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Conditions of Work When the country is at war or when any other national or local

emergency has been declared by the National Assembly or the Chief


HOURS OF WORK Executive;

Article 82. Coverage. The provisions of this Title shall apply to When it is necessary to prevent loss of life or property or in case of
employees in all establishments and undertakings whether for profit imminent danger to public safety due to an actual or impending
or not, but not to government employees, managerial employees, field emergency in the locality caused by serious accidents, fire, flood,
personnel, members of the family of the employer who are dependent typhoon, earthquake, epidemic, or other disaster or calamity;
on him for support, domestic helpers, persons in the personal service
of another, and workers who are paid by results as determined by the When there is urgent work to be performed on machines, installations,
Secretary of Labor in appropriate regulations. or equipment, in order to avoid serious loss or damage to the
employer or some other cause of similar nature;
As used herein, "managerial employees" refer to those whose primary
duty consists of the management of the establishment in which they When the work is necessary to prevent loss or damage to perishable
are employed or of a department or subdivision thereof, and to other goods; and
officers or members of the managerial staff.

Where the completion or continuation of the work started before the


"Field personnel" shall refer to non-agricultural employees who eighth hour is necessary to prevent serious obstruction or prejudice to
regularly perform their duties away from the principal place of the business or operations of the employer.
business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty.
Any employee required to render overtime work under this Article shall
be paid the additional compensation required in this Chapter.
Article 83. Normal hours of work. The normal hours of work of any
employee shall not exceed eight (8) hours a day.
Article 90. Computation of additional compensation. For purposes of
computing overtime and other additional remuneration as required by
Health personnel in cities and municipalities with a population of at
least one million (1,000,000) or in hospitals and clinics with a bed this Chapter, the "regular wage" of an employee shall include the cash
capacity of at least one hundred (100) shall hold regular office hours wage only, without deduction on account of facilities provided by the
for eight (8) hours a day, for five (5) days a week, exclusive of time for employer.
meals, except where the exigencies of the service require that such
personnel work for six (6) days or forty-eight (48) hours, in which case,
they shall be entitled to an additional compensation of at least thirty
percent (30%) of their regular wage for work on the sixth day. For REGULATIONS; RATIONALE
purposes of this Article, "health personnel" shall include resident
physicians, nurses, nutritionists, dietitians, pharmacists, social
Manila Terminal Co. Inc. vs. CIR
workers, laboratory technicians, paramedical technicians,
psychologists, midwives, attendants and all other hospital or clinic On September 1, 1945, the Manila Terminal Company, Inc.
personnel. hereinafter to be referred as to the petitioner, undertook the arrastre
service in some of the piers in Manila's Port Area at the request and
Article 84. Hours worked. Hours worked shall include (a) all time under the control of the United States Army. The petitioner hired some
during which an employee is required to be on duty or to be at a thirty men as watchmen on twelve-hour shifts at a compensation of
prescribed workplace; and (b) all time during which an employee is P3 per day for the day shift and P6 per day for the night shift. On
suffered or permitted to work. February 1, 1946, the petitioner began the postwar operation of the
arrastre service at the present at the request and under the control of
the Bureau of Customs, by virtue of a contract entered into with the
Rest periods of short duration during working hours shall be counted Philippine Government. The watchmen of the petitioner continued in
as hours worked. the service with a number of substitutions and additions, their salaries
having been raised during the month of February to P4 per day for the
Article 85. Meal periods. Subject to such regulations as the Secretary day shift and P6.25 per day for the nightshift. On March 28, 1947,
of Labor may prescribe, it shall be the duty of every employer to give Dominador Jimenez, a member of the Manila Terminal Relief and
his employees not less than sixty (60) minutes time-off for their regular Mutual Aid Association, sent a letter to the Department of Labor,
meals. requesting that the matter of overtime pay be investigated, but nothing
was done by the Department. On April 29, 1947, Victorino Magno
Cruz and five other employees, also member of the Manila Transit
Article 86. Night shift differential. Every employee shall be paid a Mutual Aid Association, filed a 5-point demand with the Department
night shift differential of not less than ten percent (10%) of his regular of Labor, including overtime pay, but the Department again filed to do
wage for each hour of work performed between ten oclock in the anything about the matter. On May 27, 1947, the petitioner instituted
evening and six oclock in the morning. the system of strict eight-hour shifts. On June 19, 1947, the Manila
Port Terminal Police Association, not registered in accordance with
the provisions of Commonwealth Act No. 213, filed a petition with the
Article 87. Overtime work. Work may be performed beyond eight (8)
Court of Industrial Relations. On July 16, 1947, the Manila Terminal
hours a day provided that the employee is paid for the overtime work,
Relief and Mutual Aid Association was organized for the first time,
an additional compensation equivalent to his regular wage plus at
having been granted certificate No. 375 by the Department of Labor.
least twenty-five percent (25%) thereof. Work performed beyond eight
On July 28, 1947, Manila Terminal Relief and Mutual Aid Association
hours on a holiday or rest day shall be paid an additional
filed an amended petition with the Court of Industrial Relations
compensation equivalent to the rate of the first eight hours on a
praying, among others, that the petitioner be ordered to pay its
holiday or rest day plus at least thirty percent (30%) thereof.
watchmen or police force overtime pay from the commencement of
their employment. On May 9, 1949, by virtue of Customs
Article 88. Undertime not offset by overtime. Undertime work on any Administrative Order No. 81 and Executive Order No. 228 of the
particular day shall not be offset by overtime work on any other day. President of the Philippines, the entire police force of the petitioner
Permission given to the employee to go on leave on some other day was consolidated with the Manila Harvor Police of the Customs Patrol
of the week shall not exempt the employer from paying the additional Service, a Government agency under the exclusive control of the
compensation required in this Chapter. Commissioner of Customs and the Secretary of Finance The Manila
Terminal Relief and Mutual Aid Association will hereafter be referred
to as the Association.
Article 89. Emergency overtime work. Any employee may be required
by the employer to perform overtime work in any of the following
cases: Judge V. Jimenez Yanson of the Court of Industrial Relations in his
decision of April 1, 1950, as amended on April 18, 1950, while
dismissing other demands of the Association for lack of jurisdiction,
ordered the petitioner to pay to its police force
(a) Regular or base pay corresponding to four hours' overtime plus 25 spite the allegation of lack or excess of jurisdiction on the part of said
per cent thereof as additional overtime compensation for the period court. (45 Off. Gaz., 3829; 80 Phil. 272)"
from September 1, 1945 to May 24, 1947;
The important point stressed by the petitioner is that the contract
(b) Additional compensation of 25 per cent to those who worked from between it and the Association upon the commencement of the
6:00 p.m. to 6:00 a.m. during the same period: employment of its watchman was to the certain rates of pay, including
overtime compensation namely, P3 per day for the day shift and P6
per day for night shift beginning September 1, 1945, and P4 per day
(c) Additional compensation of 50 per cent for work performed on
shift and P6.25 per day for the night shift since February, 1946. The
Sundays and legal holidays during the same period;
record does not bear out these allegations. The petitioner has relied
merely on the facts that its watchmen had worked on twelve-hour
(d) Additional compensation of 50 per cent for work performed on shifts at specific wages per day and that no complaint was made
Sundays and legal holidays from May 24, 1947 to May 9, 1949; and about the matter until, first on March 28, 1947 and, secondly, on April
29, 1947.
(e) Additional compensation of 25 per cent for work performed at night
from May 29, 1947 to May 9, 1949. In times of acute unemployment, the people, urged by the instinct of
self-preservation, go from place to place and from office to office in
search for any employment, regardless of its terms and conditions,
With reference to the pay for overtime service after the watchmen had their main concern in the first place being admission to some work.
been integrated into the Manila Harbor Police, Judge Yanson ruled
Specially for positions requiring no special qualifications, applicants
that the court has no jurisdiction because it affects the Bureau of would be good as rejected if they ever try to be inquisitive about the
Customs, an instrumentality of the Government having no hours of work or the amount of salary, ever attempt to dictate their
independent personality and which cannot be sued without the
terms. The petitioner's watchmen must have railroaded themselves
consent of the State. (Metran vs. Paredes, 45. Off. Gaz., 2835.) into their employment, so to speak, happy in the thought that they
would then have an income on which to subsist. But, at the same time,
The petitioner find a motion for reconsideration. The Association also they found themselves required to work for twelve hours a day. True,
filed a motion for reconsideration in so far its other demands were there was agreement to work, but can it fairly be supposed that they
dismissed. Judge Yanson, concurred in by Judge Jose S. Bautista, had the freedom to bargain in any way, much less to insist in the
promulgated on July 13, 1950, a resolution denying both motions for observance of the Eight Hour Labor Law?
reconsideration. Presiding Judge Arsenio C. Roldan, in a separate
opinion concurred in by Judge Modesto Castillo, agreed with the As was aptly said in Floyd vs. Du Bois Soap Co., 1942, 317 U. S. 596,
decision of Judge Yanson of April 1, 1950, as to the dismissal of other 63 Sup. Ct. 159; 6 CCH Labor Cases, Par. 51, 147, "A contract of
demands of the Association, but dissented therefrom as to the employment, which provides for a weekly wage for a specified number
granting of overtime pay. In a separate decisive opinion, Judge Juan of hours, sufficient to cover both the statutory minimum wage and
S. Lanting concurred in the dismissal of other demands of the overtime compensation, if computed on the basis of the statutory
Association. With respect to overtime compensation, Judge Lanting minimum wage, and which makes no provision for a fixed hourly rate
ruled:
or that the weekly wage includes overtime compensation, does not
meet the requirements of the Act."
1. The decision under review should be affirmed in so far it grants
compensation for overtime on regular days (not Sunday and legal
Moreover, we note that after the petition had instituted the strict eight-
holidays)during the period from the date of entrance to duty to May hour shifts, no reduction was made in the salaries which its watchmen
24, 1947, such compensation to consists of the amount corresponding received under the twelve hour arrangement. Indeed, as admitted by
to the four hours' overtime at the regular rate and an additional amount
the petitioner, "when the members or the respondent union were
of 25 per cent thereof. placed on strict eight-hour shifts, the lowest salary of all the members
of the respondent union was P165 a month, or P5.50 daily, for both
2. As to the compensation for work on Sundays and legal holidays, day and night shifts." Although it may be argued that the salary for the
the petitioner should pay to its watchmen the compensation that night shift was somewhat lessened, the fact that the rate for the day
corresponds to the overtime (in excess of 8 hours) at the regular rate shift was increased in a sense tends to militate against the contention
only, that is, without any additional amount, thus modifying the that the salaries given during the twelve-hour shifts included overtime
decision under review accordingly. compensation.

3. The watchmen are not entitled to night differential pay for past Petitioner's allegation that the association had acquiesced in the
services, and therefore the decision should be reversed with the twelve-hour shifts for more than 18 months, is not accurate, because
respect thereto. the watchmen involved in this case did not enter the service of the
petitioner, at one time, on September 1, 1945. As Judge Lanting
found, "only one of them entered the service of the company on said
The petitioner has filed a present petition for certiorari. Its various date, very few during the rest of said month, some during the rest of
contentions may be briefly summed up in the following propositions: that year (1945) and in 1946, and very many in 1947, 1948 and 1949."
(1) The Court of Industrial Relations has no jurisdiction to render a
money judgment involving obligation in arrears. (2) The agreement
under which its police force were paid certain specific wages for The case at bar is quite on all fours with the case of Detective &
twelve-hour shifts, included overtime compensation. (3) The Protective Bureau, Inc. vs. Court of Industrial Relations and United
Association is barred from recovery by estoppel and laches. (4) the Employees Welfare Association, supra, in which the facts were as
nullity or invalidity of the employment contract precludes any recovery follows: "The record discloses that upon petition properly submitted,
by the Association. (5) Commonwealth Act No. 4444 does not said court made an investigation and found that the members of the
authorize recovery of back overtime pay. United Employees Welfare Association (hereafter called the
Association) were in the employ of the petitioner Detective and
Protective Bureau, Inc. (herein called the Bureau) which is engaged
The contention that the Court of Industrial Relations has no jurisdiction in the business of furnishing security guards to commercial and
to award a money judgment was already overruled by this Court in industrial establishments, paying to said members monthly salaries
G.R. No. L-4337, Detective & protective Bureau, Inc. vs. Court of out of what it received from the establishments benefited by guard
Industrial Relations and United Employees Welfare Association, 90 service. The employment called for daily tours of duty for more than
Phil., 665, in this wise: "It is also argued that the respondent court has eight hours, in addition to work on Sundays and holidays. Nonetheless
no jurisdiction to award overtime pay, which is money judgment. We the members performed their labors without receiving extra
believe that under Commonwealth Act No. 103 the Court is compensation." The only difference is that, while in said case the
empowered to make the order for the purpose of settling disputes employees concerned were paid monthly salaries, in the case now
between the employer and employee1. As a matter of fact this Court before us the wages were computed daily. In the case cited, we held
has confirmed an order of the Court of Industrial Relations requiring the following:
the Elks Club to pay to its employees certain sum of money as
overtime back wages from June 3, 1939 to March 13, 1941. This, in
It appears that the Bureau had been granting the members of the
Association, every month, "two days off" days in which they rendered
no service, although they received salary for the whole month. Said Petitioner also contends that Commonwealth Act No. 444 does not
Bureau contended below that the pay corresponding to said 2 day provide for recovery of back overtime pay, and to support this
vacation corresponded to the wages for extra work. The court rejected contention it makes referrence to the Fair Labor Standards Act of the
the contention, quite properly we believe, because in the contract United States which provides that "any employer who violates the
there was no agreement to that effect; and such agreement, if any, provisions of section 206 and section 207 of this title shall be liable to
would probably be contrary to the provisions of the Eight-Hour Law the employee or employees affected in the amount of their unpaid
(Act No. 444, sec. 6) and would be null and void ab initio. minimum wages or their unpaid overtime compensation as the case
may be," a provision not incorporated in Commonwealth Act No.
444, our Eight-Hour Labor Law. We cannot agree to the proposition,
It is argued here, in opposition to the payment, that until the
because sections 3 and 5 of Commonwealth Act 444 expressly
commencement of this litigation the members of the Association never
provides for the payment of extra compensation in cases where
claimed for overtime pay. That may be true. Nevertheless the law
overtime services are required, with the result that the employees or
gives them the right to extra compensation. And they could not be
laborers are entitled to collect such extra compensation for past
held to have impliedly waived such extra compensation, for the
overtime work. To hold otherwise would be to allow an employer to
obvious reason that could not have expressly waived it.
violate the law by simply, as in this case, failing to provide for and pay
overtime compensation.
The foregoing pronouncements are in point. The Association cannot
be said to have impliedly waived the right to overtime compensation,
The point is stressed that the payment of the claim of the Association
for the obvious reason that they could not have expressly waived it."
for overtime pay covering a period of almost two years may lead to
the financial ruin of the petitioner, to the detriment of its employees
The principle of estoppel and the laches cannot well be invoked themselves. It is significant, however, that not all the petitioner's
against the Association. In the first place, it would be contrary to the watchmen would receive back overtime pay for the whole period
spirit of the Eight Hour Labor Law, under which as already seen, the specified in the appealed decision, since the record shows that the
laborers cannot waive their right to extra compensation. In the second great majority of the watchmen were admitted in 1946 and 1947, and
place, the law principally obligates the employer to observe it, so even 1948 and 1949. At any rate, we are constrained to sustain the
much so that it punishes the employer for its violation and leaves the claim of the Association as a matter of simple justice, consistent with
employee or laborer free and blameless. In the third place, the the spirit and purpose of the Eight-Hour Labor Law. The petitioner, in
employee or laborer is in such a disadvantageous position as to be the first place, was required to comply with the law and should
naturally reluctant or even apprehensive in asserting any claim which therefore be made liable for the consequences of its violation.
may cause the employer to devise a way for exercising his right to
terminate the employment.
It is high time that all employers were warned that the public is
interested in the strict enforcement of the Eight-Hour Labor Law. This
If the principle of estoppel and laches is to be applied, it may bring was designed not only to safeguard the health and welfare of the
about a situation, whereby the employee or laborer, who cannot laborer or employee, but in a way to minimize unemployment by
expressly renounce their right to extra compensation under the Eight- forcing employers, in cases where more than 8-hour operation is
Hour Labor Law, may be compelled to accomplish the same thing by necessary, to utilize different shifts of laborers or employees working
mere silence or lapse of time, thereby frustrating the purpose of law only for eight hours each.
by indirection.
Wherefore, the appealed decision, in the form voted by Judge Lanting,
While counsel for the petitioner has cited authorities in support of the is affirmed, it being understood that the petitioner's watchmen will be
doctrine invoked, there are also authorities pointed out in the opinion entitled to extra compensation only from the dates they respectively
of Judge Lanting to the contrary. Suffice it to say, in this connection, entered the service of the petitioner, hereafter to be duly determined
that we are inclined to rule adversely against petitioner for the reasons by the Court of Industrial Relations. So ordered, without costs.
already stated.
COVERAGE; EXEMPTION
The argument that the nullity or invalidity of the employment contract
precludes recovery by the Association of any overtime pay is also
untenable. The argument, based on the supposition that the parties Article 82. Coverage. The provisions of this Title shall apply to
are in pari delicto, was in effect turned down in Gotamo Lumber Co. employees in all establishments and undertakings whether for profit
vs. Court of Industrial Relations,* 47 Off. Gaz., 3421, wherein we or not, but not to government employees, managerial employees, field
ruled: "The petitioner maintains that as the overtime work had been personnel, members of the family of the employer who are dependent
performed without a permit from the Department of Labor, no extra on him for support, domestic helpers, persons in the personal service
compensation should be authorized. Several decisions of this court of another, and workers who are paid by results as determined by the
are involved. But those decisions were based on the reasoning that Secretary of Labor in appropriate regulations.
as both the laborer and employer were duty bound to secure the
permit from the Department of Labor, both were in pari delicto. As used herein, "managerial employees" refer to those whose primary
However the present law in effect imposed that duty upon the duty consists of the management of the establishment in which they
employer (C.A. No. 444). Such employer may not therefore be heard are employed or of a department or subdivision thereof, and to other
to plead his own neglect as exemption or defense. officers or members of the managerial staff.

The employee in rendering extra service at the request of his "Field personnel" shall refer to non-agricultural employees who
employer has a right to assume that the latter has complied with the regularly perform their duties away from the principal place of
requirement of the law, and therefore has obtained the required business or branch office of the employer and whose actual hours of
permission from the Department of Labor. work in the field cannot be determined with reasonable certainty.

Moreover, the Eight-Hour Law, in providing that "any agreement or Article 276. Government employees. The terms and conditions of
contract between the employer and the laborer or employee contrary
employment of all government employees, including employees of
to the provisions of this Act shall be null avoid ab initio,"
government-owned and controlled corporations, shall be governed by
(Commonwealth Act No. 444, sec. 6), obviously intended said
provision for the benefit of the laborers or employees. The employer the Civil Service Law, rules and regulations. Their salaries shall be
cannot, therefore, invoke any violation of the act to exempt him from standardized by the National Assembly as provided for in the New
liability for extra compensation. This conclusion is further supported Constitution. However, there shall be no reduction of existing wages,
by the fact that the law makes only the employer criminally liable for benefits and other terms and conditions of employment being enjoyed
any violation. It cannot be pretended that, for the employer to commit by them at the time of the adoption of this Code.
any violation of the Eight-Hour Labor Law, the participation or
acquiescence of the employee or laborer is indispensable, because
the latter in view of his need and desire to live, cannot be considered
as being on the same level with the employer when it comes to the
question of applying for and accepting an employment.
Government Employee Asia Pacific Christening vs. Farolan
Art. 9-B. (Consti) Petitioner Asia Pacific Chartering (Phils) Inc. was, until 1996,
the general sales agent (GSA) of the Scandinavian Airline System
(SAS), an off-line international airline company with license to do
B. The Civil Service Commission
business in the Philippines. As GSA, petitioner sold passenger and
cargo spaces for airlines operated by SAS.
SECTION 1.
(1) The Civil Service shall be administered by the Civil Service Respondent Maria Linda R. Farolan was on December 16, 1992 hired
Commission composed of a Chairman and two as Sales Manager of petitioner for its passenger and cargo GSA
Commissioners who shall be natural-born citizens of the operations for SAS, following her conformity to a December 10, 1992
Philippines and, at the time of their appointment, at least 1
letter-offer of employment from petitioner through its Vice
thirty-five years of age, with proven capacity for public
President/Comptroller Catalino Bondoc. The pertinent portion of the
administration, and must not have been candidates for any
letter-offer reads:
elective position in the elections immediately preceding
their appointment. Dear Ms. Farolan:
(2) The Chairman and the Commissioners shall be appointed Confirming our previous discussions, ASIA-PACIFIC
by the President with the consent of the Commission on CHARTERING PHIL., INC. is pleased to offer you the position
Appointments for a term of seven years without of Sales Manager of its Passenger and Cargo Operations for
reappointment. Of those first appointed, the Chairman shall SCANDINAVIAN AIRLINES SYSTEM in the Philippines,
hold office for seven years, a Commissioner for five years, commencing on December 16, 1992 on the following terms:
and another Commissioner for three years, without
reappointment. Appointment to any vacancy shall be only Monthly
for the unexpired term of the predecessor. In no case shall
any Member be appointed or designated in a temporary or Basic Pay
acting capacity. P 22, 000.00

Housing Allowance
SECTION 2. 4,000.00
(1) The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government, Transportation Allowance
including government-owned or controlled
corporations with original charters.
(2) Appointments in the civil service shall be made only (200 liters of gas)
according to merit and fitness to be determined, as far Cash Equivalent
as practicable, and, except to positions which are
policy-determining, primarily confidential, or highly Meal Allowance
technical, by competitive examination. 750.00
(3) No officer or employee of the civil service shall be
Please affix your signature below if you find the foregoing
removed or suspended except for cause provided by
acceptable and return to us a signed duplicate.
law.
Meanwhile, we certainly look forward to your joining us
(4) No officer or employee in the civil service shall
and rest assured of our fullest support.
engage, directly or indirectly, in any electioneering or
partisan political campaign. xxx
(5) The right to self-organization shall not be denied to
government employees. (Sgd)
(6) Temporary employees of the Government shall be Maria Linda
given such protection as may be provided by law. R. Farolan
(7)
SECTION 3. The Civil Service Commission, as the central personnel Conforme:
agency of the Government, shall establish a career service and adopt (Emphasis
measures to promote morale, efficiency, integrity, responsiveness, supplied).
progressiveness, and courtesy in the civil service. It shall strengthen
the merit and rewards system, integrate all human resources It is gathered that Leslie Murray, the then Sales Manager of
development programs for all levels and ranks, and institutionalize a petitioner, talked to respondent into accepting the position after
management climate conducive to public accountability. It shall verbally briefing her on the nature of the position.
submit to the President and the Congress an annual report on its
personnel programs. Soon after respondent assumed her post, she participated in a
2
number of meetings/seminars including a Customer Service Seminar
SECTION 4. All public officers and employees shall take an oath or in Bangkok, Thailand, a Regional Sales Meeting on the technical
affirmation to uphold and defend this Constitution. aspects of airline commercial operations in February 1993, and a
course on the highly technical airline computer reservations system
called Amadeus, all geared towards improving her marketing and
sales skills.
Managerial Employees
Article 82. Coverage. In September of 1993, respondent, upon instruction of Bondoc,
3
submitted a report RE: OUR COMMENTS AND ACTIONS BEING
TAKEN CONCERNING SAS POOR P & L PERFORMANCE FOR
As used herein, "managerial employees" refer to those whose primary
JANUARY - JULY 1993 the pertinent portions of which read:
duty consists of the management of the establishment in which they
are employed or of a department or subdivision thereof, and to other 1 January to July 1993 Sales x x x
officers or members of the managerial staff.

1993 1992 CHANGE


Seaman 233 423 (190) implement possible solutions.

Zozobrado thus informally took over some of respondents marketing


Expats/Tourists 503 716 (213) and sales responsibilities, albeit respondent retained her title as Sales
Manager and continued to receive her salary as such.
PTAs 346 196 150 By petitioners claim, Zozobrado found out that respondent did not
adopt any sales strategy nor conduct any sales meeting or develop
Refugees/IOM 53 864 (811) other sources of revenue for SAS, she having simply let her sales staff
perform their functions all by themselves; in 1994, Soren Jespersen,
xxx General Manager of SAS in Hongkong, Southern China, Taipei and
the Philippines, came to the Philippines to assess the statistics on
Explanations. SAS sales revenues and SAS was convinced that respondent was not
fit for the job of Sales Manager; and in view of the changes introduced
1. International Organization for Migration (IOM)-both Vietnam by Zozobrado, SAS-GSA sales operations drew positive results.
and Scandinavian Governments have terminated projects for
4
refugees; hence the tremendous decrease (94%) x x x. On May 21, 1994, respondent received a message from Jespersen
reading:
2. Seamans Fares-Rates not competitive enough.
Dear Linda and Bob [Zozobrado],
3. Expats/Tourists-In a market where on-line carriers were
dropping rates drastically, we were losing passengers to said First of all congratulation to your sale result in April. You
carriers. reached and exceeded the target by 50% In C/class
(Fantastic!!!) and 1% In M/class. This is the second month
1 The present Market:
in a row (and the last 2 first in more than a year) and
1. As SAS is off-line, we have no control over space and to an hopefully the beginning of a new and positive trend.
extent our rates are higher because of proration with delivering
xxx
carriers.
As you can see May looks very good.
2. On-lines do not prorate with other carriers therefore can dive
fares x x x. With the agreed focus on selling the M/class and all the
activities initiated, Im sure that the rest of the period will
I have convinced Mr. Jespersen to bring down the pick very soon.
fares to be more competitive. The reason he did not do
so earlier was because low-yield fares are low in priority x x x (Underscoring supplied; Quoted verbatim).
for confirming seats. But now that SAS is considering
5
increasing their frequencies ex-Hongkong before year- On July 18, 1994, respondent received another message from
end, this will be advantageous to boosting our sales. Jespersen reading:
A. Measures to take remainder of 1993 and for 1994: Dear Linda
1. We have negotiated a lower fare for seamen (effective The sales report for June 1994 did unfortunately not
September) which is competitive. We are already getting reach target in C/class but in M/class you managed very
positive response from agents. Since this(sic) low-yield sales, well. Totally 9% below target.
Hongkong did not adjust fare accordingly first half of 1993
because of space constraints. The pre bookings eff. 14 July looks very good and
encouraging and with 2 weeks to go July should not be a
2. As SAS still prefers high-yield sales, we have offered problem. (enclosed)
incentives to Ameco as Asian Development Bank (ADB)
(effective 1st June for one year) with Mr. Jespersens approval x Please send my regards to all the girls and tell them to
x x. keep up the good work.

In addition, ADB itself is willing to consider proposals we submit Just for reason of clarification. Enclosed to your action list
to them in the case of cost-savings. In exchange, they can is a production report for Jan-May 1994. The figures I
endorse to SAS a relevant share of their Europe travel x x x. send to you is only your long-haul sales and do not
include European sectors. The correct figure for the
3. We have also negotiated a lower net fare for Economy Class. period will be 436,000 USD in target for long-haul (actual
This rate is also competitive and is in force. 362 TUSD) and 642 TUSD total with 514 TUSD achieved.
4. Incentive Program for Agents-Using the points system similar Please be so kind and inform Bob accordingly.
to PALs promo (PALs Smiles), to stimulate sales. We are at
present fine-tuning mechanics for Hongkongs approval which xxx
we intend to launch before Christmas. This promo is self-
sustaining (no significant expenses to be incurred) On even date, however, petitioner sent respondent a letter of
6
termination on the ground of loss of confidence. The letter reads:
5. We are currently pushing sales for Baltic area/Russia as we
have the best rates. We have identified the agents who have This confirms our (Bob Zozobrado and myself) July 4,
passengers to these destinations and we are focusing on them 1994 verbal advice to you regarding Managements
x x x. (Emphasis and underscoring supplied). decision to terminate your Services as our GSA Manager
for SCANDINAVIAN AIRLINES SYSTEMs Offline
As reflected in respondents report, there was a drop in SAS sales Operations in the Philippines, thirty (30) days upon
revenues which to her was attributable to market forces beyond her receipt of this Notice, due to our loss of confidence in
control. your Managerial and Marketing capabilities. As explained
to you by Mr. Zozobrado and myself, records will show
Noting the marked decline in SAS sales revenues, petitioner directed
that under your Management (or lack of it), our SAS-GSA
its high ranking officer Roberto Zozobrado in January 1994 to conduct
performance is, as follows:
an investigation on the matter and identify the problem/s and
A. 1993 vs. 1992 of Seven Hundred Fifty Thousand Pesos (P750,000.00),
nominal damages of Five Thousand Pesos (P5,000.00) and the
Gross Revenue - 29 % equivalent of 25% of the total award as attorneys fees.
shortfall
10
On appeal, the NLRC, by Decision of March 22, 1999, reversed the
Operating Expenses - 2% over Labor Arbiters decision, it recognizing the right of petitioner as
Net Cash Flow - 79% employer to terminate or dismiss employees based on loss of trust
shortfall and confidence, the right being a management prerogative.

