Contents 59. C. PLANAS COMMERCIAL v. NLRC........................

36
a. Concept of wages and salary; facilities and e. enforcement of minimum wage provisions....... 36
supplements............................................................. 2
60. Rajah Humabon Hotel vs Trajano ........................ 36
29. ROSARIO A. GAA vs. CA, EUROPHIL INDUSTRIES
61. National Mines v. Marcopper .............................. 37
CORPORATION ............................................................. 2
62. PEOPLES BROADCASTING v. SECRETARY OF LABOR
30. SONGCO v. NLRC ................................................... 2
................................................................................... 38
31. Mabeza v. National Labor Relations Commission .. 4
63. Balladares v. Peak Ventures Corporation ............ 41
32. Iran vs. NLRC .......................................................... 5
64. Meteoro vs. Creative Creatures, Inc. ................... 42
33. LIDUVINO M. MILLARES,et. al . vs. NLRC ............... 7
f. form, time, place and manner ............................ 44
34. Equitable PCI Bank vs Sadac ................................... 8
65. CONGSON vs. NLRC.............................................. 44
35. S.I.P. FOOD HOUSE vs. bartlina .............................. 9
66. North Davao Mining vs NLRC (1996) 254 SCRA 721
36. SLL International Cables vs NLRC ......................... 10 ................................................................................... 45
b. different methods of fixing compensation ........ 11 67. BUSINESS SERVICES OF THE FUTURE TODAY, INC.
37. LEYTE IV ELECTRIC COOPERATIVE, INC. vs. LEYECO vs. CA ......................................................................... 46
IV EMPLOYEES UNION -ALU ....................................... 11 g. prohibitions ........................................................ 49
38. ARELLANO UNIVERSITY EMPLOYEES AND 69. Jardin vs. National Labor Relations Commission . 49
WORKERS UNION vs. CA ............................................ 12
70. APEX MINING COMPANY, INC. vs.NLRC .............. 49
39. Philippine Veterans Bank vs NLRC ....................... 14
71. Kamaya Point Hotel vs. NLRC............................... 50
(1999) G.R. 130439 .................................................... 14
72. Davao fruits corp. v. assoc. labor unions ............. 51
40. Odango vs. NLRC .................................................. 15
73. Manila Banking Corp. v. NLRC.............................. 52
41. Pulp & Paper Inc. vs. NLRC ................................... 16
74. MERALCO V. SECRETARY OF LABOR AND
42. LABOR CONGRESS OF THE PHILIPPINES V. NLRC . 18 EMPLOYMENT............................................................ 53
43. SAN MIGUEL JEEPNEY SERVICE vs NLRC .............. 19 75. Honda Philippines Inc., vs Samahang Manggagawa
44. villuga v. NLRC ...................................................... 20 sa Honda .................................................................... 54
45. LAMBO and BELOCURA v. NLRC ........................... 22 76. Phil. Veterans Bank v. NLRC ................................. 55
46. Caong, Jr. v. Regualos........................................... 23 77. PRODUCERS BANK OF THE PHILIPPINES v. NLRC . 56
47. Pedro Chavez vs. NLRC ......................................... 24
c. fair days wage for a fair days labor or no work
no pay; equal pay for equal work .......................... 26
48. CALTEX REFINERY EMPLOYEES ASSOCIATION
(CREA) v.s BRILLANTES .............................................. 26
49-53. Prubankers Association vs Prudential Bank
(1999) 302 SCRA 74 .................................................... 27
50. INTERNATIONAL SCHOOL ALLIANCE OF
EDUCATORS vs. QUISUMBING ................................... 28
d. fixing minimum wage ......................................... 29
51. Ilaw at Buklod ng Manggagawa vs NLRC.............. 29
54. Employers Confederation of the Philippines vs
NWPC ......................................................................... 30
55. BANKARD EMPLOYEES UNION v. NLRC ................ 31
56. Pag Asa Steel Works vs CA ................................ 32
(2006) G.R. 166647 .................................................... 32
57. Philippine Hoteliers, Inc. v. NLRC ......................... 33
58. Joy Brothers v. NWPC........................................... 35
1
 a. Concept of wages and salary; facilities and
supplements
29. ROSARIO A. GAA vs. CA, EUROPHIL INDUSTRIES
CORPORATION
G.r. No. L-44169. December 3, 1985.*
Facts:
Europhil Industries filed an action for damages against
Gaa, a building administrator, for having perpetrated
certain acts that Europhil Industries considered a
trespass upon its rights, namely, cutting of its
electricity, and removing its name from the building
directory and gate passes of its officials and
employees. The court rendered judgment against Gaa
and a writ of garnishment was issued pursuant
thereto, garnishing Gaas salary, commission and/or
remuneration.
Thereafter, Gaa filed a motion to lift said garnishment
on the ground that her "salaries, commission and/or
remuneration" are exempted from execution under
Article 1708 of the New Civil Code. Said Motion was
denied as well as its MR.
On a petition for certiorari before the CA, the latter
dismissed the petition and held that petitioner is not a
mere laborer as contemplated under Article 1708 as
the term laborer does not apply to one who holds a
managerial or supervisory position like that of
petitioner, but only to those "laborers occupying the
lower strata.
ART. 1708. The laborer' s wage
shall not be subject to execution
or attachment, except for debts
incurred for food, shelter,
clothing and medical attendance."
Issue:
1. Is Gaa considered a laborer as to exempt his
salary from garnishment under art. 1708?
2. Whether or not CA was correct in interpreting
Article 1708 of the New Civil Code?
Ruling:
1. NO. It is beyond dispute that petitioner is not
an ordinary or rank and file laborer but "a
responsibly place employee," of El Grande
Hotel, responsible for planning, directing,
controlling, and coordinating the activities of
all housekeeping personnel. Considering the
importance of petitioner's function in El
Grande Hotel, it is undeniable that petitioner
is occupying a position equivalent to that of a
managerial or supervisory position.
In its broadest sense, the word "laborer"
includes everyone who performs any kind of
mental or physical labor, but as commonly
and customarily used and understood, it only
applies to one engaged in some form of
manual or physical labor.
In Kline vs. Russel, 113 Ga. 1085, 39 SE 477,
citing Oliver vs. Macon Hardware Co., supra, it
was held that a laborer, within the statute
exempting from garnishment the wages of a
"laborer," is one whose work depends on
mere physical power to perform ordinary
manual labor, and not one engaged in
services consisting mainly of work requiring
mental skill or business capacity, and involving
the exercise of intellectual faculties.
2. Article 1708 used the word "wages" and not
"salary" in relation to "laborer" when it
declared what are to be exempted from
attachment and execution. The term "wages"
as distinguished from "salary", applies to the
compensation for manual labor, skilled or
unskilled, paid at stated times, and measured
by the day, week, month, or season, while
"salary" denotes a higher degree of
employment, or a superior grade of services,
and implies a position of office: by contrast,
the term "wages" indicates considerable pay
for a lower and less responsible character of
employment, while "salary" is suggestive of a
larger and more important service.
The distinction between wages and salary was
adverted to in Bell vs. Indian Livestock Co.
(Tex. Sup.), 11 S.W. 344, wherein it was said: "
'Wages' are the compensation given to a hired
person for service, and the same is true of
'salary'. The words seem to be synonymous,
convertible terms, though we believe that use
and general acceptation have given to the
word 'salary' a significance somewhat
different from the word 'wages' in this: that
the former is understood to relate to position
of office, to be the compensation given for
official or other service, as distinguished from
'wages', the compensation for labor."
Therefore, CA was correct in ruling that Gaas
salaries, commission and other remuneration
due her from the El Grande Hotel do not
constitute wages due a laborer which, under
Article 1708 of the Civil Code, are not subject
to execution or attachment.
30. SONGCO v. NLRC
Facts
This is a petition for certiorari.
Zuellig filed with the DOLE Regional Office No. 4 an
application seeking clearance to terminate the
services of Songco, Cipres and Manuelallegedly on the
ground of retrenchment due to financial losses. This
application was seasonably opposed by petitioners
alleging that the company is not suffering from any
losses and that they are being dismissed because of
their membership in the union. At the last hearing of
the case, however, petitioners manifested that they
2
are no longer contesting their dismissal. The parties
then agreed that the sole issue to be resolved is the
basis of the separation pay due to petitioners. the
petitioners received a monthly salary of at least
P40,000.00, plus commissions for every sale they
made.
The CBA between between Zuellig and F.E. Zuellig
Employees Associationcontains the following
provision:
ARTICLE XIVRetirement Gratuity
Section l(a)Any employee, who is
separated from employment due to
old age, sickness, death or permanent
lay-off not due to the fault of said
employee shall receive from the
company a retirement gratuity in an
amount equivalent to one (1) months
salary per year of service. One month
of salary as used in this paragraph
shall be deemed equivalent to the
salary at date of retirement; years of
service shall be deemed equivalent to
total service credits, a fraction of at
least six months being considered one
year, including probationary
employment.
On the other hand, Article 284 of the Labor Code
provides:
Art. 284. Reduction of personnel.
The termination of employment of
any employee due to the installation
of labor saving-devices, redundancy,
retrenchment to prevent losses, and
other similar causes, shall entitle the
employee affected thereby to
separation pay. In case of termination
due to the installation of labor-saving
devices or redundancy, the separation
pay shall be equivalent to one (1)
month pay or to at least one (1)
month pay for every year of service,
whichever is higher. In case of
retrenchment to prevent losses and
other similar causes, the separation
pay shall be equivalent to one (1)
month pay or at least one-half (1/2)
month pay for every year of service,
whichever is higher. A fraction of at
least six (6) months shall be
considered one (1) whole year.
In addition, Sections 9(b) and 10, Rule 1, Book VI of
the Rules Implementing the Labor Code provide:
Sec. 9(b). Where the termination of
employment is due to retrenchment
initiated by the employer to prevent
losses or other similar causes, or
where the employee suffers from a
disease and his continued
employment is prohibited by law or is
prejudicial to his health or to the
health of his co-employees, the
employee shall be entitled to
termination pay equivalent at least to
his one month salary, or to one-half
month pay for every year of service,
whichever is higher, a fraction of at
least six (6) months being considered
as one whole year.
Sec. 10. Basis of termination pay.
The computation of the termination
pay of an employee as provided
herein shall be based on his latest
salary rate, unless the same was
reduced by the employer to defeat
the intention of the Code, in which
case the basis of computation shall be
the rate before its deduction.
The Labor Arbiter rendered a decision, holding that
respondent should pay petitioners separation pay
equivalent to the one month salary (exclusive of
commissions, allowances, etc.) for every year of
service. Petitioners appeal to the NLRC was dismissed
for lack of merit.
Petitioner Cipres filed a Notice of Voluntary
Abandonment and Withdrawal of Petition saying
that he wants to abide by the decision appealed
from since he had received, to his full and complete
satisfaction, his separation pay. The Court thus
dismissed the petition as to him.
Issue
Should sales commissions and allowances be included
in the monthly salary of petitioners for the purpose of
computation of their separation pay?
Ruling
YES.
Petitioners argues that in the computation of
separation pay, whether under the Labor Code or the
CBA, their basic salary, earned sales commissions and
allowances should be added together, citing Article
97(f) of the Labor Code which includes commission as
part on ones salary. Zuellig, on the other hand, posits
that if it were really the intention of the Labor Code
and its implementing rules to include commission, it
could have explicitly said so in clear and unequivocal
terms. Furthermore, commission is used only as one
of the features or designations attached to the word
remuneration or earnings.
Regarding allowances, this has been settled in the
case of Santos v. NLRC: In the computation of
backwages and separation pay, account must be
taken not only of the basic salary of petitioner but
also of her transportation and emergency living
allowances.
Regarding commissions, Article 97(f) is explicit that
commission is included in the definition of the term
wage. On one side, it may be argued that if we
correlate Article 97(f) with Article XIV of the Collective
Bargaining Agreement, Article 284 of the Labor Code
and Sections 9(b) and 10 of the Implementing Rules,
3
there appears to be an ambiguity. However, the
ambiguity between Article 97(f) and Article XIV of the
Collective Bargaining Agreement, Article 284 of the
Labor Code and Sections 9(b) and 10 of the
Implementing Rules is more apparent than real.
Salary means a recompense or consideration made
to a person for his pains or industry in another mans
business. Whether it be derived from salarium, or
more fancifully from sal, the pay of the Roman
soldier, it carries with it the fundamental idea of
compensation for services rendered. Indeed, there is
eminent authority for holding that the words wages
and salary are in essence synonymous. Inasmuch as
the words wages, pay and salary have the same in the form of facilities to Mabeza and the hotel's
meaning, and commission is included in the definition
of wage, the logical conclusion, therefore, is, in the
computation of the separation pay of petitioners,
their salary base should include also their earned sales
commissions.
We agree with the Solicitor General that granting, in
gratia argumenti, that the commissions were in the
form of incentives or encouragement, so that the
petitioners would be inspired to put a little more
industry on the jobs particularly assigned to them, still
these commissions are direct remuneration services
rendered which contributed to the increase of income
of Zuellig . Commission is the recompense,
compensation or reward of an agent, salesman,
executor, trustees, receiver, factor, broker or bailee,
when the same is calculated as a percentage on the
amount of his transactions or on the profit to the
principal. The nature of the work of a salesman and
the reason for such type of remuneration for services
rendered demonstrate clearly that commission is part
of petitioners wage or salary.
Since the commissions in the present case were
earned by actual market transactions attributable to
petitioners, these should be included in their
separation pay. What should be taken into account is
the average commissions earned during their last year
of employment.
The final consideration is, in carrying out and
interpreting the Labor Codes provisions and its
implementing regulations, the workingmans welfare
should be the primordial and paramount
consideration.
31. Mabeza v. National Labor Relations Commission
G.R. No. 118506, April 18, 1997, 271 SCRA 670
Facts:
Mabeza works as a chambermaid at the Hotel
Supreme. She and her co-employees were asked by
the hotels management to sign an affidavit to the
latters compliance with minimum wage and other
labor standard provisions of law. The instrument
provides, among other things, that we have no
complaints against the management of the Hotel
Supreme as we are paid accordingly and that we are
treated well. Mabeza signed the affidavit but refused
to go to the prosecutors office to swear to the
veracity and contents thereof. Because of said refusal,
she was ordered by management to remove her
belongings from the hotel premises. She thereafter
filed a leave of absence which was denied. When she
attempted to return to work, the hotels cashier
informed her not to report to anymore.
Mabeza filed a complaint before the NLRC for
illegal dismissal, underpayment of wages, non-
payment of holiday pay, service incentive leave, and
other benefits. Hotel Supreme responded alleging
that: 1) Mabeza actually abandoned here work; 2)
there was no basis for the money claims for
underpayment and other benefits as these were paid
other employees. Eleven months after the filing of the
complaint, a new ground for loss of confidence was
raised which was supported by a criminal complaint
for qualified theft.
The LA dismissed Mabezas complaint and the
NLRC affirmed the LAs decision.
Issues:
WON there was underpayment of wages.
WON Mabeza abandoned her work.
WON Mabeza was illegally dismissed.
WON the dismissal constituted ULP.
Ruling:
Underpayment of wagesHotel Supreme
claims that the reason the monetary benefits received
by Mabeza were less than minimum wage was
because she did not factor in the meals, lodging,
electric consumption and water she received during
the period in her computations.
Granting that meals and lodging were
provided and indeed constituted facilities, such
facilities could not be deducted without the employer
complying first with certain legal requirements.
Without satisfying these requirements, the employer
simply cannot deduct the value from the employee's
ages. First, proof must be shown that such facilities
are customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily
accepted in writing by the employee. Finally, facilities
must be charged at fair and reasonable value.
These requirements were not met in the
instant case. Hotel Supreme failed to present any
company policy or guideline to show that the meal
and lodging are part of the salary;" it failed to provide
proof of the employee's written authorization; and, it
failed to show how it arrived at the valuations.
More significantly, the food and lodging, or
the electricity and water consumed by the petitioner
were not facilities but supplements. A benefit or
privilege granted to an employee for the convenience
of the employer is not a facility. The criterion in
making a distinction between the two not so much
lies in the kind but the purpose. Considering,
therefore, that hotel workers are required to work
different shifts and are expected to be available at
4
various odd hours, their ready availability is a
necessary matter in the operations of a small hotel.
Abandonment For abandonment to arise,
there must be concurrence of two things: 1) lack of
intention to work; and 2) the presence of overt acts
signifying the employee's intention not to work. In the
instant case, Hotel Supreme does not dispute the fact
that Mabeza tried to file a leave of absence when she
learned that the hotel management was displeased
with her refusal to attest to the affidavit. The fact that
she made this attempt clearly indicates not an
intention to abandon but an intention to return to
work after the period of her leave of absence, had it
been granted, shall have expired. Furthermore, while
absence from work for a prolonged period may
suggest abandonment in certain instances, mere
absence of one or two days would not be enough to
sustain such a claim.
Illegal dismissal, loss of confidenceLoss of
confidence should ideally apply only to cases involving
employees occupying positions of trust and
confidence or to those situations where the employee
is routinely charged with the care and custody of the
employer's money or property. To the first class
belong managerial employees, i.e., those vested with
the powers or prerogatives to lay down management
policies; and to the second class belong cashiers,
auditors, property custodians, etc., or those who, in
the normal and routine exercise of their functions,
regularly handle significant amounts of money or
property. Evidently, an ordinary chambermaid who
has to sign out for linen and other hotel property from
the property custodian each day and who has to
account for each and every towel or bed sheet utilized
by the hotel's guests at the end of her shift would not
fall under any of these two classes of employees for
which loss of confidence, if ably supported by
evidence, would normally apply.
More importantly, loss of confidence should
not be simulated in order to justify what would
otherwise be, under the provisions of law, an illegal
dismissal. It must be genuine, not a mere afterthought
to justify an earlier action taken in bad faith. In the
case at bar, the suspicious delay in the filing of
qualified theft charges against Mabeza long after the
latter exposed the hotel's scheme by her act of filing
illegal dismissal charges hardly warrant serious
consideration of loss of confidence as a valid ground
for dismissal.
Unfair labor practice The act of compelling
employees to sign an instrument indicating that the
employer observed labor standards provisions of law
when he might have not, together with the act of
terminating or coercing those who refuse to
cooperate with the employer's scheme constitutes
unfair labor practice. The first act clearly preempts the
right of the hotel's workers to seek better terms and
conditions of employment through concerted action.
32. Iran vs. NLRC
G.R. No. 121927, April 22, 1998
Facts:
Petitioner Iran, doing business under the name and
style of Tones Iran Enterprises (TIE), is engaged in
softdrinks merchandising and distribution, and
employed private respondents as truck drivers who
double as salesmen, truck helpers, and non-field
personnel. The drivers/salesmen drove TIEs delivery
trucks and promoted, sold and delivered softdrinks to
various outlets, while the truck helpers assisted in the
delivery of the softdrinks to the outlets covered by
the drivers/salesmen. As part of their compensation,
the driver/salesmen and truck helpers of TIE received
commissions per case of softdrinks sold at the
following rates:
SALESMEN:
Ten Centavos (P0.10) per case of Regular softdrinks.
Twelve Centavos (P0.12) per case of Family Size
softdrinks.
TRUCK HELPERS:
Eight Centavos (P0.08) per case of Regular softdrinks.
