA, JOSE
DAKOYKOY, PATERNO WONG, EVELYN LACAYA, RODRIGO GONZALES,
JEOGINA GOZO, MIGUEL CABALLES, CONSUELO JAVELOSA, QUILIANO
LASCO, FRANKLIN LAUTA, JUSTINIANA LARGO, RONALD LICUPA, ALAN
MILANO, MARIA MONSANTO, REYNALDO NOYNAY, RAMON PARADELA,
NATALIO PLAZA, LUZPURA QUIROGA, NOE RODIS, COSMENIA SAAVEDRA,
LEONARDO SAGARIO, LETICIA SERRA, SIEGFREDO TABANAG, LUCINO
TAMAOSO, DANILO TERANTE, HELEN CALVO TORRES, ERNESTO
VILLANUEVA, DOLORES VILLONDO, EDWARD YAP, ROWENA VIVARES,
DOLORES SANANAM, RODRIGO BACALSO, YOLANDA TABLANTE, ROMERO
BALATUCAN, CARMELITA LADOT, PANFILO CANETE, EMMANUEL CHAVEZ,
JR., SERGIO GALIDO, ANGEL COLLERA, ZOSIMO CUNANAN, RENE BURT
LLANTO, GIL BATAYOLA, VICENTE DELANTE, CANDELARIO DE DIOS, JOSE
MA. ESTELLA, NECITA TRINIDAD, ROTELLO ILUMBA, TEODORICO JAYME,
RAYMUNDO ABSIN, RUDY MANEJA, REYNA RAMOS, ANASTACIA BLANCO, FE
DELMUNDO, ELNORA MONTERA, MORRISON MONTESCLAROS, ELEAZAR
PANIAMOGAN, BERNARDO PILAPIL, RODOLFO POL, DEMOSTHENES
REDOBLE, PACHECO ROMERO, DELLO SABANAL, SARAH SALINAS, RENATO
SOLATORIO, EDUARDO TABLANTE, EMMANUEL TAN, FELICISIMO TESALUNA,
JOSE VERALLO, JR., MAGDALENO VERGARA, ESMERALDA ABARQUEZ, MAC
ARTHUR DACUYCUY ACOMPANADA, TRINIDAD ADLAWAN, FE ELIZORDO
ALCANTARA, REOSEBELLA AMPER, ZENAIDA BACALSO, ELIZA BADANA,
GEORGIA BAS, ERLINDA BURIAS, ELDEFONSO BURIAS, CORAZON CASENAS,
REGINO CASTANEDA, GEORGE CATADA, CARMENCITA G. CHAVEZ, LORETIA
CUNANAN, FLORES DELFIN, TERESITA ESPINO, ELVIE GALANZA, AMADEA
GALELA, TERESITA. JUNTILLA, LEONARDA KAPUNGAN, ADORACION
LANAWAN, LINDA LAYAO, GERARDO LAYSON, VIRGILIO LIBETARIO,
RAYMOND PAUL LOGARTA, NORMA LUCERO, ANATOLIA MENDEZ, ELIODORO
MENDEZ, JUDALINE MONTE, ELMA OCAMPO, ESTEFA OLIVARES, GEORGE
ORAIS, CRISPINA PALANG, GRETA PEGARIDO, MELBA QUIACHON, REMEDIOS
QUIROS, VIRGINIA RANCES, EDNA DELOS REYES, VICENTE TAN,
EMERGENCIA ROSELL, JULIETA TATING, MERCIA TECARRO, FELISA
VERGARA, WEMINA VILLACIN, MACRINA YBARSABAL, MILAGROS CATALAN,
JULIETA AQUINDE, SONIA ARTIAGA, MA. TERESITA OBANDO, ASUNCION
ABAYAN, ESTHER CARREON, ECHEVARRE, BUENAFE SAMSON, CONCEPCION

GONZALES, VITALIANA VENERACION,

VILLACARLOS. respondents.

LEONCIA

ABELLAR,

REYNITA

No. L-68345 December 18, 1987

DIVINE
WORD
COLLEGE
OF
LEGAZPI, petitioner,
vs.
The Honorable Deputy Minister of Labor and Employment, VICENTE
LEOGARDO, JR., the HONORABLE REGIONAL DIRECTOR (Regional Office No.
5) of the Ministry of Labor & Employment GERARDO S. CASTILLO, CECILIA
MANUEL and other alleged complainants, respondents.
Nos. L-69224-5 December 18, 1987
FAR EASTERN UNIVERSITY EMPLOYEES LABOR UNION, petitioner,
vs.
FAR EASTERN UNIVERSITY and the NATIONAL LABOR RELATIONS
COMMISSION, respondents.
No. 70832 December 18, 1987
GREGORIO T. FABROS, ROGELIO B. DE GUZMAN, CRESENCIANO ESPINO,
JOSE RAMOS SUNGA, BAYLON BANEZ FERNANDO ELESTERIO, ISMAEL
TABO, AMABLE TUIBEO CELSO TUBAY, RAFAEL HERNANDEZ, GERONIMO
JASARENO, MEL BALTAZAR, MA. LOURDES PASCUAL, T. DEL ROSARIO
ACADEMY TEACHERS and EMPLOYEES ASSOCIATION, DENNIS MONTE,
BECKY TORRES, LOIDA VELASCO, ROMLY NERY, DAISY N. AMPIG, PATRICIO
DOLORES, ROGELIO RAMIREZ, and NILDA L. SEVILLA, petitioners,
vs.
The HON. JAIME C. LAYA, in his capacity as Minister of Education, Culture and
Sports, respondents.
No. L-76524 December 18, 1987
JASMIN BISCOCHO, ROWENA MARIANO, AGNES GALLEGO, MA. ANA
ORDENES, ISABEL DE LEON, LUZVIMINDA FIDEL, MARIQUIT REYES, SOTERA
ORTIZ, ANGELINA ROXAS, BITUIN DE PANO, ELIZABETH ORDEN, APOLLO
ORDEN, GUILLERMA CERCANO, IMELDA CARINGAL, EFREN BATIFORA,
ROSIE VALDEZ, DELIA QUILATEZ, FELIX RODRIGUEZ, OSCAR RODRIGUEZ,
JOVITA CEREZO, JOSEFINA BONDOC, BELEN POSADAS, DOLORES PALMA,
ANTONINA CRUS, CONRADO BANAYAT, TERESITA LORBES, and CORAZON
MIRANDA, petitioners,
vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor
and Employment, ESPIRITU SANTO PAROCHIAL SCHOOL AND ESPIRITU
SANTO PAROCHIAL SCHOOL FACULTY ASSOCIATION,respondents.

No. 76596 December 18, 1987

RICARDO
C.
VALMONTE
and
CORAZON
BADIOLA, petitioners,
vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor
and Employment, ESPIRITU SANTO PAROCHIAL SCHOOL FACULTY
ASSOCIATION, and ESPIRITU SANTO PAROCHIAL SCHOOL,respondents.

CORTES, J.:
Six cases involving various private schools, their teachers and non-teaching school
personnel, and even parents with children studying in said schools, as well as the then
Minister of Labor and Employment, his Deputy, the National Labor Relations
Commission, and the then Minister of Education, Culture and Sports, have
beenconsolidated in this single Decision in order to dispose of uniformly the common
legal issue raised therein, namely, the allocation of the incremental proceeds of
authorized tuition fee increases of private schools provided for in section 3 (a) of
Presidential Decree No. 451, and thereafter, under the Education Act of 1982 (Batas
Pambansa Blg. 232).
Specifically, the common problem presented by these cases requires an interpretation
of section 3(a) of Pres. Decree No. 451 which states:
SEC. 3. Limitations. The increase in tuition or other
school fees or other charges as well as the new fees or
charges authorized under the next preceding section
shall be subject to the following conditions;
(a) That no increase in tuition or other school fees or
charges shall be approved unless sixty (60%)per
centum of the proceeds is allocated for increase in
salaries or wages of the members of the faculty and all
other employees of the school concerned, and the
balance for institutional development, student
assistance and extension services, and return to
investments: Provided That in no case shall the return
to investments exceed twelve (12%) per centum of the
incremental proceeds;
xxx xxx xxx
In addition, there is also a need for a pronouncement on the effect of the subsequent
enactment of B.P. Blg. 232 which provides for the allocation of tuition fee increases in
section 42 thereof.

In a nutshell, the present controversy was precipitated by the claims of some school
personnel for allowances and other benefits and the refusal of the private schools
concerned to pay said allowances and benefits on the ground that said items should
be deemed included in the salary increases they had paid out of the 60% portion of
the proceeds from tuition fee increases provided for in section 3 (a) of Pres. Decree
No. 451. The interpretation and construction of laws being a matter of judicial power
and duty [Marbury v. Madison, 1 Cranch 137 (1803); Endencia v. David, 93 Phil. 696
(1953)], this Court has been called upon to resolve the controversy.
In the process of reading and at times, having to decipher, the numerous pleadings
filed in the six cases, the Court found that the main issue has been approached by the
parties from almost diametrical points, thereby bringing into focus three subissues: first, whether or not allowances and other fringe benefits of faculty members
and other school employees may be charged against the 60% portion of the tuition fee
increases provided for in section 3(a) of Pres. Dec. No. 451: second, whether or not
the same items may be charged against said portion under the provisions of B.P. Blg.
232: and, third, whether or not schools and their employees may enter into a collective
bargaining agreement allocating more than 60% of said incremental proceeds for
salary increases and other benefits of said employees. After these sub-issues have
been resolved, the Court will tackle the other incidents attending the individual
cases, seriatim.

its position paper that it had paid thirteenth month pay to its employees and that it was
exempt from the payment of service incentive leave to its teachers who were
employed on contract basis [Rollo, pp. 85-86].
After the report and recommendation of the committee, herein public respondent, then
Minister of Labor and Employment issued the assailed Order dated September 29,
1981 and held that the basic hourly rate designated in the Teachers' Program is
regarded as the basic hourly rate of teachers exclusive of the COLA, and that COLA
should not be taken from the 60% incremental proceeds of the approved increase in
tuition fee. The dispositive portion of the Order reads:
PREMISES CONSIDERED, CIT is hereby ordered to
pay its teaching staff the following:
1) COLA under P.D.'s 525 and 1123 from February
1978 up to 1981;
2) COLA under P.D.'s l6l4,1634,1678 and l7l3;and
3) Service incentive leave from l978 upto l981.

The factual antecedents that brought these cases before this Tribunal are as follows:
CIT is further directed to integrate into the basic
salaries of its teachers and (sic) COLA under P.D.'s 525
and 1123 starting on January 1981, pursuant to P.D.
1751. For purposes of integration, the hourly rate
shown in its Teachers' Program for school year 198182
shall be considered as the basic hourly rate.

I.. FACTUAL BACKGROUND OF EACH CASE

A.
CEBU INSTITUTE OF TECHNOLOGY CASE

SO ORDERED.
This case originated from a Complaint filed with the Regional Office No. VII of the
Ministry of Labor on February 11, 1981 against petitioner Cebu Institute of Technology
(CIT) by private respondents, Panfilo Canete, et al., teachers of CIT, for non-payment
of: a) cost of living allowances (COLA) under Pres. Dec. Nos. 525, 1123, 1614, 1678
and 1713, b) thirteenth (13th) month pay differentials and c) service incentive leave.
By virtue of an Order issued by the then Deputy Minister of Labor Carmelo C. Noriel, a
labor-management committee composed of one representative each from the Ministry
of Labor and Employment (MOLE), the Minister of Education, Culture and Sports
(MECS), and two representatives each from CIT and from the teachers was created.
Said committee was to ascertain compliance with the legal requirements for the
payment of COLA, thirteenth (13th) month pay and service incentive leave [Rollo, p.
84].
The position taken by CIT during the conference held by the labor management
committee was that it had paid the allowances mandated by various decrees but the
same had been integrated in the teacher's hourly rate. It alleged that the payment of
COLA by way of salary increases is in line with Pres. Dec. No. 451. It also claimed in

Petitioner assails the aforesaid Order in this Special Civil Action of certiorari with
Preliminary Injunction and/or Restraining Order. The Court issued a Temporary
Restraining Order on December 7, 1981 against the enforcement of the questioned
Order of the Minister of Labor and Employment.
B.
DIVINE WORD COLLEGE OF LEGAZPI CASE
Upon a complaint filed by ten faculty members for alleged non-compliance by herein
petitioner Divine Word College of Legazpi with, among others, Pres. Dec. No. 451,
i.e., allowances were charged to the 60% incremental proceeds of tuition fee increase,
the Labor Regulation Section of Regional Office No. V (Legazpi City) of the Ministry of
Labor and Employment conducted an inspection of the employment records of said
school. On the basis of the report on the special inspection that the school did not

comply with Pres. Dec. No. 451, herein respondent Regional Director issued an Order
dated May 30, 1983, requiring compliance by the Divine Word College. The latter filed
a Memorandum of Appeal from said Order which the Regional Director treated as a
Motion for Reconsideration. Upon failure of the school to comply with the aforesaid
Order, another Order (August 2, 1983) was issued by herein respondent Regional
Director requiring herein petitioner to pay the faculty members- complainants (herein
private respondents) the amounts indicated therein or the total sum of Six Hundred
Seventeen Thousand Nine Hundred Sixty Seven Pesos and Seventy Seven Centavos
(P 617,967.77). Petitioner's Motion for Reconsideration of the Order was denied.
On appeal, the respondent Deputy Minister of Labor and Employment affirmed the
Order of the Regional Director,viz:
xxx xxx xxx
Coming now to the substantial merit of the case, we
share the view that the emergency allowances due the
complainants under the several presidential decrees
(PD's 525, 1123, etc.) cannot be charged by the
respondent against the 60% of the incremental
proceeds from increase in tuition fees authorized under
PD 451, not only because as per decision of the
Supreme Court (UE vs. UE Faculty Association, et. al.,
G.R. No. 57387, September 30, 1982) said allowances
whether mandated by law or secured by collective
bargaining should be taken only from the return to
investment referred to in the decree if the school has no
other resources to grant the allowances but not from
the 60% incremental proceeds, but also because to
hold otherwise would, to our mind, inevitably result in
the loss of one benefit due the complainants-that is the
salary or wage increase granted them by PD 451.
In other words, we believe that by paying the
complainants' allowances out of the 60% incremental
proceeds intended for their salary increase they are
practically being deprived of one benefit-their share in
the 60% incremental proceeds in terms of salary or
wage increase.
WHEREFORE, for the reasons abovestated, the Order
appealed from is hereby AFFIRMED, and the appeal
DISMISSED, for lack of merit.
SO ORDERED.
(Annex "K " to Petition; Rollo, p. 108, 110).

This special civil action of certiorari and Prohibition with Preliminary Injunction
questions the interpretation of, and application by the respondent Deputy Minister, of
the provisions of Pres. Dec. No. 45 1, as set forth in the assailed Order.
On March 25, 1985, after considering the allegations, issues and arguments adduced
in the Petition as well as the Comment thereon of the public respondent and
dispensing with the private respondents' Comment, the Court resolved to dismiss the
Petition for lack of merit (Rollo, p. 198). On April 26, 1985, petitioner filed a Motion for
Reconsideration with Motion to Consider the Case En Banc. On June 26, 1985 the
First Division of the Court referred the case to the Court En Banc for consolidation
with G.R. No. 70832, entitled "Gregorio T. Fabros, et al vs. Hon. Jaime C. Laya, etc.
" since it involves the same issue on the application of 60% incremental proceeds of
authorized tuition fee increases [Rollo, p. 235]. The Court EN BANC resolved to
accept the case. (Resolution of July 16, 1985). These cases were further consolidated
with other cases involving the same issues.
C.
FAR EASTERN UNIVERSITY CASE
On December 17, 1978, petitioner Union filed with the Ministry of Labor and
Employment a complaint against respondent University for non-payment of legal
holiday pay and under-payment of the thirteenth (13th) month pay. On July 7, 1979,
while the case was pending, the Union President, in his personal capacity, filed
another complaint for violation of Pres. Dec. No. 451 against the same respondent.
The two cases were forthwith consolidated and jointly heard and tried. On March 10,
1980, Labor Arbiter Ruben A. Aquino promulgated a decision the dispositive portion of
which is quoted hereunder:
RESPONSIVE TO THE FOREGOING, respondent is
hereby directed, within ten (10) days from receipt
hereof, to:
1. To (sic) pay the paid legal holidays that it withdrew
since January 14, 1976 up to the present; and
2. Pay the 13th month pay differential of complainant's
for the covered period December 16, 1975 to
December 17, 1978, date of filing of complaint for nonpayment of legal holiday pay and under payment of the
13th month pay, and thereafter. Barred forever are
money claims beyond three (3) years from the time the
course (sic) of action occurred. Respondent's formula
on transportation allowance which was deducted from
the 13th month pay is thus subject to this prescriptive

period, for purposes of computation of differentials for

the 13th month pay.
The claim under PD 451 is hereby dismissed for lack of
merit.
SO ORDERED.
(Annex " E " to Petition; Rollo, p. 55, 65-66).
Both parties appealed the decision of the Labor Arbiter. On September 18, 1984, the
respondent Commission disposed of the appeal in the following manner:
RESPONSIVE TO THE FOREGOING, the Decision of
Labor Arbiter Ruben A. Aquino in the instant case dated
March 10, 1980 is hereby Modified in the sense that
complainant's claims for legal holiday pay and 13th
month pay are likewise dismissed for lack of merit and
the dismissal of the claim under P.D. 451 is hereby
Affirmed en (sic) toto.
(Annex "A" to Petition: Rollo, p. 24, 35).
Petitioner's Motion for Reconsideration dated September 29, 1984 was denied for lack
of merit on November 8, 1984. Before this Court is the petition on certiorari filed by the
Union assailing the abovementioned decision of the Commissioner.

Sec. 42. Tuition and other School Fees. Each private

School shall determine its rate of tuition and other
school fees or charges. The rates and charges adopted
by schools pursuant to this provision shall be
collectible, and their application or use authorized
subject to rules and regulations promulgated by the
Ministry of Education, Culture and Sports. (Emphasis
supplied).
Invoking section 42 of B.P. Blg. 232, among others, as its legal basis, the then Minister
of Education Jaime C. Laya promulgated on April 1, 1985 the disputed MECS Order
No. 25, s. 1985 entitled Rules and Regulations To Implement the Provisions of B.P.
Blg. 232. The Education Act of 1982, Relative to Student Fees for School Year 19851986. The relevant portions of said Order are quoted hereunder:
7. Application or Use of Tuition and
Other School Fees or Charges.
7.1. The proceeds from tuition fees and other school
charges as well as other income of each school shall be
treated as an institutional fund which shall be
administered and managed for the support of school
purposes strictly: Provided, That for the purpose of
generating additional financial resources or income for
the operational support and maintenance of each
school two or more schools may pool their institutional
funds, in whole or in part, subject to the prior approval
of their respective governing boards.

D.
FABROS CASE
This petition is in the nature of a class suit brought by petitioners in behalf of the
faculty members and other employees of more than 4000 private schools nationwide.
Petitioners seek to enjoin the implementation of paragraphs 7 to 7.5 of MECS Order
No. 5, series of 1985 on the ground that the said order is null and void for being
contrary to Pres. Dec. No. 451 and the rulings of the Supreme Court in the cases
of University of the East v. UE Faculty Association [G.R. No. L-57387, September 20,
1982, 117 SCRA 5541, University of Pangasinan Faculty Union v. University of
Pangasinan and NLRC [G.R. No. 63122, February 20, 1984, 127 SCRA 691 ], St.
Louis University Faculty Club v. NLRC and St. Louis University [G.R. No. 65585,
September 28, 1984, 132 SCRA 380].
On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was
signed into law. On the matter of tuition and other school fees of private schools,
section 42 of said law provides as follows:

7.2. Tuition fees shag be used to cover the general

expenses of operating the school in order to allow it to
meet the minimum standards required by the Ministry or
any other higher standard, to which the school aspires.
They may be used to meet the costs of operation for
maintaining
or
improving
the
quality
of
instruction/training/research through improved facilities
and through the payment of adequate and competitive
compensation for its faculty and support personnel,
including compliance with mandated increases in
personnel compensation and/or allowance.
7.3. Tuition fees shag be used to cover minimum and
necessary costs including the following: (a)
compensation of school personnel such as teaching or
academic staff, school administrators, academic nonteaching personnel, and non-academic personnel, (b)

maintenance and operating expenses, including power

and utilities, rentals, depreciation, office supplies; and
(c) interest expenses and installment payments on
school debts.
7.4. Not less than sixty (60) percent of the incremental
tuition proceeds shall be used for salaries or wages,
allowances and fringe benefits of faculty and support
staff, including cost of living allowance, imputed costs of
contributed services, thirteenth (13th) month pay,
retirement fund contributions, social security, medicare,
unpaid school personnel claims and payments as may
be prescribed by mandated wage orders. collective
bargaining agreements and voluntary employer
practices, Provided That increases in fees specifically
authorized for the purposes listed in paragraph 4.3.3
hereof shall be used entirely for those purposes. (Italics
supplied).
7.5. Other student fees and charges as may be
approved, including registration, library, laboratory,
athletic, application, testing fees and charges shall be
used exclusively for the indicated purposes, including
(a) the acquisition and maintenance of equipment,
furniture and fixtures, and buildings, (b) the payment of
debt amortization and interest charges on debt incurred
for school laboratory, athletic, or other purposes, and
(c) personal services and maintenance and operating
expenses incurred to operate the facilities or services
for which fees and charges are collected.
The Petition prayed for the issuance of a temporary restraining order which was
granted by this Court after hearing. The dispositive portion of the resolution dated May
28, 1985 reads as follows:
After due consideration of the allegations of the petition
dated May 22, 1985 and the arguments of the parties,
the Court Resolved to ISSUE, effective immediately
and continuing until further orders from this Court, a
TEMPORARY RESTRAINING ORDER enjoining the
respondent from enforcing or implementing paragraphs
7.4 to 7.5 of MECS Order No. 25, s. 1985, which
provide for the use and application of sixty per centum
(60%) of the increases in tuition and other school fees
or charges authorized by public respondent for the
school year 1985-1986 in a manner inconsistent with
section 3(a), P.D. No. 451, (which allocates such 60%
of the increases exclusively "for increases in salaries or

wages of the members of the faculty and other

employees of the school concerned.") and directing
accordingly that such 60% of the authorized increases
shall be held in escrow by the respective colleges and
universities, i.e., shall be kept intact and not disbursed
for any purpose pending the Court's resolution of the
issue of the validity of the aforementioned MECS Order
in question.
(Rollo, p. 21).
In the same resolution, the Philippine Association of Colleges and Universities (PACU)
was impleaded as respondent.
Subsequent to the issuance of this resolution, four (4) schools, represented in this
petition, moved for the lifting of the temporary restraining order as to them. In separate
resolutions, this Court granted their prayers.
Ateneo de Manila University, De La Sale University (Taft Avenue) and De La Salle
University-South, through their respective counsels, manifested that for the school
year 1985-1986, tuition fee increase was approved by the MECS and that on the basis
of Pres. Dec. No. 451, 60% of the tuition fee increases shall answer for salary
increase. However, a budgeted salary increase, exclusive of living allowances and
other benefits, was approved for the same school year which when computed
amounts to more than the 60%.
This Court granted the motions in separate resolutions lifting the temporary restraining
order with respect to these schools in order that they may proceed with the
implementation of the general salary increase for their employees.
In the case of St. Louis University, its Faculty Club, Administrative Personnel
Association and the University itself joined in a petition seeking for leave that 49% of
the increase in tuition and other fees for school year 1985-1986 be released.
Petitioners manifested that the remaining balance shall continue to be held in escrow
by the University.
In a resolution dated January 28, 1986, the Court resolved as follows:
Accordingly, the Temporary Restraining Order issued by
this Court on May 28, 1985 is hereby ordered LIFTED
with respect to Saint Louis University of Baguio City in
order that it may proceed immediately with the
implementation of salary increases for its employees.
D.

BISCOCHO CASE
The Espiritu Santo Parochial School and the Espiritu Santo Parochial School Faculty
Association were parties to a labor dispute which arose from a deadlock in collective
bargaining. The parties entered into conciliation proceedings. The union went on strike
after efforts at the conciliation failed. Subsequently, a return to work agreement was
forged between the parties and both agreed to submit their labor dispute to the
jurisdiction of the Minister of Labor.
In the exercise of his power to assume jurisdiction, the Ministry of Labor and
Employment issued an Order dated April 14, 1986 which provides for the following:

salary adjustments. Such other benefits being enjoyed

by the members of the bargaining unit prior to the
negotiation of the CBA shall remain the same and shall
not be reduced.
f) the School to deduct the amount equivalent to ten
(10%) per cent of the backwages payable to all
members of the bargaining unit as negotiation fee and
to deliver the same to the Union Treasurer for proper
disposition (Emphasis supplied).
SO ORDERED.

IN CONSIDERATION OF ALL THE FOREGOING, the

Ministry hereby declares the strike staged by the Union
to be legal and orders the following:
a) the School to submit the pertinent record of
employment of Romualdo Noriego to the Research and
Information Division of the NLRC for computation of his
underpayment of wages and for the parties to abide by
the said computation;

(Rollo, pp. 16-17)

Pursuant to the said order, private respondent Union agreed to incorporate in their
proposed collective bargaining agreement (CBA) with the School the following:
2) The Union and School Administration will incorporate
the following in their CBA 1) The computation of the tuition
fee increase shall be gross to gross
from which the corresponding
percentage of 90% will be taken.
The resulting amount will be
divided among 141.5 employees
for 1985-86 and 132.5 employees
for 1986-87.

b) the School to submit all pertinent record of

collections of tuition fee increases for school year (sic)
1982-1983, 1983-1984 and 1984-1985 to the Research
and Information Division of the NLRC for proper
computation and for equal distribution of the amount to
all employees and teachers during the abovementioned
school year (sic) as their salary adjustment under P.D.
461;

1/2 of the resulting increase will be

added to basic and divided by 13.3
to arrive at monthly increase in
basic. The other 1/2 will be divided
by 12.3 to arrive at monthly
increase in living allowance.

c) the parties to wait for the final resolution of the illegal

dismissal (case) docketed as NLRC NCR Case No. 51450-85 and to abide by the said resolution;
d) to furnish the MECS a copy of this order for them to
issue the guidelines in the implementation of PRODED
Program;
e) the parties to execute a collective bargaining
agreement with an economic package equivalent to
90% of the proceeds from tuition fee increases for
school year 1985-1986 and another 90% for school
year 1986-1987 and 85% for school year 1987-1988.
The amount aforementioned shall be divided equally to
all members of the bargaining unit as their respective

xxx xxx xxx

4) xxx
Upon request/demand of the Union, School win deduct
from backwages of managerial employees and others
outside the bargaining unit what Union win charge its

own members in the form of attorney's fees, special

assessment and union dues/agency fee.

Petition; Rollo, pp. 9, 14-15; Comment of the Respondent Faculty Association: Rollo,
p. 26].

5) The signing of the CBA and payment of backwages

and others shall be on November 26, 1986 at the
Espiritu Santo Parochial School Library.

II. RESOLUTION OF THE COMMON LEGAL ISSUE

(Rollo, pp. 3-4).

The herein petitioners, Jasmin Biscocho and 26 others, all employees and faculty
members of the respondent School, filed the present petition for prohibition to restrain
the implementation of the April 14, 1986 Order of respondent Labor Minister as well as
the agreements arrived at pursuant thereto. They contend that said Order and
agreements affect their rights to the 60% incremental proceeds under Pres. Dec. No.
451 which provide for the exclusive application of the 60% incremental proceeds to
basic salary.
Acting on the petitioners' prayer, this Court immediately issued a temporary restraining
order on November 25, 1986 ". . . enjoining the respondents from enforcing,
implementing and proceeding with the questioned order of April 14, 1986 and
collective bargaining agreement executed between respondents Union and the School
Administration in pursuance thereof." [Rollo, p. 20].
F.
VALMONTE CASE
This Petition was filed by parents with children studying at respondent school, Espiritu
Santo Parochial School to nullify the Order dated April 14, 1986 issued by public
respondent, then Minister of Labor and Employment, specifically paragraphs (e) and
(f) thereof, quoted in the Biscocho case.

This long-drawn controversy has sadly placed on the balance diverse interests,
opposed yet intertwined, and all deserving, and demanding, the protection of the
State. On one arm of the balance hang the economic survival of private schools and
the private school system, undeniably performing a complementary role in the State's
efforts to maintain an adequate educational system in the country. Perched
precariously on the other arm of the same balance is the much-needed financial uplift
of schoolteachers, extolled for all times as the molders of the minds of youth, hence of
every nation's future. Ranged with them with needs and claims as insistent are other
school personnel. And then, anxiously waiting at the sidelines, is the interest of the
public at large, and of the State, in the continued availability to all who desire it, highstandard education consistent with national goals, at a reasonable and affordable
price.
Amidst these opposing forces the task at hand becomes saddled with the resultant
implications that the interpretation of the law would bear upon such varied interests.
But this Court can not go beyond what the legislature has laid down. Its duty is to say
what the law is as enacted by the lawmaking body. That is not the same as saying
what the law should be or what is the correct rule in a given set of circumstances. It is
not the province of the judiciary to look into the wisdom of the law nor to question the
policies adopted by the legislative branch. Nor is it the business of this Tribunal to
remedy every unjust situation that may arise from the application of a particular law. It
is for the legislature to enact remedial legislation if that be necessary in the premises.
But as always, with apt judicial caution and cold neutrality, the Court must carry out
the delicate function of interpreting the law, guided by the Constitution and existing
legislation and mindful of settled jurisprudence. The Court's function is therefore
limited, and accordingly, must confine itself to the judicial task of saying what the law
is, as enacted by the lawmaking body.
FIRST SUB-ISSUE

The award contained in the said Order is the result of the assumption of jurisdiction by
the public respondent over a labor dispute involving the private respondents school
and faculty association. The latter had earlier filed a notice of strike because of a
bargaining deadlock on the demands of its members for additional economic benefits.
After numerous conciliation conferences held while the union was on strike, the
parties voluntarily agreed that the public respondent shall assume jurisdiction over all
the disputes between them. As to the subject matter of the instant case, the public
respondent found that the latest proposals of the respondent school was to give 85%
of the proceeds from tuition fee increases for the school years to be divided among
the teachers and employees as salary adjustments. What the respondent faculty
association offered to accept was a package of 95% for school year 1985-1986, 90%
for school year 1986- 1987. The respondent school offered to strike the middle of the
two positions, hence the Order complained of by the petitioners [See Annex "A",

A. Whether or not allowances and other fringe benefits

of employees may be charged against the 60% portion
of the incremental proceeds provided for in sec. 3(a) of
Pres. Dec. No. 451.
1. Arguments raised in the Cebu Institute of Technology case
In maintaining its position that the salary increases it had paid to its employees should
be considered to have included the COLA, Cebu Institute of Technology (CIT) makes
reference to Pres. Dec. No. 451 and its Implementing Rules. The line of reasoning of
the petitioner appears to be based on the major premise that under said decree and
rules, 60% of the incremental proceeds from tuition fee increases may be applied to

salaries, allowances and other benefits of teachers and other school personnel. In
support of this major premise, petitioner cites various implementing rules and
regulations of the then Minister of Education, Culture and Sports, to the effect that
60% of the incremental proceeds may be applied to salaries, allowances and other
benefits for members of the faculty and other school personnel [Petition citing
Implementing Rules and Regulations of Pres. Dec. No. 451 of various dates; Rollo,
pp. 318-320]. Petitioner concludes that the salary increases it had granted the CIT
teachers out of the 60% portion of the incremental proceeds of its tuition fee increases
from 1974-1980 pursuant to Pres. Dec. No. 451 and the MECS implementing rules
and regulations must be deemed to have included the COLA payable to said
employees for those years [Rollo, pp. 911].
With leave of Court, the Philippine Association of Colleges and Universities, filed its
Memorandum as Intervenor in support of the proposition that schools may pay the
COLA to faculty members and other employees out of the 60% of the increase in
tuition fees. In addition to the arguments already set forth in the memorandum of the
petitioner CIT, intervenor PACU attacks the Decision of this Court in University of the
East v. University of the East Faculty Association et. all G.R. No. 57387 as "not
doctrinal" and inapplicable to the CIT case. The Court held in the UE case, which was
promulgated on September 30, 1982, during the pendency of these cases, that:
... allowances and benefits should be chargeable to the
return to investment referred to in Sec. 3(a), if the
schools should happen to have no other resources than
incremental proceeds of authorized tuition fee
increases ... (See Dispositive Portion of the Decision)
Intervenor PACU alleges that the aforecited U.E. decision does not categorically rule
that COLA and other fringe benefits should not be charged against the 60%
incremental proceeds of the authorized tuition fee increase.
The Solicitor General, on the other hand, argues in support of the Order of the public
respondent that Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee
increases exclusively for salary increases of teachers and non- teaching supportive
personnel of the school concerned, and that the Decree does not provide that said
salary increases would take the place of the COLA [Rollo, p. 244-245]. He cites as
authority for this stance, two (2) memoranda of the then President dated June 6, 1978
and March 30, 1979 both of which provide that the 60% incremental proceeds of
tuition fee increases "shall be allocated for the increase in the salaries of teachers and
supportive personnel. " Anent the U.E. case, the Solicitor General states that the
Supreme Court in deciding said case took note of the stand of the Office of the
President that the 60% incremental proceeds shall be solely applied to salaries of
faculty members and employees.
On August 7, 1986, considering the supervening events, including the change of
administration, that have transpired during the pendency of these cases, the Court
required the Solicitor General to state whether or not he maintains the action and

position taken by his predecessor-in-office. In his Compliance with said Resolution,

the Solicitor General Manifested the position that:
a. If the tuition fee increase was collected during the
effectivity oil Presidential Decree No. 451, 60% thereof
shall answer exclusively for salary increase of school
personnel. Other employment benefits shall be covered
by the 12% allocated for return of investment, this is in
accordance with the ruling of this Honorable Court
in University of the East vs. U.E. Faculty Association,
et. al (117 SCRA 554), ... and reiterated in University of
Pangasinan Faculty Union v. University of Pangasinan,
et. al. (127 SCRA 691) and St. Louis Faculty Club u.
NLRC (132 SCRA 380).
b. If the salary increase was collected during the
effectivity of Batas Pambansa Blg. (sic) 232, 60%
thereof shall answer not only for salary increase of
school personnel but also for other employment
benefits.
(Rollo, at pp. 513-514)
2. Arguments raised in the Divine Word College Case
Petitioner Divine Word College of Legazpi (DWC) advances the theory that the COLA,
13th month pay and other personnel benefits decreed by law, must be deemed
chargeable against the 60% portion allocated for increase of salaries or wages of
faculty and all other school employees. In support of this stance, petitioner points out
that said personnel benefits are not included in the enumeration of the items for which
the balance (less 60%) or 40% portion of the incremental proceeds may be alloted
under section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30. Petitioner likewise cites the
interpretation of the respondent Minister of Education, Culture and Sports embodied in
the Implementing Rules and Regulations of P.D. 451, DEC Issuance, May 13, 1987;
Rollo, p. 30], that the 60% incremental proceeds of authorized tuition fee increases
may be applied to increases in emoluments and/or benefits for members of faculty,
including staff and administrative employees of the school as the valid interpretation of
the law, as against that made by the respondent Deputy Minister of Labor in the
assailed Order. If the latter interpretation is upheld, petitioner would go as far as
questioning the constitutionality of Pres. Dec. No. 451 upon the ground that the same
discriminates against the petitioner and other private schools as a class of employers.
According to the petitioner, the discrimination takes the form of requiring said class of
employers to give 60% of their profits to their employees in addition to the COLA
mandated by law, while other employers have to contend only with salary increases
and COLA [Petition; Rollo, p. 46].

With regard to the Decision of this Court in the U.E. case, petitioner claims exemption
therefrom upon the ground that the Court's interpretation of a law cannot be applied
retroactively to parties who have relied upon the previous administrative interpretation
which has not been declared invalid or unconstitutional [Petition; Rollo, pp. 50-51 1.
Petitioner further argues on this point that if the court had intended to invalidate the
MECS interpretation of the Decree, it should have positively stated so in the Decision
[Petition; Rollo, p. 50].
The Comment of the public respondents cite as settled jurisprudence applicable to the
case at bar, the ruling of this Court in the U.E. case, supra, which was reiterated in the
subsequent cases of University of Pangasinan Faculty Union v. University of
Pangasinan et all and St. Louis Faculty Club v. NLRC, et al.
Public respondents Deputy Minister of Labor and Employment and Regional Director
of the MOLE (Region V) likewise attack the validity of the Revised Implementing Rules
and Regulations of Pres. Dec. No. 451 cited by the petitioner insofar as said rules
direct the allotment of the 60% of incremental proceeds from tuition fee hikes for
retirement plan, faculty development and allowances. They argue that said rules and
regulations were invalid for having been promulgated in excess of the rule-making
authority of the then Minister of Education under Pres. Dec. No. 451 which mandates
that the 60% of incremental proceeds from tuition fee hikes should be allotted solely
for salary increases [Comment; Rollo, pp. 184-185]. Finally, with respect to the issue
on the allege unconstitutionality of Pres. Dec. No. 451, the public respondents posit
that a legislation (such as Pres. Dec. No. 451) which affects a particular class does
not infringe the constitutional guarantee of equal protection of the law as long as it
applies uniformly and without discrimination to everyone of that class [Comment;
Rollo, p. 14].
3. Arguments raised in the Far Eastern University case
It is the petitioner's contention that in respect of Pres. Dec. No. 451, the decision of
the NLRC is a defiance of the rulings of this Court in the cases of University of the
East v. U.E. Faculty, Association et al. and of University of Pangasinan Faculty Union
v. University of Pangasinan and NLRC (supra). The Union submits that monetary
benefits, other than increases in basic salary, are not chargeable to the 60%
incremental proceeds.
The respondent University in its Comment dated June 13, 1982 refers to Article 97(f)
of the Labor Code which provides a definition of the term "wages" to support its
position that "salaries or wages" as used in Pres. Dec. No. 451 should be interpreted
to include other benefits in terms of money.
As mentioned in the Cebu Institute of Technology case, the Solicitor General filed its
Compliance with this Court's resolution dated August 7, 1986 requiring him to manifest
whether public respondents maintain the position they have taken in these
consolidated cases. The resolution of September 25, 1986 required petitioners to
Comment on said Compliance.

The Comment dated December 6, 1986 was received by this Court after petitioner
Union was required to show cause why no disciplinary action should be taken against
them for failure to comply earlier. The Union agreed with the position taken by the
Solicitor General that under Pres. Dec. No. 451, 60% of the tuition fee increases, shall
answer exclusively for salary increase. However, it expressed disagreement with the
opinion that during the effectivity of B.P. Blg. 232, the 60% ncremental proceeds shall
answer not only for salary increases but also for other employment benefits. The
Union argues that whereas "Pres. Dec. No. 451 is a law on a particular subject, viz.,
increase of tuition fee by educational institutions and how such increase shall be
allocated B.P. Blg. 232 is not a law on a particular subject of increase of tuition fee . . .
; at most it is a general legislation on tuition fee as it touches on such subject in
general, " [Comment on Compliance; Rollo, p. 376], Suppletory to its argument that
B.P. Blg. 232 did not impliedly repeal Pres. Dec. No. 451, the Union also invokes the
principle that a special or particular law cannot be repealed by a general law.
RESOLUTION OF THE FIRST SUB-ISSUE
This Court has consistently held, beginning with the University of the East case, that if
the schools have no resources other than those derived from tuition fee increases,
allowances and benefits should be charged against the proceeds of tuition fee
increases which the law allows for return on investments under section 3(a) of Pres.
Dec. No. 451, therefore, not against the 60% portion allocated for increases in salaries
and wages (See 117 SCRA at 571). This ruling was reiterated in the University of
Pangasinan case and in the Saint Louis Universitycase.
There is no cogent reason to reverse the Court's ruling in the aforecited cases.
Section 3(a) of Pres. Dec. No. 451 imposes among the conditions for the approval of
tuition fee increases, the allocation of 60% per cent of the incremental proceeds
thereof for increases in salaries or wages of school personnel and not for any other
item such as allowances or other fringe benefits. As aptly put by the Court
in University of Pangasinan Faculty Union v. University of Pangasinan, supra:
... The sixty (60%) percent incremental proceeds from
the tuition increase are to be devoted entirely to wage
or salary increases which means increases in basic
salary. The law cannot be construed to include
allowances which are benefits over and above the basic
salaries of the employees. To charge such benefits to
the 60% incremental proceeds would be to reduce the
increase in basic salary provided by law, an increase
intended also to help the teachers and other workers
tide themselves and their families over these difficult
economic times. [Italics supplied] (127 SCRA 691, 702).
This interpretation of the law is consistent with the legislative intent expressed in the
Decree itself, i.e., to alleviate the sad plight of private schools and that of their
personnel wrought by slump in enrollment and increasing operational costs on the part
of the schools, and the increasing costs of living on the part of the personnel

(Preamble, Pres. Dec. No. 451). While coming to the aid of the private school system
by simplifying the procedure for increasing tuition fees, the Decree imposes as a
condition for the approval of any such increase in fees, the allocation of 60% of the
incremental proceeds thereof, to increases in salaries or wages of school personnel.
This condition makes for a quid pro quo of the approval of any tuition fee hike by a
school, thereby assuring the school personnel concerned, of a share in its proceeds.
The condition having been imposed to attain one of the main objectives of the Decree,
which is to help the school personnel cope with the increasing costs of living, the
same cannot be interpreted in a sense that would diminish the benefit granted said
personnel.
In the light of existing laws which exclude allowances from the basic salary or wage in
the computation of the amount of retirement and other benefits payable to an
employee, this Court will not adopt a different meaning of the terms "salaries or
wages" to mean the opposite, i.e. to include allowances in the concept of salaries or
wages.
As to the alleged implementing rules and regulations promulgated by the then MECS
to the effect that allowances and other benefits may be charged against the 60%
portion of the proceeds of tuition fee increases provided for in Section 3(a) of Pres.
Dec. No. 45 1, suffice it to say that these were issued ultra vires, and therefore not
binding upon this Court.
The rule-making authority granted by Pres. Dec. No. 451 is confined to the
implementation of the Decree and to the imposition of limitations upon the approval of
tuition fee increases, to wit:
SEC. 4. Rules and Regulations. The Secretary of
Education and Culture is hereby authorized,
empowered and directed to issue the requisite rules
and regulations for the effective implementation of this
Decree. He may, in addition to the requirements and
limitations provided for under Sections 2 and 3 hereof,
impose other requirements and limitations as he may
deem proper and reasonable.
The power does not allow the inclusion of other items in addition to those for which
60% of the proceeds of tuition fee increases are allocated under Section 3(a) of the
Decree.
Rules and regulations promulgated in accordance with the power conferred by law
would have the force and effect of law [Victorias Milling Company, Inc. v. Social
Security Commission, 114 Phil. 555 (1962)] if the same are germane to the subjects of
the legislation and if they conform with the standards prescribed by the same law
[People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450]. Since the
implementing rules and regulations cited by the private schools adds allowances and
other benefits to the items included in the allocation of 60% of the proceeds of tuition

fee increases expressly provided for by law, the same were issued in excess of the
rule-making authority of said agency, and therefore without binding effect upon the
courts. At best the same may be treated as administrative interpretations of the law
and as such, they may be set aside by this Court in the final determination of what the
law means.
SECOND SUB-ISSUE
B. Whether or not allowances and other fringe benefits may be charged against the
60% portion of the incremental proceeds of tuition fee increases upon the effectivity of
the Education Act of 1982 (B.P. Blg. 232).
1. Arguments raised in the Fabros case
In assailing MECS Order No. 25, s. 1985, petitioners argue that the matter of
allocating the proceeds from tuition fee increases is still governed by Pres. Dec. No.
451. It is their opinion that section 42 of B.P. Blg. 232 did not repeal Pres. Dec. No.
451 for the following reasons: first, there is no conflict between section 42 of B.P. Blg.
232 and section 3(a) of Pres. Dec. No. 451 or any semblance of inconsistency to
deduce a case of a repeal by implication: second, Pres. Dec. No. 451 is a specific law
upon a particular subject-the purposes and distribution of the incremental proceeds of
tuition fee increases, while B.P. Blg. 232 is a general law on the educational system;
as such, a specific law is not repealed by a subsequent general law in the absence of
a clear intention; and third, Pres. Dec. No. 451 is still the only law on the subject of
tuition fee increases there being no prescription or provision in section 42 of B.P. Blg.
232 or elsewhere in the law. They furthermore aver that the disputed MECS Order
which imposed additional burdens against the 60% incremental proceeds of tuition fee
increases are not provided in either Pres. Dec. No. 451 or B.P. Blg. 232. The logical
result as intimated by petitioners is that the inclusion of paragraph 7.4 and related
paragraphs 7 to 7.3 and 7.5 in the questioned MECS order contravenes the statutory
authority granted to the public respondent, and the same are therefore, void.
Respondent PACU takes the contrary view contending that MECS Order No. 25, s.
1985, complies with the mandate of section 42 of B.P. Blg. 232 which law had already
repealed Pres. Dec. No. 451. PACU notes that theUniversity of the East case invoked
by petitioners is not applicable because the issue in that case does not involve the
effect of B.P. Blg. 232 on Pres. Dec. No. 451.
The Solicitor General, representing the public respondent, after giving a summary of
the matters raised by petitioner and respondent PACU, points out that the decisive
issue in this case is whether B.P. Big. 232 has repealed Pres. Dec. No. 451 because
on the answer to this question depends the validity of MECS Order No. 25, s. 1985.
Public respondent holds the view consistent with that of PACU on the matter of B.P.
Blg. 232 having repealed Pres. Dec. No. 451. To support this contention, the Solicitor
General compared the respective provisions of the two laws to show the inconsistency
and incompatibility which would result in a repeal by implication.

RESOLUTION OF THE SECOND SUB-ISSUE

On the matter of tuition fee increases section 42 of B.P. Blg. 232 provides:

Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other
school fees or charges by private schools is lodged with the Secretary of Education
and Culture (Sec. 1), where section 42 of B.P. Blg. 232 liberalized the procedure by
empowering each private school to determine its rate of tuition and other school fees
or charges.

SEC. 42. Tuition and Other School Fees. Each

private school shall determine its rate of tuition and
other school fees or charges. The rates and charges
adopted by schools pursuant to this provision shall be
collectible and their application or use authorized,
subject to rules and regulations promulgated by the
Ministry of Education, Culture and Sports. (Emphasis
supplied).

Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee
increases shall be applied or used to augment the salaries and wages of members of
the faculty and other employees of the school, while B.P. Blg. 232 provides that the
increment shall be applied or used in accordance with the regulations promulgated by
the MECS.

The enactment of B.P. Blg. 232 and the subsequent issuance of MECS Order No. 25,
s. 1985 revived the old controversy on the application and use of the incremental
proceeds from tuition fee increases. As can be gleaned from the pleadings and
arguments of the parties in these cases, one side, composed of the teachers and
other employees of the private schools, insist on the applicability of section 3(a) of
Pres. Dec. No. 451 as interpreted arid applied in the University of the East, University
of Pangasinan and St Louis University cases, while the private schools uphold the
view that the matter of allocating the incremental proceeds from tuition fee increases
is governed by section 42 of B.P. Blg. 232 as implemented by the MECS Rules and
Regulations. As stated, the latter's argument is premised on the allegation that B.P.
Blg. 232 impliedly repealed Pres. Dec. No. 451.

A closer look at these differences leads the Court to resolve the question in favor of
repeal. As pointed out by the Solicitor General, three aspects of the disputed
provisions of law support the above conclusion. First, the legislative authority under
Pres. Dec. No. 451 retained the power to apportion the incremental proceeds of the
tuition fee increases; such power is delegated to the Ministry of Education and Culture
under B.P. Blg. 232.Second, Pres. Dec. No. 451 limits the application or use of the
increment to salary or wage increase, institutional development, student assistance
and extension services and return on investment, whereas B.P. Blg. 232 gives the
MECS discretion to determine the application or use of the increments. Third, the
extent of the application or use of the increment under Pres. Dec. No. 451 is fixed at
the pre-determined percentage allocations; 60% for wage and salary increases, 12%
for return in investment and the balance of 28% to institutional development, student
assistance and extension services, while under B.P. Blg. 232, the extent of the
allocation or use of the increment is likewise left to the discretion of the MECS.

On the second sub-issue, therefore, this Court upholds the view taken by the Solicitor
General in the Fabros case, that the decisive issue is whether B.P. Blg. 232 has
repealed Pres. Dec. No. 451.
In recognition of the vital role of private schools in the country's educational system,
the government has provided measures to regulate their activities. As early as March
10, 1917, the power to inspect private schools, to regulate their activities, to give them
official permits to operate under certain conditions and to revoke such permits for
cause was granted to the then Secretary of Public Instruction by Act No. 2706 as
amended by Act No. 3075 and Commonwealth Act No. 180. Republic Act No. 6139,
enacted on August 31, 1970, provided for the regulation of tuition and other fees
charged by private schools in order to discourage the collection of exorbitant and
unreasonable fees. In an effort to simplify the "cumbersome and time consuming"
procedure prescribed under Rep. Act No. 6139 and "to alleviate the sad plight of
private schools," Pres. Dec. No. 451 was enacted on May 11, 1974. While this later
statute was being implemented, the legislative body envisioned a comprehensive
legislation which would introduce changes and chart directions in the educational
system, hence, the enactment of B.P. Blg. 232. What then was the effect of B.P. Blg.
232 on Pres. Dec. No. 451?
The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451,
particularly section 3(a) thereof, finds evident irreconcilable differences.

The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451
is apparent in the second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451
and section 42 of B.P. Blg. 232 which cover the same subject matter, are so clearly
inconsistent and incompatible with each other that there is no other conclusion but
that the latter repeals the former in accordance with section 72 of B.P. Blg. 232 to wit:
Sec. 72. Repealing clause. All laws or parts thereof
inconsistent with any provision of this Act shall be
deemed repealed or modified, as the case may be.
Opinion No. 16 of the Ministry of Justice dated January 29, 1985, quoted below,
supports the above conclusion:
Both P.D. No. 451 and B.P. Blg. 232 deal with the
imposition of tuition and other school fees or charges
and their use and application, although the latter is
broader in scope as it covers other aspects of the
education system. We note substantial differences or
inconsistencies between the provisions of the two laws.
P.D. No. 451 prescribes certain limitations in the

increase of tuition and other school fees and their

application, whereas the latter law, B.P. Blg. 232 s silent
on the matter. Under P.D. 451, rates of tuition/school
fees need prior approval of the Secretary of Education,
Culture (now Minister of Education, Culture and
Sports), who also determines the reasonable rates for
new school fees, whereas under B.P. Blg. 232, each
private school determines its rate of tuition and other
school fees or charges. P.D. No. 451 authorizes the
Secretary of Education and Culture to issue requisite
rules and regulations to implement the said Decree and
for that purpose, he is empowered to impose other
requirements and limitations as he may deem proper
and reasonable in addition to the limitations prescribed
by the Decree for increases in tuition fees and school
charges, particularly, the limitations imposed in the
allocation of increases in fees and charges, whereas
under B.P. Blg. 232, the collection and application or
use of rates and charges adopted by the school are
subject to rules and regulations promulgated by the
Ministry of Education, Culture and Sports without any
mention of the statutory limitations on the application or
use of the fees or charges. The authority granted to
private schools to determine its rates of tuition and
unconditional authority vested in the Ministry of
Education, Culture and Sports to determine by rules
and regulations the collection and application or use of
tuition or fees rates and charges under B.P. Big. 232
constitute substantial and irreconcilable incompatibility
with the provisions of P.D. No. 451, which should be for
that reason deemed to have been abrogated by the
subsequent legislation.
Moreover, B.P. Blg. 232 is a comprehensive legislation
dealing with the establishment and maintenance of an
integrated system of education and as such, covers the
entire subject matter of the earlier law, P.D. No. 451.
The omission of the limitations or conditions imposed in
P.D. No. 451 for increases in tuition fees and school
charges is an indication of a legislative intent to do
away with the said limitations or conditions.
(Crawford, supra, p. 674). It has also been said that
an act which purports to set out in
full all that it intends to contain,
operates as a repeal of anything
omitted which was contained in the
old act and not included in the
amendatory act." (People vs.

Almuete 69 SCRA 410; People vs.

Adillo 68 SCRA 90) (Ministry of
Justice, Op. No. 16, s. 1985).
Having concluded that under B.P. Big. 232 the collection and application or use of
tuition and other school fees are subject only to the limitations under the rules and
regulations issued by the Ministry, the crucial point now shifts to the said implementing
rules.
The guidelines and regulations on tuition and other school fees issued after the
enactment of B.P. Blg. 232 consistently permit the charging of allowances and other
benefits against the 60% incremental proceeds. Such was the tenor in the MECS
Order No. 23, s. 1983; MECS Order No. 15, s. 1984; MECS Order No. 25, s. 1985;
MECS Order No. 22, s. 1986; and DECS Order No. 37, s. 1987. The pertinent portion
of the latest order reads thus:
In any case of increase at least sixty percent (60%) of
the incremental proceeds should be allocated for
increases in or provisions for salaries or wages,
allowances and fringe benefits of faculty and other staff,
including accruals to cost of living allowance, 13th
month pay, social security, medicare and retirement
contribution and increases as may be provided in
mandated
wage
orders, collective
bargaining
agreements or voluntary employer practices.
The validity of these orders, particularly MECS Order No. 25, s. 1985, is attacked on
the ground that the additional burdens charged against ". . . the 60% of the proceeds
of the increases in tuition fees constitute both as [sic] an excess of statutory authority
and as (sic) a substantial impairment of the accrued, existing and protected rights and
benefits of the members of faculty and non-academic personnel of private schools."
Memorandum for Petitioners, Rollo, p. 1911. Petitioners alleged that these additional
burdens under the MECS Order are not provided in the law itself, either in section 42
of B.P. Blg. 232 or section 3(a) of Pres. Dec. No. 451, except increases in salaries in
the latter provision.
Section 42 of B.P. Blg. 232 grants to the Minister of Education (now Secretary of
Education) rule-making authority to fill in the details on the application or use of tuition
fees and other school charges. In the same vein is section 70 of the same law which
states:
SEC. 70. Rule-making Authority. The Minister of
Education, Culture and Sports charged with the
administration and enforcement of this Act, shall
promulgate the necessary implementing rules and
regulations.

Contrary to the petitioners' insistence that the questioned rules and regulations
contravene the statutory authority granted to the Minister of Education, this Court finds
that there was a valid exercise of rule-making authority.
The statutory grant of rule-making power to administrative agencies like the Secretary
of Education is a valid exception to the rule on non-delegation of legislative power
provided two conditions concur, namely: 1) the statute is complete in itself, setting
forth the policy to be executed by the agency, and 2) said statute fixes a standard to
which the latter must conform [Vigan Electric Light Co., Inc. v. Public Service
Commission, G.R. No. L-19850, January 30, 1964, and Pelaez v. Auditor General, G.
R. No. L-23825, December 24, 1965].
The Education Act of 1982 is "an act providing for the establishment and maintenance
of an integrated system for education " with the following basic policy:
It is the policy of the State to establish and maintain a
complete, adequate and integrated system of education
relevant to the goals of national development. Toward
this end, the government shall ensure, within the
context of a free and democratic system, maximum
contribution of the educational system to the attainment
of the following national development goals:
1. To achieve and maintain an accelerating rate of
economic development and social progress;
2. To assure the maximum participation of all the people
in the attainment and enjoyment of the benefits of such
growth; and
3. To achieve and strengthen national unity and
consciousness and preserve, develop and promote
desirable cultural, moral and spiritual values in a
changing world.
The State shall promote the right of every individual to
relevant quality education, regardless of sex, age,
creed, socioeconomic status, physical and mental
conditions, racial or ethnic origin, political or other
affiliation. The State shall therefore promote and
maintain equality of access to education as well as the
enjoyment of the benefits of education by all its citizens.
The State shall promote the right of the nation's cultural
communities in the exercise of their right to develop
themselves within the context of their cultures, customs,

traditions, interests and belief, and recognizes

education as an instrument for their maximum
participation in national development and in ensuring
their involvement in achieving national unity. (Section 3,
Declaration of Basic Policy).
With the foregoing basic policy as well as, specific policies clearly set forth in its
various provisions, the Act is complete in itself and does not leave any part of the
policy-making, a strictly legislative function, to any administrative agency.
Coming now to the presence or absence of standards to guide the Minister of
Education in the exercise of rule-making power, the pronouncement in Edu v.
Ericta [G.R. No. L-32096, October 24, 1970, 35 SCRA 481, 497] is relevant:
The standard may be either expressed or implied. If the
former, the non-delegation objection is easily met. The
standard though does not have to be spelled out
specifically. It could be implied from the policy and
purpose of the act considered as a whole. In the
Reflector Law, clearly the legislative objective is public
safety. What is sought to be attained as in Calalang v.
Williams is "safe transit upon the roads." (Italics
supplied).
Thus, in the recent case of Tablarin et al. v. Hon. Gutierrez, et al. (G.R. No. 78164,
July 31, 1987], the Court held that the necessary standards are set forth in Section 1
of the 1959 Medical Act, i.e., "the standardization and regulation of medical education"
as well as in other provisions of the Act. Similarly, the standards to be complied with
by Minister of Education in this case may be found in the various policies set forth in
the Education Act of 1982.
MECS Order No. 25, s. 1985 touches upon the economic relationship between some
members and elements of the educational community, i.e., the private schools and
their faculty and support staff. In prescribing the minimum percentage of tuition fee
increments to be applied to the salaries, allowances and fringe benefits of the faculty
and support staff, the Act affects the economic status and the living and working
conditions of school personnel, as well as the funding of the private schools.
The policies and objectives on the welfare and interests of the various members of the
educational community are found in section 5 of B.P. Blg. 232. which states:
SEC. 5. Declaration of Policy and Objectives. It is
likewise declared government policy to foster, at all
times, a spirit of shared purposes and cooperation
among the members and elements of the educational
community, and between the community and other
sectors of society, in the realization that only in such an

atmosphere can the true goals and objectives of

education be fulfilled.

provisions of the Education Act of 1982, As in the Ericta and Tablarin cases, there is
sufficient compliance with the requirements of the non-delegation principle.