B. JAN-APR 94 vs. JAN-APR 92 Respondents Motion for Reconsideration of the NLRC Decision
having been denied, she brought her case to the Court of Appeals via
11
Revenues - Certiorari.
34% shortfall
12
By Decision of June 28, 2001, the Court of Appeals, as stated early
Operating Expenses - 6% over on, reversed the NLRC decision and disposed as follows:
Net Cash Flow - 94% WHEREFORE, premises considered, the challenged decision
shortfall dated March 22, 1999 and the Resolution dated July 16, 1999
of public respondent National Labor Relations Commission
Several times in the past, we have made you aware in the
(Second Division) are hereby set aside for having been issued
need to improve your sales performance and gain the
with grave abuse of discretion amounting to lack or in excess of
respect of your staff which have openly expressed their
jurisdiction. The decision dated September 17, 1998 of Labor
concern on their lack of direction under your
Arbiter Romulus S. Protacio is hereby upheld with modifications
management. Even our principal (SAS) had negative
that the award of attorneys fees shall only be equivalent to ten
comments about the way you handle urgent requirements
percent (10%) of the total monetary award. In addition, the
of the Regional Office. SAS was also alarmed by the
award for nominal damages is deleted for lack of basis.
aforementioned dismal overall Performance of APC/SAS.
(Underscoring supplied).
All these prompted us to decide to replace you as our
SAS GSA Manager to save the situation and our 13
Petitioner filed a motion for reconsideration of the Court of Appeals
representation of the SAS-GSA in the Philippines.
decision but it was denied, hence, the present Petition for Review
14
x x x (Quoted verbatim; Emphasis supplies). on Certiorari anchored on the following grounds:

Thus spawned the filing by respondent of a complaint for illegal I


dismissal against petitioner, Bondoc, Zozobrado and one Donald
Marshall (the record indicates that he had ceased to be connected THE CA DEFIED THE WELL-ESTABLISHED RULE
with petitioner when the case was pending before the Labor Arbiter), THAT APC, AS EMPLOYER, HAS THE MANAGEMENT
with prayer for damages and attorneys fees. In her complaint PREROGATIVE TO REPLACE A SALES MANAGER
petitioner alleged that Bondoc and Zozobrado had asked her to tender WHOM IT HAS REASONABLE GROUNDS TO BELIEVE
her resignation as she was not the person whom SAS was looking for CANNOT EFFECTIVELY DISCHARGE THE DUTIES
7 DEMANDED BY SUCH POSITION.
to handle the position of Sales Manager but that she refused, hence,
8
she was terminated by the letter of July 18, 1994 letter. II
The Labor Arbiter, after a detailed analysis of the evidence for both THE CA DECISION WAS PREMISED ON LACK OF
parties, found for respondent upon the following issues: EVIDENCE TO DISPROVE RESPONDENTS THEORY
THAT THE POOR SALES PERFORMANCE OF SAS
1. Whether or not complainant was validly terminated for WAS DUE TO MARKET FORCES BEYOND HER
cause; CONTROL. YET, THE EVIDENCE ON RECORD
SHOWED THE CONTRARY. NO LESS THAN SAS
2. Whether or not due process was observed when
CONFIRMED THAT RESPONDENT WAS NOT FIT FOR
complainant was terminated; and
THE POSITION OF MANAGER AND, THAT NO
3. Whether or not any of the parties are entitled to SPECIAL CIRCUMSTANCES SUFFICIENT TO
9 TRIGGER THE SHARP DECLINE IN SALES
damages, and disposed in his decision as follows:
SUPERVENED IN THE PHILIPPINE MARKET.
WHEREFORE, finding the dismissal of the complainant Ms
III
Linda Farolan to be without just cause, effected with malice, ill
will and bad faith, respondent Asian Pacific Chartering IN AWARDING MORAL AND EXEMPLARY DAMAGES,
Philippine, Inc. is hereby ordered to pay her separation pay of THE CA ACTED WITH GRAVE ABUSE OF
Forty Four Thousand Pesos (P44,000.00), and all the benefit DISCRETION. EVEN ASSUMING, THAT
that would have been due her under the premises. Asian Pacific RESPONDENTS TERMINATION WAS WITHOUT JUST
Chartering is likewise ordered to pay complainant moral CAUSE, APC IS NOT LIABLE TO PAY DAMAGES
damages in the amount of One Million Five Hundred Thousand [MILLARES vs. NLRC, 328 SCRA 79 (2001)]
Pesos (P1,500,000.00) and exemplary damages in the amount
COROLLARILY, APC IS PRESUMED TO HAVE ACTED termination of respondent because of her dismal performance in
IN GOOD FAITH [GONZALES vs. NLRC, G.R. NO. handling its operations.
131653-26 March 2001]. THE CA, HOWEVER,
REVERSED THE PRESUMPTION. IT PRESUMED- And petitioner reiterates the principle that the right to dismiss a
WITHOUT ANY EVIDENCE WHATSOEVER-THAT APC managerial employee is a measure of self-preservation, it citing the
18
ACTED IN BAD FAITH IN TERMINATING cases of Grand Motor Parts Corp. v. Minister of Labor et al., and
19
RESPONDENT WITHOUT DUE REGARD TO THE Buiser et al. v. Legardo.
HARSH CONSEQUENCES OF THE TERMINATION
Before passing on petitioners position, this Court deems it imperative
The issue in the main is whether or not respondents dismissal was to discuss the nature of respondents job as sales manager of
legal. petitioner. It is not disputed that her job description, and the terms and
conditions of her employment, with the exception of her salary and
A statement of the requisites for a valid dismissal of an employee is allowances, were never reduced to writing.
thus in order, to wit: (a) the employee must be afforded due process,
i.e., he must be given opportunity to be heard and to defend himself; Recent decisions of this Court distinguish the treatment of managerial
and (b) dismissal must be for a valid cause as provided in Article 282 employees from that of rank and file personnel insofar as the
of the Labor Code or any of the authorized causes under Article 283 application of the doctrine of loss of trust and confidence is
15 20
and 284 of the same Code. concerned.
As regards the first requisite, the following substantiated findings of Thus with respect to rank and file personnel, loss of trust and
the Labor Arbiter, which were adopted by the Court of Appeals, reflect confidence as ground for valid dismissal requires proof of
respondents deprivation of due process: involvement in the alleged events in question and that mere
uncorroborated assertions and accusations by the employer will
xxx
not be sufficient. But as regards a managerial employee, mere
[W]e find that the manner by which complainant was existence of a basis for believing that such employee has
dismissed violated the basic precepts of fairness and due breached the trust of his employer would suffice for his
process. First, without any semblance of, or written dismissal. (Underscoring supplied)
authority whatsoever (TSN dated January 30, 1996, pp. As enunciated in Samson v. NLRC, 330 SCRA 460,
46 - 48), respondent Zozobrado took over the functions
of complainant. Complainant claims that she has been Before one may be properly considered a managerial
told it was upon the will of respondent Marshall that she employee, all the following conditions must be met:
be replaced. Although respondent Zozobrado may have
been merely giving pointers and suggestions to the staff (1) Their primary duty consists of the management of the
of complainant, the appearance of authority was establishment in which they are employed or of a department
unpleasantly conspicuous. Later, respondent Bondoc or subdivision thereof;
summoned complainant and told her to tender her
resignation or face termination. Complainant, not (2) They customarily and regularly direct the work of two or
having been given a justifiable ground, refused to more employees therein;
resign. Thereafter, she was finally terminated,
without being afforded the opportunity to be heard (3) They have the authority to hire or fire other employees of
and to present evidence in her defense. She was lower rank; or their suggestions and recommendations as to the
never given a written notice stating the particular hiring and firing and as to the promotion or any other change of
status of other employees are given particular weight. (Section
acts or omission constituting the grounds for her
16 2(b), Rule I, Book III of the Omnibus Rules Implementing
dismissal as required by law. x x x the Labor Code, emphasis supplied).
As regards the second requisite, the rule is settled that in termination By respondents claim, her function, as verbally explained to her by
cases, the employer bears the onus of proving that the dismissal is for 21
Murray, dealt mainly with servicing of existing clientele. Bondoc,
just cause failing which the dismissal is not justified and the employee 22
17 however, described respondents functions and duties as critical.
is entitled to reinstatement.

Petitioner claims that respondent failed to live up to managements The following ruling of this Court in Paper Industries Corp. of the
23
expectation in light of her failure to adopt sales and marketing Philippines v. Laguesma is instructive:
strategies to increase sales revenues of SAS, which failure is
reflective of her incompetence and inefficiency, thus resulting to loss Managerial employees are ranked as Top Managers,
Middle Managers and First Line Managers. The mere fact
of revenues in 1993 and 1994.
that an employee is designated manager does not ipso
Petitioner adds that had it not been through Zozobrados efforts, SAS facto make him one-designation should be reconciled
sales revenues could not have recovered. with the actual job description of the employee for it is the
job description that determines the nature of employment.
Petitioner further claims that Jespersen was the one who initiated the
24
(Underscoring supplied). Position

The absence of a written job description or prescribed work standards, 1960-1967 Express Tours, Inc.
however, leaves this Court in the dark. Clerk-Reservations&

Even assuming, however, that respondent was a managerial Ticketing


employee, the stated ground (in the letter of termination) for her
dismissal, loss of confidence, should have a basis and determination 1968-1970 House of Travel, Inc.
thereof cannot be left entirely to the employer. Sales Manager

Loss of trust and confidence to be a valid ground for an employees 1971-1973 Super Travel
dismissal must be based on a willful breach and founded on clearly Manager, Administration
24
established facts. A breach is willful if it is done intentionally, 1973-1978 American Express,
knowingly and purposely, without justifiable excuse, as distinguished Manager, World Health
from an act done carelessly, thoughtlessly, heedlessly or
25
inadvertently. Inc.
Organization Account
Respondents detailed REPORT dated September 8, 1993, quoted
above, relative to SAS profit and loss for 1993, which was closely 1978-1983 F.A.R. Travel
examined and analyzed by the Labor Arbiter, contains an explanation President & General Manager
of what brought about the decline in sales revenues. And it contains Masters, Inc.
too a number of recommended measures on improvement of sales for
the remainder of 1993 and for 1994. 1983-1984 Cebu Plaza
Director, Convention
As did the Labor Arbiter and the Court of Appeals, this Court finds
respondents explanation in her Report behind the decline in sales 1985-1989 American Express,
revenues as due to market forces beyond respondents control Manager-World Health
plausible. In any event, there is no showing that the decline is
Inc.
reflective of any willfull breach of duties by respondent.
Organization In-Plant Office
The two letters sent by SAS to respondent in 1994 in fact negate willful
breach of her duties by respondent. The first (received on May 21, Senior Manager-Asian
1994) congratulated her and Zozobrado for exceeding sale (sic) result
in April 1994. Petitioners argument that respondent could not invoke Development Bank In-Plant Office
these letters in her favor as they were intended for Zozobrado fails.
The letters were addressed to respondent and Zozobrado. The 1992-1994 Asia Pacific Sales
second letter (received on July 18, 1994) which was addressed to Manager, Passenger
respondent, while noting that the sales for June 1994 did not reach
the target in C/class, noted that in M/class she managed very well. Chartering Phil. Inc. &Cargo GSA
And it went on to state that [t]he pre-bookings eff. 14 July looks (sic) Operations,
very good and encouraging and with 2 weeks to go July should not be
a problem. In fact it requested respondent to send . . . regards to all Scandinavian Airlines
the girls and tell them to keep up the good work.
System.
While petitioner attributes the improvement of sales in 1994 to
Zozobrado, the fact remains that respondent was still the Sales (Exhibit A, p. 72, Court of Appeals Rollo),
Manager up to July 1994, in charge of those sales meetings during
which pertinent market strategies were developed and utilized to This Court is not prepared to find for petitioner. It bears noting that
increase sales. there is no showing that respondent represented herself as
possessed of the highest degree of skill and care known in the trade.
In another vein, petitioner attributes loss of confidence to respondents And it is not disputed that respondent was approached by petitioners
alleged gross inefficiency and incompetence, it citing, as earlier then Sales Manager Murray, and offered the position of Sales
stated, the cases of Grand Motor Parts Corp. (supra) and Buiser et al. Manager. She thus could not just be unceremoniously discharged for
26
(supra). loss of confidence arising from alleged incompetency .

The Grand Motors case, however, involved a probationary employee- While an employee may be dismissed because of
manager who failed to, among other things, submit required monthly inefficiency, neglect or carelessness, the law implies a
reports and violated company policy, clearly mirroring his situation or undertaking by an employee in entering into
insubordination and disrespect to express instructions of a contract of employment that he is competent to perform
management. the work undertaken and is possessed of the requisite
skill and knowledge to enable him to do so, and that he
While this Court, in the Buiser case (supra), held that [f]ailure to will do the work of the employer in a careful manner. If he
observe prescribed standards of work, or to fulfill reasonable work is not qualified to do the work which he undertakes, if he
assignments due to inefficiency may be just cause for dismissal, is incompetent, unskillful or inefficient, or if he executes
petitioner has neither shown what standards of work or reasonable his work in a negligent manner or is otherwise guilty of
work assignments were prescribed which respondent failed to neglect of duty, he may lawfully be discharged before the
observe nor that if she did fail to observe any such, it was due to 27
expiration of his term of employment.
inefficiency.
In fine, this Court finds that respondent had been illegally dismissed
Finally and at all events, given respondents previous work experience
and is accordingly entitled to reinstatement to her former position
as herein below indicated, to wit:

Period Company
28
without loss of seniority rights and payment of backwages. But as dismissal of the employee was attended to by bad faith, or
the matter of reinstatement is no longer feasible as the GSA contract constituted an act opposite to labor, or was done in a manner
29
between SAS and petitioner had been terminated in May of 1996, contrary to morals, good customs or public policy.
respondent is, as correctly held by the Court of Appeals, entitled to
separation pay in an amount equivalent to one (1) month salary for Award of moral and exemplary damages for an illegally
every year of service, a fraction of six (6) months to be considered a dismissed employee is proper where the employee had been
32
year. harassed and arbitrarily terminated by the employer.

Having been hired on December 16, 1992 and terminated on July 18, In determining the amount of moral damages recoverable,
1994, respondent is considered to have worked for two (2) years for however, the business, social and financial position of the
purposes of computing her separation pay. offended party and the business or financial position of the
33
offender are taken into account. Given petitioners business
Respondent is also entitled to the award of backwages computed from
position or standing before and at the time of termination and
July 18, 1994 up to May of 1996. petitioners business and financial position, this Court reduces
As regards the award to respondent of moral and exemplary the amount of moral damages awarded to P500,000.00 which
damages, petitioner assails it in this wise: The award of damages in it finds reasonable. The amount of exemplary damages
so far as the same was based solely on respondents affidavit awarded is accordingly reduced too to P250,000.00.
containing general and uncorroborated statement that she suffered WHEREFORE, the decision of the Court of Appeals is hereby
damages as a result of her termination is null and void [it being]
AFFIRMED with the MODIFICATION that the amount of moral
insufficient to overcome the presumption o good faith. damages and exemplary damages awarded to respondent, Ma. Linda
The following pertinent portions of petitioners Affidavit which Affidavit R. Farolan, is hereby reduced to Five Hundred Thousand
was submitted as part of her testimony are self-explanatory, however. (P500,000.00) Pesos and Two Hundred Fifty Thousand
(P250,000.00) Pesos, respectively.
xxx
Costs against petitioner.
8. On July 4, 1994, Messrs. Bondoc and Zozobrado summoned
me and without any clear explanation, ordered me to submit a SO ORDERED.
letter of resignation; they informed me that I was not the person
whom SAS was looking for to handle the position of Sales
Manager; even as I was deeply hurt, shocked, and humiliated,
I declined to resign from my position as I strongly believed that Chario Penaranda vs. Baganga Plywood
the instruction for me to resign was unjust and violative of my Corp
rights; during the conference, I was never given the chance to
know precisely why I was being asked to resign or to explain
my position; furthermore, I was informed then that Mr. Donald Sometime in June 1999, Petitioner Charlito Pearanda was hired as
Marshall was the one who decided and insisted on my an employee of Baganga Plywood Corporation (BPC) to take charge
termination. of the operations and maintenance of its steam plant boiler. 6 In May
2001, Pearanda filed a Complaint for illegal dismissal with money
9. On July 18, 1994, again without regard to the basic claims against BPC and its general manager, Hudson Chua, before
requirements of due process, I was given a notice of termination the NLRC.7
signed by Mr. Bondoc; the supposed ground for my termination
was APCs alleged loss of confidence in my managerial and
After the parties failed to settle amicably, the labor arbiter8 directed
marketing capabilities due to the companys alleged dismal
the parties to file their position papers and submit supporting
performance during my term of office as GSA Sales Manager;
documents.9 Their respective allegations are summarized by the labor
once more, I was never called to answer this charge; a copy of
arbiter as follows:
the notice of termination is hereto attached as Annex E;

10. The news of my termination circulated at once in the travel "[Pearanda] through counsel in his position paper alleges that he
industry and as a result, I was and still am frequently asked by was employed by respondent [Baganga] on March 15, 1999 with a
my friends and acquaintances in the industry about my monthly salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer
termination from APC to my endless humiliation and until he was illegally terminated on December 19, 2000. Further, [he]
embarrassment; this up to now causes me endless emotional alleges that his services [were] terminated without the benefit of due
pain that I even avoid my friends and acquaintances for fear process and valid grounds in accordance with law. Furthermore, he
that they might look at me differently after my termination from was not paid his overtime pay, premium pay for working during
APC; my reputation as a professional has been totally shattered holidays/rest days, night shift differentials and finally claims for
by the unjust act of APC; payment of damages and attorneys fees having been forced to litigate
the present complaint.
11. Because of the extreme social humiliation, and serious
anxiety over my now besmirched reputation in the travel
industry, I decided to seek legal advise; on July 21, 1994, my "Upon the other hand, respondent [BPC] is a domestic corporation
counsel wrote APC demanding for my immediate reinstatement duly organized and existing under Philippine laws and is represented
without loss of seniority rights and for damages; a copy of the herein by its General Manager HUDSON CHUA, [the] individual
letter-demand is hereto attached as Annex F; respondent. Respondents thru counsel allege that complainants
separation from service was done pursuant to Art. 283 of the Labor
x x x. Code. The respondent [BPC] was on temporary closure due to repair
and general maintenance and it applied for clearance with the
They need no amplification and/or corroboration. Indeed, petitioner Department of Labor and Employment, Regional Office No. XI to shut
was deprived of due process and denied basic precepts of fairness down and to dismiss employees (par. 2 position paper). And due to
when she was terminated. Her resultant sufferings thus entitle her to the insistence of herein complainant he was paid his separation
an award of moral damages. benefits (Annexes C and D, ibid). Consequently, when respondent
To warrant award of moral damages, it must be shown that the [BPC] partially reopened in January 2001, [Pearanda] failed to
reapply. Hence, he was not terminated from employment much less
illegally. He opted to severe employment when he insisted payment The CA dismissed Pearandas Petition on purely technical grounds,
of his separation benefits. Furthermore, being a managerial employee particularly with regard to the failure to submit supporting documents.
he is not entitled to overtime pay and if ever he rendered services
beyond the normal hours of work, [there] was no office order/or
In Atillo v. Bombay,19 the Court held that the crucial issue is whether
authorization for him to do so. Finally, respondents allege that the
the documents accompanying the petition before the CA sufficiently
claim for damages has no legal and factual basis and that the instant
supported the allegations therein. Citing this case, Piglas-Kamao v.
complaint must necessarily fail for lack of merit."10
NLRC20 stayed the dismissal of an appeal in the exercise of its equity
jurisdiction to order the adjudication on the merits.
The labor arbiter ruled that there was no illegal dismissal and that
petitioners Complaint was premature because he was still employed
The Petition filed with the CA shows a prima facie case. Petitioner
by BPC.11 The temporary closure of BPCs plant did not terminate his
attached his evidence to challenge the finding that he was a
employment, hence, he need not reapply when the plant reopened.
managerial employee.21 In his Motion for Reconsideration, petitioner
also submitted the pleadings before the labor arbiter in an attempt to
According to the labor arbiter, petitioners money claims for illegal comply with the CA rules.22 Evidently, the CA could have ruled on the
dismissal was also weakened by his quitclaim and admission during Petition on the basis of these attachments. Petitioner should be
the clarificatory conference that he accepted separation benefits, sick deemed in substantial compliance with the procedural requirements.
and vacation leave conversions and thirteenth month pay.12
Under these extenuating circumstances, the Court does not hesitate
Nevertheless, the labor arbiter found petitioner entitled to overtime to grant liberality in favor of petitioner and to tackle his substantive
pay, premium pay for working on rest days, and attorneys fees in the arguments in the present case. Rules of procedure must be adopted
total amount of P21,257.98.13 to help promote, not frustrate, substantial justice.23 The Court frowns
upon the practice of dismissing cases purely on procedural grounds.24
Considering that there was substantial compliance, 25 a liberal
Ruling of the NLRC
interpretation of procedural rules in this labor case is more in keeping
with the constitutional mandate to secure social justice.26
Respondents filed an appeal to the NLRC, which deleted the award
of overtime pay and premium pay for working on rest days. According
First Issue:
to the Commission, petitioner was not entitled to these awards
because he was a managerial employee.14
Timeliness of Appeal
Ruling of the Court of Appeals
Under the Rules of Procedure of the NLRC, an appeal from the
decision of the labor arbiter should be filed within 10 days from receipt
In its Resolution dated January 27, 2003, the CA dismissed
thereof.27
Pearandas Petition for Certiorari. The appellate court held that he
failed to: 1) attach copies of the pleadings submitted before the labor
arbiter and NLRC; and 2) explain why the filing and service of the Petitioners claim that respondents filed their appeal beyond the
Petition was not done by personal service.15 required period is not substantiated. In the pleadings before us,
petitioner fails to indicate when respondents received the Decision of
the labor arbiter. Neither did the petitioner attach a copy of the
In its later Resolution dated July 4, 2003, the CA denied
challenged appeal. Thus, this Court has no means to determine from
reconsideration on the ground that petitioner still failed to submit the
the records when the 10-day period commenced and terminated.
pleadings filed before the NLRC.16
Since petitioner utterly failed to support his claim that respondents
appeal was filed out of time, we need not belabor that point. The
Hence this Petition.17 parties alleging have the burden of substantiating their allegations.28

The Issues Second Issue:

Petitioner states the issues in this wise: Nature of Employment

"The [NLRC] committed grave abuse of discretion amounting to Petitioner claims that he was not a managerial employee, and
excess or lack of jurisdiction when it entertained the APPEAL of the therefore, entitled to the award granted by the labor arbiter.
respondent[s] despite the lapse of the mandatory period of TEN
DAYS.1avvphil.net
Article 82 of the Labor Code exempts managerial employees from the
coverage of labor standards. Labor standards provide the working
"The [NLRC] committed grave abuse of discretion amounting to an conditions of employees, including entitlement to overtime pay and
excess or lack of jurisdiction when it rendered the assailed premium pay for working on rest days.29 Under this provision,
RESOLUTIONS dated May 8, 2002 and AUGUST 16, 2002 managerial employees are "those whose primary duty consists of the
REVERSING AND SETTING ASIDE the FACTUAL AND LEGAL management of the establishment in which they are employed or of a
FINDINGS of the [labor arbiter] with respect to the following: department or subdivision."30

"I. The finding of the [labor arbiter] that [Pearanda] is a The Implementing Rules of the Labor Code state that managerial
regular, common employee entitled to monetary benefits employees are those who meet the following conditions:
under Art. 82 [of the Labor Code].
"(1) Their primary duty consists of the management of the
"II. The finding that [Pearanda] is entitled to the payment establishment in which they are employed or of a department or
of OVERTIME PAY and OTHER MONETARY subdivision thereof;
BENEFITS."18
"(2) They customarily and regularly direct the work of two or more
The Courts Ruling employees therein;

The Petition is not meritorious. "(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
Preliminary Issue: employees are given particular weight."31

Resolution on the Merits


The Court disagrees with the NLRCs finding that petitioner was a supervisor of the steam plant.38 His classification as supervisor is
managerial employee. However, petitioner was a member of the further evident from the manner his salary was paid. He belonged to
managerial staff, which also takes him out of the coverage of labor the 10% of respondents 354 employees who were paid on a monthly
standards. Like managerial employees, officers and members of the basis; the others were paid only on a daily basis.39
managerial staff are not entitled to the provisions of law on labor
standards.32 The Implementing Rules of the Labor Code define
On the basis of the foregoing, the Court finds no justification to award
members of a managerial staff as those with the following duties and
overtime pay and premium pay for rest days to petitioner.
responsibilities:

WHEREFORE, the Petition is DENIED. Costs against petitioner.


"(1) The primary duty consists of the performance of work directly
related to management policies of the employer; SO ORDERED.

"(2) Customarily and regularly exercise discretion and independent


judgment;
Field Personnel
"(3) (i) Regularly and directly assist a proprietor or a managerial Article 82. Coverage.
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 "Field personnel" shall refer to non-agricultural employees who
technical lines requiring special training, experience, or knowledge; or regularly perform their duties away from the principal place of
(iii) execute under general supervision special assignments and business or branch office of the employer and whose actual hours of
tasks; and work in the field cannot be determined with reasonable certainty.

"(4) who do not devote more than 20 percent of their hours worked in Merdicar Fishing Corp vs. NLRC
a workweek to activities which are not directly and closely related to
the performance of the work described in paragraphs (1), (2), and (3) This case originated from a complaint filed on September 20, 1990 by
above."33 private respondent Fermin Agao, Jr. against petitioner for illegal
dismissal, violation of P.D. No. 851, and non-payment of five days
service incentive leave for 1990. Private respondent had been
As shift engineer, petitioners duties and responsibilities were as employed as a bodegero or ships quartermaster on February 12,
follows: 1988. He complained that he had been constructively dismissed by
petitioner when the latter refused him assignments aboard its boats
"1. To supply the required and continuous steam to all consuming after he had reported to work on May 28, 1990.i
units at minimum cost.
Private respondent alleged that he had been sick and thus allowed to
go on leave without pay for one month from April 28, 1990 but that
"2. To supervise, check and monitor manpower workmanship as well when he reported to work at the end of such period with a health
as operation of boiler and accessories. clearance, he was told to come back another time as he could not be
reinstated immediately. Thereafter, petitioner refused to give him
"3. To evaluate performance of machinery and manpower. work. For this reason, private respondent asked for a certificate of
employment from petitioner on September 6, 1990. However, when
he came back for the certificate on September 10, petitioner refused
"4. To follow-up supply of waste and other materials for fuel. to issue the certificate unless he submitted his resignation. Since
private respondent refused to submit such letter unless he was given
"5. To train new employees for effective and safety while working. separation pay, petitioner prevented him from entering the premises.ii

Petitioner, on the other hand, alleged that it was private respondent


"6. Recommend parts and supplies purchases. who actually abandoned his work. It claimed that the latter failed to
report for work after his leave had expired and was, in fact, absent
without leave for three months until August 28, 1998. Petitioner further
"7. To recommend personnel actions such as: promotion, or claims that, nonetheless, it assigned private respondent to another
disciplinary action. vessel, but the latter was left behind on September 1, 1990.
Thereafter, private respondent asked for a certificate of employment
"8. To check water from the boiler, feedwater and softener, regenerate on September 6 on the pretext that he was applying to another fishing
softener if beyond hardness limit. company. On September 10, 1990, he refused to get the certificate
and resign unless he was given separation pay.iii
"9. Implement Chemical Dosing. On February 18, 1992, Labor Arbiter Arthur L. Amansec rendered a
decision disposing of the case as follows:
"10. Perform other task as required by the superior from time to ACCORDINGLY, respondents are ordered to reinstate
time."34 complainant with backwages, pay him his 13th month pay and
incentive leave pay for 1990.
The foregoing enumeration, particularly items 1, 2, 3, 5 and 7
All other claims are dismissed.
illustrates that petitioner was a member of the managerial staff. His
duties and responsibilities conform to the definition of a member of a SO ORDERED.
managerial staff under the Implementing Rules.
Petitioner appealed to the NLRC which, on August 30, 1993,
Petitioner supervised the engineering section of the steam plant dismissed the appeal for lack of merit. The NLRC dismissed
boiler. His work involved overseeing the operation of the machines petitioners claim that it cannot be held liable for service incentive leave
and the performance of the workers in the engineering section. This pay by fishermen in its employ as the latter supposedly are field
work necessarily required the use of discretion and independent personnel and thus not entitled to such pay under the Labor Code.iv
judgment to ensure the proper functioning of the steam plant boiler. The NLRC likewise denied petitioners motion for reconsideration of its
As supervisor, petitioner is deemed a member of the managerial decision in its order dated October 25, 1993.
staff.35
Hence, this petition. Petitioner contends:
Noteworthy, even petitioner admitted that he was a supervisor. In his I
Position Paper, he stated that he was the foreman responsible for the
operation of the boiler.36 The term foreman implies that he was the THE RESPONDENT COMMISSION PALPABLY ERRED
representative of management over the workers and the operation of IN RULING AND SUSTAINING THE VIEW THAT
the department.37 Petitioners evidence also showed that he was the FISHING CREW MEMBERS, LIKE FERMIN AGAO, JR.,
CANNOT BE CLASSIFIED AS FIELD PERSONNEL It is undisputed that these sales personnel start their field
UNDER ARTICLE 82 OF THE LABOR CODE. work at 8:00 a.m. after having reported to the office and
come back to the office at 4:00 p.m. or 4:30 p.m. if they
II are Makati-based.
THE RESPONDENT COMMISSION ACTED WITH The petitioner maintains that the period between 8:00
GRAVE ABUSE OF DISCRETION AMOUNTING TO a.m. to 4:00 or 4:30 p.m. comprises the sales personnels
LACK OF JURISDICTION WHEN IT UPHELD THE working hours which can be determined with reasonable
FINDINGS OF THE LABOR ARBITER THAT HEREIN certainty.
PETITIONER HAD CONSTRUCTIVELY DISMISSED
FERMIN AGAO, JR., FROM EMPLOYMENT. The Court does not agree. The law requires that the
actual hours of work in the field be reasonably
The petition has no merit. ascertained. The company has no way of determining
whether or not these sales personnel, even if they report
Art. 82 of the Labor Code provides: to the office before 8:00 a.m. prior to field work and come
ART. 82. Coverage. - The provisions of this Title [Working back at 4:30 p.m., really spend the hours in between in
Conditions and Rest Periods] shall apply to employees in all actual field work.vii
establishments and undertakings whether for profit or not, but In contrast, in the case at bar, during the entire course of their fishing
not to government employees, field personnel, members of the
voyage, fishermen employed by petitioner have no choice but to
family of the employer who are dependent on him for support, remain on board its vessel. Although they perform non-agricultural
domestic helpers, persons in the personal service of another, work away from petitioners business offices, the fact remains that
and workers who are paid by results as determined by the
throughout the duration of their work they are under the effective
Secretary of Labor in appropriate regulations. control and supervision of petitioner through the vessels patron or
.... ... ... master as the NLRC correctly held.viii

Field personnel shall refer to non-agricultural employees who Neither did petitioner gravely abuse its discretion in ruling that private
regularly perform their duties away from the principal place of respondent had constructively been dismissed by petitioner. Such
business or branch office of the employer and whose actual factual finding of both the NLRC and the Labor Arbiter is based not
hours of work in the field cannot be determined with reasonable only on the pleadings of the parties but also on a medical certificate
certainty. of fitness which, contrary to petitioners claim, private respondent
presented when he reported to work on May 28, 1990.ix As the NLRC
Petitioner argues essentially that since the work of private respondent held:
is performed away from its principal place of business, it has no way
of verifying his actual hours of work on the vessel. It contends that Anent grounds (a) and (b) of the appeal, the respondent,
private respondent and other fishermen in its employ should be in a nutshell, would like us to believe that the Arbiter
classified as field personnel who have no statutory right to service abused his discretion (or seriously erred in his findings
incentive leave pay. of facts) in giving credence to the factual version of the
complainant. But it is settled that (W)hen confronted with
In the case of Union of Filipro Employees (UFE) v. Vicar,v this Court conflicting versions of factual matters, the Labor Arbiter
explained the meaning of the phrase whose actual hours of work in has the discretion to determine which party deserves
the field cannot be determined with reasonable certainty in Art. 82 of credence on the basis of evidence received. [Gelmart
the Labor Code, as follows: Industries (Phils.), Inc. vs. Leogardo, 155 SCRA 403,
409, L-70544, November 5, 1987]. And besides, it is
Moreover, the requirement that actual hours of work in the field settled in this jurisdiction that to constitute abandonment
cannot be determined with reasonable certainty must be read of position, there must be concurrence of the intention to
in conjunction with Rule IV, Book III of the Implementing Rules abandon and some overt acts from which it may be
which provides: inferred that the employee concerned has no more
interest in working (Dagupan Bus Co., Inc. vs. NLRC,
Rule IV Holidays with Pay 191 SCRA 328), and that the filing of the complaint which
asked for reinstatement plus backwages (Record, p. 20)
Section 1. Coverage - This rule shall
is inconsistent with respondents defense of
apply to all employees except:
abandonment (Hua Bee Shirt Factory vs. NLRC, 188
.... ... ... SCRA 586).x

(e) Field personnel and other It is trite to say that the factual findings of quasi-judicial bodies are
employees whose time and performance is generally binding as long as they are supported substantially by
unsupervised by the employer xxx (Italics evidence in the record of the case. This is especially so where, as
supplied) here, the agency and its subordinate who heard the case in the first
instance are in full agreement as to the facts.xi
While contending that such rule added another element not
found in the law (Rollo, p. 13), the petitioner nevertheless
attempted to show that its affected members are not covered
As regards the labor arbiters award which was affirmed by respondent
by the abovementioned rule. The petitioner asserts that the
NLRC, there is no reason to apply the rule that reinstatement may not
companys sales personnel are strictly supervised as shown by
be ordered if, as a result of the case between the parties, their relation
the SOD (Supervisor of the Day) schedule and the company
is strained.xii Even at this late stage of this dispute, petitioner continues
circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-
to reiterate its offer to reinstate private respondent.xiii
55).
WHEREFORE, the petition is DISMISSED.
Contrary to the contention of the petitioner, the Court finds that
the aforementioned rule did not add another element to the SO ORDERED.
Labor Code definition of field personnel. The clause whose
time and performance is unsupervised by the employer did not
amplify but merely interpreted and expounded the clause
whose actual hours of work in the field cannot be determined
with reasonable certainty. The former clause is still within the
scope and purview of Article 82 which defines field personnel.
Hence, in deciding whether or not an employees actual working
hours in the field can be determined with reasonable certainty,
query must be made as to whether or not such employees time
and performance is constantly supervised by the employer.vi

Accordingly, it was held in the aforementioned case that salesmen of


Nestle Philippines, Inc. were field personnel:
WHEREFORE, all premises considered, it is hereby found that
the complaint for Illegal Dismissal has no leg to stand on. It is
hereby ordered DISMISSED, as it is hereby DISMISSED.