Ten Centavos (P0.10) per case of Family Size
softdrinks.
Iran discovered cash shortages and irregularities
allegedly committed by private respondents. Pending
the investigation of irregularities and settlement of
the cash shortages, Iran required private respondents
to report for work every day, but were not allowed to
go on their respective routes. A few days thereafter,
private respondents stopped reporting for work,
prompting Iran to conclude that they had abandoned
their employment. Thus, he terminated their services.
He then filed a complaint for estafa against private
respondents.
On the other hand, private respondents filed
complaints against petitioner for illegal dismissal,
illegal deduction, underpayment of wages, premium
pay for holiday and rest day, holiday pay, service
incentive leave pay, 13th month pay, allowances,
separation pay, recovery of cash bond, damages and
attorney's fees.
The labor arbiter (LA) found that petitioner had validly
terminated private respondents, there being just
cause for the latter's dismissal. Nevertheless, he also
ruled that petitioner had not complied with minimum
wage requirements in compensating private
respondents, and had failed to pay private
respondents their 13th month pay. The LA thus
rendered a decision ordering Iran to pay the
complainants their wage differentials. On appeal, Iran
5
argued that the LA failed to include the commissions
he paid to private respondents in determining
compliance with the minimum wage requirement.
Said decision was affirmed by the NLRC.
*NLRC RULING/RESPONDENTS CONTENTION: An
employee should receive the minimum wage as
mandated by law and that the attainment of the
minimum wage should not be dependent on the
commission earned by an employee. A commission is
an incentive for an employee to work harder for a
better production that will benefit both the employer
and the employee. To include the commission in the
computation of wage in order to comply with labor
standard laws is to negate the practice that a
commission is granted after an employee has already
earned the minimum wage or even beyond it.
ISSUE: WON commissions are included in determining
compliance with the minimum wage requirement.
RULING: Yes.
Article 97(f) of the Labor Code defines wage as
follows:
Art. 97(f) "Wage" paid to any employee
shall mean the remuneration or earnings,
however designated, capable of being
expressed in terms of money, whether fixed
or ascertained on a time, task, piece, or
commission basis, or other method of
calculating the same, which is payable by an
employer to an employee under a written or
unwritten contract of employment for work
done or to be done, or for services rendered
or to be rendered and includes the fair and
reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the
employer to the employee.
This definition explicitly includes commissions as part
of wages. While commissions are, indeed, incentives
or forms of encouragement to inspire employees to
put a little more industry on the jobs particularly
assigned to them, still these commissions are direct
remunerations for services rendered. In fact,
commissions have been defined as the recompense,
compensation or reward of an agent, salesman,
executor, trustee, receiver, factor, broker or bailee,
when the same is calculated as a percentage on the
amount of his transactions or on the profit to the
principal. The nature of the work of a salesman and
the reason for such type of remuneration for services
rendered demonstrate clearly that commissions are
part of a salesman's wage or salary.
Thus, the commissions earned by private respondents
in selling softdrinks constitute part of the
compensation or remuneration paid to
drivers/salesmen and truck helpers for serving as
such, and hence, must be considered part of the
wages paid them.
ISSUE: WON the inclusion of commissions in the
computation of wages would negate the practice of
granting commissions only after an employee has
earned the minimum wage or over.
RULING: While such a practice does exist, the
universality and prevalence of such a practice is
questionable at best. In truth, some salesmen do not
receive any basic salary but depend entirely on
commissions and allowances or commissions alone,
although an employer-employee relationship exists.
Undoubtedly, this salary structure is intended for the
benefit of the corporation establishing such, on the
apparent assumption that thereby its salesmen would
be moved to greater enterprise and diligence and
close more sales in the expectation of increasing their
sales commissions. This, however, does not detract
from the character of such commissions as part of the
salary or wage paid to each of its salesmen for
rendering services to the corporation.
Likewise, there is no law mandating that commissions
be paid only after the minimum wage has been paid
to the employee. Verily, the establishment of a
minimum wage only sets a floor below which an
employee's remuneration cannot fall, not that
commissions are excluded from wages in determining
compliance with the minimum wage law. This
conclusion is bolstered by Philippine Agricultural
Commercial and Industrial Workers Union vs. NLRC,
where this Court acknowledged that drivers and
conductors who are compensated purely on a
commission basis are automatically entitled to the
basic minimum pay mandated by law should said
commissions be less than their basic minimum for
eight hours work. It can, thus, be inferred that were
said commissions equal to or even exceed the
minimum wage, the employer need not pay, in
addition, the basic minimum pay prescribed by law. It
follows then that commissions are included in
determining compliance with minimum wage
requirements.
ISSUE: WON the NLRC erred when it disregarded the
vouchers Iran presented as proof of his payment of
13th month pay.
RULING: While it is true that the vouchers evidencing
payments of 13th month pay were submitted only on
appeal, it would have been more in keeping with the
directive of Article 221 of the Labor Code for the NLRC
to have taken the same into account. Time and again,
we have allowed evidence to be submitted on appeal,
emphasizing that, in labor cases, technical rules of
evidence are not binding. Labor officials should use
every and all reasonable means to ascertain the facts
in each case speedily and objectively, without regard
to technicalities of law or procedure.
6

It must also be borne in mind that the intent of P.D.
No. 851 is the granting of additional income in the
form of 13th month pay to employees not as yet
receiving the same and not that a double burden
should be imposed on the employer who is already
paying his employees a 13th month pay or its
equivalent. An employer who pays less than 1/12th of
the employees basic salary as their 13th month pay is
only required to pay the difference.
The foregoing notwithstanding, the vouchers
presented by petitioner covers only a particular year.
It does not cover amounts for other years claimed by
private respondents. It cannot be presumed that the
same amounts were given on said years. Hence,
petitioner is entitled to credit only the amounts paid
for the particular year covered by said vouchers.
33. LIDUVINO M. MILLARES,et. al . vs. NLRC
G.R. No. 122827. March 29, 1999.*
FACTS:
The 116 Petitioners were Technical Staff, Unit
Manager, Section Manager, Department Manager,
Division Manager and Vice President in the mill site of
respondent Paper Industries Corporation of the
Philippines (PICOP) in Bislig. They were terminated
from services by reason of retrenchment program
undertook by the company to avert further losses,
caused by restrictive govt regulation on logging and
the economic crisis. They were given separation pay
computed at the rate of one (1) month basic pay for
every year of service.
Believing however that the allowances they allegedly
regularly received on a monthly basis during their
employment should have been included in the
computation thereof they lodged a complaint for
separation pay differentials.
The allowance they were referring to are the
following:
1. Staff/Manager's Allowance this refers to
the free housing facilities, including free water
and electric consumption, provided by the
company to its supervisory and managerial
employees in Bislig. For those who rented
houses, Staff allowance are given but such
allowance ceases whenever there is vacancy
in the companys housing facilities.
2. Transportation Allowance granted to key
officers and managers who use their vehicles
in the performance of their duties. This is a
conditional grant and recipients are required
to liquidate.
3. Bislig Allowance given only to Division
Managers and corporate officers assigned in
Bislig on account of the hostile environment
prevailing therein.
The executive labor arbiter opined that the subject
allowance, customarily furnished by the company and
regularly received by petitioners formed parts of the
latters wages. In resolving the controversy, the LA
rely on the ruling in Santos v. NLRC and Soriano v.
NLRC that in the computation of separation pay
account should be taken not just of the basic salary
but also of the regular allowances that the employee
had been receiving, he concluded that the allowances
should be included in petitioners' base pay.
However, the NLRC set aside the decision of the LA
decreeing that the allowance did not form part of the
salary base used in computing the separation pay.
The NLRC relied in the ruling of Estate of the late
Eugene J. Kneebone v. NLRC where the Court held
that representation and transportation allowances
were deemed not part of salary and should therefore
be excluded in the computation of separation
benefits. The NLRC likewise found that petitioners'
allowances were contingency-based and thus not
included in their salaries. MR was denied.
In petition for certiorari, petitioners submit that their
allowances are included in the definition of "facilities"
in Art. 97, par. (f), of the Labor Code, being necessary
and indispensable for their existence and subsistence.
They claim that their availment of the monetary
equivalent of those "facilities" on a monthly basis was
characterized by permanency, regularity and
customariness. And thus, salary base in computing
separation pay includes not just the basic salary but
also the regular allowances.
ISSUE:
Whether or not the allowances given by the company
equivalent to facilities and must be included in the
salary base in computing separation pay?
RULING:
NO.
"wage" is defined in letter (f) as the
remuneration or earnings, however
designated, capable of being expressed in
terms of money, whether fixed or ascertained
on a time, task, piece, or commission basis, or
other method of calculating the same, which
is payable by an employer to an employee
under a written or unwritten contract of
employment for work done or to be done, or
for services rendered or to be rendered and
includes the fair and reasonable value, as
determined by the Secretary of Labor, of
board, lodging, or other facilities customarily
furnished by the employer to the employee.
In order to ascertain whether the subject allowances
form part of petitioner's "wages," we divide the
discussion on the following "customarily
furnished;" "board, lodging or other facilities;" and,
"fair reasonable value as determined by the Secretary
of Labor."
7
"Customary" is founded on long-established and
constant practice connoting regularity. The receipt of
an allowance on a monthly basis does not ipso facto
characterize it as regular and forming part of salary
because the nature of the grant is a factor worth
considering.
The subject allowances are temporary, not
regularly received by petitioner. The housing
allowance ceases once vacancy occurs in the
company provided housing accommodation.
In the availment of transportation allowance,
when the conditions for availment ceased to
exist, the allowance reached the cutoff point.
The Staff/Manager's allowance may fall under
"lodging" but the transportation and Bislig allowances
are not embraced in "facilities" on the main
consideration that they are granted as well as the
Staff/Manager's allowance for respondent PICOP's
benefit and convenience, i.e., to insure that
petitioners render quality performance. In
determining whether a privilege is a facility, the
criterion is not so much its kind but its purpose. That
the assailed allowances were for the benefit and
convenience of respondent company was supported
by the circumstance that they were not subjected to
withholding tax.
Moreover, Petitioners' allowances do not represent
such fair and reasonable value as determined by the
proper authority simply because the Staff/Manager's
allowance and transportation allowance were
amounts given by respondent company in lieu of
actual provisions for housing and transportation
needs whereas the Bislig allowance was given in
consideration of being assigned to the hostile
environment then prevailing in Bislig.
Though the court agrees with the rulings of the cases
relied by petitioner, that separation pay when
awarded to an illegally dismissed employee in lieu of
reinstatement or to a retrenched employee should be
computed based not only on the basic salary but also
on the regular allowances that the employee had
been receiving. But in view of the previous discussion
that the disputed allowances were not regularly
received by petitioners herein, therefore, the subject
allowances did not form part of petitioners' wages.
Wherefore, the Staff/Manager's, transportation and
Bislig allowances cannot form part of the salary base
used in computing the separation pay of petitioners.
34. Equitable PCI Bank vs Sadac
(2006) G.R. 164772
Facts:
Ricardo Sadac was appointed VP of the Legal
Department of petitioner Bank effective August 1981,
and subsequently General Counsel thereof on
December 1981. On June 1989, nine lawyers of
petitioner Banks Legal Department, in a letter-
petition to the Chairman of the Board of Directors,
accused respondent Sadac of abusive conduct and
ultimately, petitioned for a change in leadership of
the department. On the ground of lack of confidence
in Sadac, under the rules of client and lawyer
relationship, petitioner Bank instructed respondent
Sadac to deliver all materials in his custody in all cases
in which the latter was appearing as its counsel of
record. In reaction thereto, Sadac requested for a full
hearing and formal investigation but the same
remained unheeded. On November 1989, respondent
Sadac filed a complaint for illegal dismissal with
damages against petitioner Bank and individual
members of the Board of Directors thereof. After
learning of the filing of the complaint, petitioner Bank
terminated the services of respondent Sadac. Finally,
on August 1989, Sadac was removed from his office
Labor Arbiter rendered decision that Sadacs
termination was illegal and entitled to reinstatement
and payment of full back wages. NLRC affirmed the
decision upon appeal by the Bank. Sadac filed for
execution of judgment where it gave its computation
which amounted to P 6.03 M representing his back
wages and the increases he should have received
during the time he was illegally dismissed. The Bank
opposed to Sadacs computation. The Labor Arbiter
favor Sadacs computation. NLRC, upon appeal by
the bank, reversed the decision. CA reversed the
decision of NLRC and concluded that general salary
increases should be made a component in the
computation of backwages.
Main Issue: WON the computation of back wages
shall include the general increases.
Held: No. Respondent Sadac cannot take exception by
arguing that jurisprudence speaks only of wage and
not salary, and therefore, the rule* is inapplicable to
him. It is respondent Sadacs stance that he was not
paid at the wage rate nor was he engaged in some
form of manual or physical labor as he was hired as
Vice President of petitioner Bank. He cites Gaa v.
Court of Appeals where the Court distinguished
between wage and salary.
The reliance is misplaced. The distinction between
salary and wage in Gaa was for the purpose of Article
1708 of the Civil Code which mandates that, "[t]he
laborers wage shall not be subject to execution or
attachment, except for debts incurred for food,
shelter, clothing and medical attendance." In labor
law, however, the distinction appears to be merely
semantics. Paramount and Evangelista may have
involved wage earners, but the petitioner in Espejo
was a General Manager with a monthly salary of
P9,000.00 plus privileges. That wage and salary are
synonymous has been settled in Songco v. National
Labor Relations Commission. We said:
Broadly, the word "salary" means a
recompense or consideration made to a
person for his pains or industry in another
mans business. Whether it be derived from
8
 "salarium," or more fancifully from "sal," the
pay of the Roman soldier, it carries with it the
fundamental idea of compensation for
services rendered. Indeed, there is eminent
authority for holding that the words "wages"
and "salary" are in essence synonymous
(Words and Phrases, Vol. 38 Permanent
Edition, p. 44 citing Hopkins vs. Cromwell, 85
N.Y.S.839, 841, 89 App. Div. 481; 38 Am. Jur.
496). "Salary," the etymology of which is the
Latin word "salarium," is often used
interchangeably with "wage", the etymology
of which is the Middle English word "wagen".
Both words generally refer to one and the
same meaning, that is, a reward or
recompense for services performed. Likewise,
"pay" is the synonym of "wages" and "salary"
(Blacks Law Dictionary, 5th Ed). x x x (Italics
supplied.)
The rule that an unqualified award of
backwages means that the employee is paid
at the wage rate at the time of his dismissal.
The base figure to be used in the computation
of backwages due to the employee should
include not just the basic salary, but also the
regular allowances that he had been
receiving, such as the emergency living
allowances and the 13th month pay
mandated under the law. This, however, does
not include salary increases which is a mere
expectancy and not a guaranty.
35. S.I.P. FOOD HOUSE vs. bartlina
G.R. No. 192473. October 11, 2010.*
FACTS:
The GSIS Multi-Purpose Cooperative (GMPC) is an
entity organized by the employees of GSIS. Incidental
to its purpose, GMPC wanted to operate a canteen in
the new GSIS Building, but had no capability and
expertise in this area. Thus, it engaged the services of
the petitioner S.I.P. Food House (SIP), owned by the
spouses Alejandro and Esther Pablo, as
concessionaire. The respondents Restituto Batolina
and nine (9) others (the respondents) worked as
waiters and waitresses in the canteen. In February
2004, GMPC terminated SIPs contract as GMPC
concessionaire, because of GMPCs decision to take
direct investment in and management of the GMPC
canteen due to SIPs continued refusal to heed
GMPCs directives for service improvement; and the
alleged interference of the Pablos two sons with the
operation of the canteen. The termination of the
concession contract caused the termination of the
respondents employment, prompting them to file a
complaint for illegal dismissal, with money claims,
against SIP and the spouses Pablo.
The respondents alleged before the labor arbiter that
they were SIP employees, who were illegally
dismissed sometime in February and March 2004.
They further allege that they did not receive overtime
pay, service incentive leave, and maternity benefits.
Their employee contributions were also not remitted
to the Social Security System.
SIP argued on its part that it operated the canteen in
behalf of GMPC since it had no authority by itself to
do so. The respondents were not its employees, but
GMPCs, as shown by their identification cards.
LAS DECISION:
Dismissed the complaint for lack of merit. He found
that the respondents were GMPCs employees, and
not SIPs, as there existed a labor-only contracting
relationship between the two entities. It further
opined that even if respondents were considered as
SIPs employees, their dismissal would still not be
illegal because the termination of its contract to
operate the canteen came as a surprise and was
against its will, rendering the canteens closure
involuntary. He likewise denied the employees
money claims. He ruled that SIP is not liable for
unpaid salaries because it had complied with the
minimum statutory requirement and had extended
better benefits than GMPC; although they were paid
only P160.00 to PP220.00 daily, the employees were
provided with free board and lodging seven (7) days a
week.
Respondents appealed to the NLRC.
NLRC RULING:
the NLRC found that SIP was the respondents
employer, but it sustained the labor arbiters ruling
that the employees were not illegally dismissed as the
termination of SIPs concession to operate the
canteen constituted an authorized cause for the
severance of employer-employee relations. The
closure of SIPs canteen operations involuntary, thus,
negating the employees entitlement to separation
pay.
For failure of SIP to present proof of compliance with
the law on the minimum wage, 13th month pay, and
service incentive leave, the NLRC awarded the
respondents a total of P952,865.53 in salary and 13th
month pay differentials and service incentive leave
pay. The NLRC, however, denied the employees claim
for overtime pay, holding that the respondents failed
to present evidence.
SIP moved for an MR on the decision of the NLRC but
was denied. Hence, it appealed to the CA by a
petition for certiorari .
CA DECISION:
the CA granted the petition in part. While it affirmed
the award, it found merit in SIPs objection to the
NLRC computation and assumption that a month had
twenty-six (26) working days, instead of twenty (20)
working days. The CA recognized that in a government
agency such as the GSIS, there are only 20 official
business days in a month. It noted that the
9
respondents presented no evidence that the
employees worked even outside official business days
and hours. It accordingly remanded the case for a
recomputation of the award. It sustained the NLRCs
findings that SIP was the respondents employer.
SIP moved for reconsideration, but the CA denied the
motion on May 31, 2010. Hence, this present petition.
SIP contends in its petition that it was a labor-only
contractor and not the employer of the respondents.
Respondents in its comments question the propriety
of the petition for review on certiorari raising only
questions of fact and not of law as required by Rule 45
of the Rules of Court. This notwithstanding, they
submit that the CA committed no error in upholding
the NLRCs findings of facts which established that SIP
was the real employer of Batolina and the other
complainants.
ISSUES:
1. Whether or not SIP is the employer of the
respondents.
2. Whether or not an employer can deduct from the
employees wages the value of board and lodging it
provided.
3. Whether or not the petition of certiorari under rule
45 was the proper course taken by the petitioner as it
only raised questions of facts and not of law.
RULING:
1. The SC affirmed the CAs ruling that SIP was
the employer of the respondents, it ruled out
SIPs claim that it was a labor-only contractor
or a mere agent of GMPC. SIP and its
proprietors could not be considered as mere
agents of GMPC because they exercised the
essential elements of an employment
relationship with the respondents such as
hiring, payment of wages and the power of
control, not to mention that SIP operated the
canteen on its own account as it paid a fee for
the use of the building and for the privilege of
running the canteen. The fact that the
respondents applied with GMPC in February
2004 when it terminated its contract with SIP,
is another clear indication that the two
entities were separate and distinct from each
other. We thus see no reason to disturb the
CAs findings.