Moreover, the State shall:

THIRD SUB-ISSUE

1. Aid and support the natural right and duty of parents

in the rearing of the youth through the educational
system.
2. Promote and safeguard the welfare and interests of
the students by defining their rights and obligations,
according them privileges, and encouraging the
establishment of sound relationships between them and
the other members of the school community.
3. Promote the social and economic status of an school
personnel, uphold their rights, define their obligations,
and improve their living and working conditions and
career prospects.
4. Extend support to promote the viability of those
institutions through which parents, students and school
personnel seek to attain their educational goals.
On the other hand, the policy on the funding of schools in general, are laid down in
section 33:
SEC. 33. Declaration of Policy. It is hereby declared
to be a policy of the State that the national government
shall contribute to the financial support of educational
programs pursuant to the goals of education as
declared in the Constitution. Towards this end, the
government shall:
1. Adopt measures to broaden access to education
through financial assistance and other forms of
incentives to schools, teachers, pupils and students;
and
2. Encourage and stimulate private support to
education through, inter alia, fiscal and other assistance
measures.
Given the abovementioned policies and objectives, there are sufficient standards to
guide the Minister of Education in promulgating rules and regulations to implement the

C. Whether or not schools and their employees may

enter into a collective bargaining agreement allocating
more than 60% of said incremental proceeds for salary
increases and other benefits of said employees.
1. Arguments raised in the Biscocho and Valmonte cases
Assailed by the petitioners in the Biscocho and the Valmonte cases is the Order of the
respondent Minister of Labor directing the execution of a CBA between the school and
the respondent Espiritu Santo Parochial School Faculty Association which provides for
an economic package equivalent to 90% of the proceeds of tuition fee increases for
school year 1985-1986, another 90% for school year 1986-1987 and 85% for school
year 1987-1988. Pursuant to said Order, petitioners in the Biscocho case alleged that
the parties had agreed to incorporate in their CBA a provision which allocates one-half
(1/2) of the 90% portion of the proceeds or 45% to increases in the monthly basic
salaries and the other one-half (1/2) or 45% to increases in monthly living allowance.
The petitioners in the two cases seek the nullification of the MOLE Order for exactly
opposite reasons. In theBiscocho case, the controversy springs from what petitioners
perceive to be a diminution of the benefits to be received by the school employees
insofar as the CBA allocates only 45% for salary increases instead of 60%, which
petitioners claim to be the portion set aside by Pres. Dec. No. 451 for that purpose.
Parenthetically, the case questions the allocation of the remaining 45% of the 90%
economic package under the CBA, to allowances. Stripped down to its essentials, the
question is whether or not the 90% portion of the proceeds of tuition fee increases
alloted for the economic package may be allocated for both salary increases and
allowances.
On the other hand, petitioners in the Valmonte case believe that the MOLE cannot
order the execution of a CBA which would allocate more than 60% of the proceeds of
tuition fee increases for salary increases of school employees. Furthermore,
petitioners question the authority of the then Minister of Labor and Employment to
issue the aforequoted Order insofar as this allocates the tuition fee increases of the
respondent private school. According to them, only the Minister of Education, Culture
and Sports has the authority to promulgate rules and regulations on the use of tuition
fees and increases thereto, pursuant to the provisions of B.P. Blg. 232. They further
argue that the assailed Order collides with the provisions of Pres. Dec. No. 451 insofar
as it allocates 90% of the tuition fee increases for salary adjustments of the members
of the bargaining unit which exceeds the 60% of the said increases allocated by the
Decree for the same purpose.

Before delving further into the questions raised, this Court notes that in
the Valmonte case, respondent Minister and respondent Faculty Association raise a
procedural objection to the filing of the Petition: the standing of the petitioners to bring
this suit. Both respondents decry the petitioners' lack of the interest required in Rule
65 of the Rules of Court for the filing of the Petition for certiorari and Prohibition, since
the latter do not appear to be in any way aggrieved by the enforcement of the Order.
Petitioners-parents did not even participate in the proceedings below which led to the
issuance of the assailed Order.
This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of
Court (Secs. 1 and 2), only a person aggrieved by the act or proceeding in question
may file a petition for certiorari and/or prohibition. TheValmonte petition fails to
indicate how the petitioners would be aggrieved by the assailed Order. It appears that
the petitioners are not parties and never at any time intervened in the conciliation
conferences and arbitration proceedings before the respondent Minister. The parties
therein, who stand to be directly affected by the Order of the respondent Minister, do
not contest the validity of said Order. The petition does not even state that petitioners
act as representative of the parents' association in the School or in behalf of other
parents similarly situated.
If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they
should have intervened and moved for a reconsideration of respondent Minister's
Order before filing the instant petition. Petitioners failed to show that the case falls
under any one of the recognized exceptions to the rule that a motion for
reconsideration should first be availed of before filing a petition for certiorari and
prohibition.
In view of the foregoing, the resolution of the third sub-issue will be based mainly on
the arguments raised in theBiscocho case.
RESOLUTION OF THE THIRD SUB-ISSUE
The Biscocho case involves the issue on the allocation of the incremental proceeds of
the tuition fee increases applied for by the respondent Espiritu Santo Parochial School
for school years 1985-1986, 1986-1987, and 1987-1988. With the repeal of Pres. Dec.
No. 451 by B.P. Blg. 232, the allocation of the proceeds of any authorized tuition fee
increase must be governed by specific rules and regulations issued by the Minister
(now Secretary) of Education pursuant to his broadened rule making authority under
section 42 of the new law. Thus, insofar as the proceeds of the authorized tuition fee
increases for school year 1985-1986 are concerned, the allocation must conform with
the pertinent section of MECS Order No. 25, s. 1985, to wit:
7. Application or Use of Tuition and Other School Fees
or Charges.
xxx xxx xxx

7.4. Not less than sixty (60) percent of the incremental

tuition proceeds shall be used for salaries or wages,
allowances and fringe benefits of faculty and support
staff, including cost of living allowance, imputed costs of
contributed services, thirteenth (13th) month pay,
retirement fund contributions, social security, medicare,
unpaid school personnel claims, and payments as may
be prescribed by mandated wage orders, collective
bargaining agreements and voluntary employer
practices:Provided, That increases in fees specifically
authorized for the purposes fisted in paragraph 4.3.3
hereof shall be used entirely for those purposes.
xxx xxx xxx
With regard to the proceeds of the tuition fee increases for school year 1986-1987, the
applicable rules are those embodied in MECS Order No. 22, s. 1986 which made
reference to MECS Order No. 25, s. 1985, the pertinent portion of which is quoted
above.
Finally, as to the proceeds of the tuition fee increases for school year 1987- 1988,
DECS Order No. 37, s. 1987 must apply:
c. Allocation of lncremental Proceeds
(1) In any case of increase at least sixty percent (60%)
of the incremental proceeds should be allocated for
increases in or provisions for salaries or wages,
allowances and fringe benefits of faculty and other staff,
including accruals to cost of living allowance, 13th
month pay, social security, medicare and retirement
contributions and increases as may be provided in
mandated
wage
orders, collective
bargaining
agreements or voluntary employer practices.
(2) Provided, that in all cases of increase the allocation
of the incremental proceeds shall be without prejudice
to the Supreme Court cases on the interpretation and
applicability of existing legislations on tuition and other
fees especially on the allocation and use of any
incremental proceeds of tuition and other fees
increases. (Emphasis supplied).
xxx xxx xxx

Based on the aforequoted MECS and DECS rules and regulations which implement
BP Blg. 232, the 60% portion of the proceeds of tuition fee increases may now be
allotted for both salaries and allowances and other benefits. The 60% figure is,
however, a minimum which means that schools and their employees may agree on a
larger portion, or in this case, as much as 90% for salaries and allowances and
other benefits. This is not in anyway to allow diminution or loss of the portion allotted
for institutional development of the school concerned. Thus, paragraph 7.5 of MECS
Order No. 25, series of 1985 specifically provides that other student fees and charges
like registration, library, laboratory or athletic fees shall be used exclusively for the
purposes indicated.

[Annex "F"; Rollo, p. 37]. In the committee, petitioner was represented by its counsel,
registrar and assistant accountant and in the conferences that were held, the
representatives of the petitioner were present. Furthermore, the petitioner's position
paper submitted to the committee reflects that in all the deliberations, it was never
denied the right to present evidence and be heard on all the issues raised, particularly
to demonstrate that it had complied with the various COLA, 13th month pay and
service incentive leave decrees. The evidence presented during the conferences and
the position paper of the parties were made the basis of the committee's report and
recommendation which in turn became the basis of the order of the Minister of Labor
directing the petitioner to pay the complainants their COLA and service incentive leave
benefits.

III RESOLUTION OF THE SPECIFIC ISSUES

CEBU INSTITUTE OF TECHNOLOGY CASE
Petitioner assigns three other errors in the petition for certiorari:
1
RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND EMPLOYMENT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO A DENIAL OF DUE
PROCESS OF LAW IN DIRECTLY ISSUING THE ORDER DATED SEPTEMBER
29,1981 WITHOUT CONDUCTING A FORMAL INVESTIGATION AND ARBITRATION
PROCEEDINGS.
2

It could not therefore be contended that the petitioner was deprived of his right to be
heard when it appears on the record that it was permitted to ventilate its side of the
issues. There was sufficient compliance with the requirements of due process. In the
face of the well- settled principle that administrative agencies are not strictly bound by
the technical rules of procedure, this Court dismisses the petitioner's claim that formal
investigative and arbitration proceedings should be conducted. "While a day in court is
a matter of right in judicial proceedings, in administrative proceedings it is otherwise
since they rest upon different principles." [Cornejo v. Gabriel and Provincial Board of
Rizal, 41 Phil. 188 (1920); Tajonera v. Lamaroza, G.R. Nos. L-48907 and L-49035,
December 19,1981, 110 SCRA 438].
2. Going now to the matter of service incentive leave benefits, petitioner claims that
private respondents are engaged by the school on a contract basis as shown by the
individual teachers contract which defines the nature, scope and period of their
employment; hence, they are not entitled to the said benefit according to Rule V of the
Implementing Rules and Regulations of the Labor Code to wit:

PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PETITIONER IS

EXEMPTED AND/OR NOT OBLIGED TO PAY SERVICE INCENTIVE LEAVE.

Sec. 1. Coverage. This rule [on Service Incentive

Leave] shall apply to all employees, except:

xxx xxx xxx

PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PRIVATE

RESPONDENTS' CLAIMS FOR COLA AND SERVICE INCENTIVE LEAVE ARE
FULLY BARRED BY LACHES AND/OR EXTINGUISHED BY PRESCRIPTION.

(d) Field personnel and other employees whose

performance is unsupervised by the employer including
those who are engaged on task or contract basis,
purely commission basis, or those who are paid in a
fixed amount for performing work irrespective of the
time consumed in the performance thereof; (MOLE
Rules and Regulations, Rule V, Book III)

1. Petitioner assails the Order of the Minister of Labor on the ground that the same
was issued without the benefit of a hearing and was merely based on the report of the
labor management committee which is allegedly without power to pass upon the
issues raised. On this premise, petitioner claims that it was denied its right to due
process.
Petitioner's contention is without merit. The Labor Management Committee was
empowered to investigate the complaint against the petitioner for non-payment of the
cost of living allowance, 13th month pay and service incentive leave from 1974-1981

The phrase "those who are engaged on task or contract basis" should however, be
related with "field personnel " applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they follow,
[Vera v. Cuevas, G.R. No. L-33693, May 31, 1979, 90 SCRA 379]. Clearly, petitioner's
teaching personnel cannot be deemed field personnel which refers "to non-agricultural

employees who regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. [Par. 3, Article 82, Labor Code of the
Philippines]. Petitioner's claim that private respondents are not entitled to the service
incentive leave benefit cannot therefore be sustained.
3. As a last ditch effort to bar private respondents'claims, petitioner asserts that the
same are barred by laches and/or extinguished by prescription according to Article
291 of the Labor Code which provides:
Art. 291. Money claims. All money claims arising
from employer-employee , relations accruing during the
effectivity of this Code shall be filed within three (3)
years from the time the cause of action accrued;
otherwise, they shall be forever barred.
All money claims accruing prior to the effectivity of this
Code shall be filed with the appropriate entities
established under this Code within one (1) year from
the date of effectivity, and shall be processed or
determined in accordance with implementing rules and
regulations of the Code; otherwise, they shall be forever
barred.
xxx xxx xxx
Considering that the complaint alleging non-payment of benefits was filed only on
February 11, 1981, petitioner argues that prescription has already set in.
From the aforequoted provision, it is not fully accurate to conclude that the entire
claims for COLA and service incentive leave are no longer recoverable. This Court
finds no reason to disturb the following pronouncement of the Minister of Labor:
xxx xxx xxx
Simply stated, claims for COLA under P.D. 525, which
took effect on August 1, 1974, for the months of August,
September and October 1974 must be filed within one
(1) year from November 1, 1974, otherwise they shall
be considered prescribed; claims under the same
decree that accrued on or after November 1, 1974
should be initiated within three (3) years from the date
of accrual thereof, otherwise the same shall be deemed
extinguished. Although this particular claim was filed on
February 11, 1981, petitioners herein are entitled to
COLA under P.D. 525 from February 1978 up to the

present since the COLA that accrued in February 1978

has not yet prescribed at the time that the claim was
filed in February 1981. In the same vein, petitioners
herein should be granted COLA under P.D. 1123 from
February 1978 up to 1981 inasmuch as said decree
became effective only on May 11, 1977. Further,
petitioners are entitled to the full amount of COLA
provided under P.D.'s 1614, 1634, 1678 and 1713. It
must be pointed out that the earliest of the just cited
four (4) decrees, i.e., P.D. 1614, just took effect on April
1, 1979. Thus, the prescriptive period under Art. 292 of
the Labor Code, as amended, does not as yet apply to
money claims under the just mentioned decrees.
DIVINE WORD COLLEGE CASE
In assailing the disputed Order, petitioner contends that the public respondents acted
with grave and patent abuse of discretion amounting to lack of jurisdiction in that:
1. The Regional Director has no jurisdiction over money
claims arising from employer-employee relationship;
and
2. The Regional Director and Deputy Minister of Labor
adopted the report of the Labor Standards Division
without affording the petitioner the opportunity to be
heard.
1. Petitioner school claims that the case at bar is a money claim and should therefore
be within the original and exclusive jurisdiction of the Labor Arbiter pursuant to article
217 of the Labor Code, as amended.
It appears from the record, however, that the original complaint filed by ten (10) faculty
members of the Divine Word College was for non-compliance with Pres. Dec. No. 451
and with Labor Code provisions on service incentive leave, holiday and rest day pay
and which complaint specifically prayed that an inspection of the College be
conducted.
Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or
his duly authorized representatives (which includes Regional Directors) are accorded
the power to investigate complaints for non- compliance with labor laws, particularly
those which deal with labor standards such as payment of wages and other forms of
compensation, working hours, industrial safety, etc. This is provided for in article 128
of the Labor Code, as amended:
Art. 128. Visitorial and enforcement power.

(a) The Secretary of Labor or his duly authorized

representatives including labor regulation officers, shall
have access to employers' records and premises at any
time of the day or night, whenever work is being
undertaken therein, and the right to copy therefrom, to
question any employee and investigate any fact,
condition or matter which may be necessary to
determine violations or which may aid in the
enforcement of this Code and of any labor law, wage
order or rules and regulations issued pursuant thereto.
(b) The Secretary of Labor or his duly authorized
representatives shall have the power to order and
administer, after due notice and hearing, compliance
with the labor standards provisions of this Code based
on the findings of labor regulation officers or industrial
safety engineers made in the course of inspection, and
to issue writs of execution to the appropriate authority
for the enforcement of their order, except in cases
where the employer contests the findings of the labor
regulations officer and raises issues which cannot be
resolved without considering evidentiary matters that
are not verifiable in the normal course of inspection.
(Emphasis supplied).

payment of the employees' share in the sixty (60%) percent incremental proceeds.
Petitioner moved for a reconsideration of the latest order which the Regional Director,
however, denied, thereby elevating the case to the Office of the Minister of Labor and
Employment.
The foregoing facts demonstrate that petitioner had the opportunity to refute the report
on the inspection conducted. It submitted a comment thereto, which was in effect its
position paper. The arguments therein and evidence attached thereto were considered
by respondent Regional Director in the order issued subsequently. They, therefore,
had ample opportunity to present their side of the controversy.
What due process contemplates is not merely the existence of an actual hearing. The
"right to be heard" focuses more on the substance rather than the form. In the case at
bar, petitioner was actually heard through the pleadings that it filed with the Regional
Office V. As it itself admitted in its petition that it was afforded the right to be heard on
appeal [See Rollo, p. 581, petitioner cannot therefore insist that it was denied due
process.
FAR EASTERN UNIVERSITY CASE
Two other issues are raised in this petition, to wit:
1

Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction
over labor cases restates inter alia that "(L)abor standards cases arising from violation
of labor standards laws discovered in the course of inspection or complaints where
employer-employee relations still exist" are under the exclusive original jurisdiction of
the Regional Director.
Even assuming that respondent Regional Director was without jurisdiction to entertain
the case at bar, petitioner is now barred at this stage to claim lack of jurisdiction
having actively participated in the proceedings below. Petitioner never questioned the
jurisdiction of the respondent Regional Director.
2. The petitioner claims that it was never afforded the opportunity to be heard and was
therefore denied due process.
There is no dispute that an inspection of the College was conducted after a complaint
by some faculty members was filed with the Regional Office of the Ministry of Labor
and Employment. A report was submitted on the basis of the findings contained
therein. Petitioner was furnished a copy of said report to which it filed a comment.
Finding this to be without merit, the Regional Director issued an order giving petitioner
ten (10) days to manifest its compliance with the findings, otherwise, another would be
issued to enforce payment. Petitioner appealed but instead of resolving the
memorandum of appeal, which the Regional Director treated as a motion for
reconsideration, said Director issued another Order dated August 2, 1983 directing the

WHETHER OR NOT 'TRANSPORTATION ALLOWANCE' SHOULD BE

CONSIDERED AS 'EQUIVALENT TO 13TH-MONTH PAY UNDER PRES. DEC. NO.
851.
2
WHETHER OR NOT LEGAL HOLIDAY PAY BENEFIT COULD BE VALIDLY
WITHDRAWN AFTER BEING PRACTICED CONTINUOUSLY FOR EIGHT (8)
MONTHS.
1. The issue on the thirteenth (13th) month pay involves an interpretation of the
provisions of Pres. Dec. No. 851 which requires all employers "to pay all their
employees receiving a basic salary of not more than Pl,000 a month, regardless of the
nature of the employment, a 13th- month pay" (Sec. 1). However, "employer[s] already
paying their employees a 13th-month pay or its equivalent are not covered" (Sec. 2).
(Emphasis supplied)
The Rules and Regulations Implementing Pres. Dec. No. 851 provide the following:
SEC. 3. Employees. The Decree shall apply to all
employers except to: ...

c) Employers already paying their employees 13thmonth or more in a calendar year or its equivalent at
the time of this issuance; ...
xxx xxx xxx

12 months
FOR CASUAL EMPLOYEES:
13th Month Pay Formula:

The term "its equivalent" as used in paragraph (c)

hereof shall include Christmas bonus, mid-year bonus,
profit-sharing payments and other cash bonuses
amounting to not less than 1/12th of the basic salary
but shall not include cash and stock dividends, cost of
living allowances and all other allowances regularly
enjoyed by the employer, as well as non-monetary
benefits. Where an employer pays less than 1/1 2th of
the employees basic salary, the employer shall pay the
difference.
In the case at bar, the 13th month pay is paid in the following manner:
FOR REGULAR EMPLOYEES:
Transportation Allowance (TA)
50% of basic for the first year of service plus additional
5% every year thereafter but not to exceed 100% of
basic salary
Christmas Bonus (CB)
50% of basic salary for the first year of service plus
additional 5% every year thereafter but not to exceed
100% of basic salary.
For employees who have served the University for
more than 10 years, the University pays them
emoluments equivalent to the 14 months salaries.
13th Month Pay Formula:
Monthly Rate x No. of
months served for the year
Less TA/CB = 13th Mo. pay

Add salaries from 16 December of previous year to 15th December of present year
[and] divide by 12 months = 13th Mo. Pay (Rollo, pp. 60, 72).
The University's answer to the Union's claim of underpayment of the 13th month pay
is that the "transportation allowance" paid to its employees partakes the nature of a
mid-year bonus which under section 2 of Pres. Dec. No. 851 and section 3(c) of the
Implementing Rules and Regulations is equivalent to the 13th month pay,
The Labor Arbiter ordered FEU to pay the 13th month pay differentials of the
complainants reasoning that:
CLEARLY, transportation allowance cannot be
considered as equivalent" of 13th month pay as it is
neither a Christmas bonus, mid-year bonus, profit
sharing payment, or other cash bonuses, pursuant to
paragraphs (c) and (e), Section 3 of PD 851. The
regularity of its payment further cements this
proposition.
PERFORCE, complainants are underpaid of their 13th
month pay in an amount equivalent to 50% of their
basic salary for the lst year of service, plus additional
5% every year thereafter but not to exceed 100% of
their basic salary which, per respondent's formula,
corresponds to their transportation allowance. (Rollo, p.
61).
On appeal, the Third Division of the National Labor Relations Commission reversed
the Labor Arbiter's ruling by dismissing the complainant's claim for underpayment of
the 13th month pay for lack of merit. The NLRC ruled that:
From the above findings and conclusion, it is clear that
insofar as employees with ten (10) years of service or
more are concerned, they receive the equivalent of one
(1) month pay for Christmas bonus and another one (1)
month pay as transportation allowance or a total of
fourteen (14) months salary in a year. Obviously, this
group of employees are fully paid of their 13th month
pay and are not therefore subject to the instant claim.
As it is only those with less than ten (10) years of

service are included or encompassed by the Labor

Arbiter's resolution on this particular issue. With this
clarification, we shall now proceed to discuss the crux
of the controversy, that is, the determination of whether
or not the so designated "transportation allowance"
being paid to the employees should be considered
among those deemed equivalent to 13th month pay. As
adverted earlier, the Labor Arbiter opined that it cannot
be so considered as the equivalent of 13th month pay.
xxx xxx xxx
In passing upon the issue, we deemed it best to delve
deeper into the nature and intendment of the
transportation allowances as designated by both the
complainants and the respondent. Complainants claim
that the transportation allowance they enjoy has always
been called and termed allowance and never as bonus
since the time the same was given to them. They assert
that it simply was intended as an allowance and not a
bonus. It would appear however that complainants do
not dispute respondent's stand that transportation
allowance is being paid only every March of each year
as distinguished from other allowances that are being
paid on a monthly basis or on a bimonthly basis; that
the amount of transportation allowance to be paid is
dependent on the length of service of the employee
concerned (i.e. 50% basic in the first year and
additional 5% for each succeeding years, etc.); that the
said method of computing the amount of the
transportation allowance to be paid the complainants is
Identical to that used in determining Christmas bonus
(respondent's exhibit 8) that the reason behind said
transportation allowance is to financially assist
employees in meeting their tax obligations as the same
become due on or about the month of March of each
year.
xxx xxx xxx
We are inclined to believe and so hold that by the
manner by which said transportation allowance is being
paid (only once a year) as well as the method in
determining the amount to be paid (similar to Christmas
bonus) and considering further the reason behind said
payment (easing the burden of taxpayer-employee), the
said transportation allowance given out by respondent
while designating as such, partakes the nature of a mid-

year bonus. It bears to note in passing that in providing

for transportation allowance, respondent was not
compelled by law nor by the CBA (Annex "A" of
respondent's Appeal) as nowhere in the CBA nor in the
Labor Code can be found any provision on
transportation allowance. It was therefore a benefit that
stemmed out purely from the voluntary act and
generosity of the respondent FEU. Moreover, said
transportation allowance is only being paid once a year.
On the other hand, regular allowances not considered
as 13th month pay equivalent under P.D. 851, to our
mind, refer to those paid on regular intervals and
catering for specific employees' needs and
requirements that recur on a regular basis. Verily, if the
intendment behind the disputed transportation
allowance is to answer for the daily recurring
transportation expenses of the employees, the same
should have been paid to employees on regular
periodic intervals. All indications, as we see it, point out
to conclusion that the disputed transportation
allowance, while dominated as such apparently for lack
of better term, is in fact a form of bonus doled out by
the respondent during the month of March every year.
Hence, we hold that it is one of those that can very well
be considered as equivalent to the 13th month pay
(Rollo, pp. 73, 74, 75, 76).
This Court sustains the aforequoted view of public respondent. The benefit herein
designated as "transportation allowance" is a form of bonus equivalent to the 13th
month pay. Nevertheless, where this does not amount to 1/12 of the employees basic
salary, the employer shall pay the difference.
The evident intention of the law was to grant an additional income in the form of a 13th
month pay to employees not already receiving the same. This Court ruled in National
Federation of Sugar Workers (NFSW) v. Ovejera[G.R. No. 59743, May 31, 1982, 114
SCRA 354].
Otherwise put, the intention was to grant some relief
not to all workers but only to the unfortunate ones
not actually paid a 13th month salary or what amounts
to it, by whatever name called: but it was not envisioned
that a double burden would be imposed on the
employer already paying his employees a 13th month
pay or its equivalent whether out of pure generosity
or on the basis of a binding agreement and, in the latter
case, regardless of the conditional character of the
grant (such as making the payment dependent on

profit), so long as there is actual payment. Otherwise,

what was conceived to be a 13th month salary would in
effect become a 14th or possibly 15th month pay.

(a) Every worker shall be paid his regular holidays,

except in retail and service establishments regularly
employing less than ten (10) workers;

xxx xxx xxx

(b) The term "holiday" as used in this Chapter, shall

include: New Year's day, Maundy Thursday, Good
Friday, the ninth of April, the first of May, the twelfth of
June, the fourth of July, the thirtieth of November, the
twenty fifth and thirtieth of December and the day
designated by law for holding a general election.

Pragmatic considerations also weigh heavily in favor of

crediting both voluntary and contractual bonuses for the
purpose of determining liability for the 13th month pay.
To require employers (already giving their employees a
13th month salary or its equivalent) to give a second
13th month pay would be unfair and productive of
undesirable results. To the employer who had acceded
and is already bound to give bonuses to his employees,
the additional burden of a 13th month pay would
amount to a penalty for his munificence or liberality. The
probable reaction of one so circumstanced would be to
withdraw the bonuses or resist further voluntary grants
for fear that if and when a law is passed giving the
same benefits, his prior concessions might not be given
due credit; and this negative attitude would have an
adverse impact on the employees (pp.369,370).
The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, October 23, 1982,
117 SCRA 938 (1982)], citing the ruling in the above case also pointed out that:
To hold otherwise would be to impose an unreasonable and undue burden upon those
employers who had demonstrated their sensitivity and concern for the welfare of their
employees. A contrary stance would indeed create an absurd situation whereby an
employer who started giving his employees the 13th month pay only because of the
unmistakable force of the law would be in a far better position than another who, by
his own magnanimity or by mutual agreement, had long been extending his
employees the benefits contemplated under PD No. 851, by whatever nomenclature
these benefits have come to be known. Indeed, PD No. 851, a legislation benevolent
in its purpose, never intended to bring about such oppressive situation. (p. 944)
2. Presidential Decree No. 570-A was issued on November 1, 1974 amending certain
articles of Presidential Decree No. 442 (Labor Code of the Philippines promulgated on
May 1, 1974 which took effect six months thereafter). Section 28 thereof provides that:
Section 28. A new provision is hereby substituted in lieu
of the original provision of Article 258 of the same Code
to read as follows:
Art. 258. Right to holiday pay-

(c) When employer may require work on holidays. The

employer may require an employee to work on any
holiday but such employee shall be paid a
compensation equivalent twice his regular rate.
Presidential Decree No. 850 issued on December 16, 1975 also amending certain
articles of Pres. Dec. No. 442 adopted the aforequoted provision. Two months later, on
February 16, 1976, the Rules and Regulations Implementing the Labor Code, as
amended, was released the pertinent portion of which states that:
Section 2. Status of employees paid by the month.
Employees who are uniformly paid by the month,
irrespective of the number of working days therein, with
a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all
days in the month whether worked or not.
For this purpose, the monthly minimum wage shall not
be less than the statutory minimum wage multiplied by
365 days divided by twelve.
(e) Section 3. Holiday Pay. Every employer shall pay
his employees their regular daily wage for any
unworked regular holiday.
As used in the Rule, the term 'holiday' shall exclusively
refer to: New Year's Day, Maundy Thursday, Good
Friday, the ninth of April, the first of May, the twelfth of
June, the fourth of July, the thirtieth of November, the
twenty-fifth and thirtieth of December and the day
designated by law for a general election or national
referendum or plebiscite (MOLE Rules and Reg. Book
III, Rule IV, sec. 2 (1976).

After one week, on February 23, 1976, the Minister of Labor issued Policy Instruction
No. 9, to clarify further the right to holiday pay, thus:
The Rules Implementing PD 850 have clarified the
policy in the implementation of the ten (10) paid legal
holidays. Before PD 850. the number of working days a
year in a firm was considered important in determining
entitlement to the benefit. Thus, where an employee
was working for at least 313 days, he was definitely
already paid. If he was working for less than 313, there
was no certainty whether the ten (10) paid legal
holidays were already paid to him or not.
The ten (10) paid legal holidays law, to start with, is
intended to benefit principally daily employees. In the
case of monthly, only those whose monthly salary did
not yet include payment for the ten (10) paid legal
holidays are entitled to the benefit.
Under the rules implementing PD 850, this policy has
been fully clarified to eliminate controversies on the
entitlement of monthly paid employees. The new
determining rule is this: If the monthly paid employee is
receiving not less than P 240, the maximum monthly
minimum wage, and his monthly pay is uniform from
January to December, he is presumed to be already
paid the ten (10) paid legal holidays. However, if
deductions are made from his monthly salary on
account of holidays in months where they occur, then
he is entitled to the ten (10) legal holidays.
These new interpretations must be uniformly and
consistently upheld.
This issuance shall take effect immediately.
In the meantime, respondent University paid its employees holiday pay for the
following days:
DATE HOLIDAYS PAID
June 9, 1975 for the previous nine legal holidays
August, 1975 for the previous June 12 and July 4

Jan. 14, 1976 or the previous Nov. 30, Dec. 25

and 30
Jan. 1

and

After January 14, 1976, however, the University ceased paying the holiday pay
allegedly by reason of Policy Instruction No. 9. Specifically, the University claimed that
the monthly salary of its employees was, as of 1976, more than P 240.00 without
deductions from their monthly salary on account of holidays in months where they
occurred and that therefore, by virtue of Policy Instruction No. 9, they were no longer
entitled to the ten paid legal holidays.
Petitioners, upon the other hand, contend that Policy Instruction No. 9 could not have
possibly been the reason that prompted the University to withdraw such benefits from
its faculty and employees because said implementing rule was issued only on April 23,
1976 or four months later.
The Labor Arbiter ruled in favor of the complainant Union for the reason that ". . . the
payment of the 10-paid legal holiday benefits from June 8, 1975 up to January 14,
1976 is considered an employer practice that can no longer be withdrawn." [Decision;
Rollo, p. 59].
As in the case of the 13th month pay, the NLRC reversed the Labor Arbiter's ruling.
The NLRC held that:
Apparently, Arbiter Ruben Aquino concluded that
payment by the respondent of the legal holiday pay
preceded the effectivity of the Rules and Regulations
Implementing P.D. 850 and which rules took effect on
February 16, 1976. Hence, his conclusion that the
payment of the legal holiday pay stemmed out from
company practice and not from law. Tracing back,
however, the payments made by respondent of said
holiday pay will show that, if ever, the same was made
pursuant to P.D. 570-A which took effect on November
1, 1974. Noteworthy is the undisputed fact that
respondent first paid its employees legal holiday pay in
June 1975 corresponding to nine (9) legal holidays. It
bears to note that from the time of the effectivity of P.D.
570-A which was in November of 1974 up to June of
1975, the time respondent first paid legal holiday pay
for nine (9) legal holidays, there, were indeed more or
less nine legal holidays that transpired to wit: November
30, 1974, December 25, 1974, December 30, 1974,
January 1, 1975, February 27, 1975 (Referendum Day),
Maundy Thursday of 1975, Good Friday of 1975, April
9, 1975 and finally, May 1st of 1975. We are therefore

inclined to lend credence to respondent's claim that the

payment of legal holiday pay was in fact made pursuant
to law, P.D. 570-A in particular, it is not one that arose
out of company practice or policy.
Finding that said payment was made based on an
honest although erroneous interpretation of law, which
interpretation was later on corrected by the issuance
(sic) of Policy Instruction No. 9 and which issuance
prompted respondent to withdraw the holiday pay
benefits extended to the employees who were paid on a
regular monthly basis, and finding further that under
Policy Instructions No. 9, said subject employees are
deemed paid their holiday pay as they were paid on a
monthly basis at a wage rate presumably above the
statutory minimum, we believe and so hold that the
withdrawal of said holiday pay benefit was valid and
justifiable under the circumstances (Rollo, pp. 33-4).
This Court cannot sustain the foregoing decision of public respondent. Said decision
relied on Section 2, Rule IV, Book Ill of the implementing rules and on Policy
Instruction No. 9 which were declared by this Court to be null and void in Insular Bank
of Asia and America Employee's Union (IBAAEU) v. Inciong (G.R. No. 52415, October
23, 1984, 132 SCRA 6631. In disposing of the issue at hand, this Court reiterates the
ruling in that case, to wit:
WE agree with the petitioner's contention that Section
2, Rule IV, Book Ill of the implementing rules and Policy
Instruction No. 9 issued by the then Secretary of Labor
are nun and void since in the guise of clarifying the
Labor Code's provision on holiday pay, they in fact
amended them by enlarging the scope of their
exclusion.
xxx xxx xxx
It is elementary in the rules of statutory construction
that when the language of the law is clear and
unequivocal the law must be taken to mean exactly
what it says. In the case at bar, the provisions of the
Labor Code on the entitlement to the benefits of holiday
pay are clear and explicit it provides for both the
coverage of and exclusion from the benefits. In Policy
Instruction No. 9, the then Secretary of Labor went as
far as to categorically state that the benefit is principally
intended for daily paid employees, when the law clearly
states that every worker shall be paid their regular
holiday pay. This is a flagrant violation of the mandatory

directive of Article 4 of the Labor Code, which states

that "All doubts in the implementation and interpretation
of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in
favor of labor. " Moreover, it shall always be presumed
that the legislature intended to enact a valid and
permanent statute which would have the most
beneficial effect that its language permits (Orlosky vs.
Haskell, 155 A. 112). (pp. 673-4).
BISCOCHO CASE
At issue also in this petition is whether the 60% incremental proceeds may be
subjected to attorney's fees, negotiation fees, agency fees and the like.
The Court notes the fact that there are two classes of employees among the
petitioners: (1) those who are members of the bargaining unit and (2) those who are
not members of the bargaining unit. The first class may be further subdivided into two:
those who are members of the collective bargaining agent and those who are not.
It is clear that the questioned Order of the respondent Minister applies only to
members of the bargaining unit.The CBA prepared pursuant to said Order, however,
covered employees who are not members of the bargaining unit, although said CBA
had not yet been signed at the time this petition was filed on November 24, 1986.
Assuming it was signed thereafter, the inclusion of employees outside the bargaining
unit should be nullified as this does not conform to said order which directed private
respondents to execute a CBA covering only members of the bargaining unit.
Being outside the coverage of respondent Minister's order, and thus, not entitled to the
economic package involved therein, employees who are non- members of the
bargaining unit should not be assessed negotiation fees, attorney's fees, agency fees
and the like, for the simple reason that the resulting collective bargaining agreement
does not apply to them. It should be clear, however, that while non-members of the
bargaining unit are not entitled to the economic package provided by said order, they
are, in lieu thereof, still entitled to their share in the 60% incremental proceeds of
increases in tuition or other school fees or charges.
As far as assessment of fees against employees of the collective bargaining unit who
are not members of the collective bargaining agent is concerned, Article 249 of the
Labor Code, as amended by B.P. Blg. 70, provides the rule:
Art. 249. Unfair labor practices of employers.xxx xxx xxx

(e) ... Employees of an appropriate collective bargaining

unit who are not members of the recognized collective
bargaining agent may be assessed a reasonable fee
equivalent to the dues and other fees paid by members
of the recognized collective bargaining agent, if such
non- union members accept the benefits under the
collective agreement . . .

The Decision of public respondent National Labor Relations Commission dated

September 18, 1984 isREVERSED insofar as it affirmed in toto the dismissal of
petitioner Far Eastern University Employee Labor Union's claim under Pres. Dec. No.
451 and its claim for payment of holiday pay. Private respondent Far Eastern
University is therefore ordered to pay its employees the following:
(1) Their sixty (60) percent share in the increases in
tuition and other school fees or charges which shall be
allocated exclusively for increase in salaries or wages if
the tuition or other school fee increase was collected
during the effectivity of Pres. Dec. No. 451;

Employees of the collective bargaining unit who are not members of the collective
bargaining agent have to pay the foregoing fees if they accept the benefits under the
collective bargaining agreement and if such fees are not unreasonable. Petitioners
who are members of the bargaining unit failed to show that the equivalent of ten (10%)
percent of their backwages sought to be deducted is unreasonable.

(2) Their claim for holiday pay which was withdrawn

since January 14, 1976 up to the present.

WHEREFORE, the Court rules:

CEBU INSTITUTE OF TECHNOLOGY CASE

The Decision of respondent National Labor Relations Commission, however,

is SUSTAINED insofar as it denied petitioner's claim for thirteenth (1 3th month pay.
No costs.

In G.R. No. 58870, the Order of respondent Minister of Labor and Employment dated
September 29, 1981 is SUSTAINED insofar as it ordered petitioner Cebu Institute of
Technology to pay its teaching staff the following:

FABROS CASE

(1) Cost of living allowance under Pres. Dec.Nos.525

and 1123 from February 1978 up to 1981;
(2) Cost of living allowance under Pres. Dec. Nos.
1614, 1634, 1678 and 1713; and
(3) Service incentive leave due them from 1978.
The Temporary Restraining Order issued by this Court on December 7, 1981 is
hereby LIFTED and SET ASIDE. No costs.
DIVINE WORD COLLEGE CASE
The petition in G.R. No. 68345 is DENIED for lack of merit. The questioned Orders of
respondent Deputy Minister of Labor and Employment, dated December 19, 1983 and
July 4, 1984 are SUSTAINED insofar as said Orders denied the payment of the
emergency cost of living allowances of private respondents faculty teachers of the
Divine Word College of Legazpi out of the sixty (60%) incremental proceeds of tuition
and other school fee increases collected during the effectivity of Pres. Dec. No. 451.
The Rules and Regulations implementing Pres. Dec. No. 451 are hereby declared
invalid for being ultra vires No costs.
FAR EASTERN UNIVERSITY CASE

In G.R. No. 70832, the Petition for certiorari and Prohibition is DISMISSED. MECS
Order No. 25. s. 1985, particularly paragraphs 7.0 to 7.5 thereof, which provide for the
use and application of sixty (60%) percent of the increases in tuition and other school
fees or charges, having been issued pursuant to B.P. Blg. 232 which repealed Pres.
Dec. No. 451, is hereby declared VALID. The Temporary Restraining Order issued by
this Court dated May 29, 1985 is LIFTED and SET ASIDE. No costs.
BISCOCHO CASE
The assailed portions of the Order of the Minister of Labor and Employment dated
April 14, 1986 are AFFIRMED. The collective bargaining agreement prepared
pursuant thereto should, however, be MODIFIED to cover only members of the
bargaining unit. Only petitioners who are members of the collective bargaining unit, if
they accept the benefits under the resulting collective bargaining agreement, shall be
charged ten (10%) percent of the payable backwages as negotiation fees. The
Temporary Restraining Order dated November 25, 1986 is LIFTEDand SET ASIDE.
No costs.
VALMONTE CASE
The petition in G.R. No. 76596 is DISMISSED for lack of merit.
Effective September 1, 1982, the application and use of the proceeds from increases
in tuition fees and other schools fees or charges shall be governed by section 42 of

B.P. Blg. 232 as implemented by the Rules and Regulations issued by the then
Ministry, now Department of Education, Culture and Sports. SO ORDERED.
Teehankee, C.J., Yap, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco,
Bidin and Sarmiento, JJ., concur.
Fernan, Narvasa, Cruz and Padilla, JJ., took no part.

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

3.

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.
The Solicitor General for public respondent.

GUTIERREZ, JR., J.:

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:

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)
On August 30, 1987, the respondent labor union appealed to the National Labor
Relations Commission.
On June 30, 1987, the NLRC rendered the questioned decision with the following
dispositive portion:
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)
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;
b Effective 1 July, 1984-Pl.00 per worked day;

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

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

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

(p. 38, 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 one-peso wage increase provided for in the CBA
starting July 1, 1984 for the benefit of the workers.
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.
The other controverted provision of the CBA reads:
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 covered by Section 1
above, the COMPANY nevertheless agrees to grant a gratuity pay
to the resigning employee or laborer as follows:

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 petition (Dihiansan v. Court of Appeals, 153 SCRA 712
[1987]). Furthermore, we agree with the NLRC as it held:
It is our finding that the respondent is bound by the CBA to grant
an increase on July 1, 1984.

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)
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.

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.

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:

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.

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

Fernan, C.J., Feliciano, Bidin and Cortes, JJ., concur.

4.

G.R. No. L-31832

October 23, 1982

SOCIAL SECURITY SYSTEM, petitioner,

The SSS had no objection to the intervention sought but opposed the demand for the
payment of salaries pertaining to the entire period of the strike.

vs.
SSS SUPERVISORS' UNION-CUGCO and COURT OF INDUSTRIAL RELATIONS,
respondents.

In its Order of 12 March 1969, intervention was allowed by respondent Court, and
pending resolution of the claim for salaries, the SSS was directed to pay the same,
chargeable in the meantime to the accrued leave credits of the members 1 pending
the determination of the question of the illegality of the strike. Reconsideration of that
Order sought by the SSS was denied on 6 November 1969.

Benjamin C. Pineda for respondent Union.

Filemon Q. Almazan for petitioners.
MELENCIO-HERRERA, J.:
This Petition seeks to review on certiorari the Orders of respondent Court of Industrial
Relations (CIR) on the issue of whether or not petitioner Social Security System (SSS)
may be held liable for the payment of wages of members of respondent Union who
admittedly did not work during the 17-day strike declared in 1968 by the rank and file
Union (the Philippine Association of Free Labor Unions [PAFLU]).

For a brief factual background, it should be stated that the instant case is an offshoot
of Case No. 46-IPA (49) certified to the CIR by the President of the Philippines for
compulsory arbitration of labor dispute between the SSS and the PAFLU concerning
the interpretation of certain provisions of their Collective Bargaining Agreement. The
PAFLU had staged a strike in defiance of the CIR Order of August 29, 1968 "enjoining
the parties, for the sake of industrial peace . . . to maintain the status quo-the Union
not to declare any strike and the Management not to dismiss nor suspend any of its
employees nor to declare any lockout." On 3 September 1968, in that same case, the
SSS filed an Urgent Petition to declare the strike illegal.

On 26 September 1968, respondent Union (the SSS Supervisors' Union) filed a

Motion for Intervention in the said case averring, inter alia, that it had not participated
in the strike: that its members wanted to report for work but were prevented by the
picketers from entering the work premises; that under the circumstances, they were
entitled to their salaries corresponding to the duration of the strike, which could be
deducted from the accrued leave credits of their members.

On 24 November 1969, respondent Court issued an Order 2 directing the CIR

Examining Division to compute immediately the money equivalent of the salaries of
the members of respondent Union as well as the salaries of those employees who
were not members of the striking Union (PAFLU) and to deposit the amount
computed, for further disposition.

The SSS challenged on certiorari the said Orders before this Court (G.R. No. L31234), particularly the order to deposit, grounded on the overlapping membership in
the two Unions and the impossibility of compliance. We denied the Petition on 2
December 1969 and the proceedings below were resumed.

Upon a joint Motion for clarification of its Order of 24 November 1969, respondent
Court, through Judge Joaquin M. Salvador, issued the Order of 3 March 1970,
ordering the payment of salaries of the members of respondent Union during the strike
period, but not to be chargeable to accrued leave credits. The reasons given were that
this Court had already declared the strike premature, and that the members of
respondent Union had not participated in the strike and had actually manifested their
desire to work but could not cross the heavy picket lines during the height of the strike.

The SSS moved to reconsider the Order of 3 March 1970 arguing that since
respondent Union members actually rendered no service at all during the strike, they
were not entitled to the payment of salaries. Respondent Court, en banc, denied
reconsideration on 25 March 1970 for lack of sufficient justification.

Contending that the Industrial Court had no authority to issue the Order dated 3 March
1970 and its Resolution en banc dated 25 March 1970, petitioner asks this Tribunal to
have them annulled.

SO ORDERED.

5.
We find for the petitioner based on the equitable tenet of a "fair day's wage for a fair
day's labor."

The age-old rule governing the relation between labor and capital or management and
employee is that of a 'fair day's wage for a fair day's labor.' 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, dismissed or
suspended. It is hardly fair or just for an employee or laborer to fight or litigate against
his employer on the employer's time.<re||an1w> 3

In this case, the failure to work on the part of the members of respondent Union was
due to circumstances not attributable to themselves. But neither should the burden of
the economic loss suffered by them be shifted to their employer, the SSS, which was
equally faultless, considering that the situation was not a direct consequence of the
employer's lockout or unfair labor practice. Under the circumstances, it is but fair that
each party must bear his own loss.

G.R. No. 76746

July 27, 1987

DURABUILT RECAPPING PLANT & COMPANY and EDUARDO LAO, GENERAL

MANAGER, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. COMM. RICARDO C.
CASTRO, HON. ARBITER AMELIA M. GULOY, KAPISANAN NG MGA
MANGGAGAWA SA DURABUILT and REYNALDO BODEGAS, respondents.
GUTIERREZ, JR., J.:
This is a petition to review the May 16, 1986 resolution of respondent National Labor
Relations Commission (NLRC) affirming the Labor Arbiter's order in NLRC Case No.
NCR-73162083. The sole issue raised is the proper basis for the computation of
backwages in favor of an illegally dismissed employee.
The facts of the case are simple and uncontroverted.
On July 11, 1983, a complaint for illegal dismissal was filed by respondent Reynaldo
Bodegas, against petitioner Durabuilt, a tire recapping company.
In a decision rendered by the Labor Arbiter on February 13, 1984, the private
respondent was ordered reinstated to his former position with full backwages, from the
time he was terminated up to the time he is actually reinstated, without loss of
seniority rights and benefits accruing to him.

Considering, therefore, that the parties had no hand or participation in the situation
they were in, and that the stoppage of the work was not the direct consequence of the
company's lockout or unfair labor practice, 'the economic loss should not be shifted to
the employer.' Justice and equity demand that each must have to bear its own loss,
thus placing the parties in equal footing where none should profit from the other there
being no fault of either. 4

WHEREFORE, we hereby set aside respondent Court's Order dated 3 March 1970 as
affirmed by its Resolution en banc dated 25 March 1970, without pronouncement as to
costs.

The petitioners failed to file a seasonable appeal and entry of final judgment was
made on July 8, 1985.
On August 8, 1985, the Acting Chief of Research and Information and the Corporation
Auditing Examiner of the then Ministry of Labor and Employment submitted a
computation of backwages, ECOLA, 13th month pay, sick and vacation leave benefits
in favor of Reynaldo Bodegas in the total amount of P24,316.38.
The petitioner filed its opposition to the computation on the ground that it
contemplated a straight computation of twenty six (26) working days in one month
when the period covered by the computation was intermittently interrupted due to
frequent brownouts and machine trouble and that respondent Bodegas had only a

total of 250.75 days of attendance in 1982 due to absences. According to the

petitioner, Bodegas is entitled only to the amount of P3,834.05 broken down as
follows: salaries P1,993.00; ECOLA P1,433.50, and 13th month pay P407.55.

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, or suspended
(SSS v. SSS Supervisors Union-CUGCO, 117 SCRA 746).

On October 23, 1985, the Labor Arbiter denied the opposition to the computation. The
petitioner appealed to the NLRC which, in an order dated May 16, 1986, affirmed the
order of the Labor Arbiter and dismissed the appeal.

The illegal dismissal of the private respondent is conceded by the petitioner. It is

willing to pay backwages. However, the petitioner argues that for days where no work
was required and could be done by its employees, no wages could have been earned
and, thereafter, lost by said employees to justify an award of backwages. We quote
with approval the Solicitor General's comment,* to wit:

Claiming grave abuse of discretion on the part of the public respondents, Durabuilt
filed the instant petition.
Backwages, in general, are granted on grounds of equity for earnings which a worker
or employee has lost due to his dismissal from work (New Manila Candy Workers
Union (NACONWA-PAFLU v. CIR, 86 SCRA 37).
The general principle is that an employee is entitled to receive as backwages all the
amounts he may have lost starting from the date of his dismissal up to the time of his
reinstatement (Capital Garment Corporation v. Ople, 117 SCRA 473; New Manila
Candy Workers' Union (NACONWA-PAFLU) v. CIR, supra).
In a line of cases, this Court has established a policy fixing the amount of backwages
to a just and reasonable level without qualification or deduction (Insular Life
Assurance Co., Ltd. Employees' Association-NATU v. Insular Life Assurance Co., Ltd.,
76 SCRA 501; Feati University Club v. Feati University, 58 SCRA 395; Mercury Drug
Co., Inc. v. CIR, 56 SCRA 694). The respondents center their attention on the above
underlined portion of this policy. Hence, their contention that the deductions cited by
the petitioners cannot be made.
In their bid to recover a greater amount of backwages, the rationale of the policy has
escaped the respondents' consideration. In Insular Life Assurance Employees
Association-NATU v. Insular Life Assurance Co., Ltd. (76 SCRA 50) we held that to fix
the amount of backwages without qualification or deduction simply means that the
workers are to be paid their backwages fixed as of the time of their dismissal or strike
without deduction for their earnings elsewhere during their law-off and without
qualification of their backwages as thus fixed; i.e. unqualified by any wage increases
or other benefits that may have been received by their co-workers who were not
dismissed or did not go on strike. The principle is justified "as a realistic, reasonable
and mutually beneficial solution for it relieves the employees from proving their
earnings during their law-offs and the employer from submitting counter proofs. It was
meant to obviate the twin evils of Idleness on the part of the employees and attrition
and undue delay in satisfying the award on the part of the employer" (New Manila
Candy Workers Union NACONWA-PAFLU v. CIR supra). The same was not to
establish an inflexible rule of computation of any Backwages due an employee.
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, and for that matter backwages. If there is no work

From the indubitable facts on record, it appears that petitioners have valid
reasons to claim that certain days should not be considered days worked for
purposes of computing private respondent's backwages since their business
was not in actual operation due to brownouts or power interruption and the
retrenchment of workers they had during the period of private respondent's
dismissal.
It cannot be denied that during the past years particularly in 1983, there was
chronic electrical power interruption resulting to disruption of business
operations. To alleviate the situation, the government thru the Ministry of
Trade and Industry called on the industrial sector to resort to the so-called
Voluntary Loan Curtailment Plan (or VLCP), whereby brownouts or electrical
power interruption was scheduled by area. The program while it may have
been called 1. voluntary" was not so as electrical power consumers had no
choice then due to the prevailing energy crisis.
Petitioners heeding the government's call, participated in the VLCP as
indicated in their statement of conformity dated November 23, 1982. Thus,
beginning March 21, 1983 and every Wednesday thereafter, petitioner's
business (which indicentally is recapping rubber tires) was not in actual
operation. No less than the former Minister of Trade and Industry expressed
his gratitude to petitioners for participating in the VLCP. Petitioners
substantiated claim therefore, that the days during which they were not in
operation due to the VLCP should be excluded in the number of days
worked for purposes of computing private respondents backwages stands
reasonable and should have been considered by the corporation auditing
examiner.1avvphi1
Moreover, as early as May 1978, the Ministry of Labor and Employment,
thru Policy Instruction No. 36, has said that
2. Brownouts running for more than twenty minutes may not be treated as
hours worked provided that any of the following conditions are present;
a) The employees can leave their work place or go elsewhere
whether within or without the work premises; or

b) The employees can use the time effectively for their own
interest.

liability of backwages where good faith is evident (Findlay Millar Timber Co.
v. PLASLU, 6 SCRA 26: Cromwell Com. Employees & Laborers Union v.
CIR, 13 SCRA 259, Norton and Harrison Labor Union v. Harrison Co. Inc.
15 SCRA 310; PAL v. PALEA, 57 SCRA 489; Cruz v. MOLE, 120 SCRA 15).
There is no indication, to paraphrase this Honorable Court's ruling in
Pantranco North Express Inc. v. NLRC (126 SCRA 526) that private
respondent was a "victim of arbitrary and high handed action. Rollo, pp. 3435).

It is of record that during electrical power interruptions, petitioners business

was not in operation. This was never disputed by private respondent.
Petitioners' claim that the period (December 1983) during which they
effected retrenchment of workers owing to economic crisis then prevailing
likewise appears plausible. There is substantial evidence consisting of
reports to MOLE and Social Security System showing that petitioners had
laid off workers due to lack of raw materials. The petitioners payrolls
submitted to support their objection to computation indicate that the number
of working days was reduced from the normal weekly six working days to
four working days for a great number of petitioners' workers. Obviously,
private respondent could not have been among those laid off, as at that time
he was already dismissed by petitioner. (Rollo, pp. 31-34).
Thus, we have held that where the failure of workers to work was not due to the
employer's fault, the burden of economic loss suffered by the employees should not
be shifted to the employer. Each party must bear his own loss (SSS v. SSS
Supervisors' Union-CUGCO, supra; Pan-American World Airways, Inc. v. CIR, 17
SCRA 813). As pointed out by the Solicitor General
... to allow payment of backwages of P24,316.68 as ordered by public
respondents instead of P3,834.16 as petitioners claim and which appears to
be just and reasonable under the circumstances of this case would not only
be unconscionable but would be grossly unfair to other employees who
were not paid when petitioners' business was not in operation. (Rollo, p.
35).
Indeed, it would neither be fair nor just to allow respondent to recover something he
has not earned and could not have earned and to further penalize the petitioner
company over and above the losses it had suffered due to lack of raw materials and
the energy-saving programs of the government. The private respondent cannot be
allowed to enrich himself at the expense of the petitioner company. The computation
of backwages should be based on daily rather than on monthly pay schedules where,
as in the case at bar, such basis is more realistic and accurate. (Compania Maritima v.
United Seamen's Union of the Philippines, 65 SCRA 393).
In conclusion, we again quote the Solicitor General's comment:
Finally, what strengthens petitioners claim for mitigated liability is their
evident good faith as manifested by their reinstatement of private
respondent while the case for illegal dismissal was still pending and their
willingness to pay backwages. While it is true that as a general rule order of
reinstatement carries with it an award of backwages (Art. 280, Labor Code)
this Honorable Court did not only mitigate but absolved employers from

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The order
of the Labor Arbiter, Amelia M. Guloy in NLRC Case No. NCR-7-3162083, dated
October 23, 1985, as affirmed by the NLRC is SET ASIDE. The petitioner is ordered to
pay private respondent his backwages from the time he was terminated up to the time
he was actually reinstated computed on the basis of the number of days when
petitioner's business was in actual operation. The number of days where no work was
required and could be done by petitioner's employees on account of shutdowns due to
electrical power interruptions, machine repair, and lack of raw materials are not
considered hours worked for purposes of computing the petitioner's obligation to
respondent employee. In no case shall the award exceed three year's backpay as
above computed.
SO ORDERED.
Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.