However, still based on the above-discussed premises, the


respondent must pay to the complainant the following:

a. his 13th month pay from the date of his hiring to the date
of his dismissal, presently computed at P78,117.87;
Auto Bus Transportation Systems vs. b. his service incentive leave pay for all the years he had
Bautista been in service with the respondent, presently computed
at P13,788.05.
Since 24 May 1995, respondent Antonio Bautista has been employed
by petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver- All other claims of both complainant and respondent are hereby
conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- dismissed for lack of merit.[5]
Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent
Not satisfied with the decision of the Labor Arbiter, petitioner appealed
was paid on commission basis, seven percent (7%) of the total gross
the decision to the NLRC which rendered its decision on 28
income per travel, on a twice a month basis.
September 2001, the decretal portion of which reads:
On 03 January 2000, while respondent was driving Autobus No. 114
[T]he Rules and Regulations Implementing Presidential Decree
along Sta. Fe, Nueva Vizcaya, the bus he was driving accidentally
No. 851, particularly Sec. 3 provides:
bumped the rear portion of Autobus No. 124, as the latter vehicle
suddenly stopped at a sharp curve without giving any warning. Section 3. Employers covered. The Decree shall apply to
all employers except to:
Respondent averred that the accident happened because he was
compelled by the management to go back to Roxas, Isabela, although xxx xxx xxx
he had not slept for almost twenty-four (24) hours, as he had just
arrived in Manila from Roxas, Isabela. Respondent further alleged that e) employers of those who are paid on purely
he was not allowed to work until he fully paid the amount of commission, boundary, or task basis, performing a
P75,551.50, representing thirty percent (30%) of the cost of repair of specific work, irrespective of the time consumed in the
the damaged buses and that despite respondents pleas for performance thereof. xxx.
reconsideration, the same was ignored by management. After a
month, management sent him a letter of termination. Records show that complainant, in his position paper, admitted
that he was paid on a commission basis.
Thus, on 02 February 2000, respondent instituted a Complaint for
Illegal Dismissal with Money Claims for nonpayment of 13th month pay In view of the foregoing, we deem it just and equitable to modify
and service incentive leave pay against Autobus. the assailed Decision by deleting the award of 13th month pay
to the complainant.
Petitioner, on the other hand, maintained that respondents
employment was replete with offenses involving reckless imprudence, WHEREFORE, the Decision dated 29 September 2000 is
gross negligence, and dishonesty. To support its claim, petitioner MODIFIED by deleting the award of 13th month pay. The other
presented copies of letters, memos, irregularity reports, and warrants findings are AFFIRMED.[6]
of arrest pertaining to several incidents wherein respondent was
involved. In other words, the award of service incentive leave pay was
maintained. Petitioner thus sought a reconsideration of this
Furthermore, petitioner avers that in the exercise of its management aspect, which was subsequently denied in a Resolution by the
prerogative, respondents employment was terminated only after the NLRC dated 31 October 2001.
latter was provided with an opportunity to explain his side regarding
the accident on 03 January 2000. Displeased with only the partial grant of its appeal to the NLRC,
petitioner sought the review of said decision with the Court of Appeals
On 29 September 2000, based on the pleadings and supporting which was subsequently denied by the appellate court in a Decision
evidence presented by the parties, Labor Arbiter Monroe C. Tabingan dated 06 May 2002, the dispositive portion of which reads:
promulgated a Decision,[4] the dispositive portion of which reads:
As a general rule, [field personnel] are those whose
performance of their job/service is not supervised by the
WHEREFORE, premises considered, the Petition is
employer or his representative, the workplace being away from
DISMISSED for lack of merit; and the assailed Decision of
the principal office and whose hours and days of work cannot
respondent Commission in NLRC NCR CA No. 026584-2000 is
be determined with reasonable certainty; hence, they are paid
hereby AFFIRMED in toto. No costs.[7]
specific amount for rendering specific service or performing
Hence, the instant petition. specific work. If required to be at specific places at specific
times, employees including drivers cannot be said to be field
personnel despite the fact that they are performing work away
from the principal office of the employee. [Emphasis ours]
ISSUES To this discussion by the BWC, the petitioner differs and postulates
1. Whether or not respondent is entitled to service incentive that under said advisory opinion, no employee would ever be
leave; considered a field personnel because every employer, in one way or
another, exercises control over his employees. Petitioner further
2. Whether or not the three (3)-year prescriptive period provided argues that the only criterion that should be considered is the nature
under Article 291 of the Labor Code, as amended, is of work of the employee in that, if the employees job requires that he
applicable to respondents claim of service incentive leave works away from the principal office like that of a messenger or a bus
pay. driver, then he is inevitably a field personnel.

We are not persuaded. At this point, it is necessary to stress that the


definition of a field personnel is not merely concerned with the location
where the employee regularly performs his duties but also with the
RULING OF THE COURT
fact that the employees performance is unsupervised by the
employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of
business of the employer and whose actual hours of work in the field
The disposition of the first issue revolves around the proper cannot be determined with reasonable certainty. Thus, in order to
interpretation of Article 95 of the Labor Code vis--vis Section 1(D), conclude whether an employee is a field employee, it is also
Rule V, Book III of the Implementing Rules and Regulations of the necessary to ascertain if actual hours of work in the field can be
Labor Code which provides: determined with reasonable certainty by the employer. In so doing, an
inquiry must be made as to whether or not the employees time and
performance are constantly supervised by the employer.

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE As observed by the Labor Arbiter and concurred in by the Court of
Appeals:
(a) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of It is of judicial notice that along the routes that are plied
five days with pay. by these bus companies, there are its inspectors
assigned at strategic places who board the bus and
Book III, Rule V: SERVICE INCENTIVE LEAVE inspect the passengers, the punched tickets, and the
conductors reports. There is also the mandatory once-a-
SECTION 1. Coverage. This rule shall apply to all employees
week car barn or shop day, where the bus is regularly
except:
checked as to its mechanical, electrical, and hydraulic
(d) Field personnel and other employees whose performance is aspects, whether or not there are problems thereon as
unsupervised by the employer including those who are engaged reported by the driver and/or conductor. They too, must
on task or contract basis, purely commission basis, or those be at specific place as [sic] specified time, as they
who are paid in a fixed amount for performing work irrespective generally observe prompt departure and arrival from their
of the time consumed in the performance thereof; . . . point of origin to their point of destination. In each and
every depot, there is always the Dispatcher whose
A careful perusal of said provisions of law will result in the conclusion function is precisely to see to it that the bus and its crew
that the grant of service incentive leave has been delimited by the leave the premises at specific times and arrive at the
Implementing Rules and Regulations of the Labor Code to apply only estimated proper time. These, are present in the case at
to those employees not explicitly excluded by Section 1 of Rule V. bar. The driver, the complainant herein, was therefore
According to the Implementing Rules, Service Incentive Leave shall under constant supervision while in the performance of
not apply to employees classified as field personnel. The phrase other this work. He cannot be considered a field personnel. [11]
employees whose performance is unsupervised by the employer must
not be understood as a separate classification of employees to which We agree in the above disquisition. Therefore, as correctly concluded
service incentive leave shall not be granted. Rather, it serves as an by the appellate court, respondent is not a field personnel but a
amplification of the interpretation of the definition of field personnel regular employee who performs tasks usually necessary and
under the Labor Code as those whose actual hours of work in the field desirable to the usual trade of petitioners business. Accordingly,
cannot be determined with reasonable certainty.[8] respondent is entitled to the grant of service incentive leave.

The same is true with respect to the phrase those who are engaged The question now that must be addressed is up to what amount of
on task or contract basis, purely commission basis. Said phrase service incentive leave pay respondent is entitled to.
should be related with field personnel, applying the rule on ejusdem
The response to this query inevitably leads us to the correlative issue
generis that general and unlimited terms are restrained and limited by
of whether or not the three (3)-year prescriptive period under Article
the particular terms that they follow.[9] Hence, employees engaged on
291 of the Labor Code is applicable to respondents claim of service
task or contract basis or paid on purely commission basis are not
incentive leave pay.
automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel. Article 291 of the Labor Code states that all money claims arising from
employer-employee relationship shall be filed within three (3) years
Therefore, petitioners contention that respondent is not entitled to the
from the time the cause of action accrued; otherwise, they shall be
grant of service incentive leave just because he was paid on purely
forever barred.
commission basis is misplaced. What must be ascertained in order to
resolve the issue of propriety of the grant of service incentive leave to In the application of this section of the Labor Code, the pivotal
respondent is whether or not he is a field personnel. question to be answered is when does the cause of action for money
claims accrue in order to determine the reckoning date of the three-
According to Article 82 of the Labor Code, field personnel shall refer
year prescriptive period.
to non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer It is settled jurisprudence that a cause of action has three elements,
and whose actual hours of work in the field cannot be determined with to wit, (1) a right in favor of the plaintiff by whatever means and under
reasonable certainty. This definition is further elaborated in the whatever law it arises or is created; (2) an obligation on the part of the
Bureau of Working Conditions (BWC), Advisory Opinion to Philippine named defendant to respect or not to violate such right; and (3) an act
Technical-Clerical Commercial Employees Association[10] which
states that:
of his dismissal. It was only upon his filing of a complaint for illegal
dismissal, one month from the time of his dismissal, that respondent
or omission on the part of such defendant violative of the right of the
demanded from his former employer commutation of his accumulated
plaintiff or constituting a breach of the obligation of the defendant to
leave credits. His cause of action to claim the payment of his
the plaintiff.[12]
accumulated service incentive leave thus accrued from the time when
To properly construe Article 291 of the Labor Code, it is essential to his employer dismissed him and failed to pay his accumulated leave
ascertain the time when the third element of a cause of action credits.
transpired. Stated differently, in the computation of the three-year
Therefore, the prescriptive period with respect to his claim for service
prescriptive period, a determination must be made as to the period
incentive leave pay only commenced from the time the employer
when the act constituting a violation of the workers right to the benefits
failed to compensate his accumulated service incentive leave pay at
being claimed was committed. For if the cause of action accrued more
the time of his dismissal. Since respondent had filed his money claim
than three (3) years before the filing of the money claim, said cause
after only one month from the time of his dismissal, necessarily, his
of action has already prescribed in accordance with Article 291. [13]
money claim was filed within the prescriptive period provided for by
Consequently, in cases of nonpayment of allowances and other Article 291 of the Labor Code.
monetary benefits, if it is established that the benefits being claimed
WHEREFORE, premises considered, the instant petition is hereby
have been withheld from the employee for a period longer than three
DENIED. The assailed Decision of the Court of Appeals in CA-G.R.
(3) years, the amount pertaining to the period beyond the three-year
SP. No. 68395 is hereby AFFIRMED. No Costs.
prescriptive period is therefore barred by prescription. The amount
that can only be demanded by the aggrieved employee shall be SO ORDERED.
limited to the amount of the benefits withheld within three (3) years
before the filing of the complaint.[14]

It is essential at this point, however, to recognize that the service


incentive leave is a curious animal in relation to other benefits granted EMPLOYMENT OF HOUSEHELPERS
by the law to every employee. In the case of service incentive leave,
the employee may choose to either use his leave credits or commute
it to its monetary equivalent if not exhausted at the end of the year.[15] Article 141. Coverage. This Chapter shall apply to all persons
Furthermore, if the employee entitled to service incentive leave does rendering services in households for compensation.
not use or commute the same, he is entitled upon his resignation or
separation from work to the commutation of his accrued service
"Domestic or household service" shall mean service in the employers
incentive leave. As enunciated by the Court in Fernandez v. NLRC:[16]
home which is usually necessary or desirable for the maintenance and
The clear policy of the Labor Code is to grant service incentive enjoyment thereof and includes ministering to the personal comfort
leave pay to workers in all establishments, subject to a few and convenience of the members of the employers household,
exceptions. Section 2, Rule V, Book III of the Implementing including services of family drivers.
Rules and Regulations provides that [e]very employee who has
rendered at least one year of service shall be entitled to a yearly Article 142. Contract of domestic service. The original contract of
service incentive leave of five days with pay. Service incentive domestic service shall not last for more than two (2) years but it may
leave is a right which accrues to every employee who has be renewed for such periods as may be agreed upon by the parties.
served within 12 months, whether continuous or broken
reckoned from the date the employee started working, including Article 145. Assignment to non-household work. No househelper
authorized absences and paid regular holidays unless the shall be assigned to work in a commercial, industrial or agricultural
working days in the establishment as a matter of practice or
enterprise at a wage or salary rate lower than that provided for
policy, or that provided in the employment contracts, is less than
agricultural or non-agricultural workers as prescribed herein.
12 months, in which case said period shall be considered as
one year. It is also commutable to its money equivalent if not
used or exhausted at the end of the year. In other words, an Piece Workers
employee who has served for one year is entitled to it. He may
use it as leave days or he may collect its monetary value. To Labor Congress vs. NLRC
limit the award to three years, as the solicitor general
recommends, is to unduly restrict such right.[17] [Italics supplied]
The antecedents of this case as summarized by the Office of the
Correspondingly, it can be conscientiously deduced that the cause of Solicitor General in its Manifestation and Motion in Lieu of Comment,iv
action of an entitled employee to claim his service incentive leave pay are as follows:
accrues from the moment the employer refuses to remunerate its
The 99 persons named as petitioners in this proceeding
monetary equivalent if the employee did not make use of said leave
were rank-and-file employees of respondent Empire
credits but instead chose to avail of its commutation. Accordingly, if
Food Products, which hired them on various dates
the employee wishes to accumulate his leave credits and opts for its
(Paragraph 1, Annex A of Petition, Annex B; Page 2,
commutation upon his resignation or separation from employment, his
Annex F of Petition).
cause of action to claim the whole amount of his accumulated service
incentive leave shall arise when the employer fails to pay such amount Petitioners filed against private respondents a complaint
at the time of his resignation or separation from employment. for payment of money claim[s] and for violation of labor
standard[s] laws (NLRC Case No. RAB-111-10-1817-90).
Applying Article 291 of the Labor Code in light of this peculiarity of the
They also filed a petition for direct certification of
service incentive leave, we can conclude that the three (3)-year
petitioner Labor Congress of the Philippines as their
prescriptive period commences, not at the end of the year when the
bargaining representative (Case No. R0300-9010-RU-
employee becomes entitled to the commutation of his service
005).
incentive leave, but from the time when the employer refuses to pay
its monetary equivalent after demand of commutation or upon On October 23, 1990, petitioners represented by LCP
termination of the employees services, as the case may be. President Benigno B. Navarro, Sr. and private
respondents Gonzalo Kehyeng and Evelyn Kehyeng in
The above construal of Art. 291, vis--vis the rules on service incentive
behalf of Empire Food Products, Inc. entered into a
leave, is in keeping with the rudimentary principle that in the
Memorandum of Agreement which provided, among
implementation and interpretation of the provisions of the Labor Code
others, the following:
and its implementing regulations, the workingmans welfare should be
the primordial and paramount consideration.[18] The policy is to extend 1. That in connection with the pending Petition for Direct
the applicability of the decree to a greater number of employees who Certification filed by the Labor Congress with the DOLE,
can avail of the benefits under the law, which is in consonance with Management of the Empire Food Products has no
the avowed policy of the State to give maximum aid and protection to objection [to] the direct certification of the LCP Labor
labor.[19] Congress and is now recognizing the Labor Congress of
the Philippines (LCP) and its Local Chapter as the SOLE
In the case at bar, respondent had not made use of his service
and EXCLUSIVE Bargaining Agent and Representative
incentive leave nor demanded for its commutation until his
for all rank and file employees of the Empire Food
employment was terminated by petitioner. Neither did petitioner
compensate his accumulated service incentive leave pay at the time
b. Union busting thru Harassments [sic], threats, and
interfering with the rights of employees to self-
Products regarding WAGES, HOURS OF WORK, AND
organization;
OTHER TERMS AND CONDITIONS OF
EMPLOYMENT; c. Violation of the Memorandum of Agreement dated
October 23, 1990;
2. That with regards [sic] to NLRC CASE NO. RAB-III-10-
1817-90 pending with the NLRC parties jointly and d. Underpayment of Wages in violation of R.A. No. 6640
mutually agreed that the issues thereof, shall be and R.A. No. 6727, such as Wages promulgated by the
discussed by the parties and resolve[d] during the Regional Wage Board;
negotiation of the Collective Bargaining Agreement;
e. Actual, Moral and Exemplary Damages. (Annex D of
3. That Management of the Empire Food Products shall Petition)
make the proper adjustment of the Employees Wages
within fifteen (15) days from the signing of this Agreement After the submission by the parties of their respective position
and further agreed to register all the employees with the papers and presentation of testimonial evidence, Labor Arbiter
SSS; Ariel C. Santos absolved private respondents of the charges of
unfair labor practice, union busting, violation of the
4. That Employer, Empire Food Products thru its memorandum of agreement, underpayment of wages and
Management agreed to deduct thru payroll deduction denied petitioners prayer for actual, moral and exemplary
UNION DUES and other Assessment[s] upon submission damages. Labor Arbiter Santos, however, directed the
by the LCP Labor Congress individual Check-Off reinstatement of the individual complainants:
Authorization[s] signed by the Union Members indicating
The undersigned Labor Arbiter is not oblivious to the fact
the amount to be deducted and further agreed all
that respondents have violated a cardinal rule in every
deduction[s] made representing Union Dues and
establishment that a payroll and other papers evidencing
Assessment[s] shall be remitted immediately to the LCP
hours of work, payments, etc. shall always be maintained
Labor Congress Treasurer or authorized representative
and subjected to inspection and visitation by personnel of
within three (3) or five (5) days upon deductions [sic],
the Department of Labor and Employment. As such
Union dues not deducted during the period due, shall be
penalty, respondents should not escape liability for this
refunded or reimbursed by the Employer/Management.
technicality, hence, it is proper that all individual
Employer/Management further agreed to deduct Union
complainants except those who resigned and executed
dues from non-union members the same amount
quitclaim[s] and releases prior to the filing of this
deducted from union members without need of individual
complaint should be reinstated to their former position[s]
Check-Off Authorizations [for] Agency Fee;
with the admonition to respondents that any harassment,
intimidation, coercion or any form of threat as a result of
5. That in consideration [of] the foregoing covenant,
this immediately executory reinstatement shall be dealt
parties jointly and mutually agreed that NLRC CASE NO.
with accordingly.
RAB-III-10-1817-90 shall be considered provisionally
withdrawn from the Calendar of the National Labor SO ORDERED. (Annex G of Petition)
Relations Commission(NLRC), while the Petition for
direct certification of the LCP Labor Congress parties On appeal, the National Labor Relations Commission vacated
jointly move for the direct certification of the LCP Labor the Decision dated April 14, 1972 [sic] and remanded the case
Congress; to the Labor Arbiter for further proceedings for the following
reasons:
6. That parties jointly and mutually agreed that upon
signing of this Agreement, no Harassments [sic], Threats, The Labor Arbiter, through his decision, noted that xxx
Interferences [sic] of their respective rights under the law, complainant did not present any single witness while
no Vengeance or Revenge by each partner nor any act respondent presented four (4) witnesses in the persons
of ULP which might disrupt the operations of the of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng
business; and Elvira Bulagan xxx (p. 183, Records), that xxx
complainant before the National Labor Relations
7. Parties jointly and mutually agreed that pending Commission must prove with definiteness and clarity the
negotiations or formalization of the propose[d] CBA, this offense charged. xxx (Record, p. 183); that xxx
Memorandum of Agreement shall govern the parties in complainant failed to specify under what provision of the
the exercise of their respective rights involving the Labor Code particularly Art. 248 did respondents violate
Management of the business and the terms and so as to constitute unfair labor practice xxx (Record, p.
condition[s] of employment, and whatever problems and 183); that complainants failed to present any witness who
grievances may arise by and between the parties shall be may describe in what manner respondents have
resolved by them, thru the most cordial and good committed unfair labor practice xxx (Record, p. 185); that
harmonious relationship by communicating the other xxx complainant LCP failed to present anyone of the so-
party in writing indicating said grievances before taking called 99 complainants in order to testify who committed
any action to another forum or government agencies; the threats and intimidation xxx (Record, p. 185).
8. That parties [to] this Memorandum of Agreement jointly Upon review of the minutes of the proceedings on record,
and mutually agreed to respect, abide and comply with all however, it appears that complainant presented
the terms and conditions hereof. Further agreed that witnesses, namely, BENIGNO NAVARRO, JR. (28
violation by the parties of any provision herein shall February 1991, RECORD, p. 91; 8 March 1991,
constitute an act of ULP. (Annex A of Petition). RECORD, p. 92, who adopted its POSITION PAPER
AND CONSOLIDATED AFFIDAVIT, as Exhibit A and the
In an Order dated October 24, 1990, Mediator Arbiter Antonio
annexes thereto as Exhibit B, B-1 to B-9, inclusive.
Cortez approved the memorandum of agreement and certified
LCP as the sole and exclusive bargaining agent among the
Minutes of the proceedings on record show that
rank-and-file employees of Empire Food Products for purposes
complainant further presented other witnesses, namely:
of collective bargaining with respect to wages, hours of work
ERLINDA BASILIO (13 March 1991, RECORD, p. 93;
and other terms and conditions of employment (Annex B of
LOURDES PANTILLO, MARIFE PINLAC, LENIE
Petition).
GARCIA (16 April 1991, Record, p. 96, see back portion
On November 9, 1990, petitioners through LCP President thereof; 2 May 1991, Record, p. 102; 16 May 1991,
Navarro submitted to private respondents a proposal for Record, p. 103; 11 June 1991, Record, p. 105). Formal
collective bargaining (Annex C of Petition). offer of Documentary and Testimonial Evidence was
made by complainant on June 24, 1991 (Record, p. 106-
On January 23, 1991, petitioners filed a complaint docketed as 109)
NLRC Case No. RAB-III-01-1964-91 against private
respondents for: The Labor Arbiter must have overlooked the testimonies
of some of the individual complainants which are now on
a. Unfair Labor Practice by way of Illegal Lockout and/or
Dismissal;
[sic]. Certainly, a lazy worker earns less than the
minimum wage but the same cannot be attributable to
record. Other individual complainants should have been
respondents but to the lazy workers.
summoned with the end in view of receiving their
testimonies. The complainants should be afforded the
Finally, the claim for moral and exemplary damages has
time and opportunity to fully substantiate their claims
no leg to stand on when no malice, bad faith or fraud was
against the respondents. Judgment should be rendered
ever proven to have been perpetuated by respondents.
only based on the conflicting positions of the parties. The
Labor Arbiter is called upon to consider and pass upon WHEREFORE, premises considered, the complaint is
the issues of fact and law raised by the parties. hereby DISMISSED for utter lack of merit. (Annex I of
Toward this end, therefore, it is Our considered view [that] Petition).iv
the case should be remanded to the Labor Arbiter of
origin for further proceedings.(Annex H of Petition) On appeal, the NLRC, in its Resolution dated 29 March 1995,iv
In a Decision dated July 27, 1994, Labor Arbiter Santos made affirmed in toto the decision of Labor Arbiter Santos. In so doing, the
the following determination: NLRC sustained the Labor Arbiters findings that: (a) there was a
dearth of evidence to prove the existence of unfair labor practice and
Complainants failed to present with definiteness and union busting on the part of private respondents; (b) the agreement of
clarity the particular act or acts constitutive of unfair labor 23 October 1990 could not be made the basis of an obligation within
practice. the ambit of the NLRCs jurisdiction, as the provisions thereof,
particularly Section 2, spoke of a resolutory condition which could or
It is to be borne in mind that a declaration of unfair labor could not happen; (c) the claims for underpayment of wages were
practice connotes a finding of prima facie evidence of without basis as complainants were admittedly pakiao workers and
probability that a criminal offense may have been paid on the basis of their output subject to the lone limitation that the
committed so as to warrant the filing of a criminal payment conformed to the minimum wage rate for an eight-hour
information before the regular court. Hence, evidence workday; and (d) petitioners were not underpaid.
which is more than a scintilla is required in order to
declare respondents/employers guilty of unfair labor Their motion for reconsideration having been denied by the NLRC in
practice. Failing in this regard is fatal to the cause of its Resolution of 31 October 1995,iv petitioners filed the instant special
complainants. Besides, even the charge of illegal lockout civil action for certiorari raising the following issues:
has no leg to stand on because of the testimony of
respondents through their guard Orlando Cairo (TSN, I
July 31, 1991 hearing; p. 5-35) that on January 21, 1991,
WHETHER OR NOT THE PUBLIC RESPONDENT
complainants refused and failed to report for work, hence
NATIONAL LABOR RELATIONS COMMISSION
guilty of abandoning their post without permission from
GRAVELY ABUSED ITS DISCRETION WHEN IT
respondents. As a result of complainants[] failure to
DISREGARDED OR IGNORED NOT ONLY THE
report for work, the cheese curls ready for repacking were
EVIDENCE FAVORABLE TO HEREIN PETITIONERS,
all spoiled to the prejudice of respondents. Under cross-
APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN
examination, complainants failed to rebut the authenticity
DECISIONS AND THAT OF THIS HONORABLE
of respondents witness testimony
HIGHEST TRIBUNAL WHICH [WAS] TANTAMOUNT
NOT ONLY TO THE DEPRIVATION OF PETITIONERS
As regards the issue of harassments [sic], threats and
RIGHT TO DUE PROCESS BUT WOULD RESULT [IN]
interference with the rights of employees to self-
MANIFEST INJUSTICE.
organization which is actually an ingredient of unfair labor
practice, complainants failed to specify what type of II
threats or intimidation was committed and who committed
the same. What are the acts or utterances constitutive of WHETHER OR NOT THE PUBLIC RESPONDENT
harassments [sic] being complained of? These are the GRAVELY ABUSED ITS DISCRETION WHEN IT
specifics which should have been proven with DEPRIVED THE PETITIONERS OF THEIR
definiteness and clarity by complainants who chose to CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION,
rely heavily on its position paper through generalizations SECURITY OF TENURE, PROTECTION TO LABOR,
to prove their case. JUST AND HUMANE CONDITIONS OF WORK AND
DUE PROCESS.
Insofar as violation of [the] Memorandum of Agreement
dated October 23, 1990 is concerned, both parties III
agreed that:
WHETHER OR NOT THE PETITIONERS WERE
2 - That with regards [sic] to the NLRC Case No. ILLEGALLY EASED OUT [OF] OR CONSTRUCTIVELY
RAB III-10-1817-90 pending with the NLRC, parties DISMISSED FROM THEIR ONLY MEANS OF
jointly and mutually agreed that the issues thereof LIVELIHOOD.
shall be discussed by the parties and resolve[d]
during the negotiation of the CBA. IV