Evidences that show employment relationship
between petitioner and respondents as ruled
by the NLRC and affirmed by the CA:
a) SIP was the one paying for the salary
of the respondents.
b) When SIP was charged them of
underpayment, it interposed the
defense of free board and lodging
given to its employees working at the
canteen.
c) IDs issued to respondents bear the
signature of petitioner Alejandro C.
Pablo.
d) Memoranda issued to the respondent
employees regarding their absences
without leave were signed by
petitioner Alejandro C. Pablo.
e) Letter made by petitioners counsel
addressed to GSIS after the cessation
of their contract stating that
respondents were its employees.
2. The SC affirmed the CA ruling on the monetary
award to Batolina and the other complainants. The
free board and lodging SIP furnished the employees
cannot operate as a set-off for the underpayment of
their wages. As held in Mabeza v. National Labor
Relations Commission: the employer cannot simply
deduct from the employees wages the value of the
board and lodging without satisfying the following
requirements: (1) proof that such facilities are
customarily furnished by the trade; (2) voluntary
acceptance in writing by the employees of the
deductible facilities; and (3) proof of the fair and
reasonable value of the facilities charged. As the CA
aptly noted, it is clear from the records that SIP failed
to comply with these requirements.
3. While it is the general rule that the Court may not
review factual findings of the CA, we deem it proper
to depart from the rule and examine the facts of the
case in view of the conflicting factual findings of the
labor arbiter, on one hand, and the NLRC and the CA,
on the other. We, therefore, hold the respondents
position on this point unmeritorious.
NOTE: On the collateral issue of the proper
computation of the monetary award, the court also
finds the CAs ruling to be in order. Indeed, in the
absence of evidence that the employees worked for
26 days a month, no need exists to recompute the
award for the respondents who were explicitly
claiming for their salaries and benefits for the services
rendered from Monday to Friday or 5 days a week or
a total of 20 days a month.
36. SLL International Cables vs NLRC
FACTS: On May 21, 1999, private respondents for the
4th time worked with Lagons project in Camarin,
Caloocan City with Furukawa Corporation as the
general contractor. Their contract would expire on
February 28, 2000, the period of completion of the
project. From May 21, 1997-December 1999, private
respondents received the wage of P145.00. At this
time, the minimum prescribed rate for Manila was
P198.00. In January to February 28, the three received
the wage of P165.00. The existing rate at that time
was P213.00.
10
For reasons of delay on the delivery of imported
materials from Furukawa Corporation, the Camarin
project was not completed on the scheduled date of
completion. Face[d] with economic problem[s], Lagon
was constrained to cut down the overtime work of its
worker[s][,] including private respondents. Thus,
when requested by private respondents on February
28, 2000 to work overtime, Lagon refused and told
private respondents that if they insist, they would
have to go home at their own expense and that they
would not be given anymore time nor allowed to stay
in the quarters. This prompted private respondents to
leave their work and went home to Cebu. On March 3,
2000, private respondents filed a complaint for illegal
dismissal, non-payment of wages, holiday pay, 13th
month pay for 1997 and 1998 and service incentive
leave pay as well as damages and attorneys fees.
1. What are the legal requirements before a
facilities can be deducted from the
employees wages?
On whether the value of the facilities should be
included in the computation of the wages received
by private respondents, Section 1 of DOLE
Memorandum Circular No. 2 provides that an
employer may provide subsidized meals and snacks to
his employees provided that the subsidy shall not be
less that 30% of the fair and reasonable value of such
facilities. In such cases, the employer may deduct
from the wages of the employees not more than 70%
of the value of the meals and snacks enjoyed by the
latter, provided that such deduction is with the
written authorization of the employees concerned.
Moreover, before the value of facilities can be
deducted from the employees wages, the following
requisites must all be attendant: first, proof must be
shown that such facilities are customarily furnished by
the trade; second, the provision of deductible facilities
must be voluntarily accepted in writing by the
employee; and finally, facilities must be charged at
reasonable value.20 Mere availment is not sufficient
to allow deductions from employees wages.21
2. In the present case, did SLL comply with the
legal requirements for deduction of the
facilities?
These requirements, however, have not been met in
this case. SLL failed to present any company policy or
guideline showing that provisions for meals and
lodging were part of the employees salaries. It also
failed to provide proof of the employees written
authorization, much less show how they arrived at
their valuations. At any rate, it is not even clear
whether private respondents actually enjoyed said
facilities.
3. What is the difference between facilities
and supplements?
The Court, at this point, makes a distinction between
facilities and supplements. It is of the view that
the food and lodging, or the electricity and water
allegedly consumed by private respondents in this
case were not facilities but supplements. In the case
of Atok-Big Wedge Assn. v. Atok-Big Wedge Co.,22 the
two terms were distinguished from one another in
this wise:
Supplements, therefore, constitute extra
remuneration or special privileges or benefits given to
or received by the laborers over and above their
ordinary earnings or wages. Facilities, on the other
hand, are items of expense necessary for the laborers
and his familys existence and subsistence so that by
express provision of law (Sec. 2[g]), they form part of
the wage and when furnished by the employer are
deductible therefrom, since if they are not so
furnished, the laborer would spend and pay for them
just the same.
In short, the benefit or privilege given to the
employee which constitutes an extra remuneration
above and over his basic or ordinary earning or wage
is supplement; and when said benefit or privilege is
part of the laborers basic wages, it is a facility. The
distinction lies not so much in the kind of benefit or
item (food, lodging, bonus or sick leave) given, but in
the purpose for which it is given.23
4. Based on the distinction between facilities
and supplements, in the case at bench, are
the items provided by SLL facilities or
supplements?
In the case at bench, the items provided were given
freely by SLL for the purpose of maintaining the
efficiency and health of its workers while they were
working at their respective projects.
For said reason, the cases of Agabon and Glaxo are
inapplicable in this case. At any rate, these were cases
of dismissal with just and authorized causes. The
present case involves the matter of the failure of the
petitioners to comply with the payment of the
prescribed minimum wage.
b. different methods of fixing compensation
37. LEYTE IV ELECTRIC COOPERATIVE, INC. vs. LEYECO
IV EMPLOYEES UNION -ALU
G.R. No. 157775. October 19, 2007.*
FACTS: On April 6, 1998, Leyte IV Electric Cooperative,
Inc. (petitioner) and Leyeco IV Employees Union-ALU
(respondent) entered into a Collective Bargaining
Agreement (CBA)3 covering petitioner rank-and-file
employees, for a period of five (5) years effective
January 1, 1998. On June 7, 2000, respondent,
through its Regional VicePresident, Vicente P. Casilan,
sent a letter to petitioner demanding holiday pay for
all employees, as provided for in the CBA. On June 20,
2000, petitioner, through its legal counsel, sent a
letter-reply to Casilan, explaining that after perusing
all available pay slips, it found that it had paid all
11
employees all the holiday pays enumerated in the
CBA.5 After exhausting the procedures of the
grievance machinery, the parties agreed to submit the
issues of the interpretation and implementation of
Section 2, Article VIII of the CBA on the payment of
holiday pay, for arbitration of the National
Conciliation and Mediation Board (NCMB), Regional in
Tacloban City.
Petitioner insisted payment of the holiday pay in
compliance with the CBA provisions, stating that
payment was presumed since the formula used in
determining the daily rate of pay of the covered
employees is Basic Monthly Salary divided by 30 days
or Basic Monthly Salary multiplied by 12 divided by
360 days, thus with said formula, the employees are
already paid their regular and special days, the days
when no work is done, the 51 un-worked Sundays and
the 51 un-worked Saturdays.
On March 1, 2001, Voluntary Arbitrator Antonio C.
Lopez, Jr. rendered a Decision9 in favor of
respondent, holding petitioner liable for payment of
unpaid holidays from 1998 to 2000 in the sum of
P1,054,393.07. He reasoned that petitioner miserably
failed to show that it complied with the CBA mandate
that holiday pay be reflected during any payroll
period of occurrence since the payroll slips did not
reflect any payment of the paid holidays. He found
unacceptable not only petitioners presumption of
payment of holiday pay based on a formula used in
determining and computing the daily rate of each
covered employee, but also petitioners further
submission that the rate of its employees is not less
than the statutory minimum wage multiplied by 365
days and divided by twelve.
Petitioner filed a Motion for Reconsideration10 but it
was denied by the Voluntary Arbitrator in a
Resolution11 dated June 17, 2002. Petitioner filed a
Petition for Certiorari, through rule 65, in the CA,
ascribing grave abuse of discretion amounting to lack
of jurisdiction to the Voluntary Arbitrator. The CA
dismissed outright petitioners Petition for Certiorari
for adopting a wrong mode of appeal.
1. Did petitioner adopted the correct mode of
appeal?
It has long been settled in the landmark case Luzon
Development Bank that a voluntary arbitrator,
whether acting solely or in a panel, enjoys in law the
status of a quasi-judicial agency; hence, his decisions
and awards are appealable to the CA. This is so
because the awards of voluntary arbitrators become
final and executory upon the lapse of the period to
appeal;27 and since their awards determine the rights
of parties, their decisions have the same effect as
judgments of a court. Therefore, the proper remedy
from an award of a voluntary arbitrator is a petition
for review to the CA under rule 43 of the Revised
Rules of Civil Procedure.
2. Did the Voluntary Arbitrator gravely abuse
its discretion is in giving a strict or literal
interpretation of the CBA provisions that the
holiday pay be reflected in the payroll slips.
YES. Such literal interpretation ignores the admission
of respondent in its Position Paper41 that the
employees were paid all the days of the month even if
not worked. In light of such admission, petitioners
submission of its 360 divisor in the computation of
employees salaries gains significance.
In Producers Bank,48 the employer used the divisor
314 in arriving at the daily wage rate of monthly
salaried employees. The divisor 314 was arrived at by
subtracting all Sundays from the total number of
calendar days in a year, since Saturdays are
considered paid rest days. The Court held that the use
of 314 as a divisor leads to the inevitable conclusion
that the ten legal holidays are already included
therein.
In Odango v. National Labor Relations Commission,49
the Court ruled that the use of a divisor that was less
than 365 days cannot make the employer
automatically liable for underpayment of holiday pay.
In said case, the employees were required to work
only from Monday to Friday and half of Saturday.
Thus, the minimum allowable divisor is 287, which is
the result of 365 days, less 52 Sundays and less 26
Saturdays (or 52 half Saturdays). Any divisor below
287 days meant that the employees were deprived of
their holiday pay for some or all of the ten legal
holidays. The 304-day divisor used by the employer
was clearly above the minimum of 287 days.
In this case, the employees are required to work only
from Monday to Friday. Thus, the minimum allowable
divisor is 263, which is arrived at by deducting 51 un-
worked Sundays and 51 un-worked Saturdays from
365 days. Considering that petitioner used the 360-
day divisor, which is clearly above the minimum,
indubitably, petitioners employees are being given
their holiday pay.
38. ARELLANO UNIVERSITY EMPLOYEES AND
WORKERS UNION vs. CA
G.R. No. 139940, September 19, 2006
Facts:
On December 12, 1997, the Arellano
University Employees and Workers Union (the Union)
filed with the National Conciliation and Mediation
Board (NCMB) a Notice of Strike charging the
University with Unfair Labor Practice (ULP) as follows:
1. Interfering in union activities;
2. Union Busting violation
of CBAs Article IV, Section 2;
3. Union Busting disregarding
the unions request to deduct
penalties from its members
who were absent and without
justifiable reasons during union
meetings; and
12
 4. Contracting Workout the
management is contracting out
services and functions being
performed by Union members.
On July 28, 1998, the University moved for the
consolidation with the ULP charge (NCMB-NCR-NS-12-
520-97) the Interpleader it filed against the Union and
the Complaint the Union filed for underpayment of
wages arising from the change in the manner of
computation of salary of employees and non-payment
of Sunday pay, both of which involve the same
parties.
Before the NLRC could act on the Universitys
motion for consolidation, DOLE
Secretary Bienvenido E. Laguesma, by Order of August
5, 1998, certified for compulsory arbitration to the
NLRC a second Notice of Strike filed by the Union on
July 16, 1998, docketed as NCMB-NCR-NS-07-277-98,
charging the University with the following:
a. Violation of Collective Bargaining
Agreement (CBA), Art. V
withholding of union and death
benefits;
b. Violation of CBA, Art. VI non-
granting of ten (10%) percent
salary increase to some union
members;
c. Illegal/unauthorized deductions in
the payroll;
d. Union interference circulating
letters against the union; and
e. Non-implementation of the
retirement plan as approved by
the BIR.
A strike was staged on August 5, 1998. By the
same Order of August 5, 1998, the DOLE Secretary
directed the strikers to return to work within twenty-
four (24) hours. The order was served upon
the Union on August 6, 1998, and the following
day, August 7, 1998, at about 3:00 p.m., the
Union lifted its strike.
The NLRC ruled that the University was
correct in using 314 days as divisor, instead of 365
days, in computing the equivalent daily rate of pay
of a worker. The Union et al. (hereafter petitioners)
filed a motion for reconsideration of the NLRC
decision which was denied by Resolution of January
20, 1999. Hence, they elevated the decision to the
Court of Appeals via petition for certiorari but the
same was dismissed.
Issues:
(1) Is the University guilty of ULP?
(2) Is the University correct in using 314 days
as divisor in computing the equivalent
daily rate?
Ruling:
(1) No
(2) Yes
In the present petition, petitioners insist that the
University violated the CBA by withholding union dues
and death benefits. The University counters that on
the request of Union members in light of their gripes
against the Union and its officers, it did withhold said
dues and benefits which they deposited with the
DOLE where the parties could settle the issues among
themselves.The then prevailing Rules Implementing
the Labor Code, Book V,Rule XVIII provided that:
Section 1. Right of union to
collect dues. The right of the
incumbent bargaining representative
to check off and to collect dues
resulting therefrom shall not be
affected by the pendency of a
representation case or an intra-union
dispute.
To constitute ULP, however, violations of the
CBA must be gross. Gross violation of the CBA, under
Article 261 of the Labor Code, means flagrant and/or
malicious refusal to comply with the economic
provisions thereof. Evidently, the University cannot
be faulted for ULP as it in good faith merely heeded
the above-said request of Union members.
On the NLRCs declaration of loss of
employment status of the strikers, the pertinent
provision of Article 264 of the Labor Code provides:
Any
union officer who knowingly
participates in an illegal strike and
any worker or union officer who
knowingly participates in the
commission of illegal acts during a
strike may be declared to have lost his
employment status
Under the immediately quoted provision, an
ordinary striking worker may not be declared to have
lost his employment status by mere participation in an
illegal strike. There must be proof that he knowingly
participated in the commission of illegal acts during
the strike. While the University adduced
photographs showing strikers picketing outside the
university premises, it failed to identify who they
were. It thus failed to meet the substantiality of
evidence test applicable in dismissal cases.
13

Petitioner-union members must thus be
reinstated to their former
position, without backwages. If reinstatement is no
longer possible, they should receive separation pay of
One (1) Month for every year of service in accordance
with existing jurisprudence.
With respect to the union officers, as already
discussed, their mere participation in the illegal strike
warrants their dismissal.
As for petitioners claim of substantial
diminution of their salary on account of the divisor
used by the University in its computation 314 days,
instead of 365 days, this Court finds nothing wrong
therewith. Sundays being un-worked and considered
unpaid rest days, while regular holidays as well as
special holidays considered as paid day, the
factor used by the University merely complies with
the basic rule in this jurisdiction of no work, no
pay. The right to be paid for un-worked days is
generally limited to the ten legal holidays in a year
39. Philippine Veterans Bank vs NLRC
(1999) G.R. 130439
Facts: In 1983, petitioner Philippine Veterans Bank
was placed under receivership by the Bangko Sentral.
Petitioner was subsequently placed under liquidation
on 15 June 1985. Consequently, its employees,
including private respondent Dr. Jose Teodorico V.
Molina, were terminated from work and given their
respective separation pay and other benefits. To
assist in the liquidation, some of petitioners former
employees were rehired, among them Molina, whose
re-employment commenced on 15 June 1985. On 11
May 1991, MOLINA filed a complaint against members
of the liquidation team. The complaint demanded the
implementation of Wage Orders Nos. NCR-01 and
NCR-02 (hereafter W.O. 1 and W.O. 2) as well as
moral damages and attorneys fees in the amount of
P300,000.
Meanwhile, W.O. 1 took effect on November
1990, prescribing a P17-increase in the daily wage of
employees whose monthly salary did not exceed
P3,802.08. On the other hand, W.O. 2 became
mandated a P12-increase in the daily wage of
employees whose monthly salary did not exceed
P4,319.16. Molina claimed that his salary should have
been adjusted in compliance with said wage orders.
The liquidation team countered that MOLINA was not
entitled to any salary increase because he was already
receiving a monthly salary of P6,654.60 broken down
as follows: P3,754.60 as basic compensation, P2,000
as representation and transportation allowance
(RATA), and a special allowance of P900.
Labor Arbiter rejected the 26.16 factor used
by the liquidators in computing the daily wage of
MOLINA, adopting instead the factor of 365 days.
Consequently, they were ordered to pay Molina the
wage differentials due him under W.O. 1 and W.O. 2.
On appeal, the NLRC sustained the labor arbiters
ruling after concluding that Molina was a regular
employee of petitioner with a basic monthly salary of
P3,754.60 at the time of his dismissal on 31 January
1992. He was, therefore, entitled to the wage
increases mandated by the aforesaid wage orders.
NLRC Decision: WHEREFORE, the liquidation
team are hereby directed to pay MOLINA the total
sum of P112,501.20 broken down as follows:
Wage Differential:
WO# NCR-01 (Nov. 1990 Jan. 31, 1992 - 15
mos.)
P17.00 x 365 12 = P517.08 x 15 mos.
- P7,756.20
WO# NCR-02 (Jan. 8, 1991 Jan. 31, 1992 -
13 mos.)
P12.00 x 365 12 = P365.00 x 13 mos.
- P4,745.00
Total Wage Differential P12,501.20
Moral Damages & Attorney's Fees
P100,000.00
TOTAL AWARD P112,501.20
NLRC denied petitioner's Motion for Reconsideration
prompting the latter to file the instant petition with a
prayer for the issuance of a temporary restraining
order and writ of preliminary injunction.
Arguments:
Petitioner: Petitioner insists that when it was placed
under liquidation, it lost its juridical personality, such
that it could no longer enter into contracts or transact
business. All its assets and liabilities were turned over
to the Central Bank. MOLINA's complaint pertained to
acts committed during liquidation and so was
correctly filed against the liquidation team. Its
substitution as party-respondent was clearly
erroneous. Petitioner emphasizes that he was rehired
only to assist in the liquidation process. At that
moment, the employer-employee relationship
between petitioner and MOLINA ceased to exist.
Petitioner reiterates the arguments raised by the
original respondents, particularly that the factor of
26.16 should have been applied in determining
MOLINA's daily wage. Doing so would show that
MOLINA's daily pay exceeded the minimum wage and,
therefore, was beyond the scope of the wage orders.