6.

[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.
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:

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
---------------

SALESMEN:
74,116.63
Ten Centavos (P0.10) per case of Regular softdrinks.
Twelve Centavos (P0.12) per case of Family Size softdrinks.
TRUCK HELPERS:

Attorneys Fees (10%)

of the gross award 7,411.66
-------------

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

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

GRAND TOTAL AWARD P81,528.29

========

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.

The other claims are dismissed for lack of merit.

SO ORDERED.[1]

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-12-179191, RAB VII-12-1825-91 and RAB VII-12-1826-91, and assigned to Labor Arbiter
Ernesto F. Carreon.

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 13 th 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:

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

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.

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.

SO ORDERED.[2]
x x x x x x x x x. (Emphasis supplied)
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 13TH MONTH 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

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 employer-employee 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:

Lastly, petitioner argues that the NLRC gravely erred when it disregarded the
vouchers presented by the former as proof of his payment of 13 th 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]

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]

While it is true that the vouchers evidencing payments of 13 th 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]

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 must also be borne in mind that the intent of P.D. No. 851 is the granting of
additional income in the form of 13 th 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]

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]

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.

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.

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 and SET ASIDE. This case is REMANDED to the
Labor Arbiter for a recomputation of the alleged deficiencies. For non-observance 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.

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 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.

SO ORDERED.
Narvasa, C.J., (Chairman), Kapunan, and Purisima, JJ., concur.

7.

DOUGLAS MILLARES and ROGELIO LAGDA, petitioners, vs. NATIONAL

LABOR RELATIONS COMMISSION, TRANS-GLOBAL MARITIME AGENCY,
INC. and ESSO INTERNATIONAL SHIPPING CO., LTD. respondents.

RESOLUTION
KAPUNAN, J.:
On March 14, 2000, the Court promulgated its decision in the above-entitled
case, ruling in favor of the petitioners. The dispositive portion reads, as follows:
WHEREFORE, premises considered, the assailed Decision, dated June 1, 1993, of
the National Labor Relations Commission is hereby REVERSED andSET ASIDE and
a new judgment is hereby rendered ordering the private respondents to:
(1) Reinstate petitioners Millares and Lagda to their former positions without loss of
seniority rights, and to pay full backwages computed from the time of illegal dismissal
to the time of actual reinstatement;
(2) Alternatively, if reinstatement is not possible, pay petitioners Millares and Lagda
separation pay equivalent to one months salary for every year of service; and,
(3) Jointly and severally pay petitioners One Hundred Percent (100%) of their total
credited contributions as provided under the Consecutive Enlistment Incentive Plan.
SO ORDERED.[1]
A motion for reconsideration was consequently filed[2] by the private respondents
to which petitioners filed an Opposition thereto.[3]
In a Minute Resolution dated June 28, 2000, the Court resolved to deny the
motion for reconsideration with finality.[4]
Subsequently, the Filipino Association for Mariners Employment, Inc. (FAME)
filed a Motion for Leave to Intervene and to Admit a Motion for Reconsideration in
Intervention.
Private respondents, meanwhile, also filed a Motion for Leave to File a Second
Motion for Reconsideration of our decision.
In both motions, the private respondents and FAME respectively pray in the
main that the Court reconsider its ruling that Filipino seafarers are considered regular
employees within the context of Article 280 of the Labor Code. They claim that the
decision may establish a precedent that will adversely affect the maritime industry.
The Court resolved to set the case for oral arguments to enable the parties to
present their sides.

To recall, the facts of the case are, as follows:

Petitioner Douglas Millares was employed by private respondent ESSO International
Shipping Company LTD. (Esso International, for brevity) through its local manning
agency, private respondent Trans-Global Maritime Agency, Inc. (Trans-Global, for
brevity) on November 16, 1968 as a machinist. In 1975, he was promoted as Chief
Engineer which position he occupied until he opted to retire in 1989. He was then
receiving a monthly salary of US $1,939.00.
On June 13, 1989, petitioner Millares applied for a leave of absence for the period July
9 to August 7, 1989. In a letter dated June 14, 1989, Michael J. Estaniel, President of
private respondent Trans-Global, approved the request for leave of absence. On June
21, 1989, petitioner Millares wrote G.S. Hanly, Operations Manager of Exxon
International Co., (now Esso International) through Michael J. Estaniel, informing him
of his intention to avail of the optional retirement plan under the Consecutive
Enlistment Incentive Plan (CEIP) considering that he had already rendered more than
twenty (20) years of continuous service. On July 13, 1989 respondent Esso
International, through W.J. Vrints, Employee Relations Manager, denied petitioner
Millares request for optional retirement on the following grounds, to wit: (1) he was
employed on a contractual basis; (2) his contract of enlistment (COE) did not provide
for retirement before the age of sixty (60) years; and (3) he did not comply with the
requirement for claiming benefits under the CEIP, i.e., to submit a written advice to the
company of his intention to terminate his employment within thirty (30) days from his
last disembarkation date.
On August 9, 1989, petitioner Millares requested for an extension of his leave of
absence from August 9 to 24, 1989. On August 19, 1989, Roy C. Palomar, Crewing
Manager, Ship Group A, Trans-global, wrote petitioner Millares advising him that
respondent Esso International has corrected the deficiency in its manpower
requirement specifically in the Chief Engineer rank by promoting a First Assistant
Engineer to this position as a result of (his) previous leave of absence which expired
last August 8, 1989. The adjustment in said rank was required in order to meet
manpower schedules as a result of (his) inability.
On September 26, 1989, respondent Esso International, through H. Regenboog,
Personnel Administrator, advised petitioner Millares that in view of his absence without
leave, which is equivalent to abandonment of his position, he had been dropped from
the roster of crew members effective September 1, 1989.
On the other hand, petitioner Lagda was employed by private respondent Esso
International as wiper/oiler in June 1969. He was promoted as Chief Engineer in 1980,
a position he continued to occupy until his last COE expired on April 10, 1989. He was
then receiving a monthly salary of US$1,939.00.
On May 16, 1989, petitioner Lagda applied for a leave of absence from June 19, 1989
up to the whole month of August 1989. On June 14, 1989, respondent Trans-Globals
President, Michael J. Estaniel, approved petitioner Lagdas leave of absence from

June 22, 1989 to July 20, 1989 and advised him to report for re-assignment on July
21, 1989.
On June 26, 1989, petitioner Lagda wrote a letter to G.S. Stanley, Operations
Manager of respondent Esso International, through respondent Trans-Globals
President Michael J. Estaniel, informing him of his intention to avail of the optional
early retirement plan in view of his twenty (20) years continuous service in the
complaint.
On July 13, 1989, respondent Trans-global denied petitioner Lagdas request for
availment of the optional early retirement scheme on the same grounds upon which
petitioner Millares request was denied.
On August 3, 1989, he requested for an extension of his leave of absence up to
August 26, 1989 and the same was approved. However, on September 27, 1989,
respondent Esso International, through H. Regenboog, Personnel Administrator,
advised petitioner Lagda that in view of his unavailability for contractual sea service,
he had been dropped from the roster of crew members effective September 1, 1989.
On October 5, 1989, petitioners Millares and Lagda filed a complaint-affidavit,
docketed as POEA (M) 89-10-9671, for illegal dismissal and non-payment of
employee benefits against private respondents Esso International and Trans-Global,
before the POEA.[5]
On July 17, 1991, the POEA rendered a decision dismissing the complaint for
lack of merit.
On appeal to the NLRC, the decision of the POEA was affirmed on June 1, 1993
with the following disquisition:
The first issue must be decided in the negative. Complainants-appellants, as seamen
and overseas contract workers are not covered by the term regular employment as
defined under Article 280 of the Labor Code. The POEA, which is tasked with
protecting the rights of the Filipino workers for overseas employment to fair and
equitable recruitment and employment practices and to ensure their welfare,
prescribes a standard employment contract for seamen on board ocean-going vessels
for a fixed period but in no case to exceed twelve (12) months (Part 1, Sec. C). This
POEA policy appears to be in consonance with the international maritime
practice. Moreover, the Supreme Court in Brent School, Inc. vs. Zamora, 181 SCRA
702, had held that a fixed term is essential and natural appurtenance of overseas
employment contracts to which the concept of regular employment with all that it
implies is not applicable, Article 280 of the Labor Code notwithstanding. There is,
therefore, no reason to disturb the POEA Administrators finding that complainantsappellants were hired on a contractual basis and for a definite period. Their
employment is thus governed by the contracts they sign each time they are re-hired
and is terminated at the expiration of the contract period.[6]

Undaunted, the petitioners elevated their case to this Court [7] and successfully
obtained the favorable action, which is now vehemently being assailed.
At the hearing on November 15, 2000, the Court defined the issues for
resolution in this case, namely:
I. ARE PETITIONERS REGULAR OR CONTRACTUAL EMPLOYEES WHOSE
EMPLOYMENTS ARE TERMINATED EVERYTIME THEIR CONTRACTS OF
EMPLOYMENT EXPIRE?
II. ASSUMING THAT PETITIONERS ARE REGULAR EMPLOYEES, WERE THEY
DISMISSED WITHOUT JUST CAUSE SO AS TO BE ENTITLED TO
REINSTATEMENT AND BACKWAGES, INCLUDING PAYMENT OF 100% OF THEIR
TOTAL CREDITED CONTRIBUTIONS TO THE CONSECUTIVE ENLISTMENT
INCENTIVE PLAN (CEIP)?
III. DOES THE PROVISION OF THE POEA STANDARD CONTRACT FOR
SEAFARERS ON BOARD FOREIGN VESSELS (SEC. C., DURATION OF
CONTRACT) PRECLUDE THE ATTAINMENT BY SEAMEN OF THE STATUS OF
REGULAR EMPLOYEES?
IV. DOES THE DECISION OF THE COURT IN G.R. NO. 110524 CONTRAVENE
INTERNATIONAL MARITIME LAW, ALLEGEDLY PART OF THE LAW OF THE LAND
UNDER SECTION 2, ARTICLE II OF THE CONSTITUTION?
V. DOES THE SAME DECISION OF THE COURT CONSTITUTE A DEPARTURE
FROM ITS RULING IN COYOCA VS. NLRC (G.R. NO. 113658, March 31, 1995)?[8]
In answer to the private respondents Second Motion for Reconsideration and to
FAMEs Motion for Reconsideration in Intervention, petitioners maintain that they are
regular employees as found by the Court in the March 14, 2000 Decision. Considering
that petitioners performed activities which are usually necessary or desirable in the
usual business or trade of private respondents, they should be considered as regular
employees pursuant to Article 280, Par. 1 of the Labor Code. [9] Other justifications for
this ruling include the fact that petitioners have rendered over twenty (20) years of
service, as admitted by the private respondents;[10] that they were recipients of Merit
Pay which is an express acknowledgment by the private respondents that petitioners
are regular and not just contractual employees;[11] that petitioners were registered
under the Social Security System (SSS).
The petitioners further state that the case of Coyoca v. NLRC[12] which the
private respondents invoke is not applicable to the case at bar as the factual milieu in
that case is not the same. Furthermore, private respondents fear that our judicial
pronouncement will spell the death of the manning industry is far from real. Instead,
with the valuable contribution of the manning industry to our economy, these seafarers
are supposed to be considered as Heroes of the Republic whose rights must be
protected.[13] Finally, the first motion for reconsideration has already been denied with
finality by this Court and it is about time that the Court should write finis to this case.

The private respondents, on the other hand, contend that: (a) the ruling holding
petitioners as regular employees was not in accord with the decision in Coyoca v.
NLRC, 243 SCRA 190; (b) Art. 280 is not applicable as what applies is the POEA
Rules and Regulations Governing Overseas Employment; (c) seafarers are not
regular employees based on international maritime practice; (d) grave consequences
would result on the future of seafarers and manning agencies if the ruling is not
reconsidered; (e) there was no dismissal committed; (f) a dismissed seafarer is not
entitled to back wages and reinstatement, that being not allowed under the POEA
rules and the Migrant Workers Act; and, (g) petitioners are not entitled to claim the
total amount credited to their account under the CEIP.[14]
Meanwhile, Intervenor Filipino Association of Mariners Employment (FAME)
avers that our decision, if not reconsidered, will have negative consequences in the
employment of Filipino Seafarers overseas which, in turn, might lead to the demise of
the manning industry in the Philippines. As intervenor FAME puts it:
xxx
7.1 Foreign principals will start looking for alternative sources for seafarers to man
their ships. AS reported by the BIMCO/ISF study, there is an expectancy that there will
be an increasing demand for (and supply of) Chinese seafarers, with some
commentators suggesting that this may be a long-term alternative to the
Philippines. Moreover, the political changes within the former Eastern Bloc have made
new sources of supply available to the international market. Intervenors recent survey
among its members shows that 50 Philippine manning companies had already lost
some 6,300 slots to other Asian, East Europe and Chinese competition for the last two
years;
7.2 The Philippine stands to lose an annual foreign income estimated at U.S.
DOLLARS TWO HUNDRED SEVENTY FOUR MILLION FIVE HUNDRED FORTY
NINE THOUSAND (US$ 274,549,000.00) from the manning industry and another US
DOLLARS FOUR BILLION SIX HUNDRED FIFTY MILLION SEVEN HUNDRED SIX
THOUSAND (US$ 4,650,760,000.00) from the land-based sector if seafarers and
equally situated land-based contract workers will be declared regular employees;
7.3 Some 195,917 (as of 1998) deployed overseas Filipino seafarers will be rendered
jobless should we lose the market;
7.4 Some 360 manning agencies (as of 30 June 2000) whose principals may no
longer be doing business with them will close their shops;
7.5 The contribution to the Overseas Workers Welfare Administration by the sector,
which is USD 25.00 per contract and translates to US DOLLARS FOUR MILLION
(US$ 4,000,000.00)annually, will be drastically reduced. This is not to mention the
processing fees paid to POEA, Philippine Regulatory Commission (PRC), Department
of Foreign Affairs (DFA) and Maritime Industry Authority (MARINA) for the
documentation of these seafarers;

7.6 Worst, some 195,917 (as of 1998) families will suffer socially and economically, as
their breadwinners will be rendered jobless; and
7.7 It will considerably slow down the governments program of employment
generation, considering that, as expected foreign employers will now avoid hiring
Filipino overseas contract workers as they will become regular employees with all its
concomitant effects.[15]
Significantly, the Office of the Solicitor General, in a departure from its original
position in this case, has now taken the opposite view. It has expressed its
apprehension in sustaining our decision and has called for a re-examination of our
ruling.[16]
Considering all the arguments presented by the private respondents, the
Intervenor FAME and the OSG, we agree that there is a need to reconsider our
position with respect to the status of seafarers which we considered as regular
employees under Article 280 of the Labor Code. We, therefore, partially grant the
second motion for reconsideration.
In Brent School Inc. v. Zamora,[17] the Supreme Court stated that Article 280 of
the Labor Code does not apply to overseas employment.
In the light of the foregoing description of the development of the provisions of the
Labor Code bearing on term or fixed-period employment that the question posed in
the opening paragraph of this opinion should now be addressed. Is it then the
legislative intention to outlaw stipulations in employment contracts laying down a
definite period therefor? Are such stipulations in essence contrary to public policy and
should not on this account be accorded legitimacy?
On the other hand, there is the gradual and progressive elimination of references to
term or fixed-period employment in the Labor Code, and the specific statement of the
rule that:
Regular and Casual Employment The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the
employer except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be employee is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph; provided that, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such actually exists.

There is, on the other hand, the Civil Code, which has always recognized, and
continues to recognize, the validity and propriety of contracts and obligations with a
fixed or definite period, and imposes no restraints on the freedom of the parties to fix
the duration of a contract, whatever its object, be it specific, goods or services, except
the general admonition against stipulations contrary to law, morals, good customs,
public order or public policy.Under the Civil code, therefore, and as a general
proposition, fixed-term employment contracts are not limited, as they are under the
present Labor Code, to those by natural seasonal or for specific projects with
predetermined dates of completion; they also include those to which the parties by
free choice have assigned a specific date of termination.
Some familiar examples may be cited of employment contract which may be
neither for seasonal work nor for specific projects, but to which a fixed term is
an essential and natural appurtenance: overseas employment contracts, for
one, to which, whatever the nature of the engagement, the concept of regular
employment with all that it implies does not appear ever to have been
applied. Article 280 of the Labor Code notwithstanding also appointments to the
positions of dean, assistant dean, college secretary, principal, and other administrative
offices in educational institutions, which are by practice or tradition rotated among the
faculty members, and where fixed terms are a necessity without which no reasonable
rotation would be possible. Similarly, despite the provisions of Article 280, Policy
Instructions. No. 8 of the Minister of Labor implicitly recognize that certain company
officials may be elected for what would amount to fix periods, at the expiration of
which they would have to stand down, in providing that these officials, xxx may lose
their jobs as president, executive vice-president or vice-president, etc. because the
stockholders or the board of directors for one reason or another did not reelect them.
There can of course be no quarrel with the proposition that where from the
circumstances it is apparent that periods have been imposed to preclude acquisition
of tenurial security by the employee, they should be struck down or disregard as
contrary to public policy, morals, etc. But where no such intent to circumvent the law is
shown, or stated otherwise, where the reason for the law does not exists, e.g., where
it is indeed the employee himself who insists upon a period or where the nature of the
engagement is such that, without being seasonal or for a specific project, a definite
date of termination is a sine qua non, would an agreement fixing a period be
essentially evil or illicit, therefore anathema? Would such an agreement come within
the scope of Article 280 which admittedly was enacted to prevent the circumvention of
the right of the employee to be secured in xxx his employment
As it is evident from even only the three examples already given that Article 280 of the
Labor Code, under a narrow and literal interpretation, not only fails to exhaust the
gamut of employment contracts to which the lack of a fixed period would be an
anomaly, but would also appear to restrict, without reasonable distinctions, the right of
an employee to freely stipulate within his employer the duration of his engagement, it
logically follows that such a literal interpretation should be eschewed or avoided. The
law must be given a reasonable interpretation, to preclude absurdity in its
application. Outlawing the whole concept of term employment and subverting to boot
the principle of freedom of contract to remedy the evil of employers using it as a
means to prevent their employees from obtaining security of tenure is like cutting off

the nose to spite the face or, more relevantly, curing a headache by lopping of the
head.
It is a salutary principle in statutory construction that there exists a valid presumption
that undesirable consequences were never intended by a legislative measure, and
that a construction of which the statute is fairly susceptible is favored, which will avoid
all objectionable, mischievous, indefensible, wrongful, evil, and injurious
consequences.
Nothing is better settled than that courts are not to give words a meaning which would
lead to absurd or unreasonable consequences. That is a principle that goes back to In
re Allen decided on October 27, 1902, where it was held that a literal interpretation is
to be rejected if it would be unjust or lead to absurd results. That is a strong argument
against its adoption. The words of Justice Laurel are particularly apt. Thus: the
appellants would lead to an absurdity is another argument for rejecting it.
Xxx We have, here, then a case where the true intent of the law is clear that calls for
the application of the cardinal rule of statutory construction that such intent of spirit
must prevail over the letter thereof, for whatever is within the spirit of a statute is within
the statute, since adherence to the letter would result in absurdity, injustice and
contradictions and would defeat the plain and vital purpose of the statute.
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor code clearly appears to have
been, as already observed, to prevent circumvention of the employees right to
be secure in his tenure, the clause in said article indiscriminately and
completely ruling out all written or oral agreements conflicting with the concept
of regular employment as defined therein should be construed to refer to the
substantive evil that the Code itself has singled out; agreements entered into
precisely to circumvent security of tenure. It should have no application to
instances where a fixed period of employment was agreed upon knowingly and
voluntarily by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances
vitiating his consent, or where it satisfactorily appears that the employer and
employee dealt with each other on more or less equal terms with no moral
dominance whatever being exercised by the former over the latter. Unless thus
limited in its purview, the law would be made to apply to purposes other than those
explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its
effects and apt to lead to absurd and unintended consequences.
Again, in Pablo Coyoca v. NLRC,[18] the Court also held that a seafarer is not a
regular employee and is not entitled to separation pay.His employment is governed by
the POEA Standard Employment Contract for Filipino Seamen.
XXX. In this connection, it is important to note that neither does the POEA standard
employment contract for Filipino seamen provide for such benefits.

As a Filipino seaman, petitioner is governed by the Rules and Regulations

Governing Overseas Employment and the said Rules do not provide for
separation or termination pay. What is embodied in petitioners contract is the
payment of compensation arising from permanent partial disability during the period of
employment. We find that private respondent complied with the terms of contract
when it paid petitioner P42,315.00 which, in our opinion, is a reasonable amount, as
compensation for his illness.
Lastly, petitioner claims that he eventually became a regular employee of private
respondent and thus falls within the purview of Articles 284 and 95 of the Labor
Code. In support of this contention, petitioner cites the case of Worth Shipping
Service, Inc., et al. v. NLRC, et al., wherein we held that the crew members of the
shipping company had attained regular status and thus, were entitled to separation
pay. However, the facts of said case differ from the present. In Worth, we held that the
principal and agent had operational control and management over the MV Orient
Carrier and thus, were the actual employers of their crew members.
From the foregoing cases, it is clear that seafarers are considered contractual
employees. They can not be considered as regular employees under Article 280 of the
Labor Code. Their employment is governed by the contracts they sign everytime they
are rehired and their employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time. They fall under the
exception of Article 280 whose employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season. [19] We need
not depart from the rulings of the Court in the two aforementioned cases which indeed
constitute stare decisis with respect to the employment status of seafarers.
Petitioners insist that they should be considered regular employees, since they
have rendered services which are usually necessary and desirable to the business of
their employer, and that they have rendered more than twenty(20) years of
service. While this may be true, the Brent case has, however, held that there are
certain forms of employment which also require the performance of usual and
desirable functions and which exceed one year but do not necessarily attain regular
employment status under Article 280.[20] Overseas workers including seafarers fall
under this type of employment which are governed by the mutual agreements of the
parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are
governed by the Rules and Regulations of the POEA.The Standard Employment
Contract governing the employment of All Filipino seamen on Board Ocean-Going
Vessels of the POEA, particularly in Part I, Sec. C specifically provides that the
contract of seamen shall be for a fixed period. And in no case should the contract of
seamen be longer than 12 months. It reads:
Section C. Duration of Contract

The period of employment shall be for a fixed period but in no case to exceed 12
months and shall be stated in the Crew Contract. Any extension of the Contract period
shall be subject to the mutual consent of the parties.
Moreover, it is an accepted maritime industry practice that employment of
seafarers are for a fixed period only. Constrained by the nature of their employment
which is quite peculiar and unique in itself, it is for the mutual interest of both the
seafarer and the employer why the employment status must be contractual only or for
a certain period of time. Seafarers spend most of their time at sea and
understandably, they can not stay for a long and an indefinite period of time at sea.
[21]
Limited access to shore society during the employment will have an adverse impact
on the seafarer. The national, cultural and lingual diversity among the crew during the
COE is a reality that necessitates the limitation of its period.[22]
Petitioners make much of the fact that they have been continually re-hired or
their contracts renewed before the contracts expired (which has admittedly been going
on for twenty (20) years). By such circumstance they claim to have acquired regular
status with all the rights and benefits appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of continuous rehiring was dictated by practical considerations that experienced crew members are
more preferred. Petitioners were only given priority or preference because of their
experience and qualifications but this does not detract the fact that herein petitioners
are contractual employees. They can not be considered regular employees. We quote
with favor the explanation of the NLRC in this wise:
Xxx The reference to permanent and probationary masters and employees in these
papers is a misnomer and does not alter the fact that the contracts for enlistment
between complainants-appellants and respondent-appellee Esso International were
for a definite periods of time, ranging from 8 to 12 months.Although the use of the
terms permanent and probationary is unfortunate, what is really meant is eligible forre-hire. This is the only logical conclusion possible because the parties cannot and
should not violate POEAs requirement that a contract of enlistment shall be for a
limited period only; not exceeding twelve (12)months.[23]
From all the foregoing, we hereby state that petitioners are not considered
regular or permanent employees under Article 280 of the Labor Code. Petitioners
employment have automatically ceased upon the expiration of their contracts of
enlistment (COE). Since there was no dismissal to speak of, it follows that petitioners
are not entitled to reinstatement or payment of separation pay or backwages, as
provided by law.
With respect to the benefits under the Consecutive Enlistment Incentive Plan
(CEIP), we hold that the petitioners are still entitled to receive 100% of the total
amount credited to him under the CEIP. Considering that we have declared that
petitioners are contractual employees, their compensation and benefits are covered
by the contracts they signed and the CEIP is part and parcel of the contract.
The CEIP was formulated to entice seamen to stay long in the company. As the
name implies, the program serves as an incentive for the employees to renew their

contracts with the same company for as long as their services were needed. For those
who remained loyal to them, they were duly rewarded with this additional
remuneration under the CEIP, if eligible. While this is an act of benevolence on the
part of the employer, it can not, however, be denied that this is part of the benefits
accorded to the employees for services rendered. Such right to the benefits is vested
upon them upon their eligibility to the program.

date, of his intention to terminate his employment. (To advise the Company in writing
means that the original letter must be sent to the Companys agent in the Philippines, a
copy sent to the Company in New York).

The CEIP provides that an employee becomes covered under the Plan when he
completes thirty-six (36) months or an equivalent of three (3) years of credited
service with respect to employment after June 30, 1973. [24] Upon eligibility, an amount
shall be credited to his account as it provides, among others:

C. Other Terminations

xxx

When the employment of an employee is terminated by the

Company for a reason other than one in A and B above, without
any misconduct on his part, a percentage of the total amount
credited to his account will be distributed to him in accordance with
the following.

III. Distribution of Benefits

A. Retirement, Death and Disability

Credited Service Percentage

When the employment of an employee terminates because of his
retirement, death or permanent and total disability, a percentage of
the total amount credited to his account will be distributed to him
(or his eligible survivor(s) in accordance with the following:
Reason for Termination Percentage
a) Attainment of mandatory retire- 100%
ment age of 60.
b) Permanent and total disability, 100%
while under contract, that is
not due to accident or misconduct.
c) Permanent and total disability, 100%
while under contract, that is
due to accident, and not due to
misconduct.
xxx
B. Voluntary Termination
When an employee voluntary terminates his employment with at least 36 months of
credited service without any misconduct on his part, 18 percent of the total amount
credited to his account, plus an additional of one percent for each month (up to a
maximum of 164 months of credited service in excess of 36, will be distributed to him
provided (1) the employee has completed his last Contract of Enlistment and (2)
employee advises the company in writing, within 30 days, from his last disembarkation

36 months 50%
48 75%
60 100%
When the employment of an employee is terminated due to his poorperformance, misconduct, unavailability, etc., or if employee is not
offered re-engagement for similar reasons, no distribution of any
portion of employees account will ever be made to him (or his
eligible survivor[s]).
It must be recalled that on June 21, 1989, Millares wrote a letter to his employer
informing his intention to avail of the optional retirement plan under the CEIP
considering that he has rendered more than twenty (20) years of continuous
service. Lagda, likewise, manifested the same intention in a letter dated June 26,
1989. Private respondent, however, denied their requests for benefits under the CEIP
since: (1) the contract of enlistment (COE) did not provide for retirement before 60
years of age; and that (2) petitioners failed to submit a written notice of their intention
to terminate their employment within thirty (30) days from the last disembarkation date
pursuant to the provision on Voluntary Termination of the CEIP. Petitioners were
eventually dropped from the roster of crew members and on grounds of abandonment
and unavailability for contractual sea service, respectively, they were disqualified from
receiving any benefits under the CEIP.[25]
In our March 14, 2000 Decision, we, however, found that petitioners Millares
and Lagda were not guilty of abandonment or unavailability for contractual sea
service, as we have stated:
The absence of petitioners was justified by the fact that they secured the approval of
private respondents to take a leave of absence after the termination of their last
contracts of enlistment. Subsequently, petitioners sought for extensions of their

respective leaves of absence. Granting arguendo that their subsequent requests for
extensions were not approved, it cannot be said that petitioners were unavailable or
had abandoned their work when they failed to report back for assignment as they
were still questioning the denial of private respondents of their desire to avail of the
optional early retirement policy, which they believed in good faith to exist.[26]

SO ORDERED.

8.

[G.R. No. 111042. October 26, 1999]

Neither can we consider petitioners guilty of poor performance or misconduct

since they were recipients of Merit Pay Awards for their exemplary performances in
the company.
Anent the letters dated June 21, 1989 (for Millares) and June 26, 1989 (for
Lagda) which private respondent considered as belated written notices of termination,
we find such assertion specious. Notwithstanding, we could conveniently consider the
petitioners eligible under Section III-B of the CEIP (Voluntary Termination), but this
would, however, award them only a measly amount of benefits which to our mind, the
petitioners do not rightfully deserve under the facts and circumstances of the case. As
the CEIP provides:
III. Distribution of Benefits
xxx

AVELINO LAMBO and VICENTE BELOCURA, petitioners, vs. NATIONAL LABOR

RELATIONS COMMISSION and J.C. TAILOR SHOP and/or JOHNNY
CO, respondents.
DECISION
MENDOZA, J.:
This is a petition for certiorari to set aside the decision [1] of the National Labor
Relations Commission (NLRC) which reversed the awards made by the Labor Arbiter
in favor of petitioners, except one for P4,992.00 to each, representing 13th month pay.
The facts are as follows.

E. Distribution of Accounts
When an employee terminates under conditions that would qualify for a distribution of
more than one specified in A, B or C above, the largest single amount, only, will be
distributed.
Since petitioners termination of employment under the CEIP do not fall under
Section III-A (Retirement, Death and Disability) or Section III-B (Voluntary
Termination), nor could they be considered under the second paragraph of Section IIIC, as earlier discussed; it follows that their termination falls under the first paragraph
of Section III-C for which they are entitled to 100% of the total amount credited to their
accounts. The private respondents can not now renege on their commitment under
the CEIP to reward deserving and loyal employees as the petitioners in this case.
In taking cognizance of private respondents Second Motion for Reconsideration,
the Court hereby suspends the rules to make them conformable to law and justice and
to subserve an overriding public interest.
IN VIEW OF THE FOREGOING, THE COURT Resolved to Partially
GRANT Private Respondents Second Motion for Reconsideration and Intervenor
FAMES Motion for Reconsideration in Intervention. The Decision of the National Labor
Relations Commission dated June 1, 1993 is hereby REINSTATED with
MODIFICATION. The Private Respondents, Trans-Global Maritime Agency, Inc. and
Esso International Shipping Co.,Ltd. are hereby jointly and severally ORDERED to
pay petitioners One Hundred Percent (100%) of their total credited contributions as
provided under the Consecutive Enlistment Incentive Plan(CEIP).

Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by

private respondents J.C. Tailor Shop and/or Johnny Co on September 10, 1985 and
March 3, 1985, respectively. They worked from 8:00 a.m. to 7:00 p.m. daily, including
Sundays and holidays. As in the case of the other 100 employees of private
respondents, petitioners were paid on a piece-work basis, according to the style of
suits they made. Regardless of the number of pieces they finished in a day, they were
each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents
for illegal dismissal and sought recovery of overtime pay, holiday pay, premium pay on
holiday and rest day, service incentive leave pay, separation pay, 13th month pay, and
attorneys fees.
After hearing, Labor Arbiter Jose G. Gutierrez found private respondents guilty
of illegal dismissal and accordingly ordered them to pay petitioners claims. The
dispositive portion of the Labor Arbiters decision reads:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring the
complainants to have been illegally dismissed and ordering the respondents to pay
the complainants the following monetary awards:
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P64,896.00

II. OVERTIME PAY 13,447.90 13,447.90

III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
TOTAL P94,719.20 P96,383.20 = P191,102.40
Add: 10% Attorneys Fees 19,110.24
GRAND TOTAL P210,212.64
======
or a total aggregate amount of TWO HUNDRED TEN THOUSAND TWO HUNDRED
TWELVE AND 64/100 (P210,212.64).
All other claims are dismissed for lack of merit.
SO ORDERED.[2]
On appeal by private respondents, the NLRC reversed the decision of the Labor
Arbiter. It found that petitioners had not been dismissed from employment but merely
threatened with a closure of the business if they insisted on their demand for a straight
payment of their minimum wage, after petitioners, on January 17, 1989, walked out of
a meeting with private respondents and other employees. According to the NLRC,
during that meeting, the employees voted to maintain the company policy of paying
them according to the volume of work finished at the rate of P18.00 per dozen of
tailored clothing materials. Only petitioners allegedly insisted that they be paid the
minimum wage and other benefits. The NLRC held petitioners guilty of abandonment
of work and accordingly dismissed their claims except that for 13th month pay. The
dispositive portion of its decision reads:
WHEREFORE, in view of the foregoing, the appealed decision is hereby vacated and
a new one entered ordering respondents to pay each of the complainants their 13th
month pay in the amount of P4,992.00. All other monetary awards are hereby deleted.
SO ORDERED.[3]
Petitioners allege that they were dismissed by private respondents as they were
about to file a petition with the Department of Labor and Employment (DOLE) for the

payment of benefits such as Social Security System (SSS) coverage, sick leave and
vacation leave. They deny that they abandoned their work.
The petition is meritorious.
First. There is no dispute that petitioners were employees of private
respondents although they were paid not on the basis of time spent on the job but
according to the quantity and the quality of work produced by them. There are two
categories of employees paid by results: (1) those whose time and performance
are supervised by the employer. (Here, there is an element of control and supervision
over the manner as to how the work is to be performed.A piece-rate worker belongs to
this category especially if he performs his work in the company premises.); and (2)
those whose time and performance areunsupervised. (Here, the employers control is
over the result of the work. Workers on pakyao and takay basis belong to this
group.) Both classes of workers are paid per unit accomplished. Piece-rate payment is
generally practiced in garment factories where work is done in the company premises,
while payment on pakyao and takay basis is commonly observed in the agricultural
industry, such as in sugar plantations where the work is performed in bulk or in
volumes difficult to quantify.[4] Petitioners belong to the first category, i.e., supervised
employees.
In determining the existence of an employer-employee relationship, the
following elements must be considered: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct.[5] Of these elements, the most important criterion is
whether the employer controls or has reserved the right to control the employee not
only as to the result of the work but also as to the means and methods by which the
result is to be accomplished.[6]
In this case, private respondents exercised control over the work of
petitioners. As tailors, petitioners worked in the companys premises from 8:00 a.m. to
7:00 p.m. daily, including Sundays and holidays. The mere fact that they were paid on
a piece-rate basis does not negate their status as regular employees of private
respondents. The term wage is broadly defined in Art. 97 of the Labor Code as
remuneration or earnings, capable of being expressed in terms of money whether
fixed or ascertained on a time, task, piece or commission basis. Payment by the piece
is just a method of compensation and does not define the essence of the relations.
[7]
Nor does the fact that petitioners are not covered by the SSS affect the employeremployee relationship.
Indeed, the following factors show that petitioners, although piece-rate workers,
were regular employees of private respondents: (1) within the contemplation of Art.
280 of the Labor Code, their work as tailors was necessary or desirable in the usual
business of private respondents, which is engaged in the tailoring business; (2)
petitioners worked for private respondents throughout the year, their employment not
being dependent on a specific project or season; and, (3) petitioners worked for
private respondents for more than one year.[8]
Second. Private respondents contend, however, that petitioners refused to
report for work after learning that the J.C. Tailoring and Dress Shop Employees Union
had demanded their (petitioners) dismissal for conduct unbecoming of employees. In
support of their claim, private respondents presented the affidavits [9] of Emmanuel Y.

Caballero, president of the union, and Amado Cabaero, member, that petitioners had
not been dismissed by private respondents but that practically all employees of the
company, including the members of the union had asked management to terminate
the services of petitioners. The employees allegedly said they were against petitioners
request for change of the mode of payment of their wages, and that when a meeting
was called to discuss this issue, a petition for the dismissal of petitioners was
presented, prompting the latter to walk out of their jobs and instead file a complaint for
illegal dismissal against private respondents on January 17, 1989, even before all
employees could sign the petition and management could act upon the same.
To justify a finding of abandonment of work, there must be proof of a deliberate
and unjustified refusal on the part of an employee to resume his employment. The
burden of proof is on the employer to show an unequivocal intent on the part of the
employee to discontinue employment.[10] Mere absence is not sufficient. It must be
accompanied by manifest acts unerringly pointing to the fact that the employee simply
does not want to work anymore.[11]
Private respondents failed to discharge this burden. Other than the self-serving
declarations in the affidavits of their two employees, private respondents did not
adduce proof of overt acts of petitioners showing their intention to abandon their
work. On the contrary, the evidence shows that petitioners lost no time in filing the
case for illegal dismissal against private respondent. This fact negates any intention
on their part to sever their employment relationship.[12] Abandonment is a matter of
intention; it cannot be inferred or presumed from equivocal acts.[13]
Third. Private respondents invoke the compromise agreement, [14] dated March
2, 1993, between them and petitioner Avelino Lambo, whereby in consideration of the
sum of P10,000.00, petitioner absolved private respondents from liability for money
claims or any other obligations.
To be sure, not all quitclaims are per se invalid or against public policy. But
those (1) where there is clear proof that the waiver was wangled from an unsuspecting
or gullible person or (2) where the terms of settlement are unconscionable on their
face are invalid. In these cases, the law will step in to annul the questionable
transaction.[15] However, considering that the Labor Arbiter had given petitioner Lambo
a total award of P94,719.20, the amount of P10,000.00 to cover any and all monetary
claims is clearly unconscionable. As we have held in another case, [16] the subordinate
position of the individual employee vis-a-vis management renders him especially
vulnerable to its blandishments, importunings, and even intimidations, and results in
his improvidently waiving benefits to which he is clearly entitled. Thus, quitclaims,
waivers or releases are looked upon with disfavor for being contrary to public policy
and are ineffective to bar claims for the full measure of the workers legal rights. [17] An
employee who is merely constrained to accept the wages paid to him is not precluded
from recovering the difference between the amount he actually received and that
amount which he should have received.
Fourth. The Labor Arbiter awarded backwages, overtime pay, holiday pay, 13th
month pay, separation pay and attorneys fees, corresponding to 10% of the total
monetary awards, in favor of petitioners.
As petitioners were illegally dismissed, they are entitled to reinstatement with
backwages. Considering that petitioners were dismissed from the service on January

17, 1989, i.e., prior to March 21, 1989,[18] the Labor Arbiter correctly applied the rule in
the Mercury Drug case,[19] according to which the recovery of backwages should be
limited to three years without qualifications or deductions. Any award in excess of
three years is null and void as to the excess.[20]
The Labor Arbiter correctly ordered private respondents to give separation
pay. Considerable time has lapsed since petitioners dismissal, so that reinstatement
would now be impractical and hardly in the best interest of the parties. In lieu of
reinstatement, separation pay should be awarded to petitioners at the rate of one
month salary for every year of service, with a fraction of at least six (6) months of
service being considered as one (1) year.[21]
The awards for overtime pay, holiday pay and 13th month pay are in
accordance with our finding that petitioners are regular employees, although paid on a
piece-rate basis.[22] These awards are based on the following computation of the Labor
Arbiter:
AVELINO LAMBO
I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.
P 64.00/day x 26 days =
1,664.00/mo. x 36 mos. = P 59,904.00
13th Mo. Pay:
P 1,664.00/yr. x 3 yrs. = 4, 992.00 P64,896.00
II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
Jan. 17/86 - April 30/87 = 15 mos. & 12 days =
(15 mos. x 26 days + 12 days) = 402 days
*2 hours = 25%
402 days x 2 hrs./day = 804 hrs.
P 32.00/day 8 hrs. =
4.00/hr. x 25% =
1.00/hr. + P4.00/hr. =

5.00/hr. x 804 hrs. = P 4,020.00

2.00/hr. + P8.00/hr. =

May 1/87-Sept. 30/87 = 4 mos. & 26 days =

10.00/hr. x 680 hrs. = P6,800.00 P13,447.90

(4 mos. x 26 days + 26 days) = 130 days

III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89

130 days x 2 hrs./day = 260 hrs.

Jan. 17/86 - April 30/87 = 12 RHs; 8 SHs

P 41.00/day 8 hrs. =

P 32.00/day x 200% =

5.12/hr. x 25% =

64.00/day x 12 days = P768.00

1.28/hr. + P5.12/hr. =

32.00/day x 12 days = (384.00) P384.00

6.40/hr. x 260 hrs. = P 1,664.00

32.00/day x 30% =

Oct. 1/87-Dec. 13/87 = 2 mos. & 11 days =

9.60/day x 8 days = 76.80 460.80

(2 mos. x 26 days + 11 days) = 63 days

May 1/87 - Sept. 30/87 = 3 RHs; 3 SHs

63 days x 2 hrs./day = 126 hrs.

P 41.00/day x 200% =

P 49.00/day 8 hrs. =

82.00/day x 3 days = P246.00

6.12/hr. x 25% =

41.00/day x 3 days = (123.00) P123.00

1.53/hr. + P6.12/hr. =

41.00/day x 30% =

7.65/hr. x 126 hrs. = P963.90

12.30/day x 3 days = 36.90 159.90

Dec. 14/87 - Jan. 17/89 = 13 mos. & 2 days =

Oct. 1/87 - Dec. 13/87 = 1 RH

(13 mos. x 26 days + 2 days) = 340 days

P 49.00/day x 200% =

340 days x 2 hrs./day = 680 hrs.

98.00/day x 1 day = P98.00

P 64.00/day 8 hrs. =

49.00/day x 1 day = (49.00) 49.00

8.00/hr. x 25% =

Dec. 14/87 - Jan. 17/89 = 9 RHs; 8 SHs

P 64.00/day x 200% =

Same computation as A. Lambo 4,992.00

128.00/day x 9 days = P1,152.00

V. SEPARATION PAY: March 3/85 - Jan. 17/92 = 7 yrs.

64.00/day x 9 days = (576.00) P 576.00

P1,664.00/mo. x 7 yrs. = 11,648.00

64.00/day x 30% =

TOTAL AWARD OF VICENTE BELOCURA P96,383.20

19.20/day x 8 days = 153.60 729.60 1,399.30

=====

IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89 = 3 yrs.

SUMMARY

P 64.00/day x 26 days =

AVELINO LAMBO VICENTE BELOCURA

1,664.00/yr. x 3 yrs. = 4,992.00

I. BACKWAGES P64,896.00 P64,896.00

V. SEPARATION PAY: Sept. 10/85 - Jan. 17/92 = 6 yrs.

II. OVERTIME PAY 13,447.90 13,447.90

1,664.00/mo. x 6 yrs. = 9,984.00

III. HOLIDAY PAY 1,399.30 1,399.30

TOTAL AWARD OF AVELINO LAMBO P94,719.20

IV. 13TH MO. PAY 4,992.00 4,992.00

======

V. SEPARATION PAY 9,984.00 11,648.00

VICENTE BELOCURA

TOTAL P94,719.20 P96,383.20

I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.

= P191,102.40

Same computation as A. Lambo P64,896.00

ADD: 10% Attorneys Fees 19,110.24

II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89

GRAND TOTAL P 210,212.64

Same computation as A. Lambo 13,447.90

=======

III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89

Except for the award of attorneys fees in the amount of P19,110.24, the above
computation is affirmed. The award of attorneys fees should be disallowed, it
appearing that petitioners were represented by the Public Attorneys Office. With
regard to petitioner Avelino Lambo, the amount ofP10,000.00 paid to him under the
compromise agreement should be deducted from the total award
of P94,719.20. Consequently, the award to each petitioner should be as follows:

Same computation as A. Lambo 1,399.30

IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89

AVELINO LAMBO VICENTE BELOCURA

II. OVERTIME PAY 13,447.90 13,447.90

COMMISSION (Second Division),

**CHICO-NAZARIO, JJ.
ALFREDO OFIALDA,
DIOLETO MORENTE
Promulgated:
and RUDY ALLAUIGAN,
Respondents.
November 11, 2005
x------------------------------------------------x

III. HOLIDAY PAY 1,399.30 1,399.30

DECISION

I. BACKWAGES P64,896.00 P 64,896.00

IV. 13TH MONTH PAY 4,992.00 4,992.00

AUSTRIA-MARTINEZ, J.:

V. SEPARATION PAY 9,984.00 11,648.00

Before us is a petition for review on certiorari filed by C. Planas Commercial
and/or Marcial Cohu, (petitioners) assailing the Decision of the Court of Appeals (CA)
dated January 19, 2000[1] which affirmed in toto the decision of the National Labor
Relations Commission (NLRC) and the Resolution dated August 15, 2000 [2] denying
petitioners motion for reconsideration.
On September 14, 1993, Dioleto Morente, Rudy Allauigan and Alfredo
Ofialda (private respondents) together with 5 others[3] filed a complaint for
underpayment of wages, nonpayment of overtime pay, holiday pay, service incentive
leave pay and premium pay for holiday and rest day and night shift differential against
petitioners with the Arbitration Branch of the NLRC. The case was docketed as NLRC
Case No. 00-09-05804-93.[4]

P 94,719.20
Less 10,000.00
TOTAL P84,719.20 P96,383.20
GRAND TOTAL P181,102.40
======
vvvvvvvvvv

WHEREFORE, the decision of the National Labor Relations Commission is SET

ASIDE and another one is RENDERED ordering private respondents to pay
petitioners the total amount of One Hundred Eighty-One Thousand One Hundred Two
Pesos and 40/100 (P181,102.40), as computed above.
SO ORDERED.
Buena, and De Leon, JJ., concur.
Bellosillo, (Chairman), and Quisumbing, JJ., on official leave.

9. C. PLANAS COMMERCIAL
and/or MARCIAL COHU,
Petitioners,

G.R. No. 144619

- versus -

*PUNO, Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and

NATIONAL LABOR RELATIONS

Present:

In their position paper, private respondents alleged that petitioner Cohu,

owner of C. Planas Commercial, is engaged in wholesale of plastic products and fruits
of different kinds with more than 24 employees; that private respondents were hired by
petitioners on January 14, 1990, May 14, 1990 and July 1, 1991, respectively, as
helpers/laborers; that they were paid below the minimum wage law for the past 3
years; that they were required to work for more than 8 hours a day without overtime
pay; that they never enjoyed holiday pay and did not have a rest day as they worked
for 7 days a week; and they were not paid service incentive leave pay although they
had been working for more than one year. Private respondent Ofialda asked for night
shift differential as he had worked from 8 p.m. to 8 a.m. the following day for more
than one year.
Petitioners filed their comment admitting that private respondents were their
helpers who used to accompany the delivery trucks and helped in the loading and
unloading of merchandise being distributed to clients; that they usually started their
work from 10 a.m. to 6 p.m.; that private respondents stopped working with petitioners
sometime in September 1993 as they were already working in other
establishments/stalls in Divisoria; that they only worked for 6 days a week; that they
were not entitled to holiday and service incentive leave pays for they were employed
in a retail and service establishment regularly employing less than ten workers.
On December 6, 1994, a decision [5] was rendered by the Labor Arbiter
dismissing private respondents money claims for lack of factual and legal basis. He
made the following findings:

The basic issue raised before us is whether or not

complainants are entitled to the money claims.
The rule in this jurisdiction is that employers who are
regularly employing not more than ten workers in retail
establishments are exempt from the coverage of the minimum
wage law.
In connection therewith and in consonance with Sec. 1,
Rule 131 of the Rules of Court, it is incumbent upon the party to
support affirmative allegation that an employer regularly employs
more than ten (10) workers.
In the case at bar, complainants failed to substantiate
their claim that the respondent establishment regularly employs
twenty (sic) (24) workers.
Accordingly, we have no factual basis to grant salary
differentials to complainants. In the same context, under Sec. 1
(b), Rule IV and Sec. 1(g), Rule V of the Implementing Rules of
the Labor Code, complainants are not entitled to legal holiday pay
and service incentive leave pay.
We also do not have sufficient factual basis to award
overtime pay and premium pay for holiday and rest day because
complainants failed to substantiate that they rendered overtime
and during rest days.[6]
Private respondents filed their appeal with the NLRC which was opposed by
petitioners. However, pending the appeal, private respondents Morente [7] and
Allauigan[8] filed their respective motions to dismiss with release and quitclaim before
the NLRC.
On September 30, 1997, the NLRC rendered its decision, [9] the dispostive
portion of which reads:
WHEREFORE, in view of all the foregoing
considerations, the decision appealed from should be, as it is
hereby, MODIFIED by directing the respondent to pay Alfredo
Ofialda, Diolito Morente and Rudy Allauigan the total amount of
Seventy-Five Thousand One Hundred Twenty Five Pesos
(P75,125.00) representing their combined salary differentials,
holiday pay, and service incentive leave pay.

who invokes such an exemption (usually the employer) has the

burden of showing the basis for the exemption like for instance
the fact of employing regularly less than ten workers.
In the instant case, complainants alleged that despite
employing more than twenty-four (24) workers in his
establishment, hence covered by the minimum wage law,
nevertheless the individual respondent did not pay his workers the
legal rates and benefits due them since their employment. By way
of answer, respondents countered that they employ less than ten
(10) persons, hence the money claims of complainants lack
factual and legal basis.
Stated differently, against complainants charge of underpayment
in wages and non-payment of fringe benefits legally granted to
them, the respondents raised the defense of exemption from
coverage of the minimum wage law and in support thereof alleged
that they regularly employed less than ten (10) workers to serve
as basis for their exemption under the law, they (respondents)
must prove that they employed less than ten workers, instead of
more than twenty-four (24) workers as alleged by the
complainants.
However, apart from their allegation, respondents presented no
evidence to show the number of workers they employed regularly.
This failure is fatal to respondents defense. This in turn brings us
to the question of whether the complainants were underpaid and
unpaid of legal holiday pay and service incentive leave pay due
them.
Stated earlier are the different amounts that each complainant
was receiving by way of salary on certain periods of their
employment with respondents, which amounts according to
complainants are way below the minimum wage then prevailing.
Considering that respondents failed to present the payrolls or
vouchers which could prove otherwise, the money claims deserve
favorable consideration.
Taking note of the 3 year prescription, the period covered is from
September 14, 1990 to September 14, 1993 when the instant
case was filed, and based on a 6-day work per week, the
underpayment (salary differential), legal holiday pay, and service
incentive leave pay due to complainants, as computed, are as
follows:

The NLRC made the following ratiocinations:

On claims for underpayment/non-payment of legally
mandated wages and fringe benefits where exemption from
coverage of the minimum wage law is put up as a defense, he

1.
A.
OFIALDA
2.
D.

Salary Diff.
P14,934.00

Holiday Pay
P2,362.00

SILP
P1,180.00

23,964.00

3,258.00

1,730.00

MORENTE
3. R. ALLAUIGAN
22,609.00
3,258.00
1,730.00
With respect to the other claims, i.e., overtime pay and
premium pay for holiday and rest day, We find no reason to
disturb the Labor Arbiters ruling thereon, that there is no sufficient
factual basis to award the claims because complainants failed to
substantiate that they rendered overtime and during rest days.
These claims, unlike claims for underpayment and non-payment
of fringe benefits mandated by law, need to be proven by the
claimants.[10]
Petitioners filed a petition for certiorari[11] with prayer for temporary
restraining order and preliminary injunction before this Court on November 26, 1997.
Respondents were required to file their Comment but only public respondent NLRC,
through the Solicitor General, complied therewith. In a Resolution dated June 28,
1999,[12] the petition was referred to the CA pursuant to our ruling in St. Martin Funeral
Homes vs. NLRC.
On January 19, 2000,[13] the CA denied the petition for lack of merit and
affirmed in toto the NLRC decision. It said:
Having claimed exemption from the coverage of the
minimum wage laws or order, it was incumbent upon petitioner to
prove such claim. Apart from simply denying private respondents
allegation that it employs more than 24 workers in its business,
petitioner failed to adduce evidence to prove that it is, indeed, a
retail establishment which employs less than ten (10) employees.
Its failure to present records of its workers and their respective
wages gives rise to the presumption that these are adverse to its
claims. Indeed, it is hard to believe that petitioner does not keep
such records. More so, considering private respondents claim that
petitioner employs more than twenty four (24) employees and
engaged in both wholesale and retail business of fruits by volume
on CONTAINER BASIS, not by price of fruit, but by container size
retail, involving millions of pesos capital, fruits coming from China,
Australia and the United States (p. 170, Rollo).
Needless to say, the inclusion of respondents Morente
and Allauigan in the NLRC award is in order. In its decision, public
respondent awarded P75,125.00, representing the combined
salary differentials, holiday pay and service incentive leave pay of
all three (3) private respondents. Of this, P28,952.00 is
earmarked for respondent Morente, and P27,597.00 for
respondent Allauigan, both of whom executed quitclaims after
receiving P3,000.00 and P6,000.00 respectively, from petitioner.
On this score, the Court quotes with approval the
arguments advanced by the Solicitor General thus:

While a compromise agreement or

amicable settlement is not against public
policy per se it must be shown however that it
was voluntarily entered into and represents a
reasonable settlement, and the consideration
for
the
quitclaim
is
credible
and
reasonable (Santiago v. NLRC, 198 SCRA
111 [1991]). For the law usually looks with
disfavor upon quitclaims and releases
executed by employees usually resulting from
a compromise with their employers. (Velasco
v. DOLE, 200 SCRA 201 [1991]). This is so
because the employers and the employees
obviously do not stand on equal footing.
Driven against the wall by the employer, the
employee is in no position to resist the money
offered. (Lopez Sugar Corp v. FFW-PLU, 189
SCRA 179 [1990]).
Thus, Fuentes v. NLRC, 167 SCRA 767 (1988)
enunciates:
In the absence of any showing that
the compromise settlement and the
quitclaims and releases entered into and
made by the employees were free, fair and
reasonable- especially as to the amount or
consideration given by the employer in
exchange therefore, the fact that they
executed the same and received their
monetary benefits thereunder does not
militate against them. The Law does not
consider as valid any agreement to receive
less compensation than what a worker is
entitled to receive.
In the case at bar, it will be noticed
that the vouchers dated September 13, 1995
and September 20, 1996 (pp. 194 and 197,
NLRC Record), submitted by petitioners (pp.
191-192, Record), show that private
respondent
Allauigan
was
only
paid P6,000.00 and Morente, P3,000.00 --when
they
are
legally
entitled
to
receive P28,952.00
and P27,597.00,
respectively. Under the circumstances,
subject compromise settlements cannot be
considered valid and binding upon the NLRC
as they do not represent fair and reasonable
settlements, nor do they demonstrate

voluntariness on the part of private

respondents Morente and Allauigan. These
employees should still be paid the full
amounts of their salary differentials, holiday
pay and service incentive leave pay less the
amounts they had already received under the
compromise settlements with petitioners (pp.
174-175, Rollo).
Parenthetically, the Court notes that petitioner availed
itself of this remedy without first seeking a reconsideration of the
assailed decision. As a general rule, certiorari will not lie unless
an inferior court, has through a motion for reconsideration, a
chance to correct the errors imputed to it. While the rule admits of
exceptions, petitioner has not shown any reason for this Court not
to apply said rule, which would have justified outright dismissal of
the petition were it not for the Courts desire to resolve the case
not on a technicality but on the merits.[14]
Petitioners motion for reconsideration was denied in a Resolution dated
August 15, 2000.[15]
Hence, the instant petition for review on certiorari filed by petitioners.
Petitioners insist that C. Planas Commercial is a retail establishment
principally engaged in the sale of plastic products and fruits to the customers for
personal use, thus exempted from the application of the minimum wage law; that it
merely leases and occupies a stall in the Divisoria Market and the level of its business
activity requires and sustains only less than ten employees at a time. Petitioners
contend that private respondents were paid over and above the minimum wage
required for a retail establishment, thus the Labor Arbiter is correct in ruling that
private respondents claim for underpayment has no factual and legal basis.
Petitioners claim that since private respondents alleged that petitioners employed 24
workers, it was incumbent upon them to prove such allegation which private
respondents failed to do.
Petitioners also contend that the CA erred in applying strictly the rules of
evidence against them by holding that it was incumbent upon them to prove that their
company is exempted from the minimum wage law. They contend that they could not
present records of their workers and their respective wages because by the very
nature of their business, the system of management is very loose and informal, thus
salaries and wages are paid by merely handing the money to the worker without the
latter being required to sign anything as proof of receipt. Thus, it would be
unreasonable to insist upon petitioner to present documents that they do not possess
or keep in the first place.
We are not persuaded.