The aforequoted provision does not speak of [an] WHETHER OR NOT PETITIONERS SHOULD BE
obligation on the part of respondents but on a resolutory REINSTATED FROM THE DATE OF THEIR DISMISSAL
condition that may occur or may not happen. This cannot UP TO THE TIME OF THEIR REINSTATEMENT, WITH
be made the basis of an imposition of an obligation over BACKWAGES, STATUTORY BENEFITS, DAMAGES
which the National Labor Relations Commission has AND ATTORNEYS FEES.iv
exclusive jurisdiction thereof.
We required respondents to file their respective Comments.
Anent the charge that there was underpayment of wages,
the evidence points to the contrary. The enumeration of In their Manifestation and Comment, private respondents asserted
complainants wages in their consolidated Affidavits of that the petition was filed out of time. As petitioners admitted in their
merit and position paper which implies underpayment has Notice to File petition for Review on Certiorari that they received a
no leg to stand on in the light of the fact that complainants copy of the resolution (denying their motion for reconsideration) on 13
admission that they are piece workers or paid on a pakiao December 1995, they had only until 29 December 1995 to file the
[basis] i.e. a certain amount for every thousand pieces of petition. Having failed to do so, the NLRC thus already entered
cheese curls or other products repacked. The only judgment in private respondents favor.
limitation for piece workers or pakiao workers is that they In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who
should receive compensation no less than the minimum filed the notice to file a petition for review on their behalf, mistook
wage for an eight (8) hour work [sic]. And compliance which reglementary period to apply. Instead of using the reasonable
therewith was satisfactorily explained by respondent time criterion for certiorari under Rule 65, he used the 15-day period
Gonzalo Kehyeng in his testimony (TSN, p. 12-30) during for petitions for review on certiorari under Rule 45. They hastened to
the July 31, 1991 hearing. On cross-examination, add that such was a mere technicality which should not bar their
complainants failed to rebut or deny Gonzalo Kehyengs petition from being decided on the merits in furtherance of substantial
testimony that complainants have been even receiving
more than the minimum wage for an average workers
the National Labor Relations Commission must prove with
definiteness and clarity the offense charged. x x x (Record, p.
justice, especially considering that respondents neither denied nor
183; that x x x complainant failed to specify under what
contradicted the facts and issues raised in the petition.
provision of the Labor Code particularly Art. 248 did
In its Manifestation and Motion in Lieu of Comment, the Office of the respondents violate so as to constitute unfair labor practice x x
Solicitor General (OSG) sided with petitioners. It pointed out that the x (Record, p. 183); that complainants failed to present any
Labor Arbiter, in finding that petitioners abandoned their jobs, relied witness who may describe in what manner respondents have
solely on the testimony of Security Guard Rolando Cairo that committed unfair labor practice x x x (Record, p. 185); that x x
petitioners refused to work on 21 January 1991, resulting in the x complainant a [sic] LCP failed to present anyone of the so
spoilage of cheese curls ready for repacking. However, the OSG called 99 complainants in order to testify who committed the
argued, this refusal to report for work for a single day did not constitute threats and intimidation x x x (Record, p. 185).
abandonment, which pertains to a clear, deliberate and unjustified
Upon review of the minutes of the proceedings on record,
refusal to resume employment, and not mere absence. In fact, the
however, it appears that complainant presented witnesses,
OSG stressed, two days after allegedly abandoning their work,
namely BENIGNO NAVARRO, JR. (28 February 1991,
petitioners filed a complaint for, inter alia, illegal lockout or illegal
RECORD, p. 91; 8 March 1991, RECORD, p. 92), who adopted
dismissal. Finally, the OSG questioned the lack of explanation on the
its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as
part of Labor Arbiter Santos as to why he abandoned his original
Exhibit A and the annexes thereto as Exhibit B, B-1 to B-9,
decision to reinstate petitioners.
inclusive. Minutes of the proceedings on record show that
In view of the stand of the OSG, we resolved to require the NLRC to complainant further presented other witnesses, namely:
file its own Comment. ERLINDA BASILIO (13 March 1991, RECORD, p. 93;
LOURDES PANTILLO, MARIFE PINLAC, LENI GARCIA (16
In its Comment, the NLRC invokes the general rule that factual April 1991, Record, p. 96, see back portion thereof; 2 May 1991,
findings of an administrative agency bind a reviewing court and Record, p. 102; 16 May 1991, Record, p. 103; 11 June 1991,
asserts that this case does not fall under the exceptions. The NLRC Record, p. 105). Formal offer of Documentary and Testimonial
further argues that grave abuse of discretion may not be imputed to Evidence was made by the complainant on June 24, 1991
it, as it affirmed the factual findings and legal conclusions of the Labor (Record, p. 106-109).
Arbiter only after carefully reviewing, weighing and evaluating the
evidence in support thereof, as well as the pertinent provisions of law The Labor Arbiter must have overlooked the testimonies of
and jurisprudence. some of the individual complainants which are now on record.
Other individual complainants should have been summoned
In their Reply, petitioners claim that the decisions of the NLRC and with the end in view of receiving their testimonies. The
the Labor Arbiter were not supported by substantial evidence; that complainants should [have been] afforded the time and
abandonment was not proved; and that much credit was given to self- opportunity to fully substantiate their claims against the
serving statements of Gonzalo Kehyeng, owner of Empire Foods, as respondents. Judgment should [have been] rendered only
to payment of just wages. based on the conflicting positions of the parties. The Labor
Arbiter is called upon to consider and pass upon the issues of
On 7 July 1997, we gave due course to the petition and required the fact and law raised by the parties.
parties to file their respective memoranda. However, only petitioners
and private respondents filed their memoranda, with the NLRC merely Toward this end, therefore, it is Our considered view the
adopting its Comment as its Memorandum. case should be remanded to the Labor Arbiter of origin
for further proceedings.
We find for petitioners.
Further, We take note that the decision does not contain
Invocation of the general rule that factual findings of the NLRC bind a dispositive portion or fallo. Such being the case, it may
this Court is unavailing under the circumstances. Initially, we are be well said that the decision does not resolve the issues
unable to discern any compelling reason justifying the Labor Arbiters at hand. On another plane, there is no portion of the
volte face from his 14 April 1992 decision reinstating petitioners to his decision which could be carried out by way of execution.
diametrically opposed 27 July 1994 decision, when in both instances,
he had before him substantially the same evidence. Neither do we It may be argued that the last paragraph of the decision
find the 29 March 1995 NLRC resolution to have sufficiently discussed may be categorized as the dispositive portion thereof:
the facts so as to comply with the standard of substantial evidence.
For one thing, the NLRC confessed its reluctance to inquire into the xxxxx
veracity of the Labor Arbiters factual findings, staunchly declaring that
The undersigned Labor Arbiter is not
it was not about to substitute [its] judgment on matters that are within
oblivious [to] the fact that respondents have
the province of the trier of facts. Yet, in the 21 July 1992 NLRC
violated a cardinal rule in every
resolution,iv it chastised the Labor Arbiter for his errors both in
establishment that a payroll and other papers
judgment and procedure, for which reason it remanded the records of
evidencing hour[s] of work, payment, etc.
the case to the Labor Arbiter for compliance with the pronouncements
shall always be maintained and subjected to
therein.
inspection and visitation by personnel of the
What cannot escape from our attention is that the Labor Arbiter did Department of Labor and Employment. As
not heed the observations and pronouncements of the NLRC in its such penalty, respondents should not
resolution of 21 July 1992, neither did he understand the purpose of escape liability for this technicality, hence, it
the remand of the records to him. In said resolution, the NLRC is proper that all the individual complainants
summarized the grounds for the appeal to be: except those who resigned and executed
quitclaim[s] and release[s] prior to the filing of
1. that there is a prima facie evidence of abuse of this complaint should be reinstated to their
discretion and acts of gross incompetence committed by the former position with the admonition to
Labor Arbiter in rendering the decision. respondents that any harassment,
intimidation, coercion or any form of threat as
2. that the Labor Arbiter in rendering the decision a result of this immediately executory
committed serious errors in the findings of facts. reinstatement shall be dealt with accordingly.
After which, the NLRC observed and found: SO ORDERED.
Complainant alleged that the Labor Arbiter disregarded the It is Our considered view that even assuming arguendo
testimonies of the 99 complainants who submitted their that the respondents failed to maintain their payroll and
Consolidated Affidavit of Merit and Position Paper which was other papers evidencing hours of work, payment etc.,
adopted as direct testimonies during the hearing and cross- such circumstance, standing alone, does not warrant the
examined by respondents counsel. directive to reinstate complainants to their former
positions. It is [a] well settled rule that there must be a
The Labor Arbiter, through his decision, noted that x x x finding of illegal dismissal before reinstatement be
complainant did not present any single witness while mandated.
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
grocery stores and other outlets for the sale of the
processed food is necessary in the day-to-day
In this regard, the LABOR ARBITER is hereby directed to
operation[s] of the company. With more reason, the work
include in his clarificatory decision, after receiving
of processed food repackers is necessary in the day-to-
evidence, considering and resolving the same, the
day operation[s] of respondent Empire Food Products.iv
requisite dispositive portion.iv
It may likewise be stressed that the burden of proving the existence
Apparently, the Labor Arbiter perceived that if not for petitioners, he
of just cause for dismissing an employee, such as abandonment, rests
would not have fallen victim to this stinging rebuke at the hands of the
on the employer, iv a burden private respondents failed to discharge.
NLRC. Thus does it appear to us that the Labor Arbiter, in concluding
in his 27 July 1994 Decision that petitioners abandoned their work, Private respondents, moreover, in considering petitioners
was moved by, at worst, spite, or at best, lackadaisically glossed over employment to have been terminated by abandonment, violated their
petitioners evidence. On this score, we find the following observations rights to security of tenure and constitutional right to due process in
of the OSG most persuasive: not even serving them with a written notice of such termination.iv
Section 2, Rule XIV, Book V of the Omnibus Rules Implementing the
In finding that petitioner employees abandoned their
Labor Code provides:
work, the Labor Arbiter and the NLRC relied on the
testimony of Security Guard Rolando Cairo that on SEC. 2. Notice of Dismissal. - Any employer who seeks
January 21, 1991, petitioners refused to work. As a result to dismiss a worker shall furnish him a written notice
of their failure to work, the cheese curls ready for stating the particular acts or omission constituting the
repacking on said date were spoiled. grounds for his dismissal. In cases of abandonment of
work, the notice shall be served at the workers last known
The failure to work for one day, which resulted in the
address.
spoilage of cheese curls does not amount to
abandonment of work. In fact two (2) days after the Petitioners are therefore entitled to reinstatement with full back wages
reported abandonment of work or on January 23, 1991, pursuant to Article 279 of the Labor Code, as amended by R.A. No.
petitioners filed a complaint for, among others, unfair 6715. Nevertheless, the records disclose that taking into account the
labor practice, illegal lockout and/or illegal dismissal. In number of employees involved, the length of time that has lapsed
several cases, this Honorable Court held that one could since their dismissal, and the perceptible resentment and enmity
not possibly abandon his work and shortly thereafter between petitioners and private respondents which necessarily
vigorously pursue his complaint for illegal dismissal (De strained their relationship, reinstatement would be impractical and
Ysasi III v. NLRC, 231 SCRA 173; Ranara v. NLRC, 212 hardly promotive of the best interests of the parties. In lieu of
SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328; reinstatement then, separation pay at the rate of one month for every
Atlas Consolidated Mining and Development Corp. v. year of service, with a fraction of at least six (6) months of service
NLRC, 190 SCRA 505; Hua Bee Shirt Factory v. NLRC, considered as one (1) year, is in order.iv
186 SCRA 586; Mabaylan v. NLRC, 203 SCRA 570 and
Flexo Manufacturing v. NLRC, 135 SCRA 145). In Atlas That being said, the amount of back wages to which each petitioner
Consolidated, supra, this Honorable Court explicitly is entitled, however, cannot be fully settled at this time. Petitioners, as
stated: piece-rate workers having been paid by the piece,iv there is need to
determine the varying degrees of production and days worked by
It would be illogical for Caballo, to abandon each worker. Clearly, this issue is best left to the National Labor
his work and then immediately file an action Relations Commission.
seeking for his reinstatement. We can not
believe that Caballo, who had worked for As to the other benefits, namely, holiday pay, premium pay, 13th
Atlas for two years and ten months, would month pay and service incentive leave which the labor arbiter failed to
simply walk away from his job unmindful of rule on but which petitioners prayed for in their complaint,iv we hold
the consequence of his act, i.e. the forfeiture that petitioners are so entitled to these benefits. Three (3) factors lead
of his accrued employment benefits. In us to conclude that petitioners, although piece-rate workers, were
opting to finally to [sic] contest the legality of regular employees of private respondents. First, as to the nature of
his dismissal instead of just claiming his petitioners tasks, their job of repacking snack food was necessary or
separation pay and other benefits, which he desirable in the usual business of private respondents, who were
actually did but which proved to be futile after engaged in the manufacture and selling of such food products;
all, ably supports his sincere intention to second, petitioners worked for private respondents throughout the
return to work, thus negating Atlas stand that year, their employment not having been dependent on a specific
he had abandoned his job. project or season; and third, the length of timeiv that petitioners worked
for private respondents. Thus, while petitioners mode of
In De Ysasi III v. NLRC (supra), this Honorable Court compensation was on a per piece basis, the status and nature of their
stressed that it is the clear, deliberate and unjustified employment was that of regular employees.
refusal to resume employment and not mere absence
that constitutes abandonment. The absence of petitioner The Rules Implementing the Labor Code exclude certain employees
employees for one day on January 21, 1991 as testified from receiving benefits such as nighttime pay, holiday pay, service
[to] by Security Guard Orlando Cairo did not constitute incentive leaveiv and 13th month pay,iv inter alia, field personnel and
abandonment. other employees whose time and performance is unsupervised by the
employer, including those who are engaged on task or contract basis,
In his first decision, Labor Arbiter Santos expressly purely commission basis, or those who are paid a fixed amount for
directed the reinstatement of the petitioner employees performing work irrespective of the time consumed in the performance
and admonished the private respondents that any thereof. Plainly, petitioners as piece-rate workers do not fall within this
harassment, intimidation, coercion or any form of threat group. As mentioned earlier, not only did petitioners labor under the
as a result of this immediately executory reinstatement control of private respondents as their employer, likewise did
shall be dealt with accordingly. petitioners toil throughout the year with the fulfillment of their quota as
supposed basis for compensation. Further, in Section 8 (b), Rule IV,
In his second decision, Labor Arbiter Santos did not state
Book III which we quote hereunder, piece workers are specifically
why he was abandoning his previous decision directing
mentioned as being entitled to holiday pay.
the reinstatement of petitioner employees.
SEC. 8. Holiday pay of certain employees.-
By directing in his first decision the reinstatement of
petitioner employees, the Labor Arbiter impliedly held that (b) Where a covered employee is paid by results or
they did not abandon their work but were not allowed to output, such as payment on piece work, his holiday
work without just cause. pay shall not be less than his average daily
earnings for the last seven (7) actual working days
That petitioner employees are pakyao or piece workers
preceding the regular holiday: Provided, however,
does not imply that they are not regular employees
that in no case shall the holiday pay be less than
entitled to reinstatement. Private respondent Empire
the applicable statutory minimum wage rate.
Food Products, Inc. is a food and fruit processing
company. In Tabas v. California Manufacturing Co., Inc. In addition, the Revised Guidelines on the Implementation of the 13th
(169 SCRA 497), this Honorable Court held that the work
of merchandisers of processed food, who coordinate with
SO ORDERED.
iv
Month Pay Law, in view of the modifications to P.D. No. 851 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
Normal Hours of Work
The following employers are still not covered by P.D. No. 851: Article 83. Normal hours of work. The normal hours of work of any
d. Employers of those who are paid on employee shall not exceed eight (8) hours a day.
purely commission, boundary or task basis,
and those who are paid a fixed amount for Health personnel in cities and municipalities with a population of at
performing specific work, irrespective of the least one million (1,000,000) or in hospitals and clinics with a bed
time consumed in the performance thereof, capacity of at least one hundred (100) shall hold regular office hours
except where the workers are paid on piece- for eight (8) hours a day, for five (5) days a week, exclusive of time for
rate basis in which case the employer shall
meals, except where the exigencies of the service require that such
grant the required 13th month pay to such
personnel work for six (6) days or forty-eight (48) hours, in which case,
workers. (italics supplied)
they shall be entitled to an additional compensation of at least thirty
The Revised Guidelines as well as the Rules and Regulations identify percent (30%) of their regular wage for work on the sixth day. For
those workers who fall under the piece-rate category as those who purposes of this Article, "health personnel" shall include resident
are paid a standard amount for every piece or unit of work produced physicians, nurses, nutritionists, dietitians, pharmacists, social
that is more or less regularly replicated, without regard to the time workers, laboratory technicians, paramedical technicians,
spent in producing the same.iv psychologists, midwives, attendants and all other hospital or clinic
personnel.
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, Compensable Hours of Work In General
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 Article 84. Hours worked. Hours worked shall include
Labor in accordance with the aforesaid section, are not entitled to
receive overtime pay. Here, private respondents did not allege (a) all time during which an employee is required to be on duty or to
adherence to the standards set forth in Sec. 8 nor with the rates be at a prescribed workplace; and
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 (b) all time during which an employee is suffered or permitted to work.
in a better position to determine the exact amounts owed petitioners,
if any. Rest periods of short duration during working hours shall be counted
as hours worked.
As to the claim that private respondents violated petitioners right to
self-organization, the evidence on record does not support this claim.
Petitioners relied almost entirely on documentary evidence which, per Meal Period
se, did not prove any wrongdoing on private respondents part. For
example, petitioners presented their complaintiv to prove the violation Article 85. Meal periods. Subject to such regulations as the Secretary
of labor laws committed by private respondents. The complaint, of Labor may prescribe, it shall be the duty of every employer to give
however, is merely the pleading alleging the plaintiffs cause or causes his employees not less than sixty (60) minutes time-off for their regular
of action.iv Its contents are merely allegations, the verity of which shall meals.
have to be proved during the trial. They likewise offered their
Consolidated Affidavit of Merit and Position Paperiv which, like the Philippine Airlines, Inc., vs. NLRC
offer of their Complaint, was a tautological exercise, and did not help
nor prove their cause. In like manner, the petition for certification The facts are as follow:
electioniv and the subsequent order of certificationiv merely proved that
petitioners sought and acquired the status of bargaining agent for all Private respondent was employed as flight surgeon at petitioner
rank-and-file employees. Finally, the existence of the memorandum company. He was assigned at the PAL Medical Clinic at Nichols and
of agreementiv offered to substantiate private respondents non- was on duty from 4:00 in the afternoon until 12:00 midnight.
compliance therewith, did not prove either compliance or non-
compliance, absent evidence of concrete, overt acts in contravention On February 17, 1994, at around 7:00 in the evening, private
of the provisions of the memorandum. respondent left the clinic to have his dinner at his residence, which
was about five-minute drive away. A few minutes later, the clinic
IN VIEW WHEREOF, the instant petition is hereby GRANTED. The received an emergency call from the PAL Cargo Services. One of its
Resolution of the National Labor Relations Commission of 29 March employees, Mr. Manuel Acosta, had suffered a heart attack. The
1995 and the Decision of the Labor Arbiter of 27 July 1994 in NLRC nurse on duty, Mr. Merlino Eusebio, called private respondent at home
Case No. RAB-III-01-1964-91 are hereby SET ASIDE, and another is to inform him of the emergency. The patient arrived at the clinic at
hereby rendered: 7:50 in the evening and Mr. Eusebio immediately rushed him to the
hospital. When private respondent reached the clinic at around 7:51
1. DECLARING petitioners to have been illegally in the evening, Mr. Eusebio had already left with the patient. Mr.
dismissed by private respondents, thus entitled to full Acosta died the following day.
back wages and other privileges, and separation pay in
lieu of reinstatement at the rate of one months salary for Upon learning about the incident, PAL Medical Director Dr. Godofredo
every year of service with a fraction of six months of B. Banzon ordered the Chief Flight Surgeon to conduct an
service considered as one year; investigation. The Chief Flight Surgeon, in turn, required private
respondent to explain why no disciplinary sanction should be taken
2. REMANDING the records of this case to the National against him.
Labor Relations Commission for its determination of
the back wages and other benefits and separation In his explanation, private respondent asserted that he was entitled to
pay, taking into account the foregoing observations; a thirty-minute meal break; that he immediately left his residence upon
and being informed by Mr. Eusebio about the emergency and he arrived
at the clinic a few minutes later; that Mr. Eusebio panicked and
3. DIRECTING the National Labor Relations brought the patient to the hospital without waiting for him.
Commission to resolve the referred issues within
sixty (60) days from its receipt of a copy of this Finding private respondents explanation unacceptable, the
decision and of the records of the case and to submit management charged private respondent with abandonment of post
to this Court a report of its compliance hereof within while on duty. He was given ten days to submit a written answer to
ten (10) days from the rendition of its resolution. the administrative charge.

Costs against private respondents.


for eight (8) hours a day, for five (5) days a week, exclusive of time
for meals, except where the exigencies of the service require that
In his answer, private respondent reiterated the assertions in his
such personnel work for six (6) days or forty-eight (48) hours, in which
previous explanation. He further denied that he abandoned his post
case they shall be entitled to an additional compensation of at least
on February 17, 1994. He said that he only left the clinic to have his
thirty per cent (30%) of their regular wage for work on the sixth day.
dinner at home. In fact, he returned to the clinic at 7:51 in the evening
For purposes of this Article, health personnel shall include: resident
upon being informed of the emergency.
physicians, nurses, nutritionists, dieticians, pharmacists, social
After evaluating the charge as well as the answer of private workers, laboratory technicians, paramedical technicians,
respondent, petitioner company decided to suspend private psychologists, midwives, attendants and all other hospital or clinic
respondent for three months effective December 16, 1994. personnel. (emphasis supplied)

Private respondent filed a complaint for illegal suspension against Art. 85. Meal periods.Subject to such regulations as the Secretary of
petitioner. Labor may prescribe, it shall be the duty of every employer to give his
employees not less than sixty (60) minutes time-off for their regular
On July 16, 1996, Labor Arbiter Romulus A. Protasio rendered a meals.
decisionvi declaring the suspension of private respondent illegal. It
also ordered petitioner to pay private respondent the amount Section 7, Rule I, Book III of the Omnibus Rules Implementing the
equivalent to all the benefits he should have received during his period Labor Code further states:
of suspension plus P500,000.00 moral damages. The dispositive
Sec. 7. Meal and Rest Periods.Every employer shall give his
portion of the decision reads:
employees, regardless of sex, not less than one (1) hour time-off for
WHEREFORE, in view of all the foregoing, judgment is hereby regular meals, except in the following cases when a meal period of
rendered declaring the suspension of complainant as illegal, and not less than twenty (20) minutes may be given by the employer
ordering the respondents the restitution to the complainant of all provided that such shorter meal period is credited as compensable
employment benefits equivalent to his period of suspension, and the hours worked of the employee;(a) Where the work is non-
payment to the complainant of P500,000.00 by way of moral manual work in nature or does not involve strenuous physical
damages.vi exertion;

Petitioner appealed to the NLRC. The NLRC, however, dismissed the (b) Where the establishment regularly operates not less than
appeal after finding that the decision of the Labor Arbiter is supported sixteen hours a day;
by the facts on record and the law on the matter.vi The NLRC likewise
(c) In cases of actual or impending emergencies or there is
denied petitioners motion for reconsideration.vi
urgent work to be performed on machineries, equipment or
Hence, this petition raising the following arguments: installations to avoid serious loss which the employer would otherwise
suffer; and
1. The public respondents acted without or in excess of their
jurisdiction and with grave abuse of discretion in nullifying (d) Where the work is necessary to prevent serious loss of
the 3-month suspension of private respondent despite the perishable goods.
fact that the private respondent has committed an offense
Rest periods or coffee breaks running from five (5) to twenty
that warranted the imposition of disciplinary action.
(20) minutes shall be considered as compensable working time.
2. The public respondents acted without or in excess of their
Thus, the eight-hour work period does not include the meal
jurisdiction and with grave abuse of discretion in holding the
break. Nowhere in the law may it be inferred that employees must
petitioner liable for moral damages:
take their meals within the company premises. Employees are not
(a) Despite the fact that no formal hearing prohibited from going out of the premises as long as they return to
whatsoever was conducted for their posts on time. Private respondents act, therefore, of going home
complainant to substantiate his claim; to take his dinner does not constitute abandonment.

(b) Despite the absence of proof that the We now go to the award of moral damages to private
petitioner acted in bad faith in imposing the respondent.
3-month suspension; and
Not every employee who is illegally dismissed or suspended is
(c) Despite the fact that the Labor Arbiter's entitled to damages. As a rule, moral damages are recoverable only
award of moral damages is highly irregular, where the dismissal or suspension of the employee was attended by
considering that it was more than what the bad faith or fraud, or constituted an act oppressive to labor, or was
private respondent prayed for.vi done in a manner contrary to morals, good customs or public policy.vi
Bad faith does not simply mean negligence or bad judgment. It
We find that public respondents did not err in nullifying the involves a state of mind dominated by ill will or motive. It implies a
three-month suspension of private respondent. They, however, erred conscious and intentional design to do a wrongful act for a dishonest
in awarding moral damages to private respondent. purpose or some moral obliquity.vi The person claiming moral
damages must prove the existence of bad faith by clear and
First, as regards the legality of private respondents suspension. convincing evidence for the law always presumes good faith.vi
The facts do not support petitioners allegation that private respondent
abandoned his post on the evening of February 17, 1994. Private In the case at bar, there is no showing that the management of
respondent left the clinic that night only to have his dinner at his petitioner company was moved by some evil motive in suspending
house, which was only a few minutes drive away from the clinic. His private respondent. It suspended private respondent on an honest,
whereabouts were known to the nurse on duty so that he could be albeit erroneous, belief that private respondents act of leaving the
easily reached in case of emergency. Upon being informed of Mr. company premises to take his meal at home constituted abandonment
Acostas condition, private respondent immediately left his home and of post which warrants the penalty of suspension. Also, it is evident
returned to the clinic. These facts belie petitioners claim of from the facts that petitioner gave private respondent all the
abandonment. opportunity to refute the charge against him and to defend himself.
These negate the existence of bad faith on the part of petitioner.
Petitioner argues that being a full-time employee, private respondent Under the circumstances, we hold that private respondent is not
is obliged to stay in the company premises for not less than eight (8) entitled to moral damages.
hours. Hence, he may not leave the company premises during such
time, even to take his meals. IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The
portion of the assailed decision awarding moral damages to private
We are not impressed. respondent is DELETED. All other aspects of the decision are
AFFIRMED.
Articles 83 and 85 of the Labor Code read:
SO ORDERED.
Art. 83. Normal hours of work.The normal hours of work of any
employee shall not exceed eight (8) hours a day.
Shorter Meal Period (Less than One hour,
Health personnel in cities and municipalities with a population of at
least one million (1,000,000) or in hospitals and clinics with a bed
but not less than 20 minutes)
capacity of at least one hundred (100) shall hold regular office hours
preliminary activities are necessarily and primarily for private
respondent's benefit.
--
These preliminary activities of the workers are as follows:
Waiting Time (a) First there is the roll call. This is followed by getting their individual
work assignments from the foreman.
Arica vs. NLRC
(b) Thereafter, they are individually required to accomplish the
This case stemmed from a complaint filed on April 9, 1984 against Laborer's Daily Accomplishment Report during which they are often
private respondent Stanfilco for assembly time, moral damages and made to explain about their reported accomplishment the following
attorney's fees, with the aforementioned Regional Arbitration Branch day.
No. XI, Davao City.
(c) Then they go to the stockroom to get the working materials, tools
After the submission by the parties of their respective position papers and equipment.
(Annex "C", pp. 30-40; Annex "D", Rollo, pp. 41-50), Labor Arbiter
Pedro C. Ramos rendered a decision dated October 9, 1985 (Annex (d) Lastly, they travel to the field bringing with them their tools,
'E', Rollo, pp. 51-58) in favor of private respondent STANFILCO, equipment and materials.
holding that: All these activities take 30 minutes to accomplish (Rollo, Petition, p.
11).
Given these facts and circumstances, we cannot but agree with
respondent that the pronouncement in that earlier case, i.e. the thirty- Contrary to this contention, respondent avers that the instant
minute assembly time long practiced cannot be considered waiting complaint is not new, the very same claim having been brought
time or work time and, therefore, not compensable, has become the against herein respondent by the same group of rank and file
law of the case which can no longer be disturbed without doing employees in the case of Associated Labor Union and Standard Fruit
violence to the time- honored principle of res-judicata. Corporation, NLRC Case No. 26-LS-XI-76 which was filed way back
April 27, 1976 when ALU was the bargaining agent of respondent's
WHEREFORE, in view of the foregoing considerations, the instant rank and file workers. The said case involved a claim for "waiting
complaint should therefore be, as it is hereby, DISMISSED. time", as the complainants purportedly were required to assemble at
SO ORDERED. (Rollo, p. 58) a designated area at least 30 minutes prior to the start of their
scheduled working hours "to ascertain the work force available for the
On December 12, 1986, after considering the appeal memorandum of day by means of a roll call, for the purpose of assignment or
complainant and the opposition of respondents, the First Division of reassignment of employees to such areas in the plantation where they
public respondent NLRC composed of Acting Presiding are most needed." (Rollo, pp. 64- 65)
Commissioner Franklin Drilon, Commissioner Conrado Maglaya,
Commissioner Rosario D. Encarnacion as Members, promulgated its Noteworthy is the decision of the Minister of Labor, on May 12, 1978
Resolution, upholding the Labor Arbiters' decision. The Resolution's in the aforecited case (Associated Labor Union vs. Standard (Phil.)
dispositive portion reads: Fruit Corporation, NLRC Case No. 26-LS-XI-76 where significant
findings of facts and conclusions had already been made on the
Surely, the customary functions referred to in the above- quoted matter.
provision of the agreement includes the long-standing practice and
institutionalized non-compensable assembly time. This, in effect, The Minister of Labor held:
estopped complainants from pursuing this case.
The thirty (30)-minute assembly time long practiced and
The Commission cannot ignore these hard facts, and we are institutionalized by mutual consent of the parties under Article IV,
constrained to uphold the dismissal and closure of the case. Section 3, of the Collective Bargaining Agreement cannot be
WHEREFORE, let the appeal be, as it is hereby dismissed, for lack of considered as waiting time within the purview of Section 5, Rule I,
merit. Book III of the Rules and Regulations Implementing the Labor Code.
...
Furthermore, the thirty (30)-minute assembly is a deeply- rooted,
SO ORDERED. (Annex "H", Rollo, pp. 86-89).
routinary practice of the employees, and the proceedings attendant
thereto are not infected with complexities as to deprive the workers
On January 15, 1987, petitioners filed a Motion for Reconsideration the time to attend to other personal pursuits. They are not new
which was opposed by private respondent (Annex "I", Rollo, pp. 90- employees as to require the company to deliver long briefings
91; Annex J Rollo, pp. 92-96). regarding their respective work assignments. Their houses are
situated right on the area where the farm are located, such that after
the roll call, which does not necessarily require the personal presence,
Public respondent NLRC, on January 30, 1987, issued a resolution
they can go back to their houses to attend to some chores. In short,
denying for lack of merit petitioners' motion for reconsideration (Annex
they are not subject to the absolute control of the company during this
"K", Rollo, p. 97).
period, otherwise, their failure to report in the assembly time would
justify the company to impose disciplinary measures. The CBA does
Hence this petition for review on certiorari filed on May 7, 1987 not contain any provision to this effect; the record is also bare of any
proof on this point. This, therefore, demonstrates the indubitable fact
The Court in the resolution of May 4, 1988 gave due course to this that the thirty (30)-minute assembly time was not primarily intended
petition. for the interests of the employer, but ultimately for the employees to
indicate their availability or non-availability for work during every
Petitioners assign the following issues: working day. (Annex "E", Rollo, p. 57).
Accordingly, the issues are reduced to the sole question as to whether
1) Whether or not the 30-minute activity of the petitioners before the public respondent National Labor Relations Commission committed a
scheduled working time is compensable under the Labor Code. grave abuse of discretion in its resolution of December 17, 1986.
The facts on which this decision was predicated continue to be the
2) Whether or not res judicata applies when the facts obtaining in the facts of the case in this questioned resolution of the National Labor
prior case and in the case at bar are significantly different from each Relations Commission.
other in that there is merit in the case at bar.
It is clear that herein petitioners are merely reiterating the very same
3) Whether or not there is finality in the decision of Secretary Ople in claim which they filed through the ALU and which records show had
view of the compromise agreement novating it and the withdrawal of already long been considered terminated and closed by this Court in
the appeal. G.R. No. L-48510. Therefore, the NLRC can not be faulted for ruling
that petitioners' claim is already barred by res-judicata.
4) Whether or not estoppel and laches lie in decisions for the
enforcement of labor standards (Rollo, p. 10). Be that as it may, petitioners' claim that there was a change in the
factual scenario which are "substantial changes in the facts" makes
Petitioners contend that the preliminary activities as workers of respondent firm now liable for the same claim they earlier filed against
respondents STANFILCO in the assembly area is compensable as
working time (from 5:30 to 6:00 o'clock in the morning) since these
CASE AT BAR. It is beyond dispute that the petitioners members
are full-time employees receiving their monthly salaries irrespective of
respondent which was dismissed. It is thus axiomatic that the non-
the number of working days or teaching hours in a month. However,
compensability of the claim having been earlier established, constitute
they find themselves in a most peculiar situation whereby they are
the controlling legal rule or decision between the parties and remains
forced to go on leave during semestral breaks. These semestral
to be the law of the case making this petition without merit.
breaks are in the nature of work interruptions beyond the employees
control. The duration of the semestral break varies from year to year
As aptly observed by the Solicitor General that this petition is "clearly
dependent on a variety of circumstances affecting at times only the
violative of the familiar principle of res judicata. There will be no end
private respondent but at other times all educational institutions in the
to this controversy if the light of the Minister of Labor's decision dated
country. As such, these breaks cannot be considered as absences
May 12, 1979 that had long acquired the character of finality and
within the meaning of the law for which deductions may be made from
which already resolved that petitioners' thirty (30)-minute assembly
monthly allowances. The "No work, no pay" principle does not apply
time is not compensable, the same issue can be re-litigated again."
in the instant case. The petitioners members received their regular
(Rollo, p. 183)
salaries during this period. It is clear from the aforequoted provision
This Court has held:
of law that it contemplates a "no work" situation where the employees
voluntarily absent themselves. Petitioners, in the case at bar, certainly
In this connection account should be taken of the cognate principle
do not, ad voluntatem, absent themselves during semestral breaks.
that res judicata operates to bar not only the relitigation in a
Rather, they are constrained to take mandatory leave from work. For
subsequent action of the issues squarely raised, passed upon and
this they cannot be faulted nor can they be begrudged that which is
adjudicated in the first suit, but also the ventilation in said subsequent
due them under the law.
suit of any other issue which could have been raised in the first but
was not. The law provides that 'the judgment or order is, with respect
3. ID.; ID.; ID.; EMPLOYEES WHETHER PAID ON MONTHLY OR
to the matter directly adjudged or as to any other matter that could
DAILY BASIS ENTITLED TO DAILY LIVING ALLOWANCE WHEN
have been raised in relation thereto, conclusive between the parties
PAID THEIR BASIC WAGE. Respondents contention that the
and their successors in interest by title subsequent to the
"factor receiving a salary alone should not be the basis of receiving
commencement of the action .. litigating for the same thing and in the
ECOLA", is likewise, without merit. Particular attention is brought to
same capacity.' So, even if new causes of action are asserted in the
the Implementing Rules and Regulations of Wage Order No. 1 to wit:
second action (e.g. fraud, deceit, undue machinations in connection
"Sec. 5. Allowance for Unworked Days. a) All covered employees
with their execution of the convenio de transaccion), this would not
whether paid on a monthly or daily basis shall be entitled to their daily
preclude the operation of the doctrine of res judicata. Those issues
living allowance when they are paid their basic.." . .
are also barred, even if not passed upon in the first. They could have
been, but were not, there raised. (Vda. de Buncio v. Estate of the late
4. ID.; ID.; ID.; PURPOSE OF THE LAW. The legal principles of
Anita de Leon, 156 SCRA 352 [1987]).
"No work, no pay; No pay, no ECOLA" must necessarily give way to
the purpose of the law to augment the income of employees to enable
Moreover, as a rule, the findings of facts of quasi-judicial agencies
them to cope with the harsh living conditions brought about by
which have acquired expertise because their jurisdiction is confined
inflation; and to protect employees and their wages against the
to specific matters are accorded not only respect but at times even
ravages brought by these conditions. Significantly, it is the
finality if such findings are supported by substantial evidence (Special
commitment of the State to protect labor and to provide means by
Events & Central Shipping Office Workers Union v. San Miguel
which the difficulties faced by the working force may best be
Corporation, 122 SCRA 557 [1983]; Dangan v. NLRC, 127 SCRA 706
alleviated.
[1984]; Phil. Labor Alliance Council v. Bureau of Labor Relations, 75
SCRA 162 [1977]; Mamerto v. Inciong, 118 SCRA 265 (1982];
5. ID.; ID.; ID.; PRESIDENTIAL DECREE 451; CONSTRUED.
National Federation of Labor Union (NAFLU) v. Ople, 143 SCRA 124
Respondent overlooks the elemental principle of statutory
[1986]; Edi-Staff Builders International, Inc. v. Leogardo, Jr., 152
construction that the general statements in the whereas clauses
SCRA 453 [1987]; Asiaworld Publishing House, Inc. v. Ople, 152
cannot prevail over the specific or particular statements in the law
SCRA 219 [1987]).
itself which define or limit the purposes of the legislation or proscribe
certain acts. True, the whereas clauses of PD 451 provide for salary
The records show that the Labor Arbiters' decision dated October 9,
and or wage increase and other benefits, however, the same do not
1985 (Annex "E", Petition) pointed out in detail the basis of his findings
delineate the source of such funds and it is only in Section 3 which
and conclusions, and no cogent reason can be found to disturb these
provides for the limitations wherein the intention of the framers of the
findings nor of those of the National Labor Relations Commission
law is clearly outlined. The law is clear. The sixty (60%) percent
which affirmed the same.
incremental proceeds from the tuition increase are to be devoted
entirely to wage or salary increases which means increases in basic
PREMISES CONSIDERED, the petition is DISMISSED for lack of
salary. The law cannot be construed to include allowances which are
merit and the decision of the National Labor Relations Commission is
benefits over and above the basic salaries of the employees.
AFFIRMED.
6. REMEDIAL LAW; APPEALS; FINDINGS OF FACT OF NATIONAL
SO ORDERED.
LABOR RELATIONS COMMISSION ARE BINDING WHEN FULLY
SUBSTANTIATED BY EVIDENCE. As evidenced by the payrolls
Inactive Due to Work Interruptions submitted by them during the period September 16 to September 30,
1981, the faculty members have been paid for the extra loads. We
University of Pangasinan Faculty Union vs. agree with the respondents that this issue involves a question of fact
properly within the competence of the respondent NLRC to pass
University of Pangasinan upon. The findings of fact of the respondent Commission are binding
on this Court there being no indication of their being unsubstantiated
SYLLABUS by evidence.