Petitioner also avers that the award of P100,000 in
moral damages and attorney's fees was inappropriate
since the complaint did not specify the same, and it
was clearly excessive, considering that the case was
decided based on the pleadings and without the
benefit of trial. In any event, moral damages may only
be recovered in labor cases when the dismissal is
attended by bad faith or fraud, or when it constitutes
an act oppressive to labor or committed in a manner
contrary to good morals, good customs or public
14
policy. MOLINA's dismissal was made in the ordinary
course of business.
Respondent (Molina): MOLINA primarily asserts that
upon petitioner's rehabilitation it assumed all the
rights and obligations of the liquidator, including the
NLRC's monetary award arising from the labor
complaint he filed against the liquidation team.
Issue: : (1) Are W.O. 1 and W.O. 2 applicable to
MOLINA?
(2) Is MOLINA entitled to moral damages and
attorney's fees?
(3) If so, who is liable to pay MOLINA's claims?
Held: W.O. 1 expressly states that employees having a
monthly salary of not more than P3,802.08 are
entitled to receive the mandated wage increase.
Undeniably, MOLINA was receiving a monthly salary
of P3,754.60. This fact alone leaves no doubt that he
should benefit from said wage order. On the other
hand, W.O. 2 raised the ceiling for entitlement to the
wage increase. If MOLINA was covered by the earlier
wage order, with more reason should the later wage
order apply to him.
The Court noted that the National Wages
Council rendered an opinion on the query of the
Philippines Veterans Bank Retained Employees that it
is clear that they are entitled to the wage increase
under R.A. 6440 computed on the basis of 365 paid
days and to the corresponding salary differentials as a
result of the application of this factor. The Bank has
been consistently using the factor of 365 days in
computing the quivalent monthly salary prior to its
being placed under receivership by the Central Bank.
This is evident in the wage and allowance increases
granted under previous Presidential Decrees and
Wage Orders. However, when R.A. 6640 went into
force, the Bank unilaterally reduced the factor to 262
instead of maintaining factor 365 as was the
practice/policy long before the effectivity of the Act.
And when R.A. 6727 took effect, the Bank reverted to
the old practice/policy of using factor 365 days in
computing your equivalent monthly rate salary. The
old practice of the bank in using factor 365 days in a
year in determining your equivalent monthly salary
cannot unilaterally be changed by your employer
without the consent of the employees, such practice
being now a part of the terms and conditions of your
employment.
An employment agreement, whether written
or unwritten, is a bilateral contract and, as such other
party thereto cannot change or amend the terms
thereof without the consent of the other party
thereto. To abandon such policy and revert to its old
practice of using the 26.16 factor would be a
diminution of a labor benefit, which is prohibited by
the Labor Code.
MOLINA is entitled to moral damages and
attorney's fees. He may have omitted such claims in
his complaint, but he certainly included them in his
position paper. The NLRC, however, did not
distinguish between attorney's fees and moral
damages in affirming the award of P100,000 to
MOLINA. Awards for moral damages and attorney's
fees cannot be consolidated for they are different in
nature and each must be separately determined.
Since the Labor Code limits attorney's fees to ten
percent of the wages awarded, 17 and the total wage
differential due MOLINA was computed at
P12,501.20, only P1,250.12 should have been
awarded as attorney's fees. For moral damages,
however, to be awarded, the claimant must
satisfactorily prove its factual basis and causal
connection with the respondent's acts. In this,
MOLINA failed, for which reason the award of moral
damages must be deleted.
Finally, payment of MOLINA's claims devolves
upon petitioner, not the liquidation team. In both
receivership and liquidation proceedings the bank
retains its juridical personality notwithstanding the
closure of its business; in fact, the bank may even be
sued. Upon its rehabilitation, petitioner assumed the
rights and obligations of the receiver and liquidator.
This includes MOLINA's claim for unpaid wages. It
must be borne in mind that all the acts of the receiver
and liquidator pertain to petitioner, both having
assumed petitioner's corporate existence. Petitioner
cannot disclaim liability by arguing that the non-
payment of MOLINA's just wages was committed by
the liquidators during the liquidation period.
40. Odango vs. NLRC
G.R. no. 147420 June 10, 2004
FACTS:
Petitioners are monthly paid employees of ANTECO
(Antique Electric Cooperative) whose workdays are
from Monday to Friday and half of Saturday. After a
routine inspection, the Regional Branch of the
Department of Labor and Employment (DOLE)
found ANTECO liable for underpayment of the
monthly salaries of its employees and directed
ANTECO to pay its employees wage differentials
amounting to P1,427,412.75. ANTECO failed to pay.
Thus, on various dates in 1995, thirty-three (33)
monthly-paid employees filed complaints with the
NLRC Sub-Regional Branch VI, Iloilo City, praying for
payment of wage differentials, damages and
attorneys fees. The Labor Arbiter rendered a
Decision in favor of petitioners granting them wage
differentials amounting to P1,017,507.73 and
attorneys fees of 10%. ANTECO appealed the
decision to the NLRC which reversed the Labor
Arbiters Decision, and denied petitioners
subsequent Motion for Reconsideration. Petitioners
then elevated the case to this Court through a petition
for certiorari, which the Court dismissed for
petitioners failure to comply with Section 11, Rule 13
of the Rules of Court, and referred the case back to
the Court of Appeals. The Court of Appeals dismissed
15
the petition because of petitioners failure to allege
specific instances where the NLRC abused its
discretion. Hence, the present petition.
The Labor Arbiters Ruling
The Labor Arbiter agreed with petitioners that
ANTECOs use of 304 as divisor is an admission that it
is paying its employees for only 304 days a year
instead of the 365 days as specified in Section 2, Rule
IV of Book 3 (Section 2) of the Implementing Rules of
the Labor Code. The Labor Arbiter concluded that
ANTECO owed its employees the wages for 61 days,
the difference between 365 and 304, for every year.
The NLRCs Ruling
The NLRC reversed the Labor Arbiters ruling that
ANTECO underpaid its employees. The NLRC pointed
out that the Labor Arbiters own computation showed
that the daily wage rates of ANTECOs employees
were above the minimum daily wage of P124. The
lowest paid employee of ANTECO was then receiving a
monthly wage of P3,788. The NLRC applied the
formula in Section 2 [(Daily Wage Rate = (Wage x
12)/365)] to the monthly wage of P3,788 to arrive at a
daily wage rate of P124.54, an amount clearly above
the minimum wage. The NLRC noted that while the
reasoning in the body of the Labor Arbiters decision
supported the view that ANTECO did not underpay,
the conclusion arrived at was the opposite. Finally, the
NLRC ruled that the use of 304 as a divisor in
converting leave credits is more favorable to the
employees since a lower divisor yields a higher rate of
pay.
The Ruling of the Court of Appeals
The Court of Appeals held that the petition was
insufficient in form and substance since it does not
allege the essential requirements of the extra-
ordinary special action of certiorari. The Court of
Appeals faulted petitioners for failing to recite where
and in what specific instance public respondent
abused its discretion. The appellate court
characterized the allegations in the petition as
sweeping and clearly falling short of the
requirement of Section 3, Rule 46 of the Rules of
Court.
ISSUE:
Whether petitioners (Odango and the 32
complainants) are entitled to their money claims.
RULING:
Petitioners argue that under this provision on Section
2, Rule IV of Book III of the Omnibus Rules
Implementing the Labor Code, monthly-paid
employees are considered paid for all days of the
month including un-worked days. Petitioners assert
that they should be paid for all the 365 days in a year.
They argue that since in the computation of leave
credits, ANTECO uses a divisor of 304, ANTECO is not
paying them 61 days every year. PETITIONERS CLAIM
IS WITHOUT BASIS.
Section 2 cannot serve as basis of any right or claim
since it has long been declared by the Court as null
and void (in the guise of clarifying the Labor Codes
provisions on holiday pay, they in effect amended
them by enlarging the scope of their exclusion).
Absent any other legal basis, petitioners claim for
wage differentials must fail. Even assuming that
Section 2, Rule IV of Book III is valid, petitioners claim
will still fail. The basic rule in this jurisdiction is no
work, no pay. The right to be paid for un-worked
days is generally limited to the ten legal holidays in a
year. Petitioners claim is based on a mistaken notion
that Section 2, Rule IV of Book III gave rise to a right to
be paid for un-worked days beyond the ten legal
holidays. In effect, petitioners demand that ANTECO
should pay them on Sundays, the un-worked half of
Saturdays and other days that they do not work at all.
Petitioners line of reasoning is not only a violation of
the no work, no pay principle, it also gives rise to an
invidious classification, a violation of the equal
protection clause.
The use of a divisor less than 365 days cannot make
ANTECO automatically liable for underpayment. The
facts show that petitioners are required to work only
from Monday to Friday and half of Saturday. Thus, the
minimum allowable divisor is 287, which is the result
of 365 days, less 52 Sundays and less 26 Saturdays (or
52 half Saturdays). Any divisor below 287 days means
that ANTECOs workers are deprived of their holiday
pay for some or all of the ten legal holidays. The 304
days divisor used by ANTECO is clearly above the
minimum of 287 days.
WHEREFORE, the petition is DENIED. The Resolution
of the Court of Appeals DISMISSING CA-G.R. SP No.
51519 is AFFIRMED.
41. Pulp & Paper Inc. vs. NLRC
GR. No. 116593
September 24, 1997
FACTS:
A case of illegal dismissal and underpayment of wages
was filed by Epifania Antonio against PULP AND
PAPER DISTRIBUTORS INC..
Epifania was a regular employee of the corporation
having served as Wrapper in September 1975. On
November 1991, for unknown reasons, she was
advised verbally of her termination and was given a
prepared form of Quitclaim and Release which she
refused to sign. Instead she brought the present
complaint for illegal dismissal.
In charging the corporation of underpayment of
wages, Epifania in the same position paper alleges
that, rarely during her employment she received her
salary, which was in accordance with the minimum
wage law. She was not paid overtime pay, holiday pay
16
and five-day service incentive leave pay, hence she is
claiming for payments thereof by instituting the
present case.
Pulp & Paper denied having terminated the services of
the complainant and alleges that starting 1989 the
orders from customers became fewer and dwindled
to the point that it is no longer practical to maintain
the present number of packer/wrappers. Maintaining
the same number of packers/wrappers would mean
less pay because the work allocation is no longer the
same as it was. So the company has to reduce
temporarily the number of packers/wrappers.
Epifania was among those who were temporarily laid-
off from work. She last worked with the company on
June 1991.
The company contended that 5 months from the time
the complainant last worked with the company, the
management decided to release Epifania and gave her
a chance to look for another job in the meantime that
no job is available for her with the company. So she
was given the option and considering that she did not
sign the documents referred to as the Quitclaim and
Release, the company did not insist, and did not
terminate her services. The respondent added that
the reason why the complainant was called on
November 1991 was not to work but to receive her
13th month pay of P636.70 as shown by the voucher
she signed.
As regards the claim of the complainant for
underpayment, Pulp & Paper did not actually deny the
same but gave the reservation that should the same
be determined by this Office it is willing to settle
considering the fact that Epifania, being paid by
results, it is not in a proper position to determine
whether the complainant was underpaid or not.
ISSUE:
How should the separation pay and salary differential
of such workers be computed?
RULING:
Computation of Minimum Wage
Epifania was a piece-rate worker and not a time-
worker. Since her employment as "packer/wrapper"
in 1975 until her separation on 1991, her salary
depended upon the number of reams of bond paper
she packed per day. Her work depended upon the
number and availability of purchase orders from
customers. Oftentimes, packers/wrappers only work
three to four hours a day. Thus, her separation pay
must be based on her latest actual compensation per
piece or on the minimum wage per piece as
determined by Article 101 of the Labor Code,
whichever is higher, and not on the daily minimum
wage applicable to time-workers.
Compensation of Pieceworkers
In the absence of wage rates based on time and
motion studies, wage rates of piece-rate workers
must be based on the applicable daily minimum wage
determined by the Regional Tripartite Wages and
Productivity Commission. To ensure the payment of
fair and reasonable wage rates, Article 101 of the
Labor Code provides that "the Secretary of Labor shall
regulate the payment of wages by results, including
pakyao, piecework and other nontime work." The
same statutory provision also states that the wage
rates should be based, preferably, on time and motion
studies, or those arrived at in consultation with
representatives of workers' and employers'
organizations. In the absence of such prescribed wage
rates for piece-rate workers, the ordinary minimum
wage rates prescribed by the Regional Tripartite
Wages and Productivity Boards should apply.
In 1991, Epifania was orally informed of the
termination of her employment. Wage Order No.
NCR-02, in effect at the time, set the minimum daily
wage for non-agricultural workers like private
respondent at P118.00. This was the rate used by the
labor arbiter in computing the separation pay of
private respondent. We cannot find any abuse of
discretion, let alone grave abuse, in the order of the
labor arbiter which was later affirmed by the NLRC.
Moreover, since Pulp & Paper employed piece-rate
workers, it should have inquired from the secretary of
labor about their prescribed specific wage rates. In
any event, there being no such prescribed rates, Pulp,
after consultation with its workers, should have
submitted for the labor secretary's approval time and
motion studies as basis for the wage rates of its
employees.
In the present case, employer Pulp & Paper
unquestionably failed to discharge the responsibility
of submitting to the secretary of labor a proposed
wage rate based on time and motion studies and
reached after consultation with the representatives
from both workers' and employers' organization
which would have applied to its piece-rate workers.
Without those submissions, the labor arbiter had the
duty to use the daily minimum wage rate for non-
agricultural workers prevailing at the time of private
respondent's dismissal, as prescribed by the Regional
Tripartite Wages and Productivity Boards.
It is clear, therefore, that the applicable minimum
wage for an eight-hour working day is the basis for
the computation of the separation pay of piece-rate
workers like Epifnia. The computed daily wage should
not be reduced on the basis of unsubstantiated claims
that her daily working hours were less than eight. The
labor arbiter correctly used the full amount of
P118.00 per day in computing private respondent's
separation pay.
We agree with the following computation:
17
 Considering therefore that complainant had
been laid-off for more than six (6) months
now, we strongly feel that it is already
reasonable for the respondent to pay the
complainant her separation pay of one month
for every year of service, a fraction of six (6)
months to be considered as one whole year.
Separation pay should be computed based on
her minimum salary as will be determined
hereunder.
Separation pay 1 month = 16 years
P118.00 x 26 x 16 years = P49,088.00
The amount "P118.00" represents the applicable daily
minimum wage per Wage Order Nos. NCR-02 and
NCR-02-A; "26", the number of working days in a
month after excluding the four Sundays which are
deemed rest days; "16", the total number of years
spent by private respondent in the employ of
petitioner.
42. LABOR CONGRESS OF THE PHILIPPINES V. NLRC
FACTS:
The 99 persons named as petitioners in this
proceeding were rank-and-file employees of
respondent Empire Food Products. Petitioners filed
against private respondents a complaint for payment
of money claim[s] and for violation of labor
standard[s] laws.
On January 23, 1991, petitioners filed a complaint
against private respondents for:
a. Unfair Labor Practice by way of Illegal Lockout
and/or Dismissal;
b. Union busting thru Harassments [sic], threats, and
interfering with the rights of employees to self-
organization;
c. Violation of the Memorandum of Agreement dated
October 23, 1990;
d. Underpayment of Wages in violation of R.A. No.
6640 and R.A. No. 6727, such as Wages promulgated
by the Regional Wage Board;
e. Actual, Moral and Exemplary Damages. (Annex D
of Petition)
ISSUE:
1. WHETHER OR NOT THE PETITIONERS WERE
ILLEGALLY EASED OUT [OF] OR CONSTRUCTIVELY
DISMISSED FROM THEIR ONLY MEANS OF
LIVELIHOOD.
2. WHETHER OR NOT PETITIONERS SHOULD BE
REINSTATED FROM THE DATE OF THEIR DISMISSAL UP
TO THE TIME OF THEIR REINSTATEMENT, WITH
BACKWAGES, STATUTORY BENEFITS, DAMAGES AND
ATTORNEYS FEES.
3. What is the status and nature of the employment of
petitioners whose mode of compensation was on a
per piece basis?
RULING:
1. YES. The burden of proving the existence of just
cause for dismissing an employee, such as
abandonment, rests on the employer, a burden
private respondents failed to discharge. Private
respondents, moreover, in considering petitioners
employment to have been terminated by
abandonment, violated their rights to security of
tenure and constitutional right to due process in not
even serving them with a written notice of such
termination. Section 2, Rule XIV, Book V of the
Omnibus Rules Implementing the Labor Code
provides: SEC. 2. Notice of Dismissal.Any employer
who seeks to dismiss a worker shall furnish him a
written notice stating the particular acts or omission
constituting the grounds for his dismissal. In cases of
abandonment of work, the notice shall be served at
the workers last known address.
2. YES. Petitioners are entitled to reinstatement with
full back wages pursuant to Article 279 of the Labor
Code, as amended by R.A. No. 6715. Nevertheless, the
records disclose that taking into account the number
of employees involved, the length of time that has
lapsed since their dismissal, and the perceptible
resentment and enmity between petitioners and
private respondents which necessarily strained their
relationship, reinstatement would be impractical and
hardly promotive of the best interests of the parties.
In lieu of reinstatement then, separation pay at the
rate of one month for every year of service, with a
fraction of at least six (6) months of service
considered as one (1) year, is in order.
3. While petitioners mode of compensation was on a
per piece basis the status and nature of their
employment was that of regular employees.As to
the other benefits, namely, holiday pay, premium pay,
13th month pay and service incentive leave which the
labor arbiter failed to rule on but which petitioners
prayed for in their complaint, we hold that petitioners
are so entitled to these benefits. Three (3) factors lead
us to conclude that petitioners, although piece-rate
workers, were regular employees of private
respondents. First, as to the nature of petitioners
tasks, their job of repacking snack food was necessary
or desirable in the usual business of private
respondents, who were engaged in the manufacture
and selling of such food products; second, petitioners
worked for private respondents throughout the year,
their employment not having been dependent on a
specific project or season; and third, the length of
time that petitioners worked for private respondents.
Thus, while petitioners mode of compensation was
18
on a per piece basis, the status and nature of their
employment was that of regular employees.
Petitioners are beyond the ambit of exempted
persons and are therefore entitled to overtime pay.
As to overtime pay, the rules, however, are different.
According to Sec. 2(e), Rule I, Book III of the
Implementing Rules, workers who are paid by results
including those who are paid on piece-work, takay,
pakiao, or task basis, if their output rates are in
accordance with the standards prescribed under Sec.
8, Rule VII, Book III, of these regulations, or where
such rates have been fixed by the Secretary of Labor
in accordance with the aforesaid section, are not
entitled to receive overtime pay. Here, private
respondents did not allege adherence to the
standards set forth in Sec. 8 nor with the rates
prescribed by the Secretary of Labor. As such,
petitioners are beyond the ambit of exempted
persons and are therefore entitled to overtime pay.
Once more, the National Labor Relations Commission
would be in a better position to determine the exact
amounts owed petitioners, if any.