R.A. No. 6727 known as the Wage Rationalization Act provides for the
statutory minimum wage rate of all workers and employees in the private sector.
Section 4 of the Act provides for exemption from the coverage, thus:
Sec. 4.
...
(c) Exempted from the provisions of this Act are
household or domestic helpers and persons employed in the
personal service of another, including family drivers.
Retail/service establishments regularly employing not
more than ten (10) workers may be exempted from the
applicability of this Act upon application with and as determined
by the appropriate Regional Board in accordance with the
applicable rules and regulations issued by the Commission.
Whenever an application for exemption has been duly filed with
the appropriate Regional Board, action on any complaint for
alleged non-compliance with this Act shall be deferred pending
resolution of the application for exemption by the appropriate
Regional Board.
In the event that applications for exemptions are not
granted, employees shall receive the appropriate compensation
due them as provided for by this Act plus interest of one percent
(1%) per month retroactive to the effectivity of this Act.
Clearly, for a retail/service establishment to be exempted from the coverage
of the minimum wage law, it must be shown that the establishment is regularly
employing not more than ten (10) workers and had applied for exemptions with and as
determined by the appropriate Regional Board in accordance with the applicable rules
and regulations issued by the Commission. Petitioners main defense in controverting
private respondents claim for underpayment of wages is that they are exempted from
the application of the minimum wage law, thus the burden of proving [16] such
exemption rests on petitioners. Petitioners had not shown any evidence to show that
they had applied for such exemption and if they had applied, the same was granted.
In Murillo vs. Sun Valley Realty, Inc.[17] where the respondents claim that
petitioners therein are not entitled to service incentive leave pay inasmuch as
establishment employing less than ten (10) employees are exempted by the Labor
Code and the Implementing Rules from paying service incentive leave pay, we held:
..the clear policy of the Labor Code is to include all
establishments, except a few classes, under the coverage of the
provision granting service incentive leave to workers. Private
respondents' claim is that they fell within the exception. Hence, it
was incumbent upon them to prove that they belonged to a class
excepted by law from the general rule. Specifically, it was the duty
of respondents, not of petitioners, to prove that there were less
than ten (10) employees in the company. Having failed to
discharge its task, private respondents must be deemed to be

covered by the general rule, notwithstanding the failure of

petitioners to allege the exact number of employees of the
corporation. In other words, petitioners must be deemed entitled
to service incentive leave.[18]
Moreover, in C. Planas Commercial vs. NLRC,[19] where herein petitioners
are also involved in a case filed by one of its employees, we ruled:
Petitioners invoke the exemption provided by law for
retail establishments which employ not more than ten (10)
workers to justify their non-liability for the salary differentials in
question. They insist that PLANAS is a retail establishment
leasing a very small and cramped stall in the Divisoria market
which cannot accommodate more than ten (10) workers in the
conduct of its business.
We are unconvinced. The records disclose de los
Reyes' clear entitlement to salary differentials. Well-settled is the
rule that factual findings of labor officials who are deemed to have
acquired expertise in matters within their jurisdiction are generally
accorded not only respect but even finality and bind this Court
when supported by substantial evidence or that amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion. Thus, as long as their decisions
are devoid of any unfairness or arbitratriness in the process of
their deduction from the evidence proferred by the parties before
them, all that is left is our stamp of finality by affirming the factual
findings made by them. In this case, the award of salary
differentials by the NLRC in favor of de los Reyes was made
pursuant to RA 6727 otherwise known as the Wage
Rationalization Act, and the Rules Implementing Wage Order
Nos. NCR-01 and NCR-01-A and Wage Order Nos. NCR-02 and
NCR-02-A.
Petitioners claim exemption under the aforestated law.
However, the best proof that they could have adduced was their
approved application for exemption in accordance with applicable
guidelines issued by the Commission. Section 4, subpar. (c) of RA
6727 categorically provides:
Retail/service
establishments
regularly employing not more than ten (10)
workers may be exempted from the
applicability of this Act upon application with
and as determined by the appropriate
Regional Board in accordance with the
applicable rules and regulations issued by the
Commission. Whenever an application for
exemption has been duly filed with the
appropriate Regional Board, action on any
complaint for alleged non-compliance with

this Act shall be deferred pending resolution

of the application for exemption by the
appropriate Regional Board. In the event that
applications for exemptions are not granted,
employees shall receive the appropriate
compensation due them as provided for by
this Act plus interest of one percent (1%) per
month retroactive to the effectivity of this Act
(emphasis supplied).
Extant in the records is the fact that petitioners had
persistently raised the matter of their exemption from any liability
for underpayment without substantiating it by showing compliance
with the aforecited provision of law. It bears stressing that the
NLRC affirmed the Labor Arbiters award of salary differentials due
to underpayment on the ground that de los Reyes' claim therefor
was not even denied or rebutted by petitioners.
More importantly, NLRC correctly upheld the Labor
Arbiter's finding that PLANAS employed around thirty (30)
workers. We have every reason to believe that petitioners need at
least thirty (30) persons to conduct their business considering that
Manager Cohu did not submit any employment record to prove
otherwise. As employer, Manager Cohu ought to be the keeper of
the employment records of all his workers. Thus, it was well within
his means to refute any monetary claim alleged to be unpaid. His
inability to produce the payrolls from their files without any
satisfactory explanation can be interpreted no less as suppression
of vital evidence adverse to PLANAS.
Petitioners aver that the CA erred in ruling that private respondents Morente and
Allauigan are still entitled to monetary awards despite the latters execution of release
and quitclaims because the settlement was not voluntarily entered into by private
respondents. Petitioners insist that both private respondents Morente and Allauigan
voluntarily entered into an amicable settlement with them on September 17 and 18,
1995, respectively; that they were the ones who initiated the talks for settlement and
who pegged the amount; that they both voluntarily appeared before the Labor Arbiter
to move for the dismissal of their case insofar as their claims are concerned as well as
submitted to the Labor Arbiter their respective quitclaims and releases which were
duly subscribed before the Labor Arbiter and duly notarized.
We find merit in petitioners argument.
It has been held that not all quitclaims are per se invalid or against public
policy, except (1) where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or (2) where the terms of settlement are
unconscionable on their face. In these cases, the law will step in to annul the
questionable transactions.[20] Such quitclaim and release agreements are regarded as
ineffective to bar the workers from claiming the full measure of their legal rights. [21]

We find these two instances not present in private respondents Allauigan

and Morentes case. They failed to refute petitioners allegation that the settlement was
voluntarily made as they had not filed any pleadings before the CA. Notably, we have
required private respondents to file their comment on the instant petition, however,
they failed to do so. They were then required to show cause why they should not be
disciplinarily dealt with or held in contempt. [22] However, they still failed to file their
comment, thus, they were imposed a fine of P1,000.00[23] which was subsequently
increased to P2,000.00 as there was still no compliance. In a Resolution dated July
22, 2002, the Court ordered the National Bureau of Investigation to arrest and detain
private respondents and the private respondents to file their comment. [24] As private
respondents could not be located at their given address and they are not known in
their locality, the order of arrest and commitment was returned unserved, [25] thus the
Court required the Office of the Solicitor General to file the comment in behalf of all the
respondents.[26] The Court finds such inaction on the part of private respondents
Allauigan and Morente an indication that they already relented in their claims and
gives credence to petitioners claim that they had voluntarily executed the release and
quitclaim and the motion to dismiss.

respondent Alfredo Ofialda the total amount of P18,476.00 and the monetary awards
in favor of private respondents Rudy Allauigan and Dioleto Morente are
hereby DELETED.

The CA found that the subject compromise agreements are not valid considering that
they did not represent the fair and reasonable settlements, i.e., that private
respondent Allauigan was only paid P6,000.00 and Morente, P3,000.00 --- when they
are legally entitled to receive P28,952.00 and P27,597.00, respectively.

Bansalan B. Metilla for Association of Trade Unions (ATUTUCP).

We do not agree. It bears stressing that at the time of the execution of the
release and quitclaim, the case filed by private respondents against petitioners was
already dismissed by the Labor Arbiter and it was pending appeal before the NLRC.
Private respondents could have executed the release and quitclaim because of a
possibility that their appeal with the NLRC may not be successful. Since there was yet
no decision rendered by the NLRC when the quitclaims were executed, it could not be
said that the amount of the settlement is unconscionable. In any event, no deception
has been established that would justify the annulment of private respondents
quitclaims.[27] In Mercer vs. NLRC,[28] we held that:

1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR RELATIONS; COLLECTIVE

BARGAINING AGREEMENT; DEFINED; NATURE THEREOF; CONSTRUCTION TO
BE PLACED THEREON. A collective bargaining agreement (CBA), as used in
Article 252 of the Labor Code, refers to a contract executed upon request of either the
employer or the exclusive bargaining representative incorporating the agreement
reached after negotiations with respect to wages, hours of work and all other terms
and conditions of employment, including proposals for adjusting any grievances or
questions arising under such agreement. While the terms and conditions of a CBA
constitute the law between the parties, it is not, however, an ordinary contract to which
is applied the principles of law governing ordinary contracts. A CBA, as a labor
contract within the contemplation of Article 1700 of the Civil Code of the Philippines
which governs the relations between labor and capital, is not merely contractual in
nature but impressed with public interest, thus, it must yield to the common good. As
such, it must be construed liberally rather than narrowly and technically, and the courts
must place a practical and realistic construction upon it, giving due consideration to
the context in which it is negotiated and purpose which it is intended to serve.

In Samaniego v. NLRC, we ruled that: A quitclaim

executed in favor of a company by an employee amounts to a
valid and binding compromise agreement between them."
Recently, we held that in the absence of any showing
that petitioner was "coerced or tricked" into signing the abovequoted Quitclaim and Release or that the consideration thereof
was very low, she is bound by the conditions thereof.
As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the
payment of P14,934.00 as salary differential,P2,362.00 as legal holiday pay
and P1,180.00 as service incentive leave pay, all in the total amount of P18,476.00.
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of
Appeals dated January 19, 2000 and its Resolution dated August 15, 2000
are AFFIRMED with MODIFICATION that petitioners are ordered to pay private

SO ORDERED.

10. G.R. No. 102132. March 19, 1993.

DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner, vs. RUBEN V.
ABARQUEZ, in his capacity as an accredited Voluntary Arbitrator and THE
ASSOCIATION OF TRADE UNIONS (ATU-TUCP), respondents.
Libron, Gaspar & Associates for petitioner.

SYLLABUS

2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. It is thus erroneous for petitioner to
isolate Section 1, Article VIII of the 1989 CBA from the other related section on sick
leave with pay benefits, specifically Section 3 thereof, in its attempt to justify the
discontinuance or withdrawal of the privilege of commutation or conversion to cash of
the unenjoyed portion of the sick leave benefit to regular intermittent workers. The
manner they were deprived of the privilege previously recognized and extended to
them by petitioner-company during the lifetime of the CBA of October 16, 1985 until
three (3) months from its renewal on April 15, 1989, or a period of three (3) years and
nine (9) months, is not only tainted with arbitrariness but likewise discriminatory in
nature. It must be noted that the 1989 CBA has two (2) sections on sick leave with pay

benefits which apply to two (2) distinct classes of workers in petitioner's company,
namely: (1) the regular non-intermittent workers or those workers who render a daily
eight-hour service to the company and are governed by Section 1, Article VIII of the
1989 CBA; and (2) intermittent field workers who are members of the regular labor
pool and the present regular extra labor pool as of the signing of the agreement on
April 15, 1989 or those workers who have irregular working days and are governed by
Section 3, Article VIII of the 1989 CBA. It is not disputed that both classes of workers
are entitled to sick leave with pay benefits provided they comply with the conditions
set forth under Section 1 in relation to the last paragraph of Section 3, to wit: (1) the
employee-applicant must be regular or must have rendered at least one year of
service with the company; and (2) the application must be accompanied by a
certification from a company-designated physician. the phrase "herein sick leave
privilege," as used in the last sentence of Section 1, refers to the privilege of having a
fixed 15-day sick leave with pay which, as mandated by Section 1, only the nonintermittent workers are entitled to. This fixed 15-day sick leave with pay benefit
should be distinguished from the variable number of days of sick leave, not to exceed
15 days, extended to intermittent workers under Section 3 depending on the number
of hours of service rendered to the company, including overtime pursuant to the
schedule provided therein. It is only fair and reasonable for petitioner-company not to
stipulate a fixed 15-day sick leave with pay for its regular intermittent workers since, as
the term "intermittent" implies, there is irregularity in their work-days. Reasonable and
practical interpretation must be placed on contractual provisions. Interpetatio fienda
est ut res magis valeat quam pereat. Such interpretation is to be adopted, that the
thing may continue to have efficacy rather than fail.
3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND PURPOSE. Sick leave
benefits, like other economic benefits stipulated in the CBA such as maternity leave
and vacation leave benefits, among others, are by their nature, intended to be
replacements for regular income which otherwise would not be earned because an
employee is not working during the period of said leaves. They are non-contributory in
nature, in the sense that the employees contribute nothing to the operation of the
benefits. By their nature, upon agreement of the parties, they are intended to alleviate
the economic condition of the workers.
4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR; CASE AT BAR.
Petitioner-company's objection to the authority of the Voluntary Arbitrator to direct the
commutation of the unenjoyed portion of the sick leave with pay benefits of
intermittent workers in his decision is misplaced. Article 261 of the Labor Code is clear.
The questioned directive of the herein public respondent is the necessary
consequence of the exercise of his arbitral power as Voluntary Arbitrator under Article
261 of the Labor Code "to hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement." We,
therefore, find that no grave abuse of discretion was committed by public respondent
in issuing the award (decision). Moreover, his interpretation of Sections 1 and 3, Article
VIII of the 1989 CBA cannot be faulted with and is absolutely correct.
5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION AGAINST ELIMINATION OR
DIMINUTION OF BENEFITS; BENEFITS GRANTED PURSUANT TO COMPANY
PRACTICE OR POLICY CANNOT BE PEREMPTORILY WITHDRAWN. Whatever

doubt there may have been early on was clearly obliterated when petitioner-company
recognized the said privilege and paid its intermittent workers the cash equivalent of
the unenjoyed portion of their sick leave with pay benefits during the lifetime of the
CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989.
Well-settled is it that the said privilege of commutation or conversion to cash, being an
existing benefit, the petitioner-company may not unilaterally withdraw, or diminish such
benefits. It is a fact that petitioner-company had, on several instances in the past,
granted and paid the cash equivalent of the unenjoyed portion of the sick leave
benefits of some intermittent workers. Under the circumstances, these may be
deemed to have ripened into company practice or policy which cannot be peremptorily
withdrawn.
DECISION
ROMERO, J p:
In this petition for certiorari, petitioner Davao Integrated Port Services Corporation
seeks to reverse the Award 1 issued on September 10, 1991 by respondent Ruben V.
Abarquez, in his capacity as Voluntary Arbitrator of the National Conciliation and
Mediation Board, Regional Arbitration Branch XI in Davao City in Case No. AC-211BX1-10-003-91 which directed petitioner to grant and extend the privilege of
commutation of the unenjoyed portion of the sick leave with pay benefits to its
intermittent field workers who are members of the regular labor pool and the present
regular extra pool in accordance with the Collective Bargaining Agreement (CBA)
executed between petitioner and private respondent Association of Trade Unions
(ATU-TUCP), from the time it was discontinued and henceforth.
The facts are as follows:
Petitioner Davao Integrated Port Stevedoring Services (petitioner-company) and
private respondent ATU-TUCP (Union), the exclusive collective bargaining agent of
the rank and file workers of petitioner-company, entered into a collective bargaining
agreement (CBA) on October 16, 1985 which, under Sections 1 and 3, Article VIII
thereof, provide for sick leave with pay benefits each year to its employees who have
rendered at least one (1) year of service with the company, thus:
"ARTICLE VIII
Section 1. Sick Leaves The Company agrees to grant 15 days sick leave with pay
each year to every regular non-intermittent worker who already rendered at least one
year of service with the company. However, such sick leave can only be enjoyed upon
certification by a company designated physician, and if the same is not enjoyed within
one year period of the current year, any unenjoyed portion thereof, shall be converted
to cash and shall be paid at the end of the said one year period. And provided
however, that only those regular workers of the company whose work are not
intermittent, are entitled to the herein sick leave privilege.

xxx xxx xxx

Section 3. All intermittent field workers of the company who are members of the
Regular Labor Pool shall be entitled to vacation and sick leaves per year of service
with pay under the following schedule based on the number of hours rendered
including overtime, to wit:

"Section 3. All intermittent field workers of the company who are members of the
Regular Labor Pool and present Regular Extra Labor Pool as of the signing of this
agreement shall be entitled to vacation and sick leaves per year of service with pay
under the following schedule based on the number of hours rendered including
overtime, to wit:
Hours of Service Per Vacation Sick Leave

Hours of Service Per Vacation Sick Leave

Calendar Year Leave
Calendar Year Leave
Less than 750 NII NII
Less than 750 NII NII
751 825 6 days 6 days
751 825 6 days 6 days
826 900 7 7
826 900 7 7
901 925 8 8
901 925 8 8
926 1,050 9 9
926 1,050 9 9
1,051 1,125 10 10
1,051 1,125 10 10
1,126 1,200 11 11
1,126 1,200 11 11
1,201 1,275 12 12
1,201 1,275 12 12
1,276 1,350 13 13
1,276 1,350 13 13
1,351 1,425 14 14
1,351 1,425 14 14
1,426 1,500 15 15
1,426 1,500 15 15
The conditions for the availment of the herein vacation and sick leaves shall be in
accordance with the above provided Sections 1 and 2 hereof, respectively."
Upon its renewal on April 15, 1989, the provisions for sick leave with pay benefits were
reproduced under Sections 1 and 3, Article VIII of the new CBA, but the coverage of
the said benefits was expanded to include the "present Regular Extra Labor Pool as of
the signing of this Agreement." Section 3, Article VIII, as revised, provides, thus:

The conditions for the availment of the herein vacation and sick leaves shall be in
accordance with the above provided Sections 1 and 2 hereof, respectively."
During the effectivity of the CBA of October 16, 1985 until three (3) months after its
renewal on April 15, 1989, or until July 1989 (a total of three (3) years and nine (9)
months), all the field workers of petitioner who are members of the regular labor pool
and the present regular extra labor pool who had rendered at least 750 hours up to
1,500 hours were extended sick leave with pay benefits. Any unenjoyed portion
thereof at the end of the current year was converted to cash and paid at the end of the
said one-year period pursuant to Sections 1 and 3, Article VIII of the CBA. The number
of days of their sick leave per year depends on the number of hours of service per

calendar year in accordance with the schedule provided in Section 3, Article VIII of the
CBA.

regular workers of the Company whose work are not intermittent are entitled to the
herein sick leave privilege."

The commutation of the unenjoyed portion of the sick leave with pay benefits of the
intermittent workers or its conversion to cash was, however, discontinued or withdrawn
when petitioner-company under a new assistant manager, Mr. Benjamin Marzo (who
replaced Mr. Cecilio Beltran, Jr. upon the latter's resignation in June 1989), stopped
the payment of its cash equivalent on the ground that they are not entitled to the said
benefits under Sections 1 and 3 of the 1989 CBA.

Petitioner-company further argued that while the intermittent workers were paid the
cash equivalent of their unenjoyed sick leave with pay benefits during the previous
management of Mr. Beltran who misinterpreted Sections 1 and 3 of Article VIII of the
1985 CBA, it was well within petitioner-company's rights to rectify the error it had
committed and stop the payment of the said sick leave with pay benefits. An error in
payment, according to petitioner-company, can never ripen into a practice.

The Union objected to the said discontinuance of commutation or conversion to cash

of the unenjoyed sick leave with pay benefits of petitioner's intermittent workers
contending that it is a deviation from the true intent of the parties that negotiated the
CBA; that it would violate the principle in labor laws that benefits already extended
shall not be taken away and that it would result in discrimination between the nonintermittent and the intermittent workers of the petitioner-company.

We find the arguments unmeritorious.

Upon failure of the parties to amicably settle the issue on the interpretation of Sections
1 and 3, Article VIII of the 1989 CBA, the Union brought the matter for voluntary
arbitration before the National Conciliation and Mediation Board, Regional Arbitration
Branch XI at Davao City by way of complaint for enforcement of the CBA. The parties
mutually designated public respondent Ruben Abarquez, Jr. to act as voluntary
arbitrator.
After the parties had filed their respective position papers, 2 public respondent Ruben
Abarquez, Jr. issued on September 10, 1991 an Award in favor of the Union ruling that
the regular intermittent workers are entitled to commutation of their unenjoyed sick
leave with pay benefits under Sections 1 and 3 of the 1989 CBA, the dispositive
portion of which reads:

A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code,
refers to a contract executed upon request of either the employer or the exclusive
bargaining representative incorporating the agreement reached after negotiations with
respect to wages, hours of work and all other terms and conditions of employment,
including proposals for adjusting any grievances or questions arising under such
agreement.
While the terms and conditions of a CBA constitute the law between the parties, 3 it is
not, however, an ordinary contract to which is applied the principles of law governing
ordinary contracts. 4 A CBA, as a labor contract within the contemplation of Article
1700 of the Civil Code of the Philippines which governs the relations between labor
and capital, is not merely contractual in nature but impressed with public interest, thus,
it must yield to the common good. As such, it must be construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic
construction upon it, giving due consideration to the context in which it is negotiated
and purpose which it is intended to serve. 5

Petitioner-company disagreed with the aforementioned ruling of public respondent,

hence, the instant petition.

It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989 CBA from
the other related section on sick leave with pay benefits, specifically Section 3 thereof,
in its attempt to justify the discontinuance or withdrawal of the privilege of
commutation or conversion to cash of the unenjoyed portion of the sick leave benefit
to regular intermittent workers. The manner they were deprived of the privilege
previously recognized and extended to them by petitioner-company during the lifetime
of the CBA of October 16, 1985 until three (3) months from its renewal on April 15,
1989, or a period of three (3) years and nine (9) months, is not only tainted with
arbitrariness but likewise discriminatory in nature. Petitioner-company is of the
mistaken notion that since the privilege of commutation or conversion to cash of the
unenjoyed portion of the sick leave with pay benefits is found in Section 1, Article VIII,
only the regular non-intermittent workers and no other can avail of the said privilege
because of the proviso found in the last sentence thereof.

Petitioner-company argued that it is clear from the language and intent of the last
sentence of Section 1, Article VIII of the 1989 CBA that only the regular workers
whose work are not intermittent are entitled to the benefit of conversion to cash of the
unenjoyed portion of sick leave, thus: ". . . And provided, however, that only those

It must be noted that the 1989 CBA has two (2) sections on sick leave with pay
benefits which apply to two (2) distinct classes of workers in petitioner's company,
namely: (1) the regular non-intermittent workers or those workers who render a daily
eight-hour service to the company and are governed by Section 1, Article VIII of the

"WHEREFORE, premises considered, the management of the respondent Davao

Integrated Port Stevedoring Services Corporation is hereby directed to grant and
extend the sick leave privilege of the commutation of the unenjoyed portion of the sick
leave of all the intermittent field workers who are members of the regular labor pool
and the present extra pool in accordance with the CBA from the time it was
discontinued and henceforth.
SO ORDERED."

1989 CBA; and (2) intermittent field workers who are members of the regular labor
pool and the present regular extra labor pool as of the signing of the agreement on
April 15, 1989 or those workers who have irregular working days and are governed by
Section 3, Article VIII of the 1989 CBA.
It is not disputed that both classes of workers are entitled to sick leave with pay
benefits provided they comply with the conditions set forth under Section 1 in relation
to the last paragraph of Section 3, to wit: (1) the employee-applicant must be regular
or must have rendered at least one year of service with the company; and (2) the
application must be accompanied by a certification from a company-designated
physician.
Sick leave benefits, like other economic benefits stipulated in the CBA such as
maternity leave and vacation leave benefits, among others, are by their nature,
intended to be replacements for regular income which otherwise would not be earned
because an employee is not working during the period of said leaves. 6 They are noncontributory in nature, in the sense that the employees contribute nothing to the
operation of the benefits. 7 By their nature, upon agreement of the parties, they are
intended to alleviate the economic condition of the workers.
After a careful examination of Section 1 in relation to Section 3, Article VIII of the 1989
CBA in light of the facts and circumstances attendant in the instant case, we find and
so hold that the last sentence of Section 1, Article VIII of the 1989 CBA, invoked by
petitioner-company does not bar the regular intermittent workers from the privilege of
commutation or conversion to cash of the unenjoyed portion of their sick leave with
pay benefits, if qualified. For the phrase "herein sick leave privilege," as used in the
last sentence of Section 1, refers to the privilege of having a fixed 15-day sick leave
with pay which, as mandated by Section 1, only the non-intermittent workers are
entitled to. This fixed 15-day sick leave with pay benefit should be distinguished from
the variable number of days of sick leave, not to exceed 15 days, extended to
intermittent workers under Section 3 depending on the number of hours of service
rendered to the company, including overtime pursuant to the schedule provided
therein. It is only fair and reasonable for petitioner-company not to stipulate a fixed 15day sick leave with pay for its regular intermittent workers since, as the term
"intermittent" implies, there is irregularity in their work-days. Reasonable and practical
interpretation must be placed on contractual provisions. Interpetatio fienda est ut res
magis valeat quam pereat. Such interpretation is to be adopted, that the thing may
continue to have efficacy rather than fail. 8

they are both given the same treatment with respect to vacation leaves - noncommutable and non-cumulative. If they are treated equally with respect to vacation
leave privilege, with more reason should they be on par with each other with respect
to sick leave privileges. 9 Besides, if the intention were otherwise, during its
renegotiation, why did not the parties expressly stipulate in the 1989 CBA that regular
intermittent workers are not entitled to commutation of the unenjoyed portion of their
sick leave with pay benefits?
Whatever doubt there may have been early on was clearly obliterated when petitionercompany recognized the said privilege and paid its intermittent workers the cash
equivalent of the unenjoyed portion of their sick leave with pay benefits during the
lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April
15, 1989. Well-settled is it that the said privilege of commutation or conversion to
cash, being an existing benefit, the petitioner-company may not unilaterally withdraw,
or diminish such benefits. 10 It is a fact that petitioner-company had, on several
instances in the past, granted and paid the cash equivalent of the unenjoyed portion of
the sick leave benefits of some intermittent workers. 11 Under the circumstances,
these may be deemed to have ripened into company practice or policy which cannot
be peremptorily withdrawn. 12
Moreover, petitioner-company's objection to the authority of the Voluntary Arbitrator to
direct the commutation of the unenjoyed portion of the sick leave with pay benefits of
intermittent workers in his decision is misplaced. Article 261 of the Labor Code is clear.
The questioned directive of the herein public respondent is the necessary
consequence of the exercise of his arbitral power as Voluntary Arbitrator under Article
261 of the Labor Code "to hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement." We,
therefore, find that no grave abuse of discretion was committed by public respondent
in issuing the award (decision). Moreover, his interpretation of Sections 1 and 3, Article
VIII of the 1989 CBA cannot be faulted with and is absolutely correct.
WHEREFORE, in view of the foregoing, the petition is DISMISSED. The award
(decision) of public respondent dated September 10, 1991 is hereby AFFIRMED. No
costs.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Melo, JJ., concur.

We find the same to be a reasonable and practical distinction readily discernible in

Section 1, in relation to Section 3, Article VIII of the 1989 CBA between the two
classes of workers in the company insofar as sick leave with pay benefits are
concerned. Any other distinction would cause discrimination on the part of intermittent
workers contrary to the intention of the parties that mutually agreed in incorporating
the questioned provisions in the 1989 CBA.
Public respondent correctly observed that the parties to the CBA clearly intended the
same sick leave privilege to be accorded the intermittent workers in the same way that

Gutierrez, J

11. G.R. No. 91231

NESTL
vs.

February 4, 1991
PHILIPPINES,

INC., petitioner,

THE NATIONAL LABOR RELATIONS COMMISSION and UNION OF FILIPRO

EMPLOYEES, respondents.
Siguion
Reyna,
Montecillo
&
Ongsiako
for
petitioner.
Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for private respondent.

GRIO-AQUINO, J.:
Nestl Philippines, Inc., by this petition for certiorari, seeks to annul, on the ground of
grave abuse of discretion, the decision dated August 8, 1989 of the National Labor
Relations Commission (NLRC), Second Division, in Cert. Case No. 0522 entitled, "In
Re: Labor Dispute of Nestl Philippines, Inc." insofar as it modified the petitioner's
existing non-contributory Retirement Plan.
Four (4) collective bargaining agreements separately covering the petitioner's
employees in its:

the Makati office and Cagayan de Oro factory on September 11, 1987 up to December
8, 1987. The company retaliated by dismissing the union officers and members of the
negotiating panel who participated in the illegal strike. The NLRC affirmed the
dismissals on November 2, 1988.
On January 26, 1988, UFE filed a notice of strike on the same ground of CBA
deadlock and unfair labor practices. However, on March 30, 1988, the company was
able to conclude a CBA with the union at the Cebu/Davao Sales Office, and on August
5, 1988, with the Cagayan de Oro factory workers. The union assailed the validity of
those agreements and filed a case of unfair labor practice against the company on
November 16, 1988.
After conciliation efforts of the National Conciliation and Mediation Board (NCMB)
yielded negative results, the dispute was certified to the NLRC by the Secretary of
Labor on October 28, 1988.
After the parties had filed their pleadings, the NLRC issued a resolution on June 5,
1989, whose pertinent disposition regarding the union's demand for liberalization of
the company's retirement plan for its workers, provides as follows:
xxx

xxx

xxx

1. Alabang/Cabuyao factories;
7. Retirement Plan
2. Makati Administration Office. (Both Alabang/Cabuyao factories and
Makati office were represented by the respondent, Union of Filipro
Employees [UFE]);
3. Cagayan de Oro Factory represented by WATU; and
4. Cebu/Davao Sales Offices represented by the Trade Union of the
Philippines and Allied Services (TUPAS),

The company shall continue implementing its retirement plan modified as

follows:
a) for fifteen years of service or less an amount equal to 100% of the
employee's monthly salary for every year of service;
b) more than 15 but less than 20 years 125% of the employee's monthly
salary for every year of service;

all expired on June 30, 1987.

Thereafter, UFE was certified as the sole and exclusive bargaining agent for all regular
rank-and-file employees at the petitioner's Cagayan de Oro factory, as well as its
Cebu/Davao Sales Office.
In August, 1987, while the parties, were negotiating, the employees at Cabuyao
resorted to a "slowdown" and walk-outs prompting the petitioner to shut down the
factory. Marathon collective bargaining negotiations between the parties ensued.
On September 2, 1987, the UFE declared a bargaining deadlock. On September 8,
1987, the Secretary of Labor assumed jurisdiction and issued a return to work order.
In spite of that order, the union struck, without notice, at the Alabang/Cabuyao factory,

c) 20 years or more 150% of the employee's monthly salary for every

year of service. (pp. 58-59, Rollo.)
Both parties separately moved for reconsideration of the decision.
On August 8, 1989, the NLRC issued a resolution denying the motions for
reconsideration. With regard to the Retirement Plan, the NLRC held:
Anent management's objection to the modification of its Retirement Plan,
We find no cogent reason to alter our previous decision on this matter.

While it is not disputed that the plan is non-contributory on the part of the
workers, tills does not automatically remove it from the ambit of collective
bargaining negotiations. On the contrary, the plan is specifically mentioned
in the previous bargaining agreements (Exhibits "R-1" and "R-4"), thereby
integrating or incorporating the provisions thereof to the agreement. By
reason of its incorporation, the plan assumes a consensual character which
cannot be terminated or modified at will by either party. Consequently, it
becomes part and parcel of CBA negotiations.
However, We need to clarify Our resolution on this issue. When we
increased the emoluments in the plan, the conditions for the availment of
the benefits set forth therein remain the same. (p. 32, Rollo.)
On December 14, 1989, the petitioner filed this petition for certiorari, alleging that
since its retirement plan is non-contributory, it (Nestl) has the sole and exclusive
prerogative to define the terms of the plan "because the workers have no vested and
demandable rights thereunder, the grant thereof being not a contractual obligation but
merely gratuitous. At most the company can only be directed to maintain the same but
not to change its terms. It should be left to the discretion of the company on how to
improve or mollify the same" (p. 10, Rollo).
The Court agrees with the NLRC's finding that the Retirement Plan was "a collective
bargaining issue right from the start" (p. 109, Rollo) for the improvement of the existing
Retirement Plan was one of the original CBA proposals submitted by the UFE on May
8, 1987 to Arthur Gilmour, president of Nestl Philippines. The union's original
proposal was to modify the existing plan by including a provision for early retirement.
The company did not question the validity of that proposal as a collective bargaining
issue but merely offered to maintain the existing non-contributory retirement plan
which it believed to be still adequate for the needs of its employees, and competitive
with those existing in the industry. The union thereafter modified its proposal, but the
company was adamant. Consequently, the impass on the retirement plan become
one of the issues certified to the NLRC for compulsory arbitration.
The company's contention that its retirement plan is non-negotiable, is not welltaken.1wphi1 The NLRC correctly observed that the inclusion of the retirement plan
in the collective bargaining agreement as part of the package of economic benefits
extended by the company to its employees to provide them a measure of financial
security after they shall have ceased to be employed in the company, reward their
loyalty, boost their morale and efficiency and promote industrial peace, gives "a
consensual character" to the plan so that it may not be terminated or modified at will
by either party (p. 32, Rollo).
The fact that the retirement plan is non-contributory, i.e., that the employees contribute
nothing to the operation of the plan, does not make it a non-issue in the CBA
negotiations. As a matter of fact, almost all of the benefits that the petitioner has
granted to its employees under the CBA salary increases, rice allowances, midyear bonuses, 13th and 14th month pay, seniority pay, medical and hospitalization
plans, health and dental services, vacation, sick & other leaves with pay are non-

contributory benefits. Since the retirement plan has been an integral part of the CBA
since 1972, the Union's demand to increase the benefits due the employees under
said plan, is a valid CBA issue. The deadlock between the company and the union on
this issue was resolvable by the Secretary of Labor, or the NLRC, after the Secretary
had assumed jurisdiction over the labor dispute (Art. 263, subparagraph [i] of the
Labor Code).
The petitioner's contention, that employees have no vested or demandable right to a
non-contributory retirement plan, has no merit for employees do have a vested and
demandable right over existing benefits voluntarily granted to them by their employer.
The latter may not unilaterally withdraw, eliminate or diminish such benefits (Art. 100,
Labor Code; Tiangco, et al. vs. Hon. Leogardo, et al., 122 SCRA 267).
This Court ruled similarly in Republic Cement Corporation vs. Honorable Panel of
Arbitrators, G.R. No. 89766, Feb. 19, 1990:
. . . Petitioner's claim that retirement benefits, being noncontributory in
nature, are not proper subjects for voluntary arbitration is devoid of merit.
The expired CBA previously entered into by the parties included provisions
for the implementation of a "Retirement and Separation Plan." it is only to be
expected that the parties would seek a renewal or an improvement of said
item in the new CBA. In fact, the parties themselves expressly included
retirement benefits among the economic issues to be resolved by voluntary
arbitration. Petitioner is estopped from now contesting the validity of the
increased award granted by the arbitrators. (p. 145, Rollo.)
The NLRC's resolution of the bargaining deadlock between Nestl and its employees
is neither arbitrary, capricious, nor whimsical. The benefits and concessions given to
the employees were based on the NLRC's evaluation of the union's demands, the
evidence adduced by the parties, the financial capacity of the Company to grant the
demands, its longterm viability, the economic conditions prevailing in the country as
they affect the purchasing power of the employees as well as its concommitant effect
on the other factors of production, and the recent trends in the industry to which the
Company belongs (p. 57, Rollo). Its decision is not vitiated by abuse of discretion.
WHEREFORE, the petition for certiorari is dismissed, with costs against the petitioner.
SO ORDERED.
Narvasa,
Gancayco
Cruz, J., took no part.

and

12. G.R. No. L-57636 May 16, 1983

Medialdea,

JJ.,

concur.

REYNALDO
TIANGCO
and
VICTORIA
TIANGCO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the Ministry of Labor and
Employment, AURELIO ILUSTRISIMO, ABRAHAM GILBUENA, ROGELIO
CARABIO, JESUS GILBUENA, PEPITO GILBUENA, DOMINADOR LASERNA,
CLEMENTE VILLARUEL, RUSTOM OFQUERIA, ERNESTO DIONG, GRACIANO
DURANA, AGUEDO MARABE, SOLOMON CLARIN, ALCAFONE ESGANA, JUAN
CASTRO, ANTONIO GILBUENA, GREGORIO LAYLAY, DANIEL CABRERA,
ROBERTO BAYON-ON, ELIAS ESCARAN, ERNESTO BATOY, EDDIE
BATOBALANOS, TOMAS CAPALAR, JUAN GIHAPON, JOSE OFQUERIA, FRUTO
GIHAPON, PEPITO BATOY, and SERAFIO YADAWON, respondents.
Florencio Pineda for petitioners.
The Solicitor General for respondents.

CONCEPCION, JR., J.:

Petition for certiorari and prohibition, with preliminary injunction and/or restraining
order, to annul and set aside the order of the respondent Deputy Minister of Labor
which modified and affirmed the order of Director of the National Capitol Region of the
Ministry of Labor directing the petitioners to pay the private respondents their legal
holiday pay, service incentive pay, and differentials in their emergency cost of living
allowances.
The petitioner, Reynaldo Tiangco, is a fishing operator who owns the Reynaldo
Tiangco Fishing Company and a fleet of fishing vessels engaged in deep-sea fishing
which operates from Navotas, Rizal. His business is capitalized at
P2,000,000.00, 1 while the petitioner, Victoria Tiangco, is a fish broker whose business
is capitalized at P100,000.00. 2
The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio,
Abraham Gilbuena, Rustom Ofqueria, Ernesto Diong, Jesus Gilbuena, Clemente
(Emerenciano)
Villaruel,
Dominador
Lacerna,
and
Graciano
Durana,
are batillos engaged by the petitioner Reynaldo Tiangco to unload the fish catch from
the vessels and take them to the Fish Stall of the petitioner Victoria Tiangco. The
private respondents, Eddie Batobalanos, Aguedo Marabe, Gregorio Laylay, Fruto
Gihapon, Solomon Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan Castro,
Alcafone Esgana, Tomas Capalar, Antonio Gilbuena, Ernesto Batoy, Serafio Yadawon,
Juan Gihapon, Elias Escaran and Roberto Bayon-on, were batillos engaged by
Victoria Tiangco. 3 The work of these batillos were limited to days of arrival of the
fishing vessels and their working days in a month are comparatively few. Their working
hours average four (4) hours a day.

On April 8, 1980, the private respondents filed a complaint against the petitioners with
the Ministry of Labor and Employment for non-payment of their legal holiday pay and
service incentive leave pay, as well as underpayment of their emergency cost of living
allowances which used to be paid in full irrespective of their working days, but which
were reduced effective February, 1980, in contravention of Article 100 of the new
Labor Code which prohibits the elimination or diminution of existing benefits. 4
The petitioners denied the laborers' contention, claiming that the laborers were all
given, in addition to their regular daily wage, a daily extra pay in amounts ranging from
30 centavos to 10 pesos which are sufficient to offset the laborers' claim for service
incentive leave and legal holiday pay. As regards the claim for emergency allowance
differentials, the petitioners admitted that they discontinued their practice of paying
their employees a fixed monthly allowance, and effective February, 1980, they no
longer paid allowances for non-working days. They argued, however, that no law was
violated as their refusal to pay allowances for non-working days is in consonance with
the principle of "no work, no allowance"; and that they could not pay private
respondents a fixed monthly allowance without risking the viability of their business. 5
Resolving the case, the Director of the National Capitol Region of the Ministry of Labor
and Employment ruled that the daily extra pay given to private respondents was
a ,'production incentive benefit", separate and distinct from the service incentive leave
pay and legal holiday pay, payment of which cannot be used to offset a benefit
provided by law, and ordered the petitioners to pay the private respondents their
service incentive leave pay and legal holiday pay. However, he denied the laborers'
claim for differentials in the emergency cost of living allowance for the reason that the
emergency cost of living allowance accrues only when the laborers actually work
following the principle of "no work, no pay," and private respondents are not entitled to
a fixed monthly allowance since they work on a part time basis which average only
four (4) days a week. The private respondents should not be paid their allowances
during non-working days. 6
From this order, both parties appealed.
On May 22, 1981, the respondent Deputy Minister of Labor and Employment modified
the order and directed the petitioners to restore and pay the individual respondents
their fixed monthly allowance from March, 1980 and to pay them the amount of
P58,860.00, as underpayment of their living allowance from May, 1977 to February 21,
1980. 7
When their motion for the reconsideration of the above order was denied, the
petitioners interposed the present recourse.
The petitioners claim that the respondent Deputy Minister of Labor and Employment
acted in excess of jurisdiction, or with grave abuse of discretion in ordering them to
pay the private respondents a fixed monthly allowance from March, 1980, despite the
"no work, no pay," law; the private respondents' consent to receive an allowance for
days worked for, as stated in their appeal; and the findings of the Director of the

National Capitol Region that private respondents work for other employers and are
part-time employees of the petitioners.
Indeed, the record shows that the private respondents work for the petitioners on a
part-time basis and their work average only four (4) days a week. It is not also
disputed that the private respondents work for more than one employer so that the
private respondents should be paid their living allowance only for the days they
actually worked in a week or month and all the employers of the employee shall share
proportionately in the payment of the allowance of the employee. Section 12 of the
Rules and Regulations implementing P.D. 525 which made mandatory the payment of
emergency cost of living allowances to workers in the private section, provides, as
follows:
Section 12. Allowance on Daily Paid & Part Time employees.
Employees who are paid on a daily basis shall be paid their
allowances for the number of days they actually worked in a week
or month, on the basis of the scales provided in Section 7 hereof.
In case of part-time employment, the allowances shall be paid in
the amount proportionate to the time worked by the employee, or
higher. If employed by more than one employer, all employers of
such employee shall share proportionately in the payment of the
allowance of the employee.
Section 11 of the Rules implementing P.D. 1123, increasing the
emergency allowance under P.D. 525, also provides, as follows:
Section 11. Allowances of full-time and part-time employees.
Employees shall be paid in full the monthly allowances on the
basis of the scales provided in Section 3 hereof, regardless of the
number of their regular working days, if they incur no absence
during the month. If they incur absences, the amounts
corresponding to their absences may be deducted from the
monthly allowance.
In case of part-time employment, the allowance to be paid shall
be proportionate to the time worked by the employee. This
requirement shall apply to any employee with more than one
employer.
However, the respondent Deputy Minister of Labor and Employment correctly ruled
that since the petitioners had been paying the private respondents a fixed monthly
emergency allowance since November, 1976 up to February, 1980, as a matter of
practice and/or verbal agreement between the petitioners and the private
respondents, the discontinuance of the practice and/or agreement unilaterally by the
petitioners contravened the provisions of the Labor Code, particularly Article 100
thereof which prohibits the elimination or diminution of existing benefits.

Section 15 of the Rules on P.D. 525 and Section 16 of the Rules on P. D. 1123 also
prohibits the diminution of any benefit granted to the employees under existing laws,
agreements, and voluntary employer practice. Section 15 of the Rules on P.D. 525
provides, as follows:
Section 15. Relation to Agreement. Nothing herein shall
prevent the employer and his employees from entering into any
agreement with terms more favorable to the employees than
those provided therein, or be construed to sanction the diminution
of any benefit granted to the employees under existing laws,
agreements, and voluntary employer practice.
Section 16 of the Rules on P.D. 1123 similarly prohibits diminution
of benefits. It provides, as follows:
Section 16. Relation to other agreements. Nothing herein shall
prevent employers from granting allowances to their employees in
excess of those provided under the Decree and the Rules nor
shall it be construed to countenance any reduction of benefits
already being enjoyed.
The petitioners further claim that the respondent Deputy Minister of Labor and
Employment erred in ordering them to pay the amount of P58,860.00 to the private
respondents as underpayment of respondents' allowances from May, 1977 to
February 20, 1980. The petitioners contend that the emergency cost of living
allowances of the private respondents had been paid in full.
We find no merit in the contention. However, a revision of the amount due the private
respondents is in order for the reason that the respondent Deputy Minister of Labor
and Employment failed to take into consideration, in computing the amount due each
worker, the fact that the private respondents are employed by two different individuals
whose businesses are divergent and capitalized at various amounts, contrary to the
provisions of P.D. 525 and subsequent amendatory decrees, wherein the amount of
the emergency cost of living allowance to be paid to a worker is made to depend upon
the capitalization of the business of his employer or its total assets, whichever is
higher. Thus, Section 7 of the Rules and Regulations implementing P.D. 525 reads, as
follows:
Section 7. Amount of Allowances. Every covered employer
shall give to each of his employees who is receiving less than
P600.00 a month not less than the following allowances;
(a) P50.00 where the authorized capital stock or total assets,
whichever is applicable and higher, is 71 million or more;

(b) P30.00 where the authorized capital stock or total assets,

whichever is applicable and higher is at least P100,000.00 but
less than P 1miilion and
(c) P15.00 where the authorized capital stock or total assets,
whichever is applicable and higher, is less than P100,000.00.
Nothing herein shall prevent employers from granting allowances
to their employees who will receive more than P600.00 a month,
including the allowances. An employer, however, may grant his
employees an allowance which if added to their monthly salary,
will not yield to them more than P600.00 a month.
In this case, the private respondents admit that only ten (10) of them, namely: Aurelio
Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom Ofquiera,
Ernesto Diong, Jesus Gilbuena, Emerenciano Villaruel, Dominador Lacerna, and
Graciano Durana, were employees of the petitioner Reynaldo Tiangco, while the
remaining seventeen (17) were employed by the petitioner Victoria
Tiangco. 8 Accordingly, the workers of the petitioner Victoria Tiangco, whose business
as fish broker is capitalized at P100,000.00, 9 should receive a lesser amount of
allowance (P30.00) than those workers employed by the petitioner Reynaldo Tiangco
whose business, as a fishing operator with a fleet of fishing vessels, is capitalized at
more than P2,000,000.00, and are entitled to receive a fixed monthly allowance of
P50.00 a month, each.
After P.D. 525, the following amendatory decrees, directing the payment of additional
allowances to employees, were promulgated:
1. P.D. 1123. providing for an across-the-board increase of
P60.00 a month effective May 1, 1977;
2. P.D. 1614, which directed the payment of P60.00 monthly
allowance effective April 1, 1979;
3. P.D. 1634, which provided for the payment of an additional
P60.00 a month effective September 1, 1979, and another P30.00
a month beginning January 1, 1980; and
4. P.D. 1678,which directed the payment of an additional P2.00 a
day from February 21, 1980.
Hence, for the period from November, 1976 to April 30, 1977, the petitioner Victoria
Tiangco should pay her workers a fixed monthly allowance of P 30.00, while the
workers of the petitioner Reynaldo Tiangco were entitled to a fixed monthly allowance
of P50.00, each. The record shows that during this period, the petitioner Victoria
Tiangco was paying her workers a monthly allowance of P30.00 each. 10 Accordingly,

there was no underpayment for this period insofar as her batillos are concerned. The
petitioner Reynaldo Tiangco, however, paid his employees P30.00, instead of P50.00,
as mandated by law. 11 Therefore, there was an underpayment of P20.00 a month for
each batillo under his employ. For the 6-month period, he should pay his workers
differentials in the amount of P120.00 each.
For the period from May, 1977 to March 1979, the workers of the petitioner Victoria
Tiangco were entitled to a fixed monthly allowance of P90.00 in view of the
promulgation of P.D. 1123 which granted an across-the-board increase of P60.00 a
month in their allowances. For this period, however, the said petitioner paid her
workers only P60.00 a month, or a difference of P30.00 a month. 12 There was,
therefore, an underpayment of P690.00 for every batillo under her employ for the 23month period.
With the addition of P60.00 across-the-board increase in their allowances, the workers
of the petitioner Reynaldo Tiangco were entitled to receive a fixed monthly allowance
of P110.00. However, the record shows that his workers were only paid P60.00 a
month, 13 or a difference of P50.00 a month. Consequently, each batillo hired by him
should be paid a differential of P1,150.00 for the 23-month period.
For the period from April, 1979 to August, 1979, the employees of the petitioner
Victoria Tiangco were entitled to a fixed monthly allowance of P150.00 while the
workers employed by the petitioner Reynaldo Tiangco were entitled to an allowance of
P170.00, pursuant to P.D. 1614. The record shows, however, that both petitioners paid
their workers only P120.00 a month. 14 There was a difference of P30.00 a month in
the case of the petitioner Victoria Tiangco, and P50.00, a month, in the case of the
petitioner Reynaldo Tiangco. Hence, for this period, the petitioner Victoria Tiangco
should pay the amount of P150.00 to each batillo in her employ, while the petitioner
Reynaldo Tiangco should pay the amount of P250.00, as differentials in the cost of
living allowances of the workers under his employ.
Upon the promulgation of P.D. 1634, directing the payment of an additional P60.00 a
month effective September, 1979 and another P30.00 effective January 1, 1980, the
workers of the petitioner Victoria Tiangco were entitled to receive a fixed monthly
allowance of P210.00 a month from September, 1979, and P340.00, a month
beginning January, 1980. The workers of the petitioner Reynaldo Tiangco, upon the
other hand, were entitled to a monthly allowance of P230.00, effective September,
1979, and P260.00, a month beginning January, 1980. The record shows, however,
that both petitioners paid their workers the amounts of P180.00 a month for the
months of September to December, 1979, 15 and P210.00 a month for the months of
January and February, 1980. 16 There was underpayment, therefore, in the allowances
of the workers of the petitioner Victoria Tiangco in the amount of P30.00, a month, for
the months of September, 1979 to February, 1980, or P180.00 for each batillo in her
employ. The private respondents hired by the petitioner Reynaldo Tiangco, upon the
other hand, are entitled to differentials in the amount of P50.00 a month for the same
period, or P300.00 each.

Then, beginning February, 21, 1980, the workers should be paid an additional P2.00,
a day, pursuant to P.D. 1678. The record shows that the petitioners had complied with
this requirement. 17 The petitioners, however, failed to pay the fixed monthly allowance
of their workers which was P240.00, in the case of the workers employed by the
petitioner Victoria Tiangco, and P260.00, in the case of the workers of the petitioner
Reynaldo Tiangco. Thus, for the month of March, 1980, the petitioner Victoria Tiangco
paid her workers varying amounts, the lowest of which was P30.00, paid to Eddie
Batobalanos and Fruto Gihapon, and the highest of which was P210.00, paid to Juan
Gihapon and Roberto Bayonon. 18 Hence, there was underpayment in their emergency
cost of living allowances. But, since, the respondents employed by Victoria Tiangco
are wining to accept P50.00 a month as differentials for the months of March, 1980 to
May, 1980, 19 the workers employed by her should be paid P50.00, each, for the
month of March, 1980, except Juan Gihapon and Roberto Bayon-on who should be
paid P30.00, each, for the said month, having received the amount of P210.00, each
as allowance for that month.
For the month of April, 1980, the workers of the petitioner, Victoria Tiangco, were paid
varying amounts ranging from P120.00 to P210.00. 20 Hence, there was also
underpayment in their allowances. Accordingly, they should be paid the amount of
P50.00, each, except for Juan Gihapon, Antonio Gilbuena, Juan Castro, and Aguedo
Marabe, who should be paid P40.00, each, and Solomon Clarin, Daniel Cabrera, and
Gregorio Laylay who should be paid P30.00 each.
For the month of May, 1980, the petitioner Victoria Tiangco, paid her workers varying
amounts less that what was provided for by law. 21 Hence, they should be paid the
amount of P50.00, each, for this month.
The petitioner, Reynaldo Tiangco, also paid the employees varying amounts, ranging
from P210.00 to P250.00, as emergency cost of living allowance, for the month of
March, 22, 1980. 22 Since they were entitled to a fixed monthly allowance of P260.00,
each, there was underpayment in their cost of living allowances. Accordingly, the
petitioner should pay the respondent Pepito Gilbuena the amount of P50.00; the
respondents Dominador Lacerna and Graciano Durano, the amount of P40.00, each;
the respondent Ernesto Diong, the amount of P30.00; the respondents Rustom
Ofqueria and Aurelio Ilustrisimo, the amount of P20.00, each; and the respondents
Abraham Gilbuena, Jesus Gilbuena, Rogelio Carabio, and Emerenciano Villaruel, the
amount of P10.00 each.
For the month of April, 1980, the workers of the petitioner Reynaldo Tiangco, were not
also paid their emergency cost of living allowance in full. 23 Hence, the said petitioner
should pay his workers the amount of P30.00 each, except for Pepito Gilbuena, who
should be paid the amount of P50.00, and Rustom Ofqueria, Jesus Gilbuena, and
Graciano Durano, who are entitled to only P40.00 each.
The petitioner, Reynaldo Tiangco did not also pay his workers their full cost of living
allowance for the month of May, 1980. The workers were paid varying amounts of
P130.00 to P150.00, instead of P260.00, as required by law. 24Hence, they should be
paid the amunt of P50.00 each for the month of May, 1980.

WHEREFORE, the petitioners Victoria Tiangco and Reynaldo Tiangco should be, as
they are hereby, ordered to PAY the private respondents the following amounts as
differentials in their emergency cost of living allowance:
Petitioner Victoria Tiangco:
1

Eddie
Batobalanos.....
........

Pl,1
70.0
0

2
.

Aguedo
Morabe............
.....

1,16
0.00

3
.

Gregorio
Laylay...............
...

1,15
0.00

4
.

Fruto
Gihapon...........
..........

1,17
0.00

5
.

Solomon Clarin
...................

1,15
0.00

6
.

Pepito
Batoy................
........

1,17
0.00

7
.

Jose
Ofqueria...........
............

1,17
0.00

8
.

Daniel
Cabrera............
.........

1,15
0.00

9
.

Juan
Castro..............
............

1,16
0.00

1
0
.

Alcafone
Esgana............
.....

1,17
0.00

1
1

Tomas Capalar
....................

1,17
0.00

......

1
2
.

Antonio
Gilbuena..........
......

1,16
0.00

6
.

Ernesto
Diong..............
......

1,93
0.00

1
3
.

Ernesto
Batoy................
......

1,17
0.00

7
.

Jesus
Gilbuena.........
..........

1,92
0.00

1
4
.

Serapio
Yadawon..........
......

1,15
0.00

8
.

Emerenciano
Villaruel........

1,91
0.00

1
5
.

Juan
Gihapon...........
............

1,14
0.00

9
.

Dominador
Lacerna..........
..

1,94
0.00

1
6
.

Elias
Escaran ..........
............

1,15
0.00

1
0
.

Graciano
Durano............
.....

1,95
0.00

1
7
.

Roberto
Bayonon..............

1,13
0.00

With this modification, the judgment appealed from is AFFIRMED in all other respects.
With costs against the petitioners.
SO ORDERED.

Petitioner Reynaldo Tiangco:

1

Aurelio
Ilustrisimo.......
.....

P
l,92
0.00

2
.

Pepito
Gilbuena.........
........

1,97
0.00

3
.

Rogelio
Carabio...........
......

1,91
0.00

4
.

Abraham
Gilbuena.........
....

1,91
0.00

5
.

Rustom
Ofqueria..........