1. LABOR AND SOCIAL LEGISLATIONS; LABOR LAWS; DECISION


PRESIDENTIAL DECREES ON EMERGENCY COST OF LIVING
ALLOWANCE; REQUISITES FOR ENTITLEMENT TO
ALLOWANCES PROVIDED THEREUNDER. The various GUTIERREZ, JR., J.:
Presidential Decrees on ECOLAs to wit: PDs 1614, 1634, 1678 and
1713, provide on "Allowances of Fulltime Employees . . ." that
"Employees shall be paid in full the required monthly allowance
This is a petition for review on certiorari pursuant to Rule 65 of the
regardless of the number of their regular working days if they incur no
Rules of Court to annul and to set aside the decision of respondent
absences during the month. If they incur absences without pay, the
National Labor Relations Commission (NLRC) dated October 25,
amounts corresponding to the absences may be deducted from the
1982, dismissing the appeal of petitioner in NLRC Case No. RBI-47-
monthly allowance . . ." ; and on "Leave of Absence Without Pay", that
82, entitled "University of Pangasinan Faculty Union, complainant,
"All covered employees shall be entitled to the allowance provided
versus University of Pangasinan, Respondent." chanrobles law library
herein when they are on leave of absence with pay."cralaw virtua1aw
: red
library

2. ID.; ID.; ID.; "NO WORK, NO PAY" PRINCIPLE NOT APPLICABLE


to the allowance provided herein when they are on leave of absence
with pay."cralaw virtua1aw library
Petitioner is a labor union composed of faculty members of the
respondent University of Pangasinan, an educational institution duly
It is beyond dispute that the petitioners members are full-time
organized and existing by virtue of the laws of the Philippines.
employees receiving their monthly salaries irrespective of the number
of working days or teaching hours in a month. However, they find
On December 18, 1981, the petitioner, through its President, Miss
themselves in a most peculiar situation whereby they are forced to go
Consuelo Abad, filed a complaint against the private respondent with
on leave during semestral breaks. These semestral breaks are in the
the Arbitration Branch of the NLRC, Dagupan District Office, Dagupan
nature of work interruptions beyond the employees control. The
City. The complaint seeks: (a) the payment of Emergency Cost of
duration of the semestral break varies from year to year dependent
Living Allowances (ECOLA) for November 7 to December 5, 1981, a
on a variety of circumstances affecting at times only the private
semestral break; (b) salary increases from the sixty (60%) percent of
respondent but at other times all educational institutions in the
the incremental proceeds of increased tuition fees; and (c) payment
country. As such, these breaks cannot be considered as absences
of salaries for suspended extra loads.
within the meaning of the law for which deductions may be made from
monthly allowances. The "No work, no pay" principle does not apply
The petitioners members are full-time professors, instructors, and
in the instant case. The petitioners members received their regular
teachers of respondent University. The teachers in the college level
salaries during this period. It is clear from the aforequoted provision
teach for a normal duration of ten (10) months a school year, divided
of law that it contemplates a "no work" situation where the employees
into two (2) semesters of five (5) months each, excluding the two (2)
voluntarily absent themselves. Petitioners, in the case at bar, certainly
months summer vacation. These teachers are paid their salaries on a
do not, ad voluntatem, absent themselves during semestral breaks.
regular monthly basis.
Rather, they are constrained to take mandatory leave from work. For
this they cannot be faulted nor can they be begrudged that which is
In November and December, 1981, the petitioners members were
due them under the law. To a certain extent, the private respondent
fully paid their regular monthly salaries. However, from November 7
can specify dates when no classes would be held. Surely, it was not
to December 5, during the semestral break, they were not paid their
the intention of the framers of the law to allow employers to withhold
ECOLA. The private respondent claims that the teachers are not
employee benefits by the simple expedient of unilaterally imposing
entitled thereto because the semestral break is not an integral part of
"no work" days and consequently avoiding compliance with the
the school year and there being no actual services rendered by the
mandate of the law for those days.chanrobles.com.ph : virtual law
teachers during said period, the principle of "No work, no pay" applies.
library
During the same school year (1981-1982), the private respondent was
Respondents contention that "the fact of receiving a salary alone
authorized by the Ministry of Education and Culture to collect, as it did
should not be the basis of receiving ECOLA", is, likewise, without
collect, from its students a fifteen (15%) percent increase of tuition
merit. Particular attention is brought to the Implementing Rules and
fees. Petitioners members demanded a salary increase effective the
Regulations of Wage Order No. 1 to wit.
first semester of said schoolyear to be taken from the sixty (60%)
percent incremental proceeds of the increased tuition fees. Private
SECTION 5. Allowance for Unworked Days.
respondent refused, compelling the petitioner to include said demand
in the complaint filed in the case at bar. While the complaint was
"a) All covered employees whether paid on a monthly or daily basis
pending in the arbitration branch, the private respondent granted an
shall be entitled to their daily living allowance when they are paid their
across-the-board salary increase of 5.86%. Nonetheless, the
basic wage."cralaw virtua1aw library
petitioner is still pursuing full distribution of the 60% of the incremental
proceeds as mandated by the Presidential Decree No. 451.
x x x
Aside from their regular loads, some of petitioners members were
given extra loads to handle during the same 1981-1982 schoolyear.
Some of them had extra loads to teach on September 21, 1981, but This provision, at once refutes the above contention. It is evident that
they were unable to teach as classes in all levels throughout the the intention of the law is to grant ECOLA upon the payment of basic
country were suspended, although said days was proclaimed by the wages. Hence, we have the principle of "No pay, no ECOLA" the
President of the Philippines as a working holiday. Those with extra converse of which finds application in the case at bar. Petitioners
loads to teach on said day claimed they were not paid their salaries cannot be considered to be on leave without pay so as not to be
for those loads, but the private respondent claims otherwise. entitled to ECOLA, for, as earlier stated, the petitioners were paid their
wages in full for the months of November and December of 1981,
The issue to be resolved in the case at bar are the notwithstanding the intervening semestral break. This, in itself, is a
following:chanrob1es virtual 1aw library tacit recognition of the rather unusual state of affairs in which teachers
find themselves. Although said to be on forced leave, professors and
teachers are, nevertheless, burdened with the task of working during
I
a period of time supposedly available for rest and private matters.
There are papers to correct, students to evaluate, deadlines to meet,
and periods within which to submit grading reports. Although they may
"WHETHER OR NOT PETITIONERS MEMBERS ARE ENTITLED
be considered by the respondent to be on leave, the semestral break
TO ECOLA DURING THE SEMESTRAL BREAK FROM NOVEMBER
could not be used effectively for the teachers own purposes for the
7 TO DECEMBER 5, 1981 OF THE 1981-82 SCHOOL YEAR.
nature of a teachers job imposes upon him further duties which must
be done during the said period of time. Learning is a never ending
II process. Teachers and professors must keep abreast of
developments all the time. Teachers cannot also wait for the opening
of the next semester to begin their work. Arduous preparation is
"WHETHER OR NOT 60% OF THE INCREMENTAL PROCEEDS OF necessary for the delicate task of educating our children. Teaching
INCREASED TUITION FEES SHALL BE DEVOTED EXCLUSIVELY involves not only an application of skill and an imparting of knowledge,
TO SALARY INCREASE, but a responsibility which entails self dedication and sacrifice. The
task of teaching ends not with the perceptible efforts of the petitioners
III members but goes beyond the classroom: a continuum where only
the visible labor is relieved by academic intermissions. It would be
most unfair for the private respondent to consider these teachers as
"WHETHER OR NOT ALLEGED PAYMENT OF SALARIES FOR employees on leave without pay to suit its purposes and, yet, in the
EXTRA LOADS ON SEPTEMBER 21, 1981 WAS PROVEN BY meantime, continue availing of their services as they prepare for the
SUBSTANTIAL EVIDENCE."cralaw virtua1aw library next semester or complete all of the last semesters requirements.
Furthermore, we may also by analogy apply the principle enunciated
Anent the first issue, the various Presidential Decrees on ECOLAs to in the Omnibus Rules Implementing the Labor Code to
wit: PDs 1614, 1634, 1678 and 1713, provide on "Allowances of wit:chanrob1es virtual 1aw library
Fulltime Employees . . ." that "Employees shall be paid in full the
required monthly allowance regardless of the number of their regular Sec. 4. Principles in Determining Hours Worked. The following
working days if they incur no absences during the month. If they incur general principles shall govern in determining whether the time spent
absences without pay, the amounts corresponding to the absences by an employee is considered hours worked for purposes of this
may be deducted from the monthly allowance . . ." ; and on "Leave of Rule:chanrob1es virtual 1aw library
Absence Without Pay", that "All covered employees shall be entitled
the intention and spirit of the law" which intention is clear from the
x x x "whereas" clauses as follows:jgc:chanrobles.com.ph

"It is imperative that private educational institutions upgrade


"(d) The time during which an employee is inactive by reason of classroom instruction . . . provide salary and or wage increases and
interruptions in his work beyond his control shall be considered time other benefits . . ."cralaw virtua1aw library
either if the imminence of the resumption of work requires the
employees presence at the place of work or if the interval is too brief Respondent further contends that PD 451 was issued to alleviate the
to be utilized effectively and gainfully in the employees own interest." sad plight of private schools, their personnel and all those directly or
(Emphasis supplied). indirectly on school income as the decree was aimed
The petitioners members in the case at bar, are exactly in such a ". . . to upgrade classroom instruction by improving their facilities and
situation. The semestral break scheduled is an interruption beyond
bring competent teachers in all levels of education, provide salary and
petitioners control and it cannot be used "effectively nor gainfully in
the employees interest. Thus, the semestral break may also be or wage increases and other benefits to their teaching, administrative,
considered as "hours worked." For this, the teachers are paid regular and other personnel to keep up with the increasing cost of living."
salaries and, for this, they should be entitled to ECOLA. Not only do (Emphasis supplied)
the teachers continue to work during this short recess but much less
do they cease to live for which the cost of living allowance is intended. Respondent overlooks the elemental principle of statutory
The legal principles of "No work, no pay; No pay, no ECOLA" must construction that the general statements in the whereas clauses
necessarily give way to the purpose of the law to augment the income cannot prevail over the specific or particular statements in the law
of employees to enable them to cope with the harsh living conditions itself which define or limit the purposes of the legislation or proscribe
brought about by inflation; and to protect employees and their wages certain acts. True, the whereas clauses of PD 451 provide for salary
against the ravages brought by these conditions. Significantly, it is the and or wage increase and other benefits, however, the same do not
commitment of the State to protect labor and to provide means by delineate the source of such funds and it is only in Section 3 which
which the difficulties faced by the working force may best be provides for the limitations wherein the intention of the framers of the
alleviated. To submit to the respondents interpretation of the no work,
law is clearly outlined. The law is clear. The sixty (60%) percent
no pay policy is to defeat this noble purpose. The Constitution and the
law mandate otherwise.chanrobles.com:cralaw:red incremental proceeds from the tuition increase are to be devoted
entirely to wage or salary increases which means increases in basic
With regard to the second issue, we are called upon to interpret and salary. The law cannot be construed to include allowances which are
apply Section 3 of Presidential Decree 451 to wit:chanrob1es virtual benefits over and above the basic salaries of the employees. To
1aw library charge such benefits to the 60% incremental proceeds would be to
reduce the increase in basic salary provided by law, an increase
SEC. 3. Limitations. The increase in tuition or other school fees or intended also to help the teachers and other workers tide themselves
other charges as well as the new fees or charges authorized under and their families over these difficult economic times.chanrobles
the next preceding section shall be subject to the following virtual lawlibrary
conditions:jgc:chanrobles.com.ph
This Court is not guilty of usurpation of legislative functions as claimed
"(a) That no increase in tuition or other school fees or charges shall
by the respondents. We expressed the opinion in the University of the
be approved unless sixty (60%) per centum of the proceeds is
East case that benefits mandated by law and collective bargaining
allocated for increase in salaries or wages of the members of the
faculty and all other employees of the school concerned, and the may be charged to the 12% return on investments within the 40%
balance for institutional development, student assistance and incremental proceeds of tuition increase. As admitted by respondent,
extension services, and return to investments: Provided, That in no we merely made this statement as a suggestion in answer to the
case shall the return to investments exceed twelve (12%) per centum respondents query as to where then, under the law, can such benefits
of the incremental proceeds; . . ."cralaw virtua1aw library be charged. We were merely interpreting the meaning of the law
within the confines of its provisions. The law provides that 60% should
x x x go to wage increases and 40% to institutional developments, student
assistance, extension services, and return on investments (ROI).
Under the law, the last item ROI has flexibility sufficient to
This Court had the occasion to rule squarely on this point in the very accommodate other purposes of the law and the needs of the
recent case entitled, University of the East v. University of the East university. ROI is not set aside for any one purpose of the university
Faculty Association, 117 SCRA 554. We held such as profits or returns on investments. The amount may be used
that:jgc:chanrobles.com.ph to comply with other duties and obligations imposed by law which the
university exercising managerial prerogatives finds cannot under
"In effect, the problem posed before Us is whether or not the reference present circumstances, be funded by other revenue sources. It may
in Section 3(a) to increase in salaries or wages of the faculty and all be applied to any other collateral purpose of the university or invested
other employees of the schools concerned as the first purpose to elsewhere. Hence, the framers of the law intended this portion of the
which the incremental proceeds from authorized increases to tuition increases in tuition fees to be a general fund to cover up for the
fees may be devoted, may be construed to include allowances and universitys miscellaneous expenses and, precisely, for this reason, it
benefits. In the negative, which is the position of respondents, it would was not so delimited. Besides, ROI is a return or profit over and above
follow that such allowances must be taken in resources of the school the operating expenditures of the university, and still, over and above
not derived from tuition fees. the profits it may have had prior to the tuition increase. The earning
capacities of private educational institutions are not dependent on the
"Without delving into the factual issue of whether or not there could increases in tuition fees allowed by P.D. 451. Accommodation of the
be any such other resources, We note that among the items of second allowances required by law require wise and prudent management of
purpose stated in provision in question is return in investment. And all the university resources together with the incremental proceeds of
the law provides only for a maximum, not a minimum. In other words, tuition increases. Cognizance should be taken of the fact that the
the schools may get a return to investment of not more than 12%, but private respondent had, before PD 451, managed to grant all
if circumstances warrant, there is no minimum fixed by law which they allowances required by law. It cannot now claim that it could not afford
should get. the same, considering that additional funds are even granted them by
the law in question. We find no compelling reason, therefore, to
"On this predicate, We are of the considered view that, if the school deviate from our previous ruling in the University of the East case
happen to have no other resources to grant allowances and benefits, even as we take the second hard look at the decision requested by
either mandated by law or secured by collective bargaining, such the private Respondent. This case was decided in 1982 when PDs
allowances and benefits should be charged against the return to 1614, 1634, 1678, and 1713 which are also the various Presidential
investments referred to in the second purpose stated in Section 3(a) Decrees on ECOLA were already in force. PD 451 was interpreted in
of P.D. 451."cralaw virtua1aw library the light of these subsequent legislations which bear upon but do not
modify nor amend, the same. We need not go beyond the ruling in the
Private respondent argues that the above interpretation "disregarded
phase of the project; and that it is further understood that the
engagement of his/her services is coterminus with the same and not
University of the East case.
with the whole project or other phases thereof wherein other
employees of similar position as he/she have been hired. (Par. 7,
Coming now to the third issue, the respondents are of the considered emphasis supplied)
view that as evidenced by the payrolls submitted by them during the
period September 16 to September 30, 1981, the faculty members Petitioner's first contract of employment expired on June 30, 1979.
have been paid for the extra loads. We agree with the respondents Meanwhile, the main project, MNEE Stage 2, was not finished on
that this issue involves a question of fact properly within the account of various constraints, not the least of which was inadequate
competence of the respondent NLRC to pass upon. The findings of funding, and the same was extended and remained in progress
fact of the respondent Commission are binding on this Court there beyond the original period of 2.3 years. Fortunately for the Petitioner,
being no indication of their being unsubstantiated by evidence. We at the time the first contract of employment expired, Respondent was
find no grave abuse in the findings of respondent NLRC on this matter in need of Driver for the extended project. Since Petitioner had the
to warrant reversal. Assuming arguendo, however, that the petitioners necessary experience and his performance under the first contract of
have not been paid for these extra loads, they are not entitled to employment was found satisfactory, the position of Driver was offered
to Petitioner, which he accepted. Hence a second Contract of
payment following the principles of "No work, no pay." This time, the
Employment for a Definite Period of 10 months, that is, from July 1,
rule applies. Involved herein is a matter different from the payment of 1979 to April 30, 1980 was executed between Petitioner and
ECOLA under the first issue. We are now concerned with extra, not Respondent on July 7, 1979. . . .
regular loads for which the petitioners are paid regular salaries every
month regardless of the number of working days or hours in such a In March 1980 some of the areas or phases of the project were
month. Extra loads should be paid for only when actually performed completed, but the bulk of the project was yet to be finished. By that
by the employee. Compensation is based, therefore, on actual work time some of those project employees whose contracts of
done and on the number of hours and days spent over and beyond employment expired or were about to expire because of the
their regular hours of duty. Since there was no work on September completion of portions of the project were offered another employment
21, 1981, it would now be unfair to grant petitioners demand for extra in the remaining portion of the project. Petitioner was among those
wages on that day.chanrobles law library : red whose contract was about to expire, and since his service
performance was satisfactory, respondent renewed his contract of
employment in April 1980, after Petitioner agreed to the offer.
Finally, disposing of the respondents charge of petitioners lack of
Accordingly, a third contract of employment for a definite period was
legal capacity to sue, suffice it to say that this question can no longer
executed by and between the Petitioner and the Respondent whereby
be raised initially on appeal or certiorari. It is quite belated for the the Petitioner was again employed as Driver for 19 months, from May
private respondent to question the personality of the petitioner after it 1, 1980 to November 30, 1981, . . .
had dealt with it as a party in the proceedings below. Furthermore, it
was not disputed that the petitioner is a duly registered labor This third contract of employment was subsequently extended for a
organization and as such has the legal capacity to sue and be sued. number of times, the last extension being for a period of 3 months,
Registration grants it the rights of a legitimate labor organization and that is, from October 1, 1985 to December 31, 1985, . . .
recognition by the respondent University is not necessary for it to
institute this action in behalf of its members to protect their interests The last extension, from October 1, 1985 to December 31, 1985
and obtain relief from grievances. The issues raised by the petitioner (Annex E) covered by an "Amendment to the Contract of Employment
do not involve pure money claims but are more intricately intertwined with a Definite Period," was not extended any further because
with conditions of employment. Petitioner had no more work to do in the project. This last extension
was confirmed by a notice on November 28, 1985 duly acknowledged
by the Petitioner the very next day, . . .
WHEREFORE the petition for certiorari is hereby GRANTED. The
private respondent is ordered to pay its regular fulltime Sometime in the 2nd week of December 1985, Petitioner applied for
teachers/employees emergency cost of living allowances for the "Personnel Clearance" with Respondent dated December 9, 1985 and
semestral break from November 7 to December 5, 1981 and the acknowledged having received the amount of P3,796.20 representing
undistributed balance of the sixty (60%) percent incremental proceeds conversion to cash of unused leave credits and financial assistance.
from tuition increases for the same schoolyear as outlined above. The Petitioner also released Respondent from all obligations and/or
respondent Commission is sustained insofar as it DENIED the claims, etc. in a "Release, Waiver and Quitclaim" . . . 2
payment of salaries for the suspended extra loads on September 21,
1981. Culled from the records, it appears that on May 20, 1987, petitioner
filed before the NLRC, National Capital Region, Department of Labor
SO ORDERED. and Employment, a Complaint for non-payment of separation pay and
overtime pay. On June 3, 1987, Philnor filed its Position Paper
alleging, inter alia, that petitioner was not illegally terminated since the
project for which he was hired was completed; that he was hired under
three distinct contracts of employment, each of which was for a
Travel Time definite period, all within the estimated period of MNEE Stage 2
Project, covering different phases or areas of the said project; that his
Rada vs. NLRC work was strictly confined to the MNEE Stage 2 Project and that he
was never assigned to any other project of Philnor; that he did not
render overtime services and that there was no demand or claim for
The facts, as stated in the Comment of private respondent Philnor him for such overtime pay; that he signed a "Release, Waiver and
Consultants and Planners, Inc. (Philnor), are as follows: Quitclaim" releasing Philnor from all obligations and claims; and that
Philnor's business is to provide engineering consultancy services,
Petitioner's initial employment with this Respondent was under a including supervision of construction services, such that it hires
"Contract of Employment for a Definite Period" dated July 7, 1977, employees according to the requirements of the project manning
copy of which is hereto attached and made an integral part hereof as schedule of a particular contract. 3
Annex A whereby Petitioner was hired as "Driver" for the construction On July 2, 1987, petitioner filed an Amended Complaint alleging that
supervision phase of the Manila North Expressway Extension, he was illegally dismissed and that he was not paid overtime pay
Second Stage (hereinafter referred to as MNEE Stage 2) for a term of although he was made to render three hours overtime work form
"about 24 months effective July 1, 1977. Monday to Saturday for a period of three years.
On July 7, 1987, petitioner filed his Position Paper claiming that he
xxx xxx xxx was illegally dismissed since he was a regular employee entitled to
security of tenure; that he was not a project employee since Philnor is
Highlighting the nature of Petitioner's employment, Annex A not engaged in the construction business as to be covered by Policy
specifically provides as follows: Instructions No. 20; that the contract of employment for a definite
period executed between him and Philnor is against public policy and
It is hereby understood that the Employer does not have a continuing a clear circumvention of the law designed merely to evade any
need for the services of the Employee beyond the termination date of benefits or liabilities under the statute; that his position as driver was
this contract and that the Employee's services shall automatically, and essential, necessary and desirable to the conduct of the business of
without notice, terminate upon the completion of the above specified
Hence this petition wherein petitioner charges respondent NLRC with
grave abuse of discretion amounting to lack of jurisdiction for the
Philnor; that he rendered overtime work until 6:00 p.m. daily except
following reasons:
Sundays and holidays and, therefore, he was entitled to overtime pay.
4

In his Reply to Respondent's Position Paper, petitioner claimed that 1. The decision of the labor arbiter, dated August 31, 1989, has
he was a regular employee pursuant to Article 278(c) of the Labor already become final and executory;
Code and, thus, he cannot be terminated except for a just cause under
Article 280 of the Code; and that the public respondent's ruling in
Quiwa vs. Philnor Consultants and Planners, Inc. 5 is not applicable 2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not
to his case since he was an administrative employee working as a binding nor is it applicable to this case;
company driver, which position still exists and is essential to the
conduct of the business of Philnor even after the completion of his 3. The petitioner is a regular employee with eight years and five
contract of employment. 6 Petitioner likewise avers that the contract months of continuous services for his employer, private respondent
of employment for a definite period entered into between him and Philnor;
Philnor was a ploy to defeat the intent of Article 280 of the Labor Code.
4. The claims for overtime services, reinstatement and full backwages
On July 28, 1987, Philnor filed its Respondent's Supplemental are valid and meritorious and should have been sustained; and
Position Paper, alleging therein that petitioner was not a company
driver since his job was to drive the employees hired to work at the
MNEE Stage 2 Project to and from the filed office at Sto. Domingo 5. The decision of the labor arbiter should be reinstated as it is more
Interchange, Pampanga; that the office hours observed in the project in accord with the facts, the law and evidence.
were from 7:00 a.m. to 4:00 p.m. Mondays through Saturdays; that
Philnor adopted the policy of allowing certain employees, not The petition is devoid of merit.
necessarily the project driver, to bring home project vehicles to afford
fast and free transportation to and from the project field office
considering the distance between the project site and the employees' 1. Petitioner questions the jurisdiction of respondent NLRC in taking
residence, to avoid project delays and inefficiency due to employee cognizance of the appeal filed by Philnor in spite of the latter's failure
tardiness caused by transportation problem; that petitioner was to file a supersedeas bond within ten days from receipt of the labor
allowed to use a project vehicle which he used to pick up and drop off arbiter's decision, by reason of which the appeal should be deemed
some ten employees along Epifanio de los Santos Avenue (EDSA), to have been filed out of time. It will be noted, however, that Philnor
on his way home to Marikina, Metro Manila; that when he was absent was able to file a bond although it was made beyond the 10-day
or on leave, another employee living in Metro Manila used the same reglementary period.
vehicle in transporting the same employees; that the time used by
petitioner to and from his residence to the project site from 5:30 a.m. While it is true that the payment of the supersedeas bond is an
to 7:00 a.m. and from 4:00 p.m. to 6:00 p.m., or about three hours essential requirement in the perfection of an appeal, however, where
daily, was not overtime work as he was merely enjoying the benefit the fee had been paid although payment was delayed, the broader
and convenience of free transportation provided by Philnor, otherwise interests of justice and the desired objective of resolving controversies
without such vehicle he would have used at least four hours by using on the merits demands that the appeal be given due course. Besides,
public transportation and spent P12.00 daily fare; that in the case of it was within the inherent power of the NLRC to have allowed late
Quiwa vs. Philnor Consultants and Planners, Inc., supra, the NLRC payment of the bond, considering that the aforesaid decision of the
upheld Philnor's position that Quiwa was a project employee and he labor arbiter was received by private respondent on October 3, 1989
was not entitled to termination pay under Policy Instructions No. 20 and its appeal was duly filed on October 13, 1989. However, said
since his employment was coterminous with the completion of the decision did not state the amount awarded as backwages and
project. overtime pay, hence the amount of the supersedeas bond could not
be determined. It was only in the order of the NLRC of February 16,
On August 25, 1987, Philnor filed its Respondent's Reply/Comments 1990 that the amount of the supersedeas bond was specified and
to Complainant's Rejoinder and Reply, submitting therewith two which bond, after an extension granted by the NLRC, was timely filed
letters dated January 5, 1985 and February 6, 1985, signed by MNEE by private respondent.
Stage 2 Project employees, including herein petitioner, where they
asked what termination benefits could be given to them as the MNEE Moreover, as provided by Article 221 of the Labor Code, "in any
Stage 2 Project was nearing completion, and Philnor's letter-reply proceeding before the Commission or any of the Labor Arbiters, the
dated February 22, 1985 informing them that they are not entitled to rules of evidence prevailing in Courts of law or equity shall not be
termination benefits as they are contractual/project employees. controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every
On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a and all reasonable means to ascertain the facts in each case speedily
decision 7 with the following dispositive portion: and objectively without regard to technicalities of law or procedure, all
in the interest of due process. 8 Finally, the issue of timeliness of the
appeal being an entirely new and unpleaded matter in the
WHEREFORE, in view of all the foregoing considerations, judgment proceedings below it may not now be raised for the first time before
is hereby rendered: this Court. 9

(1) Ordering the respondent company to reinstate the complainant to 2. Petitioner postulates that as a regular employee, he is entitled to
his former position without loss of seniority rights and other privileges security of tenure, hence he cannot be terminated without cause.
with full backwages from the time of his dismissal to his actual Private respondent Philnor believes otherwise and asserts that
reinstatement; petitioner is merely a project employee who was terminated upon the
completion of the project for which he was employed.
(2) Directing the respondent company to pay the complainant
overtime pay for the three excess hours of work performed during In holding that petitioner is a regular employee, the labor arbiter found
working days from January 1983 to December 1985; and that:

(3) Dismissing all other claims for lack of merit. . . . There is no question that the complainant was employed as driver
in the respondent company continuously from July 1, 1977 to
SO ORDERED. December 31, 1985 under various contracts of employment. Similarly,
there is no dispute that respondent Philnor Consultant & Planner, Inc.,
as its business name connotes, has been engaged in providing to its
Acting on Philnor's appeal, the NLRC rendered its assailed decision client(e)le engineering consultancy services. The record shows that
dated November 19, 1990, setting aside the labor arbiter's while the different labor contracts executed by the parties stipulated
aforequoted decision and dismissing petitioner's complaint. definite periods of engaging the services of the complainant, yet the
latter was suffered to continue performing his job upon the expiration
of one contract and the renewal of another. Under these
nature of the business the corporation is engaged into is one which
will not allow it to employ workers for an indefinite period.
circumstances, the complaint has obtained the status of regular
employee, it appearing that he has worked without fail for almost eight
It is significant to note that the corporation does not construct vessels
years, a fraction of six months considered as one whole year, and that
for sale or otherwise which will demand continuous productions of
his assigned task as driver was necessary and desirable in the usual
ships and will need permanent or regular workers. It merely accepts
trade/business of the respondent employer. Assuming to be true, as
contracts for shipbuilding or for repair of vessels form third parties
spelled out in the employment contract, that the Employer has no
and, only, on occasion when it has work contract of this nature that it
"continuing need for the services of the Employe(e) beyond the
hires workers to do the job which, needless to say, lasts only for less
termination date of this contract and that the Employee's services
than a year or longer.
shall automatically, and without notice, terminate upon completion of
the above specified phase of the project," still we cannot see our way
The completion of their work or project automatically terminates their
clear why the complainant was hired and his services engaged
employment, in which case, the employer is, under the law, only
contract after contract straight from 1977 to 1985 which, to our
obliged to render a report on the termination of the employment. (139-
considered view, lends credence to the contention that he worked as
140, Rollo of G.R. No. 65689) (Emphasis supplied)
regular driver ferrying early in the morning office personnel to the
In Cartagenas, et al. vs. Romago Electric Company, Inc., et al., 13 we
company main office in Pampanga and bringing back late in the
likewise held that:
afternoon to Manila, and driving company executives for inspection of
construction workers to the jobsites. All told, we believe that the
As an electrical contractor, the private respondent depends for its
complainant, under the environmental facts obtaining in the case at
business on the contracts it is able to obtain from real estate
bar, is a regular employee, the provisions of written agreement to the
developers and builders of buildings. Since its work depends on the
contrary notwithstanding and regardless of the oral understanding of
availability of such contracts or "projects," necessarily the duration of
the parties . . . 10
the employment's of this work force is not permanent but co-terminus
with the projects to which they are assigned and from whose payrolls
On the other hand, respondent NLRC declared that, as between the
they are paid. It would be extremely burdensome for their employer
uncorroborated and unsupported assertions of petitioners and those
who, like them, depends on the availability of projects, if it would have
of private respondent which are supported by documents, greater
to carry them as permanent employees and pay them wages even if
credence should be given the latter. It further held that:
there are no projects for them to work on. (Emphasis supplied.)
Complainant was hired in a specific project or undertaking as driver.
It must be stressed herein that although petitioner worked with Philnor
While such project was still on-going he was hired several times with
as a driver for eight years, the fact that his services were rendered
his employment period fixed every time his contract was renewed. At
only for a particular project which took that same period of time to
the completion of the specific project or undertaking his employment
complete categorizes him as a project employee. Petitioner was
contract was not renewed.
employed for one specific project.
We reiterate our ruling in the case of (Quiwa) vs. Philnor Consultants
A non-project employee is different in that the employee is hired for
and Planners, Inc., NLRC RAB III 5-1738-84, it is being applicable in
more than one project. A non-project employee, vis-a-vis a project
this case, viz.:
employee, is best exemplified in the case of Fegurin, et al. vs. National
Labor Relations Commission, et al. 14 wherein four of the petitioners
. . . While it is true that the activities performed by him were necessary
had been working with the company for nine years, one for eight
or desirable in the usual business or trade of the respondent as
years, another for six years, the shortest term being three years. In
consultants, planners, contractor and while it is also true that the
holding that petitioners are regular employees, this Court therein
duration of his employment was for a period of about seven years,
explained:
these circumstances did not make him a
regular employee in contemplation of Article 281 of (the) Labor Code.
Considering the nature of the work of petitioners, that of carpenter,
. . . 11
laborer or mason, their respective jobs would actually be continuous
and on-going. When a project to which they are individually assigned
Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations
is completed, they would be assigned to the next project or a phase
Commission, et al. 12 is applicable to the case at bar. Thus:
thereof. In other words, they belonged to a "work pool" from which the
company would draw workers for assignment to other projects at its
We hold that private respondents were project employees whose work
discretion. They are, therefore, actually "non-project employees."
was coterminous with the project or which they were hired. Project
employees, as distinguished from regular or non-project employees,
From the foregoing, it is clear that petitioner is a project employee
are mentioned in section 281 of the Labor Code as those "where the
considering that he does not belong to a "work pool" from which the
employment has been fixed for a specific project or undertaking the
company would draw workers for assignment to other projects at its
completion or termination of which has been determined at the time
discretion. It is likewise apparent from the facts obtaining herein that
of the engagement of the employee."
petitioner was utilized only for one particular project, the MNEE Stage
2 Project of respondent company. Hence, the termination of herein
Policy Instructions No. 20 of the Secretary of Labor, which was issued
petitioner is valid by reason of the completion of the project and the
to stabilize employer-employee relations in the construction industry,
expiration of his employment contract.
provides:
Project employees are those employed in connection with a particular
3. Anent the claim for overtime compensation, we hold that petitioner
construction project. Non-project (regular) employees are those
is entitled to the same. The fact that he picks up employees of Philnor
employed by a construction company without reference to any
at certain specified points along EDSA in going to the project site and
particular project.
drops them off at the same points on his way back from the field office
Project employees are not entitled to termination pay if they are
going home to Marikina, Metro Manila is not merely incidental to
terminated as a result of the completion of the project or any phase
petitioner's job as a driver. On the contrary, said transportation
thereof in which they are employed, regardless of the number of
arrangement had been adopted, not so much for the convenience of
projects in which they have been employed by a particular
the employees, but primarily for the benefit of the employer, herein
construction company. Moreover, the company is not required to
private respondent. This fact is inevitably deducible from the
obtain clearance from the Secretary of Labor in connection with such
Memorandum of respondent company:
termination.
The herein Respondent resorted to the above transport arrangement
The petitioner cited three of its own cases wherein the National Labor
because from its previous project construction supervision
Relations Commission, Deputy Minister of Labor and Employment
experiences, Respondent found out that project delays and
Inciong and the Director of the National Capital Region held that the
inefficiencies resulted from employees' tardiness; and that the
layoff of its project employees was lawful. Deputy Minister Inciong in
problem of tardiness, in turn, was aggravated by transportation
TFU Case No. 1530, In Re Sandoval Shipyards, Inc. Application for
problems, which varied in degrees in proportion to the distance
Clearance to Terminate Employees, rendered the following ruling on
between the project site and the employees' residence. In view of this
February 26, 1979;
lesson from experience, and as a practical, if expensive, solution to
employees' tardiness and its concomitant problems, Respondent
We feel that there is merit in the contention of the applicant
adopted the policy of allowing certain employees not necessarily
corporation. To our mind, the employment of the employees
project drivers to bring home project vehicles, so that employees
concerned were fixed for a specific project or undertaking. For the
wage only, without deduction on account of facilities provided by the
could be afforded fast, convenient and free transportation to and from employer.
the project field office. . . . 15

Private respondent does not hesitate to admit that it is usually the


project driver who is tasked with picking up or dropping off his fellow
employees. Proof thereof is the undisputed fact that when petitioner
Proof of Work/Employer Obligation
is absent, another driver is supposed to replace him and drive the
vehicle and likewise pick up and/or drop off the other employees at SSS vs. CA
the designated points on EDSA. If driving these employees to and
from the project site is not really part of petitioner's job, then there In a petition before the Social Security Commission, Margarita Tana,
would have been no need to find a replacement driver to fetch these widow of the late Ignacio Tana, Sr., alleged that her husband was,
employees. But since the assigned task of fetching and delivering before his demise, an employee of Conchita Ayalde as a farmhand in
employees is indispensable and consequently mandatory, then the the two (2) sugarcane plantations she owned (known as Hda. No.
time required of and used by petitioner in going from his residence to Audit B-70 located in Pontevedra, La Carlota City) and leased from
the field office and back, that is, from 5:30 a.m. to 7:00 a.m. and from the University of the Philippines (known as Hda. Audit B-15-M situated
4:00 p.m. to around 6:00 p.m., which the labor arbiter rounded off as in La Granja, La Carlota City). She further alleged that Tana worked
averaging three hours each working day, should be paid as overtime continuously six (6) days a week, four (4) weeks a month, and for
work. Quintessentially, petitioner should be given overtime pay for the twelve (12) months every year between January 1961 to April 1979.
three excess hours of work performed during working days from For his labor, Tana allegedly received a regular salary according to
January, 1983 to December, 1985. the minimum wage prevailing at the time. She further alleged that
throughout the given period, social security contributions, as well as
WHEREFORE, subject to the modification regarding the award of medicare and employees compensation premiums were deducted
overtime pay to herein petitioner, the decision appealed from is from Tanas wages. It was only after his death that Margarita
AFFIRMED in all other respects. discovered that Tana was never reported for coverage, nor were his
SO ORDERED. contributions/premiums remitted to the Social Security System (SSS).
Consequently, she was deprived of the burial grant and pension
benefits accruing to the heirs of Tana had he been reported for
Overtime Work Pay coverage.

Hence, she prayed that the Commission issue an order directing:


Article 87. Overtime work. Work may be performed beyond eight (8)
hours a day provided that the employee is paid for the overtime work 1. respondents Conchita Ayalde and Antero Maghari as
her administrator to pay the premium contributions of
An additional compensation equivalent to his regular wage plus at the deceased Ignacio Tana, Sr. and report his name
least twenty-five percent (25%) thereof. for SSS coverage; and

2. the SSS to grant petitioner Margarita Tana the funeral


Work performed beyond eight hours on a holiday or rest day shall be and pension benefits due her.viii
paid an additional compensation equivalent to the rate of the first eight
hours on a holiday or rest day plus at least thirty percent (30%) The SSS, in a petition-in-intervention, revealed that neither Hda. B-70
thereof. nor respondents Ayalde and Maghari were registered members-
employers of the SSS, and consequently, Ignacio Tana, Sr. was never
registered as a member-employee. Likewise, SSS records reflected
Article 88. Undertime not offset by overtime. Undertime work on any that there was no way of verifying whether the alleged premium
particular day shall not be offset by overtime work on any other day. contributions were remitted since the respondents were not registered
Permission given to the employee to go on leave on some other day members-employers. Being the agency charged with the
of the week shall not exempt the employer from paying the additional implementation and enforcement of the provisions of the Social
compensation required in this Chapter. Security Law, as amended, the SSS asked the Commissions leave to
intervene in the case.viii
Article 89. Emergency overtime work. Any employee may be required
In his answer, respondent Antero Maghari raised the defense that he
by the employer to perform overtime work in any of the following
was a mere employee who was hired as an overseer of Hda. B-70
cases:
sometime during crop years 1964-65 to 1971-72, and as such, his job
was limited to those defined for him by the employer which never
When the country is at war or when any other national or local involved matters relating to the SSS. Hence, he prayed that the case
emergency has been declared by the National Assembly or the Chief against him be dismissed for lack of cause of action.viii
Executive;
For her part, respondent Ayalde belied the allegation that Ignacio
Tana, Sr. was her employee, admitting only that he was hired
When it is necessary to prevent loss of life or property or in case of intermittently as an independent contractor to plow, harrow, or burrow
imminent danger to public safety due to an actual or impending Hda. No. Audit B-15-M. Tana used his own carabao and other
emergency in the locality caused by serious accidents, fire, flood, implements, and he followed his own schedule of work hours. Ayalde
typhoon, earthquake, epidemic, or other disaster or calamity; further alleged that she never exercised control over the manner by
which Tana performed his work as an independent contractor.
When there is urgent work to be performed on machines, installations, Moreover, Ayalde averred that way back in 1971, the University of the
or equipment, in order to avoid serious loss or damage to the Philippines had already terminated the lease over Hda. B-15-M and
employer or some other cause of similar nature; she had since surrendered possession thereof to the University of the
Philippines. Consequently, Ignacio Tana, Sr. was no longer hired to
work thereon starting in crop year 1971-72, while he was never
When the work is necessary to prevent loss or damage to perishable contracted to work in Hda. No. Audit B-70. She also prayed for the
goods; and dismissal of the case considering that Ignacio Tana, Sr. was never
her employee.viii
Where the completion or continuation of the work started before the
After hearing both parties, the Social Security Commission issued a
eighth hour is necessary to prevent serious obstruction or prejudice to
Resolution on January 28, 1988, the dispositive portion of which
the business or operations of the employer.
reads:

Any employee required to render overtime work under this Article shall After a careful evaluation of the testimonies of the petitioner and her
be paid the additional compensation required in this Chapter. witnesses, as well as the testimony of the respondent together with
her documentary evidences, this Commission finds that the late
Ignacio Tana was employed by respondent Conchita Ayalde from
Article 90. Computation of additional compensation. For purposes of January 1961 to March 1979. The testimony of the petitioner which
computing overtime and other additional remuneration as required by was corroborated by Agaton Libawas and Aurelio Tana, co-workers
this Chapter, the "regular wage" of an employee shall include the cash
contractor.
of the deceased Ignacio Tana, sufficienty established the latters 2) The Court of Appeals was in error in not giving due
employment with the respondent. consideration to the fundamental tenet that doubts in
the interpretation and implementation of labor and
As regards respondent Antero Maghari, he is absolved from liability
social welfare laws should be resolved in favor of
because he is a mere employee of Conchita Ayalde.
labor.
PREMISES CONSIDERED, this Commission finds and so holds that
3) The Court of Appeals was in error in disregarding the
the late Ignacio Tana had been employed continuously from January
settled rule that the factual findings of administrative
1961 to March 1979 in Hda. B-70 and Hda. B-15-M which are owned
bodies on matters within their competence shall not
and leased, respectively, by respondent Conchita (Concepcion)
be disturbed by the courts.
Ayalde with a salary based on the Minimum Wage prevailing during
his employment. 4) The Court of Appeals was in error in ruling that even
granting arguendo that Ignacio Tana was employed
Not having reported the petitioners husband for coverage with the
by Conchita Ayalde, such employment did not entitle
SSS, respondent Conchita (Concepcion) Ayalde is, therefore, liable
him to compulsory coverage since he was not paid
for the payment of damages equivalent to the death benefits in the
any regular daily wage or basic pay and he did not
amount of P7,067.40 plus the amount of P750.00 representing funeral
work for an uninterrupted period of at least six months
benefit or a total of P7,817.40.
in a year in accordance with Section 8(j) (1) of the SS
Further, the SSS is ordered to pay to the petitioner her accrued Law.
pension covering the period after the 5-year guaranteed period
The pivotal issue to be resolved in this petition is whether or not an
corresponding to the employers liability.
agricultural laborer who was hired on pakyaw basis can be considered
SO ORDERED.viii an employee entitled to compulsory coverage and corresponding
benefits under the Social Security Law.
Respondent Ayalde filed a motion for reconsiderationviiiwhich
the Commission denied for lack of merit in an Order dated November Petitioner, Social Security System (or SSS), argues that the deceased
3, 1988.viii Ignacio Tana, Sr., who was hired by Conchita Ayalde on pakyaw basis
to perform specific tasks in her sugarcane plantations, should be
Not satisfied with the Commissions ruling, Ayalde appealed to considered an employee; and as such, his heirs are entitled to
the Court of Appeals, docketed as CA-G.R. SP No. 16427, raising the pension and burial benefits.
following assignment of errors:
The Court of Appeals, however, ruled otherwise, reversing the ruling
of the Social Security Commission and declaring that the late Ignacio
Tana, Sr. was an independent contractor, and in the absence of an
I
The Social Security Commission erred in not finding that there is employer-employee relationship between Tana and Ayalde, the latter
sufficient evidence to show that: cannot be compelled to pay to his heirs the burial and pension benefits
under the SS Law.

At the outset, we reiterate the well-settled doctrine that the existence


(a) The deceased Ignacio Tana, Sr. never worked in the of an employer-employee relationship is ultimately a question of fact.viii
farmland of respondent-appellant situated in Pontevedra, La Carlota And while it is the general rule that factual issues are not within the
City, otherwise known as Hacienda No. Audit B-70, (Pontevedra B-70 province of the Supreme Court, said rule is not without exception. In
Farm for short), in any capacity, whether as a daily or monthly laborer cases, such as this one, where there are conflicting and contradictory
or as independent contractor; findings of fact, this Court has not hesitated to scrutinize the records
to determine the facts for itself.viii Our disquisition of the facts shall be
(b) During the time that respondent-appellant was leasing a our guide as to whose findings are supported by substantial evidence.
portion of the land of the University of the Philippines, otherwise
known as Hacienda Audit No. B-15-M, (La Granja B-15 Farm for The mandatory coverage under the SSS Law (Republic Act No. 1161,
short), the deceased Ignacio Tana, Sr. was hired thereat on a pakyaw as amended by PD 1202 and PD 1636) is premised on the existence
basis, or as an independent contractor, performing the services of an of an employer-employee relationship, and Section 8(d) defines an
arador (Plower), for which he was proficient, using his own carabao employee as any person who performs services for an employer in
and farming implements on his own time and discretion within the which either or both mental and physical efforts are used and who
period demanded by the nature of the job contracted. receives compensation for such services where there is an employer-
employee relationship. The essential elements of an employer-
employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and
II (d) the power of control with regard to the means and methods by
The Social Security Commission erred in holding that there is no
evidence whatsoever to show that respondent-appellant was no which the work is to be accomplished, with the power of control being
longer leasing La Granja B-15 Farm. the most determinative factor.viii

There is no question that Tana was selected and his services


engaged by either Ayalde herself, or by Antero Maghari, her overseer.
III
The Social Security Commission erred in not holding that the Corollarily, they also held the prerogative of dismissing or terminating
deceased Ignacio Tana, having been hired as an independent Tanas employment. The dispute is in the question of payment of
contractor on pakyaw basis, did not fall within the coverage of the wages. Claimant Margarita Tana and her corroborating witnesses
Social Security Law.viii testified that her husband was paid daily wages per quincena as well
as on pakyaw basis. Ayalde, on the other hand, insists that Tana was
paid solely on pakyaw basis. To support her claim, she presented
payrolls covering the period January of 1974 to January of 1976;viii
The Court of Appeals rendered judgment in favor of respondent- and November of 1978 to May of 1979.viii
appellant Conchita Ayalde and dismissed the claim of petitioner
Margarita Tan. A careful perusal of the records readily show that the exhibits offered
are not complete, and are but a mere sampling of payrolls. While the
The SSS, as intervenor-appellee, filed a Motion for Reconsideration, names of the supposed laborers appear therein, their signatures are
which was denied on the ground that the arguments advanced are nowhere to be found. And while they cover the years 1975, 1976 and
mere reiterations of issues and arguments already considered and portions of 1978 and 1979, they do not cover the 18-year period
passed upon in the decision in question which are utterly insufficient during which Tana was supposed to have worked in Ayaldes
to justify a modification or reversal of said decision.viii plantations. Also an admitted fact is that these exhibits only cover
Hda. B70, Ayalde having averred that all her records and payrolls for
Hence, this petition for review on certiorari on the following assigned
the other plantation (Hda. B-15-M) were either destroyed or lost.viii
errors:
To our mind, these documents are not only sadly lacking, they are
1) The Court of Appeals was in error in ruling that an
also unworthy of credence. The fact that Tanas name does not appear
employee working under the pakyaw system is
in the payrolls for the years 1975, 1976 and part of 1978 and 1979, is
considered under the law to be an independent
pakyaw basis does not necessarily mean that he was not employed
to do other tasks for the remainder of the year. Even Ayalde admitted
no proof that he did not work in Hda. B70 in the years 1961 to 1974,
that Tana did other jobs when he was not hired to plow. Consequently,
and the rest of 1978 and 1979. The veracity of the alleged documents
the conclusion culled from their testimonies to the effect that Tana was
as payrolls are doubtful considering that the laborers named therein
mainly and solely an arador was at best a selective appreciation of
never affixed their signatures to show that they actually received the
portions of the entire evidence. It was the Social Security Commission
amounts indicated corresponding to their names. Moreover, no record
that took into consideration all the documentary and testimonial
was shown pertaining to Hda. B-15-M, where Tana was supposed to
evidence on record.
have worked. Even Ayalde admitted that she hired Tana as arador
and sometimes as laborer during milling in Hda. B-15-M.viii In light of Secondly, Ayalde made much ado of her claim that Tana could not be
her incomplete documentary evidence, Ayaldes denial that Tana was her employee because she exercised no control over his work hours
her employee in Hda. B-70 or Hda. B-15-M must fail. and method of performing his task as arador. It is also an admitted
fact that Tana, Jr. used his own carabao and tools. Thus, she
In contrast to Ayaldes evidence, or lack thereof, is Margarita Tanas
contends that, applying the control test, Tana was not an employee
positive testimony, corroborated by two (2) other witnesses. On the
but an independent contractor.
matter of wages, they testified as follows: (omitted)
A closer scrutiny of the records, however, reveals that while Ayalde
These witnesses did not waver in their assertion that while Tana was
herself may not have directly imposed on Tana the manner and
hired by Ayalde as an arador on pakyaw basis, he was also paid a
methods to follow in performing his tasks, she did exercise control
daily wage which Ayaldes overseer disbursed every fifteen (15) days.
through her overseer.
It is also undisputed that they were made to acknowledge receipt of
their wages by signing on sheets of ruled paper, which are different Be that as it may, the power of control refers merely to the existence
from those presented by Ayalde as documentary evidence. In fine, we of the power. It is not essential for the employer to actually supervise
find that the testimonies of Margarita Tana, Agaton Libawas and the performance of duties of the employee; it is sufficient that the
Aurelio Tana prevail over the incomplete and inconsistent former has a right to wield the power.viii Certainly, Ayalde, on her own
documentary evidence of Ayalde. or through her overseer, wielded the power to hire or dismiss, to check
on the work, be it in progress or quality, of the laborers. As the
In the parallel case of Opulencia Ice Plant and Storage v. NLRC, the
owner/lessee of the plantations, she possessed the power to control
petitioners argued that since Manuel P. Esitas name does not appear
everyone working therein and everything taking place therein.
in the payrolls of the company it necessarily means that he was not
an employee. This Court held: Jurisprudence provides other equally important considerations which
support the conclusion that Tana was not an independent contractor.
Petitioners further argue that complainant miserably failed to present
First, Tana cannot be said to be engaged in a distinct occupation or
any documentary evidence to prove his employment. There was no
business. His carabao and plow may be useful in his livelihood, but
timesheet, pay slip and/or payroll/cash voucher to speak of. Absence
he is not independently engaged in the business of farming or
of these material documents are necessarily fatal to complainants
plowing. Second, he had been working exclusively for Ayalde for
cause.
eighteen (18) years prior to his demise. Third, there is no dispute that
We do not agree. No particular form of evidence is required to prove Ayalde was in the business of growing sugarcane in the two
the existence of an employer-employee relationship. Any competent plantations for commercial purposes. There is also no question that
and relevant evidence to prove the relationship may be admitted. For, plowing or preparing the soil for planting is a major part of the regular
if only documentary evidence would be required to show that business of Ayalde.
relationship, no scheming employer would ever be brought before the
Under the circumstances, the relationship between Ayalde and Tana
bar of justice, as no employer would wish to come out with any trace
has more of the attributes of employer-employee than that of an
of the illegality he has authored considering that it should take much
independent contractor hired to perform a specific project. In the case
weightier proof to invalidate a written instrument. Thus, as in this case
of Dy Keh Beng v. International Labor,viii we cited our long-standing
where the employer-employee relationship between petitioners and
ruling in Sunripe Coconut Products Co. v. Court of Industrial
Esita was sufficiently proved by testimonial evidence, the absence of
Relations, to wit:
time sheet, time record or payroll has become inconsequential.viii
(Underscoring ours) When a worker possesses some attributes of an employee and others
of an independent contractor, which make him fall within an
Clearly, then, the testimonial evidence of the claimant and her
intermediate area, he may be classified under the category of an
witnesses constitute positive and credible evidence of the existence
employee when the economic facts of the relations make it more
of an employer-employee relationship between Tana and Ayalde. As
nearly one of employment than one of independent business
the employer, the latter is duty-bound to keep faithful and complete
enterprise with respect to the ends sought to be accomplished.
records of her business affairs, not the least of which would be the
(Underscoring Ours)viii
salaries of the workers. And yet, the documents presented have been
selective, few and incomplete in substance and content. We find the above-quoted ruling to be applicable in the case of Tana.
Consequently, Ayalde has failed to convince us that, indeed, Tana There is preponderance of evidence to support the conclusion that he
was not her employee. was an employee rather than an independent contractor.
The argument is raised that Tana is an independenent contractor The Court of Appeals also erred when it ruled, on the alternative, that
because he was hired and paid wages on pakyaw basis. We find this if ever Tana was an employee, he was still ineligible for compulsory
assertion to be specious for several reasons. coverage because he was not paid any regular daily wage and he did
not work for an uninterrupted period of at least six months in a year in
First, while Tana was sometimes hired as an arador or plower for
accordance with Section 8(j) (I) of the Social Security Law. There is
intermittent periods, he was hired to do other tasks in Ayaldes
substantial testimonial evidence to prove that Tana was paid a daily
plantations. Ayalde herself admitted as much, although she minimized
wage, and he worked continuously for most part of the year, even
the extent of Tanas labors. On the other hand, the claimant and her
while he was also occasionally called on to plow the soil on a pakyaw
witnesses were direct and firm in their testimonies, to wit: (omitted)
basis. As a farm laborer who has worked exclusively for Ayalde for
It is indubitable, therefore, that Tana worked continuously for Ayalde, eighteen (18) years, Tana should be entitled to compulsory coverage
not only as arador on pakyaw basis, but as a regular farmhand, doing under the Social Security Law, whether his service was continuous or
backbreaking jobs for Ayaldes business. There is no shred of broken.
evidence to show that Tana was only a seasonal worker, much less a
Margarita Tana alleged that SSS premiums were deducted from
migrant worker. All witnesses, including Ayalde herself, testified that
Tanas salary, testifying, thus: (omitted)
Tana and his family resided in the plantation. If he was a mere pakyaw
worker or independent contractor, then there would be no reason for Ayalde failed to counter these positive assertions. Even on the
Ayalde to allow them to live inside her property for free. The only assumption that there were no deductions, the fact remains that Tana
logical explanation is that he was working for most part of the year was and should have been covered under the Social Security Law.
exclusively for Ayalde, in return for which the latter gratuitously The circumstances of his employment place him outside the ambit of
allowed Tana and his family to reside in her property. the exception provided in Section 8(j) of Republic Act No. 1611, as
amended by Section 4 of R.A. 2658.
The Court of Appeals, in finding for Ayalde, relied on the claimants
and her witnesses admission that her husband was hired as an arador WHEREFORE, in view of all the foregoing, the Decision of the
on pakyaw basis, but it failed to appreciate the rest of their Court of Appeals in C.A.-G.R. SP No. 16427 and the Resolution dated
testimonies. Just because he was, for short periods of time, hired on
Work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of
June 14, 1991 are hereby REVERSED and SET ASIDE. The
the employee. Where such holiday work falls on the employees
Resolution of the Social Security Commission in SSC Case No. 8851
scheduled rest day, he shall be entitled to an additional compensation
is REINSTATED.
of at least fifty per cent (50%) of his regular wage.
No costs.
Where the collective bargaining agreement or other applicable
SO ORDERED.
employment contract stipulates the payment of a higher premium pay
than that prescribed under this Article, the employer shall pay such
Nightwork higher rate.
Article 86. Night shift differential. Every employee shall be paid a
night shift differential of not less than ten percent (10%) of his regular
wage for each hour of work performed between ten oclock in the
evening and six oclock in the morning.
Holiday

Weekly Rest Period Article 94. Right to holiday pay.

Article 91. Right to weekly rest day. Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly
employing less than ten (10) workers;
It shall be the duty of every employer, whether operating for profit or
not, to provide each of his employees a rest period of not less than
twenty-four (24) consecutive hours after every six (6) consecutive The employer may require an employee to work on any holiday but
normal work days. such employee shall be paid a compensation equivalent to twice his
regular rate; and

(Determination)
As used in this Article, "holiday" includes: New Years Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth
The employer shall determine and schedule the weekly rest day of his of June, the fourth of July, the thirtieth of November, the twenty-fifth
employees subject to collective bargaining agreement and to such and thirtieth of December and the day designated by law for holding
rules and regulations as the Secretary of Labor and Employment may a general election.
provide. However, the employer shall respect the preference of
employees as to their weekly rest day when such preference is based
on religious grounds. Retail and Service Establishments *see
Manual.
Article 92. When employer may require work on a rest day. The
employer may require his employees to work on any day:
Coverage/Exclusion
In case of actual or impending emergencies caused by serious
accident, fire, flood, typhoon, earthquake, epidemic or other disaster
or calamity to prevent loss of life and property, or imminent danger to
public safety; Mantrade Division Employees and Workers
Union v. Bacungan
In cases of urgent work to be performed on the machinery, equipment,
or installation, to avoid serious loss which the employer would
otherwise suffer;
1. LABOR AND SOCIAL LEGISLATION; LABOR CODE;
In the event of abnormal pressure of work due to special VOLUNTARY ARBITRATORS; DECISIONS SUBJECT TO JUDICIAL
circumstances, where the employer cannot ordinarily be expected to REVIEW. The contentions of respondent corporation have been
resort to other measures; ruled against in the decision of this court in the case of Oceanic Bic
Division (FFW) v. Romero, promulgated on July 16, 1984, wherein it
To prevent loss or damage to perishable goods; stated: . . . "A voluntary arbitrator by the nature of her functions acts
in a quasijudicial capacity. There is no reason why her decisions
involving interpretation of law should be beyond this courts review.
Where the nature of the work requires continuous operations and the Administrative officials are presumed to act in accordance with law
stoppage of work may result in irreparable injury or loss to the and yet we do not hesitate to pass upon their work where a question
employer; and of law is involved or where a showing of abuse of discretion in their
officials acts is properly raised in petitions for certiorari." (130 SCRA
392, 399, 400-401)
Under other circumstances analogous or similar to the foregoing as
determined by the Secretary of Labor and Employment.
2. ID.; ID.; GRANT FOR HOLIDAY PAY MONTHLY PAID
EMPLOYEES; ISSUE SETTLED IN THE CASES OF INSULAR BANK
OF ASIA AND AMERICA EMPLOYEES UNION VS. INCIONG, [132
SCRA 633], AND CHARTERED BANK EMPLOYEES UNION VS.
OPLE [141 SCRA 9]. Respondent arbitrator opined that respondent
Article 93. Compensation for rest day, Sunday or holiday work.
corporation does not have any legal obligation to grant its monthly
salaried employees holiday pay, unless it is argued that the pertinent
Where an employee is made or permitted to work on his scheduled section of the Rule and Regulations implementing Section 94 of the
rest day, he shall be paid an additional compensation of at least thirty Labor Code is not in conformity with the law, and thus, without force
percent (30%) of his regular wage. An employee shall be entitled to and effect. This issue was subsequently decided on October 24, 1984
such additional compensation for work performed on Sunday only by a division of this court in the case of Insular Bank of Asia and
when it is his established rest day. American Employees Union (IBAAEU) v. Inciong, wherein it held as
follows: "We agree with petitioners contention that Section 2, Rule IV,
Book III of the implementing rules and Policy Instruction No. 9 issued
When the nature of the work of the employee is such that he has no
by the then Secretary of Labor are null and void since in the guise of
regular workdays and no regular rest days can be scheduled, he shall
clarifying the Labor Codes provisions on holiday pay, they in effect
be paid an additional compensation of at least thirty percent (30%) of
amended them enlarging the scope of their exclusion (p. 11, rec.). . .
his regular wage for work performed on Sundays and holidays.
. "From the above-cited provisions, it is clear that monthly paid
employees are not excluded from the benefits of holiday pay.
These contentions have been ruled against in the decision of this
However, the implementing rules on holiday pay promulgated by the
Court in the case of Oceanic Bic Division (FFW) v. Romero,
then Secretary of Labor excludes monthly paid employees from the
promulgated on July 16, 1984, wherein it
said benefits by inserting under Rule IV, Book III of the implementing
stated:jgc:chanrobles.com.ph
rules, section 2, which provides that: employees who are uniformly
paid by the month, irrespective of the number of working days therein
"We agree with the petitioner that the decisions of voluntary arbitrators
, with the salary of not less than the statutory or established minimum
must be given the highest respect and as a general rule must be
wage shall be presumed to be paid for all days in the month whether
accorded a certain measure of finality. This is especially true where
worked or not." (132 SCRA 663, 672-673) This ruling was reiterated
the arbitrator chosen by the parties enjoys the first rate credentials of
by the court en banc on August 28, 1985 in the case of Chartered
Professor Flerida Ruth Pineda Romero, Director of the U.P. Law
Bank Employees Association v. Ople, wherein it added that: "The
Center and an academician of unquestioned expertise in the field of
questioned Sec. 2, Rule IV, Book III of the Integrated Rules and the
Labor Law. It is not correct, however, that this respect precludes the
Secretarys Policy Instruction No. 9 add another excluded group,
exercise of judicial review over their decisions. Article 262 of the Labor
namely employees who are uniformly paid by the month. While
Code making voluntary arbitration awards final, inappealable and
additional exclusion is only in the form of a presumption that all
executory, except where the money claims exceed P100,000.00 or
monthly paid employees have already been paid holiday paid, it
40% of the paid-up capital of the employer or where there is abuse of
constitutes a taking away or a deprivation which must be in the law if
discretion or gross incompetence refers to appeals to the National
it is to be valid. An administrative interpretation which diminishes the
Labor Relations Commission and not to judicial review.
benefits of labor more than what the statute delimits or withholds is
obviously ultra vires." (138 SCRA 273, 282. See also CBTC
"In spite of statutory provisions making final the decisions of certain
Employees Union v. Clave, January 7, 1986, 141 SCRA 9.)
administrative agencies, we have taken cognizance of petitions
questioning these decisions where want of jurisdiction, grave abuse
3. REMEDIAL LAW; SPECIAL CIVIL ACTION; MANDAMUS;
of discretion, violation of due process, denial of substantial justice, or
APPROPRIATE EQUITABLE REMEDY IN CASE AT BAR.
erroneous interpretation of the Law were brought to our attention. . . .
Respondent corporation contends that mandamus does not lie to
compel the performance of an act which the law does not clearly
enjoin as a duty. True it is also that mandamus is not proper to enforce x x x
a contractual obligation, the remedy being an action for specific
performance (Province of Pangasinan v. Reparations Commission,
November 29, 1977, 80 SCRA 376). In the case at bar, however, in "A voluntary arbitrator by the nature of her functions acts in a quasi-
view of the above-cited subsequent decisions of this Court clearly judicial capacity. There is no reason why her decisions involving
defining the legal duty to grant holiday pay to monthly salaried interpretation of law should be beyond this Courts review.
employees, mandamus is an appropriate equitable remedy (Dionisio Administrative officials are presumed to act in accordance with law
v. Paterno, July 23, 1980, 98 SCRA 677; Gonzales v. Government and yet we do not hesitate to pass upon their work where a question
Service Insurance System, September 10, 1981, 107 SCRA 492). of law is involved or where a showing of abuse of discretion in their
official acts is properly raised in petitions for certiorari." (130 SCRA
392, 399, 400-401)
DECISION
In denying petitioners claim for holiday pay, respondent arbitrator
stated that although monthly salaried employees are not among those
excluded from receiving such additional pay under Article 94 of the
FERIA, J.: Labor Code of the Philippines, to wit:chanrobles virtual lawlibrary