43. SAN MIGUEL JEEPNEY SERVICE vs NLRC
Facts:
The 23 complainants were formerly working (as
drivers, dispatchers and mechanic) with petitioner San
Miguel JeepneyService (SMJS), with services ranging
from two to eight years. Petitioner SMJS had a
contract with the U.S. Naval Base Facility located in
San Miguel, San Antonio, Zambales, to provide
transportation services to personnel and dependents
inside said facility. When the said contract expired
petitioner Galace, owner and general manager of
SMJS, "opted not to renew the existing contract nor
bid on the new contract," due to financial difficulties,
he having suffered a net loss the prior year. As a
consequence, the services of the complainants were
terminated. By that time, however, the 23 had already
filed a complaint for non-compliance with the
minimum wage law from 1980 onwards, plus non-
payment of the 13th month pay, legal holiday pay,
overtime pay, service incentive leave pay and
separation pay. In their position paper, complainants
claimed that they were drivers (except for
EdnaFarin and Brainly Aglibot who worked as
dispatchers, andAbner Martinez who was a mechanic-
dispatcher) and all of them were receiving their pay
based on commission basis, which was below the
statutory minimum wage, They further alleged,
among others, that their work entitled them to over-
time pay, legal holiday pay and severance pay, which
were not paid to them.
Petitioners on the other hand rejected any liability for
the money claims.
Decision of the Labor Arbiter
In the cases of
Edna Farin and Brainly Aglibot andAbner Martinez are,
they are entitled to the difference of the
underpayment of their wages as their jobs are
different from that of complainants-drivers, but
regular employees of respondents, in accordance with
Article(s) 280 and 281 of the Labor Code as amended.
These three (3) employees having been found to have
been dismissed without due process of law are
entitled to separation pay equivalent to one-half (1/2)
month for every year of service.
He likewise held that the non-renewal of the contract
with the US Naval Base is a closure or cessation of
operations NOT due to serious business losses under
Art. 283 of the Labor Code, and that being the case,
the drivers became entitled to one-half (1/2) month
pay for every year of service. All other claims, such as
for overtime pay and the like, were dismissed for lack
of both legal basis and evidence to support the same.
However, the arbiter ordered payment of
P1,000.00 to each of the complainants-drivers by way
of financial assistance, considering their length of
service.
The NLRC Decision
It modified the arbiter's ruling, holding that "all the
complainants are regular employees in the
contemplation of Article 281 (now Art. 280) of the
Labor Code, which provides that employment 'shall be
deemed regular when the employee performs
activities which are usually necessary and desirable in
the usual business or trade ... and ruled that the
complainants are entitled to separation pay of one-
half month for every year of service, by virtue of the
non-renewal of the transportation contract with the
naval base. However, finding that the complainants
did not ask for financial assistance, the NLRC deleted
the award of P1,000.00 for each of the complainants.
Issue:
May workers who are paid on commission basis be
considered regular employees, and therefore entitled
to separation pay?
Ruling:
The mere fact that they were paid on commission
basis does not affect or change their status as regular
employees. The test for determining whether an
employee is regular or casual has nothing to do with
the manner of computing or paying an employee's
wages or compensation. Rather, "The primary
standard of determining a regular (as against casual)
employment is the reasonable connection between
the particular activity performed by the employee in
relation to the usual business or trade of the
employer. The test is whether the former is usually
necessary or desirable in the usual business or trade
19
of the employer. The connection can be determined
by considering the nature of the work performed and
its relation to the scheme of the particular business or
trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the
performance is not continuous or merely intermittent,
the law deems the repeated and continuing need for
its performance as sufficient evidence of the necessity
if not indispensability of that activity to the business.
Hence, the employment is also considered regular,
but only with respect to such activity and while such
activity exists."
As the Solicitor General in his Comment suggested
that, being regular employees, they are likewise
entitled to the protection of minimum wage
statutes. Hence, the separation pay due them may be
computed on the basis of the minimum wage
prevailing at the time their services were terminated
by petitioners. We agree. Executive Order No. 178
fixed the minimum wage for non-agricultural workers
working outside Metro Manila at P53.00 a day
effective October 1, 1987. Thus, we utilize this figure
as the basis for computing private respondents'
separation pay.
WHEREFORE, in view of the foregoing, the assailed
Resolution of public respondent NLRC is hereby
AFFIRMED. The separation pay of the private
respondents equivalent to one half month pay for
every year of service shall be computed at the then
prevailing minimum daily wage of P53.00.
SO ORDERED.
NOTE:
While in this particular case, these "commission-
basis employees involved were regular employees
(by operation of law, plus of course, the fact that their
status as employees had never been challenged at any
stage of the present case), it does not follow that
every employee paid (whether wholly or partly) on
commission basis can be considered a regular
employee, or an employee at all, for that matter.
While this caveat may seem rather elementary, it is
still needful to stress that there are many lines of
business legally and legitimately engaging the services
of workers, who are paid on commission basis to
perform activities desirable and necessary for such
businesses, without creating any kind of employer-
employee relationship at any time.
44. villuga v. NLRC
Facts:
A basic factor underlying the exercise of rights and the
filing of claims for benefits under the Labor Code and
other presidential issuances or labor legislations is the
status and nature of one's employment. Whether an
employer-employee relationship exist and whether
such employment is managerial in character or that of
a rank and file employee are primordial
considerations before extending labor benefits.
The facts of the case shows that petitioner Elias
Villuga was employed as cutter in the tailoring shop
owned by private respondent Rodolfo Zapanta and
known as Broad Street Tailoring located at Shaw
Boulevard, Mandaluyong, Metro Manila. As cutter, he
was paid a fixed monthly salary of P840.00 and a
monthly transportation allowance of P40.00. In
addition to his work as cutter, Villuga was assigned
the chore of distributing work to the shop's tailors or
sewers when both the shop's manager and assistant
manager would be absent. He saw to it that their
work conformed with the pattern he had prepared
and if not, he had them redone, repaired or resewn.
The other petitioners were either ironers, repairmen
and sewers. They were paid a fixed amount for every
item ironed, repaired or sewn, regardless of the time
consumed in accomplishing the task. Petitioners did
not fill up any time record since they did not observe
regular or fixed hours of work. They were allowed to
perform their work at home especially when the
volume of work, which depended on the number of
job orders, could no longer be coped up with.
From February 17 to 22, 1978, petitioner Villuga failed
to report for work allegedly due to illness. For not
properly notifying his employer, he was considered to
have abandoned his work.
In a complaint dated March 27, 1978, filed with the
Regional Office of the Department of Labor, Villuga
claimed that he was refused admittance when he
reported for work after his absence, allegedly due to
his active participation in the union organized by
private respondent's tailors. He further claimed that
he was not paid overtime pay, holiday pay, premium
pay for work done on rest days and holidays, service
incentive leave pay and 13th month pay.
Petitioners Renato Abistado, Jill Mendoza, Benjamin
Brizuela and David Oro also claimed that they were
dismissed from their employment because they joined
the Philippine Social Security Labor Union (PSSLU).
Petitioners Andres Abad, Norlito Ladia, Marcelo
Aguilan, Nelia Brizuela, Flora Escobido, Justilita
Cabaneg and Domingo Saguit claimed that they
stopped working because private respondents gave
them few pieces of work to do after learning of their
membership with PSSLU. All the petitioners laid claims
under the different labor standard laws which private
respondent allegedly violated.
HELD:
Rule 1, Section 2(c), Book III of the Implementing
Rules of Labor Code, provides the Elements of
Membership of a Managerial Staff:
(1) that his primary duty consists of the performance
20
of work directly related to management policies; even alleged. However, we disagree with the finding
(2) that he customarily and regularly exercises of respondentCommission that the eleven petitioners
discretion and independent judgment in the are independent contractors.
performance of his functions; For an employer-employee relationship to exist, the
(3) that he regularly and directly assists in the following elements are generally considered: (1) the
management of the establishment; and selectionand engagement of the employee; and
(4) that he does not devote his twenty per cent of his engagement of the employee;
time to work other than those described above. (2) the payment of wages; (3) the power of dismissal
Villugas primary work or duty is to cut or prepare and (4) the power to control the employees
patterns for items to be sewn. conduct.

The duty to lay down/implement any of the

The mere fact that petitioners were paid on a piece-
management policies lies in their manager and
rate basis is no argumentthat herein petitioners were
assistant manager. While he distributes and assigns
not employees. The term wage has been broadly
work to employees in the absence of the manager &
defined in Article 97 of the LaborCode as
the assistant manager, the duty is only occasional.
remuneration or earnings, capable of being expressed
Also, Villuga does not participate in policy-making.
in terms of money whether fixed or ascertained on
Rather, his positions functions involve execution of
atime, task, piece or commission
approved and established policies.
basis. . . . The facts of this case indicate that payment
In Franklin Baker Company of the Philippines v.
by the piece is just a method of compensation and
Trajano, employees who do not participate in policy-
does notdefine the essence of the
making but are given ready policies to execute and
relation. 13 The petitioners were allowed to perform
standard practices to observe are not managerial
their work at home does not likewise imply absence
employees.
of controland supervision. The control test calls
Villuga is definitely a rank and file employee hired to
merely for the existence of a right to control the
perform the work of the cutter and not hired to
manner of doing the work, not the actual exercise of
perform supervisory or managerial functions. The fact
the right.
that he is uniformly paid by the month does not
exclude him from the benefits of holiday pay. He
should also be paid in addition to the 13th month pay, In determining whether the relationship is that of
his overtime pay, holiday pay, premium pay for employer and employee or one of an independent
holiday and rest day, and service incentive leave pay. contractor,each case must be determined on its own
facts and all the features of the relationship are to be
considered. 15Considering that petitioners who are
either sewers, repairmen or ironer, have been in the
For abandonment to constitute a valid cause for
employ of privaterespondent as early as 1972 or at
dismissal, there must be a deliberate and unjustified
the latest in 1976, faithfully rendering services which
refusal of the employee to resume his employment.
are desirable or necessaryfor the business of private
Mere absence is not sufficient, it must be
respondent, and observing managements approved
accompanied by overt acts unerringly pointing to the
standards set for their respectivelines of work as well
factthat the employee simply does not want to work
as the customers specifications, petitioners should be
anymore. 8 At any rate, dismissal of an employee due
considered employees, not independentcontractors.
to hisprolonged absence without leave by reason of
Independent contractors are those who exercise
illness duly established by the presentation of a
independent employment, contracting to do a piece
medical certificate is not justified. 9 In the case at bar,
of workaccording to their own methods and without
however, considering that petitioner Villuga absented
being subjected to control of their employer except as
himself for four (4) dayswithout leave and without
to the result oftheir work. By the nature of the
submitting a medical certificate to support his claim of
different phases of work in a tailoring shop where the
illness, the imposition of a sanctionis justified, but
customers specifications mustbe followed to the
surely, not dismissal, in the light of the fact that this is
letter, it is inconceivable that the workers therein
petitioners first offense. In lieu ofreinstatement,
would not be subjected to control.be followed to the
petitioner Villuga should be paid separation pay
letter, it is inconceivable that the workers therein
where reinstatement can no longer be effected inview
would not be subjected to control.
of the long passage of time or because of the realities
In Rosario Brothers, Inc. v. Ople, 16 this Court ruled
of the situation. 10 But petitioner should not be
that tailors and similar workers hired in the tailoring
grantedbackwages in addition to reinstatement as the
department,although paid weekly wages on piece
same is not just and equitable under the
work basis, are employees not independent
circumstances consideringthat he was not entirely
contractors. Accordingly, asregular employees, paid
free from blame.
on a piece-rate basis, petitioners are not entitled to
overtime pay, holiday pay, premium payfor
As to the other eleven petitioners, there is no clear holiday/rest day and service incentive leave pay. Their
showing that they were dismissed because the claim for separation pay should also be defined for
circumstancessurrounding their dismissal were not lack ofevidence that they were in fact dismissed by
21
private respondent. They should be paid, however,
their 13th monthpay under P.D. 851, since they are
employees not independent contractors.
45. LAMBO and BELOCURA v. NLRC
Facts
This is a petition for certiorari.
Petitioners Lambo and Belocura were employed as
tailors by J.C. Tailor Shop and/or Johnny Co on
September 10, 1985 and March 3, 1985, respectively,
working from 8:00 a.m. to 7:00 p.m. daily, including
Sundays and holidays. Petitioners were paid on a
piece-work basis, and regardless of the number of
pieces they finished in a day, they were each given a
daily pay of at least P64.00.
On January 1989, petitioners filed a complaint against
private respondents for illegal dismissal and sought
recovery of overtime pay, holiday pay, premium pay
on holiday and rest day, service incentive leave pay,
separation pay, 13th month pay, and attorneys fees.
Labor Arbiter Gutierrez ruled in favor of petitioners
and order private respondents pay petitioners claims.
CLAIMS LAMBO BELOCURA
BACKWAGES P64,896.00 P64,896.00
OVERTIME PAY P13,447.90 P13,447.90
HOLIDAY PAY P1,399.30 P1,399.30
SEPARATION PAY P9,984.00 P11,648.00
10% ATTORNEYS P19,110.24
FEES
GRAND TOTAL P210,212.64
On appeal, the NLRC reversed the decision of the
Labor Arbiter, finding that petitioners had not been
dismissed from employment but merely threatened
with a closure of the business if they insisted on their
demand for a straight payment of their minimum
wage, after petitioners walked out of a meeting with
private respondents and other employees. The NLRC
held petitioners guilty of abandonment of work and
accordingly dismissed their claims except that for 13th
month pay.
Petitioners allege that they were dismissed by private
respondents as they were about to file a petition with
the DOLE for the payment of benefits such as SSS
coverage, sick leave and vacation leave.
Issues
1. Is there employment relationship between
petitioners and private respondent?
2. Did petitioners abandon their work?
3. Should the Court give credence to the quitclaim
between private respondents and petitioner
Lambo?
4. Was the Labor Arbiter correct in ordering
payment to the petitioners of backwages,
separation pay, overtime pay, holiday pay, 13th
month pay and attorneys fees?
Ruling
1. YES, they are regular employees who are paid by
results.
There is no dispute that petitioners were
employees of private respondents although they
were paid not on the basis of time spent on the
job but according to the quantity and the quality
of work produced by them. There are two
categories of employees paid by results: 1) those
whose time and performance are supervised by
the employer, where there is an element of
control and supervision over the manner as to
how the work is to be performed; and 2) those
whose time and performance are unsupervised,
where the employers control is over the result of
the work. Petitioners belong to the first category.
In determining the existence of an employer-
employee relationship, the following elements
must be considered: 1) the selection and
engagement of the employee; 2) the payment of
wages; 3) the power of dismissal; and 4) the
power to control the employees conduct. Of
these elements, the most important criterion is
whether the employer controls or has reserved
the right to control the employee not only as to
the result of the work but also as to the means
and methods by which the result is to be
accomplished.
Private respondents exercised control over the
work of petitioners. Petitioners worked in the
companys premises from 8:00 a.m. to 7:00 p.m.
daily, including Sundays and holidays. The mere
fact that they were paid on a piece-rate basis does
not negate their status as regular employees of
private respondents. Payment by the piece is just
a method of compensation and does not define
the essence of the relations. Nor does the fact
that petitioners are not covered by the SSS affect
the employer-employee relationship.
Petitioners were regular employees of private
respondents: 1) within the contemplation of Art.
280 of the Labor Code, their work as tailors was
necessary or desirable in the usual business of
private respondents, which is engaged in the
tailoring business; 2) petitioners worked for
private respondents throughout the year, their
employment not being dependent on a specific
project or season; and, 3) petitioners worked for
private respondents for more than one year.
2. NO.
Private respondents contend that they did not
dismiss petitioners. Practically all employees of
the company, including the members of the union
had asked management to terminate the services
of petitioners, as the employees were against
petitioners request for change of the mode of
payment of their wages.
To justify a finding of abandonment of work, there
must be proof of a deliberate and unjustified
refusal on the part of an employee to resume his
employment. The burden of proof is on the
employer to show an unequivocal intent on the
22
 part of the employee to discontinue employment.
Mere absence is not sufficient. It must be
accompanied by manifest acts unerringly pointing
to the fact that the employee simply does not
want to work anymore.
Private respondents failed to discharge this
burden. Other than the self-serving declarations
in the affidavits of their two employees, private
respondents did not adduce proof of overt acts of
petitioners showing their intention to abandon
their work. On the contrary, the evidence shows
that petitioners lost no time in filing the case for
illegal dismissal against private respondent. This
fact negates any intention on their part to sever
their employment relationship.
3. NO.
Private respondents invoke the compromise
agreement (dated March 2, 1993) between them
and petitioner Lambo, whereby in consideration
of P10,000.00, the latter absolved the former
from liability for money claims or any other
obligations.
Not all quitclaims are per se invalid or against
public policy. But those 1) where there is clear
proof that the waiver was wangled from an
unsuspecting or gullible person or 2) where the
terms of settlement are unconscionable on their
face are invalid. However, considering that the
Labor Arbiter had given petitioner Lambo a total
award of P94,719.20, the amount of P10,000.00
to cover any and all monetary claims is clearly
unconscionable.
4. YES to backwages, separation pay, overtime pay,
holiday pay and 13th month pay. NO to attorneys
fees.
As petitioners were illegally dismissed, they are
entitled to reinstatement with backwages.
Considering that petitioners were dismissed from
the service on January 17, 1989, prior to March
21, 1989, the Labor Arbiter correctly applied the
rule in the Mercury Drug case, according to which
the recovery of backwages should be limited to
three years without qualifications or deductions.
The Labor Arbiter correctly ordered private
respondents to give separation pay. Considerable
time has lapsed since petitioners dismissal, so
that reinstatement would now be impractical and
hardly in the best interest of the parties. In lieu of
reinstatement, separation pay should be awarded
to petitioners at the rate of one month salary for
every year of service, with a fraction of at least six
(6) months of service being considered as one (1)
year.
The awards for overtime pay, holiday pay and
13th month pay are in accordance with our
finding that petitioners are regular employees,
although paid on a piece-rate basis.
The award of attorneys fees should be
disallowed, it appearing that petitioners were
represented by the Public Attorneys Office. With
regard to petitioner Lambo, the amount of
P10,000.00 paid to him under the compromise
agreement should be deducted from the total
award of P94,719.20.
46. Caong, Jr. v. Regualos
G.R. No. 179428, January 26, 2011 640 SCRA 597
Facts:
Petitioners were employed by respondent
under a boundary agreement as drivers of his
jeepneys. On several different occasions, petitioners
failed to remit the full amount of the boundary due to
the scarcity of passengers. As a result, respondent
barred petitioners from driving the vehicles due to
deficiencies in their boundary payments. Petitioner
then filed separate complaints for illegal dismissal.
Petitioners questioned the respondents
policy of automatically dismissing drivers who fail to
remit the full amount of the boundary as it a) violates
their right to due process; b) does not constitute a just
cause for dismissal; and c) disregards the reality that
there are days when they could not raise the full
amount of the boundary because of the scarcity of
passengers. Respondent alleged that petitioners were
lessees of his vehicles and not employees.
The LA decided in favor respondent arguing
that petitioners were not dismissed considering that
they could go back to work once they have paid their
arrears. The LA further ruled that it was a valid form
of disciplinary measure. The NLRC and the CA agreed
with the LA.
Issues:
WON there is employment relationship.
WON petitioners were illegally dismissed.
WON respondents policy of suspending
drivers who fail to remit the full amount of the
boundary fail and reasonable.