1,93
0.00

13. G.R. No. 58094-95 March 15, 1989

MAMERTO
B.
ASIS,
petitioner,
vs.
MINISTER OF LABOR AND EMPLOYMENT, CENTRAL AZUCARERA DE PILAR,
and EMMANUEL JAVELLANA, respondents.
Belo, Ermitano Abiera & Associates for petitioner.
Yolanda, Quisumbing-Javellana & Associates for respondent Emmanuel Q. Javellana.
V. Veloso & Associates for respondent Central Azucarera

NARVASA, J.:
The facts of this case depict a picture that is hardly edifying: avidity trying to wear the
mantle of right. The facts raise a twofold issue: whether a company which has been
haled to court by its own in-house counsel is obliged to continue his employment and
entrust its legal affairs to him, specially when his cause of action has been shown to
be devoid of merit; and whether a firm is bound to retain in its service a personnel
manager who has incited the very employees under his supervision and control to file
complaints against it. Asserting a right to sue his employer for a legitimate grievance
without meriting retaliatory action, the petitioner claims that his dismissal for such
conduct or on the ground, essentially, of loss of confidence, was illegal; and he asks
this Court to annul the judgment of the respondent Commission, which upheld the
termination of his services in respondent company. Said claim finds no support in
either the law or the established facts and must, therefore, be rejected.
The petitioner was appointed Legal Counsel of the Central Azucarera de Pilar 1 Later,
concurrently with his position as Legal Counsel, he was named Head of its Manpower
and Services Department.
In addition to his basic salaries and other fringe benefits, his employer granted him,
and a few other officials of the company, a monthly ration of 200 liters of gasoline and
a small tank of liquefied petroleum gas (LPG). 2 This monthly ration was temporarily
revoked some five (5) years later as a cost reduction measure of the Central .3 The
petitioner and the other officials adversely affected moved for reconsideration. Their
plea was denied.
The petitioner then commenced an action against the Central with the Regional Office
of the Ministry of Labor and Employment, seeking restoration of his monthly ration of
gasoline and LPG which, as aforesaid, had been temporarily suspended. The case
was docketed as LRD Case No. 1632.
Shortly afterwards, he filed another action against his employer, docketed as LRD
Case No. 1685, this time complaining against the Central's memorandum ordaining
his relief (by being placed on leave of absence) as the Central's Legal Counsel and
Head of the Manpower Services Department, impleaded by the petitioner as corespondent was Emmanuel Q. Javellana, the Finance Manager and Comptroller of the
Central, who had signed the memorandum for his relief. 4 The petitioner theorized that
he had in effect been dismissed, illegally. 5
The two cases were jointly heard and decided by the Regional Director. The latter's
judgments 6 was for the petitioner's reinstatement to his former positions without loss
of seniority, benefits and other privileges, the payment to him of back wages from date
of his relief up to time of reinstatement, and the delivery to him of the monthly benefits
from the time of their temporary revocation up to actual restoration or, at his option,
the money equivalent thereof. 7

The Deputy Minister of Labor however reversed this decision of the Regional Director,
on appeal taken by the Central; the Deputy Minister ordered the dismissal of the
petitioner's complaint. 8 The Deputy Minister found that the evidence satisfactorily
established that the Central's suspension of the petitioner's and others' monthly ration
of gasoline and LPG, had been caused by unavoidable financial constraints; that such
a suspension, in line with its conservation and cost-saving policy, did not in truth effect
any significant diminution of said benefits, since the petitioner was nevertheless
entitled to reimbursement of the actual amount of gas consumed; that petitioner had
encouraged his co-employees to file complaints against the Central over the rations
issue, and this, as well as his institution of his own actions, had created an
atmosphere of enmity in the Central, and caused the loss by the Central of that trust
and confidence in him so essential in a lawyer-client relationship as that theretofore
existing between them; and that under the circumstances, petitioner's discharge as
the Central's Legal Counsel and Head of the Manpower & Services Department was
justified. The Deputy Minister's order of dismissal was however subsequently
modified, at the petitioner's instance, by decreeing the payment to the latter of
separation pay equivalent to one month's salary for every year of service rendered. 9
The petitioner theorizes that apart from the fact that the Deputy Minister lacked
jurisdiction to entertain the Central's appeal from the decision of the Regional Director,
he had gravely abused his discretion in reaching his factual conclusions, pejoratively
described as guesswork and speculation.
The petitioner's theory of the Deputy Minister's lack of jurisdiction, founded on the
tardy payment by the Central of the appeal fee of P 25.00, is quickly disposed of by
simply adverting to our holding in Del Rosario & Sons Logging Enterprises, Inc. v.
NLRC, 10 to wit:
It may be that, as held in Acda vs. MOLE, 119 SCRA 306 [1982], payment of the
appeal fee is by no means a mere technicality but is an essential requirement in the
perfection of an appeal. However, where as in this case, the fee had been paid, unlike
in the Acda case, although payment was delayed, the broader interest of justice and
the desired objective of resolving controversies on the merits demanded that the
appeal be given course as, in fact, it was so given by the NLRC. Besides, it was within
the inherent power of the NLRC to have allowed the late payment of the appeal fee.
As regards the temporary revocation of the petitioner's monthly ration of fuel, suffice it
to point out that, as the Solicitor General stresses, this bad been occasioned by force
of circumstances affecting the Central's business. The monthly ration was not a part of
his basic salary, and is not indeed found in any of the management payroll vouchers
pertinent to the petitioner. 11 Moreover, the adverse consequences of the suspension
of the monthly rations had been largely if not entirely negated by the Central's
undertaking to reimburse the petitioner for his actual consumption of fuel during the
period of suspension. These facts are entirely distinct from those obtaining in the case
of States Marine Corporation and Royal Line, Inc. v. Cebu Seamen's Association,
Inc., 12 invoked by petitioner and thus preclude application of the ruling therein laid
down to the case at bar.

A review of the record demonstrates that there is substantial evidence supporting the
factual findings of the respondent Deputy Minister. Said findings, as well as the legal
conclusions derived therefrom, cannot be said to have been rendered with grave
abuse of discretion, and will thus be affirmed. In fine, and as petitioner could not but
have realized from the outset, neither he nor any other employee similarly situated
had any legitimate grievance against the Central.
WHEREFORE, the petition is DISMISSED for lack of merit, with costs against
petitioner.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
14. G.R. No. L-24632

October 26, 1968

LEXAL LABORATORIES and/or JOSE ANGELES, Manager, petitioners,

vs.
NATIONAL CHEMICAL INDUSTRIES WORKERS UNION-PAFLU (Lexal
Laboratories
Chapter)
and
THE
COURT
OF
INDUSTRIAL
RELATIONS, respondents.
Matias,
Liboro
&
F. M. de los Reyes for respondents.

Benitez

for

petitioners.

SANCHEZ, J.:
Condensed, the question before us is this: Are per diems included in backpay? This
problem came about because of the implementation of the decision of the Court of
Industrial Relations (CIR) of June 29, 1963 1directing petitioner Lexal Laboratories
(Lexal) to reinstate Guillermo Ponseca, a dismissed employee, to his former position
"with full back wages from the day of his dismissal up to the time he is actually
reinstated without loss of his seniority rights and of such other rights and privileges
enjoyed by him prior to his lay-off."
CIR, confirming the report of its Chief Examiner and Economist, ruled in its order of
February 16, 1965 that Ponseca was entitled to back wages from November 5, 1958
when he ceased reporting for work, to November 24, 1963 a day prior to his
reinstatement on November 25, 1963; and that for the number of days that he was
supposed to be in Manila, he was to earn P4.50 a day, and during the periods when
he should have been in the provinces, P4.50 a day plus a per diem of P4.00 or a total
of P8.50 daily. This order was subsequently modified by CIR's resolution of May 22,
1965 which directed the deduction of P5,000.00 previously paid Ponseca under the
judgment and P610.00 which Ponseca earned from other sources during his lay-off.
Petitioners vigorously objected to the inclusion of the P4.00 per diem in the
computation of Ponseca's back wages because the latter "did not actually spend for
his meals and lodgings for he was all the time in Manila, his station." CIR brushed this

contention aside. Whereupon, petitioners appealed to this Court from the order of
February 16, 1965 and the resolution of May 22, 1965.2
1. Our attention has not been drawn to a rule of law or jurisprudence which holds
that per diems are integral parts of regular wages or salaries. Neither is it suggested in
the record that per diems formed part of the terms of employment between petitioners
and respondent union (of which Ponseca is a member), or with Ponseca himself for
that matter. Nor was pronouncement made either in the original decision or in the
questioned order and resolution of CIR that per diems are part of back wages. CIR
simply hit upon the idea that per diems should be paid as part of the back wages
because they were "paid to him regularly."
Per diem, the dictionary definition tells us, is "a daily allowance" given "for each day
he (an officer or employee) was away from his home base". 3 It would seem to us
that per diem is intended to cover the cost of lodging and subsistence of officers and
employees when the latter are on duty outside of their permanent station. 4 Lexal
concedes that whenever its employee, Guillermo Ponseca, was out of Manila, he was
allowed a per diem of P4.00 broken down as follows: P1.00 for breakfast; P1.00 for
lunch; P1.00 for dinner; and P1.00 for lodging. Ponseca during the period involved
did not leave Manila. Therefore, he spent nothing for meals and lodging outside of
Manila. Because he spent nothing, there is nothing to be reimbursed. Since per
diems are in the nature of reimbursement, Ponseca should not be entitled to per
diems.
Besides, back wages are what an employee has lost "in the way of wages" due to his
dismissal. So that, because Ponseca earned P4.50 a day, "then that is the amount
which he lost daily by reason of his dismissal, nothing more nothing less:"5
We, accordingly, rule that CIR erred in including per diems in the back wages due and
payable to Guillermo Ponseca.
2. The rest is a matter of mathematical computation but first to the facts. The union's
evidence is that since the last part of October, 1958 Ponseca had been reporting
everyday to the bodega of respondents.6 Anyway, prior to Ponseca's dismissal, he
worked daily either in Manila or in the provinces.7
But the order of February 15, 1965 credits Ponseca with 1,856 days for the period
from November 5, 1958 to November 24, 1963. We checked the accuracy of this
figure. We found that there should only be 1,846 days from November 5, 1958 to
November 24, 1963, viz:
November 5, 1958 to December 31, 1958

57 days

January 1, 1959 to December 31, 1959

365 days

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION and NBSR SUPERVISORY UNION, (PACIWU)
TUCP, respondents.

January 1, 1960 to December 31, 1960

366 days

January 1, 1961 to December 31, 1961

365 days

January 1, 1962 to December 31, 1962

365 days

Jose Mario C. Bunag for petitioner.

January 1, 1963 to November 24, 1963

328 days

The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

T O TAL

1,846 days

Zoilo V. de la Cruz for private respondent.

This brings us to the total amount due from Lexa1 to Guillermo Ponseca, as follows: .
1,846 days
Less:

P4.50

Advance payment

Earnings from other sources

NET BACKPAY

P8,307.00
P5,000.00
P610.00

P5,610.008
P2,697.00 .

For the foregoing reasons, the order of February 16, 1965, and the resolution of May
22, 1965, both of the Court of Industrial Relations, in its Case No. 2002-ULP, entitled
"National Chemical Industries Workers Union-PAFLU (Lexal Laboratories Chapter),
Complainant, versus Lexal Laboratories and Jose Angeles, its Manager,
Respondents", are hereby modified; and
Judgment is hereby rendered ordering petitioner Lexal Laboratories to pay Guillermo
Ponseca, by way of net backpay, the sum of P2,697.00.
No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Angeles, Fernando and
Capistrano,
JJ., concur.
Zaldivar, J., is on leave.

15. G.R. No. 101761. March 24, 1993.

DECISION
REGALADO, J p:
The main issue presented for resolution in this original petition for certiorari is whether
supervisory employees, as defined in Article 212 (m), Book V of the Labor Code,
should be considered as officers or members of the managerial staff under Article 82,
Book III of the same Code, and hence are not entitled to overtime rest day and holiday
pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which
is fully owned and controlled by the Government, operates three (3) sugar refineries
located at Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on
April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent union represents
the former supervisors of the NASUREFCO Batangas Sugar Refinery, namely, the
Technical Assistant to the Refinery Operations Manager, Shift Sugar Warehouse
Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift
Operations Chemist, Shift Electrical Supervisor, General Services Supervisor,
Instrumentation Supervisor, Community Development Officer, Employment and
Training Supervisor, Assistant Safety and Security Officer, Head and Personnel
Services, Head Nurse, Property Warehouse Supervisor, Head of Inventory Control
Section, Shift Process Supervisor, Day Maintenance Supervisor and Motorpool
Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all
employees, from rank-and-file to department heads. The JE Program was designed to
rationalized the duties and functions of all positions, reestablish levels of responsibility,
and recognize both wage and operational structures. Jobs were ranked according to
effort, responsibility, training and working conditions and relative worth of the job. As a
result, all positions were re-evaluated, and all employees including the members of
respondent union were granted salary adjustments and increases in benefits
commensurate to their actual duties and functions.
We glean from the records that for about ten years prior to the JE Program, the
members of respondent union were treated in the same manner as rank-and file

employees. As such, they used to be paid overtime, rest day and holiday pay pursuant
to the provisions of Articles 87, 93 and 94 of the Labor Code as amended. With the
implementation of the JE Program, the following adjustments were made: (1) the
members of respondent union were re-classified under levels S-5 to S-8 which are
considered managerial staff for purposes of compensation and benefits; (2) there was
an increase in basic pay of the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap (P1,269.00 per month) in
basic pay compared to the highest paid rank-and-file employee; (3) longevity pay was
increased on top of alignment adjustments; (4) they were entitled to increased
company COLA of P225.00 per month; (5) there was a grant of P100.00 allowance for
rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which
was organized pursuant to Republic Act NO. 6715 allowing supervisory employees to
form their own unions, as the bargaining representative of all the supervisory
employees at the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990,
the members of herein respondent union filed a complainant with the executive labor
arbiter for non-payment of overtime, rest day and holiday pay allegedly in violation of
Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2
disposing as follows:
"WHEREFORE, premises considered,
Corporation is hereby directed to

respondent

National

Sugar

hence there was no way for the individual supervisors to express their collective
response thereto prior to the formation of the union; and the comparative
computations presented by the private respondent union showed that the P100.00
special allowance given NASUREFCO fell short of what the supervisors ought to
receive had the overtime pay rest day pay and holiday pay not been discontinued,
which arrangement, therefore, amounted to a diminution of benefits.
On appeal, in a decision promulgated on July 19, 1991 by its Third Division,
respondent National Labor Relations Commission (NLRC) affirmed the decision of the
labor arbiter on the ground that the members of respondent union are not managerial
employees, as defined under Article 212 (m) of the Labor Code and, therefore, they
are entitled to overtime, rest day and holiday pay. Respondent NLRC declared that
these supervisory employees are merely exercising recommendatory powers subject
to the evaluation, review and final action by their department heads; their
responsibilities do not require the exercise of discretion and independent judgment;
they do not participate in the formulation of management policies nor in the hiring or
firing of employees; and their main function is to carry out the ready policies and plans
of the corporation. 3 Reconsideration of said decision was denied in a resolution of
public respondent dated August 30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public
respondent commission committed a grave abuse of discretion in refusing to
recognized the fact that the members of respondent union are members of the
managerial staff who are not entitled to overtime, rest day and holiday pay; and in
making petitioner assume the "double burden" of giving the benefits due to rank-andfile employees together with those due to supervisors under the JE Program.

refineries

1. pay the individual members of complainant union the usual overtime pay, rest day
pay and holiday pay enjoyed by them instead of the P100.00 special allowance which
was implemented on June 11, 1988; and
2. pay the individual members of complainant union the difference in money value
between the P100.00 special allowance and the overtime pay, rest day pay and
holiday pay that they ought to have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor ruled that the along
span of time during which the benefits were being paid to the supervisors has accused
the payment thereof to ripen into contractual obligation; at the complainants cannot be
estopped from questioning the validity of the new compensation package despite the
fact that they have been receiving the benefits therefrom, considering that respondent
union was formed only a year after the implementation of the Job Evaluation Program,

We find creditable merit in the petition and that the extraordinary writ of certiorari shall
accordingly issue.
The primordial issue to be resolved herein is whether the members of respondent
union are entitled to overtime, rest day and holiday pay. Before this can be resolved,
however it must of necessity be ascertained first whether or not the union members,
as supervisory employees, are to be considered as officers or members of the
managerial staff who are exempt from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees,
as defined employees, as defined under Article 212(m), Book V of the Labor Code on
Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharged, assign or discipline employees. Supervisory employees are those
who, in the interest of the employer effectively recommend such managerial actions if
the exercise of such authority is not merely routinary or clerical in nature but requires
the use of independent judgment. All employees not falling within any of those above
definitions are considered rank-and-file employees of this Book."

Respondent NLRC, in holding that the union members are entitled to overtime, rest
day and holiday pay, and in ruling that the latter are not managerial employees,
adopted the definition stated in the aforequoted statutory provision.

(1) The primary duty consists of the performance of work directly related to
management policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment;

Petitioner, however, avers that for purposes of determining whether or not the
members of respondent union are entitled to overtime, rest day and holiday pay, said
employees should be considered as "officers or members of the managerial staff" as
defined under Article 82, Book III of the Labor Code on "Working Conditions and Rest
Periods" and amplified in Section 2, Rule I, Book III of the Rules to Implement the
Labor Code, to wit:
"Art. 82 Coverage. The provisions of this title shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in Appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists of
the management of the establishment in which they are employed or of a department
or subdivision thereof, and to other officers or members of the managerial staff."
(Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. The provisions of this rule shall not apply to the following
persons if they qualify for exemption under the condition set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they
are employed or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion
or any other change of status of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities:

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work along
specialized or technical lines requiring special training, experience, or knowledge; or
(iii) execute under general supervision special assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2), and above."
It is the submission of petitioner that while the members of respondent union, as
supervisors, may not be occupying managerial positions, they are clearly officers or
members of the managerial staff because they meet all the conditions prescribed by
law and, hence, they are not entitled to overtime, rest day and supervisory employees
under Article 212 (m) should be made to apply only to the provisions on Labor
Relations, while the right of said employees to the questioned benefits should be
considered in the light of the meaning of a managerial employee and of the officers or
members of the managerial staff, as contemplated under Article 82 of the Code and
Section 2, Rule I Book III of the implementing rules. In other words, for purposes of
forming and joining unions, certification elections, collective bargaining, and so forth,
the union members are supervisory employees. In terms of working conditions and
rest periods and entitlement to the questioned benefits, however, they are officers or
members of the managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the interest of simple fair play. Out of
its concern for those with less privileges in life, this Court has inclined more often than
not toward the worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law
and doctrine. 5
This is one such case where we are inclined to tip the scales of justice in favor of the
employer.
The question whether a given employee is exempt from the benefits of the law is a
factual one dependent on the circumstances of the particular case, In determining
whether an employee is within the terms of the statutes, the criterion is the character
of the work performed, rather than the title of the employee's position. 6

Consequently, while generally this Court is not supposed to review the factual findings
of respondent commission, substantial justice and the peculiar circumstances
obtaining herein mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements 7 of the union members
will readily show that these supervisory employees are under the direct supervision of
their respective department superintendents and that generally they assist the latter in
planning, organizing, staffing, directing, controlling communicating and in making
decisions in attaining the company's set goals and objectives. These supervisory
employees are likewise responsible for the effective and efficient operation of their
respective departments. More specifically, their duties and functions include, among
others, the following operations whereby the employee:

7) recommends disciplinary actions/promotions;

8) recommends measures to improve work methods, equipment performance, quality
of service and working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and
followed by all NASUREFCO employees, recommends revisions or modifications to
said rules when deemed necessary, and initiates and prepares reports for any
observed abnormality within the refinery;
10) supervises the activities of all personnel under him and goes to it that instructions
to subordinates are properly implemented; and

1) assists the department superintendent in the following:

11) performs other related tasks as may be assigned by his immediate superior.
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes
employee shifting scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends
disciplinary action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become
more productive;
4) conducts semi-annual performance evaluation of his subordinates
recommends necessary action for their development/advancement;

and

5) represents the superintendent or the department when appointed and authorized by

the former;
6) coordinates and communicates with other inter and intra department supervisors
when necessary;

From the foregoing, it is apparent that the members of respondent union discharge
duties and responsibilities which ineluctably qualify them as officers or members of the
managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules to
Implement the Labor Code, viz.: (1) their primary duty consists of the performance of
work directly related to management policies of their employer; (2) they customarily
and regularly exercise discretion and independent judgment; (3) they regularly and
directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are employed (4)
they execute, under general supervision, work along specialized or technical lines
requiring special training, experience, or knowledge; (5) they execute, under general
supervision, special assignments and tasks; and (6) they do not devote more than
20% of their hours worked in a work-week to activities which are not directly and
clearly related to the performance of their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with petitioner that
the union members should be considered as officers and members of the managerial
staff and are, therefore, exempt from the coverage of Article 82. Perforce, they are not
entitled to overtime, rest day and holiday.
The distinction made by respondent NLRC on the basis of whether or not the union
members are managerial employees, to determine the latter's entitlement to the
questioned benefits, is misplaced and inappropriate. It is admitted that these union
members are supervisory employees and this is one instance where the
nomenclatures or titles of their jobs conform with the nature of their functions. Hence,
to distinguish them from a managerial employee, as defined either under Articles 82 or
212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually
involved here seeks a determination of whether or not these supervisory employees
ought to be considered as officers or members of the managerial staff. The distinction,
therefore, should have been made along that line and its corresponding conceptual
criteria.

II. We likewise no not subscribe to the finding of the labor arbiter that the payment of
the questioned benefits to the union members has ripened into a contractual
obligation.

words, after the JE Program there was an ascent in position, rank and salary. This in
essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and
usually accompanied by an increase in salary. 12

A. Prior to the JE Program, the union members, while being supervisors, received
benefits similar to the rank-and-file employees such as overtime, rest day and holiday
pay, simply because they were treated in the same manner as rank-and-file
employees, and their basic pay was nearly on the same level as those of the latter,
aside from the fact that their specific functions and duties then as supervisors had not
been properly defined and delineated from those of the rank-and-file. Such fact is
apparent from the clarification made by petitioner in its motion for reconsideration 8
filed with respondent commission in NLRC Case No. CA No. I-000058, dated August
16, 1991, wherein, it lucidly explained:

Quintessentially, with the promotion of the union members, they are no longer entitled
to the benefits which attach and pertain exclusively to their positions. Entitlement to
the benefits provided for by law requires prior compliance with the conditions set forth
therein. With the promotion of the members of respondent union, they occupied
positions which no longer met the requirements imposed by law. Their assumption of
these positions removed them from the coverage of the law, ergo, their exemption
therefrom.

"But, complainants no longer occupy the same positions they held before the JE
Program. Those positions formerly classified as 'supervisory' and found after the JE
Program to be rank-and-file were classified correctly and continue to receive overtime,
holiday and restday pay. As to them, the practice subsists.

As correctly pointed out by petitioner, if the union members really wanted to continue
receiving the benefits which attach to their former positions, there was nothing to
prevent them from refusing to accept their promotions and their corresponding
benefits. As the sating goes by, they cannot have their cake and eat it too or, as
petitioner suggests, they could not, as a simple matter of law and fairness, get the
best of both worlds at the expense of NASUREFCO.

"However, those whose duties confirmed them to be supervisory, were re-evaluated,

their duties re-defined and in most cases their organizational positions re-designated
to confirm their superior rank and duties. Thus, after the JE program, complainants
cannot be said to occupy the same positions." 9
It bears mention that this positional submission was never refuted nor controverted by
respondent union in any of its pleadings filed before herein public respondent or with
this Court. Hence, it can be safely concluded therefrom that the members of
respondent union were paid the questioned benefits for the reason that, at that time,
they were rightfully entitled thereto. Prior to the JE Program, they could not be
categorically classified as members or officers of the managerial staff considering that
they were then treated merely on the same level as rank-and-file. Consequently, the
payment thereof could not be construed as constitutive of voluntary employer practice,
which cannot be now be unilaterally withdrawn by petitioner. To be considered as
such, it should have been practiced over a long period of time, and must be shown to
have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an indubitable showing that
the employer agreed to continue giving the benefits knowingly fully well that said
employees are not covered by the law requiring payment thereof. 11 In the case at
bar, respondent union failed to sufficiently establish that petitioner has been motivated
or is wont to give these benefits out of pure generosity.
B. It remains undisputed that the implementation of the JE Program, the members of
private respondent union were re-classified under levels S-5 S-8 which were
considered under the program as managerial staff purposes of compensation and
benefits, that they occupied re-evaluated positions, and that their basic pay was
increased by an average of 50% of their basic salary prior to the JE Program. In other

Promotion of its employees is one of the jurisprudentially-recognized exclusive

prerogatives of management, provided it is done in good faith. In the case at bar,
private respondent union has miserably failed to convince this Court that the petitioner
acted implementing the JE Program. There is no showing that the JE Program was
intended to circumvent the law and deprive the members of respondent union of the
benefits they used to receive.
Not so long ago, on this particular score, we had the occasion to hold that:
". . . it is the prerogative of the management to regulate, according to its discretion and
judgment, all aspects of employment. This flows from the established rule that labor
law does not authorize the substitution of the judgment of the employer in the conduct
of its business. Such management prerogative may be availed of without fear of any
liability so long as it is exercised in good faith for the advancement of the employer's
interest and not for the purpose of defeating on circumventing the rights of employees
under special laws or valid agreement and are not exercised in a malicious, harsh,
oppressive, vindictive or wanton manner or out of malice or spite." 13
WHEREFORE, the impugned decision and resolution of respondent National Labor
Relations Commission promulgated on July 19, 1991 and August 30, 1991,
respectively, are hereby ANNULLED and SET ASIDE for having been rendered and
adopted with grave abuse of discretion, and the basic complaint of private respondent
union is DISMISSED.
Narvasa, C . J ., Padilla, Nocon and Campos, Jr., JJ., concur.

16. G.R. No. L-12444

INC., petitioners,

A decision was rendered on February 21, 1957 in favor of the respondent union. The
motion for reconsideration thereof, having been denied, the companies filed the
present writ of certiorari, to resolve legal question involved. Always bearing in mind the
deep-rooted principle that the factual findings of the Court of Industrial Relations
should not be disturbed, if supported by substantial evidence, the different issues are
taken up, in the order they are raised in the brief for the petitioners.

petitioners.

1. First assignment of error. The respondent court erred in holding that it

had jurisdiction over case No. 740-V, notwithstanding the fact that those
who had dispute with the petitioners, were less than thirty (30) in number.

February 28, 1963

STATES MARINE CORPORATION and ROYAL

vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.
Pedro
B.
Uy
Calderon
Gaudioso C. Villagonzalo for respondent.

LINE,

for

PAREDES, J.:
Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the
business of marine coastwise transportation, employing therein several steamships of
Philippine registry. They had a collective bargaining contract with the respondent Cebu
Seamen's Association, Inc. On September 12, 1952, the respondent union filed with
the Court of Industrial Relations (CIR), a petition (Case No. 740-V) against the States
Marine Corporation, later amended on May 4, 1953, by including as party respondent,
the petitioner Royal Line, Inc. The Union alleged that the officers and men working on
board the petitioners' vessels have not been paid their sick leave, vacation leave and
overtime pay; that the petitioners threatened or coerced them to accept a reduction of
salaries, observed by other shipowners; that after the Minimum Wage Law had taken
effect, the petitioners required their employees on board their vessels, to pay the sum
of P.40 for every meal, while the masters and officers were not required to pay their
meals and that because Captain Carlos Asensi had refused to yield to the general
reduction of salaries, the petitioners dismissed said captain who now claims for
reinstatement and the payment of back wages from December 25, 1952, at the rate of
P540.00, monthly.
The petitioners' shipping companies, answering, averred that very much below 30 of
the men and officers in their employ were members of the respondent union; that the
work on board a vessel is one of comparative ease; that petitioners have suffered
financial losses in the operation of their vessels and that there is no law which
provides for the payment of sick leave or vacation leave to employees or workers of
private firms; that as regards the claim for overtime pay, the petitioners have always
observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law),
notwithstanding the fact that it does not apply to those who provide means of
transportation; that the shipowners and operators in Cebu were paying the salaries of
their officers and men, depending upon the margin of profits they could realize and
other factors or circumstances of the business; that in enacting Rep. Act No. 602
(Minimum Wage Law), the Congress had in mind that the amount of P.40 per meal,
furnished the employees should be deducted from the daily wages; that Captain
Asensi was not dismissed for alleged union activities, but with the expiration of the
terms of the contract between said officer and the petitioners, his services were
terminated.

The CIR made a finding that at the time of the filing of the petition
in case No. 740-V, respondent Union had more than thirty
members actually working with the companies, and the court
declared itself with jurisdiction to take cognizance of the case.
Against this order, the herein petitioners did not file a motion for
reconsideration or a petition for certiorari. The finding of fact made
by the CIR became final and conclusive, which We are not now
authorized to alter or modify. It is axiomatic that once the CIR had
acquired jurisdiction over a case, it continues to have that
jurisdiction, until the case is terminated (Manila Hotel Emp.
Association v. Manila Hotel Company, et al., 40 O.G. No. 6, p.
3027). It was abundantly shown that there were 56 members who
signed Exhibits A, A-I to A-8, and that 103 members of the Union
are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that
at the time of the filing of the petition, the respondent union had a
total membership of 159, working with the herein petitioners, who
were presumed interested in or would be benefited by the
outcome of the case (NAMARCO v. CIR, L-17804, Jan. 1963).
Annex D, (Order of the CIR, dated March 8, 1954), likewise belies
the contention of herein petitioner in this regard. The fact that only
7 claimed for overtime pay and only 7 witnesses testified, does
not warrant the conclusion that the employees who had some
dispute with the present petitioners were less than 30. The ruling
of the CIR, with respect to the question of jurisdiction is, therefore,
correct.
2. Second assignment of error. The CIR erred in holding, that inasmuch
as in the shipping articles, the herein petitioners have bound themselves to
supply the crew with provisions and with such "daily subsistence as shall be
mutually agreed upon" between the master and the crew, no deductions for
meals could be made by the aforesaid petitioners from their wages or
salaries.
3. Third assignment of error. The CIR erred in holding that inasmuch as
with regard to meals furnished to crew members of a vessel, section 3(f) of
Act No. 602 is the general rule, which section 19 thereof is the exception,

the cost of said meals may not be legally deducted from the wages or
salaries of the aforesaid crew members by the herein petitioners.
4. Fourth assignment of error. The CIR erred in declaring that the
deduction for costs of meals from the wages or salaries after August 4,
1951, is illegal and same should be reimbursed to the employee concerned,
in spite of said section 3, par. (f) of Act No. 602.
It was shown by substantial evidence, that since the beginning of the operation of the
petitioner's business, all the crew of their vessels have been signing "shipping articles"
in which are stated opposite their names, the salaries or wages they would receive. All
seamen, whether members of the crew or deck officers or engineers, have been
furnished free meals by the ship owners or operators. All the shipping articles signed
by the master and the crew members, contained, among others, a stipulation, that "in
consideration of which services to be duly performed, the said master hereby agrees
to pay to the said crew, as wages, the sums against their names respectively
expressed in the contract; and to supply them with provisions as provided herein ..."
(Sec. 8, par. [b], shipping articles), and during the duration of the contract "the master
of the vessel will provide each member of the crewsuch daily subsistence as shall be
mutually agreed daily upon between said master and crew; or, in lieu of such
subsistence the crew may reserve the right to demand at the time of execution of
these articles that adequatedaily rations be furnished each member of the crew." (Sec.
8, par. [e], shipping articles). It is, therefore, apparent that, aside from the payment of
the respective salaries or wages, set opposite the names of the crew members, the
petitioners bound themselves to supply the crew with ship's provisions, daily
subsistence or daily rations, which include food.

Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows
(f) Until and unless investigations by the Secretary of Labor on his initiative
or on petition of any interested party result in a different determination of the
fair and reasonable value, the furnishing of meals shall be valued at not
more than thirty centavos per meal for agricultural employees and not more
than fortycentavos for any other employees covered by this Act, and the
furnishing of housing shall be valued at not more than twenty centavos daily
for agricultural workers and not more than forty centavos daily for other
employees covered by this Act.
Petitioners maintain, in view of the above provisions, that in fixing the minimum wage
of employees, Congress took into account the meals furnished by employers and that
in fixing the rate of forty centavos per meal, the lawmakers had in mind that the latter
amount should be deducted from the daily wage, otherwise, no rate for meals should
have been provided.
However, section 19, same law, states
SEC. 19. Relations to other labor laws and practices. Nothing in this Act
shall deprive an employee of the right to seek fair wages, shorter working
hours and better working conditions nor justify an employer in violating any
other labor law applicable to his employees, in reducing the wage now paid
to any of his employees in excess of the minimum wage established under
this Act, or in reducing supplements furnished on the date of enactment.

This was the situation before August 4, 1951, when the Minimum Wage Law became
effective. After this date, however, the companies began deducting the cost of meals
from the wages or salaries of crew members; but no such deductions were made from
the salaries of the deck officers and engineers in all the boats of the petitioners. Under
the existing laws, therefore, the query converges on the legality of such deductions.
While the petitioners herein contend that the deductions are legal and should not be
reimbursed to the respondent union, the latter, however, claims that same are illegal
and reimbursement should be made.

At first blush, it would appear that there exists a contradiction between the provisions
of section 3(f) and section 19 of Rep. Act No. 602; but from a careful examination of
the same, it is evident that Section 3(f) constitutes the general rule, while section 19 is
the exception. In other words, if there are no supplements given, within the meaning
and contemplation of section 19, but merely facilities, section 3(f) governs. There is no
conflict; the two provisions could, as they should be harmonized. And even if there is
such a conflict, the respondent CIR should resolve the same in favor of the safety and
decent living laborers (Art. 1702, new Civil Code)..

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be
admitted and approved by this Honorable Court, without prejudice to the parties
adducing other evidence to prove their case not covered by this stipulation of
facts. 1wph1.t

It is argued that the food or meals given to the deck officers, marine engineers and
unlicensed crew members in question, were mere "facilities" which should be
deducted from wages, and not "supplements" which, according to said section 19,
should not be deducted from such wages, because it is provided therein: "Nothing in
this Act shall deprive an employee of the right to such fair wage ... or in reducing
supplements furnished on the date of enactment." In the case of Atok-Big Wedge
Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are
defined as follows

We hold that such deductions are not authorized. In the coastwise business of
transportation of passengers and freight, the men who compose the complement of a
vessel are provided with free meals by the shipowners, operators or agents, because
they hold on to their work and duties, regardless of "the stress and strain concomitant
of a bad weather, unmindful of the dangers that lurk ahead in the midst of the high
seas."

"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 criterion is not so much with the kind of the benefit or item (food, lodging, bonus
or sick leave) given, but its purpose. Considering, therefore, as definitely found by the
respondent court that the meals were freely given to crew members prior to August 4,
1951, while they were on the high seas "not as part of their wages but as a necessary
matter in the maintenance of the health and efficiency of the crew personnel during
the voyage", the deductions therein made for the meals given after August 4, 1951,
should be returned to them, and the operator of the coastwise vessels affected should
continue giving the same benefit..
In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L9742, Oct. 27, 1955, the company used to pay to its drivers and conductors, who were
assigned outside of the City limits, aside from their regular salary, a certain percentage
of their daily wage, as allowance for food. Upon the effectivity of the Minimum Wage
Law, however, that privilege was stopped by the company. The order CIR to the
company to continue granting this privilege, was upheld by this Court.
The shipping companies argue that the furnishing of meals to the crew before the
effectivity of Rep. Act No. 602, is of no moment, because such circumstance was
already taken into consideration by Congress, when it stated that "wage" includes the
fair and reasonable value of boards customarily furnished by the employer to the
employees. If We are to follow the theory of the herein petitioners, then a crew
member, who used to receive a monthly wage of P100.00, before August 4, 1951, with
no deduction for meals, after said date, would receive only P86.00 monthly (after
deducting the cost of his meals at P.40 per meal), which would be very much less than
the P122.00 monthly minimum wage, fixed in accordance with the Minimum Wage
Law. Instead of benefiting him, the law will adversely affect said crew member. Such
interpretation does not conform with the avowed intention of Congress in enacting the
said law.

the uncorroborated testimony of said Severino Pepito; and in ordering the herein
petitioners to pay him. Severino Pepito was found by the CIR to have worked overtime
and had not been paid for such services. Severino Pepito categorically stated that he
worked during the late hours of the evening and during the early hours of the day
when the boat docks and unloads. Aside from the above, he did other jobs such as
removing rusts and cleaning the vessel, which overtime work totalled to 6 hours a day,
and of which he has not been paid as yet. This statement was not rebutted by the
petitioners. Nobody working with him on the same boat "M/V Adriana" contrawise. The
testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa), are
incompetent and unreliable. And considering the established fact that the work of
Severino Pepito was continuous, and during the time he was not working, he could not
leave and could not completely rest, because of the place and nature of his work, the
provisions of sec. 1, of Comm. Act No. 444, which states "When the work is not
continuous, the time during which the laborer is not working and can leave his working
place and can rest completely shall not be counted", find no application in his case.
8. Eighth assignment of error. The CIR erred in ordering petitioners to reinstate
Capt. Carlos Asensi to his former position, considering the fact that said officer had
been employed since January 9, 1953, as captain of a vessel belonging to another
shipping firm in the City of Cebu.
The CIR held
Finding that the claims of Captain Carlos Asensi for back salaries from the
time of his alleged lay-off on March 20, 1952, is not supported by the
evidence on record, the same is hereby dismissed. Considering, however,
that Captain Asensi had been laid-off for a long time and that his failure to
report for work is not sufficient cause for his absolute dismissal,
respondents are hereby ordered to reinstate him to his former job without
back salary but under the same terms and conditions of employment
existing prior to his lay-off, without loss of seniority and other benefits
already acquired by him prior to March 20, 1952. This Court is empowered
to reduce the punishment meted out to an erring employee (Standard
Vacuum Oil Co., Inc. v. Katipunan Labor Union, G.R. No. L-9666, Jan. 30,
1957). This step taken is in consonance with section 12 of Comm. Act 103,
as amended." (p. 16, Decision, Annex 'G').
The ruling is in conformity with the evidence, law and equity.

One should not overlook a fact fully established, that only unlicensed crew members
were made to pay for their meals or food, while the deck officers and marine
engineers receiving higher pay and provided with better victuals, were not. This
pictures in no uncertain terms, a great and unjust discrimination obtaining in the
present case (Pambujan Sur United Mine Workers v. CIR, et al., L-7177, May 31,
1955).
Fifth, Sixth and Seventh assignments of error. The CIR erred in holding that
Severino Pepito, a boatsman, had rendered overtime work, notwithstanding the
provisions of section 1, of C.A. No. 444; in basing its finding ofthe alleged overtime, on

Ninth and Tenth assignments of error. The CIR erred in denying a duly verified
motion for new trial, and in overruling petitioner's motion for reconsideration.
The motion for new trial, supported by an affidavit, states that the movants have a
good and valid defense and the same is based on three orders of the WAS (Wage
Administration Service), dated November 6, 1956. It is alleged that they would
inevitably affect the defense of the petitioners. The motion for new trial is without
merit. Having the said wage Orders in their possession, while the case was pending

decision, it was not explained why the proper move was not taken to introduce them
before the decision was promulgated. The said wage orders, dealing as they do, with
the evaluation of meals and facilities, are irrelevant to the present issue, it having
been found and held that the meals or food in question are not facilities but
supplements. The original petition in the CIR having been filed on Sept. 12, 1952, the
WAS could have intervened in the manner provided by law to express its views on the
matter. At any rate, the admission of the three wage orders have not altered the
decision reached in this case.
IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,
Barrera, Dizon, Regala and Makalintal, JJ., concur.

17. G.R. No. 82511 March 3, 1992

GLOBE-MACKAY
CABLE
AND
vs.
NATIONAL
LABOR
RELATIONS
SALAZAR, respondents.

RADIO

CORPORATION, petitioner,

COMMISSION

and

IMELDA

Castillo, Laman, Tan & Pantaleon for petitioner.

Gerardo S. Alansalon for private respondent.

Company with Richard A. Yambao, owner and manager of Elecon Engineering

Services (Elecon), a supplier of petitioner often recommended by Saldivar. The report
also disclosed that Saldivar had taken petitioner's missing Fedders airconditioning unit
for his own personal use without authorization and also connived with Yambao to
defraud petitioner of its property. The airconditioner was recovered only after petitioner
GMCR filed an action for replevin against Saldivar. 1
It likewise appeared in the course of Maramara's investigation that Imelda Salazar
violated company reglations by involving herself in transactions conflicting with the
company's interests. Evidence showed that she signed as a witness to the articles of
partnership between Yambao and Saldivar. It also appeared that she had full
knowledge of the loss and whereabouts of the Fedders airconditioner but failed to
inform her employer.
Consequently, in a letter dated October 8, 1984, petitioner company placed private
respondent Salazar under preventive suspension for one (1) month, effective October
9, 1984, thus giving her thirty (30) days within which to, explain her side. But instead
of submitting an explanations three (3) days later or on October 12, 1984 private
respondent filed a complaint against petitioner for illegal suspension, which she
subsequently amended to include illegal dismissal, vacation and sick leave benefits,
13th month pay and damages, after petitioner notified her in writing that effective
November 8, 1984, she was considered dismissed "in view of (her) inability to refute
and disprove these findings. 2
After due hearing, the Labor Arbiter in a decision dated July 16, 1985, ordered
petitioner company to reinstate private respondent to her former or equivalent position
and to pay her full backwages and other benefits she would have received were it not
for the illegal dismissal. Petitioner was also ordered to pay private respondent moral
damages of P50,000.00. 3
On appeal, public respondent National Labor Relations, Commission in the
questioned resolution dated December 29, 1987 affirmed the aforesaid decision with
respect to the reinstatement of private respondent but limited the backwages to a
period of two (2) years and deleted the award for moral damages. 4

ROMERO, J.:
For private respondent Imelda L. Salazar, it would seem that her close association
with Delfin Saldivar would mean the loss of her job. In May 1982, private respondent
was employed by Globe-Mackay Cable and Radio Corporation (GMCR) as general
systems analyst. Also employed by petitioner as manager for technical operations'
support was Delfin Saldivar with whom private respondent was allegedly very close.
Sometime in 1984, petitioner GMCR, prompted by reports that company equipment
and spare parts worth thousands of dollars under the custody of Saldivar were
missing, caused the investigation of the latter's activities. The report dated September
25, 1984 prepared by the company's internal auditor, Mr. Agustin Maramara, indicated
that Saldivar had entered into a partnership styled Concave Commercial and Industrial

Hence, this petition assailing the Labor Tribunal for having committed grave abuse of
discretion in holding that the suspension and subsequent dismissal of private
respondent were illegal and in ordering her reinstatement with two (2) years'
backwages.
On the matter of preventive suspension, we find for petitioner GMCR.
The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's acts in
conflict with his position as technical operations manager, necessitated immediate and
decisive action on any employee closely, associated with Saldivar. The suspension of
Salazar was further impelled by th.e discovery of the missing Fedders airconditioning
unit inside the apartment private respondent shared with Saldivar. Under such

circumstances, preventive suspension was the proper remedial recourse available to

the company pending Salazar's investigation. By itself, preventive suspension does,
not signify that the company has adjudged the employee guilty of the charges she was
asked to answer and explain. Such disciplinary measure is resorted to for the
protection of the company's property pending investigation any alleged malfeasance
or misfeasance committed by the employee. 5
Thus, it is not correct to conclude that petitioner GMCR had violated Salazar's right to
due process when she was promptly suspended. If at all, the fault, lay with private
respondent when she ignored petitioner's memorandum of October 8, 1984 "giving her
ample opportunity to present (her) side to the Management." Instead, she went
directly to the Labor Department and filed her complaint for illegal suspension without
giving her employer a chance to evaluate her side of the controversy.

Before proceeding any furthers, it needs must be recalled that the present Constitution
has gone further than the 1973 Charter in guaranteeing vital social and economic
rights to marginalized groups of society, including labor. Given the pro-poor orientation
of several articulate Commissioners of the Constitutional Commission of 1986, it was
not surprising that a whole new Article emerged on Social Justice and Human Rights
designed, among other things, to "protect and enhance the right of all the people to
human dignity, reduce social, economic and political inequalities, and remove cultural
inequities by equitably diffusing wealth and political power for the common
good." 8 Proof of the priority accorded to labor is that it leads the other areas of
concern in the Article on Social Justice, viz., Labor ranks ahead of such topics as
Agrarian and Natural Resources Reform, Urban Land Roform and Housing, Health,
Women, Role and Rights of Poople's Organizations and Human Rights. 9
The opening paragraphs on Labor states

But while we agree with the propriety of Salazar's preventive suspension, we hold that
her eventual separation from employment was not for cause.
What is the remedy in law to rectify an unlawful dismissal so as to "make whole" the
victim who has not merely lost her job which, under settled Jurisprudence, is a
property right of which a person is not to be deprived without due process, but also the
compensation that should have accrued to her during the period when she was
unemployed?
Art. 279 of the Labor Code, as amended, provides:
Security of Tenure. In cases of regular employment, the
employer shall not terminate the services of an employee except
for a just cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his
actual reinstatement. 6 (Emphasis supplied)
Corollary thereto are the following provisions of the Implementing Rules and
Regulations of the Labor Code:
Sec. 2. Security of Tenure. In cases of regular employments,
the employer shall not terminate the services of an employee
except for a just cause as provided in the Labor Code or when
authorized by existing laws.
Sec. 3. Reinstatement. An employee who is unjustly dismissed
from work shall by entitled to reinstatement without loss of
seniority rights and to backwages." 7 (Emphasis supplied)

The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and
equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law. They
shall be entitled to security of tenure, humane conditions of work,
and a living wage. They shall also participate in policy and
decision-making processes affecting their rights and benefits is
may be provided by law. 10 (Emphasis supplied)
Compare this with the sole.provision on Labor in the 1973 Constitution under the
Article an Declaration of Principles and State Policies that provides:
Sec. 9. The state shall afford protection to labor, promote full
employment and equality in employment, ensure equal work
opportunities regardless of sex, race, or creed, and regulate the
relations between workers and employers. The State shall ensure
the rights of workers to self-organization, collective baegaining,
security of tenure, and just and humane conditions of work. The
State may provide for compulsory arbitration. 11
To be sure, both Charters recognize "security of tenure" as one of the rights of labor
which the State is mandated to protect. But there is no gainsaying the fact that the
intent of the framers of the present Constitution was to give primacy to the rights of
labor and afford the sector "full protection," at least greater protection than heretofore
accorded them, regardless of the geographical location of the workers and whether
they are organized or not.
It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who
substantially contributed to the present formulation of the protection to labor provision

and proposed that the same be incorporated in the Article on Social Justice and not
just in the Article on Declaration of Principles and State Policies "in the light of the
special importance that we are giving now to social justice and the necessity of
emphasizing the scope and role of social justice in national development." 12
If we have taken pains to delve into the background of the labor provisions in our
Constitution and the Labor Code, it is but to stress that the right of an employee not to
be dismissed from his job except for a just or authorized cause provided by law has
assumed greater importance under the 1987 Constitution with the singular
prominence labor enjoys under the article on Social Justice. And this transcendent
policy has been translated into law in the Labor Code. Under its terms, where a case
of unlawful or unauthorized dismissal has been proved by the aggrieved employee, or
on the other hand, the employer whose duty it is to prove the lawfulness or justness of
his act of dismissal has failed to do so, then the remedies provided in Article 279
should find, application. Consonant with this liberalized stance vis-a-vis labor, the
legislature even went further by enacting Republic Act No. 6715 which took effect on
March 2, 1989 that amended said Article to remove any possible ambiguity that
jurisprudence may have generated which watered down the constitutional intent to
grant to labor "full protection."13
To go back to the instant case, there being no evidence to show an authorized, much
less a legal, cause for the dismissal of private respondent, she had every right, not
only to be entitled to reinstatement, but ay well, to full backwages." 14
The intendment of the law in prescribing the twin remedies of reinstatement and
payment of backwages is, in the former, to restore the dismissed employee to her
status before she lost her job, for the dictionary meaning of the word "reinstate" is "to
restore to a state, conditione positions etc. from which one had been removed" 15 and
in the latter, to give her back the income lost during the period of unemployment. Both
remedies, looking to the past, would perforce make her "whole."
Sadly, the avowed intent of the law has at times been thwarted when reinstatement
has not been forthcoming and the hapless dismissed employee finds himself on the
outside looking in.
Over time, the following reasons have been advanced by the Court for denying
reinstatement under the facts of the case and the law applicable thereto; that
reinstatement can no longer be effected in view of the long passage of time (22 years
of litigation) or because of the realities of the situation; 16 or that it would be "inimical to
the employer's interest; " 17 or that reinstatement may no longer be feasible; 18 or, that
it will not serve the best interests of the parties involved; 19 or that the company would
be prejudiced by the workers' continued employment; 20 or that it will not serve any
prudent purpose as when supervening facts have transpired which make execution on
that score unjust or inequitable 21 or, to an increasing extent, due to the resultant
atmosphere of "antipathy and antagonism" or "strained relations" or "irretrievable
estrangement" between the employer and the employee. 22

In lieu of reinstatement, the Court has variously ordered the payment of backwages
and separation pay 23 or solely separation pay. 24
In the case at bar, the law is on the side of private respondent. In the first place the
wording of the Labor Code is clear and unambiguous: "An employee who is unjustly
dismissed from work shall be entitled to reinstatement. . . . and to his full backwages. .
. ." 25 Under the principlesof statutory construction, if a statute is clears plain and free
from ambiguity, it must be given its literal meaning and applied without attempted
interpretation. This plain-meaning rule or verba legis derived from the
maxim index animi sermo est (speech is the index of intention) rests on the valid
presumption that the words employed by, the legislature in a statute correctly express
its intent or will and preclude the court from construing it differently. 26 The legislature
is presumed to know the meaning of the words, to:have used words advisedly, and to
have expressed its intent by the use of such words as are found in the
statute. 27 Verba legis non est recedendum, or from the words of a statute there should
be no departure. Neither does the provision admit of any qualification. If in the wisdom
of the Court, there may be a ground or grounds for non-application of the above-cited
provision, this should be by way of exception, such as when the reinstatement may be
inadmissible due to ensuing strained relations between the employer and the
employee.
In such cases, it should be proved that the employee concerned occupies a position
where he enjoys the trust and confidence of his employer; and that it is likely that if
reinstated, an atmosphere of antipathy and antagonism may be generated as to
adversely affect the efficiency and productivity of the employee concerned.
A few examples, will suffice to illustrate the Court's application of the above principles:
where the employee is a Vice-President for Marketing and as such, enjoys the full
trust and confidence of top management; 28 or is the Officer-In-Charge of the
extension office of the bank where he works; 29 or is an organizer of a union who was
in a position to sabotage the union's efforts to organize the workers in commercial and
industrial establishments; 30 or is a warehouseman of a non-profit organization whose
primary purpose is to facilitate and maximize voluntary gifts. by foreign individuals and
organizations to the Philippines; 31 or is a manager of its Energy Equipment Sales. 32
Obviously, the principle of "strained relations" cannot be applied indiscriminately.
Otherwisey reinstatement can never be possible simply because some hostility is
invariably engendered between the parties as a result of litigation. That is human
nature. 33
Besides, no strained relations should arise from a valid and legal act of asserting
one's right; otherwise an employee who shall assert his right could be easily
separated from the service, by merely paying his separation pay on the pretext that
his relationship with his employer had already become strained. 34
Here, it has not been proved that the position of private respondent as systems
analyst is one that may be characterized as a position of trust and confidence such

that if reinstated, it may well lead to strained relations between employer and
employee. Hence, this does not constitute an exception to the general rule mandating
reinstatement for an employee who has been unlawfully dismissed.
On the other hand, has she betrayed any confidence reposed in her by engaging in
transactions that may have created conflict of interest situations? Petitioner GMCR
points out that as a matter of company policy, it prohibits its employees from involving
themselves with any company that has business dealings with GMCR. Consequently,
when private respondent Salazar signed as a witness to the partnership papers of
Concave (a supplier of Ultra which in turn is also a supplier of GMCR), she was
deemed to have placed. herself in an untenable position as far as petitioner was
concerned.

WHEREFORE, the assailed resolution of public respondent National Labor Relations

Commission dated December 29, 1987 is hereby AFFIRMED. Petitioner GMCR is
ordered to REINSTATE private respondent Imelda Salazar and to pay her backwages
equivalent to her salary for a period of two (2) years only.
This decision is immediately executory.
SO ORDERED.
Paras, Bidin, Grio-Aquino, Medialdea, Reg

However, on close scrutiny, we agree with public respondent that such a circumstance
did not create a conflict of interests situation. As a systems analyst, Salazar was very
far removed from operations involving the procurement of supplies. Salazar's duties
revolved around the development of systems and analysis of designs on a continuing
basis. In other words, Salazar did not occupy a position of trust relative to the approval
and purchase of supplies and company assets.
In the instant case, petitioner has predicated its dismissal of Salazar on loss of
confidence. As we have held countless times, while loss of confidence or breach of
trust is a valid ground for terminations it must rest an some basis which must be
convincingly established. 35 An employee who not be dismissed on mere presumptions
and suppositions. Petitioner's allegation that since Salazar and Saldivar lived together
in the same apartment, it "presumed reasonably that complainant's sympathy would
be with Saldivar" and its averment that Saldivar's investigation although unverified,
was probably true, do not pass this Court's test. 36 While we should not condone the
acts of disloyalty of an employee, neither should we dismiss him on the basis of
suspicion derived from speculative inferences.
To rely on the Maramara report as a basis for Salazar's dismissal would be most
inequitous because the bulk of the findings centered principally oh her friend's alleged
thievery and anomalous transactions as technical operations' support manager. Said
report merely insinuated that in view of Salazar's special relationship with Saldivar,
Salazar might have had direct knowledge of Saldivar's questionable activities. Direct
evidence implicating private respondent is wanting from the records.
It is also worth emphasizing that the Maramara report came out after Saldivar had
already resigned from GMCR on May 31, 1984. Since Saldivar did not have the
opportunity to refute management's findings, the report remained obviously one-sided.
Since the main evidence obtained by petitioner dealt principally on the alleged
culpability of Saldivar, without his having had a chance to voice his side in view of his
prior resignation, stringent examination should have been carried out to ascertain
whether or not there existed independent legal grounds to hold Salatar answerable as
well and, thereby, justify her dismissal. Finding none, from the records, we find her to
have been unlawfully dismissed.

18. G.R. No. L-7349

July 19, 1955

ATOK-BIG
WEDGE
MUTUAL
BENEFIT
ASSOCIATION, petitioner,
vs.
ATOK-BIG WEDGE MINING COMPANY, INCORPORATED, respondents.
Pablo
C.
Sanidad
Roxas and Sarmiento for respondents.

for

petitioner.

REYES, J. B. L., J.:

On September 4, 1950, the petitioner labor union, the Atok-Big Wedge Mutual Benefit
Association, submitted to the Atok-Big Wedge Mining Co., Inc. (respondent herein)
several demands, among which was an increase of P0.50 in daily wage. The matter
was referred by the mining company to the Court of Industrial Relations for arbitration
and settlement (Case No. 523-V). In the course of conciliatory measures taken by the
Court, some of the demands were granted, and others (including the demand for
increased wages) rejected, and so, hearings proceeded and evidence submitted on
the latter. On July 14, 1951, the Court rendered a decision (Record, pp. 25-32) fixing
the minimum wage at P2.65 a day with the rice ration, or P3.20 without rice ration;
denying the deduction from such minimum wage, of the value of housing facilities
furnished by the company to the laborers, as well as the efficiency bonus given to
them by the company; and ordered that the award be made effective retroactively from
the date of the demand, September 4, 1950, as agreed by the parties. From this
decision, the mining company appealed to this Court (G.R. No. L-5276).

Subsequently, an urgent petition was presented in Court on October 15, 1952 by the
Atok-Big Wedge Mining Company for authority to stop operations and lay off
employees and laborers, for the reason that due to the heavy losses, increased taxes,
high cost of materials, negligible quantity of ore deposits, and the enforcement of the
Minimum Wage Law, the continued operation of the company would lead to its
immediate bankruptcy and collapse (Rec. pp. 100-109). To avert the closure of the
company and the consequent lay-off of hundreds of laborers and employees, the
Court, instead of hearing the petition on the merits, convened the parties for voluntary
conciliation and mediation. After lengthy discussions and exchange of views, the
parties on October 29, 1952 reached an agreement effective from August 4, 1952 to
December 31, 1954 (Rec. pp. 18-23). The Agreement in part provides:
I
That the petitioner, Atok-Big Wedge Mining Company, Incorporated, agrees
to abide by whatever decision that the Supreme Court may render with
respect to Case No. 523-V (G.R. 5276) and Case No. 523-1 (10) (G.R.
5594).
xxx

xxx

xxx

xxx

xxx

III
xxx

That the petitioner, Atok-Big Wedge Mining Company, Incorporated, and the
respondent, Atok-Big Wedge Mutual Benefit Association, agree that the
following facilities heretofore given or actually being given by the petitioner
to its workers and laborers, and which constitute as part of their wages, be
valued as follows:
Rice ration
P.55 per day
Housing facility
40 per day
All other facilities such as recreation facilities,
medical treatment to dependents of laborers,
school facilities, rice ration during off-days,
water, light, fuel, etc., equivalent to at least
85 per day
It is understood that the said amount of facilities valued at the abovementioned prices,
may be charged in full or partially by the Atok-Big Wedge Mining Company, Inc.,
against laborer or employee, as it may see fit pursuant to the exigencies of its
operation.