ART. 94. Right to holiday pay. (a) Every worker shall be paid his
This is a petition for Certiorari and Mandamus filed by petitioner regular daily wage during regular holidays, except in retail and service
against arbitrator Froilan M. Bacungan and Mantrade Development establishments regularly employing less than ten (10) workers;
Corporation arising from the decision of respondent arbitrator, the
dispositive part of which reads as follows:jgc:chanrobles.com.ph (b) The employer may require an employee to work on any holiday
but such employee shall be paid compensation equivalent to twice his
"CONSIDERING ALL THE ABOVE, We rule that Mantrade regular rate; and
Development Corporation is not under legal obligation to pay holiday
pay (as provided for in Article 94 of the Labor Code in the third official (c) As used in this Article, "holiday" includes: New Years Day,
Department of Labor edition) to its monthly paid employees who are Maundy Thursday, Good Friday, the ninth of April, the first of May, the
uniformly paid by the month, irrespective of the number of working twelfth of June, the fourth of July, the thirtieth of November, the
days therein, with a salary of not less than the statutory or established twenty-fifth and the thirtieth of December, and the day designated by
minimum wage, and this rule is applicable not only as of March 2, law for holding a general election.
1976 but as of November 1, 1974."cralaw virtua1aw library
they appear to be excluded under Sec. 2, Rule IV, Book III of the Rules
Petitioner questions the validity of the pertinent section of the Rules and Regulations implementing said provision which reads
and Regulations Implementing the Labor Code as amended on which thus:chanrob1es virtual 1aw library
respondent arbitrator based his decision.
SEC. 2. Status of employees paid by the month. Employees who
On the other hand, respondent corporation has raised procedural and are uniformly paid by the month, irrespective of the number of working
substantive objections. It contends that petitioner is barred from days therein, with a salary of not less than the statutory or established
pursuing the present action in view of Article 263 of the Labor Code, minimum wage shall be presumed to be paid for all days in the month
which provides in part that "voluntary arbitration awards or decisions whether worked or not.
shall be final, inappealable, and executory," as well as the rules
implementing the same; the pertinent provision of the Collective Respondent arbitrator further opined that respondent corporation
Bargaining Agreement between petitioner and respondent does not have any legal obligation to grant its monthly salaried
corporation; and Article 2044 of the Civil Code which provides that employees holiday pay, unless it is argued that the pertinent section
"any stipulation that the arbitrators award or decision shall be final, is of the Rules and Regulations implementing Section 94 of the Labor
valid, without prejudice to Articles 2038, 2039, and 2040." Code is not in conformity with the law, and thus, without force and
Respondent corporation further contends that the special civil action effect.
of certiorari does not lie because respondent arbitrator is not an
"officer exercising judicial functions" within the contemplation of Rule This issue was subsequently decided on October 24, 1984 by a
65, Section 1, of the Rules of Court; that the instant petition raises an division of this Court in the case of Insular Bank of Asia and America
error of judgment on the part of respondent arbitrator and not an error Employees Union (IBAAEU) v. Inciong, wherein it held as
of jurisdiction; that it prays for the annulment of certain rules and follows:jgc:chanrobles.com.ph
regulations issued by the Department of Labor, not for the annulment
of the voluntary arbitration proceedings; and that appeal by certiorari "WE agree with the petitioners contention that Section 2, Rule IV,
under Section 29 of the Arbitration Law, Republic Act No. 876, is not Book III of the implementing rules and Policy Instruction No. 9, issued
applicable to the case at bar because arbitration in labor disputes is by the then Secretary of Labor are null and void since in the guise of
expressly excluded by Section 3 of said law.chanrobles law library : clarifying the Labor Codes provisions on holiday pay, they in effect
red
Trans-Asia Phil. Express Employees Association vs. NLRC
amended them by enlarging the scope of their exclusion (p. 11, rec.)
The antecedents of this case are as follows:
"Article 94 of the Labor Code, as amended by P.D. 850, On 7 July 1988, Trans-Asia Philippines Employees Association
provides:chanrob1es virtual 1aw library (TAPEA), the duly-recognized collective bargaining agent of the
monthly-paid rank-and-file employees of Trans-Asia (Phils.), entered
Art. 94. Right to holiday pay. (a) Every worker shall be paid his into a Collective Bargaining Agreement (CBA) with their employer.
regular daily wage during regular holidays, except in retail and service The CBA, which was to be effective from 1 April 1988 up to 31 March
establishments regularly employing less than ten (10) workers . . . 1991, provided for, among others, the payment of holiday pay with a
stipulation that if an employee is permitted to work on a legal holiday,
"The coverage and scope of exclusion of the Labor Codes holiday the said employee will receive a salary equivalent to 200% of the
pay provisions is spelled out under Article 82 thereof which regular daily wage plus a 60% premium pay.
reads:chanrob1es virtual 1aw library
Despite the conclusion of the CBA, however, an issue was still left
Art. 82. Coverage. The provision of this Title shall apply to unresolved with regard to the claim of TAPEA for payment of holiday
employees in all establishments and undertakings, whether for profit pay covering the period from January of 1985 up to December of
or not, but not to government employees, managerial employees, field 1987. Thus, the parties underwent preventive mediation meetings
personnel, members of the family of the employer who are dependent with a representative from the National Mediation and Conciliation
on him for support, domestic helpers, persons, in the personal service Board in order to settle their disagreement on this particular issue.
of another, and workers who are paid by results as determined by the Since the parties were not able to arrive at an amicable settlement
Secretary of Labor in appropriate regulations. despite the conciliation meetings, TAPEA, led by its President,
petitioner Arnie Galvez, filed a complaint before the labor arbiter, on
x x x 18 August 1988, for the payment of their holiday pay in arrears. On
18 September 1988, petitioners amended their complaint to include
the payment of holiday pay for the duration of the recently concluded
"From the above-cited provisions, it is clear that monthly paid CBA (from 1988 to 1991), unfair labor practice, damages and
attorneys fees.
employees are not excluded from the benefits of holiday pay.
However, the implementing rules on holiday pay promulgated by the In their Position Paper, petitioners contended that their claim for
then Secretary of Labor excludes monthly paid employees from the holiday pay in arrears is based on the non-inclusion of the same in
said benefits by inserting under Rule IV, Book III of the implementing their monthly pay. In this regard, petitioners cited certain
rules, Section 2, which provides that: employees who are uniformly circumstances which, according to them, would support their claim for
paid by the month, irrespective of the number of working days therein, past due holiday pay. First, petitioners presented Trans-Asias
with a salary of not less than the statutory or established minimum Employees Manual which requires, as a pre-condition for the payment
wage shall be presumed to be paid for all days in the month whether of holiday pay, that the employee should have worked or was on
worked or not." (132 SCRA 663, 672-673). authorized leave with pay on the day immediately preceding the legal
holiday. Petitioners argued that if the intention [of Trans-Asia] was not
to pay holiday pay in addition to the employees monthly pay, then
This ruling was reiterated by the Court en banc on August 28, 1985 in
there would be no need to impose or specify the pre-condition for the
the case of Chartered Bank Employees Association v. Ople, wherein payment.viii Second, petitioners proffered as evidence their
it added that:chanrobles virtualawlibrary appointment papers which do not contain any stipulation on the
chanrobles.com:chanrobles.com.ph inclusion of holiday pay in their monthly salary. According to
petitioners, the absence of such stipulation is an indication that the
"The questioned Sec. 2, Rule IV, Book III of the Integrated Rules and mandated holiday pay is not incorporated in the monthly salary. Third,
the Secretarys Policy Instruction No. 9 add another excluded group, petitioners noted the inclusion of a provision in the CBA for the
namely employees who are uniformly paid by the month. While the payment of an amount equivalent to 200% of the regular daily wage
additional exclusion is only in the form of a presumption that all plus 60% premium pay to employees who are permitted to work on a
monthly paid employees have already been paid holiday pay, it regular holiday. Petitioners claimed that this very generous provision
constitutes a taking away or a deprivation which must be in the law if was the remedy availed of by Trans-Asia to allow its employees to
it is to be valid. An administrative interpretation which diminishes the recoup the holiday pay in arrears and, as such, is a tacit admission of
the non-payment of the same during the period prior to the current
benefits of labor more than what the statute delimits or withholds is
CBA.
obviously ultra vires." (138 SCRA 273, 282. See also CBTC
Employees Union v. , Clave, January 7, 1986, 141 SCRA 9.) Finally, petitioners cited the current CBA provision which obligates
Trans-Asia to give holiday pay. Petitioners asserted that this provision
Lastly, respondent corporation contends that mandamus does not lie is an acknowledgment by Trans-Asia of its failure to pay the same in
to compel the performance of an act which the law does not clearly the past since, if it was already giving holiday pay prior to the CBA,
enjoin as a duty. True it is also that mandamus is not proper to enforce there was no need to stipulate on the said obligation in the current
a contractual obligation, the remedy being an action for specific CBA.
performance (Province of Pangasinan v. Reparations Commission,
With regard to the claim for the payment of holiday pay for the duration
November 29, 1977, 80 SCRA 376). In the case at bar, however, in of the CBA, the accusation of unfair labor practice and the claim for
view of the above cited subsequent decisions of this Court clearly damages and attorneys fees, petitioners asserted that Trans-Asia is
defining the legal duty to grant holiday pay to monthly salaried guilty of bad faith in negotiating and executing the current CBA since,
employees, mandamus is an appropriate equitable remedy (Dionisio after it recognized the right of the employees to receive holiday pay,
v. Paterno, July 23, 1980, 98 SCRA 677; Gonzales v. Government Trans-Asia allegedly refused to honor the CBA provision on the same.
Service Insurance System, September 10, 1981, 107 SCRA 492).
In response to petitioners contentions, Trans-Asia refuted the same
WHEREFORE, the questioned decision of respondent arbitrator is in seriatim. With regard to the pre-condition for the payment of holiday
pay stated in the Employees Manual and the absence of a stipulation
SET ASIDE and respondent corporation is ordered to GRANT holiday
on holiday pay in the employees appointment papers, Trans-Asia
pay to its monthly salaried employees. No costs.
asserted that the above circumstances are not indicative of its non-
payment of holiday pay since it has always honored the labor law
SO ORDERED. provisions on holiday pay by incorporating the same in the payment
of the monthly salaries of its employees. In support of this claim,
Trans-Asia pointed out that it has long been the standing practice of
the company to use the divisor of 286 days in computing for its
Holiday Pay employees overtime pay and daily rate deductions for absences.
Trans-Asia explained that this divisor is arrived at through the
Article 94 (b). Right to holiday pay. following formula:

The employer may require an employee to work on any holiday but 52 x 44


such employee shall be paid a compensation equivalent to twice his ---------- = 286 days
regular rate; 8
of complainants.
Where: 52 = number of weeks in a year Besides, the respondents unlike the respondent bank in the Chartered
Bank Employees Association vs. Hon. Blas F. Ople, et al. (supra)
44 = number of work hours per week
citing also the case of IBAAEU vs. Hon,. Amado Inciong (132 SCRA
8 = number of work hours per day 663) which case have (sic) invalidated Section 2, Rule IV, Book III of
the Implementing Rules of the Labor Code and Policy Instruction No.
Trans-Asia further clarified that the 286 days divisor already takes into 9, have never relied on the said invalidated rule and Policy Instruction.
account the ten (10) regular holidays in a year since it only subtracts
from the 365 calendar days the unworked and unpaid 52 Sundays and The complainants arguments and juxtapositions in claiming that they
26 Saturdays (employees are required to work half-day during were denied payment of their holiday pay paled in the face of the
Saturdays). Trans-Asia claimed that if the ten (10) regular holidays prevailing company practices and circumstances abovestated.
were not included in the computation of their employees monthly
Also, for the reasons adverted to above, the complainants charge of
salary, the divisor which they would have used would only be 277
unfair labor practice claiming that respondents in bad faith refused to
days which is arrived at by subtracting 52 Sundays, 26 Saturdays and
comply with their contractual obligation under the CBA by not paying
the 10 Legal holidays from 365 calendar days. Furthermore, Trans-
the complainants holiday pay, must fail. Since respondents have
Asia explained that the 286 days divisor is based on Republic Act No.
nothing more to pay by way of legal holiday pay as it has already been
6640,viii wherein the divisor of 262 days (composed of the 252 working
included in their monthly salaries, the provision in the CBA relative to
days and the 10 legal holidays) is used in computing for the monthly
holiday pay is just but a recognition of the complainants right to
rate of workers who do not work and are not considered paid on
payment of legal holiday pay as mandated by the Labor Code.
Saturdays and Sundays or rest days. According to Trans-Asia, if the
additional 26 working Saturdays in a year is factored-in to the divisor WHEREFORE, all the foregoing premises being considered,
provided by Republic Act No. 6640, the resulting divisor would be 286 judgment is hereby rendered dismissing the complaint for lack of
days. merit.
On petitioners contention with regard to the CBA provision on the SO ORDERED.viii
allegedly generous holiday pay rate of 260%, Trans-Asia explained
that this holiday pay rate was included in the CBA in order to comply Petitioners appealed to the National Labor Relations Commission. In
with Section 4, Rule IV, Book III of the Omnibus Rules Implementing its Resolution, dated 23 November 1993, the NLRC dismissed the
the Labor Code. The aforesaid provision reads: appeal and affirmed the decision of the labor arbiter, to wit:
Sec. 4. Compensation for holiday work. Any employee who is We find no cogent reason to change or disturb the decision appealed
permitted or suffered to work on any regular holiday, not exceeding from, the same being substantially supported by the facts and
eight (8) hours, shall be paid at least two hundred percent (200%) of evidence on record. "It is a well-settled rule that findings of facts of
his regular daily wage. If the holiday falls on the scheduled rest day of administrative bodies, if based on substantial evidence are controlling
the employee, he shall be entitled to an additional premium pay of at on the reviewing authority. (Planters Products, Inc. vs. NLRC, G. R.
least 30% of his regular holiday rate of 200% based on his regular No. 78524 & 78739, January 20, 1989; 169 SCRA 328).
wage rate.
We find no abuse of discretion and/or error in the assailed decision.
On the contention that Trans-Asias acquiescence to the inclusion of a
holiday pay provision in the CBA is an admission of non-payment of WHEREFORE, the appeal are (sic) hereby DISMISSED for lack of
the same in the past, Trans-Asia reiterated that it is simply a merit and the decision appealed from is AFFIRMED.
recognition of the mandate of the Labor Code that employees are
entitled to holiday pay. It clarified that the companys firm belief in the SO ORDERED.viii
payment of holiday pay to employees led it to agree to the inclusion
Petitioners motion for reconsideration was, likewise, denied by the
of the holiday pay provision in the CBA.
NLRC in its Resolution, dated 13 September 1994.
With regard to the accusation of unfair labor practice because of
Petitioners are now before us faulting the NLRC with the
Trans-Asias act of allegedly bargaining in bad faith and refusal to give
following assignment of errors:
holiday pay in accordance with the CBA, Trans-Asia explained that
what petitioners would like the company to do is to give double holiday I
pay since, as previously stated, the company has already included the
same in its employees monthly salary and, yet, petitioners want it to PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF
pay a second set of holiday pay. DISCRETION IN UPHOLDING THE LABOR ARBITERS
DECISION DESPITE THE LACK OF SUBSTANTIAL
On 13 February 1989, the labor arbiter rendered a decision dismissing EVIDENCE TO SUPPORT IT
the complaint, to wit:
II
After considering closely the arguments of the parties in support of
their respective claims and defenses, this Branch upholds a different IN UPHOLDING THE LABOR ARBITERS DECISION
view from that espoused by the complainants. DESPITE THE LACK OF SUBSTANTIAL EVIDENCE TO
SUPPORT IT, PUBLIC RESPONDENT NLRC VIOLATED THE
Just like in the Chartered Bank Case (L-44717), August 28, 1985, 138 CONSTITUTIONAL AND LEGAL MANDATE TO RESOLVE
SCRA 273, which is cited by the complainants in their Position Paper, ALL DOUBTS IN SOCIAL LEGISLATION IN FAVOR OF
there appears to be no clear agreement between the parties in the LABOR.viii
instant case, whether verbal or in writing, that the monthly salary of
the employees included the mandated holiday pay. In the absence of Petitioners, in furtherance of their first assignment of error,
such agreement, the Supreme Court in said Chartered Bank Case assert that the NLRC blatantly an unshamedly disregarded the
took into consideration existing practices in the bank in resolving the numerous evidence in support of their claim and relied merely on the
issue, such as employment by the bank of a divisor of 251 days which sole evidence presented by Trans-Asia, the 286 days divisor, in
is the result of subtracting all Saturdays, Sundays and the ten (10) dismissing their appeal and, in so doing, is guilty of grave abuse of
legal holidays from the total number of calendar days in a year. discretion.viii
Further, the Court took note of the fact that the bank used conflicting
or different divisors in computing salary-related benefits as well as the We do not agree.
employees absence from work. In the case at bar, not only did the
CBA between the complainants and respondents herein provides (sic) Trans-Asias inclusion of holiday pay in petitioners monthly salary is
that the ten (10) legal holidays are recognized by the Company as full clearly established by its consistent use of the divisor of 286 days in
holiday with pay. What is more, there can be no doubt that since 1977 the computation of its employees benefits and deductions. The use
up to the execution of the CBA, the Trans-Asia, unlike that obtaining by Trans-Asia of the 286 days divisor was never disputed by
in the Chartered Bank Case, never used conflicting or different petitioners. A simple application of mathematics would reveal that the
divisors but consistently employed the divisor of 286 days, which as ten (10) legal holidays in a year are already accounted for with the
earlier pointed out, was arrived at by subtracting only the unworked use of the said divisor. As explained by Trans-Asia, if one is to deduct
52 Sundays and the 26 half-day-worked Saturdays from the total the unworked 52 Sundays and 26 Saturdays (derived by dividing 52
number of days in a year. The consistency in the established practice Saturdays in half since petitioners are required to work half-day on
of the Trans-Asia, which incidentally is not disputed by complainants, Saturdays) from the 365 calendar days in a year, the resulting divisor
did not give rise to any doubt which could have been resolved in favor
Araw ng Kagitingan - April 9
(Bataan and Corregidor Day)
would be 286 days (should actually be 287 days). Since the ten (10)
legal holidays were never included in subtracting the unworked and Labor Day - May 1
unpaid days in a calendar year, the only logical conclusion would be
that the payment for holiday pay is already incorporated into the said Independence Day - June 12
divisor. Thus, when viewed against this very convincing piece of
evidence, the arguments put forward by petitioners to support their National Heroes Day - Last
claim of non-payment of holiday pay, i.e., the pre-condition stated in Sunday of August
the Employees Manual for entitlement to holiday pay, the absence of
a stipulation in the employees appointment papers for the inclusion of Bonifacio Day - November
holiday pay in their monthly salary, the stipulation in the CBA 30
recognizing the entitlement of the petitioners to holiday pay with a
Christmas Day - December 25
concomitant provision for the granting of an allegedly very generous
holiday pay rate, would appear to be merely inferences and Rizal Day - December
suppositions which, in the apropos words of the labor arbiter, paled in 30
the face of the prevailing company practices and circumstances
abovestated. B. Nationwide Special Days

Hence, it is on account of the convincing and legally sound arguments All Saints Day - November
and evidence of Trans-Asia that the labor arbiter rendered a decision 1
adverse to petitioners. Acknowledging that the decision of the labor
arbiter was based on substantial evidence, the NLRC affirmed the Last Day of the Year - December
formers disposition. It is also with this acknowledgment that the Court 31
affirms the questioned resolutions of the NLRC. As aptly put by the
Solicitor General, citing Sunset View Condominium Corporation vs. On the other hand, Section 6 of the Implementing Rules and
NLRC,viii findings of fact of administrative bodies should not be Regulations of Republic Act No. 6727 provides:
disturbed in the absence of grave abuse of discretion or unless the Section 6. Suggested Formula in Determining the Equivalent
findings are not supported by substantial evidence.viii In this regard, Monthly Statutory Minimum Wage Rates.- Without prejudice from
the Solicitor General observed: As said above, public respondent existing company practices, agreements or policies, the following
acted on the basis of substantial evidence, hence, grave abuse of formulas may be used as guides in determining the equivalent
discretion is ruled out.viii monthly statutory minimum wage rates:
However, petitioners insist that the agreement of Trans-Asia in the xxx xxx xxx
CBA to give a generous 260% holiday pay rate to employees who
work on a holiday is conclusive proof that the monthly pay of d) For those who do not work and are not considered paid on
petitioners does not include holiday pay.viii Petitioners cite as basis the Saturdays and Sundays or rest days:
case of Chartered Bank Employees Association vs. Ople,viii which
reads: Equivalent Monthly = Average Daily Wage Rate x 262 days
Rate (EMR) 12
Any remaining doubts which may arise from the conflicting or different
divisors used in the computation of overtime pay and employees Where 262 days =
absences are resolved by the manner in which work actually rendered
on holidays is paid. Thus, whenever monthly paid employees work on 250 days Ordinary working days
a holiday, they are given an additional 100% base pay on top of a
10 days Regular holidays
premium pay of 50%. If the employees monthly pay already includes
their salaries for holidays, they should be paid only premium pay but 2 days Special days (If considered paid; if actually worked, this
not both base pay and premium pay.viii is equivalent to 2.6 days)
-----------
We are not convinced. The cited case cannot be relied upon by
petitioners since the facts obtaining in the Chartered Bank case are 262 days Total equivalent number of days
very different from those in the present case. In the Chartered Bank
case, the bank used different divisors in computing for its employees Based on the above, the proper divisor that should be used for a
benefits and deductions. For computing overtime compensation, the situation wherein the employees do not work and are not considered
bank used 251 days as its divisor. On the other hand, for computing paid on Saturdays and Sundays or rest days is 262 days. In the
deductions due to absences, the bank used 365 days as divisor. Due present case, since the employees of Trans-Asia are required to work
to this confusing situation, the Court declared that there existed a half-day on Saturdays, 26 days should be added to the divisor of 262
doubt as to whether holiday pay is already incorporated in the days, thus, resulting to 288 days. However, due to the fact that the
employees monthly salary. Since doubts should be resolved in favor rest days of petitioners fall on a Sunday, the number of unworked but
of labor, the Court in the Chartered Bank case ruled in favor of the paid legal holidays should be reduced to nine (9), instead of ten (10),
employees and further stated that its conclusion is fortified by the since one legal holiday under E.O. No. 203 always falls on the last
manner in which the employees are remunerated for work rendered Sunday of August, National Heroes Day. Thus, the divisor that should
on holidays. In the present case, however, there is no confusion with be used in the present case should be 287 days.
regard to the divisor used by Trans-Asia in computing for petitioners
benefits and deductions. Trans-Asia consistently used a 286 days However, the Court notes that if the divisor is increased to 287 days,
divisor for all its computations. the resulting daily rate for purposes of overtime pay, holiday pay and
conversions of accumulated leaves would be diminished. To illustrate,
Nevertheless, petitioners cause is not entirely lost. The Court notes if an employee receives P8,000.00 as his monthly salary, his daily rate
that there is a need to adjust the divisor used by Trans-Asia to 287 would be P334.49, computed as follows:
days, instead of only 286 days, in order to properly account for the
entirety of regular holidays and special days in a year as prescribed P8,000.00 x 12 months
by Executive Order No. 203viii in relation to Section 6 of the Rules ------------------------- = P334.49/day
Implementing Republic Act 6727.viii 287 days

Section 1 of Executive Order No. 203 provides: Whereas if the divisor used is only 286 days, the employees daily rate
would be P335.66, computed as follows:
SECTION 1. Unless otherwise modified by law, order or proclamation,
the following regular holidays and special days shall be observed in P8,000.00 x 12 months
the country: ------------------------ = P335.66/day
286 days
A. Regular Holidays
Clearly, this muddled situation would be violative of the proscription
New Years Day - January 1 on the non-diminution of benefits under Section 100 of the Labor
Code. On the other hand, the use of the divisor of 287 days would be
Maundy Thursday - Movable Date to the advantage of petitioners if it is used for purposes of computing
for deductions due to the employees absences. In view of this
Good Friday - Movable
Date
does not reliably reflect the actual working days in a year, " and
consequently commanded Wellington to pay its employees the "six
situation, the Court rules that the adjusted divisor of 287 days should
additional working days resulting from regular holidays falling on
only be used by Trans-Asia for computations which would be
Sundays in 1988, 1989 and 1990." 6 Again, Wellington moved for
advantageous to petitioners, i.e., deductions for absences, and not for
reconsideration, 7 and again was rebuffed. 8
computations which would diminish the existing benefits of the
employees, i.e., overtime pay, holiday and leave conversions.
Wellington then instituted the special civil action of certiorari at bar in
For their second assignment of error, petitioners argue that, since they an attempt to nullify the orders above mentioned. By Resolution dated
provided the NLRC with overwhelming proof of their claim against July 4, 1994, this Court authorized the issuance of a temporary
Trans-Asia, the least that the NLRC could have done was to declare restraining order enjoining the respondents from enforcing the
that there existed an ambiguity with regard to Trans-Asias payment of questioned orders. 9
holiday pay. Petitioners then posits that if the NLRC had only done so,
this ambiguity would have been resolved in their favor because of the
constitutional mandate to resolve doubts in favor of labor. Every worker should, according to the Labor Code, 10 "be paid his
regular daily wage during regular holidays, except in retail and service
We are not persuaded. As previously stated, the decision of the labor establishments regularly employing less than ten (10) workers;" this,
arbiter and the resolutions of the NLRC were based on substantial of course, even if the worker does no work on these holidays. The
evidence and, as such, no ambiguity or doubt exists which could be regular holidays include: "New Year's Day, Maundy Thursday, Good
resoled in petitioners favor. Friday, the ninth of April, the first of May, the twelfth of June, the fourth
of July, the thirtieth of November, the twenty-fifth of December, and
WHEREFORE, premises considered, the Resolutions of the the day designated by law for holding a general election (or national
NLRC, dated 23 November 1993 and 13 September 1994, are hereby referendum or plebiscite). 11
AFFIRMED with the MODIFICATION that Trans-Asia is hereby
ordered to adjust its divisor to 287 days and pay the resulting holiday
pay in arrears brought about by this adjustment starting from 30 June Particularly as regards employees "who are uniformly paid by the
1987, the date of effectivity of E.O. No. 203. month, "the monthly minimum wage shall not be less than the
statutory minimum wage multiplied by 365 days divided by twelve." 12
SO ORDERED. This monthly salary shall serve as compensation "for all days in the
month whether worked or not," and "irrespective of the number of
Sunday working days therein." 13 In other words, whether the month is of thirty
(30) or thirty-one (31) days' duration, or twenty-eight (28) or twenty-
nine (29) (as in February), the employee is entitled to receive the
Article 93. Compensation for rest day, Sunday or holiday work. entire monthly salary. So, too, in the event of the declaration of any
special holiday, or any fortuitous cause precluding work on any
particular day or days (such as transportation strikes, riots, or
Where an employee is made or permitted to work on his scheduled
typhoons or other natural calamities), the employee is entitled to the
rest day, he shall be paid an additional compensation of at least thirty
salary for the entire month and the employer has no right to deduct
percent (30%) of his regular wage. An employee shall be entitled to the proportionate amount corresponding to the days when no work
such additional compensation for work performed on Sunday only was done. The monthly compensation is evidently intended precisely
when it is his established rest day. to avoid computations and adjustments resulting from the
contingencies just mentioned which are routinely made in the case of
workers paid on daily basis.

Wellington Investment. Inc. vs. Trajano In Wellington's case, there seems to be no question that at the time
of the inspection conducted by the Labor Enforcement Officer on
The case arose from a routine inspection conducted by a Labor August 6, 1991, it was and had been paying its employees "a salary
Enforcement Officer on August 6, 1991 of the Wellington Flour Mills, of not less than the statutory or established minimum wage," and that
an establishment owned and operated by petitioner Wellington the monthly salary thus paid was "not . . . less than the statutory
Investment and Manufacturing Corporation (hereafter, simply minimum wage multiplied by 365 days divided by twelve," supra.
Wellington). The officer thereafter drew up a report, a copy of which There is, in other words, no issue that to this extent, Wellington
was "explained to and received by" Wellington's personnel manager, complied with the minimum norm laid down by law.
in which he set forth his finding of "(n)on-payment of regular holidays
falling on a Sunday for monthly-paid employees." 1 Apparently the monthly salary was fixed by Wellington to provide for
compensation for every working day of the year including the holidays
Wellington sought reconsideration of the Labor Inspector's report, by specified by law and excluding only Sundays. In fixing the salary,
letter dated August 10, 1991. It argued that "the monthly salary of the Wellington used what it calls the "314 factor;" that is to say, it simply
company's monthly-salaried employees already includes holiday pay deducted 51 Sundays from the 365 days normally comprising a year
for all regular holidays . . . (and hence) there is no legal basis for the and used the difference, 314, as basis for determining the monthly
finding of alleged non-payment of regular holidays falling on a salary. The monthly salary thus fixed actually covers payment for 314
Sunday." 2 It expounded on this thesis in a position paper days of the year, including regular and special holidays, as well as
subsequently submitted to the Regional Director, asserting that it pays days when no work is done by reason of fortuitous cause, as above
its monthly-paid employees a fixed monthly compensation "using the specified, or causes not attributable to the employees.
314 factor which undeniably covers and already includes payment for
all the working days in a month as well as all the 10 unworked regular The Labor Officer who conducted the routine inspection of Wellington
holidays within a year." 3 discovered that in certain years, two or three regular holidays had
fallen on Sundays. He reasoned that this had precluded the
Wellington's arguments failed to persuade the Regional Director who, enjoyment by the employees of a non-working day, and the
in an Order issued on July 28, 1992, ruled that "when a regular holiday employees had consequently had to work an additional day for that
falls on a Sunday, an extra or additional working day is created and month. This ratiocination received the approval of his Regional
the employer has the obligation to pay the employees for the extra Director who opined 14 that "when a regular holiday falls on a Sunday,
day except the last Sunday of August since the payment for the said an extra or additional working day is created and the employer has
holiday is already included in the 314 factor," and accordingly directed the obligation to pay its employees for the extra day except the last
Wellington to pay its employees compensation corresponding to four Sunday of August since the payment for the said holiday is already
(4) extra working days. 4 included in the 314 factor." 15

Wellington timely filed a motion for reconsideration of this Order of This ingenuous theory was adopted and further explained by
August 10, 1992, pointing out that it was in effect being compelled to respondent Labor Undersecretary, to whom the matter was appealed,
"shell out an additional pay for an alleged extra working day" despite as follows: 16
its complete payment of all compensation lawfully due its workers,
using the 314 factor. 5 Its motion was treated as an appeal and was . . . By using said (314) factor, the respondent (Wellington) assumes
acted on by respondent Undersecretary. By Order dated September that all the regular holidays fell on ordinary days and never on a
22, the latter affirmed the challenged order of the Regional Director, Sunday. Thus, the respondent failed to consider the circumstance that
holding that "the divisor being used by the respondent (Wellington)
without authority, or at the very least, with grave abuse of their
discretion. Their acts must be nullified and set aside.
whenever a regular holiday coincides with a Sunday, an additional
working day is created and left unpaid. In other words, while the said
divisor may be utilized as proof evidencing payment of 302 working WHEREFORE, the orders complained of, namely: that of the
days, 2 special days and the ten regular holidays in a calendar year, respondent Undersecretary dated September 22, 1993, and that of
the same does not cover or include payment of additional working the Regional Director dated July 30, 1992, are NULLIFIED AND SET
days created as a result of some regular holidays falling on Sundays. ASIDE, and the proceeding against petitioner DISMISSED.
He pointed out that in 1988 there was "an increase of three (3) working
days resulting from regular holidays falling on Sundays;" hence
Wellington "should pay for 317 days, instead of 314 days." By the SO ORDERED.
same process of ratiocination, respondent Undersecretary theorized
that there should be additional payment by Wellington to its monthly-
paid employees for "an increment of three (3) working days" for 1989
and again, for 1990. What he is saying is that in those years, Service Incentive Leave
Wellington should have used the "317 factor," not the "314 factor."
Article 95. Right to service incentive leave.
The theory loses sight of the fact that the monthly salary in Wellington
which is based on the so-called "314 factor" accounts for all 365
days of a year; i.e., Wellington's "314 factor" leaves no day (Coverage) Every employee who has rendered at least one year of
unaccounted for; it is paying for all the days of a year with the service shall be entitled to a yearly service incentive leave of five days
exception only of 51 Sundays. with pay.