Ruling:
Employment relationshipIt is already settled
that the relationship between jeepney
owners/operators and jeepney drivers under the
boundary system is that of employer-employee and
not of lessor-lessee. The fact that the drivers do not
receive fixed wages but only get the amount in excess
of the so-called "boundary" that they pay to the
owner/operator is not sufficient to negate the
relationship between them as employer and
employee.
Illegal dismissalPetitioners suspension
cannot be categorized as a dismissal, considering that
there was no intent on the part of respondent to
sever the employment relationship between him and
petitioners. In fact, it was made clear that petitioners
could put an end to the suspension if they only pay
their recent arrears. As it was, the suspension dragged
on for years because of petitioners stubborn refusal
to pay. It would have been different if petitioners
23
complied with the condition and respondent still
refused to readmit them to work. Then there would
have been a clear act of dismissal.
Boundary scheme, policy of suspension
Respondents policy of suspending drivers who fail to
remit the full amount of the boundary was fair and
reasonable under the circumstances. Petitioners had
already incurred a considerable amount of arrears.
Respondent had to put a stop to it as he also relied on
these boundary payments to raise the full amount of
his monthly amortizations on the jeepneys.
It is acknowledged that an employer enjoys a
wide latitude of discretion to regulate all aspects of
employment, including the prerogative to instill
discipline. This is a management prerogative. The only
limitation on the exercise of management prerogative
is that the policies, rules, and regulations must always
be fair and reasonable, and the corresponding
penalties commensurate to the offense involved and
to the degree of the infraction.
Under a boundary scheme, the driver remits
the "boundary," which is a fixed amount, to the
owner/operator and gets to earn the amount in
excess thereof. Thus, on a day when there are many
passengers along the route, it is the driver who
actually benefits from it. It would be unfair then if,
during the times when passengers are scarce, the
owner/operator will be made to suffer by not getting
the full amount of the boundary. Unless clearly shown
or explained by an event that irregularly and
negatively affected the usual number of passengers
within the route, the scarcity of passengers should not
excuse the driver from paying the full amount of the
boundary.
47. Pedro Chavez vs. NLRC
G.R. No. 146530, January 17, 2005
Facts:
Respondent company, Supreme Packaging, Inc. (SPI),
is in the business of manufacturing cartons and other
packaging materials for export and distribution.
Petitioner Pedro Chavez was engaged as truck driver,
and as such, was tasked to deliver SPIs products from
its factory in Mariveles, Bataan, to Metro Manila. The
deliveries were made in accordance with the routing
slips issued by SPI indicating the order, time and
urgency of delivery. Initially, Chavez was paid the sum
of P350.00 per trip, which was later adjusted to
P480.00 per trip and, at the time of his alleged
dismissal, P900.00 per trip.
Chavez expressed to respondent Alvin Lee, SPIs plant
manager, his desire to avail himself of the benefits
that the regular employees were receiving such as
overtime pay, nightshift differential pay, and 13th
month pay, among others. Although he promised to
extend these benefits to Chavez, Lee failed to actually
do so. Thereafter, Chavez filed a complaint for
regularization with the Regional Arbitration Branch.
Before the case could be heard, SPI terminated the
services of petitioner. Consequently, Chavez filed an
amended complaint for illegal dismissal, unfair labor
practice and non-payment of overtime pay, nightshift
differential pay, 13th month pay, among others.
SPI Contention: SPI denied the existence of an
employer-employee relationship between SPI and
Chavez. They averred that he was an independent
contractor as evidenced by the contract of service
which he and the respondent company entered into.
The relationship of the company and Chavez was
allegedly governed by this contract of service. SPI
insisted that Chavez had the sole control over the
means and methods by which his work was
accomplished. He paid the wages of his helpers and
exercised control over them. As such, he was not
entitled to regularization because he was not an
employee of the respondent company. They, likewise,
maintained that they did not dismiss the petitioner.
Rather, the severance of his contractual relation with
the respondent company was due to his violation of
the terms and conditions of their contract. Chavez
allegedly failed to observe the minimum degree of
diligence in the proper maintenance of the truck he
was using, thereby exposing SPI to unnecessary
significant expenses of overhauling the said truck.
LA Decision: The Labor Arbiter (LA) found
respondents guilty of illegal dismissal. The LA declared
that Chavez was a regular employee of SPI as he was
performing a service that was necessary and desirable
to its business. Moreover, it was noted that he had
discharged his duties as truck driver for SPI for a
continuous and uninterrupted period of more than
ten years. The contract of service invoked by SPI was
declared null and void as it constituted a
circumvention of the constitutional provision
affording full protection to labor and security of
tenure. The LA found that Chavezs dismissal was
anchored on his insistent demand to be regularized.
Hence, for lack of a valid and just cause therefor and
for their failure to observe the due process
requirements, SPI was found guilty of illegal dismissal.
NLRC Decision: Affirmed but on reconsideration
reversed. No employer-employee relationship existed
between SPI and Chavez. SPI did not exercise control
over the means and methods by which Chavez
accomplished his delivery services. It upheld the
validity of the contract of service as said contract was
silent as to the time by which Chavez was to make the
deliveries and that he could hire his own helpers
whose wages would be paid from his own account.
These factors indicated that Chavez was an
independent contractor, not an employee of SPI. The
NLRC ruled that the contract of service was not
intended to circumvent Article 280 of the Labor Code
on the regularization of employees. Said contract,
including the fixed period of employment contained
therein, having been knowingly and voluntarily
entered into by the parties thereto was declared valid
citing Brent School, Inc. v. Zamora. The NLRC, thus,
24
dismissed the petitioners complaint for illegal
dismissal.
CA: Reinstated the decision of the Labor Arbiter, but
on motion for reconsideration, reinstated the decision
of the NLRC.
ISSUE: WON there existed an employer-employee
relationship between SPI and Chavez.
RULING: Yes. The elements to determine the
existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4)
the employers power to control the employees
conduct. The most important element is the
employers control of the employees conduct, not
only as to the result of the work to be done, but also
as to the means and methods to accomplish it. All the
four elements are present in this case.
First. Undeniably, it was the respondents who
engaged the services of the petitioner without the
intervention of a third party.
Second. Wages are defined as "remuneration or
earnings, however designated, capable of being
expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission
basis, or other method of calculating the same, which
is payable by an employer to an employee under a
written or unwritten contract of employment for work
done or to be done, or for service rendered or to be
rendered." That the petitioner was paid on a per trip
basis is not significant. This is merely a method of
computing compensation and not a basis for
determining the existence or absence of employer-
employee relationship. One may be paid on the basis
of results or time expended on the work, and may or
may not acquire an employment status, depending on
whether the elements of an employer-employee
relationship are present or not. In this case, it cannot
be gainsaid that the petitioner received compensation
from the respondent company for the services that he
rendered to the latter.
Moreover, under the Rules Implementing the Labor
Code, every employer is required to pay his
employees by means of payroll. The payroll should
show, among other things, the employees rate of
pay, deductions made, and the amount actually paid
to the employee. Interestingly, the respondents did
not present the payroll to support their claim that the
petitioner was not their employee, raising
speculations whether this omission proves that its
presentation would be adverse to their case.
Third. The respondents power to dismiss the
petitioner was inherent in the fact that they engaged
the services of the petitioner as truck driver. They
exercised this power by terminating the petitioners
services albeit in the guise of "severance of
contractual relation" due allegedly to the latters
breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the
employer-employee relationship, the "control test" is
the most important. Compared to an employee, an
independent contractor is one who carries on a
distinct and independent business and undertakes to
perform the job, work, or service on its own account
and under its own responsibility according to its own
manner and method, free from the control and
direction of the principal in all matters connected with
the performance of the work except as to the results
thereof.17 Hence, while an independent contractor
enjoys independence and freedom from the control
and supervision of his principal, an employee is
subject to the employers power to control the means
and methods by which the employees work is to be
performed and accomplished.
Although the respondents denied that they exercised
control over the manner and methods by which the
petitioner accomplished his work, a careful review of
the records shows that the latter performed his work
as truck driver under the respondents supervision
and control. Their right of control was manifested by
the following attendant circumstances:
1. The truck driven by the petitioner belonged to
respondent company;
2. There was an express instruction from SPI that the
truck shall be used exclusively to deliver its goods;
3. SPI directed Chavez, after completion of each
delivery, to park the truck in either of two specific
places only;
4. SPI determined how, where and when Chavez
would perform his task by issuing to him gate passes
and routing slips.
a. The routing slips indicated on the column
REMARKS, the chronological order and
priority of delivery such as 1st drop, 2nd drop,
3rd drop, etc. This meant that Chavez had to
deliver the same according to the order of
priority indicated therein.
b. The routing slips, likewise, showed whether
the goods were to be delivered urgently or
not by the word RUSH printed thereon.
c. The routing slips also indicated the exact
time as to when the goods were to be
delivered to the customers as, for example,
the words "tomorrow morning" was written
on slip no. 2776.
These circumstances, to the Courts mind, prove that
the respondents exercised control over the means
and methods by which the petitioner accomplished
his work as truck driver of SPI. On the other hand, the
Court is hard put to believe the respondents
25
allegation that the petitioner was an independent
contractor engaged in providing delivery or hauling
services when he did not even own the truck used for
such services. Evidently, he did not possess
substantial capitalization or investment in the form of
tools, machinery and work premises. Moreover, the
petitioner performed the delivery services exclusively
for the respondent company for a continuous and
uninterrupted period of ten years.
The contract of service to the contrary
notwithstanding, the factual circumstances earlier
discussed indubitably establish the existence of an
employer-employee relationship between the
respondent company and the petitioner. It bears
stressing that the existence of an employer-employee
relationship cannot be negated by expressly
repudiating it in a contract and providing therein that
the employee is an independent contractor when, as
in this case, the facts clearly show otherwise. Indeed,
the employment status of a person is defined and
prescribed by law and not by what the parties say it
should be.
ISSUE: WON SPI validly dismissed Chavez.
RULING:
As a rule, the employer bears the burden to prove
that the dismissal was for a valid and just cause. In
this case, SPI failed to prove any such cause for the
petitioners dismissal. They insinuated that petitioner
abandoned his job. To constitute abandonment, these
two factors must concur: (1) the failure to report for
work or absence without valid or justifiable reason;
and (2) a clear intention to sever employer-employee
relationship. Obviously, Chavez did not intend to
sever his relationship with SPI for at the time that he
allegedly abandoned his job, he just filed a complaint
for regularization, which was forthwith amended to
one for illegal dismissal. A charge of abandonment is
totally inconsistent with the immediate filing of a
complaint for illegal dismissal, more so when it
includes a prayer for reinstatement.
Neither can the respondents claim that the petitioner
was guilty of gross negligence in the proper
maintenance of the truck constitute a valid and just
cause for his dismissal. Gross negligence implies a
want or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without
exerting any effort to avoid them. The negligence, to
warrant removal from service, should not merely be
gross but also habitual. The single and isolated act of
the petitioners negligence in the proper maintenance
of the truck alleged by the respondents does not
amount to "gross and habitual neglect" warranting his
dismissal.
Thus, the lack of a valid and just cause in terminating
the services of the petitioner renders his dismissal
illegal. Under Article 279 of the Labor Code, an
employee who is unjustly dismissed is entitled to
reinstatement, without loss of seniority rights and
other privileges, and to the payment of full
backwages, inclusive of allowances, and other
benefits or their monetary equivalent, computed from
the time his compensation was withheld from him up
to the time of his actual reinstatement. However, as
found by the Labor Arbiter, the circumstances
obtaining in this case do not warrant the petitioners
reinstatement. A more equitable disposition, as held
by the Labor Arbiter, would be an award of separation
pay equivalent to one month for every year of service
from the time of his illegal dismissal up to the finality
of this judgment in addition to his full backwages,
allowances and other benefits.
c. fair days wage for a fair days labor or no work no
pay; equal pay for equal work
48. CALTEX REFINERY EMPLOYEES ASSOCIATION
(CREA) v.s BRILLANTES
G.R. No. 123782. September 16, 1997.*
Facts:
Petitioner and private respondent negotiated the
terms and conditions of employment to be contained
in the new CBA. However, some items were
unresolved which eventually lead petitioner to
declare a deadlock. Private respondent then filed with
the DOLE a petition for assumption of jurisdiction. The
latter assumed jurisdiction over the entire labor
dispute at Caltex and issued an order enjoining
petitioner to strike or lockout. However, petitioner
deviated from the order and began a strike and set up
a picket in private respondents premises.
During the strike, DOLE Undersecretary interceded
and conducted several conciliation meetings between
the contending parties. Still issues remained
unresolved thus the problem was referred to the
secretary of labor and employment. Dissatisfied with
the orders issued by the sec. of labor, petitioner
sought remedy before the SC.
Petitioner questions public respondent's resolution of
five issues in the CBA, one of which is on wage
increase. Petitioner belittles the awarded increases
ordered by the sec. of labor and insisted that the
increase ruled on the basis of four factors: (a) the
economic needs of the union's members; (b) the
company's financial capacity; (c) the bargaining
history between the union and the company; and (d)
the traditional parity in wages between Caltex and
Shell Refinery Employees. Petitioner argues that the
agreement on a package wage increases at Shell
Company should be the usual yardstick for purposes
of developing its own package of improved wage
increases.
Issue:
Can the parity in wages between Caltex and shell
refinery employees be the basis of the wage increase
demanded by the union?
Ruling:
26
No. The alleged "similarity" in the situation of Caltex
and Shell cannot be considered a valid ground for a
demand of wage increase, in the absence of a
showing that the two companies are also similar in
"substantial aspects," as discussed above. Private
respondent is merely asking that an employee should
be paid on the basis of work done. If such employee is
absent on a certain day, he should not, as a rule, be
paid wages for that day. And if the employee has
worked only for a portion of a day, he is not entitled
to the pay corresponding to a full day. A contrary
precept would ultimately result in the financial ruin of
the employer. The age-old general rule governing
relations between labor and capital, or management
and employee, is "a fair day's wage for a fair day's
work." If no work is performed by the employee,
there can be no wage or pay unless, of course, the
laborer was ready, willing and able to work but was
locked out, dismissed, suspended or otherwise
illegally prevented from working. True, union
members have the right to demand wage increases
through their collective force; but it is equally cogent
that they should also be able to justify an appreciable
increase in wages. We observe that private
respondent's detailed allegations on productivity are
unrebutted. It is noteworthy that petitioner ignored
this argument of private respondent and based its
demand for wage increase not on the ground that
they were as productive as the Shell employees.
49-53. Prubankers Association vs Prudential Bank
(1999) 302 SCRA 74
Facts:
The RTWPB Region V issued Wage Order No. RB 05-03
which provided for a Cost of Living Allowance (COLA)
to workers in the private sector who had rendered
service for at least three (3) months before its
effectivity, and for the same period thereafter, in the
following categories: P17.50 in the cities of Naga and
Legaspi; P15.50 in the municipalities of Tabaco,
Daraga, Pili and the city of Iriga; and P10.00 for all
other areas in the Bicol Region.
On November 1993, RTWPB Region VII issued Wage
Order No. RB VII-03, which directed the integration of
the COLA mandated pursuant to Wage Order No. RO
VII-02-A into the basic pay of all workers. It also
established an increase in the minimum wage rates
for all workers and employees in the private sector as
follows: by Ten Pesos (P10.00) in the cities of Cebu,
Mandaue and Lapulapu; Five Pesos (P5.00) in the
municipalities of Compostela, Liloan, Consolacion,
Cordova, Talisay, Minglanilla, Naga and the cities of
Davao, Toledo, Dumaguete, Bais, Canlaon, and
Tagbilaran. The bank granted a COLA of P17.50 to its
employees at its Naga Branch, the only branch
covered by Wage Order No. RB 5-03, and integrated
the P150.00 per month COLA into the basic pay of its
rank-and-file employees at its Cebu, Mabolo and P.
del Rosario branches, the branches covered by Wage
Order No. RB VII-03.
On June 7, 1994, Prubankers Association wrote the
petitioner requesting that the Labor Management
Committee be immediately convened to discuss and
resolve the alleged wage distortion created in the
salary structure upon the implementation of the said
wage orders. It demanded in the Labor Management
Committee meetings that the petitioner extend the
application of the wage orders to its employees
outside Regions V and VII, claiming that the regional
implementation of the said orders created a wage
distortion in the wage rates of petitioner's employees
nationwide. As the grievance could not be settled in
the said meetings, the parties agreed to submit the
matter to voluntary arbitration.
The Voluntary Arbitration Committee that the banks
implementation of the wage order created a wage
distortion. The CA reversed the VAC and declared
there was no wage distortion that resulted from the
petitioners separate and regional implementation of
Wage Order No. VII-03 at its Cebu, Mabolo and P. del
Rosario branches.
Issue: WON a wage distortion resulted from
respondent's implementation of the Wage Orders.
Held: The court ruled that there is no wage distortion
since the wage order implementation covers all the
branches of the bank.
There was no wage distortion as there is no wage
parity between employees in different rungs, instead
there is a wage disparity between employees in the
same rung but located in different regions of the
country. The hierarchy of positions was still
preserved. The levels of different pay classes was not
eliminated.
The statutory definition of wage distortion is found in
Article 124 of the Labor Code, as amended by
Republic Act No. 6727, which reads:
Standards/Criteria for Minimum Wage Fixing . .
."As used herein, a wage distortion shall mean a
situation where an increase in prescribed wage results
in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates
between and among employee groups in an
establishment as to effectively obliterate the
distinctions embodied in such wage structure based
on skills, length of service, or other logical bases of
differentiation."
Wage distortion involves four elements: (1) An
existing hierarchy of positions with corresponding
salary rates; (2) A significant change in the salary rate
of a lower pay class without a concomitant increase in
the salary rate of a higher one; (3)The elimination of
the distinction between the two levels and (4) The
existence of the distortion in the same region of the
country.
A disparity in wages between employees holding
similar positions but in different regions does not
constitute wage distortion as contemplated by law. As
stated, it is the hierarchy of positions and the disparity
of their corresponding wages and other emoluments
27
that are sought to be preserved by the concept of
wage distortion.
50. INTERNATIONAL SCHOOL ALLIANCE OF
EDUCATORS vs. QUISUMBING
G.R. No. 128845. June 1, 2000.*
FACTS: Private respondent International School, Inc.
pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for
dependents of foreign diplomatic personnel and other
temporary residents. To enable the School to
continue carrying out its educational program and
improve its standard of instruction, Section 2(c) of the
same decree authorizes the School to employ its own
teaching and management personnel selected by it
either locally or abroad, from Philippine or other
nationalities, such personnel being exempt from
otherwise applicable laws and regulations attending
their employment, except laws that have been or will
be enacted for the protection of employees.
Accordingly, the School hires both foreign and local
teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires.
The School employs four tests to determine whether a
faculty member should be classifled as a foreign-hire
or a local hire: a) domicile of the hired employeer; b)
ones home economy; c) country where one owe
economic allegiance; d) whether the individual hired
abroad specifically to work in the School and was the
School responsible for bringing that individual to the
Philippines. Should the answer to any of these queries
point to the Philippines, the faculty member is
classified as a local hire; otherwise, he or she is
deemed a foreign-hire.
The School grants foreign-hires certain benefits not
accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave
travel allowance. Foreign-hires are also paid a salary
rate twenty-five percent (25%) more than local-hires.