The agreement was submitted to the Court for approval and on December 26, 1952,
was approved by the Court in an order giving it effect as an award or decision in the
case (Rec., p. 24).
Later, Case No. G.R. No. L-5276 was decided by this Court (promulgated March 3,
1953), affirming the decision of the Court of Industrial Relations fixing the minimum
cash wage of the laborers and employees of the Atok-Big Wedge Mining Co. at P3.20
cash, without rice ration, or P2.65, with rice ration. On June 13, 1953, the labor union
presented to the Court a petition for the enforcement of the terms of the agreement of
October 29, 1952, as allegedly modified by the decision of this Court in G.R. No. L5276 and the provisions of the Minimum Wage Law, which has since taken effect,
praying for the payment of the minimum cash wage of P3.45 a day with rice ration, or
P4.00 without rice ration, and the payment of differential pay from August 4, 1952,
when the award became effective. The mining company opposed the petition claiming
that the Agreement of October 29, 1952 was entered into by the parties with the end in
view that the company's cost of production be not increased in any way, so that it was
intended to supersede whatever decision the Supreme Court would render in G.R. No.
L-5276 and the provisions of the Minimum Wage Law with respect to the minimum
cash wage payable to the laborers and employees. Sustaining the opposition, the
Court of Industrial Relations, in an order issued on September 22, 1953 (Rec. pp. 4449), denied the petition, upon the ground that when the Agreement of the parties of
October 29, 1952 was entered into by them, they already knew the decision of said
Court (although subject to appeal to the Supreme Court) fixing the minimum cash
wage at P3.20 without rice ration, or P2.65 with rice ration, as well as the provisions of
the Minimum Wage Law requiring the payment of P4 minimum daily wage in the
provinces effective August 4, 1952; so that the parties had intended to be regulated by
their Agreement of October 29, 1952. On the same day, the Court issued another
order (Rec. pp. 50-55), denying the claim of the labor union for payment of an
additional 50 per cent based on the basic wage of P4 for work on Sundays and
holidays, holding that the payments being made by the company were within the
requirements of the law. Its motion for the reconsideration of both orders having been
denied, the labor union filed this petition for review by certiorari.
The first issue submitted to us arises from an apparent contradiction in the Agreement
of October 29, 1952. By paragraph III thereof, the parties by common consent
evaluated the facilities furnished by the Company to its laborers (rice rations, housing,
recreation, medical treatment, water, light, fuel, etc.) at P1.80 per day, and authorized
the company to have such value "charge in full or partially against any laborer or
employee as it may see fit"; while in paragraph I, the Company agreed to abide by the
decision of this Court (pending at the time the agreement was had) in G.R. No. L5594; and as rendered, the decision was to the effect that the Company could deduct
from the minimum wage only the value of the rice ration.
It is contended by the petitioner union that the two provisions should be harmonized
by holding paragraph III (deduction of all facilities) to be merely provisional, effective
only while this Court had not rendered its decision in G.R. No. L-5594; and that the
terms of said paragraph should be deemed superseded by the decision from the time
the latter became final, some four or five months after the agreement was entered
into; in consequence, (it is claimed), the laborers became entitled by virtue of said

decision to the prevailing P4.00 minimum wage with no other deduction than that of
the rice ration, or a net cash wage of P3.45.
This contention, in our opinion, is untenable. The intention of the parties could not
have been to make the arrangement in paragraph III a merely provisional
arrangement pending the decision of the Supreme Court for "this agreement" was
expressly made retroactive and effective as of August 4, 1952, and to be in force up to
and including December 31, 1954" (Par. IV). When concluded on October 29, 1952,
neither party could anticipate the date when the decision of the Supreme Court would
be rendered; nor is any reason shown why the parties should desire to limit the effects
of the decision to the period 1952-1954 if it was to supersede the agreement of
October 29, 1952.
To ascertain the true import of paragraph I of said Agreement providing that the
respondent company agreed to abide by whatever decision the Supreme Court would
render in G.R. No. L-5276, it is important to remember that, as shown by the records,
the agreement was prompted by an urgent petition filed by the respondent mining
company to close operations and lay-off laborers because of heavy losses and the full
enforcement of the Minimum Wage Law in the provinces, requiring it to pay its
laborers the minimum wage of P4; to avoid such eventuality, through the mediation of
the Court of Industrial Relations, a compromise was reached whereby it was agreed
that the company would pay the minimum wage fixed by the law, but the facilities then
being received by the laborers would be evaluated and charged as part of the wage,
but without in any way reducing the P2.00 cash portion of their wages which they were
receiving prior to the agreement (hearing of Oct. 28, 1952, CIR, t.s.n. 47). In other
words, while it was the objective of the parties to comply with the requirements of the
Minimum Wage Law, it was also deemed important that the mining company should
not have to increase the cash wages it was then paying its laborers, so that its cost of
production would not also be increased, in order to prevent its closure and the lay-off
of employees and laborers. And as found by the Court below in the order appealed
from (which finding is conclusive upon us), "it is this eventuality that the parties did not
like to happen, when they have executed the said agreement" (Rec. p. 49).
Accordingly, after said agreement was entered into, the Company started paying its
laborers a basic cash or "take-home" wage of P2.20 (Rec. p. 9), representing the
difference between P4 (minimum wage) and P1.80 (value of all facilities).
With this background, the provision to abide by our decision in G.R. No. L-5276 can
only be interpreted thus: That the company agreed to pay whatever award this Court
would make in said case from the date fixed by the decision (which was that of the
original demand, September 4, 1950) up to August 3, 1952 (the day previous to the
effectivity of the Compromise Agreement) and from August 4, 1954 to December 31,
1954, they are to be bound by their agreement of October 29, 1952.
This means that during the first period (September 4, 1950 to August 3, 1952), only
rice rations given to the laborers are to be regarded as forming part of their wage and
deductible therefrom. The minimum wage was then fixed (by the Court of Industrial
Relations, and affirmed by this Court) at P3.20 without rice ration, or P2.65 with rice
ration. Since the respondent company had been paying its laborers the basic cash or

"take-home" wage of P2 prior to said decision and up to August 3, 1952, the laborers
are entitled to a differential pay of P0.65 per working day from September 4, 1950 (the
date of the effectivity of the award in G.R. L-5276) up to August 3, 1952.
From August 4, 1952, the date when the Agreement of the parties of October 29, 1952
became effective (which was also the date when the Minimum Wage Law became
fully enforceable in the provinces), the laborers should be paid a minimum wage of P4
a day. From this amount, the respondent mining company is given the right to charge
each laborer "in full or partially", the facilities enumerated in par. III of the Agreement;
i.e., rice ration at P0.55 per day, housing facility at P0.40 per day, and other facilities
"constitute part of his wages". It appears that the company had actually been paying
its laborers the minimum wage of P2.20 since August 4, 1952; hence they are not
entitled to any differential pay from this date.
Petitioner argues that to allow the deductions stipulated in the Agreement of October
29, 1952 from the minimum daily wage of P4 would be a waiver of the minimum wage
fixed by the law and hence null and void, since Republic Act No. 602, section 20,
provides that "no agreement or contract, oral or written, to accept a lower wage or less
than any other under this Act, shall be valid". An agreement to deduct certain facilities
received by the laborers from their employer is not a waiver of the minimum wage
fixed by the law. Wage, as defined by section 2 of Republic Act No. 602, "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." Thus, the
law permits the deduction of such facilities from the laborer's minimum wage of P4, as
long as their value is "fair and reasonable". It is not here claimed that the valuations
fixed in the Agreement of October 29, 1952 are not fair and reasonable. On the
contrary, the agreement expressly states that such valuations:
"have been arrived at after careful study and deliberation by both
representatives of both parties, with the assistance of their respective
counsels, and in the presence of the Honorable Presiding Judge of the
Court of Industrial Relations" (Rec. p. 2).
Neither is it claimed that the parties, with the aid of the Court of Industrial Relations in
a dispute pending before it, may not fix by agreement the valuation of such facilities,
without referring the matter to the Department of Labor.
Petitioner also argues that to allow the deductions of the facilities appearing
in the Agreement referred to, would be contrary to the mandate of section
19 of the law, that "nothing in this Act . . . justify an employer . . . in reducing
supplements furnished on the date of enactment.
The meaning of the term "supplements" has been fixed by the Code of Rules and
Regulations promulgated by the Wage Administration Office to implement the
Minimum Wage Law (Ch. 1, [c]), as:

extra renumeration or benefits received by wage earners from their

employees and include but are not restricted to pay for vacation and
holidays not worked; paid sick leave or maternity leave; overtime rate in
excess of what is required by law; sick, pension, retirement, and death
benefits; profit-sharing; family allowances; Christmas, war risk and cost-ofliving bonuses; or other bonuses other than those paid as a reward for extra
output or time spent on the job.
"Supplements", therefore, constitute extra renumeration 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 the 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. It is thus clear that the facilities mentioned in the
agreement of October 29, 1952 do not come within the term "supplements" as used in
Art. 19 of the Minimum Wage Law.

While the respondent company computes the additional compensation given to its
laborers for work on Sundays and holidays on the "cash portion" of their wages of
P2.20, it is giving them 50 per cent thereof, or P1.10 a day. Considering that the
minimum additional compensation fixed by the law is P1 (25 per cent of P4), the
compensation being paid by the respondent company to its laborers is even higher
than such minimum legal additional compensation. We, therefore, see no error in the
holding of the Court a quo that the respondent company has not violated the law with
respect to the payment of additional compensation for work rendered by its laborers
on Sundays and legal holidays.
Finding no reason to sustain the present petition for review, the same is, therefore,
dismissed, with costs against the petitioner Atok-Big Wedge Mutual Benefit
Association.
Bengzon, Acting C.J., Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo,
Labrador, and Concepcion, JJ.,concur.

For the above reasons, we find the appeal from the Order of the Court a quo of
September 22, 1953 denying the motion of the petitioner labor union for the payment
of the minimum wage of P3.45 per day plus rice ration, or P4 without rice ration, to be
unmeritorious and untenable.
The second question involved herein relates to the additional compensation that
should be paid by the respondent company to its laborers for work rendered on
Sundays and holidays. It is admitted that the respondent company is paying an
additional compensation of 50 per cent based on the basic "cash portion" of the
laborer's wage of P2.20 per day; i.e., P1.10 additional compensation for each Sunday
or holiday's work. Petitioner union insists, however, that this 50 per cent additional
compensation should be computed on the minimum wage of P400 and not on the
"cash portion" of the laborer's wage of P2.20, under the provisions of the Agreement
of October 29, 1952 and the Minimum Wage Law.
SEC. 4. Commonwealth Act No. 444 (otherwise known as the Eight Hour Labor Law)
provides:
No person, firm, or corporations, business establishment or place or center
of labor shall compel an employee or laborer to work during Sundays and
holidays, unless he is paid an additional sum of at least twenty-five per
centum of his regular renumeration:
The minimum legal additional compensation for work on Sundays and legal holidays
is, therefore, 25 per cent of the laborer's regular renumeration. Under the Minimum
Wage Law, this minimum additional compensation is P1 a day (25 per cent of P4, the
minimum daily wage).

19. MANILA
ELECTRIC
COMPANY, petitioner,
vs. THE
HONORABLE
SECRETARY OF LABOR LEONARDO QUISUMBING AND MERALCO
EMPLOYEES AND WORKERS ASSOCIATION (MEWA), respondents.
DECISION
MARTINEZ, J.:
In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to
annul the orders of the Secretary of labor dated August 19, 1996 and December 28,
1996, wherein the Secretary required MERALCO and its rank and file union- the
Meralco Workers Association (MEWA) to execute a collective bargaining agreement
(CBA) for the remainder of the parties 1992-1997 CBA cycle, and to incorporate in this
new CBA the Secretarys dispositions on the disputed economic and non-economic
issues.
MEWA is the duly recognized labor organization of the rank-and-file employees
of MERALCO.
On September 7, 1995, MEWA informed MERALCO of its intention to renegotiate the terms and conditions of their existing 1992-1997 Collective Bargaining
Agreement (CBA) covering the remaining period of two years starting from December
1, 1995 to November 30, 1997.[1] MERALCO signified its willingness to re-negotiate
through its letter dated October 17, 1995[2] and formed a CBA negotiating panel for the
purpose. On November 10, 1995, MEWA submitted its proposal [3] to MERALCO,
which, in turn, presented a counter-proposal. Thereafter, collective bargaining

negotiations proceeded. However, despite the series of meetings between the

negotiating panels of MERALCO and MEWA, the parties failed to arrive at terms and
conditions acceptable to both of them.

Longevity Increase- the present longevity bonus is maintained but the bonus shall be
incorporated into the new CBA.

On April 23, 1996, MEWA filed a Notice of Strike with the National Capital
Region Branch of the National Conciliation and Mediation Board (NCMB) of the
Department of Labor and Employment (DOLE) which was docketed as NCMB-NCRNS-04-152-96, on the grounds of bargaining deadlock and unfair labor practices. The
NCMB then conducted a series of conciliation meetings but the parties failed to reach
an amicable settlement.Faced with the imminence of a strike, MERALCO on May 2,
1996, filed an Urgent Petition [4] with the Department of Labor and Employment which
was docketed as OS-AJ No. 0503[1]96 praying that the Secretary assume jurisdiction
over the labor dispute and to enjoin the striking employees to go back to work.

Sick Leave- MEWAs demand for upgrading is denied; the companys present policy is
maintained. However, those who have not used the sick leave benefit during a
particular year shall be entitled to a one-day sick leave incentive.

The Labor Secretary granted the petition through its Order [5] of May 8, 1996, the
dispositive portion of which reads:

Vacation Leave - MEWAs demand for upgrading denied & the companys present
policy is maintained which must be incorporated into the new CBA but scheduled
vacation leave may be rounded off to one full day at a time in case of a benefit
involving a fraction of a day.

WHEREFORE, premises considered, this Office now assumes jurisdiction over the
labor dispute obtaining between the parties pursuant to Article 263 (g) of the Labor
Code. Accordingly, the parties are here enjoined from committing any act that may
exacerbate the situation. To speed up the resolution of the dispute, the parties are
also directed to submit their respective Position Papers within ten (10) days from
receipt.
Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferences
between the parties to bridge their differences and eventually hammer out a solution
that is mutually acceptable. He shall be assisted by the Legal Service.

Sick leave reserve- the present reserve of 25 days shall be reduced to 15 days; the
employee has the option either to convert the excess of 10 days to cash or let it
remain as long as he wants. In case he opts to let it remain, he may later on convert it
to cash at his retirement or separation.

Union Leave- of MEWAs officers, directors or stewards assigned to perform union

duties or legitimate union activity is increased from 30 to 40 Mondays per month.
Maternity, Paternity and Funeral leaves- the existing policy is to be maintained and
must be incorporated in the new CBA unless a new law granting paternity leave
benefit is enacted which is superior to what the company has already granted.

SO ORDERED.

Birthday Leave - unions demand is granted. If birthday falls on the employees rest day
or on a non-working holiday, the worker shall be entitled to go on leave with pay on the
next working day.

Thereafter, the parties submitted their respective memoranda and on August 19,
1996, the Secretary resolved the labor dispute through an Order, [6]containing the
following awards:

Group Hospitalization & Surgical Insurance Plan (GHSIP) and Health Maintenance
Plan (HMP)- present policy is maintained insofar as the cost sharing is concerned70% for the Company and 30% for MEWA.

ECONOMIC DEMANDS

Health Maintenance Plan (HMP) for dependents - subsidized dependents increased

from three to five dependents.

Wage increase - P2,300.00 for the first year covering the

period from December 1, 1995 to November 30, 1996
- P2,200.00 for the second year covering
the period December 1, 1996 to November 30, 1997.
Red Circle Rate (RCR) Allowance- all RCR allowances (promotional increases that go
beyond the maximum range of a job classification salary) shall be integrated into the
basic salary of employees effective December 1, 1995.

Longevity Bonus- is increased from P140.00 to P200.00 for every year of service to be
received by the employee after serving the Company for 5 years.
Christmas Bonus and Special Christmas Grant- MEWAs demand of one month salary
as Christmas Bonus and two months salary as Special Christmas Grant is granted
and to be incorporated in the new CBA.
Midyear Bonus- one months pay to be included in the CBA.

Longevity Allowance- the integration of the longevity allowance into the basic wage is
denied; the present policy is maintained.

Anniversary Bonus - unions demand is denied.

Christmas Gift Certificate - company has the discretion as to whether it will give it to its
employees.
Retirement Benefits:
a. Full retirement-present policy is maintained;
b. one cavan of rice per month is granted to retirees;
c. special retirement leave and allowance-present policy is maintained;
d. HMP coverage for retirees- HMP coverage is granted to retirees who
have not reached the age of 70, with MERALCO subsidizing
100% of the monthly premium; those over 70 are entitled to not
more than 30 days of hospitalization at the J.F. Cotton Hospital
with the company shouldering the entire cost.
e. HMP coverage for retirees dependents is denied
f. Monthly pension of P3,000.00 for each retiree is denied.
g. Death benefit for retirees beneficiaries is denied.
Optional retirement - unions demand is denied; present policy is maintained;
employee is eligible for optional retirement if he has rendered at least 18 years of
service.
Dental, Medical and Hospitalization Benefits- grant of all the allowable medical,
surgical, dental and annual physical examination benefits, including free medicine
whenever the same is not available at the JFCH.

High Voltage allowance- is increased from P45.00 to P55.00 to be given to any

employee authorized by the Safety Division to perform work on or near energized bare
lines & bus including stockman drivers & crane operators and other crew members on
ground.
High Pole Allowance- is increased from P30.00 to P40.00 to be given to those
authorized to climb poles up to at least 60 ft. from the ground. Members of the team
including stockman drivers, crane operators and other crew members on the ground,
are entitled to this benefit.
Towing Allowance- where stockmen drive tow trailers with long poles and equipment
on board, they shall be entitled to a towing allowance of P20.00 whether they perform
the job on regular shift or on overtime.
Employees Cooperative- a loan of P3 M seed money is granted to the proposed
establishment of a cooperative, payable in twenty (20) years starting one year from
the start of operations.
Holdup Allowance- the union demand is denied; the present policy shall be
maintained.
Meal and Lodging Allowance- shall be increased effective December 1, 1995 as
follows:
Breakfast - from P25.00 to P35.00
Lunch - from P35.00 to P45.00
Dinner - from P35.00 to P45.00
Lodging - from P135.00 to P180.00 a night in all MERALCO franchise areas
Payroll Treatment for Accident while on Duty- an employee shall be paid his salary
and allowance if any is due plus average excess time for the past 12 months from the
time of the accident up to the time of full recovery and placing of the employee back to
normal duty or an allowance of P2,000.00, whichever is higher.

Resignation benefits- unions demand is denied.

Housing and Equity Assistance Loan- is increased to P60,000.00; those who have
already availed of the privilege shall be allowed to get the difference.

Night work- union demand is denied but present policy must be incorporated in CBA.

Benefits for Collectors:

Shortswing- work in another shift within the same day shall be considered as the
employees work for the following day and the employee shall be given additional four
(4) hours straight time and the applicable excess time premium if he works beyond 8
hours in the other shift.

a. Company shall reduce proportionately the quota and monthly average

product level (MAPL) in terms of equivalent bill assignment when
an employee is on sick leave and paid vacation leave.
b. When required to work on Saturdays, Sundays and holidays, an
employee shall receive P60.00 lunch allowance and applicable

transportation allowance as determined by the Company and

shall also receive an additional compensation to one day fixed
portion in addition to lunch and transportation allowance.
c. The collector shall be entitled to an incentive pay of P25.00 for every
delinquent account disconnected.
d. When a collector voluntarily performs other work on regular shift or
overtime, he shall be entitled to remuneration based on his
computed hourly compensation and the reimbursement of actually
incurred transportation expenses.
e. Collectors shall be provided with bobcat belt bags every year
f. Collectors cash bond shall be deposited under his capital contribution to
MESALA.
g. Collectors quota and MAPL shall be proportionately reduced during
typhoons, floods, earthquakes and other similar force majeure
events when it is impossible for a collector to perform collection
work.
Political Demands:
a. Scope of the collective bargaining unit- the collective bargaining unit
shall be composed of all regular rank-and-file employees hired by
the company in all its offices and operative centers throughout its
franchise area and those it may employ by reason of expansion,
reorganization or as a result of operational exigencies.
b. Union recognition and security i. The union shall be recognized by the Company as sole and
exclusive bargaining representative of the rank-and-file
employees included in the bargaining unit. The Company shall
agree to meet only with Union officers and its authorized
representatives on all matters involving the Union and all
issues arising from the implementation and interpretation of the
new CBA.
ii. The union shall meet with the newly regularized employees for a
period not to exceed four (4) hours, on company time, to
acquaint the new regular employees of the rights, duties and
benefits of Union membership.

iii. The right of all rank-and-file employees to join the union shall be
recognized in accordance with the maintenance of membership
principle as a form of union security.
c. Transfer of assignment and job securityi. No transfer of an employee from one position to another shall be
made if motivated by considerations of sex, race, creed,
political and religious belief, seniority or union activity.
ii. If the transfer is due to the reorganization or decentralization, the
distance from the employees residence shall be considered
unless the transfer is accepted by the employee. If the transfer
is extremely necessary, the transfer shall be made within the
offices in the same district.
iii. Personnel hired through agencies or contractors to perform the
work done by covered employees shall not exceed one
month. If extension is necessary, the union shall be
informed. But the Company shall not permanently contract out
regular or permanent positions that are necessary in the
normal operation of the Company.
d. Check off Union Dues- where the union increases its dues as approved
by the Board of Directors, the Company shall check off such
increase from the salaries of union members after the union
submits check off authorizations signed by majority of the
members. The Company shall honor only those individual
authorizations signed by the majority of the union members and
collectively submitted by the union to the Companys Salary
Administration.
e. Payroll Reinstatement- shall be in accordance with Article 223, p. 3 of
the Labor Code.
f. Union Representation in Committees- the union is allowed to participate
in policy formulation and in the decision-making process on
matters affecting their rights and welfare, particularly in the
Uniform Committee, the Safety Committee and other committees
that may be formed in the future.
Signing Bonus- P4,000.00 per member of the bargaining unit for the conclusion of the
CBA

Existing benefits already granted by the Company but which are not expressly or
impliedly repealed in the new agreement shall remain subsisting and shall be included
in the new agreement to be signed by the parties effective December 1, 1995.
On August 30, 1996, MERALCO filed a motion for reconsideration [7] alleging that
the Secretary of Labor committed grave abuse of discretion amounting to lack or
excess of jurisdiction:
1. in awarding to MEWA a package that would cost at least P1.142 billion, a
package that is grossly excessive and exorbitant, would not be affordable to
MERALCO and would imperil its viability as a public utility affected with national
interest.
2. in ordering the grant of a P4,500.00 wage increase, as well as a new and
improved fringe benefits, under the remaining two (2) years of the CBA for the
rank-and-file employees.
3. in ordering the incorporation into the CBA of all existing employee benefits, on
the one hand, and those that MERALCO has unilaterally granted to its
employees by virtue of voluntary company policy or practice, on the other hand.

First year - P2,200.00 per month;

Second year - P2,200.00 per month.
3) Integration of Red Circle Rate (RCR) and Longevity Allowance into Basic Salary
-the RCR allowance shall be integrated into the basic salary of employees as of
August 19, 1996 (the date of the disputed Order).
4) Longevity Bonus - P170 per year of service starting from 10 years of continuous
service.
5) Vacation Leave - The status quo shall be maintained as to the number of vacation
leave but employees scheduled vacation may be taken one day at a time in the
manner that this has been provided in the supervisory CBA.
6) Sick Leave Reserve - is reduced to 15 days, with any excess payable at the end of
the year. The employee has the option to avail of this cash conversion or to
accumulate his sick leave credits up to 25 days for conversion to cash at retirement or
separation from the service.
7) Birthday Leave - the grant of a day off when an employees birthday falls on a
non-working day is deleted.

4. in granting certain political demands presented by the union.

5. in ordering the CBA to be effective December 1995 instead of August 19,
1996 when he resolved the dispute.
MERALCO filed a supplement to the motion for reconsideration on September
18, 1995, alleging that the Secretary of Labor did not properly appreciate the effect of
the awarded wages and benefits on MERALCOs financial viability.
MEWA likewise filed a motion asking the Secretary of Labor to reconsider its
Order on the wage increase, leaves, decentralized filing of paternity and maternity
leaves, bonuses, retirement benefits, optional retirement, medical, dental and
hospitalization benefits, short swing and payroll treatment. On its political demands,
MEWA asked the Secretary to rule its proposal to institute a Code of Discipline for its
members and the unions representation in the administration of the Pension Fund.
[8]

On December 28, 1996, the Secretary issued an Order resolving the parties
separate motions, the modifications of the August 19, 1996 Order being highlighted
hereunder:
1) Effectivity of Agreement - December 1, 1995 to November 30, 1997.
Economic Demands
2) Wage Increase:

8) Retirement Benefits for Retirees - The benefits granted shall be effective on August
19, 1996, the date of the disputed order up to November 30, 1997, which is the date
the CBA expires and shall apply to those who are members of the bargaining unit at
the time the award is made.
One sack of rice per quarter of the year shall be given to those retiring between
August 19, 1996 and November 30, 1997.
On HMP Coverage for Retirees- The parties maintain the status quo, that is, with the
Company complying with the present arrangement and the obligations to retirees as
is.
9) Medical, Dental and Hospitalization Benefits - The cost of medicine unavailable at
the J.F. Cotton Hospital shall be in accordance with MERALCOs Memorandum dated
September 14, 1976.
10) GHSIP and HMP for Dependents - The number of dependents to be subsidized
shall be reduced from 5 to 4 provided that their premiums are proportionately
increased.
11) Employees Cooperative - The original award of P3 million pesos as seed money
for the proposed Cooperative is reduced to P1.5 million pesos.

12) Shortswing - the original award is deleted.

13) Payroll Treatment for Accident on Duty - Company ordered to continue its present
practice on payroll treatment for accident on duty without need to pay the excess time
the Union demanded.
Political Demands:
14) Scope of the collective bargaining unit - The bargaining unit shall be composed of
all rank and file employees hired by the Company in accordance with the original
Order.

With respect to special assessments, attorneys fees, negotiation fees or any other
extraordinary fees, individual authorizations shall be necessary before the company
may so deduct the same.
19) Union Representation in Committees - The union is granted representation in the
Safety Committee, the Uniform Committee and other committees of a similar nature
and purpose involving personnel welfare, rights and benefits as well as duties.
Dissatisfied, petitioner filed this petition contending that the Secretary of Labor
gravely abused his discretion:
1). . . in awarding wage increases of P2,200.00 for 1996 and P2,200.00 for 1997;

15) Union recognition and security - The incorporation of a closed shop form of
union security in the CBA; the Company is prohibited from entertaining individuals
or groups of individuals only on matters that are exclusively within the domain of the
union; the Company shall furnish the union with a complete list of newly regularized
employees within a week from regularization so that the Union can meet these
employees on the Unions and the employees own time.
16) Transfer of assignment and job security - Transfer is a prerogative of the
Company but the transfer must be for a valid business reason, made in good faith and
must be reasonably exercised. The CBA shall provide that No transfer of an employee
from one position to another, without the employees written consent, shall be made if
motivated by considerations of sex, race, creed, political and religious belief, age or
union activity.
17) Contracting Out - The Company has the prerogative to contract out services
provided that this move is based on valid business reasons in accordance with law, is
made in good faith, is reasonably exercised and, provided further that if the
contracting out involves more than six months, the Union must be consulted before its
implementation.

2) . . . in awarding the following economic benefits:

a. Two months Christmas bonus;
b. Rice Subsidy and retirement benefits for retirees;
c. Loan for the employees cooperative;
d. Social benefits such as GHSIP and HMP for dependents,
employees cooperative and housing equity assistance loan;
e. Signing bonus;
f. Integration of the Red Circle Rate Allowance
g. Sick leave reserve of 15 days
h. The 40-day union leave;
i. High pole/high voltage and towing allowance;
and
j. Benefits for collectors
3) . . . in expanding the scope of the bargaining unit to all regular rank and file
employees hired by the company in all its offices and operating centers and those it
may employ by reason of expansion, reorganization or as a result of operational
exigencies;

18) Check off of union dues

In any increase of union dues or contributions for mandatory activities, the union must
submit to the Company a copy of its board resolution increasing the union dues or
authorizing such contributions;
If a board resolution is submitted, the Company shall deduct union dues from all union
members after a majority of the union members have submitted their individual written
authorizations. Only those check-off authorizations submitted by the union shall be
honored by the Company.

4) . . . in ordering for a closed shop when his original order for a maintenance of
membership arrangement was not questioned by the parties;
5) . . . in ordering that Meralco should consult the union before any contracting out for
more than six months;
6) . . . in decreeing that the union be allowed to have representation in policy and
decision making into matters affecting personnel welfare, rights and benefits as well
as duties;
7) . . . in ruling for the inclusion of all terms and conditions of employment in the
collective bargaining agreement;

8) . . . in exercising discretion in determining the retroactivity of the CBA;

Both MEWA and the Solicitor General; on behalf of the Secretary of Labor, filed
their comments to the petition. While the case was also set for oral argument on Feb
10, 1997, this hearing was cancelled due to MERALCO not having received the
comment of the opposing parties. The parties were instead required to submit written
memoranda, which they did. Subsequently, both petitioner and private respondent
MEWA also filed replies to the opposing parties Memoranda, all of which We took into
account in the resolution of this case.
The union disputes the allegation of MERALCO that the Secretary abused his
discretion in issuing the assailed orders arguing that he acted within the scope of the
powers granted him by law and by the Constitution. The union contends that any
judicial review is limited to an examination of the Secretarys decisionmaking/discretion - exercising process to determine if this process was attended by
some capricious or whimsical act that constitutes grave abuse; in the absence of such
abuse, his findings - considering that he has both jurisdiction and expertise to make
them - are valid.
The unions position is anchored on two premises:
First, no reviewable abuse of discretion could have attended the Secretarys
arbitral award because the Secretary complied with constitutional norms in rendering
the dispute award. The union posits that the yardstick for comparison and for the
determination of the validity of the Secretarys actions should be the specific standards
laid down by the Constitution itself. To the union, these standards include the State
policy on the promotion of workers welfare, [9] the principle of distributive justice, [10] the
right of the State to regulate the use of property,[11] the obligation of the State to protect
workers, both organized and unorganized, and insure their enjoyment of humane
conditions of work and a living wage, and the right of labor to a just share in the fruits
of production.[12]
Second, no reversible abuse of discretion attended the Secretarys decision
because the Secretary took all the relevant evidence into account, judiciously weighed
them, and rendered a decision based on the facts and law. Also, the arbitral award
should not be reversed given the Secretarys expertise in his field and the general rule
that findings of fact based on such expertise is generally binding on this Court.
To put matters in proper perspective, we go back to basic principles. The
Secretary of Labors statutory power under Art. 263 (g) of the Labor Code to assume
jurisdiction over a labor dispute in an industry indispensable to the national interest,
and, to render an award on compulsory arbitration, does not exempt the exercise of
this power from the judicial review that Sec. 1, Art. 8 of the Constitution
mandates. This constitutional provision states:
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the government.

Under this constitutional mandate, every legal power of the Secretary of Labor
under the Labor Code, or, for that matter, any act of the Executive, that is attended by
grave abuse of discretion is subject to review by this Court in an appropriate
proceeding. To be sure, the existence of an executive power alone - whether granted
by statute or by the Constitution - cannot exempt the executive action from judicial
oversight, interference or reversal when grave abuse of discretion is, or is alleged to
be, present. This is particularly true when constitutional norms are cited as the
applicable yardsticks since this Court is the final interpreter of the meaning and intent
of the Constitution.[13]
The extent of judicial review over the Secretary of Labors arbitral award is not
limited to a determination of grave abuse in the manner of the secretarys exercise of
his statutory powers. This Court is entitled to, and must - in the exercise of its judicial
power - review the substance of the Secretarys award when grave abuse of discretion
is alleged to exist in the award, i.e., in the appreciation of and the conclusions the
Secretary drew from the evidence presented.
The natural and ever present limitation on the Secretarys acts is, of course, the
Constitution. And we recognize that indeed the constitutional provisions the union
cited are State policies on labor and social justice that can serve as standards in
assessing the validity of a Secretary of Labors actions. However, we note that these
provisions do not provide clear, precise and objective standards of conduct that lend
themselves to easy application.We likewise recognize that the Constitution is not a
lopsided document that only recognizes the interests of the working man; it too
protects the interests of the property owner and employer as well.[14]
For these reasons - and more importantly because a ruling on the breadth and
scope of the suggested constitutional yardsticks is not absolutely necessary in the
disposition of this case - we shall not use these yardsticks in accordance with the
time-honored practice of avoiding constitutional interpretations when a decision can
be reached using non-constitutional standards. We have repeatedly held that one of
the essential requisites for a successful judicial inquiry into constitutional questions is
that the resolution of the constitutional question must be necessary in deciding the
case.[15]
In this case we believe that the more appropriate and available standard - and
one does not require a constitutional interpretation - is simply the standard of
reasonableness. In laymans terms, reasonableness implies the absence of
arbitrariness;[16] in legal parlance, this translates into the exercise of proper discretion
and to the observance of due process. Thus, the question we have to answer in
deciding this case is whether the Secretarys actions have been reasonable in light of
the parties positions and the evidence they presented.
MEWAs second premise - i.e., that the Secretary duly considered the evidence
presented - is the main issue that we shall discuss at length below.Additionally, MEWA
implied that we should take great care before reading an abuse of discretion on the
part of the Secretary because of his expertise on labor issues and because his
findings of fact deserve the highest respect from this Court.
This Court has recognized the Secretary of Labors distinct expertise in the study
and settlement of labor disputes falling under his power of compulsory arbitration. [17] It
is also well-settled that factual findings of labor administrative officials, if supported by

substantial evidence, are entitled not only to great respect but even to finality. [18] We,
therefore, have no difficulty in accepting the unions caveat on how to handle a
Secretary of Labors arbitral award.
But at the same time, we also recognize the possibility that abuse of discretion
may attend the exercise of the Secretarys arbitral functions; his findings in an
arbitration case are usually based on position papers and their supporting documents
(as they are in the present case), and not on the thorough examination of the parties
contending claims that may be present in a court trial and in the face-to-face
adversarial process that better insures the proper presentation and appreciation of
evidence.[19] There may also be grave abuse of discretion where the board, tribunal or
officer exercising judicial function fails to consider evidence adduced by the parties.
[20]
Given the parties positions on the justiciability of the issues before us, the question
we have to answer is one that goes into the substance of the Secretarys disputed
orders: Did the Secretary properly consider and appreciate the evidence presented
before him?
We find, based on our consideration of the parties positions and the evidence
on record, that the Secretary of Labor disregarded and misappreciated evidence,
particularly with respect to the wage award. The Secretary of Labor apparently also
acted arbitrarily and even whimsically in considering a number of legal points; even
the Solicitor General himself considered that the Secretary gravely abused his
discretion on at least three major points: (a) on the signing bonus issue; (b) on the
inclusion of confidential employees in the rank and file bargaining unit, and (c) in
mandating a union security closed-shop regime in the bargaining unit.
We begin with a discussion on the wages issue. The focal point in the
consideration of the wage award is the projected net income for 1996 which became
the basis for the 1996 wage award, which in turn - by extrapolation - became the basis
for the (2nd Year) 1997 award. MERALCO projected that the net operating income for
1996 was 14.7% above the 1999 level or a total net operating income of 4.171 Billion,
while the union placed the 1996 net operating income at 5.795 Billion.
MERALCO based its projection on the increase of the income for the first 6
months of 1996 over the same period in 1995. The union, on the other hand, projected
that the 1996 income would increase by 29% to 35% because the consumption of
electric power is at its highest during the last two quarters with the advent of the
Yuletide season. The union likewise relied heavily on a newspaper report citing an
estimate by an all Asia capital financial analyst that the net operating income would
amount to 5.795 Billion.[21]
Based essentially on these considerations, the Secretary made the following
computations and ordered his disputed wage award:
Projected net operating
Income for 1996 5,795,000,000
Principals and interests 1,426,571,703
Dividends at 1995 rate 1,636,949,000
Net amount left with the Company 2,729,479,297

Add: Tax credit equivalent to 35% of labor cost 231,804,940

Companys net operating income 2,961,284,237
For 1997, the projected income is P7,613,612 which can easily absorb the
incremental increase of P2,200 per month or a total of P4,500 during the last year of
the CBA period.
xxxxxxxxx
An overriding aim is to estimate the amount that is left with the Company after the
awarded wages and benefits and the companys customary obligations are paid. This
amount can be the source of an item not found in the above computations but which
the Company must provide for, that is - the amount the company can use for
expansion.
Considering the expansion plans stated in the Companys Supplement that calls for
capital expenditures of 6 billion, 6.263 billion and 5.802 billion for 1996, 1997 and
1998 respectively, We conclude that our original award of P2,300 per month for the
first year and P2,200 for the second year will still leave much by way of retained
income that can be used for expansion.[22] (Underscoring ours.)
We find after considering the records that the Secretary gravely abused his
discretion in making this wage award because he disregarded evidence on
record. Where he considered MERALCOs evidence at all, he apparently
misappreciated this evidence in favor of claims that do not have evidentiary
support. To our mind, the MERALCO projection had every reason to be reliable
because it was based on actual and undisputed figures for the first six months of
1996.[23] On the other hand, the union projection was based on a speculation of
Yuletide consumption that the union failed to substantiate. In fact, as against the
unions unsubstantiated Yuletide consumption claim, MERALCO adduced evidence in
the form of historical consumption data showing that a lengthy consumption does not
tend to rise during the Christmas period.[24] Additionally, the All-Asia Capital Report
was nothing more than a newspaper report that did not show any specific breakdown
or computations. While the union claimed that its cited figure is based on MERALCOs
10-year income stream,[25] no data or computation of this 10-year stream appear in the
record.
While the Secretary is not expected to accept the company-offered figures
wholesale in determining a wage award, we find it a grave abuse of discretion to
completely disregard data that is based on actual and undisputed record of financial
performance in favor of the third-hand and unfounded claims the Secretary eventually
relied upon. At the very least, the Secretary should have properly justified his
disregard of the company figures. The Secretary should have also reasonably insured
that the figure that served as the starting point for his computation had some
substantial basis.

Both parties extensely discussed the factors that the decision maker should
consider in making a wage award. While We do not seek to enumerate in this decision
the factors that should affect wage determination, we must emphasize that a collective
bargaining dispute such as this one requires due consideration and proper balancing
of the interests of the parties to the dispute and of those who might be affected
by the dispute. To our mind, the best way in approaching this task holistically is to
consider the available objective facts, including, where applicable, factors such as the
bargaining history of the company, the trends and amounts of arbitrated and agreed
wage awards and the companys previous CBAs, and industry trends in general. As a
rule, affordability or capacity to pay should be taken into account but cannot be the
sole yardstick in determining the wage award, especially in a public utility like
MERALCO. In considering a public utility, the decision maker must always take into
account the public interest aspects of the case; MERALCOs income and the amount
of money available for operating expenses - including labor costs - are subject to
State regulation. We must also keep in mind that high operating costs will certainly
and eventually be passed on to the consuming public as MERALCO has bluntly
warned in its pleadings.
We take note of the middle ground approach employed by the Secretary in this
case which we do not necessarily find to be the best method of resolving a wage
dispute. Merely finding the midway point between the demands of the company and
the union, and splitting the difference is a simplistic solution that fails to recognize that
the parties may already be at the limits of the wage levels they can afford. It may lead
to the danger too that neither of the parties will engage in principled bargaining; the
company may keep its position artificially low while the union presents an artificially
high position, on the fear that a Solomonic solution cannot be avoided. Thus, rather
than encourage agreement, a middle ground approach instead promotes a play safe
attitude that leads to more deadlocks than to successfully negotiated CBAs.
After considering the various factors the parties cited, we believe that the
interests of both labor and management are best served by a wage increase
of P1,900.00 per month for the first year and another P1,900.00 per month for the
second year of the two-year CBA term. Our reason for this is that these increases
sufficiently protects the interest of the worker as they are roughly 15% of the monthly
average salary of P11,600.00.[26] They likewise sufficiently consider the employers
costs and its overall wage structure, while at the same time, being within the range
that will not disrupt the wage trends in Philippine industries.
The records shows that MERALCO, throughout its long years of existence, was
never remiss in its obligation towards its employees. In fact, as a manifestation of its
strong commitment to the promotion of the welfare and well-being of its employees, it
has consistently improved their compensation package. For instance, MERALCO has
granted salary increases[27] through the collective bargaining agreement the amount of
which since 1980 for both rank-and-file and supervisory employees were as follows:
AMOUNT OF CBA INCREASES
CBACOVER
RANKSUPERVISORY
AGE
AND-FILE
1980
230.00
342.50
1981
210.00
322.50
1982
200.00
312.50

AMOUNT
112.50
112.50
112.50

DIFFERENCE
PERCENT
48.91%
53.57
56.25

TOTAL
1983
1984
1985
TOTAL
1986
1987
1988
TOTAL
1989
1990
1991
TOTAL
1992
1993
1994
TOTAL

640.00
320.00
350.00
370.00
1,040.00
860.00
640.00
600.00
2,100.00
1,100.00
1,200.00
1,300.00
3,600.00
1,400.00
1,350.00
1,150.00
3,900.00

977.50
432.50
462.50
482.50
1,377.50
972.50
752.50
712.50
2,437.50
1,212.50
1,312.50
1,412.50
3,937.50
1,742.50
1,682.50
1,442.50
4,867.50

337.50
112.50
112.50
112.50
337.50
112.50
112.50
112.50
337.50
112.50
112.50
112.50
337.50
342.50
332.50
292.50
967.50

52.73
35.16
32.14
30.41
32.45
13.08
17.58
18.75
16.07
10.23
9.38
8.65
9.38
24.46
24.63
25.43
24.81

Based on the above-quoted table, specifically under the column RANK-ANDFILE, it is easily discernible that the total wage increase of P3,800.00 for 1996 to 1997
which we are granting in the instant case is significantly higher than the total increases
given in 1992 to 1994, or a span of three (3) years, which is only P3,900.00 a
month. Thus, the Secretarys grant of P2,200.00 monthly wage increase in the
assailed order is unreasonably high a burden for MERALCO to shoulder.
We now go to the economic issues.
1. CHRISTMAS BONUS
MERALCO questions the Secretarys award of Christmas bonuses on the
ground that what it had given its employees were special bonuses to mark or
celebrate special occasions, such as when the Asia Money Magazine recognized
MERALCO as the best managed company in Asia. These grants were given on or
about Christmas time, and the timing of the grant apparently led the Secretary to the
conclusion that what were given were Christmas bonuses given by way of a company
practice on top of the legally required 13th month pay.
The Secretary in granting the two-month bonus, considered the following factual
finding, to wit:
We note that each of the grant mentioned in the commonly adopted table of grants
has a special description. Christmas bonuses were given in 1988 and 1989. However,
the amounts of bonuses given differed. In 1988, it was P1,500. In 1989, it was month
salary. The use of Christmas bonus title stopped after 1989. In 1990, what was given
was a cash gift of months salary. The grants thereafter bore different titles and were
for varying amounts.Significantly, the Company explained the reason for the 1995
bonuses and this explanation was not substantially contradicted by the Union.

What comes out from all these is that while the Company has consistently given some
amount by way of bonuses since 1988, these awards were not given uniformly as
Christmas bonuses or special Christmas grants although they may have been given at
or about Christmas time.
xxxxxxxxx

We can not, however, affirm the Secretarys award of a two-month special

Christmas bonus to the employees since there was no recognized company practice
of giving a two-month special grant. The two-month special bonus was given only in
1995 in recognition of the employees prompt and efficient response during the
calamities. Instead, a one-month special bonus, We believe, is sufficient, this being
merely a generous act on the part of MERALCO.
2. RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES

The Company is not therefore correct in its position that there is not established
practice of giving Christmas bonuses that has ripened to the status of being a term
and condition of employment. Regardless of its nomenclature and purpose, the act of
giving this bonus in the spirit of Christmas has ripened into a Company practice. [28]
It is MERALCOs position that the Secretary erred when he recognized that there
was an established practice of giving a two-month Christmas bonus based on the fact
that bonuses were given on or about Christmas time. It points out that the established
practice attributed to MERALCO was neither for a considerable period of time nor
identical in either amount or purpose. The purpose and title of the grants were never
the same except for the Christmas bonuses of 1988 and 1989, and were not in the
same amounts.
We do not agree.
As a rule, a bonus is not a demandable and enforceable obligation; [29] it may
nevertheless be granted on equitable consideration[30] as when the giving of such
bonus has been the companys long and regular practice. [31] To be considered a
regular practice, the giving of the bonus should have been done over a long period of
time, and must be shown to have been consistent and deliberate. [32] Thus we have
ruled in National Sugar Refineries Corporation vs. NLRC:[33]
The test or rationale of this rule on long practice requires an indubitable showing that
the employer agreed to continue giving the benefits knowing fully well that said
employees are not covered by the law requiring payment thereof.
In the case at bar, the record shows the MERALCO, aside from complying with
the regular 13th month bonus, has further been giving its employees an additional
Christmas bonus at the tail-end of the year since 1988. While the special bonuses
differed in amount and bore different titles, it can not be denied that these were given
voluntarily and continuously on or about Christmas time. The considerable length of
time MERALCO has been giving the special grants to its employees indicates a
unilateral and voluntary act on its part, to continue giving said benefits knowing that
such act was not required by law.
Indeed, a company practice favorable to the employees has been established
and the payments made by MERALCO pursuant thereto ripened into benefits enjoyed
by the employees. Consequently, the giving of the special bonus can no longer be
withdrawn by the company as this would amount to a diminution of the employees
existing benefits.[34]

It appears that the Secretary of Labor originally ordered the increase of the
retirement pay, rice subsidy and medical benefits of MERALCO retirees.This ruling
was reconsidered based on the position that retirees are no longer employees of the
company and therefore are no longer bargaining members who can benefit from a
compulsory arbitration award. The Secretary, however, ruled that all members of the
bargaining unit who retire between August 19, 1996 and November 30, 1997 (i.e., the
term of the disputed CBA under the Secretarys disputed orders) are entitled to receive
an additional rice subsidy.
The question squarely brought in this petition is whether the Secretary can issue
an order that binds the retirement fund. The company alleges that a separate and
independent trust fund is the source of retirement benefits for MERALCO retirees,
while the union maintains that MERALCO controls these funds and may therefore be
compelled to improve this benefit in an arbitral award.
The issue requires a finding of fact on the legal personality of the retirement
fund. In the absence of any evidence on record indicating the nature of the retirement
funds legal personality, we rule that the issue should be remanded to the Secretary for
reception of evidence as whether or not the MERALCO retirement fund is a separate
and independent trust fund. The existence of a separate and independent juridical
entity which controls an irrevocable retirement trust fund means that these retirement
funds are beyond the scope of collective bargaining: they are administered by an
entity not a party to the collective bargaining and the funds may not be touched
without the trustees conformity.
On the other hand, MERALCO control over these funds means that MERALCO
may be compelled in the compulsory arbitration of a CBA deadlock where it is the
employer, to improve retirement benefits since retirement is a term or condition of
employment that is a mandatory subject of bargaining.
3. EMPLOYEES COOPERATIVE
The Secretarys disputed ruling requires MERALCO to provide the employees
covered by the bargaining unit with a loan of 1.5 Million as seed money for the
employees formation of a cooperative under the Cooperative Law, R.A. 6938. We see
nothing in this law - whether expressed or implied - that requires employers to provide
funds, by loan or otherwise, that employees can use to form a cooperative. The
formation of a cooperative is a purely voluntary act under this law, and no party in any
context or relationship is required by law to set up a cooperative or to provide the
funds therefor. In the absence of such legal requirement, the Secretary has no basis
to order the grant of a 1.5 million loan to MERALCO employees for the formation of a
cooperative. Furthermore, we do not see the formation of an employees cooperative,
in the absence of an agreement by the collective bargaining parties that this is a

bargainable term or condition of employment, to be a term or condition of employment

that can be imposed on the parties on compulsory arbitration.
4. GHSIP, HMP BENEFITS FOR DEPENDENTS and HOUSING EQUITY
LOAN
MERALCO contends that it is not bound to bargain on these benefits because
these do not relate to wages, hours of work and other terms and conditions of
employment hence, the denial of these demands cannot result in a bargaining
impasse.
The GHSIP, HMP benefits for dependents and the housing equity loan have
been the subject of bargaining and arbitral awards in the past. We do not see any
reason why MERALCO should not now bargain on these benefits. Thus, we agree
with the Secretarys ruling:
x x x Additionally and more importantly, GHSIP and HMP, aside from being
contributory plans, have been the subject of previous rulings from this Office as
bargainable matters. At this point, we cannot do any less and must recognize that
GHSIP and HMP are matters where the union can demand and negotiate for
improvements within the framework of the collective bargaining system. [35]
Moreover, MERALCO have long been extending these benefits to the
employees and their dependents that they now become part of the terms and
conditions of employment. In fact, MERALCO even pledged to continue giving these
benefits. Hence, these benefits should be incorporated in the new CBA.
With regard to the increase of the housing equity grant, we find P60,000.00
reasonable considering the prevailing economic crisis.
5. SIGNING BONUS
On the signing bonus issue, we agree with the positions commonly taken by
MERALCO and by the Office of the Solicitor General that the signing bonus is a grant
motivated by the goodwill generated when a CBA is successfully negotiated and
signed between the employer and the union. In the present case, this goodwill does
not exist. In the words of the Solicitor General:
When negotiations for the last two years of the 1992-1997 CBA broke down and the
parties sought the assistance of the NCMB, but which failed to reconcile their
differences, and when petitioner MERALCO bluntly invoked the jurisdiction of the
Secretary of Labor in the resolution of the labor dispute, whatever goodwill existed
between petitioner MERALCO and respondent union disappeared. xxx.[36]

6. RED-CIRCLE-RATE ALLOWANCE
An RCR allowance is an amount, not included in the basic salary, that is granted
by the company to an employee who is promoted to a higher position grade but whose
actual basic salary at the time of the promotion already exceeds the maximum salary
for the position to which he or she is promoted. As an allowance, it applies only to
specifics individuals whose salary levels are unique with respect to their new and
higher positions. It is for these reasons that MERALCO prays that it be allowed to
maintain the RCR allowance as a separate benefit and not be integrated in the basic
salary.
The integration of the RCR allowance in the basic salary of the employees had
consistently been raised in the past CBAs (1989 and 1992) and in those cases, the
Secretary decreed the integration of the RCR allowance in the basic salary. We do not
see any reason why it should not be included in the present CBA. In fact, in the 1995
CBA between MERALCO and the supervisory union (FLAMES), the integration of the
RCR allowance was recognized.Thus, Sec. 4 of the CBA provides:
All Red-Circle-Rate Allowance as of December 1, 1995 shall be integrated in the basic
salary of the covered employees who as of such date are receiving such
allowance. Thereafter, the company rules on RCR allowance shall continue to be
observed/applied.[37]
For purposes of uniformity, we affirm the Secretarys order on the integration of
the RCR allowance in the basic salary of the employees.
7. SICK LEAVE RESERVE OF 15 DAYS
MERALCO assails the Secretarys reduction of the sick leave reserve benefit
from 25 days to 15 days, contending that the sick leave reserve of 15 days has
reached the lowest safe level that should be maintained to give employees sufficient
buffer in the event they fall ill.
We find no compelling reason to deviate from the Secretarys ruling that the sick
leave reserve is reduced to 15 days, with any excess convertible to cash at the end of
the year. The employee has the option to avail of this cash conversion or to
accumulate his sick leave credits up to 25 days for conversion to cash at his
retirement or separation from the service. This arrangement is, in fact, beneficial to
MERALCO. The latter admits that the diminution of this reserve does not seriously
affect MERALCO because whatever is in reserve are sick leave credits that are
payable to the employee upon separation from service. In fact, it may be to
MERALCOs financial interest to pay these leave credits now under present salary
levels than pay them at future higher salary levels.[38]
8. 40-DAY UNION LEAVE

In contractual terms, a signing bonus is justified by and is the consideration paid

for the goodwill that existed in the negotiations that culminated in the signing of a
CBA. Without the goodwill, the payment of a signing bonus cannot be justified and any
order for such payment, to our mind, constitutes grave abuse of discretion. This is
more so where the signing bonus is in the not insignificant total amount of P16 Million.

MERALCO objects to the demand increase in union leave because the union
leave granted to the union is already substantial. It argues that the union has not
demonstrated any real need for additional union leave.

The thirty (30) days union leave granted by the Secretary, to our mind,
constitute sufficient time within which the union can carry out its union activities such
as but not limited to the election of union officers, selection or election of appropriate
bargaining agents, conduct referendum on union matters and other union-related
matters in furtherance of union objectives. Furthermore, the union already enjoys a
special union leave with pay for union authorized representatives to attend work
education seminars, meetings, conventions and conferences where union
representation is required or necessary, and Paid-Time-off for union officers, stewards
and representatives for purpose of handling or processing grievances.

the Company; (d) bobcat belt bags; and (e) reduction of quota and MAPL during
typhoons and other force majeure events, reasonable considering the risks taken by
the company personnel involved, the nature of the employees functions and
responsibilities and the prevailing standard of living. We do not however subscribe to
the Secretarys award on the following:
(a) Reduction of quota and MAPL when the collector is on sick leave because
the previous CBA has already provided for a reduction of this demand.There
is no need to further reduce this.

9. HIGH VOLTAGE/HIGH POLE/TOWING ALLOWANCE

MERALCO argues that there is no justification for the increase of these
allowances. The personnel concerned will not receive any additional risk during the
life of the current CBA that would justify the increase demanded by the union. In the
absence of such risk, then these personnel deserve only the same salary increase
that all other members of the bargaining unit will get as a result of the disputed
CBA. MERALCO likewise assails the grant of the high voltage/high pole allowance to
members of the team who are not exposed to the high voltage/high pole risks. The
risks that justify the higher salary and the added allowance are personal to those who
are exposed to those risks. They are not granted to a team because some members
of the team are exposed to the given risks.
The increase in the high-voltage allowance (from P45.00 to P55.00), high-pole
allowance (from P30.00 to P40.00), and towing allowance is justified considering the
heavy risk the employees concerned are exposed to. The high-voltage allowance is
granted to an employee who is authorized by the company to actually perform work on
or near energized bare lines and bus, while the high-pole allowance is given to those
authorized to climb poles on a height of at least 60 feet from the ground to work
thereat. The towing allowance, on the other hand, is granted to the stockman drivers
who tow trailers with long poles and equipment on board. Based on the nature of the
job of these concerned employees, it is imperative to give them these additional
allowances for taking additional risks. These increases are not even commensurate to
the danger the employees concerned are subjected to. Besides, no increase has been
given by the company since 1992.[39]
We do not, however, subscribe to the Secretarys order granting these
allowances to the members of the team who are not exposed to the given risks.The
reason is obvious- no risk, no pay. To award them the said allowances would be
manifestly unfair for the company and even to those who are exposed to the risks, as
well as to the other members of the bargaining unit who do not receive the said
allowances.
10. BENEFITS FOR COLLECTORS

(b) Deposit of cash bond at MESALA because this is no longer necessary in

view of the fact that collectors are no longer required to post a bond.
We shall now resolve the non-economic issues.
1. SCOPE OF THE BARGAINING UNIT
The Secretarys ruling on this issue states that:
a. Scope of the collective bargaining unit. The union is demanding that the collective
bargaining unit shall be composed of all regular rank and file employees hired by the
company in all its offices and operating centers through its franchise and those it may
employ by reason of expansion, reorganization or as a result of operational
exigencies. The law is that only managerial employees are excluded from any
collective bargaining unit and supervisors are now allowed to form their own union
(Art. 254 of the Labor Code as amended by R.A. 6715). We grant the union demand.
Both MERALCO and the Office of the Solicitor General dispute this ruling
because if disregards the rule We have established on the exclusion ofconfidential
employee from the rank and file bargaining unit.
In Pier 8 Arrastre vs. Confesor and General Maritime and Stevedores
Union,[40] we ruled that:
Put another way, the confidential employee does not share in the same community of
interest that might otherwise make him eligible to join his rank and file co-workers,
precisely because of a conflict in those interests.
Thus, in Metrolab Industries vs. Roldan-Confesor,[41] We ruled:

MERALCO opposes the Secretarys grant of benefits for collectors on the

ground that this is grossly unreasonable both in scope and on the premise it is
founded.

..that the Secretarys order should exclude the confidential employees from the regular
rank and file employees qualified to become members of the MEWA bargaining unit.

We have considered the arguments of the opposing parties regarding these

benefits and find the Secretarys ruling on the (a) lunch allowance; (b) disconnection
fee for delinquent accounts; (c) voluntary performance of other work at the instance of

From the foregoing disquisition, it is clear that employees holding a confidential

position are prohibited from joining the union of the rank and file employees.
2. ISSUE OF UNION SECURITY

The Secretary in his Order of August 19, 1996,[42] ruled that:

b. Union recognition and security. The union is proposing that it be recognized by the
Company as sole and exclusive bargaining representative of the rank and file
employees included in the bargaining unit for the purpose of collective bargaining
regarding rates of pay, wages, hours of work and other terms and conditions of
employment. For this reason, the Company shall agree to meet only with the Union
officers and its authorized representatives on all matters involving the Union as an
organization and all issues arising from the implementation and interpretation of the
new CBA. Towards this end, the Company shall not entertain any individual or group
of individuals on matters within the exclusive domain of the Union.
Additionally, the Union is demanding that the right of all rank and file employees to join
the Union shall be recognized by the Company. Accordingly, all rank and file
employees shall join the union.
xxxxxxxxx
These demands are fairly reasonable. We grant the same in accordance with the
maintenance of membership principle as a form of union security."
The Secretary reconsidered this portion of his original order when he said in his
December 28, 1996 order that:
x x x. when we decreed that all rank and file employees shall join the Union, we were
actually decreeing the incorporation of a closed shop form of union security in the CBA
between the parties. In Ferrer v. NLRC, 224 SCRA 410, the Supreme Court ruled that
a CBA provision for a closed shop is a valid form of union security and is not a
restriction on the right or freedom of association guaranteed by the Constitution,
citing Lirag v. Blanco, 109 SCRA 87.
MERALCO objected to this ruling on the grounds that: (a) it was never
questioned by the parties; (b) there is no evidence presented that would justify the
restriction on employee's union membership; and (c) the Secretary cannot rule on the
union security demand because this is not a mandatory subject for collective
bargaining agreement.
We agree with MERALCOs contention.
An examination of the records of the case shows that the union did not ask for a
closed shop security regime; the Secretary in the first instance expressly stated that a
maintenance of membership clause should govern; neither MERALCO nor MEWA
raised the issue of union security in their respective motions for reconsideration of the
Secretarys first disputed order; and that despite the parties clear acceptance of the
Secretarys first ruling, the Secretary motu proprio reconsidered his maintenance of
membership ruling in favor of the more stringent union shop regime.