The respondents' theory would make each of the years in question (Exclusion) This provision shall not apply to those who are already
(1988, 1989, 1990), a year of 368 days. Pursuant to this theory, no enjoying the benefit herein provided, those enjoying vacation leave
employer opting to pay his employees by the month would have any with pay of at least five days and those employed in establishments
definite basis to determine the number of days in a year for which regularly employing less than ten employees or in establishments
compensation should be given to his work force. He would have to exempted from granting this benefit by the Secretary of Labor and
ascertain the number of times legal holidays would fall on Sundays in Employment after considering the viability or financial condition of
all the years of the expected or extrapolated lifetime of his business. such establishment.
Alternatively, he would be compelled to make adjustments in his
employees' monthly salaries every year, depending on the number of The grant of benefit in excess of that provided herein shall not be
times that a legal holiday fell on a Sunday. made a subject of arbitration or any court or administrative action.

There is no provision of law requiring any employer to make such


adjustments in the monthly salary rate set by him to take account of
legal holidays falling on Sundays in a given year, or, contrary to the
legal provisions bearing on the point, otherwise to reckon a year at
more than 365 days. As earlier mentioned, what the law requires of
employers opting to pay by the month is to assure that "the monthly Makati Haberdashery Inc., vs. NLRC
minimum wage shall not be less than the statutory minimum wage
multiplied by 365 days divided by twelve," 17 and to pay that salary "for
all days in the month whether worked or not," and "irrespective of the The undisputed facts are as follows:
number of working days therein." 18 That salary is due and payable
regardless of the declaration of any special holiday in the entire Individual complainants, private respondents herein, have been
country or a particular place therein, or any fortuitous cause working for petitioner Makati Haberdashery, Inc. as tailors,
precluding work on any particular day or days (such as transportation seamstress, sewers, basters (manlililip) and "plantsadoras". They are
strikes, riots, or typhoons or other natural calamities), or cause not paid on a piece-rate basis except Maria Angeles and Leonila Serafina
imputable to the worker. And as also earlier pointed out, the legal who are paid on a monthly basis. In addition to their piece-rate, they
provisions governing monthly compensation are evidently intended are given a daily allowance of three (P 3.00) pesos provided they
precisely to avoid re-computations and alterations in salary on report for work before 9:30 a.m. everyday.
account of the contingencies just mentioned, which, by the way, are
routinely made between employer and employees when the wages
are paid on daily basis. Private respondents are required to work from or before 9:30 a.m. up
to 6:00 or 7:00 p.m. from Monday to Saturday and during peak periods
even on Sundays and holidays.
The public respondents argue that their challenged conclusions and
dispositions may be justified by Section 2, Rule X, Book III of the
Implementing Rules, giving the Regional Director power 19 On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor
organization of the respondent workers, filed a complaint docketed as
NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic
. . . to order and administer (in cases where employer-employee wage; (b) underpayment of living allowance; (c) non-payment of
relations still exist), after due notice and hearing, compliance with the overtime work; (d) non-payment of holiday pay; (e) non-payment of
labor standards provisions of the Code and the other labor legislations service incentive pay; (f) 13th month pay; and (g) benefits provided
based on the findings of their Regulations Officers or Industrial Safety for under Wage Orders Nos. 1, 2, 3, 4 and 5. 1
Engineers (Labor Standard and Welfare Officers) and made in the
course of inspection, and to issue writs of execution to the appropriate
authority for the enforcement of his order, in line with the provisions During the pendency of NLRC NCR Case No. 7-2603-84, private
of Article 128 in relation to Articles 289 and 290 of the Labor Code, as respondent Dioscoro Pelobello left with Salvador Rivera, a salesman
amended. . . . of petitioner Haberdashery, an open package which was discovered
to contain a "jusi" barong tagalog. When confronted, Pelobello replied
that the same was ordered by respondent Casimiro Zapata for his
The respondents beg the question. Their argument assumes that customer. Zapata allegedly admitted that he copied the design of
there are some "labor standards provisions of the Code and the other petitioner Haberdashery. But in the afternoon, when again questioned
labor legislations" imposing on employers the obligation to give about said barong, Pelobello and Zapata denied ownership of the
additional compensation to their monthly-paid employees in the event same. Consequently a memorandum was issued to each of them to
that a legal holiday should fall on a Sunday in a particular month explain on or before February 4, 1985 why no action should be taken
with which compliance may be commanded by the Regional Director against them for accepting a job order which is prejudicial and in direct
when the existence of said provisions is precisely the matter to be competition with the business of the company. 2 Both respondents
established. allegedly did not submit their explanation and did not report for work.
3
Hence, they were dismissed by petitioners on February 4, 1985.
In promulgating the orders complained of the public respondents have They countered by filing a complaint for illegal dismissal docketed as
attempted to legislate, or interpret legal provisions in such a manner NLRC NCR Case No. 2-428-85 on February 5, 1985. 4
as to create obligations where none are intended. They have acted
4. Effective immediately, new procedures shall be followed:
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered
judgment, the dispositive portion of which reads: A. To follow instruction and orders from the undersigned Roger
Valderama, Ruben Delos Reyes and Ofel Bautista. Other than this
person (sic) must ask permission to the above mentioned before
WHEREFORE, judgment is hereby rendered in NLRC NCR Case No.
giving orders or instructions to the tailors.
2-428-85 finding respondents guilty of illegal dismissal and ordering
them to reinstate Dioscoro Pelobello and Casimiro Zapata to their
respective or similar positions without loss of seniority rights, with full B. Before accepting the job orders tailors must check the materials,
backwages from July 4, 1985 up to actual reinstatement. The charge job orders, due dates and other things to maximize the efficiency of
of unfair labor practice is dismissed for lack of merit. our production. The materials should be checked (sic) if it is matched
(sic) with the sample, together with the number of the job order.
In NLRC NCR Case No. 7-26030-84, the complainants' claims for
underpayment re violation of the minimum wage law is hereby ordered C. Effective immediately all job orders must be finished one day
dismissed for lack of merit. before the due date. This can be done by proper scheduling of job
order and if you will cooperate with your supervisors. If you have many
due dates for certain day, advise Ruben or Ofel at once so that they
Respondents are hereby found to have violated the decrees on the
can make necessary adjustment on due dates.
cost of living allowance, service incentive leave pay and the 13th
Month Pay. In view thereof, the economic analyst of the Commission
is directed to compute the monetary awards due each complainant D. Alteration-Before accepting alteration person attending on customs
based on the available records of the respondents retroactive as of (sic) must ask first or must advise the tailors regarding the due dates
three years prior to the filing of the instant case. so that we can eliminate what we call 'Bitin'.

SO ORDERED. 5 E. If there is any problem regarding supervisors or co-tailor inside our


shop, consult with me at once settle the problem. Fighting inside the
shop is strictly prohibited. Any tailor violating this memorandum will
From the foregoing decision, petitioners appealed to the NLRC. The
be subject to disciplinary action.
latter on March 30, 1988 affirmed said decision but limited the
backwages awarded the Dioscoro Pelobello and Casimiro Zapata to
only one (1) year. 6 For strict compliance. 10

After their motion for reconsideration was denied, petitioners filed the From this memorandum alone, it is evident that petitioner has
instant petition raising the following issues: reserved the right to control its employees not only as to the result but
also the means and methods by which the same are to be
accomplished. That private respondents are regular employees is
I
further proven by the fact that they have to report for work regularly
from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT allowance of P 3.00 daily if they report for work before 9:30 a.m. and
AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN which is forfeited when they arrive at or after 9:30 a.m. 11
PETITIONER HABERDASHERY AND RESPONDENTS WORKERS.
Since private respondents are regular employees, necessarily the
II argument that they are independent contractors must fail. As
established in the preceding paragraphs, private respondents did not
exercise independence in their own methods, but on the contrary were
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
subject to the control of petitioners from the beginning of their tasks
RESPONDENTS WORKERS ARE ENTITLED TO MONETARY
to their completion. Unlike independent contractors who generally rely
CLAIMS DESPITE THE FINDING THAT THEY ARE NOT ENTITLED
on their own resources, the equipment, tools, accessories, and
TO MINIMUM WAGE.
paraphernalia used by private respondents are supplied and owned
by petitioners. Private respondents are totally dependent on
III petitioners in all these aspects.

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT Coming now to the second issue, there is no dispute that private
RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY respondents are entitled to the Minimum Wage as mandated by
DISMISSED. 7 Section 2(g) of Letter of Instruction No. 829, Rules Implementing
Presidential Decree No. 1614 and reiterated in Section 3(f), Rules
Implementing Presidential Decree 1713 which explicitly states that,
The first issue which is the pivotal issue in this case is resolved in
"All employees paid by the result shall receive not less than the
favor of private respondents. We have repeatedly held in countless
applicable new minimum wage rates for eight (8) hours work a day,
decisions that the test of employer-employee relationship is four-fold:
except where a payment by result rate has been established by the
(1) the selection and engagement of the employee; (2) the payment
Secretary of Labor. ..." 12 No such rate has been established in this
of wages; (3) the power of dismissal; and (4) the power to control the
case.
employee's conduct. It is the so called "control test" that is the most
important element. 8 This simply means the determination of whether
the employer controls or has reserved the right to control the But all these notwithstanding, the question as to whether or not there
employee not only as to the result of the work but also as to the means is in fact an underpayment of minimum wages to private respondents
and method by which the same is to be accomplished. 9 has already been resolved in the decision of the Labor Arbiter where
he stated: "Hence, for lack of sufficient evidence to support the claims
of the complainants for alleged violation of the minimum wage, their
The facts at bar indubitably reveal that the most important requisite of
claims for underpayment re violation of the Minimum Wage Law under
control is present. As gleaned from the operations of petitioner, when
Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13
a customer enters into a contract with the haberdashery or its
proprietor, the latter directs an employee who may be a tailor, pattern
maker, sewer or "plantsadora" to take the customer's measurements, The records show that private respondents did not appeal the above
and to sew the pants, coat or shirt as specified by the customer. ruling of the Labor Arbiter to the NLRC; neither did they file any
Supervision is actively manifested in all these aspects the manner petition raising that issue in the Supreme Court. Accordingly, insofar
and quality of cutting, sewing and ironing. as this case is concerned, that issue has been laid to rest. As to
private respondents, the judgment may be said to have attained
finality. For it is a well-settled rule in this jurisdiction that "an appellee
Furthermore, the presence of control is immediately evident in this
who has not himself appealed cannot obtain from the appellate court-
memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr.
, any affirmative relief other than the ones granted in the decision of
dated May 30, 1981 addressed to Topper's Makati Tailors which the court below. " 14
reads in part:
The law is protecting the rights of the laborer authorizes neither
oppression nor self-destruction of the employer. 17 More importantly,
As a consequence of their status as regular employees of the
while the Constitution is committed to the policy of social justice and
petitioners, they can claim cost of living allowance. This is apparent
the protection of the working class, it should not be supposed that
from the provision defining the employees entitled to said allowance,
every labor dispute will automatically be decided in favor of labor. 18
thus: "... All workers in the private sector, regardless of their position,
designation or status, and irrespective of the method by which their
wages are paid. " 15 Finally, it has been established that the right to dismiss or otherwise
impose discriplinary sanctions upon an employee for just and valid
cause, pertains in the first place to the employer, as well as the
Private respondents are also entitled to claim their 13th Month Pay
authority to determine the existence of said cause in accordance with
under Section 3(e) of the Rules and Regulations Implementing P.D.
the norms of due process. 19
No. 851 which provides:

There is no evidence that the employer violated said norms. On the


Section 3. Employers covered. The Decree shall apply to all
contrary, private respondents who vigorously insist on the existence
employers except to:
of employer-employee relationship, because of the supervision and
control of their employer over them, were the very ones who exhibited
xxx xxx xxx their lack of respect and regard for their employer's rules.

(e) Employers of those who are paid on purely commission, boundary, Under the foregoing facts, it is evident that petitioner Haberdashery
or task basis, and those who are paid a fixed amount for performing a had valid grounds to terminate the services of private respondents.
specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in
WHEREFORE, the decision of the National Labor Relations
which case the employer shall be covered by this issuance insofar as
Commission dated March 30, 1988 and that of the Labor Arbiter dated
such workers are concerned. (Emphasis supplied.)
June 10, 1986 are hereby modified. The complaint filed by Pelobello
and Zapata for illegal dismissal docketed as NLRC NCR Case No. 2-
On the other hand, while private respondents are entitled to Minimum 428-85 is dismissed for lack of factual and legal bases. Award of
Wage, COLA and 13th Month Pay, they are not entitled to service service incentive leave pay to private respondents is deleted.
incentive leave pay because as piece-rate workers being paid at a
fixed amount for performing work irrespective of time consumed in the
SO ORDERED.
performance thereof, they fall under one of the exceptions stated in
Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code.
For the same reason private respondents cannot also claim holiday
pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor
Code).

With respect to the last issue, it is apparent that public respondents Labor Congress vs. NLRC.
have misread the evidence, for it does show that a violation of the
employer's rules has been committed and the evidence of such See case above*
transgression, the copied barong tagalog, was in the possession of
Pelobello who pointed to Zapata as the owner. When required by their
employer to explain in a memorandum issued to each of them, they Requirement
not only failed to do so but instead went on AWOL (absence without
official leave), waited for the period to explain to expire and for
Article 95. Right to service incentive leave.
petitioner to dismiss them. They thereafter filed an action for illegal
dismissal on the far-fetched ground that they were dismissed because
of union activities. Assuming that such acts do not constitute Every employee who has rendered at least one year of service shall
abandonment of their jobs as insisted by private respondents, their be entitled to a yearly service incentive leave of five days with pay.
blatant disregard of their employer's memorandum is undoubtedly an
open defiance to the lawful orders of the latter, a justifiable ground for
This provision shall not apply to those who are already enjoying the
termination of employment by the employer expressly provided for in
benefit herein provided, those enjoying vacation leave with pay of at
Article 283(a) of the Labor Code as well as a clear indication of guilt
least five days and those employed in establishments regularly
for the commission of acts inimical to the interests of the employer,
employing less than ten employees or in establishments exempted
another justifiable ground for dismissal under the same Article of the
from granting this benefit by the Secretary of Labor and Employment
Labor Code, paragraph (c). Well established in our jurisprudence is
after considering the viability or financial condition of such
the right of an employer to dismiss an employee whose continuance
establishment.
in the service is inimical to the employer's interest. 16

The grant of benefit in excess of that provided herein shall not be


In fact the Labor Arbiter himself to whom the explanation of private
respondents was submitted gave no credence to their version and made a subject of arbitration or any court or administrative action.
found their excuses that said barong tagalog was the one they got
from the embroiderer for the Assistant Manager who was investigating
them, unbelievable.
Computation and Liability
Under the circumstances, it is evident that there is no illegal dismissal
of said employees. Thus, We have ruled that Sentinel Security Agency Inc., vs. NLRC
No employer may rationally be expected to continue in employment a This is the rationale used by the Court in dismissing the two
person whose lack of morals, respect and loyalty to his employer, consolidated petitions for certiorari before us, seeking the reversal of
regard for his employer's rules, and appreciation of the dignity and the Decision dated August 25, 1995, and the Resolution date October
responsibility of his office, has so plainly and completely been bared. 24, 1995, both promulgated by the National Labor Relations
That there should be concern, sympathy, and solicitude for the rights Commissionxiii in NLRC Case No. V-0317-94 (RAB VII-01-0097-94,
and welfare of the working class, is meet and proper. That in RAB VII-020173-94, and RAB VII-01-0133-94).
controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and In the action for illegal dismissal and payment of salary differential,
writings should be resolved in the former's favor, is not an service incentive leave pay and separation pay filed by private
unreasonable or unfair rule. But that disregard of the employer's own respondents, Labor Arbiter Dominador A. Almirante rendered a
rights and interests can be justified by that concern and solicitude is Decision, which disposed:xiii
unjust and unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157
WHEREFORE, premises considered[,] judgment is hereby rendered
SCRA 414-415 [1988] ).
ordering xxx Sentinel Security Agency, Inc. jointly and severally with
reason is a scheme to justify or camouflage illegal dismissal.
xxx Philamlife, Cebu Branch, to pay complainants the total amount of It ruled Superstar Security Agency, Inc. vs. National Labor Relations
[s]ixty [t]housand [o]ne [h]undred [t]welve [p]esos and 50/100 Commissionxiii and A Prime Security Services, Inc. vs. national Labor
(P60,112.50) in the concept of 13th month pay and service incentive Relations Commissionxiii were not applicable to the case at bar. In the
leave benefits as computed by our Labor Arbitration Associate whose former, the security guard was placed on temporary off-detail due to
computation is hereto attached and forming part thereof.xiii his poor performance and lack of elementary courtesy and tact, and
to the cost-cutting program of the agency. In the latter, the relief of the
On appeal, the NLRC modified the labor arbiters Decision. The
security guard was due to his sleeping while on duty and his repeated
dispositive portion of the NLRC Decisionxiiireads:
refusal to resume work despite notice.
WHEREFORE, the assailed Decision is hereby MODIFIED in so far
In the present case, the complainants case, the complainants were
as the award of 13th month pay for the previous years which is hereby
told by the Agency that they lost their assignment at the Clients
excluded. Further, xxx Sentinel Security Agency, Inc. is hereby
premises because they were already old, and not because they had
ORDERED to pay complainants separation pay at the rate of month
committed any infraction or irregularity. The NLRC applied RA 7641,xiii
pay for every year of service and for both xxx Philippine American Life
which gives retirement benefits of one-half month pay per year of
Insurance, Inc. and Sentinel Security Agency, Inc. and/or Daniel Iway
service to retirable employees, viz.:
to pay to the [complainants] jointly and severally their backwages from
January 16, 1994 to January 15, 1995 and the corresponding 13th xxx As stated earlier xxx, the complainants were in the service of [the
month pay for the said year. The monetary awards hereby granted Client] for nearly twenty (20) years in the cases of Helcias Arroyo and
are broken down as follows [into separation pay, back wages, 13th for more than twenty (20) years in the cases of Veronico Zambo and
month pay and service incentive leave pay]: Rustico Andoy, which long years of service [appear] on record to be
unblemished. The complainants were then confronted with an
xxx xxx x x x.xiii
impending sudden loss of earning for while the order of [the Agency]
The challenged Resolution denied reconsideration for lack of merit.xiii to immediately report for reassignment momentarily gave them hope,
there was in fact no immediate reinstatement. While it could have
The Facts been prudent for the complainants to wait, they were set unstable and
were actually threatened by the statement of the personnel in charge
of [the Agency] that they were already old, that was why they were
The undisputed factual backdrop is narrated by Respondent replaced.
Commission as follows:xiii
Against these glaring facts is the new Retirement Law, R.A. 7641
The complainants were employees of Sentinel [Security Agency, Inc. which took effect on January 7, 1993 giving retirement benefits of
hereafter referred to as the Agency] since March 1, 1966 in the case month pay per year of service to an employee upon reaching
of Veronico Zambo; October 27, 1975 in the case of Helcias Arroyo; retirement age to be paid by the employer, in this case at quiet a
September 20, 1985 in the case of Adriano Cabano; February 1, 1990 sizeable amount and in not so long due time as some of the
in the case of Maximo Ortiz; and Ortiz and November 1, 1967 in the complainants were described as already old.
case of Rustico Andoy. They were assigned to render guard duty at
the premises of [Philippine American Life Insurance Company] at As complainants were illegally dismissed, the NLRC ruled that they
Jones Avenue, Cebu City. On December 16, 1993 Philippine were entitled to the twin remedies of back wages for one (1) year from
American Life Insurance Company [the Client, for brevity], through the time of their dismissal on January 15, 1994, payable by both the
Carlos De Pano, Jr., sent notice to all concerned that the [Agency] Client and the Agency, and separation pay one-half month pay for
was again awarded the contract of [s]ecurity [s]ervices together with every year of service payable only by the Agency. Reinstatement was
a request to replace all the security guards in the companys offices at not granted due to the resulting antipathy and resentment among the
the cities of Cebu, Bacolod, Cagayan de Oro, Dipolog and Ilagan. In complainants, the Agency and the Client.
compliance therewith, [the Agency] issued on January 12, 1994, a
Relief and Transfer Order replacing the complainants as guards [of Hence, this petition.xiii
the Client] and for then to be re-assigned [to] other clients effective
January 16, 1994. As ordered, the complainants reported but were The Issues
never given new assignments but instead they were told in the In their memoranda, the Agency poses this question:xiii
vernacular, gui-ilisa mo kay mga tigulang naman mo which when
translated means, you were replace[d] because you are already old. xxx [W]hether xxx Sentinel is guilty of illegal dismissal[,]
Precisely, the complainants lost no time but filed the subject illegal
dismissal cases on January 18, January 26 and February 4, 1994 and On the other hand, the Client raises the following issues:xiii
prayed for payment of separation pay and other labor standard
benefits. Whether xxx [the complainants] were illegally dismissed by their
employer, Sentinel Security Agency, Inc., and in holding petitioner to
[The Client and the Agency] maintained there was no dismissal on the
be equally liable therefor.
part of the complainants, constructive or otherwise, as they were
protected by the contract of security services which allows the recall
Whether xxx petitioner is jointly and severally liable with Sentinel
of security guards from their assigned posts at the will of either party.
Security Agency, Inc., in the latters payment of backwages, 13th month
It also advanced that the complainants prematurely filed the subject
pay and service incentive leave pay to its employees xxx.
cases without giving the [Agency] a chance to give them some
In sum, the resolution of these consolidated petitions hinges on
assignments.
(1) whether the complainants were illegally dismissed, and (2)
On the part of [the Client], it averred further that there [was] no whether the Client is jointly and severally liable for their thirteenth-
employer-employee relationship between it and the complainants as month and service incentive leave pays.
the latter were merely assigned to its Cebu Branch under a job The Courts Ruling
contract; that [the Agency] ha[d] its own separate corporate The petition is partly meritorious.
personality apart from that of [the Client]. Besides, it pointed out that
the functions of the complainants in providing security services to [the First Issue: Illegal Dismissal
Clients] property [were] not necessary and desirable to the usual
business or trade of [the Client], as it could still operate and engage The private respondents transfer, according to Respondent
in its life insurance business without the security guards. In fine, [the Commission, was affected to circumvent the mandate of Republic Act
Client] maintains that the complainants have no cause of action 7641 (New Retirement Law), which by then had already taken effect,
against it. in view of the fact that the complainants had worked for both the Client
and the Agency for 10 to 20 years and were nearing retirement age.
With this premise, the NLRC concluded that the guards were illegally
dismissed. The complainants add that the findings of the Commission
Ruling of Respondent Commission match the remarks of the personnel manager of the Agency, Feliciano
Marticion; that is, that they were being replaced because they were
already old. They insist that their service records are unblemished;
hence, they could not have been dismissed by reason of any just
Respondent Commission ruled that the complainants were cause.
constructively dismissed, as the recall of the complainants from their
long time post[s] at [the premises of the Client] without any good
suspension of operation, business or undertaking. In security
services, this happens when the clients that do not renew their
We agree that the security guards were illegally dismissed, but not for
contracts with a security agency are more than those that do and the
the reasons given by the public respondent. The aforecited
new ones that the agency gets. However, in the case at bar, the
contentions of the NLRC are speculative and unsupported by the
Agency was awarded a new contract by the Client. There was no
evidence on record. As the solicitor general said in his Manifestation
surplus of security guards over available assignments. If there were,
in Lieu of Comment, the relief and transfer order was akin to placing
it was because the Agency hired new security guards. Thus, there
private respondents on temporary off-detail.
was no suspension of operation, business or undertaking, bona fide
Being sidelined temporarily is a standard stipulation in employment or not, that would have justified placing the complainants off-detail and
contracts, as the availability of assignment for security guards is making them wait for a period of six months. If indeed they were
primarily dependent on the contracts entered into by the agency with merely transferred, there would have been no need to make them wait
third parties. Most contracts for security services, as in this case, for six months.
stipulate that the client may request the replacement of the guards
The only logical conclusion from the foregoing discussion is that the
assigned to it. In security agency parlance, being placed off detail or
Agency illegally dismissed the complainants. Hence, as a necessary
on floating status means waiting to be posted.xiii This circumstance is
consequence, the complainants are entitled to reinstatement and
not equivalent to dismissal, so long as such status does not continue
back wages.xiii However, reinstatement is no longer feasible in this
beyond reasonable time.xiii
case. The Agency cannot reassign them to the Client, as the former
In the case at bar, the relief and transfer order per se did not sever has recruited new security guards; the complainants, on the other
the employment relationship between the complainants and the hand, refuse to accept other assignments. Verily, complainants do not
Agency. Thus, despite the fact that complainants were no longer pray for reinstatement; in fact, they refused to be reinstated. Such
assigned to the Client, Article 287 of the Labor Code, as amended by refusal is indicative of strained relations.xiii Thus, separation pay is
RA 7641, still binds the Agency to provide them upon their reaching awarded in lieu of reinstatement.xiii
the retirement age of sixty to sixty-five years retirement pay or
whatever else was established in the collective bargaining agreement
or in any other applicable employment contract. On the other hand,
the Client is not liable to the complainants for their retirement pay Second Issue:
because of the absence of an employer-employee relationship Clients Liability
between them.

However, the Agency claims that the complainants, after being placed
off-detail, abandoned their employ. The solicitor general, siding with
The Client did not, as it could not, illegally dismiss the complainants.
the Agency and the labor arbiter, contends that while abandonment
Thus, it should not be held liable for separation pay and back wages.
of employment is inconsistent with the filing of a complaint for illegal
But even if the Client is not responsible for the illegal dismissal of the
dismissal, such rule is not applicable where [the complainant]
complainants, it is jointly and severally liable with the Agency for the
expressly rejects this relief and asks for separation pay instead.
complainants service incentive leave pay. In Rosewood Processing,
The Court disagrees. Abandonment, as a just and valid cause for Inc. vs. National Labor Relations Commission,xiii the Court explained
termination, requires a deliberate and unjustified refusal of an that, notwithstanding the service contract between the client and the
employee to resume his work, coupled with a clear absence of any security agency, the two are solidarily liable for the proper wages
intention of returning to his or her work.xiii That complainants did not prescribed by the Labor Code, pursuant to Article 106, 107 and 109
pray for reinstatement is not sufficient proof of abandonment. A strong thereof, which we quote hereunder:
indication of the intention of complainants to resume work is their
ART. 106. Contractor or subcontractor.Whenever an
allegation that on several dates they reported to the Agency for
employer enters into a contract with another person for the
reassignment, but were not given any. In fact, the contention of
performance of the former[s] work, the employees of the contractor
complainant is that the Agency constructively dismissed them.
and of the latter[s] subcontractor, if any, shall be paid in accordance
Abandonment has recently been ruled to be incompatible with
with the provisions of this Code.
constructive dismissal. We, thus, rule that complainants did not
abandon their jobs.xiii We will now demonstrate why we believe In the event that the contractor or subcontractor fails to pay the wages
complainants were illegally dismissed. of his employees in accordance with this Code, the employer shall be
jointly and severally liable with his contractor or subcontractor to such
In several cases, the Court has recognized the prerogative of
employees to the extent of the work performed under the contract, in
management to transfer an employee from one office to another within
the same manner and extent that he is liable to employees directly
the same business establishment, as the exigency of the business
employed by him.
may require, provided that the said transfer does not result in a
demotion in rank or a diminution in salary, benefits and other The Secretary of Labor may, by appropriate regulations, restrict or
privileges of the employee;xiii or is not unreasonable, inconvenient or prohibit the contracting out of labor to protect the rights of workers
prejudicial to the latter;xiii or is not used as a subterfuge by the established under this Code. In so prohibiting or restricting, he may
employer to rid himself of an undesirable worker.xiii make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting
A transfer means a movement (1) from one position to another of
and determine who among the parties involved shall be considered
equivalent rank, level or salary, without a break in the service;xiii and
the employer for purposes of this Code, to prevent any violation or
(2) from one office to another within the same business
circumvention of any provision of this Code.
establishment.xiii It is distinguished from a promotion in the sense that
it involves a lateral change as opposed to a scalar ascent.xiii xxx In such cases [labor-only contracting], the person or intermediary
shall be considered merely as an agent of the employer who shall be
In this case, transfer of the complainants implied more than a relief
responsible to the workers in the same manner and extent as if the
from duty to give them time to rest a mere changing of the guards.
latter were directly employed by him.
Rather, their transfer connoted a reshuffling or exchange of their
posts, or their reassignment to other posts, such that no security ART. 107. Indirect employer.The provisions of the
guard would be without an assignment. immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an employer,
However, this legally recognized concept of transfer was not
contracts with an independent contractor for the performance of any
implemented. The agency hired new security guards to replace the
work, task, job or project.
complainants, resulting in a lack of posts to which the complainants
could have been reassigned. Thus, it refused to reassign Complainant ART. 109. Solidary liability.The provisions of existing laws to
Andoy when he reported for duty on February 2, 4 and 7, 1994; and the contrary notwithstanding, every employer or indirect employer
merely told the other complainants on various dates from January 25 shall be held responsible with his contractor or subcontractor for any
to 27, 1994 that they were already too old to be posted anywhere. violation of any provision of this Code. For purpose of determining the
extent of their civil liability under this Chapter, they shall be considered
The Agency now explains that since, under the law, the Agency is
as direct employers.
given a period of not more than six months to retain the complainants
on floating status, the complaint for illegal dismissal is premature. This Under these provisions, the indirect employer, who is the Client in the
contention is incorrect. case at bar, is jointly and severally liable with the contractor for the
A floating status requires the dire exigency of the employers bona fide
The award of the thirteenth-month pay is deleted in view of the
evidence presented by the Agency that such claim has already been
workers wages, in the same manner and extent that it is liable to its
paid to the complainants. Obviously then, the award of such benefit in
direct employees. This liability of the Client covers the payment of the
the dispositive portion of the assailed Decision is merely an oversight,
service incentive leave pay of the complainants during the time they
considering that Respondent Commission itself deleted it from the
were posted at the Cebu branch of the Client. As service had been
main body of the said Decision.
rendered, the liability accrued, even if the complainants were
eventually transferred or reassigned. WHEREFORE, the petition is DISMISSED and the assailed Decision
and Resolution are hereby AFFIRMED, but the award of the
The service incentive leave is expressly granted by these pertinent
thirteenth-month pay is DELETED. Costs against petitioners.
provisions of the Labor Code:
SO ORDERED.
ART. 95. Right to service incentive leave.(a) Every employee
who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
Auto Bus Transport System vs. Bautista
(b) This provision shall not apply to those who are already
enjoying the benefit herein provided, those enjoying vacation leave - See case above*
with pay of at least five days and those employed in establishments
regularly employing less than ten employees or in establishments
exempted from granting this benefit by the Secretary of Labor after
considering the viability or financial condition of such establishment. Paternity Leave

(c) The grant of benefit in excess of that provided herein shall - See Manual
not be made a subject of arbitration or any court [or] admnistrative
Parental Leave
action.
- See Manual
Under the Implementing Rules and Regulations of the Labor Code,
an unused service incentive leave is commutable to its money Service Charges
equivalent, viz.:
- See Manual
Sec. 5. Treatment of Banefit. - The service incentive leave shall be
commutable to its money equivalent if not used or exhausted at the
end of the year.