The School justifies the difference on two significant
economic disadvantages foreign-hires have to
endure, namely: (a) the dislocation factor and (b)
limited tenure. The compensation scheme is simply
the Schools adaptive measure to remain competitive
on an international level in terms of attracting
competent professionals in the field of international
education.
When negotiations for a new collective bargaining
agreement were held on June 1995, petitioner
International School Alliance of Educators, a
legitimate labor union and the collective bargaining
representative of all faculty members of the School,
contested the difference in salary rates between
foreign and local-hires. This issue, as well as the
question of whether foreign-hires should be included
in the appropriate bargaining unit, eventually caused
a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of
strike. The failure of the NCMB to bring the parties to
a compromise prompted the DOLE to assume
jurisdiction over the dispute. On June 10, 1996, the
DOLE Acting Secretary issued an Order resolving the
parity and representation issues in favor of the
School. Then DOLE Secretary subsequently denied
petitioners motion for reconsideration. Petitioner
now seeks relief in this Court.
Petitioner claims that the point-of-hire classification
employed by the School is discriminatory to Filipinos
and that the grant of higher salaries to foreign-hires
constitutes racial discrimination. The School disputes
these claims and gives a breakdown of its faculty
members with nationalities other than Filipino, who
have been hired locally and classified as local hires.
The Acting Secretary upheld the point-of-hire
classification for the distinction in salary rates and
said that the existence of a system of salaries and
benefits accorded to foreign hired personnel which
system is universally recognized. Furthermore, it ruled
that the Union cannot also invoke the equal
protection clause to justify its claim of parity as it is an
established principle of constitutional law that the
guarantee of equal protection of the laws is not
violated by legislation or private covenants based on
reasonable classification.
ISSUES: 1. Whether or not the point-of-hire
classification employed by the School is discriminatory
to Filipinos.
2. Whether or not the grant of higher salaries
to foreign-hires constitutes racial discrimination.
3. Whether or not the foreign hire should be
included in the Collective Bargaining negotiation.
RULING: 1. Yes. The Constitution enjoins the State to
protect the rights of workers and promote their
welfare, to afford labor full protection. The State,
therefore, has the right and duty to regulate the
relations between labor and capital. These relations
are not merely contractual but are so impressed with
public interest that labor contracts, collective
bargaining agreements included, must yield to the
common good. Should such contracts contain
stipulations that are contrary to public policy, courts
will not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification
employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local
hires to be an invalid classification. There is no
reasonable distinction between the services rendered
by foreign-hires and local-hires. The practice of the
School of according higher salaries to foreign-hires
contravenes public policy and, certainly, does not
deserve the sympathy of this Court.
2. Yes. Discrimination, particularly in terms of wages,
is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes the payment of
lesser compensation to a female employee as against
a male employee for work of equal value. Article 248
declares it an unfair labor practice for an employer to
discriminate in regard to wages in order to encourage
or discourage membership in any labor organization.
28
Notably, the International Covenant on Economic,
Social, and Cultural Rights, supra, in Article 7 thereof,
provides:
The States Parties to the present Covenant recognize
the right of everyone to the enjoyment of just and
favorable conditions of work, which ensure, in
particular:
a. Remuneration which provides all workers, as a
minimum, with:
i. Fair wages and equal remuneration for work of
equal value without distinction of any kind, in
particular women being guaranteed conditions of
work not inferior to those enjoyed by men, with equal
pay for equal work;
The foregoing provisions impregnably institutionalize
in this jurisdiction the long honored legal truism of
equal pay for equal work. Persons who work with
substantially equal qualifications, skill, effort and
responsibility, under similar conditions, should be
paid similar salaries. This rule applies to the School, its
international character notwithstanding.
The School contends that petitioner has not adduced
evidence that local-hires perform work equal to that
of foreign hires. The Court finds this argument a little
cavalier. If an employer accords employees the same
position and rank, the presumption is that these
employees perform equal work. This presumption is
borne by logic and human experience. If the employer
pays one employee less than the rest, it is not for that
employee to explain why he receives less or why the
others receive more. That would be adding insult to
injury. The employer in this case has failed to
discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or
effectively than the local-hires. Both groups have
similar functions and responsibilities, which they
perform under similar working conditions.
Moreover, the School cannot invoke the need to
entice foreign-hires to leave their domicile to
rationalize the distinction in salary rates without
violating the principle of equal work for equal pay.
While we recognize the need of the School to attract
foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-
hires perform the same services as foreign-hires and
they ought to be paid the same salaries as the latter.
For the same reason, the dislocation factor and the
foreign-hires limited tenure also cannot serve as valid
bases for the distinction in salary rates. The
dislocation factor and limited tenure affecting foreign-
hires are adequately compensated by certain benefits
accorded them which are not enjoyed by local-hires,
such as housing, transportation, shipping costs, taxes
and home leave travel allowances.
3. We agree, however, that foreign-hires do not
belong to the same bargaining unit as the local-hires.
A bargaining unit is a group of employees of a given
employer, comprised of all or less than all of the
entire body of employees, consistent with equity to
the employer, indicate to be the best suited to serve
the reciprocal rights and duties of the parties under
the collective bargaining provisions of the law.29 The
factors in determining the appropriate collective
bargaining unit are (1) the will of the employees
(Globe Doctrine); (2) affinity and unity of the
employees interest, such as substantial similarity of
work and duties, or similarity of compensation and
working conditions (Substantial Mutual Interests
Rule); (3) prior collective bargaining history; and (4)
similarity of employment status.30 The basic test of
an asserted bargaining units acceptability is whether
or not it is fundamentally the combination which will
best assure to all employees the exercise of their
collective bargaining rights.31
It does not appear that foreign-hires have indicated
their intention to be grouped together with local-hires
for purposes of collective bargaining. The collective
bargaining history in the School also shows that these
groups were always treated separately. Foreign-hires
have limited tenure; local-hires enjoy security of
tenure. Although foreign-hires perform similar
functions under the same working conditions as the
local-hires, foreign-hires are accorded certain benefits
not granted to local-hires. These benefits, such as
housing, transportation, shipping costs, taxes, and
home leave travel allowance, are reasonably related
to their status as foreign-hires, and justify the
exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires
would not assure either group the exercise of their
respective collective bargaining rights.
SC RULING: WHEREFORE, the petition is GIVEN DUE
COURSE. The petition is hereby GRANTED IN PART.
The Orders of the Secretary of Labor and Employment
dated June 10, 1996 and March 19, 1997, are hereby
REVERSED and SET ASIDE insofar as they uphold the
practice of respondent School of according foreign-
hires higher salaries than local-hires.
d. fixing minimum wage
51. Ilaw at Buklod ng Manggagawa vs NLRC
FACTS: The controversy at bar had its origin in the
wage distortions affecting the employees of
respondent San Miguel Corporation allegedly caused
by Republic Act No. 6727, otherwise known as the
Wage Rationalization Act. Upon the effectivity of the
Act on June 5, 1989, the union known as Ilaw at
Buklod Ng Manggagawa (IBM)said to represent
4,500 employees of San Miguel Corporation, more or
less, working at the various plants, offices, and
warehouses located at the National Capital Region
presented to the company a demand for correction
of the significant distortion in x x (the workers)
wages.But the Union claims that that demand was
ignored:1
The x x COMPANY ignored said demand by offering a
measly across-the-board wage increase of P7.00 per
day, per employee, as against the proposal of the
UNION of P25.00 per day, per employee. Later, the
UNION reduced its proposal to P15.00 per day, per
employee by way of amicable settlement.
When the x x COMPANY rejected the reduced
proposal of the UNION the members thereof, on their
29
own accord, refused to render overtime services,
most especially at the Beer Bottling Plants at Polo,
starting October 16, 1989. In other words, they
would adopt the eight-hour work shift in the
meantime pending correction by management of the
wage distortion. Because of the eight-hour work shift
adopted by the Union, SMC incurred substantial
losses.
Thereafter SMC filed with the Arbitration Branch of
the NLRC a complaint against the Union and its
members to declare the strike or slowdown illegal
and to terminate the employment of the union
officers and shop stewards. The NLRC issued a TRO
directing the union to cease and desist from
concerted activities. The union filed a petition for
certiorari and prohibition. The issue, among others,
raised by the Union is the application of the eight-
hour labor law, that is may an employer force an
employee to work everyday beyond the eight hours a
day?
1. Was the refusal by SMC to comply with the
demands of the Union for the correction of
the wage distortion justifies the coordinated
reduction by the Unions members of the
work time?
NO. In the particular instance of distortions of the
wage structure within an establishment resulting
from the application of any prescribed wage increase
by virtue of a law or wage order, Section 3 of
Republic Act No. 6727 prescribes a specific, detailed
and comprehensive procedure for the correction
thereof, thereby implicitly excluding strikes or
lockouts or other concerted activities as modes of
settlement of the issue. The provision11 states that
x x the employer and the union shall negotiate to
correct the distortions. Any dispute arising from wage
distortions shall be resolved through the grievance
procedure under their collective bargaining
agreement and, if it remains unresolved, through
voluntary arbitration. Unless otherwise agreed by the
parties in writing, such dispute shall be decided by the
voluntary arbitrator or panel of voluntary arbitrators
within ten (10) calendar days from the time said
dispute was referred to voluntary arbitration.
In cases where there are no collective agreements or
recognized labor unions, the employers and workers
shall endeavor to correct such distortions. Any dispute
arising therefrom shall be settled through the
National Conciliation and Mediation Board and, if it
remains unresolved after ten (10) calendar days of
conciliation, shall be referred to the appropriate
branch of the National Labor Relations Commission
(NLRC). It shall be mandatory for the NLRC to conduct
continuous hearings and decide the dispute within
twenty (20) calendar days from the time said dispute
is submitted for compulsory arbitration.
Moreover, the collective bargaining agreement
between the SMC and the Union, relevant provisions
of which are quoted by the former without the latters
demurring to the accuracy of the quotation,14 also
prescribes a similar eschewal of strikes or other
similar or related concerted activities as a mode of
resolving disputes or controversies, generally, said
agreement clearly stating that settlement of all
disputes, disagreements or controversies of any kind
should be achieved by the stipulated grievance
procedure and ultimately by arbitration.
54. Employers Confederation of the Philippines vs
NWPC
FACTS: The Employers Confederation of the
Philippines (ECOP) is questioning the validity of Wage
Order No. NCR-01-A dated October 23, 1990 of the
Regional Tripartite Wages and Productivity Board,
National Capital Region, promulgated pursuant to the
authority of Republic Act No. 6727, Aside from
providing new wage rates,1 the Wage Rationalization
Act also provides, among other things, for various
Regional Tripartite Wages and Productivity Boards in
charge of prescribing minimum wage rates for all
workers in the various regions,2 and for a National
Wages and Productivity Commission to review, among
other functions, wage levels determined by the
boards.3
On October 15, 1990, the Regional Board of the NCR
issued Wage Order No. NCR-01, increasing the
minimum wage by P17.00 daily in the NCR..5 ECOP
opposed. On October 23, 1990, the Board issued
Wage Order No. NCR01-A, amending Wage Order No.
NCR-01, granting all workers and employees in the
private sector in the NCR already receiving wages
above the statutory minimum wage rates up to (P1
25.00) per day shall also receive an increase of
(P17.00) per day.
ECOP appealed to the NWPC. On November 6, 1990,
the Commission promulgated an Order, dismissing.
the appeal for lack of merit. On November 14, 1990,
the Commission denied.reconsideration. The Orders
of the Commission (as well as Wage Order No. NCR-
01-A) are the subject of this petition, in which ECOP
assails the boards grant of an across-the-board
wage increase to workers already being paid more
than existing minimum wage rates (up to P125.00 a
day) as an alleged excess of authority, and alleges
that under the Republic Act No. 6727, the boards may
only prescribe minimum wages, not determine
salary ceilings/' ECOP likewise claims that Republic
Act No. 6727 is meant to promote collective
bargaining as the primary mode of settling wages, and
in its opinion, the boards can not preempt collective
bargaining agreements by establishing ceilings.
ECOP insists, in its reply, that wage-fixing is a
legislative function, and Republic Act No. 6727
delegated to the regional boards no more than the
power to grant minimum wage adjustments"7 and in
the absence of clear statutory authority,"8 the boards
may no more than adjust floor wages."9
1. What are the methods in the determination
of wages?
30
Historically, legislation involving the adjustment of the Commission correctly upheld the Regional Board of
minimum wage made use of two methods. The first the National Capital Region.
method involves the fixing of determinate amount 3. Does RA 6727 intend to deregulate the
that would be added to the prevailing statutory relation between labor and capital?
minimum wage. The other involves the salary-ceiling
No. The Court does not think that the law intended to
method whereby the wage adjustment is applied to
deregulate the relation between labor and capital for
employees receiving a certain denominated salary
several reasons: (1) The Constitution calls upon the
ceiling. The first method was adopted in the earlier
State to protect the rights of workers and promote
wage orders, while the latter method was used in R.A.
their welfare;15 (2) the Constitution also makes it a
Nos. 6640 and 6727. Prior to this, the salary-ceiling
duty of the State to intervene when the common
method was also used in no less than eleven issuances
goal so demands in regulating property and property
mandating the grant of cost-of-living allowances (P.D.
relations;16 (3) the Charter urges Congress to give
Nos. 525, 1123, 1614, 1634, 1678, 1713 and Wage
priority to the enactment of measures, among other
Order Nos. 1, 2, 3, 5 and 6). The shift from the first
things, to diffuse the wealth of the nation and to
method to the second method was brought about by
regulate the use of property;17 (4) the Charter
labor disputes arising from wage distortions, a
recognizes the just share of labor in the fruits of
consequence of the implementation of the said wage
production;"18 (5) under the Labor Code, the State
orders. Apparently, the wage order provisions that
shall regulate the relations between labor and
wage distortions shall be resolved through the
management;19 (6) under Republic Act No. 6727
grievance procedure was perceived by legislators as
itself, the State is interested in seeing that workers
ineffective in checking industrial unrest resulting from
receive fair and equitable wages;20 and (7) the
wage order implementations. With the establishment
Constitution is primarily a document of social justice,
of the second method as a practice in minimum wage
and although it has recognized the importance of the
fixing, wage distortion disputes were minimized.
private sector,21 it has not embraced fully the
As the Commission noted, the increasing trend is concept of laissez faire22 or otherwise, relied on pure
toward the second mode, the salary-cap method, market forces to govern the economy; We can not
which has reduced disputes arising from wage give to the Act a meaning or intent that will conflict
distortions (brought about, apparently, by the floor- with these basic principles.
wage method). Of course, disputes are appropriate
It is the Courts thinking, reached after the Courts
subjects of collective bargaining and grievance
own study of the Act, that the Act is meant to
procedures, but as the Commission observed and as
rationalize wages;that is, by having permanent boards
we are ourselves agreed, bargaining has helped very
to decide wages rather than leaving wage
little in correcting wage distortions. Precisely,
determination to Congress year after year and law
Republic Act No. 6727 was intended to rationalize
after law. The Court is not of course saying that the
wages, first, by providing for full-time boards to police
Act is an effort of Congress to pass the buck, or worse,
wages round-the-clock, and second, by giving the
to -abdicate its duty, but simply, to leave the question
boards enough powers to achieve this objective. The
of wages to the expertise of experts. As Justice Cruz
Court is of the opinion that Congress meant the
observed, "[w]ith the proliferation of specialized
boards to be creative in resolving ;the annual question
activities and their attendant peculiar problems, the
of wages without labor and management knocking on
national legislature has found it more necessary to
the legislatures door at every turn. The Courts
entrust to administrative agencies the power of
opinion is that if Republic No. 6727 intended the
subordinate legislation as it is called."23
boards alone to set floor wages, the Act would have
no need for a board but an accountant to keep track
of the latest consumer price index, or better. would 55. BANKARD EMPLOYEES UNION v. NLRC
have Congress done it as the need arises, as the
legislature, prior to the Act, has done so for years. The Facts:
fact of the matter is that the Act sought a thinking
Bankard, Inc. classifies its employees by levels
group of men and women bound by statutory
as Level I, Level II, Level III, Level IV, and Level V. On
standards.
May 28, 1993, its Board of Directors approved a New
2. Did the Regional Board of the NCR, in Salary Scale, made retroactive to April 1, 1993, for
decreeing an across-the-board hike, the purpose of making its hiring rate competitive in
performed an unlawful act of legislation? the industrys labor market. The New Salary Scale
NO. It is true that wage fixing, like rate-fixing, increased the hiring rates of new employees which
constitutes an act Congress;13 it is also true, however, resulted to the following:
that Congress may delegate the power to fix rates14 Levels I and V by one thousand pesos (P1,000.00), and
provided that, as in all delegations cases, Congress Levels II, III and IV by nine hundred pesos (P900.00)
leaves sufficient standards. As this Court has
Accordingly, the salaries of employees who
indicated, it is impressed that the above-quoted
fell below the new minimum rates were also adjusted
standards are sufficient, and in the light of the floor-
to reach such rates under their levels. Bankards move
wage methods failure, the Court believes that the
drew the Bankard Employees Union-WATU
(petitioner), the duly certified exclusive bargaining
31
agent of the regular rank and file employees of
Bankard, to press for the increase in the salary of its
old, regular employees. Bankard took the position,
however, that there was no obligation on the part of
the management to grant to all its employees the
same increase in an across-the-board manner.As the
continued request of petitioner for increase in the
wages and salaries of Bankards regular employees
remained unheeded, it filed a Notice of Strike on
August 26, 1993 on the ground of discrimination and
other acts of Unfair Labor Practice (ULP). The Notice
of Strike was treated as a Preventive Mediation
Case based on a finding that the issues therein were
not strikeable.
The Second Division of the NLRC, by Order of
May 31, 1995, finding no wage distortion, dismissed
the case for lack of merit. Petitioners motion for
reconsideration of the dismissal of the case was, by
Resolution of July 28, 1995, denied. Petitioner
thereupon filed a petition for certiorari before this
Court.
Issue: Did the unilateral adoption of an upgraded
salary scale that increased the hiring rates of new
employees without increasing the salary rates of old
employees result in a wage distortion?
Ruling: No.
Upon the enactment of R.A. No. 6727 (WAGE
RATIONALIZATION ACT, amending, among others,
Article 124 of the Labor Code) on June 9, 1989, the
term wage distortion was explicitly defined as a
situation where an increase in prescribed wage rates
results in the elimination or severe contraction of
intentional quantitative differences in wage or salary
rates between and among employee groups in an
establishment as to effectively obliterate the
distinctions embodied in such wage structure based
on skills, length of service, or other logical bases of
differentiation.
In Prubankers Association v. Prudential Bank
and Trust Company laid down the four elements of
wage distortion:
(1.) An existing hierarchy of positions with
corresponding salary rates;
(2) A significant change in the salary rate of a lower
pay class without a concomitant increase in the salary
rate of a higher one;
(3) The elimination of the distinction between the two
levels; and
(4) The existence of the distortion in the same region
of the country.