Under these circumstances, it is indubitably clear that the Secretary gravely

abused his discretion when he ordered a union shop in his order of December 28,
1996. The distinctions between a maintenance of membership regime from a closed
shop and their consequences in the relationship between the union and the company
are well established and need no further elaboration.
Consequently, We rule that the maintenance of membership regime should
govern at MERALCO in accordance with the Secretarys order of August 19, 1996
which neither party disputed.
3. THE CONTRACTING OUT ISSUE
This issue is limited to the validity of the requirement that the union be consulted
before the implementation of any contracting out that would last for 6 months or
more. Proceeding from our ruling in San Miguel Employees Union-PTGWO vs
Bersamina,[43] (where we recognized that contracting out of work is a proprietary right
of the employer in the exercise of an inherent management prerogative) the issue we
see is whether the Secretarys consultation requirement is reasonable or unduly
restrictive of the companys management prerogative. We note that the Secretary
himself has considered that management should not be hampered in the operations of
its business when he said that:
We feel that the limitations imposed by the union advocates are too specific and may
not be applicable to the situations that the company and the union may face in the
future. To our mind, the greater risk with this type of limitation is that it will tend to
curtail rather than allow the business growth that the company and the union must
aspire for. Hence, we are for the general limitations we have stated above because
they will allow a calibrated response to specific future situations the company and the
union may face.[44]
Additionally, We recognize that contracting out is not unlimited; rather, it is a
prerogative that management enjoys subject to well-defined legal limitations. As we
have previously held, the company can determine in its best business judgment
whether it should contract out the performance of some of its work for as long as the
employer is motivated by good faith, and the contracting out must not have been
resorted to circumvent the law or must not have been the result of malicious or
arbitrary action.[45] The Labor Code and its implementing rules also contain specific
rules governing contracting out (Department of Labor Order No. 10, May 30, 1997,
Sections. 1-25).
Given these realities, we recognize that a balance already exist in the parties
relationship with respect to contracting out; MERALCO has its legally defined and
protected management prerogatives while workers are guaranteed their own
protection through specific labor provisions and the recognition of limits to the exercise
of management prerogatives. From these premises, we can only conclude that the
Secretarys added requirement only introduces an imbalance in the parties collective
bargaining relationship on a matter that the law already sufficiently regulates. Hence,
we rule that the Secretarys added requirement, being unreasonable, restrictive and
potentially disruptive should be struck down.

4. UNION REPRESENTATION IN COMMITTEES

We agree with MERALCO.

As regards this issue, We quote with approval the holding of the Secretary in his
Order of December 28, 1996, to wit:

The Secretary acted in excess of the discretion allowed him by law when he
ordered the inclusion of benefits, terms and conditions that the law and the parties did
not intend to be reflected in their CBA.

We see no convincing reason to modify our original Order on union representation in

committees. It reiterates what the Article 211 (A)(g) of the Labor Codes provides: To
ensure the participation of workers in decision and policy-making processes affecting
their rights, duties and welfare. Denying this opportunity to the Union is to lay the
claim that only management has the monopoly of ideas that may improve
management strategies in enhancing the Companys growth. What every company
should remember is that there might be one among the Union members who may offer
productive and viable ideas on expanding the Companys business horizons. The
unions participation in such committees might just be the opportune time for dormant
ideas to come forward. So, the Company must welcome this development (see also
PAL v. NLRC, et. al., G.R. 85985, August 13, 1995). It must be understood, however,
that the committees referred to here are the Safety Committee, the Uniform
Committee and other committees of a similar nature and purpose involving personnel
welfare, rights and benefits as well as duties.

To avoid the possible problems that the disputed orders may bring, we are
constrained to rule that only the terms and conditions already existing in the current
CBA and was granted by the Secretary (subject to the modifications decreed in this
decision) should be incorporated in the CBA, and that the Secretarys disputed orders
should accordingly be modified.

We do not find merit in MERALCOs contention that the above-quoted ruling of

the Secretary is an intrusion into the management prerogatives of MERALCO. It is
worthwhile to note that all the Union demands and what the Secretarys order granted
is that the Union be allowed to participate in policy formulation and decision-making
process on matters affecting the Union members right, duties and welfare as
required in Article 211 (A)(g) of the Labor Code. And this can only be done when
the Union is allowed to have representatives in the Safety Committee, Uniform
Committee and other committees of a similar nature. Certainly, such participation by
the Union in the said committees is not in the nature of a co-management control of
the
business
of
MERALCO. What
is
granted
by
the
Secretary
is participation and representation. Thus, there is no impairment of management
prerogatives.
5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA
MERALCO also decries the Secretarys ruling in both the assailed Orders thatAll other benefits being enjoyed by the companys employees but which are not
expressly or impliedly repealed in this new agreement shall remain subsisting and
shall likewise be included in the new collective bargaining agreement to be signed by
the parties effective December 1, 1995.[46]
claiming that the above-quoted ruling intruded into the employers freedom to contract
by ordering the inclusion in the new CBA all other benefits presently enjoyed by the
employees even if they are not incorporated in the new CBA. This matter of inclusion,
MERALCO argues, was never discussed and agreed upon in the negotiations; nor
presented as issues before the Secretary; nor were part of the previous CBAs
between the parties.

6. RETROACTIVITY OF THE CBA

Finally, MERALCO also assails the Secretarys order that the effectivity of the
new CBA shall retroact to December 1, 1995, the date of the commencement of the
last two years of the effectivity of the existing CBA. This retroactive date, MERALCO
argues, is contrary to the ruling of this Court in Pier 8 Arrastre and Stevedoring
Services, Inc. vs. Roldan-Confessor[47] which mandates that the effective date of the
new CBA should be the date the Secretary of Labor has resolved the labor disputes.
On the other hand, MEWA supports the ruling of the Secretary on the theory that
he has plenary power and discretion to fix the date of effectivity of his arbitral award
citing our ruling in St. Lukes Medical Center, Inc. vs. Torres.[48] MEWA also contends
that if the arbitral award takes effect on the date of the Secretary Labors ruling on the
parties motion for reconsideration (i.e., on December 28, 1996), an anomaly situation
will result when CBA would be more than the 5-year term mandated by Article 253-A of
the Labor Code.
However, neither party took into account the factors necessary for a proper
resolution of this aspect. Pier 8, for instance, does not involve a mid-term negotiation
similar to this case, while St. Lukes does not take the hold over principle into account,
i.e., the rule that although a CBA has expired, it continues to have legal effects as
between the parties until a new CBA has been entered into.[49]
Article 253-A serves as the guide in determining when the effectivity of the CBA
at bar is to take effect. It provides that the representation aspect of the CBA is to be for
a term of 5 years, while
x x x [A]ll other provisions of the Collective Bargaining Agreement shall be renegotiated not later than 3 years after its execution. Any agreement on such other
provisions of the Collective Bargaining Agreement entered into within 6 months from
the date of expiry of the term of such other provisions as fixed in such Collective
Bargaining Agreement shall retroact to the day immediately following such date. If
such agreement is entered into beyond 6 months, the parties shall agree on the
duration of the effectivity thereof. x x x.
Under these terms, it is clear that the 5-year term requirement is specific to the
representation aspect. What the law additionally requires is that a CBA must be renegotiated within 3 years after its execution. It is in this re-negotiation that gives rise to
the present CBA deadlock.

If no agreement is reached within 6 months from the expiry date of the 3 years
that follow the CBA execution, the law expressly gives the parties - not anybody else the discretion to fix the effectivity of the agreement.
Significantly, the law does not specifically cover the situation where 6 months
have elapsed but no agreement has been reached with respect to effectivity. In this
eventuality, we hold that any provision of law should then apply for the law abhors a
vacuum.[50]
One such provision is the principle of hold over, i.e., that in the absence of a
new CBA, the parties must maintain the status quo and must continue in full force and
effect the terms and conditions of the existing agreement until a new agreement is
reached.[51] In this manner, the law prevents the existence of a gap in the relationship
between the collective bargaining parties. Another legal principle that should apply is
that in the absence of an agreement between the parties, then, an arbitrated CBA
takes on the nature of any judicial or quasi-judicial award; it operates and may be
executed only respectively unless there are legal justifications for its retroactive
application.
Consequently, we find no sufficient legal ground on the other justification for the
retroactive application of the disputed CBA, and therefore hold that the CBA should be
effective for a term of 2 years counted from December 28, 1996 (the date of the
Secretary of Labors disputed order on the parties motion for reconsideration) up to
December 27, 1999.
WHEREFORE, the petition is granted and the orders of public respondent
Secretary of Labor dated August 19, 1996 and December 28, 1996 are set aside to
the extent set forth above. The parties are directed to execute a Collective Bargaining
Agreement incorporating the terms and conditions contained in the unaffected portions
of the Secretary of Labors order of August 19, 1996 and December 28, 1996, and the
modifications set forth above. The retirement fund issue is remanded to the Secretary
of Labor for reception of evidence and determination of the legal personality of the
MERALCO retirement fund.
SO ORDERED.
Davide, Jr., C.J. (Chairman), Melo, Kapunan, and Pardo, JJ., concur.

GRIO-AQUINO, J.:
This petition for certiorari seeks to nullify or set aside the decision dated September 2,
1988 of the National Labor Relations Commission, which found the petitioner, Traders
Royal Bank (or TRB), guilty of diminution of benefits due the private respondents and
ordered it to pay the said employees' claims for differentials in their holiday, mid-year,
and year-end bonuses.
On November 18, 1986, the Union, through its president, filed a letter-complaint
against TRB with the Conciliation Division of the Bureau of Labor Relations claiming
that:
First, the management of TRB per memo dated October 10, 1986
paid the employees their HOLIDAY PAY, but has withheld from the
Union the basis of their computation.
Second, the computation in question, has allegedly decreased the
daily salary rate of the employees. This diminution of existing
benefits has decreased our overtime rate and has affected the
employees' take home pay.
Third, the diminution of benefits being enjoyed by the employees
since time immemorial, e.g. mid-year bonus, from two (2) months
gross pay to two (2) months basic and year-end bonus from three
(3) months gross to only two (2) months.
Fourth, the refusal by management to recall active union
members from the branches which were being transferred without
prior notice, solely at the instance of the branch manager. (p.
26, Rollo.)
In its answer to the union's complaint, TRB pointed out that the NLRC, not the Bureau
of Labor Relations, had jurisdiction over the money claims of the employees.

20. G.R. No. 88168 August 30, 1990

TRADERS
ROYAL
BANK, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL BANK
EMPLOYEES UNION, respondents.

On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for
resolution of the following issues raised by the complainants:
l) The Management of TRB per memo dated October 10, 1986
paid the employees their holiday pay but has withheld from the
union the basis of their computation.

San Juan, Gonzalez, San Agustin & Sinense for petitioner.

E.N.A. Cruz, Enfero & Associates for private respondent.

2) The computation in question has allegedly decreased the daily

salary rate of the employees. This diminution of existing benefits

has decreased our overtime rate and has affected the employees'
take home pay.

Directors but to start from November 11, 1983 and using the
Divisor 251 days in determining the daily rate of the employees;

3) The diminution of benefits being enjoyed by the employees

since the (sic) immemorial, e.g. mid-year bonus, from two (2)
months gross pay to two (2) months basic and year-end bonus
from three (3) months gross to only two (2) months.

2. Mid-year bonus differential representing the difference between

two (2) months gross pay and two (2) months basic pay and endyear bonus differential of one (1) month gross pay for 1986.

4) The refusal by management to recall active union members

from the branches which were being transferred without prior
notice, solely at the instance of the branch, manager. (p.
28, Rollo.)
In the meantime, the parties who had been negotiating for a collective bargaining
agreement, agreed on the terms of the CBA, to wit:
1. The whole of the bonuses given in previous years is not
demandable, i.e., there is no diminution, as to be liable for a
differential, if the bonus given is less than that in previous years.
2. Since only two months bonus is guaranteed, only to that extent
are bonuses deemed part of regular compensation.
3. As regards the third and fourth bonuses, they are entirely
dependent on the income of the bank, and not demandable as
part of compensation. (pp. 67-68, Rollo.)
Despite the terms of the CBA, however, the union insisted on pursuing the case,
arguing that the CBA would apply prospectively only to claims arising after its
effectivity.
Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The
practice of giving them bonuses at year's end, would depend on how profitable the
operation of the bank had been. Generally, the bonus given was two (2) months basic
mid-year and two (2) months gross end-year.
On September 2, 1988, the NLRC rendered a decision in favor of the employees, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the
petitioner and ordering respondent bank to pay petitioner
members-employees the following:
1. Holiday differential for the period covering l983-1986 as
embodied in Resolution No. 4984-1986 of respondent's Board of

The claim for holiday differential for the period earlier than
November 11, 1983 is hereby dismissed, the same having
prescribed.
Likewise, the charge of unfair labor practice against the
respondent company is hereby dismissed for lack of merit. (pp.
72-73, Rollo.)
A motion for reconsideration was filed by TRB but it was denied. Hence, this petition
for certiorari.
There is merit in the petitioner's contention that the NLRC gravely abused its
discretion in ordering it to pay mid-year/year-end bonus differential for 1986 to its
employees.
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 vs. Cebu Portland Cement Co., 61 O.G. 4597).
"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 vs. National Labor Relations Commission,
Federation of Free Workers and Nemia Quiambao, G.R. No. 75289, August 31, 1989).
It is clear from the above-cited rulings that the petitioner may not be obliged to pay
bonuses to its employees. The matter of giving them bonuses over and above their
lawful salaries and allowances is entirely dependent on the profits, if any, realized by
the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had
decreased. In 1986, the income of the Bank was only 20.2 million pesos, but the Bank
still gave out the usual two (2) months basic mid-year and two months gross year-end
bonuses. The petitioner pointed out, however, that the Bank weakened considerably
after 1986 on account of political developments in the country. Suspected to be a
Marcos-owned or controlled bank, it was placed under sequestration by the present
administration and is now managed by the Presidential Commission on Good
Government (PCGG).

In the light of these submissions of the petitioner, the contention of the Union that the
granting of bonuses to the employees had ripened into a company practice that may
not be adjusted to the prevailing financial condition of the Bank has no legal and moral
bases. Its fiscal condition having declined, the Bank may not be forced to distribute
bonuses which it can no longer afford to pay and, in effect, be penalized for its past
generosity to its employees.
Private respondent's contention, that the decrease in the midyear and year-end
bonuses constituted a diminution of the employees' salaries, is not correct, for
bonuses are not part of labor standards in the same class as salaries, cost of living
allowances, holiday pay, and leave benefits, which are provided by the Labor Code.
WHEREFORE, the petition for certiorari is granted. The decision of the National Labor
Relations Commission is modified by deleting the award of bonus differentials to the
employees for 1986. In other respects, the decision is affirmed. Costs against the
respondent union.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Medialdea, JJ., concur.

MENDOZA, RODOLFO VE. TIMBOL, RUBEN G. ASEDILLO, FLORINDA

S. DAYRIT, and 19 other Senior Officers similarly situated; HORACE
REYES, JOSE BELMONTE and 14 other Senior Managers and 53
Managers similarly situated; AURORA VILLACERAN and 34 other
Assistant Managers similarly situated; CONSUELO RIZARRI,
EMERENCIANA SAMSON, BRENDA C. BERMUDEZ, FLORYPEE
ABRIGO, EMMA BALDERAMA, and 211 other Junior Officers similarly
situated,respondents.
DECISION
KAPUNAN, J.:
The principal issue presented for resolution in these petitions
for certiorari[1] under Rule 65 of the Rules of Court is whether or not public respondent
National Labor Relations Commission (NLRC) committed grave abuse of discretion in
affirming with slight modifications Labor Arbiter Felipe Patis decision awarding herein
private respondents claim of P193,338,212.33 consisting of:
1. Wage increase of 25% of gross monthly wage from January 1985 to
December 1988;
2. Christmas Bonus of one and one-half (1-1/2) months pay from December
1985 to December 1987;
3. Mid-year Bonus of one (1) month pay from 1985 to 1988, inclusive;

21. THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B.

AURELLANO
in
his
capacity
as
Statutory
Receiver
of
Manilabank, petitioners, vs.
THE
NATIONAL
LABOR
RELATIONS
COMMISSION, VICTOR L. MENDOZA, RODOLFO VE. TIMBOL, RUBEN G.
ASEDILLO, FLORINDA S. DAYRIT, and 19 other Senior Officers similarly
situated; HORACE REYES and 14 other Senior Managers similarly situated;
AURORA VILLACERAN and 34 other Assistant Managers similarly situated;
CONSUELO RIZARRI, EMERENCIANA SAMSON, BRENDA C. BERMUDEZ,
FLORYPEE ABRIGO, EMMA BALDERAMA, and 211 other Junior Officers
similarly situated, respondents.

4. Profit Sharing of 5% of net profit for 1985 and 1986;

5. Differentials on accrued leaves, retirement benefits and Christmas and
Mid-year bonuses;
6. Longevity pay, Loyalty Bonus and Medical, Dental and Optical Benefits;
7. Uniform allowance of P600.00 per year from January 1985 to January
1988, inclusive;
8. One-half (1/2) month pay 1987 Christmas Bonus which was deducted
from the retirement benefit of each complainant;
9. Travel Plan and Car Plan with respect to the 23 complainants Senior
Officers; and

[G.R. No. 107902. September 29, 1997]

THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B.

AURELLANO
in
his
capacity as
Statutory Receiver
of
Manilabank, petitioners, vs. THE NATIONAL LABOR RELATIONS
COMMISSION-NCR, LABOR ARBITER FELIPE PATI and VICTOR L.

10. Car Plan and Gasoline Allowance benefits with respect to the 15
complainants, Senior Managers and 54 Assistant Managers.
annual interest thereon of 12% and attorneys fees amounting to 10% of the said
amount.
The antecedents show that on June 5, 1984, petitioner Manila Banking
Corporation (Manilabank) was placed under comptrollership by then Central Bank
Governor Jose B. Fernandez in view of the banks financial distress.[2]

The decision of the Monetary Board of the Central Bank was based on the
findings that the bank was experiencing liquidity problems and had incurred chronic
reserve deficiencies against deposit liabilities. In fact on May 23, 1984, a month before
it was placed under comptrollership, Manilabank was prohibited by the Monetary
Board from granting new loans and making new investments except investments in
government securities with Central Bank support, and from declaring cash or stock
dividends.[3]
A February 19, 1986 Central Bank report on Manilabanks financial condition as
of December 31, 1985 disclosed, among other things, that the banks operations for
the preceding year resulted in a net loss of P362.4 million. It likewise revealed that the
banks financial condition continued to deteriorate.[4]
Consequently, on May 22, 1987, the Monetary Board issued Resolution No. 505
prohibiting Manilabank from doing business in the Philippines. The said resolution
reads:
Finding to be true the statements of the Assistant to the Governor and
Officer-in-Charge, Supervision and Examination Sector (SES) Department
I, in his memorandum dated April 28, 1987 submitting a report on the
financial condition of the Manila Banking Corporation (TMBC) as of March
31, 1987, that the financial condition of TMBC is one of insolvency and its
continuance in business would involve probable loss to its depositors and
creditors and considering, among other things, that:
1. During the 3-month period January 1 to March 31, 1987,
TMBC incurred losses of 62.3 million , before interest on
Central Bank overdraft and penalties on reserve deficiencies
(242.9 million for the three months);
2. Prior notices had been made to TMBC of a condition which
may be considered as one indicating insolvency as defined
under Sec. 29 of R.A. No. 265, as amended, in various letters
of Mr. Antonio T. Castro, Jr., Special Assistant to the Governor
and Head, SES Department I, dated December 9, 1985,
December 13, 1985 and October 16, 1986 and in a letter of the
Governor, dated February 27, 1987;
3. Mr. Vicente G. Puyat, in response to his request conveyed
by Mrs. Reyes to the Monetary Board, for a chance to appear
before the Monetary Board in representation of the majority
stockholders of TMBC, in connection with the rehabilitation
plan for TMBC, had been invited three times to appear before
the Board: first, on May 13, 1987, then on May 18, 1987 upon
his request, and on May 22, 1987, which invitations he did not
respond to himself and neither did he attend the Board
meetings held on May 18, 1987 and May 22, 1987;
4. TMBC has not submitted a rehabilitation plan accepted to
the Central Bank; and

5. The said Assistant to the Governor, who was present during

the Monetary Board meeting held on May 22, 1987, had
categorically confirmed that, after considering all the
adjustments, TMBC would still be insolvent even with an
additional capital infusion of P500 million.
the Board decided as follows:
1. To prohibit TMBC to do business in the Philippines and place its assets
and affairs under receivership in accordance with the provisions of Section
29 of R.A. No. 265, as amended; and
2. To designate the Assistant to the Governor and Officer-in-Charge, SES
Department I, as Receiver of TMBC, to immediately take charge of its
assets and liabilities, as expeditiously as possible collect and gather all
the assets and administer the same for the benefit of its creditors
exercising all the powers necessary for these purposes including, but not
limited to, bringing suits and foreclosing mortgages in its name.[5]
Thereafter, Feliciano Miranda, Jr. was designated as receiver. He immediately
took charge of the banks assets and liabilities. He likewise terminated the employment
of about 343 officers and top managers of the bank. All these officers and top
managers, who are private respondents herein, were paid whatever separation and/or
retirement benefits were due them.
On November 11, 1988, the Monetary Board issued Resolution No. 1003
ordering the liquidation of Manilabank on account of insolvency. The resolution reads
as follows:
Having determined and confirmed on the basis of the memorandum of the
Special Assistant to the Governor and Head, Supervision and Examination
Sector (SES) Department I, and Receiver, The Manila Banking
Corporation (TMBC), dated November 4, 1988, submitting a report on the
financial condition of TMBC as of July 31, 1988, that the financial
condition of the bank continues to be one of insolvency and it can no
longer resume business with safety to its depositors, creditors and the
general public, considering the opinion of the Central Bank legal counsel
that, with the Supreme Courts decision dated March 10, 1988 (a) setting
aside the decision of the Court of Appeals sustaining the decision of the
Regional Trial Court to issue a writ of preliminary injunction dated July 14,
1987 against the enforcement of Monetary Board Resolution No. 505
dated May 22, 1987, (b) dissolving the said writ of preliminary injunction,
and (c) making permanent the temporary restraining order issued by the
Supreme Court on February 16, 1988, the liquidation of TMBC may now
be ordered by the Monetary Board and that its authority to order such
liquidation is not affected by the pendency of Civil Case No. 87-40659 nor
of the Supreme Courts resolution of March 10, 1988 (enjoining the Court
of Appeals from interfering in the receivership of TMBC), the Board
decided as follows:
1. To order the liquidation of TMBC in accordance with Section
29 of R.A. No. 265, as amended; and

2. To designate Mr. Renan V. Santos, Special Assistant to the Governor, and Head,
Supervision and Examination Sector Department V, as Liquidator of TMBC.[6]
Of even date, private respondents filed a complaint against ManilaBank and its
statutory receiver with the arbitration branch of the National Labor Relations
Commission (NLRC) claiming entitlement to the following additional benefits alleged to
have accrued from 1984 to their effective dates of termination, viz: (a) Wage
increases; (b) Christmas bonuses; (c) Mid-year bonuses; (d) Profit sharing; (e) Car
and travel plans; (f) Gasoline allowances; (g) Differentials on accrued leaves,
retirement and other bonuses; (h) Longevity pay and loyalty pay; (i) Medical, dental
and optical benefits; and (j) Uniform allowances.[7] Such claims to entitlement of the
foregoing benefits was based on Manilabanks alleged practice, policy and tradition of
awarding said benefits. They contended that the policy has ripened into vested
property rights in their favor.
Manila bank, on its part, alleged that the additional benefits sought are without
basis in fact and in law. It argued that the same are conferred by management only
when it deems necessary to do so. The award of the said benefits is in the nature of a
management prerogative which, it contended, can be withheld by management upon
a clear showing that the company is not in a position to grant them either because of
financial difficulties or circumstances which do not warrant conferment of such
benefits. And since it was experiencing financial distress, it claimed that it was in no
position to give the benefits sought. Additionally, it asseverated that it was deprived of
its right to present evidence in a full-blown trial by the labor arbiter.
On November 14, 1989, Labor Arbiter Felipe Pati rendered his decision ordering
Manilabank and its statutory receiver to pay in full all the claims of private respondents
amounting to P193,338,212.33, plus 12% interest annually and 10% of the total award
as attorneys fees. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the complainants
and against the respondents, ordering and authorizing the Receiver
RENAN V. SANTOS to pay, pursuant to the provisions of Article 110 of the
Labor Code, as amended:
1.The complainants the net amount of claims due appearing
opposite the name of each complainant listed in the
Computation of Net Claim consisting of six (6) pages hereto
attached and made part of this Decision;
2.The complainants counsel the amount equal to 10% of the
total amount awarded to complainants in this action as
attorneys fees.
SO ORDERED.[8]
On November 25, 1989, petitioners Manilabank and the CB statutory receiver
appealed to the NLRC and posted an appeal bond in the form of a certification from
the Central Bank to the effect that the portion of Manilabanks funds in an amount
equal to that of the total award of the labor arbiter, has been reserved and set aside by

the Central Bank to answer for the private respondents claims should they finally be
adjudged to be entitled thereto.
On December 8, 1989, private respondents opposed the appeal and filed a
motion for the issuance of a writ of execution of the labor arbiters judgment on the
ground that the Central Bank certification cannot be considered as an appeal bond.
On June 21, 1991, the NLRC issued an order requiring petitioners to deposit
with the Cashier of the NLRC a cash bond or its equivalent in treasury bills, warrants
and/or other government securities in the amount of P193,000,000.00, plus ten
percent (10%) thereof as attorneys fees within ten (10) days from receipt thereof.
On July 5, 1991, petitioners moved to reconsider said order. However, pending
resolution of said motion for reconsideration, petitioners submitted to the NLRC a
Certificate of Time Deposit issued by the Philippine National Bank (PNB) in the
amount of P212,700,000.00, payable to the receiver of Manilabank.
On January 16, 1992, the NLRC held a hearing where the parties agreed that
the certificate of time deposit submitted by Manilabank to the NLRC be considered
substantial compliance of the requirement of an appeal bond, on the condition that it
will be periodically renewed and re-deposited with the NLRC Cashier upon its maturity,
and that the securities deposited should be free from any other claims or liens.
On September 9, 1992, the NLRC issued a resolution on the merits of the case
and, as above-stated, affirmed with slight modifications, the decision of the labor
arbiter. The decretal portion of the same reads:
WHEREFORE, except for the modification we provided on the manner
medical, dental and optical benefits should be claimed/paid, and our
awarding annual interest of 12% to whatever has been awarded below,
the appealed decision is hereby affirmed and respondents appeal is
hereby dismissed.
SO ORDERED.[9]
Petitioners filed a motion for reconsideration from the aforequoted resolution.
On October 14, 1992, private respondents filed an ex parte motion for the
issuance of a writ of execution. Petitioners opposed the same, reasoning that the
assets of Manilabank are exempt from execution and that the NLRC resolution had
not become final and executory.
On October 22, 1992, the NLRC issued an order directing petitioners, under
pain of contempt, to renew the certificate of time deposit and to have the same issued
in the name of , and deposited with, the cashier of the NLRC.
In response, petitioners Manilabank and Arnulfo Aurellano filed petition
for certiorari before this Court, docketed as G.R. No. 107487, to set aside said order
alleging that the same was issued with grave abuse of discretion because it (as rephrased):
a. violated an existing statute.[10]

b. arbitrary compelled the Receiver to violate his statutory duty to preserve

Manilabanks assets for the benefit of all creditors.[11]

papers which were never identified nor supported by any

single affidavit.

c. whimsically deprived petitioners of their right to file a motion for

reconsideration of the Order.[12]

(2) The Labor Arbiter proceeded to decide the case solely on

the bases of the pleadings filed, despite the enormity of the
claims and the reapeted demands for a full-dress trial (which,
ironically, were initially granted by the Office of the Labor
Arbiter), made necessary by the conflicting factual allegations
of the parties and the worthless papers passed off by private
respondents as their evidence.[15]

d. was not anchored upon any cogent reason other than to preempt
petitioners from invoking the corrective powers of this Honorable Court of
last resort.[13]
On November 26, 1992, petitioners earlier motion for reconsideration of the
NLRC Decision dated September 9, 1992 was denied for lack of merit in an order
which dispositively reads as follows:
Wherefore, premises considered, order is hereby issued:
1. denying respondents motion for reconsideration;
2. directing the NLRC Cashier to hold in her custody resubmitted Certificate of Time Deposit No. 890530-D dated
October 27, 1992 with maturity date on December 28, 1992;
3. directing the respondents to post an additional bond, either
in cash, surety, or certificate of time deposit drawn in the
name of the Cashier, NLRC, in the amount of P76,572,000.00
to cover, the additional award detailed in our September 9,
1992 resolution;
4. directing, accordingly, the Executive Clerk to cause the
personal service of this Order upon the parties, particularly
the respondents and their counsel; and
5. holding in abeyance the execution of our September 9,
1992 resolution (despite its finality now) for a period of ten
(10) calendar days from respondents receipt of this Order,
with the warning, however, that should this Commission not
receive a restraining order from the Supreme Court within
said period of ten (10) calendar days, then a writ of execution
will be issued to enforce our now final judgment.
SO ORDERED.[14]
Consequently, petitioners filed another petition for certiorari before this Court,
this time docketed as G.R. No. 107902, contending that:
a. Public respondents, in grave abuse of discretion, effectively violated
petitioners right due process because(1) The monstrous award totaling about P212 million was
decided based purely on private respondents worthless

b. Public respondents unlawfully arrogated unto themselves the

jurisdiction to pass upon the question of Manilabanks insolvency, despite
the pleaded pendency of that prejudicial question before the RTC of
Manila which had aquired exclusive jurisdiction to rule on the issue to the
exclusion of all others.[16]
c. The money award adjudged against the insolvent Manilabank violates
all notions of justice and equity, considering that the beneficiaries thereof
are former officers and top managers of Manilabank who, being part of
management, were partly to blame for the banks financial decline.[17]
d. A statutory receiver has the power to adopt and implement prudent
policies aimed at preserving the assets of an insolvent bank including
regulating, according to his own discretion and judgment, all aspects of
employment.[18]
e. Public respondents arbitrary findings that salary increases, Christmas
and mid-year bonuses and other benefits have been regularly and
unconditionally paid by Manilabank to private respondents, and that
Manilabank earned profits in 1984, 1985 and 1986, are contrary to the
evidence on record and are based on pure unsubstantiated guesswork. [19]
f. The award of attorneys fees is unconscionable, especially in light of its
dissipative effect of the remaining assets of the insolvent Manilabank and
its prejudicial consequences on Manilabanks stockholders and creditors.
[20]

g. The NLRCs award of legal interest on the amount awarded by the labor
arbiter and its order to deposit an additional bond to cover such interest
have no legal basis and give an undue advantage to other creditors of the
insolvent Manilabank.[21]
h. The NLRCs threat to execute the judgment would be unlawful if carried
out, because Manilabanks assets are legally exempt from execution.[22]
On December 9, 1992, this Court ordered that G.R. No. 107902 be consolidated
with G.R. No. 107487.[23]
On December 16, 1992, this Court issued a Resolution temporarily enjoining
public respondent NLRC from enforcing and/or carrying out the decision of the labor
arbiter dated November 14, 1989 and its resolution dated September 9, 1992 and

order dated November 26, 1992, all issued in NLRC NCR Case No. 00-11-04624-88.
[24]

G.R. No. 107902 is impressed with merit.

Both the Labor Arbiter and the NLRC opted to award all the additional benefits
claimed by the 343 private respondents who had already been duly paid separation
pay and/or retirement benefits upon termination of their employment. The NLRC
erroneously adopted the findings of the labor arbiter, misapplying the time-honored
rule that factual findings of quasi-judicial agencies are accorded not only respect but
even finality if supported by substantial evidence. It declared that the additional
benefits sought are in the nature of bonuses which when made part of the wage or
salary or compensation of an employee become demandable and enforceable.[25]
Both the Labor Arbiters and the NLRCs findings and conclusions are flawed.
By definition, 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. [26] 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 employees basic salaries or wages, [27] especially so if
it is incapable of doing so.
In Philippine Education Co., Inc. v. Court of Industrial Relations, [28] cited
in Philippine duplicators, Inc. v. NLRC,[29] the Court expounded on the nature of a
bonus, thus:
As a rule, a bonus is an amount granted and paid to an employee for his
industry and loyalty which contributed to the success of the employers
business and made possible the realization of profits. It is an act
of generosity 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. xxx From the legal point of view, a bonus is not a
demandable 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
fixed amount and the former would be a contingent one dependent upon
the realization of profits. xxx . (Italics supplied).[30]
Clearly then, a bonus is an amount given ex gratia to an employee by an
employer on account of success in business or realization of profits. How then can an
employer be made liable to pay additional benefits in the nature of bonuses to its
employees when it has been operating on considerable net losses for a given period
of time?
Records bear out that petitioner Manilabank was already in dire financial straits
in the mid-80s. As early as 1984, the Central Bank found that Manilabank had been
suffering financial losses. Presumably, the problems commenced even before their
discovery in 1984. As earlier chronicled, the Central Bank placed petitioner bank under
comptrollership in 1984 because of liquidity problems and excessive interbank

borrowings. In 1987, it was placed under receivership and was ordered to close
operation. In 1988, it was ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the
years 1984, 1985 and 1986, thus, resulting to its eventual closure in 1987 and
liquidation in 1988. Clearly, there was no success in business or realization of profits
to speak of that would warrant the conferment of additional benefits sought by private
respondents. No company should be compelled to act liberally and confer upon its
employees additional benefits over and above those mandated by law when it is
plagued by economic difficulties and financial losses. No act of enlightened generosity
and self-interest can be exacted from near empty, if not empty, coffers.
Consequently, on the ten (10) items awarded to herein private respondents
(enumerated at page 3) which represent additional benefits, they having already been
paid separation and retirement benefits, we rule as follows:
First. The award of 5% profit sharing of petitioner banks net profits for the years
1985 and 1986 is deleted as there were clearly no profits to share during that period
given the banks financial status in 1985 and 1986 when it was operating on net
losses.
Second. The award of wage increases and Christmas and mid-year bonuses
from 1985 to 1988, being in the nature of gratuities and dependent as they on the
petitioners liberality and capability to give, is likewise deleted for same reasons above
stated.
Third. The award of differentials on accrued leaves, retirement benefits and
Christmas and mid-year bonuses is also deleted as a necessary and logical
consequence of the denial of the wage increases and Christmas and mid-year
bonuses.
Fourth. The award of medical, dental and optical benefits is well-taken and,
therefore, affirmed.
Fifth. The claim for travel plans for 23 senior officers, and car plans and gasoline
allowances for 23 senior officers, 15 senior managers and 54 assistant managers may
only be granted to those officers who have not yet availed of the said benefit subject to
the proper determination by the labor arbiter.
Sixth and last. Claims for longevity pay, loyalty bonuses and uniform allowance
of P600.00 for 1985 may be granted given the apparent loyalty and allegiance shown
by herein private respondents to petitioner bank despite rough sailing during the said
period of time.
That disposes of G.R. No. 107902.
With respect to G.R. No. 107487, the same is dismissed, the issues raised
therein having been rendered moot and academic by the foregoing disquisitions and
disposition. Besides, it is beyond dispute that employees indeed enjoy first preference
in the event of bankruptcy or liquidation of an employers business.[31]
WHEREFORE, premises considered, G.R. No. 107902 is GRANTED and is
hereby REMANDED to the Labor Arbiter for the proper computation of the monetary

awards in accordance with the foregoing disquisition and with reasonable dispatch.
G.R. No. 107487 is hereby DISMISSED.
SO ORDERED.

22. G.R. No. 111744 September 8, 1995

LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, BALTAZARA J. LOPEZ AND
VILMA
L.
CRUZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and INSULAR LIFE ASSURANCE
CO., LTD., respondents.

should receive their respective service awards and other prorated bonuses which they
had earned at the time they were dismissed. In addition, Lopez argued that "the cash
service awards have already been budgeted in a fund distinct and apart from
redundancy fund. 5
Thereafter, private respondent required petitioners to execute a "Release and
Quitclaim," 6 and petitioners complied but with a written protest reiterating their
previous demand that they were nonetheless entitled to receive their service awards.
On March 21, 1991, petitioners inquired from the Legal Service of the Department of
Labor and Employment 7whether respondent corporation could legally refuse the
payment of their service awards as mandated in their Employee's Manual.
About three months later the labor department issued its opinion, with pertinent
authorities, responding to petitioners' query as follows:
xxx xxx xxx

REGALADO, J.:
This petition for certiorari seeks the nullification of the decision 1 of the National Labor
Relations Commission (NLRC) promulgated on May 31, 1992 in NLRC NCR CA No.
004120-92, and its resolution dated August 27, 1993 denying petitioner's motion for
reconsideration thereof. The said decision set aside on appeal, the decision of Labor
Arbiter Alex Arcadio Lopez ordering private respondent to pay petitioners their service
awards, anniversary bonus and prorated performance bonus in the amount of
P144,579.00 and 10% attorney's fees in the amount of P14,457.90. 2

This Department believes that your query presents several

issues. These shall be addressed point by point, thus:
First, the Department deems the service
award to be part of the benefits of the
employees of Insular Life. Company policies
and practices are fertile sources of
employee's rights. These must be applied
uniformly as interpretation cannot vary from
one employee to another. . . .

First, the undisputed facts.

Petitioners were regular employees of private respondent Insular Life Assurance Co:,
Ltd., but they were dismissed on November 1, 1990 when their positions were
declared redundant. A special redundancy benefit was paid to them, which included
payment of accrued vacation leave and fifty percent (50%) of unused current sick
leave, special redundancy benefit, equivalent to three (3) months salary for every year
of service; and additional cash benefits, in lieu of other benefits provided by the
company or required by law. 3
Before the termination of their services, petitioner Marcos had been in the employ of
private respondent for more than twenty (20) years, from August 26, ]970; petitioner
Andrada, more than twenty-five (25) years, from July 26, 1965; petitioner Lopez,
exactly thirty (30) years, from October 31, 1960; and petitioner Cruz, more than twenty
(20) years, from March 1, 1970. 4
Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to
respondent company questioning the redundancy package, She claimed that they

xxx xxx xxx

While it may be argued that the above-cited case applies only to
retirement benefits, we find solace in the cases of Liberation
Steamship Co., Inc. vs. CIR and National Development Company
vs. Unlicensed Crew members of Three Dons vessels (23 SCRA
1105) where the Supreme Court held that a gratuity or bonus, by
reason of its long and regular concession indicating company
practice, may become regarded as part of regular compensation
and thus demandable.
xxx xxx xxx
Second, the award is earned at the pertinent anniversary date. At
this time, entitlement to the award becomes vested. The
anniversary date is the only crucial determining factor. Since the

award accrues on that date, it is of no moment that the entitled

employee is separated from service (for whatever cause) before
the awards are physically handed out.

Respondent company appealed to public respondent NLRC claiming grave abuse of

discretion committed by the labor arbiter in holding it liable to pay said service award,
performance and anniversary bonuses, and in not finding that petitioners were
estopped from claiming the same as said benefits had already been given to them.

xxx xxx xxx

Third, even if the award has not accrued as when an employee
is separated from service because of redundancy before the
applicable 5th year anniversary, the material benefits of the award
must be given, prorated, by Insular Life. This is especially true (in)
redundancy, wherein he/she had no control.
xxx xxx xxx
Fourth, the fact that you were required to sign "Release and
Quitclaim" does not affect your right to the material benefits of the
service award. . . . 8
Meanwhile, in the same year, private respondent celebrated its 80th anniversary
wherein the management approved the grant of an anniversary bonus equivalent to
one (1) month salary only to permanent and probationary employees as of November
15, 1990. 9
On March 26, 1991, respondent company announced the grant of performance bonus
to both rank and file employees and supervisory specialist grade and managerial staff
equivalent to two (2) months salary and 2.75 basic salary, respectively, as of
December 30, 1990. The performance bonus, however, would be given only to
permanent employees as of March 30, 1991. 10
Despite the aforequoted opinion of the Department of Labor and Employment, private
respondent refused to pay petitioners service awards. This prompted the latter to file a
consolidated complaint, which was assigned to NLRC Labor Arbiter Lopez, for
payment of their service awards, including performance and anniversary bonuses.
In their complaint, petitioners contended that they are likewise entitled to the
performance and anniversary bonuses because, at the time the performance bonus
was announced to be given, they were only short of two (2) months service to be
entitled to the full amount thereof as they had already served the company for ten (10)
months prior to the declaration of the grant of said benefit. Also, they lacked only
fifteen (15) days to be entitled to the full amount of the anniversary bonus when it was
announced to be given to employees as of November 15, 1990.
In a decision dated October 8, 1992, the labor arbiter ordered respondent company to
pay petitioners their service awards, anniversary bonuses and prorated performance
bonuses, including ten percent (10%) thereof as attorney's fees.

In setting aside the decision of the labor arbiter, respondent NLRC upheld the validity
of the quitclaim document executed by petitioners. For this conclusion, it rationalized
that "(c)ertainly, before complainants signed the quitclaim and release, they are aware
of the nature of such document. In fact, they never assailed the genuineness and due
execution of the same. Hence, we can safely say that they were not placed under
duress or were compelled by means of force to sign the document." 11
Furthermore, the NLRC held that "(n)either was there any unwritten agreement
between complainants and respondent upon separation, which entitled the former to
other renumerations or benefits. On the contrary, they voluntarily accepted the
redundancy benefit package, otherwise, they would not have been separated from
employment." 12
Hence, this petition wherein it is postulated that the basic issue is whether or not
respondent NLRC committed reversible error or grave abuse of discretion in affirming
the validity of the "Release and Quitclaim" and, consequently, that petitioners are not
entitled to payment of service awards and other bonuses. 13 The Solicitor General
public respondent NLRC and private respondent company duly filed their respective
comments. 14
In their petition, petitioners stress that they have actually devoted much, if not all, of
their employable life with private respondent; that given their length of service, their
loyalty to the latter is easily demonstrable; and that the same length of service had
rendered slim, if not eliminated, their chances of getting employed somewhere else." 15
On the other hand, respondent company reiterates its basic contention that the
consideration for the settlement of petitioners' claim is credible and reasonable, more
than satisfies the legal requirement therefor, and that petitioners, in executing the
release and quitclaim, did so voluntarily and with full knowledge of the consequences
thereof. 16
The petition being meritorious, we find for petitioners.
Under prevailing jurisprudence, the fact that an employee has signed a satisfaction
receipt for his claims does not necessarily result in the waiver thereof. The law does
not consider as valid any agreement whereby a worker agrees to receive less
compensation than what he is entitled to recover. A deed of release or quitclaim
cannot bar an employee from demanding benefits to which he is legally entitled. 17
We have heretofore explained that the reason why quitclaims commonly frowned upon
as contrary to public policy, and why they are held to be ineffective to bar claims for

the full measure of the workers' legal rights, is the fact that the employer and the
employee obviously do not stand on the same footing. The employer drove the
employee to the wall. The latter must have harsh necessities of life. He thus found
himself in no position to resist money proffered. His, then, is a case of adherence, not
of choice. One thing sure, however, is that petitioners did not relent on their claim.
They pressed it. They are deemed not have waived any of their rights. Renuntiatio
non praesumitur. 18
Along this line, we have more trenchantly declared that quitclaims and/or complete
releases executed by the employees do not estop them from pursuing their claims
arising from unfair labor practices of the employer. The basic reason for this is that
such quitclaims and/or complete releases are against public policy and, therefore, null
and void. The acceptance of termination does not divest a laborer of the right to
prosecute his employer for unfair labor practice acts. 19 While there maybe possible
exceptions to this holding, we do not perceive any in the case at bar.
Furthermore, in the instant case, it is an undisputed fact that when petitioners signed
the instrument of release and quitclaim, they made a written manifestation reserving
their right to demand the payment of their service awards. 20 The element of total
voluntariness in executing that instrument is negated by the fact that they expressly
stated therein their claim for the service awards, a manifestation equivalent to a
protest and a disavowal of any waiver thereof.
As earlier stated, petitioners even sought the opinion of the Department of Labor and
Employment to determine where and how they stood in the controversy. This act only
shows their adamant desire to obtain their service awards and to underscore their
disagreement with the "Release and Quitclaim" they were virtually forced to sign in
order to receive their separation pay.
We have pointed out in Veloso, et al., vs. Department of Labor and Employment, et
al., 21 that:
While rights may be waived, the same must not be contrary to
law, public order, public policy, morals or good customs or
prejudicial to a third person with a right recognized by law.
Article 6 of the Civil Code renders a quitclaim agreement void ab
initio where the quitclaim obligates the workers concerned to
forego their benefits while at the same time exempting the
employer from any liability that it may choose to reject. This runs
counter to Art. 22 of the Civil Code which provides that no one
shall be unjustly enriched at the expense of another.
We agree with the further observations of the Solicitor General
who, in recommending the setting aside of the decision of
respondent NLRC, called attention to the fact that "contrary to
private respondent's contention, the "additional" redundancy

package does not and could not have covered the payment of the
service awards, performance and anniversary bonuses since the
private respondent company has initially maintained the position
that petitioners are not legally entitled to the same. . . .
Surprisingly, in a sudden turnabout, private respondent now
claims . . . that the subject awards and bonuses are integrated in
the redundancy package. It is evident, therefore, that private
respondent has not truly consolidated the payment of the subject
awards and bonuses in the redundancy package paid to the
petitioners. 22
We are likewise in accord with the findings of the labor arbiter that
petitioners are indeed entitled to receive service awards and other
benefits, thus:
Since each of the complainants have rendered services to
respondent in multiple(s) of five years prior to their separation
from employment, respondent should be paid their service awards
for 1990.
We are not impressed with the contention of the respondent that
service award is a bonus and therefore is an act of gratuity which
the complainants have no right to demand. Service awards are
governed by respondent's employee's manual and (are) therefore
contractual in nature.
On the matter of anniversary and performance bonuses, it is not
disputed that it is respondent's practice to give an anniversary
bonus every five years from its incorporation; that pursuant to this
practice, respondent declared an anniversary bonus for its 80th
Anniversary in 1990; that per terms of this declaration, only the
employees of respondent as of 15 November 1990 will be given
the bonus; and that complainants were separated from
respondent only 25 days before :the respondent's anniversary. On
the other hand, it is also (not) disputed that respondent regularly
gives performance bonuses; that for its commendable
performance in 1990, respondent declared a performance bonus;
that per terms of this declaration, only permanent employees of
respondent as of March 30, 1991 will be given this bonus; and
that complainants were employees of respondents for the first 10
months of 1990.
We cannot see any cogent reason why an anniversary bonus
which respondent gives only once in every five years were given
to all employees of respondent as of 15 November 1990 (pro rata
even to probationary employees; Annex 9) and not to
complainants who have rendered service to respondent for most
of the five year cycle. This is also true in the case of performance

bonus which were given to permanent employees of respondent

as of 30 March 1991 and not to employees who have been
connected with respondent for most of 1990 but were separated
prior to 30 March 1991.

case at bar, equity demands that the performance and anniversary bonuses should be
prorated to the number of months that petitioners actually served respondent
company in the year 1990. This observation should be taken into account in the
computation of the amounts to be awarded to petitioners.

We believe that the prerogative of the employer to determine who

among its employee shall be entitled to receive bonuses which
are, as a matter of practice, given periodically cannot be
exercised arbitrarily. 23 (Emphasis and corrections in parentheses
supplied.)

WHEREFORE, the assailed decision and resolution of respondent National Labor

Relations Commission are hereby SET ASIDE and the decision of Labor Arbiter Alex
Arcadio Lopez is REINSTATED.

The grant of service awards in favor of petitioners is more importantly underscored in

the precedent case ofInsular Life Assurance Co., Ltd., et al. vs. NLRC, et al., 24 where
this Court ruled that "as to the service award differentials claimed by some respondent
union members, the company policy shall likewise prevail, the same being based on
the employment contracts or collective bargaining agreements between the parties. As
the petitioners had explained, pursuant to their policies on the matter, the service
award differential is given at the end of the year to an employee who has completed
years of service divisible by 5.
A bonus is not a gift or gratuity, but is paid for some services or consideration and is in
addition to what would ordinarily be given. 25 The term "bonus" as used in employment
contracts, also conveys an idea of something which is gratuitous, or which may be
claimed to be gratuitous, over and above the prescribed wage which the employer
agrees to pay.
While there is a conflict of opinion as to the validity of an agreement to pay additional
sums for the performance of that which the promisee is already under obligation to
perform, so as to give the latter the right to enforce such promise after performance,
the authorities hold that if one enters into a contract of employment under an
agreement that he shall be paid a certain salary by the week or some other stated
period and, in addition, a bonus, in case he serves for a specified length of time, there
is no reason for refusing to enforce the promise to pay the bonus, if the employee has
served during the stipulated time, on the ground that it was a promise of a mere
gratuity.
This is true if the contract contemplates a continuance of the employment for a definite
term, and the promise of the bonus is made at the time the contract is entered into. If
no time is fixed for the duration of the contract of employment, but the employee
enters upon or continues in service under an offer of a bonus if he remains therein for
a certain time, his service, in case he remains for the required time, constitutes an
acceptance of the offer of the employer to pay the bonus and, after that acceptance,
the offer cannot be withdrawn, but can be enforced by the employee. 26
The weight of authority in American jurisprudence, with which we are persuaded to
agree, is that after the acceptance of a promise by an employer to pay the bonus, the
same cannot be withdrawn, but may be enforced by the employee. 27 However, in the

SO ORDERED.
Narvasa, C.J., Puno, Mendoza and Francisco, JJ., concur.

23. [G. R. No. 123938. May 21, 1998]

LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its

members, ANA MARIE OCAMPO, MARY INTAL, ANNABEL CARESO,
MARLENE MELQIADES, IRENE JACINTO, NANCY GARCIA, IMELDA
SARMIENTO, LENITA VIRAY, GINA JACINTO, ROSEMARIE DEL
ROSARIO, CATHERINE ASPURNA, WINNIE PENA, VIVIAN BAA, EMILY
LAGMAN, LILIAN MARFIL, NANCY DERACO, JANET DERACO,
MELODY JACINTO, CAROLYN DIZON, IMELDA MANALOTO, NORY
VIRAY, ELIZA SALAZAR, GIGI MANALOTO, JOSEFINA BASILIO, MARY
ANN MAYATI, ZENAIDA GARCIA, MERLY CANLAS, ERLINDA
MANALANG, ANGELINA QUIAMBAO, LANIE GARCIA, ELVIRA PIEDRA,
LOURDES PANLILIO, LUISA PANLILIO, LERIZA PANLILIO, ALMA
CASTRO, ALDA DAVID, MYRA T. OLALIA, MARIFE PINLAC, NENITA DE
GUZMAN, JULIE GACAD, EVELYN MANALO, NORA PATIO, JANETH
CARREON, ROWENA MENDOZA, ROWENA MANALO, LENY GARCIA,
FELISISIMA PATIO, SUSANA SALOMON, JOYDEE LANSANGAN,
REMEDIOS AGUAS, JEANIE LANSANGAN, ELIZABETH MERCADO,
JOSELYN MANALESE, BERNADETH RALAR, LOLITA ESPIRITU,
AGNES SALAS, VIRGINIA MENDIOLA, GLENDA SALITA, JANETH
RALAR, ERLINDA BASILIO, CORA PATIO, ANTONIA CALMA, AGNES
CARESO, GEMMA BONUS, MARITESS OCAMPO, LIBERTY
GELISANGA, JANETH MANARANG, AMALIA DELA CRUZ, EVA
CUEVAS, TERESA MANIAGO, ARCELY PEREZ, LOIDA BIE, ROSITA
CANLAS, ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE MANABAT,
ROSARIO DIMATULAC, NYMPA TUAZON, DAIZY TUASON, ERLINDA
NAVARRO, EMILY MANARANG, EMELITA CAYANAN, MERCY
CAYANAN, LUZVIMINDA CAYANAN, ANABEL MANALO, SONIA DIZON,
ERNA CANLAS, MARIAN BENEDICTA, DOLORES DOLETIN, JULIE
DAVID, GRACE VILLANUEVA, VIRGINIA MAGBAG, CORAZON

RILLION, PRECY MANALILI, ELENA RONOZ, IMELDA MENDOZA,

EDNA CANLAS and ANGELA CANLAS, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its
Proprietor/President & Manager, MR. GONZALO KEHYENG and MRS.
EVELYN KEHYENG,respondents.
DECISION
DAVIDE, JR., J.:
In this special civil action for certiorari under Rule 65, petitioners seek to reverse
the 29 March 1995 resolution[1] of the National Labor Relations Commission (NLRC) in
NLRC RAB III Case No. 01-1964-91 which affirmed the Decision [2] of Labor Arbiter
Ariel C. Santos dismissing their complaint for utter lack of merit.
The antecedents of this case as summarized by the Office of the Solicitor
General in its Manifestation and Motion in Lieu of Comment,[3]are as follows:

3. That Management of the Empire Food Products shall make the proper adjustment
of the Employees Wages within fifteen (15) days from the signing of this Agreement
and further agreed to register all the employees with the SSS;
4. That Employer, Empire Food Products thru its Management agreed to deduct thru
payroll deduction UNION DUES and other Assessment[s] upon submission by the
LCP Labor Congress individual Check-Off Authorization[s] signed by the Union
Members indicating the amount to be deducted and further agreed all deduction[s]
made representing Union Dues and Assessment[s] shall be remitted immediately to
the LCP Labor Congress Treasurer or authorized representative within three (3) or five
(5) days upon deductions [sic], Union dues not deducted during the period due, shall
be refunded or reimbursed by the Employer/Management. Employer/Management
further agreed to deduct Union dues from non-union members the same amount
deducted from union members without need of individual Check-Off Authorizations
[for] Agency Fee;

The 99 persons named as petitioners in this proceeding were rank-and-file employees

of respondent Empire Food Products, which hired them on various dates (Paragraph
1, Annex A of Petition, Annex B; Page 2, Annex F of Petition).

5. That in consideration [of] the foregoing covenant, parties jointly and mutually
agreed that NLRC CASE NO. RAB-III-10-1817-90 shall be considered provisionally
withdrawn from the Calendar of the National Labor Relations Commission(NLRC),
while the Petition for direct certification of the LCP Labor Congress parties jointly
move for the direct certification of the LCP Labor Congress;

Petitioners filed against private respondents a complaint for payment of money

claim[s] and for violation of labor standard[s] laws (NLRC Case No. RAB-111-10-181790). They also filed a petition for direct certification of petitioner Labor Congress of the
Philippines as their bargaining representative (Case No. R0300-9010-RU-005).

6. That parties jointly and mutually agreed that upon signing of this Agreement, no
Harassments [sic], Threats, Interferences [sic] of their respective rights under the law,
no Vengeance or Revenge by each partner nor any act of ULP which might disrupt the
operations of the business;

On October 23, 1990, petitioners represented by LCP President Benigno B. Navarro,

Sr. and private respondents Gonzalo Kehyeng and Evelyn Kehyeng in behalf of
Empire Food Products, Inc. entered into a Memorandum of Agreement which
provided, among others, the following:

7. Parties jointly and mutually agreed that pending negotiations or formalization of the
propose[d] CBA, this Memorandum of Agreement shall govern the parties in the
exercise of their respective rights involving the Management of the business and the
terms and condition[s] of employment, and whatever problems and grievances may
arise by and between the parties shall be resolved by them, thru the most cordial and
good harmonious relationship by communicating the other party in writing indicating
said grievances before taking any action to another forum or government agencies;

1. That in connection with the pending Petition for Direct Certification filed by the
Labor Congress with the DOLE, Management of the Empire Food Products has no
objection [to] the direct certification of the LCP Labor Congress and is now recognizing
the Labor Congress of the Philippines (LCP) and its Local Chapter as the SOLE and
EXCLUSIVE Bargaining Agent and Representative for all rank and file employees of
the Empire Food Products regarding WAGES, HOURS OF WORK, AND OTHER
TERMS AND CONDITIONS OF EMPLOYMENT;
2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90 pending with the
NLRC parties jointly and mutually agreed that the issues thereof, shall be discussed
by the parties and resolve[d] during the negotiation of the Collective Bargaining
Agreement;

8. That parties [to] this Memorandum of Agreement jointly and mutually agreed to
respect, abide and comply with all the terms and conditions hereof. Further agreed
that violation by the parties of any provision herein shall constitute an act of
ULP. (Annex A of Petition).
In an Order dated October 24, 1990, Mediator Arbiter Antonio Cortez approved the
memorandum of agreement and certified LCP as the sole and exclusive bargaining
agent among the rank-and-file employees of Empire Food Products for purposes of
collective bargaining with respect to wages, hours of work and other terms and
conditions of employment (Annex B of Petition).

On November 9, 1990, petitioners through LCP President Navarro submitted to private

respondents a proposal for collective bargaining (Annex C of Petition).
On January 23, 1991, petitioners filed a complaint docketed as NLRC Case No. RABIII-01-1964-91 against private respondents for:
a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;
b. Union busting thru Harassments [sic], threats, and interfering with the rights of
employees to self-organization;
c. Violation of the Memorandum of Agreement dated October 23, 1990;
d. Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727, such as
Wages promulgated by the Regional Wage Board;
e. Actual, Moral and Exemplary Damages. (Annex D of Petition)
After the submission by the parties of their respective position papers and
presentation of testimonial evidence, Labor Arbiter Ariel C. Santos absolved private
respondents of the charges of unfair labor practice, union busting, violation of the
memorandum of agreement, underpayment of wages and denied petitioners prayer
for actual, moral and exemplary damages. Labor Arbiter Santos, however, directed the
reinstatement of the individual complainants:
The undersigned Labor Arbiter is not oblivious to the fact that respondents have
violated a cardinal rule in every establishment that a payroll and other papers
evidencing hours of work, payments, etc. shall always be maintained and subjected to
inspection and visitation by personnel of the Department of Labor and
Employment. As such penalty, respondents should not escape liability for this
technicality, hence, it is proper that all individual complainants except those who
resigned and executed quitclaim[s] and releases prior to the filing of this
complaint should be reinstated to their former position[s] with the admonition to
respondents that any harassment, intimidation, coercion or any form of threat as a
result of this immediately executory reinstatement shall be dealt with accordingly.
SO ORDERED. (Annex G of Petition)
On appeal, the National Labor Relations Commission vacated the Decision dated
April 14, 1972 [sic] and remanded the case to the Labor Arbiter for further proceedings
for the following reasons:
The Labor Arbiter, through his decision, noted that xxx complainant did not present
any single witness while respondent presented four (4) witnesses in the persons of
Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira Bulagan xxx (p. 183,

Records), that xxx complainant before the National Labor Relations Commission must
prove with definiteness and clarity the offense charged. xxx (Record, p. 183); that xxx
complainant failed to specify under what provision of the Labor Code particularly Art.
248 did respondents violate so as to constitute unfair labor practice xxx (Record, p.
183); that complainants failed to present any witness who may describe in what
manner respondents have committed unfair labor practice xxx (Record, p. 185); that
xxx complainant LCP failed to present anyone of the so-called 99 complainants in
order to testify who committed the threats and intimidation xxx (Record, p. 185).
Upon review of the minutes of the proceedings on record, however, it appears that
complainant presented witnesses, namely, BENIGNO NAVARRO, JR. (28 February
1991, RECORD, p. 91; 8 March 1991, RECORD, p. 92, who adopted its POSITION
PAPER AND CONSOLIDATED AFFIDAVIT, as Exhibit A and the annexes thereto as
Exhibit B, B-1 to B-9, inclusive. Minutes of the proceedings on record show that
complainant further presented other witnesses, namely: ERLINDA BASILIO (13 March
1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENIE GARCIA (16
April 1991, Record, p. 96, see back portion thereof; 2 May 1991, Record, p. 102; 16
May 1991, Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of
Documentary and Testimonial Evidence was made by complainant on June 24, 1991
(Record, p. 106-109)
The Labor Arbiter must have overlooked the testimonies of some of the individual
complainants which are now on record. Other individual complainants should have
been summoned with the end in view of receiving their testimonies. The complainants
should be afforded the time and opportunity to fully substantiate their claims against
the respondents. Judgment should be rendered only based on the conflicting positions
of the parties. The Labor Arbiter is called upon to consider and pass upon the issues
of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view [that] the case should be
remanded to the Labor Arbiter of origin for further proceedings.(Annex H of Petition)
In a Decision dated July 27, 1994, Labor Arbiter Santos made the following
determination:
Complainants failed to present with definiteness and clarity the particular act or acts
constitutive of unfair labor practice.
It is to be borne in mind that a declaration of unfair labor practice connotes a finding of
prima facie evidence of probability that a criminal offense may have been committed
so as to warrant the filing of a criminal information before the regular court. Hence,
evidence which is more than a scintilla is required in order to declare
respondents/employers guilty of unfair labor practice. Failing in this regard is fatal to
the cause of complainants. Besides, even the charge of illegal lockout has no leg to
stand on because of the testimony of respondents through their guard Orlando Cairo
(TSN, July 31, 1991 hearing; p. 5-35) that on January 21, 1991, complainants refused
and failed to report for work, hence guilty of abandoning their post without permission

from respondents. As a result of complainants[] failure to report for work, the cheese
curls ready for repacking were all spoiled to the prejudice of respondents. Under
cross-examination, complainants failed to rebut the authenticity of respondents
witness testimony.
As regards the issue of harassments [sic], threats and interference with the rights of
employees to self-organization which is actually an ingredient of unfair labor practice,
complainants failed to specify what type of threats or intimidation was committed and
who committed the same. What are the acts or utterances constitutive of harassments
[sic] being complained of? These are the specifics which should have been proven
with definiteness and clarity by complainants who chose to rely heavily on its position
paper through generalizations to prove their case.
Insofar as violation of [the] Memorandum of Agreement dated October 23, 1990 is
concerned, both parties agreed that:
2 - That with regards [sic] to the NLRC Case No. RAB III-10-181790 pending with the NLRC, parties jointly and mutually agreed
that the issues thereof shall be discussed by the parties and
resolve[d] during the negotiation of the CBA.
The aforequoted provision does not speak of [an] obligation on the part of
respondents but on a resolutory condition that may occur or may not happen. This
cannot be made the basis of an imposition of an obligation over which the National
Labor Relations Commission has exclusive jurisdiction thereof.

On appeal, the NLRC, in its Resolution dated 29 March 1995, [5] affirmed in
toto the decision of Labor Arbiter Santos. In so doing, the NLRC sustained the Labor
Arbiters findings that: (a) there was a dearth of evidence to prove the existence of
unfair labor practice and union busting on the part of private respondents; (b) the
agreement of 23 October 1990 could not be made the basis of an obligation within the
ambit of the NLRCs jurisdiction, as the provisions thereof, particularly Section 2, spoke
of a resolutory condition which could or could not happen; (c) the claims for
underpayment of wages were without basis as complainants were
admittedly pakiao workers and paid on the basis of their output subject to the lone
limitation that the payment conformed to the minimum wage rate for an eight-hour
workday; and (d) petitioners were not underpaid.
Their motion for reconsideration having been denied by the NLRC in its
Resolution of 31 October 1995,[6] petitioners filed the instant special civil action
for certiorari raising the following issues:
I
WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL LABOR
RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION WHEN IT
DISREGARDED OR IGNORED NOT ONLY THE EVIDENCE FAVORABLE TO
HEREIN PETITIONERS, APPLICABLE JURISPRUDENCE BUT ALSO ITS
OWN DECISIONS AND THAT OF THIS HONORABLE HIGHEST TRIBUNAL
WHICH [WAS] TANTAMOUNT NOT ONLY TO THE DEPRIVATION OF
PETITIONERS RIGHT TO DUE PROCESS BUT WOULD RESULT [IN]
MANIFEST INJUSTICE.
II

Anent the charge that there was underpayment of wages, the evidence points to the
contrary. The enumeration of complainants wages in their consolidated Affidavits of
merit and position paper which implies underpayment has no leg to stand on in the
light of the fact that complainants admission that they are piece workers or paid on
a pakiao [basis] i.e. a certain amount for every thousand pieces of cheese curls or
other products repacked. The only limitation for piece workers or pakiao workers is
that they should receive compensation no less than the minimum wage for an eight (8)
hour work [sic]. And compliance therewith was satisfactorily explained by respondent
Gonzalo Kehyeng in his testimony (TSN, p. 12-30) during the July 31, 1991
hearing. On cross-examination, complainants failed to rebut or deny Gonzalo
Kehyengs testimony that complainants have been even receiving more than the
minimum wage for an average workers [sic].Certainly, a lazy worker earns less than
the minimum wage but the same cannot be attributable to respondents but to the lazy
workers.
Finally, the claim for moral and exemplary damages has no leg to stand on when no
malice, bad faith or fraud was ever proven to have been perpetuated by respondents.
WHEREFORE, premises considered, the complaint is hereby DISMISSED for utter
lack of merit. (Annex I of Petition).[4]

WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY ABUSED ITS

DISCRETION WHEN IT DEPRIVED THE PETITIONERS OF THEIR
CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION, SECURITY OF
TENURE, PROTECTION TO LABOR, JUST AND HUMANE CONDITIONS OF
WORK AND DUE PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY EASED OUT [OF]
OR CONSTRUCTIVELY DISMISSED FROM THEIR ONLY MEANS OF
LIVELIHOOD.
IV
WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED FROM THE
DATE OF THEIR DISMISSAL UP TO THE TIME OF THEIR REINSTATEMENT,
WITH BACKWAGES, STATUTORY BENEFITS, DAMAGES AND ATTORNEYS
FEES.[7]

We required respondents to file their respective Comments.

In their Manifestation and Comment, private respondents asserted that the
petition was filed out of time. As petitioners admitted in their Notice to File petition for
Review on Certiorari that they received a copy of the resolution (denying their motion
for reconsideration) on 13 December 1995, they had only until 29 December 1995 to
file the petition. Having failed to do so, the NLRC thus already entered judgment in
private respondents favor.
In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed the
notice to file a petition for review on their behalf, mistook which reglementary period to
apply. Instead of using the reasonable time criterion for certiorari under Rule 65, he
used the 15-day period for petitions for review on certiorari under Rule 45. They
hastened to add that such was a mere technicality which should not bar their petition
from being decided on the merits in furtherance of substantial justice, especially
considering that respondents neither denied nor contradicted the facts and issues
raised in the petition.
In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor
General (OSG) sided with petitioners. It pointed out that the Labor Arbiter, in finding
that petitioners abandoned their jobs, relied solely on the testimony of Security Guard
Rolando Cairo that petitioners refused to work on 21 January 1991, resulting in the
spoilage of cheese curls ready for repacking. However, the OSG argued, this refusal
to report for work for a single day did not constitute abandonment, which pertains to a
clear, deliberate and unjustified refusal to resume employment, and not mere
absence. In fact, the OSG stressed, two days after allegedly abandoning their work,
petitioners filed a complaint for, inter alia, illegal lockout or illegal dismissal. Finally, the
OSG questioned the lack of explanation on the part of Labor Arbiter Santos as to why
he abandoned his original decision to reinstate petitioners.
In view of the stand of the OSG, we resolved to require the NLRC to file its own
Comment.
In its Comment, the NLRC invokes the general rule that factual findings of an
administrative agency bind a reviewing court and asserts that this case does not fall
under the exceptions. The NLRC further argues that grave abuse of discretion may
not be imputed to it, as it affirmed the factual findings and legal conclusions of the
Labor Arbiter only after carefully reviewing, weighing and evaluating the evidence in
support thereof, as well as the pertinent provisions of law and jurisprudence.
In their Reply, petitioners claim that the decisions of the NLRC and the Labor
Arbiter were not supported by substantial evidence; that abandonment was not
proved; and that much credit was given to self-serving statements of Gonzalo
Kehyeng, owner of Empire Foods, as to payment of just wages.
On 7 July 1997, we gave due course to the petition and required the parties to
file their respective memoranda. However, only petitioners and private respondents
filed their memoranda, with the NLRC merely adopting its Comment as its
Memorandum.
We find for petitioners.

Invocation of the general rule that factual findings of the NLRC bind this Court is
unavailing under the circumstances. Initially, we are unable to discern any compelling
reason justifying the Labor Arbiters volte face from his 14 April 1992 decision
reinstating petitioners to his diametrically opposed 27 July 1994 decision, when in
both instances, he had before him substantially the same evidence. Neither do we find
the 29 March 1995 NLRC resolution to have sufficiently discussed the facts so as to
comply with the standard of substantial evidence.For one thing, the NLRC confessed
its reluctance to inquire into the veracity of the Labor Arbiters factual findings,
staunchly declaring that it was not about to substitute [its] judgment on matters that
are within the province of the trier of facts. Yet, in the 21 July 1992 NLRC resolution,
[8]
it chastised the Labor Arbiter for his errors both in judgment and procedure, for
which reason it remanded the records of the case to the Labor Arbiter for compliance
with the pronouncements therein.
What cannot escape from our attention is that the Labor Arbiter did not heed the
observations and pronouncements of the NLRC in its resolution of 21 July 1992,
neither did he understand the purpose of the remand of the records to him. In said
resolution, the NLRC summarized the grounds for the appeal to be:
1. that there is a prima facie evidence of abuse of discretion and acts of gross
incompetence committed by the Labor Arbiter in rendering the decision.
2. that the Labor Arbiter in rendering the decision committed serious errors in the
findings of facts.
After which, the NLRC observed and found:
Complainant alleged that the Labor Arbiter disregarded the testimonies of the 99
complainants who submitted their Consolidated Affidavit of Merit and Position Paper
which was adopted as direct testimonies during the hearing and cross-examined by
respondents counsel.
The Labor Arbiter, through his decision, noted that x x x complainant did not present
any single witness while respondent presented four (4) witnesses in the persons of
Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira Bulagan x x x (Records,
p. 183), that x x x complainant before the National Labor Relations Commission must
prove with definiteness and clarity the offense charged. x x x (Record, p. 183; that x x
x complainant failed to specify under what provision of the Labor Code particularly Art.
248 did respondents violate so as to constitute unfair labor practice x x x (Record, p.
183); that complainants failed to present any witness who may describe in what
manner respondents have committed unfair labor practice x x x (Record, p. 185); that
x x x complainant a [sic] LCP failed to present anyone of the so called 99
complainants in order to testify who committed the threats and intimidation x x x
(Record, p. 185).
Upon review of the minutes of the proceedings on record, however, it appears that
complainant presented witnesses, namely BENIGNO NAVARRO, JR. (28 February

1991, RECORD, p. 91; 8 March 1991, RECORD, p. 92), who adopted its POSITION
PAPER AND CONSOLIDATED AFFIDAVIT, as Exhibit A and the annexes thereto as
Exhibit B, B-1 to B-9, inclusive. Minutes of the proceedings on record show that
complainant further presented other witnesses, namely: ERLINDA BASILIO (13 March
1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENI GARCIA (16
April 1991, Record, p. 96, see back portion thereof; 2 May 1991, Record, p. 102; 16
May 1991, Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of
Documentary and Testimonial Evidence was made by the complainant on June 24,
1991 (Record, p. 106-109).
The Labor Arbiter must have overlooked the testimonies of some of the individual
complainants which are now on record. Other individual complainants should have
been summoned with the end in view of receiving their testimonies. The complainants
should [have been] afforded the time and opportunity to fully substantiate their claims
against the respondents. Judgment should [have been] rendered only based on the
conflicting positions of the parties. The Labor Arbiter is called upon to consider and
pass upon the issues of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view the case should be remanded to
the Labor Arbiter of origin for further proceedings.
Further, We take note that the decision does not contain a dispositive portion or
fallo. Such being the case, it may be well said that the decision does not resolve the
issues at hand. On another plane, there is no portion of the decision which could be
carried out by way of execution.
It may be argued that the last paragraph of the decision may be categorized as the
dispositive portion thereof:
xxxxx
The undersigned Labor Arbiter is not oblivious [to] the fact that respondents have
violated a cardinal rule in every establishment that a payroll and other papers
evidencing hour[s] of work, payment, etc. shall always be maintained and subjected to
inspection and visitation by personnel of the Department of Labor and
Employment. As such penalty, respondents should not escape liability for this
technicality, hence, it is proper that all the individual complainants except those who
resigned and executed quitclaim[s] and release[s] prior to the filing of this complaint
should be reinstated to their former position with the admonition to respondents that
any harassment, intimidation, coercion or any form of threat as a result of this
immediately executory reinstatement shall be dealt with accordingly.
SO ORDERED.
It is Our considered view that even assuming arguendo that the respondents failed to
maintain their payroll and other papers evidencing hours of work, payment etc., such

circumstance, standing alone, does not warrant the directive to reinstate complainants
to their former positions. It is [a] well settled rule that there must be a finding of illegal
dismissal before reinstatement be mandated.
In this regard, the LABOR ARBITER is hereby directed to include in his clarificatory
decision, after receiving evidence, considering and resolving the same, the requisite
dispositive portion.[9]
Apparently, the Labor Arbiter perceived that if not for petitioners, he would not
have fallen victim to this stinging rebuke at the hands of the NLRC. Thus does it
appear to us that the Labor Arbiter, in concluding in his 27 July 1994 Decision that
petitioners abandoned their work, was moved by, at worst, spite, or at best,
lackadaisically glossed over petitioners evidence. On this score, we find the following
observations of the OSG most persuasive:
In finding that petitioner employees abandoned their work, the Labor Arbiter and the
NLRC relied on the testimony of Security Guard Rolando Cairo that on January 21,
1991, petitioners refused to work. As a result of their failure to work, the cheese curls
ready for repacking on said date were spoiled.
The failure to work for one day, which resulted in the spoilage of cheese curls does not
amount to abandonment of work. In fact two (2) days after the reported abandonment
of work or on January 23, 1991, petitioners filed a complaint for, among others, unfair
labor practice, illegal lockout and/or illegal dismissal. In several cases, this Honorable
Court held that one could not possibly abandon his work and shortly thereafter
vigorously pursue his complaint for illegal dismissal (De Ysasi III v. NLRC, 231 SCRA
173; Ranara v. NLRC, 212 SCRA 631;Dagupan Bus Co. v. NLRC, 191 SCRA
328; Atlas Consolidated Mining and Development Corp. v. NLRC, 190 SCRA 505; Hua
Bee ShirtFactory v. NLRC, 186 SCRA 586; Mabaylan v. NLRC, 203 SCRA 570
and Flexo Manufacturing v. NLRC, 135 SCRA 145). In Atlas Consolidated, supra, this
Honorable Court explicitly stated:
It would be illogical for Caballo, to abandon his work and then immediately file an
action seeking for his reinstatement. We can not believe that Caballo, who had worked
for Atlas for two years and ten months, would simply walk away from his job unmindful
of the consequence of his act, i.e. the forfeiture of his accrued employment benefits. In
opting to finally to [sic] contest the legality of his dismissal instead of just claiming his
separation pay and other benefits, which he actually did but which proved to be futile
after all, ably supports his sincere intention to return to work, thus negating Atlas stand
that he had abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable Court stressed that it is the clear,
deliberate and unjustified refusal to resume employment and not mere absence that
constitutes abandonment. The absence of petitioner employees for one day on
January 21, 1991 as testified [to] by Security Guard Orlando Cairo did not constitute
abandonment.

In his first decision, Labor Arbiter Santos expressly directed the reinstatement of the
petitioner employees and admonished the private respondents that any harassment,
intimidation, coercion or any form of threat as a result of this immediately executory
reinstatement shall be dealt with accordingly.
In his second decision, Labor Arbiter Santos did not state why he was abandoning his
previous decision directing the reinstatement of petitioner employees.
By directing in his first decision the reinstatement of petitioner employees, the Labor
Arbiter impliedly held that they did not abandon their work but were not allowed to
work without just cause.
That petitioner employees are pakyao or piece workers does not imply that they are
not regular employees entitled to reinstatement. Private respondent Empire Food
Products, Inc. is a food and fruit processing company. In Tabas v. California
Manufacturing Co., Inc. (169 SCRA 497), this Honorable Court held that the work of
merchandisers of processed food, who coordinate with grocery stores and other
outlets for the sale of the processed food is necessary in the day-to-day operation[s]
of the company. With more reason, the work of processed food repackers is
necessary in the day-to-day operation[s] of respondent Empire Food Products. [10]
It may likewise be stressed that the burden of proving the existence of just
cause for dismissing an employee, such as abandonment, rests on the employer, [11] a
burden private respondents failed to discharge.
Private respondents, moreover, in considering petitioners employment to have
been terminated by abandonment, violated their rights to security of tenure and
constitutional right to due process in not even serving them with a written notice of
such termination.[12] Section 2, Rule XIV, Book V of the Omnibus Rules Implementing
the Labor Code provides:
SEC. 2. Notice of Dismissal. - Any employer who seeks to dismiss a worker shall
furnish him a written notice stating the particular acts or omission constituting the
grounds for his dismissal. In cases of abandonment of work, the notice shall be served
at the workers last known address.
Petitioners are therefore entitled to reinstatement with full back wages pursuant
to Article 279 of the Labor Code, as amended by R.A. No. 6715. Nevertheless, the
records disclose that taking into account the number of employees involved, the
length of time that has lapsed since their dismissal, and the perceptible resentment
and enmity between petitioners and private respondents which necessarily strained
their relationship, reinstatement would be impractical and hardly promotive of the best
interests of the parties. In lieu of reinstatement then, separation pay at the rate of one
month for every year of service, with a fraction of at least six (6) months of service
considered as one (1) year, is in order.[13]
That being said, the amount of back wages to which each petitioner is entitled,
however, cannot be fully settled at this time. Petitioners, as piece-rate workers having

been paid by the piece,[14] there is need to determine the varying degrees of
production and days worked by each worker. Clearly, this issue is best left to the
National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay, 13 th month pay and
service incentive leave which the labor arbiter failed to rule on but which petitioners
prayed for in their complaint,[15] we hold that petitioners are so entitled to these
benefits. Three (3) factors lead us to conclude that petitioners, although piece-rate
workers, were regular employees of private respondents. First, as to the nature of
petitioners tasks, their job of repacking snack food was necessary or desirable in the
usual business of private respondents, who were engaged in the manufacture and
selling of such food products; second, petitioners worked for private respondents
throughout the year, their employment not having been dependent on a specific
project or season; and third, the length of time[16] that petitioners worked for private
respondents. Thus, while petitioners mode of compensation was on a per piece basis,
the status and nature of their employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees from
receiving benefits such as nighttime pay, holiday pay, service incentive leave [17] and
13th month pay,[18] inter alia, field personnel and other employees whose time and
performance is unsupervised by the employer, including those who are engaged on
task or contract basis, purely commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in the performance
thereof. Plainly, petitioners as piece-rate workers do not fall within this group. As
mentioned earlier, not only did petitioners labor under the control of private
respondents as their employer, likewise did petitioners toil throughout the year with the
fulfillment of their quota as supposed basis for compensation. Further, in Section 8 (b),
Rule IV, Book III which we quote hereunder, piece workers are specifically mentioned
as being entitled to holiday pay.
SEC. 8. Holiday pay of certain employees.(b) Where a covered employee is paid by results or output, such as payment on
piece work, his holiday pay shall not be less than his average daily
earnings for the last seven (7) actual working days preceding the regular
holiday: Provided, however, that in no case shall the holiday pay be less
than the applicable statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13 th Month Pay
Law, in view of the modifications to P.D. No. 851 [19] by Memorandum Order No. 28,
clearly exclude the employer of piece rate workers from those exempted from paying
13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:

d. Employers of those who are paid on purely commission, boundary or

task basis, and those who are paid a fixed amount for performing
specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall grant the
required 13th month pay to such workers. (italics supplied)

2. REMANDING the records of this case to the National Labor Relations

Commission for its determination of the back wages and other
benefits and separation pay, taking into account the foregoing
observations; and
3. DIRECTING the National Labor Relations Commission to resolve the
referred issues within sixty (60) days from its receipt of a copy of this
decision and of the records of the case and to submit to this Court a
report of its compliance hereof within ten (10) days from the rendition
of its resolution.

The Revised Guidelines as well as the Rules and Regulations identify those workers
who fall under the piece-rate category as those who are paid a standard amount for
every piece or unit of work produced that is more or less regularly replicated, without
regard to the time spent in producing the same.[20]
As to overtime pay, the rules, however, are different. According to Sec. 2(e),
Rule I, Book III of the Implementing Rules, workers who are paid by results including
those who are paid on piece-work, takay, pakiao, or task basis, if their output rates are
in accordance with the standards prescribed under Sec. 8, Rule VII, Book III, of these
regulations, or where such rates have been fixed by the Secretary of Labor in
accordance with the aforesaid section, are not entitled to receive overtime pay. Here,
private respondents did not allege adherence to the standards set forth in Sec. 8 nor
with the rates prescribed by the Secretary of Labor. As such, petitioners are beyond
the ambit of exempted persons and are therefore entitled to overtime pay. Once more,
the National Labor Relations Commission would be in a better position to determine
the exact amounts owed petitioners, if any.
As to the claim that private respondents violated petitioners right to selforganization, the evidence on record does not support this claim. Petitioners relied
almost entirely on documentary evidence which, per se, did not prove any wrongdoing
on private respondents part.For example, petitioners presented their complaint [21] to
prove the violation of labor laws committed by private respondents. The complaint,
however, is merely the pleading alleging the plaintiffs cause or causes of action. [22] Its
contents are merely allegations, the verity of which shall have to be proved during the
trial. They likewise offered their Consolidated Affidavit of Merit and Position
Paper[23] which, like the offer of their Complaint, was a tautological exercise, and did
not help nor prove their cause. In like manner, the petition for certification
election[24]and the subsequent order of certification [25] merely proved that petitioners
sought and acquired the status of bargaining agent for all rank-and-file
employees. Finally, the existence of the memorandum of agreement [26] offered to
substantiate private respondents non-compliance therewith, did not prove either
compliance or non-compliance, absent evidence of concrete, overt acts in
contravention of the provisions of the memorandum.
IN VIEW WHEREOF, the instant petition is hereby GRANTED. The Resolution
of the National Labor Relations Commission of 29 March 1995 and the Decision of the
Labor Arbiter of 27 July 1994 in NLRC Case No. RAB-III-01-1964-91 are hereby SET
ASIDE, and another is hereby rendered:
1. DECLARING petitioners to have been illegally dismissed by private
respondents, thus entitled to full back wages and other privileges, and
separation pay in lieu of reinstatement at the rate of one months
salary for every year of service with a fraction of six months of service
considered as one year;

Costs against private respondents.

24. BERNARDO JIMENEZ and JOSE JIMENEZ, as Operators of JJs

TRUCKING, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
PEDRO JUANATAS and FREDELITO JUANATAS, respondents.
SYLLABUS
1.

REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF THE NLRC,

GENERALLY RESPECTED; EXCEPT WHEN AT ODDS WITH THE LABOR
ARBITER. - The review of labor cases elevated to us on certiorari is confined to
questions of jurisdiction or grave abuse of discretion. As a rule, this Court does
not review supposed errors in the decision of the NLRC which raise factual
issues, because factual findings of agencies exercising quasi-judicial functions
are accorded not only respect but even finality, aside from the consideration that
the Court is essentially not a trier of facts. However, in the case at bar, a review
of the records thereof with an assessment of the facts is necessary since the
factual findings of the NLRC and the labor arbiter are at odds with each other.

2. ID.; ID.; BURDEN OF PROOF; THE DEBTOR WHO PLEADS AFFIRMATIVE

ALLEGATION OF PAYMENT OF OBLIGATION MUST PROVE THE SAME;
WHEN THE BURDEN SHIFTS TO THE CREDITOR. - As a general rule, one
who pleads payment has the burden of proving it. Even where the plaintiff must
allege non-payment, the general rule is that the burden rests on the defendant
to prove payment, rather than on the plaintiff to prove non-payment. The debtor
has the burden of showing with legal certainty that the obligation has been
discharged by payment. When the existence of a debt is fully established by the
evidence contained in the record, the burden of proving that it has been
extinguished by payment devolves upon the debtor who offers such a defense
to the claim of the creditor. Where the debtor introduces some evidence of
payment, the burden of going forward with the evidence - as distinct from the
general burden of proof- shifts to the creditor, who is then under a duty of
producing some evidence to show non-payment. In the instant case, the right of
respondent to be paid a commission is not disputed by petitioners. Although
private respondents admit receipt of partial payment, petitioners still have to
present proof of full payment. Where the defendant sued for a debt admits that
the debt was originally owed, and pleads payment in whole or in part, it is

incumbent upon him to prove such payment. That a plaintiff admits that some
payments have been made does not change the burden of proof. The defendant
still has the burden of establishing payments beyond those admitted by plaintiff.
The positive testimony of a creditor may be sufficient of itself to show nonpayment, even when met by indefinite testimony of the debtor. Similarly, the
testimony of the debtor may also be sufficient to show payment, but, where his
testimony is contradicted by the other party or by a disinterested witness, the
issue may be determined against the debtor since he has the burden of proof.
The testimony of the debtor creating merely an inference of payment will not be
regarded as conclusive on that issue. Hence, for failure to present evidence to
prove payment, petitioners defaulted in their defense and in effect admitted the
allegations of private respondents.
3. ID.; ID.; RULES OF ADMISSIBILITY; DOCUMENTS NOT PROPERLY
ACCOMPLISHED HAS NO PROBATIVE VALUE. - The testimony of petitioners
which merely denied the claim of private respondents, unsupported by
documentary evidence, is not sufficient to establish payment. Although
petitioners submitted a notebook showing the alleged vales of private
respondents for the year 1990, the same is inadmissible and cannot be given
probative value considering that it is not properly accomplished, is undated and
unsigned, and is thus uncertain as to its origin and authenticity.
4. LABOR LAW AND SOCIAL LEGISLATION; EMPLOYER-EMPLOYEE
RELATIONSHIP; ELEMENTS; NOT PRESENT IN CASE AT BAR. - In
determining the existence of an employer-employee relationship, the elements
that are generally considered are the following: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees conduct, with the control
test assuming primacy in the overall consideration. In the case at bar, the
aforementioned elements are not present.
APPEARANCES OF COUNSEL
Fernandez law Office for petitioners.
Alejandro M. Villamil for private respondents.
DECISION

trucking firm, JJ Trucking. They were assigned to a ten-wheeler truck to haul soft
drinks of Coca-Cola Bottling Company and paid on commission basis, initially fixed at
17% but later increased to 20% in 1988.
Private respondents further alleged that for the years 1988 and 1989 they
received only a partial commission of P84,000.00 from petitioners total gross income
of almost P1,000,000.00 for the said two years. Consequently, with their commission
for that period being computed at 20% of said income, there was an unpaid balance to
them of P106,211.86; that until March, 1990 when their services were illegally
terminated, they were further entitled to P15,050.309 which, excluding the partial
payment of P7,000.00, added up to a grand total of P114,261.86 due and payable to
them; and that petitioners refusal to pay their aforestated commission was a ploy to
unjustly terminate them.
Disputing the complaint, petitioners contend that respondent Fredelito Juanatas
was not an employee of the firm but was merely a helper of his father Pedro; that all
commissions for 1988 and 1989, as well as those up to March, 1990, were duly paid;
and that the truck driven by respondent Pedro Juanatas was sold to one Winston
Flores in 1991 and, therefore, private respondents were not illegally dismissed.2
After hearings duly conducted, and with the submission of the parties
position/supporting papers, Labor Arbiter Roque B. de Guzman rendered a decision
dated March 9, 1993, with this decretal portion:
WHEREFORE, decision is hereby issued ordering respondents JJs Trucking and/or
Dr. Bernardo Jimenez to pay jointly and severally complainant Pedro Juanatas a
separation pay of FIFTEEN THOUSAND FIFTY (P15,050.00) PESOS, plus attorneys
fee equivalent to ten percent (10%) of the award.
The complaint of Fredelito Juanatas is hereby dismissed for lack of merit. 3
On appeal filed by private respondents, the NLRC modified the decision of the
labor arbiter and disposed as follows:
PREMISES CONSIDERED, the Decision of March 9, 1993 is hereby MODIFIED, to
wit:

REGALADO, J.:
This petition for certiorari seeks the annulment of the decision of respondent
National Labor Relations Commission (NLRC), dated May 27, 1994, as well as its
resolution,
dated August
8,
1994,
denying
petitioners
motion
for
reconsideration,1 which assailed decision affirmed with modifications the adverse
decision of the labor arbiter against herein petitioners.
On June 29, 1990, herein private respondents Pedro and Fredelito Juanatas,
father and son, filed a claim for unpaid wages/commissions, separation pay and
damages against JJ s Trucking and/or Dr. Bernardo Jimenez. Said respondents, as
complainants therein, alleged that in December, 1987, they were hired by herein
petitioner Bernardo Jimenez as driver! mechanic and helper, respectively, in his

1. Complainant Fredelito Juanatas is hereby declared respondents employee and

shares in (the) commission and separation pay awarded to complainant Pedro
Juanatas, his father.
2. Respondent JJs Trucking and Dr. Bernardo Jimenez are jointly and severally liable
to pay complainants their unpaid commissions in the total amount of Eighty Four
Thousand Three Hundred Eighty Seven Pesos and 05/100 (P84,387.05).
3. The award of attorneys fees is reduced accordingly to eight thousand four hundred
thirty eight pesos and 70/100 (P8,438.70).

4. The other findings stand affirmed.4

Petitioners motion for reconsideration having been denied thereafter in public
respondents resolution dated August 8, 1994, 5 petitioners have come to us in this
recourse, raising for resolution the issues as to whether or not respondent NLRC
committed grave abuse of discretion in ruling (a) that private respondents were not
paid their commissions in full, and (b) that respondent Fredelito Juanatas was an
employee of JJs Trucking.
The review of labor cases elevated to us on certiorari is confined to questions
ofjurisdiction or grave abuse of discretion. 6 As a rule, this Court does not review
supposed errors in the decision of the NLRC which raise factual issues, because
factual findings of agencies exercising quasi-judicial functions are accorded not only
respect but even finality,7 aside from the consideration that the Court is essentially not
a trier of facts. However, in the case at bar, a review of the records thereof with an
assessment of the facts is necessary since the factual findings of the NLRC and the
labor arbiter are at odds with each other.8
On the first issue, we find no reason to disturb the findings of respondent NLRC
that the entire amount of commissions was not paid, this by reason of the evident
failure of herein petitioners to present evidence thatfull payment thereof has been
made. It is a basic rule in evidence that each party must prove his affirmative
allegations. Since the burden of evidence lies with the party who asserts an affirmative
allegation, the plaintiff or complainant has to prove his affirmative allegation, in the
complaint and the defendant or respondent has to prove the affirmative allegations in
his affirmative defenses and counterclaim. Considering that petitioners herein assert
that the disputed commissions have been paid, they have the bounden duty to prove
that fact.
As a general rule, one who pleads payment has the burden of proving it. 9 Even
where the plaintiff must allege non-payment, the general rule is that the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove nonpayment.10 The debtor has the burden of showing with legal certainty that the
obligation has been discharged by payment.11
When the existence of a debt is fully established by the evidence contained in
the record, the burden of proving that it has been extinguished by payment devolves
upon the debtor who offers such a defense to the claim of the creditor.12 Where the
debtor introduces some evidence of payment, the burden of going forward with the
evidence - as distinct from the general burden of proof - shifts to the creditor, who is
then under a duty of producing some evidence to show non-payment.13
In the instant case, the right of respondent Pedro Juanatas to be paid a
commission equivalent to 17%, later increased to 20%, of the gross income is not
disputed by petitioners. Although private respondents admit receipt of partial payment,
petitioners still have to present proof of full payment. Where the defendant sued for a
debt admits that the debt was originally owed, and pleads payment in whole or in part,
it is incumbent upon him to prove such payment. That a plaintiff admits that some
payments have been made does not change the burden of proof. The defendant still
has the burden of establishing payments beyond those admitted by plaintiff.14

The testimony of petitioners which merely denied the claim of private

respondents, unsupported by documentary evidence, is not sufficient to establish
payment. Although petitioners submitted a notebook showing the alleged vales of
private respondents for the year 1990,15 the same is inadmissible and cannot be given
probative value considering that it is not properly accomplished, is undated and
unsigned, and is thus uncertain as to its origin and authenticity.16
The positive testimony of a creditor may be sufficient of itself to show nonpayment, even when met by indefinite testimony of the debtor. Similarly, the testimony
of the debtor may also be sufficient to show payment, but, where his testimony is
contradicted by the other party or by a disinterested witness, the issue may be
determined against the debtor since he has the burden of proof. The testimony of the
debtor creating merely an inference of payment will not be regarded as conclusive on
that issue.17
Hence, for failure to present evidence to prove payment, petitioners defaulted in
their defense and in effect admitted the allegations of private respondents.
With respect to the second issue, however, we agree with petitioners that the
NLRC erred in holding that the son, Fredelito, was an employee of petitioners.
We have consistently ruled that in determining the existence of an employeremployee relationship, the elements that are generally considered are the following:
(1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct, 18 with the
control test assuming primacy in the overall consideration.
In the case at bar, the aforementioned elements are not present. The agreement
was between petitioner JJs Trucking and respondent Pedro Juanatas. The hiring of a
helper was discretionary on the part of Pedro. Under their contract, should he employ
a helper, he would be responsible for the latters compensation. With or without a
helper, respondent Pedro Juanatas was entitled to the same percentage of
commission. Respondent Fredelito Juanatas was hired by his father, Pedro, and the
compensation he received was paid by his father out of the latters commission.
Further, Fredelito was not subject to the control and supervision of and dismissal by
petitioners but of and by his father.
Even the Solicitor General, in his comment, agreed with the finding of the labor
arbiter that Fredelito was not an employee of petitioners, to wit:
Public respondent committed grave abuse of discretion in holding that said private
respondent is an employee of JJs Trucking on the ground that, citing Article 281 of the
Labor Code, Fredelitos functions as helper was (sic) necessary and desirable to
respondents trucking business.
In the first place, Article 281 of the Labor Code does not refer to the basic factors that
must underlie every existing employer-employee relationship, the absence of any of
which will negate such existence. It refers instead to the qualifications of (A)n
employee who is allowed to work after a probationary period and who, as a
consequence, shall be considered a regular employee. Secondly, the test in
determining the existence of an employee-employer relationship is not the necessity

and/or desirability of ones functions in relation to an employers business, but (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power to control the employees conduct. The latter is the
most important element (Singer Sewing Machine Company vs. Drilon, 193 SCRA 270,
275; Deferia vs. NLRC, 194 SCRA 531, 525; Ecal vs. NLRC, 224, 228; Hijos De F.
Escano, Inc. vs. NLRC, 224 SCRA 781, 785). The aforequoted pertinent findings of
the Labor Arbiter indicate (that) the foregoing requirements do not exist between
petitioner and private respondent Fredelito Juanatas. Thus, the labor arbiter stated
that respondent Fredelito Juanatas was never hired by petitioners. Instead the formers
services were availed of by respondent Pedro Juanatas his father, who, at the same
time, supervised and controlled his work and paid his commissions. Respondent
NLRCs ruling did not traverse these findings of the labor arbiter.19
WHEREFORE, the judgment of respondent National Labor Relations
Commission is hereby AFFIRMED, with the MODIFICATION that paragraph 1 thereof,
declaring Fredelito Juanatas an employee of petitioners and entitled to share in the
award for commission and separation pay, is hereby DELETED.
SO ORDERED.
Romero, Puno and Mendoza, JJ., concur.
Torres, Jr. J.,

25. G.R. No. L-66598 December 19, 1986

PHILIPPINE
BANK
OF
COMMUNICATIONS, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, HONORABLE ARBITER
TEODORICO L. DOGELIO and RICARDO ORPIADA respondents.
Marcelino Lontok, Jr. for respondents.

FELICIANO, J.:
Petitioner Philippine Bank of Communications and the Corporate Executive Search
Inc. (CESI) entered into a letter agreement dated January 1976 under which (CESI)
undertook to provide "Tempo[rary] Services" to petitioner Consisting of the "temporary
services" of eleven (11) messengers. The contract period is described as being "from
January 1976." The petitioner in truth undertook to pay a "daily service rate of P18, "
on a per person basis.

Attached to the letter agreement was a "List of Messengers assigned at Philippine

Bank of Communications" which list included, as item No. 5 thereof, the name of
private respondent Ricardo Orpiada.
Ricardo Orpiada was thus assigned to work with the petitioner bank. As such, he
rendered services to the bank, within the premises of the bank and alongside other
people also rendering services to the bank. There was some question as to when
Ricardo Orpiada commenced rendering services to the bank. As noted above, the
letter agreement was dated January 1976. However, the position paper submitted by
(CESI) to the National Labor Relations Commission stated that (CESI) hired Ricardo
Orpiada on 25 June 1975 as a Tempo Service employee, and assigned him to work
with the petitioner bank "as evidenced by the appointment memo issued to him on 25
June 1975. " Be that as it may, on or about October 1976, the petitioner requested
(CESI) to withdraw Orpiada's assignment because, in the allegation of the bank,
Orpiada's services "were no longer needed."
On 29 October 1976, Orpiada instituted a complaint in the Department of Labor (now
Ministry of Labor and Employment) against the petitioner for illegal dismissal and
failure to pay the 13th month pay provided for in Presidential Decree No. 851. This
complaint was docketed as Case No. R04-1010184-76-E. After investigation, the
Office of the Regional Director, Regional Office No. IV of the Department of Labor,
issued an order dismissing Orpiada's complaint for failure of Mr. Orpiada to show the
existence of an employer-employee relationship between the bank and himself.
Despite the foregoing order, Orpiada succeeded in having his complaint certified for
compulsory arbitration in Case No. RB-IV-11187-77 entitled "Ricardo Orpiada,
complaint vs. Philippine Bank of Communications, respondent." During the
compulsory arbitration proceedings, CE SI was brought into the picture as an
additional respondent by the bank. Both the bank and (CESI) stoutly maintained that
(CESI) (and not the bank) was the employer of Orpiada.
On 12 September 1977, respondent Labor Arbiter Dogelio rendered a decision in
Case No. RB-IV-11187-77, the dispositive portion of which read as follows:
WHEREFORE, premises considered, respondent bank is hereby ordered to
reinstate complainant to the same or equivalent position with full back
wages and to pay the latter's 13th month pay for the year 1976.
On 26 October 1977, the bank appealed the decision of the Labor Arbiter to the
respondent NLRC. More than six years laterand the record is silent on why the
proceeding in the NLRC should have taken more than six years to resolve the NLRC
promulgated its decision affirming the award of the Labor Arbiter and stating as
follows:
WHEREFORE, except for the modification reducing the complainant's back
wages to two (2) years without qualification, the Decision appealed from is
hereby AFFIRMED in an other respects.

Accordingly, on 2 April 1984, the bank filed the present petition for certiorari with this
Court seeking to annul and set aside (a) the decision of respondent Labor Arbiter
Dogelio dated 12 September 1977 in Labor Case No. RB-IV-1118-77 and (b) the
decision of the NLRC promulgated on 29 December 1983 affirming with some
modifications the decision of the Labor Arbiter. This Court granted a temporary
restraining order on 11 April 1984. The main issue as litigated by the parties in this
case relates to whether or not an employer-employee relationship existed between the
petitioner bank and private respondent Ricardo Orpiada. The petitioner bank
maintains that no employer-employee relationship was established between itself and
Ricardo Orpiada and that Ricardo Orpiada was an employee of (CESI) and not of the
bank. The bank documents its position by pointing to the following provisions of its
letter agreement with CE SI
1. The individual/s you i.e. (CESI) will assign to us i.e. petitioner) will be
subject to our acceptance and will observe work-days, hours, and methods
of work (sic); on the other hand, they will not be asked to perform job (sic)
not normally related to the position/s for which Tempo Services were
contracted.
2. Such individuals will nevertheless remain your own employees and you
will therefore, retain all liabilities arising from the new Labor Code as
amended Social Security Act and other applicable Governmental decrees,
rules and regulations, provided that, on our part, we shaIl
a. Require your employers assigned to us to properly accomplish
your daily time record, to faithfully reflect all hours worked in our
behalf whether such work be within or beyond eight hours of any
day.
b. Notify you of any change in the work assignment or contract
period affecting any of your employers assigned to us within 24
hours, after such change is made.
(Emphasis supplied)
The above language of the agreement between the bank and CE SI is of course
relevant and important as manifesting an intent to refrain from constituting an
employer-employee relationship between the bank and the persons assigned or
seconded to the bank by (CESI) That extent to which the parties were successful in
realizing their intent is another matter, one that is dependent upon applicable law and
not merely upon the terms of their contract.
In the case of Viana vs. AI-Lagdan and Pica, 99 Phil. 408 (1956), this Court listed
certain factors to be taken into account in determining the existence of an employeremployee relationship. These factors are:

1) The selection and engagement of the putative employee;

2) The payment of wages;
3) The power of dismissal- and
4) The power to control the putative employees' conduct, although the latter
is the most important element. ... (99 Phil. at 411- 412; Emphasis supplied)
In the present case, Orpiada was not previously selected by the bank. Rather, Orpiada
was assigned to work in the bank by (CESI) Orpiada could not have found his way to
the bank's offices had he not been first hired by (CESI) and later assigned to work in
the bank's offices. The selection of Orpiada by (CESI) was, however, subject to the
acceptance of the bank and the bank did accept him As will be seen shortly, (CESI)
had hired Orpiada from the outside world precisely for the purpose of assigning or
seconding him to the bank.
With respect to the payment of Orpiada's wages, the bank remitted to CE SI amounts
corresponding to the "daily service rate" of Orpiada and the others similarly assigned
by (CESI) to the bank, and (CESI) paid to Orpiada and the others the wages
pertaining to to them. It is not clear from the record whether the amounts remitted to
(CESI) included some factor for CESIs fees; it seems safe to assume that (CESI) had
required some amount in excess of the wages paid by (CESI) to Orpiada and the
others to cover its own overhead expenses and provide some contribution to profit.
The bank alleged that Orpiada did not appear in its payroll and this allegation was not
denied by Orpiada. Indeed, the Labor Arbiter in Case No. R04-184-76-B found that
Orpiada was listed in the payroll of (CESI) with (CESI) deducting amounts
representing his Medicare and Social Security System premiums. A copy of the (CESI)
payroll was presented, strangely enough, by Orpiada himself to Regional Office No.
IV.
In respect of the power of dismissal we note that the bank requested (CESI) to
withdraw Orpiada's assignment and that (CESI) did, in fact, withdraw such
assignment. Upon such withdrawal from his assignment with the bank, Orpiada was
also terminated by (CESI) Indeed, it appears clear that Orpiada was hired by (CESI)
specifically for assignment with the bank and that upon his withdrawal from such
assignment upon request of the bank, Orpiada's employment with (CESI) was also
severed, until some other client of (CESI) showed up in the horizon to which Orpiada
could once more be assigned. In the position paper dated August 5, 1977 submitted
by (CESI) before the NLRC, (CESI) explained the relationship between itself and
Orpiada in lucid terms:
5. That as Petitioner herein was very well aware of from the very beginning,
he was hired by Corporate Executive Search, Inc. as a temporary employee
and as such, was being assigned to work with the latter's client Respondent
herein that the rationale behind his hiring was the existence of a service
contract between Corporate Executive Search Inc. and its client-company,

the Philippine Bank of Communications, the herein Respondent, and that

when this service contract was 0terminated, then the reason for his
employment with Corporate Executive Search, Inc., ceased to exist and that
therefore Corporate Executive Search Inc. had no alternative but to
discontinue his employment until another opportune time for his hiring
would present itself;
6. That Petitioner was not given his 13th-month pay under P.D. 851,
because Corporate Executive Search Inc. gave the 13th month pay for 1976
to its employees in December 1976, and since the company had lost
contact with the Petitioner by reason of his having ceased to be connected
with it as of 22 October 1976, he was not among those given the 13thmonth pay. (Emphasis supplied)
Turning to the power to control Orpiada's conduct, it should be noted immediately that
Orpiada performed his sections within the bank's premises, and not within the office
premises of (CESI) As such, Orpiada must have been subject to at least the same
control and supervision that the bank exercises over any other person physically
within its premises and rendering services to or for the bank, in other words, any
employee or staff member of the bank. It seems unreasonable to suppose that the
bank would have allowed Orpiada and the other persons assigned to the bank by CE
SI to remain within the bank's premises and there render services to the bank, without
subjecting them to a substantial measure of control and supervision, whether in
respect of the manner in which they discharged their functions, or in respect of the
end results of their functions or activities, or both.
Application of the above factors in the specific context of this case appears to yield
mixed results so far as concerns the existence of an employer- employer relationship
between the bank and Orpiada. The second ("payment of wages") and third ("power of
dismissal") factors suggest that the relevant relationship was that subsisting between
(CESI) and Orpiada, a relationship conceded by (CESI) to be one between employer
and employee. Upon the other hand, the first ("selection and engagement") and fourth
("control of employee's conduct") factors indicate that some direct relationship did
exist between Orpiada and the bank and that such relationship may be assimilated to
employment. Perhaps the most important circumstance which emerges from an
examination of the facts of the tri-lateral relationship between the bank, (CESI) and
Orpiada is that the employer-employee relationship between (CESI) and Orpiada was
established precisely in anticipation of, and for the very purpose of making possible,
the secondment of Orpiada to the bank. It is therefore necessary to confront the task
of determining the appropriate characterization of the relationship between the bank
and (CESI) was that relationship one of employer and job (independent) contractor or
one of employer and "labor-only" contractor?
Articles 106 and 107 of the Labor Code of the Philippines (Presidential Decree No.
442, as amended) provides as follows:
ART. 106. Contractor or sub-contractor.Whenever an employer enters into
a contract with another person for the performance of the former's work, the

employees of the contractor and of the latter's subcontractor, if any, shall be

paid in accordance with the provisions in this Code.
In the event that the contractor or sub-contractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or sub-contructor to such employees
to the extent of the work performed under the contract in the same manner
and extent that he is liable to employees directly employed by him
The Secretary of Labor may, by appropriate regulations, restrict or prohibit
the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among
the parties involved shall be considered the employer for purposes of this
Code, to prevent any violation or circumvention of any provisions of this
Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.
ART. 107. Indirect employer. The provisions of the immediately preceding
Article shall likewise apply to any person, part, nership association or
corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project. (Emphasis
supplied)
Under the general rule set out in the first and second paragraphs of Article 106, an
employer who enters into a contract with a contractor for the performance of work for
the employer, does not thereby create an employer-employes relationship between
himself and the employees of the contractor. Thus, the employees of the contractor
remain the contractor's employees and his alone. Nonetheless when a contractor fails
to pay the wages of his employees in accordance with the Labor Code, the employer
who contracted out the job to the contractor becomes jointly and severally liable with
his contractor to the employees of the latter "to the extent of the work performed under
the contract" as such employer were the employer of the contractor's employees. The
law itself, in other words, establishes an employer-employee relationship between the
employer and the job contractor's employees for a limited purpose, i.e., in order to
ensure that the latter get paid the wages due to them.

A similar situation obtains where there is "labor only" contracting. The "labor-only"
contractor-i.e "the person or intermediary" is considered "merely as an agent of the
employer. " The employer is made by the statute responsible to the employees of the
"labor only" contractor as if such employees had been directly employed by the
employer. Thus, where "labor only" contracting exists in a given case, the statute itself
implies or establishes an employer-employee relationship between the employer (the
owner of the project) and the employees of the "labor only" contractor, this time for
a comprehensive purpose: "employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code. " The law in effect holds both
the employer and the "labor-only" contractor responsible to the latter's employees for
the more effective safeguarding of the employees' rights under the Labor Code.
Both the petitioner bank and (CESI) have insisted that (CESI) was not a "labor only"
contractor. Section 9 of Rule VIII of Book III entitled "Conditions of Employment," of
the Omnibus Rules Implementing the Labor Code provides as follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply
workers to an employer shag be deemed to be engaged in labor-only
contracting where such person:
(1) Does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises and other
materials; and
(2) The workers recruited and placed by such person are
performing activities which are to the principal business or
operations of the c workers are habitually employed,
(b) Labor-only contracting as defined herein is hereby prohibited and the
person acting as contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him
(c) For cases not file under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the contracting out of
labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the
workers involved. In such case, he may prescribe conditions and restrictions
to insure the protection and welfare of the workers. (Emphasis supplied)
In contrast, job contracting-contracting out a particular job to an independent
contractor is defined by the Implementing Rules as follows:
Sec. 8. Job contracting. There is job contracting permissible under the
Code if the following conditions are met:

(1) The contractor carries on an independent business and undertakes the

contract work on his own account under his own responsibility according to
his own manner and method free from the control and direction of his
employer or principal in all matters connected with the performance of the
work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business. (Emphasis supplied)
The bank and (CESI) urge that (CESI) is not properly regarded as a "labor-only"
contractor upon n the ground that (CESI) is possessed of substantial capital or
investment in the form of office equipment, tools and trained service personnel.
We are unable to agree with the bank and (CESI) on this score. The definition of
"labor-only" contracting in Rule VIII, Book III of the Implementing Rules must be read
in conjunction with the definition of job contracting given in Section 8 of the same
Rules. The undertaking given by CESI in favor of the bank was not the performance of
a specific job for instance, the carriage and delivery of documents and parcels to
the addresses thereof. There appear to be many companies today which perform this
discrete service, companies with their own personnel who pick up documents and
packages from the offices of a client or customer, and who deliver such materials
utilizing their own delivery vans or motorcycles to the addresses. In the present case,
the undertaking of (CESI) was toprovide its client-thebank-with a certain number of
persons able to carry out the work of messengers. Such undertaking of CESI was
complied with when the requisite number of persons were assigned or seconded to
the petitioner bank. Orpiada utilized the premises and office equipment of the bank
and not those of (CESI) Messengerial work-the delivery of documents to designated
persons whether within or without the bank premises is of course directly related to
the day-to-day operations of the bank. Section 9(2) quoted above does notrequire for
its applicability that the petitioner must be engaged in the delivery of items as a
distinct and separate line of business.
Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a
recruitment and placement corporation placing bodies, as it were, in d ifferent client
companies for longer or shorter periods of time. It is this factor that, to our mind,
distinguishes this case from American President v. Clave et al, 114 SCRA 826 (1982)
if indeed distinguishing way is needed.
The bank urged that the letter agreement entered into with CESI was designed to
enable the bank to obtain the temporary services of people necessary to enable the
bank to cope with peak loads, to replace temporary workers who were out on vacation
or sick leave, and to handle specialized work. There is, of course, nothing illegal about
hiring persons to carry out "a specific project or undertaking the completion or
termination of which [was] determined at the time of the engagement of [the]
employee, or where the work or service to be performed is seasonal in nature and the
employment is for the duration of the season" (Article 281, Labor Code).<re||
an1w> The letter agreement itself, however, merely required (CESI) to furnish the

bank with eleven 11) messengers for " a contract period from January 19, 1976 ."
The eleven (11) messengers were thus supposed to render "temporary" services for
an indefinite or unstated period of time. Ricardo Orpiada himself was assigned to the
bank's offices from 25 June 1975 and rendered services to the bank until sometime in
October 1976, or a period of about sixteen months. Under the Labor Code, however,
any employee who has rendered at least one year of service, whether such service is
continuous or not, shall be considered a regular employee (Article 281, Second
paragraph). Assuming, therefore, that Orpiada could properly be regarded as a casual
(as distinguished from a regular) employee of the bank, he became entitled to be
regarded as a regular employee of the bank as soon as he had completed one year of
service to the bank. Employers may not terminate the service of a regular employee
except for a just cause or when authorized under the Labor Code (Article 280, Labor
Code). It is not difficult to see that to uphold the contractual arrangement between the
bank and (CESI) would in effect be to permit employers to avoid the necessity of hiring
regular or permanent employees and to enable them to keep their employees
indefinitely on a temporary or casual status, thus to deny them security of tenure in
their jobs. Article 106 of the Labor Code is precisely designed to prevent such a result.
We hold that, in the circumstances 'instances of this case, (CESI) was engaged in
"labor-only" or attracting vis-a-vis the petitioner and in respect c Ricardo Orpiada, and
that consequently, the petitioner bank is liable to Orpiada as if Orpiada had been
directly, employed not only by (CESI) but also by the bank. It may well be that the
bank may in turn proceed against (CESI) to obtain reimbursement of, or some
contribution to, the amounts which the bank will have to pay to Orpiada; but this it is
not necessary to determine here.
WHEREFORE, the petition for certiorari is DENIED and the decision promulgated on
29 December 1983 of the National Labor Relations Commission is AFFIRMED. The
Temporary Restraining Order issued by this Court on 11 April 1984 is hereby lifted.
Costs against petitioner.
SO ORDERED.
Yap (Chairman), Narvasa,