Normally, a company has a wage structure or
method of determining the wages of its employees. In
a problem dealing with wage distortion, the basic
assumption is that there exists a grouping or
classification of employees that establishes
distinctions among them on some relevant or
legitimate bases. Involved in the classification of
employees are various factors such as the degrees of
responsibility, the skills and knowledge required, the
complexity of the job, or other logical basis of
differentiation. The differing wage rate for each of the
existing classes of employees reflects this
classification. Petitioner maintains that for purposes
of wage distortion, the classification is not one based
on levels or ranks but on two groups of
employees, the newly hired and the old, in each and
every level, and not between and among the different
levels or ranks in the salary structure.
The issue of whether wage distortion exists
being a question of fact that is within the jurisdiction
of quasi-judicial tribunals, and it being a basic rule
that findings of facts of quasi-judicial agencies, like the
NLRC, are generally accorded not only respect but at
times even finality if they are supported by substantial
evidence, as are the findings in the case at bar, they
must be respected. For these agencies have acquired
expertise, their jurisdiction being confined to specific
matters.
It is thus clear that there is no hierarchy of
positions between the newly hired and regular
employees of Bankard, hence, the first element of
wage distortion provided in Prubankers is wanting.
While seniority may be a factor in determining the
wages of employees, it cannot be made the sole basis
in cases where the nature of their work differs.
Moreover, for purposes of determining the existence
of wage distortion, employees cannot create their
own independent classification and use it as a basis to
demand an across-the-board increase in salary.
56. Pag Asa Steel Works vs CA
(2006) G.R. 166647
Facts: Petitioner is engaged in the manufacture of
steel bars and wire rods while Pag-Asa Steel Workers
Union is the duly authorized bargaining agent of the
rank-and-file employees. RTWPB of NCR issued a
wage order which provided for a P 13.00 increase of
the salaries receiving minimum wages consequent
increase in the minimum wage rate to P198.00 per
day. The Petitioner and the union negotiated on the
increase. Petitioner forwarded a letter to the union
with the list of adjustments involving rank and file
employees.
In September 1999, the petitioner and union
entered into a collective bargaining agreement where
it provided wage adjustments namely P15, P25, P30
for three succeeding year. On the first year, the
increase provided were followed until RTWPB issued
another wage order where it provided for a P25.50
per day increase in the salary of employees receiving
the minimum wage and increased the minimum wage
to P223.50 per day. Petitioner paid the P25.50 per day
increase to all of its rank-and-file employees.
On November 2000, Wage Order No. NCR-08
was issued where it provided the increase of P26.50
per day making the minimum P250.00 per day. The
union president asked that the wage order be
implemented. Petitioner rejected the request,
32
claiming that since none of the employees were increases. Respondents isolated act could hardly be
receiving a daily salary rate lower than P250.00 and classified as a "company practice" or company usage
there was no wage distortion, it was not obliged to that may be considered an enforceable obligation.
grant the wage increase.
The Union elevated the matter to the National 57. Philippine Hoteliers, Inc. v. NLRC
Conciliation and Mediation Board. When the parties
G.R. No. 181972., August 25, 2009
failed to settle, they agreed to refer the case to
voluntary arbitration where it favored the position of
the company that there was no company practice of
granting a wage order increase to employees across- FACTS:
the-board, and that there is no provision in the CBA
that would oblige petitioner to grant the wage
Wage Order (WO) No. 9, approved by the
increase under Wage Order No. NCR08 across-the-
Regional Tripartite Wages and Productivity Board
board, and dismissed the complaint. The matter was
(RTWPB) of the NCR, took effect on 5 November 2001.
elevated to CA under Rule 43 of the Rules of Court
It grants P30.00 ECOLA to particular employees and
where it favored the respondents.
workers of all private sectors, identified as follows in
Section 1 thereof:
Issue: WON the company was obliged to grant the Amount of
wage increase under the Wage Order #8 as a matter ECOLA Effectivity
of practice.
P15.005
November 2001
Held: Company is not obliged to grant the wage P15.001
increase under Wage Order No. NCR-08 either by February 2002
virtue of the CBA, or as a matter of company practice.
Respondent Union, through its President,
It is submitted that employers unless exempt are
Reynaldo C. Rasing (Rasing), sent a letter to Director
mandated to implement the said wage order but
Alex Maraan (Dir. Maraan) of the DOLE-National
limited to those entitled thereto. A perusal of the
Capital Region (DOLE-NCR), reporting the non-
record shows that the lowest paid employee before
compliance of Dusit Hotel with WO No. 9, while there
the implementation of Wage Order #8 is P250.00/day
was an on-going compulsory arbitration before the
and none was receiving below P223.50 minimum. This
NLRC due to a bargaining deadlock between the
could only mean that the union can no longer demand
Union and Dusit Hotel. Acting on Rasings letters, the
for any wage distortion adjustment. The provision of
DOLE-NCR sent Labor Standards Officer Estrellita
wage order #8 and its implementing rules are very
Natividad (LSO Natividad) to conduct an inspection of
clear as to who are entitled to the P26.50/day
Dusit Hotel premises. LSO Natividads Inspection
increase, i.e., "private sector workers and employees
Results Report stated, in sum, that employees are
in the National Capital Region receiving the prescribed
receiving more than P290.00 average daily rate which
daily minimum wage rate of P223.50 shall receive an
is exempted in the compliance of Wage Order NCR-09
increase of P26.50 per day," and since the lowest paid
and that there is an ongoing negotiation now
is P250.00/day the company is not obliged to adjust
forwarded to the NLRC for compulsory arbitration.
the wages of the workers.
Rasing requested for another inspection; accordingly
The provision in the CBA that "Any Wage the DOLE-NCR issued a Notice of Inspection Result
Order to be implemented by the Regional Tripartite directing Dusit Hotel to effect restitution and/or
Wage and Productivity Board shall be in addition to correction of the noted violation within five days from
the wage increase adverted above" cannot be receipt of the Notice, and to submit any question on
interpreted in support of an across-the-board the findings of the Labor Inspector within the same
increase. Moreover, to ripen into a company practice period, otherwise, an order of compliance would be
that is demandable as a matter of right, the giving of issued.
the increase should not be by reason of a strict legal
In the meantime, the NLRC rendered a
or contractual obligation, but by reason of an act of
Decision dated 9 October 2002 in NLRC-NCR-CC No.
liberality on the part of the employer. Hence, even if
000215-02the compulsory arbitration involving the
the company continuously grants a wage increase as
Collective Bargaining Agreement (CBA) deadlock
mandated by a wage order or pursuant to a CBA, the
between Dusit Hotel and the Uniongranting the
same would not automatically ripen into a company
hotel employees the following wage increases, in
practice. The only instance when petitioner
accord with the CBA:
admittedly implemented a wage order despite the
fact that the employees were not receiving salaries Effective January 1, 2001 P500.00/month
below the minimum wage was under Wage Order No. Effective January 1, 2002 P550.00/month
NCR-07. Petitioner, however, explains that it did so Effective January 1, 2003 P600.00/month
because it was agreed upon in the CBA that should a
Thereafter, DOLE-NCR, through Dir. Maraan,
wage increase be ordered within six months from its
issued the Order directing Dusit Hotel to pay 144 of its
signing, petitioner would give the increase to the
employees the total amount corresponding to their
employees in addition to the CBA-mandated
33
unpaid ECOLA under WO No. 9; plus the penalty of
double indemnity, pursuant to Sec. 12 of RA no. 6727,
as amended by RA 8188.
Dusit Hotel filed a Motion for Reconsideration
of the DOLE-NCR Order arguing that the NLRC
decision resolving the bargaining deadlock between
Dusit Hotel and the Union, and awarding salary
increases under the CBA to hotel employees
retroactive to 1 January 2001, already rendered the
DOLE-NCR Order moot and academic. With the
increase in the salaries of the hotel employees
ordered by the NLRC Decision, along with the hotel
employees share in the service charge, the 144 hotel
employees, covered by the DOLE-NCR Order would
already be receiving salaries beyond the coverage of
WO No. 9. The wage increase granted by the NLRC in
the latters Decision retroacted to 1 January 2001. The
said wage increase, taken together with the hotel
employees share in the service charges of Dusit
Hotel, already constituted compliance with the WO
No. 9.
ISSUE: Whether the 144 hotel employees were still
entitled to ECOLA granted by WO No. 9 despite the
increases in their salaries, retroactive to 1 January
2001, ordered by NLRC in the latters Decision.
RULING:
No. Section 1 of WO No. 9 very plainly stated that
only private sector workers and employees in the NCR
receiving daily wage rates of P250.00 to P290.00 shall
be entitled to ECOLA. Necessarily, private sector
workers and employees receiving daily wages of more
than P290.00 were no longer entitled to ECOLA. The
ECOLA was to be implemented in two tranches:
P15.00/day beginning 5 November 2001; and the full
amount of P30.00/day beginning 1 February 2002.
WO No. 9 took effect on 5 November 2001. The
Decision rendered by the NLRC on 9 October 2002
ordered Dusit Hotel to grant its employees salary
increases retroactive to 1 January 2001 and 1 January
2002. In determining which of its employees were
entitled to ECOLA, Dusit Hotel used as bases the daily
salaries of its employees, inclusive of the retroactive
salary increases. The Union protested and insisted
that the bases for the determination of entitlement to
ECOLA should be the hotel employees daily salaries,
exclusive of the retroactive salary increases.
According to the Union, Dusit Hotel cannot credit the
salary increases as compliance with WO No. 9. Much
of the confusion in this case arises from the insistence
of the Union to apply Section 131 of WO No. 9. The
1
Section 13. Wage increases/allowances granted by an
employer in an organized establishment with three (3)
months prior to the effectivity of this Order shall be credited
as compliance with the prescribed increase set forth herein,
provided the corresponding bargaining agreement provision
allowing creditability exists. In the absence of such an
agreement or provision in the CBA, any increase granted by
the employer shall not be credited as compliance with the
increase prescribed in this Order.In unorganized
establishments, wage increases/allowances granted by the
reliance of the Union on Section 13 of WO No. 9 in
this case is misplaced. The position of Dusit Hotel is
merely that the salary increases should be taken into
account in determining the employees entitlement to
ECOLA. The retroactive increases could raise the hotel
employees daily salary rates above P290.00,
consequently, placing said employees beyond the
coverage of WO No. 9. Evidently, Section 13 of WO
No. 9 on creditability is irrelevant and inapplicable
herein.
The Court agrees with Dusit Hotel that the increased
salaries of the employees should be used as bases for
determining whether they were entitled to ECOLA
under WO No. 9. The very fact that the NLRC decreed
that the salary increases of the Dusit Hotel employees
shall be retroactive to 1 January 2001 and 1 January
2002, means that said employees were already
supposed to receive the said salary increases
beginning on these dates. The increased salaries were
the rightful salaries of the hotel employees by 1
January 2001, then again by 1 January 2002. Although
belatedly paid, the hotel employees still received their
salary increases. It is only fair and just, therefore, that
in determining entitlement of the hotel employees to
ECOLA, their increased salaries by 1 January 2001 and
1 January 2002 shall be made the bases. There is no
logic in recognizing the salary increases for one
purpose (i.e., to recover the unpaid amounts thereof)
but not for the other (i.e., to determine entitlement to
ECOLA). For the Court to rule otherwise would be to
sanction unjust enrichment on the part of the hotel
employees, who would be receiving increases in their
salaries, which would place them beyond the
coverage of Section 1 of WO No. 9, yet still be paid
ECOLA under the very same provision.
The NLRC, in its Decision dated 9 October 2002,
directed Dusit Hotel to increase the salaries of its
employees by P500.00 per month, retroactive to 1
January 2001. After applying the said salary increase,
only 82 hotel employees29 would have had daily
salary rates falling within the range of P250.00 to
P290.00. Thus, upon the effectivity of WO No. 9 on 5
November 2001, only the said 82 employees were
entitled to receive the first tranch of ECOLA,
equivalent to P15.00 per day.
The NLRC Decision dated 9 October 2002 also ordered
Dusit Hotel to effect a second round of increase in its
employees salaries, equivalent to P550.00 per month,
retroactive to 1 January 2002. As a result of this
increase, the daily salary rates of all hotel employees
were already above P290.00. Consequently, by 1
January 2002, no more hotel employee was qualified
to receive ECOLA.
employer within three (3) months prior to the effectivity of
this Order shall be credited as compliance therewith.In case
the increases given are less than the prescribed adjustment,
the employer shall pay the difference. Such increases shall
not include anniversary increases, merit wage increases and
those resulting from the regularization or promotion of
employees
34
Given that 82 hotel employees were entitled to
receive the first tranch of ECOLA from 5 November
2001 to 31 December 2001, the Court must address
the assertion of Dusit Hotel that the receipt by said
hotel employees of their shares in the service charges
already constituted substantial compliance with the
prescribed payment of ECOLA under WO No. 9. The
Court rules in the negative. It must be noted that the
hotel employees have a right to their share in the
service charges collected by Dusit Hotel, pursuant to
Article 96 on Service Charges of the Labor Code. Since
Dusit Hotel is explicitly mandated by the afore-quoted
statutory provision to pay its employees and
management their respective shares in the service
charges collected, the hotel cannot claim that
payment thereof to its 82 employees constitute
substantial compliance with the payment of ECOLA
under WO No. 9. Undoubtedly, the hotel employees
right to their shares in the service charges collected by
Dusit Hotel is distinct and separate from their right to
ECOLA; gratification by the hotel of one does not
result in the satisfaction of the other.
The Court holds that the retroactive salary increases
should be taken into account in the determination of
which hotel employees were entitled to ECOLA under
WO No. 9. After applying the salary increases
retroactive to 1 January 2001, 82 hotel employees still
had daily salary rates between P250.00 and P290.00,
thus, entitling them to receive the first tranch of
ECOLA, equivalent to P15.00 per day, beginning 5
November 2001, the date of effectivity of WO No. 9,
until 31 December 2001. Following the second round
of salary increases retroactive to 1 January 2002, all
the hotel employees were already receiving daily
salary rates above P290.00, hence, leaving no one
qualified to receive ECOLA. Receipt by the 82 hotel
employees of their shares from the service charges
collected by Dusit Hotel shall not be deemed payment
of their ECOLA from 5 November 2001 to 31
December 2001.
58. Joy Brothers v. NWPC
FACTS:
Wage Order No. NCR-03, providing for a twenty-seven
peso wage increase for all private sector workers and
employees in the National Capital Region receiving
one hundred fifty-four pesos (P154.00) and below
daily, was approved November 29, 1993.
On February 1994, petitioner applied for exemption
from said wage order on the ground that it was a
distressed establishment. The RTWPB denied
petitioner's application for exemption after holding
that the corporation accumulated profits amounting
to P38,381.80 for the period under review.
Petitioner's motion for reconsideration was likewise
denied by the Wages and Productivity Board on
January 5, 1995. On appeal to the National Wages and
Productivity Commission, petitioner was again denied
relief.
More specifically, petitioner contends that the interim
period to be reckoned with is from January 1, 1993 to
December 15, 1993 and not merely up to September
30, 1993 as held by respondent Commission.
Significantly, the period up to December 31, 1993 will
reflect losses in petitioner corporation's books, but
not if the covered interim period is only up to
September 30, 1993.
ISSUE:
Is the petitioner Company a distressed establishment,
therefore, entitled to the exemption of the wage
order?
RULING:
The petitioner company is not entitled to exemption
of the wage order since it is not a distressed
establishment.
Under Section 5 of Wage Order No. NCR-03,
distressed firms may be exempted from the provisions
of the Order upon application with and due
determination of the Board. NWPC Guidelines No. 01,
Series of 1992, providing for the Revised Guidelines
on Exemption indicate the criteria to qualify for
exemption as follows:
For Distressed Establishments: In the case of a
stock corporation, partnership, single
proprietorship, non-stock, non-profit
organization or cooperative engaged in a
business activity or charging fees for its
services When accumulated losses for the
last 2 full accounting periods and interim
period, if any, immediately preceding the
effectivity of the Order have impaired by at
least 25 percent the: Paid-up capital at the
end of the last full accounting period
preceding the effectivity of the Order, in the
case of corporations: Total invested capital at
the beginning of the last full accounting
period preceding the effectivity of the Order
in the case of partnerships and single
proprietorships. Establishments operating for
less than two (2) years may be granted
exemption when accumulated losses for said
period have impaired by at least 25% the
paid-up capital or total invested capital, as the
case may be.
Section 8, paragraph a, of the Rules Implementing
Wage Order No. NCR-03 provides that exemption
from compliance with the wage increase may be
granted to distressed establishments whose paid-up
capital has been impaired by at least twenty-five
percent (25%) or which registers capital deficiency or
negative net worth.
The Guidelines expressly require interim quarterly
financial statements for the period immediately
preceding December 16, 1993. The last two full
accounting periods here are 1991 and 1992, for which
35
years petitioner incurred net profits of P53,607.00
and P60,188.00, respectively.
59. C. PLANAS COMMERCIAL v. NLRC
FACTS:
C. PLANAS COMMERCIAL, a business entity engaged in
merchandising and retailing of plastic products and
fruits, was charged by respondent Ramil de los Reyes
with illegal dismissal and non-payment of basic wages
and certain monetary benefits.1 De los Reyes claimed
that he started working as deliveryman of PLANAS in
August 1988 and later tasked with selling fruits until 4
June 1993 when he was allegedly dismissed.
On 15 April 1994 the Labor Arbiter found petitioners
C. Planas Commercial (PLANAS hereon) and Marcial
Cohu, its manager, to have illegally dismissed Ramil de
los Reyes. Consequently, petitioners were ordered to
reinstate him with back wages and to pay him salary
differentials, 13th month pay and service incentive
pay.2
On appeal public respondent National Labor Relations
Commission reversed and set aside the decision of the
Labor Arbiter which declared the dismissal of de los
Reyes illegal as well as the grant to him of back wages
and other monetary benefits, except salary
differentials in the amount of P36,342.80 which NLRC
sustained.3 Since their motion for reconsideration
was denied,4 petitioners filed on 18 December 1995
the instant petition for certiorari with prayer for
preliminary injunction.5 They impute grave abuse of
discretion amounting to lack or excess of jurisdiction
on the part of NLRC for sustaining the award of salary
differentials despite the fact that private respondent
Ramil de los Reyes was then receiving a daily wage
higher than the mandated minimum wage for retail
establishments employing less than ten (10) workers,
like petitioner PLANAS.
ISSUE: Whether or not Planas is liable to de los Reyes
for payment of salary differentials.
RULING:
Petitioners invoke the exemption provided by law for
retail establishments which employ not more than ten
(10) workers to justify their non-liability for the salary
differentials in question. They insist that PLANAS is a
retail establishment leasing a very small and cramped
stall in the Divisoria market which cannot
accommodate more than ten (10) workers in the
conduct of its business. However, the best proof that
they could have adduced was their approved
application for exemption in accordance with
applicable guidelines issued by the Commission.
Section 4, subpar. (c) of RA 6727 categorically
provides:
Retail/service establishments regularly employing not
more than ten (10) workers may be exempted from
the applicability of this Act upon application with and
as determined by the appropriate Regional Board in
accordance with the applicable rules and regulations
issued by the Commission. Whenever an application
for exemption has been duly filed with the
appropriate Regional Board, action on any complaint
for alleged non-compliance with this Act shall be
deferred pending resolution of the application for
exemption by the appropriate Regional Board. In the
event that applications for exemptions are not
granted, employees shall receive the appropriate
compensation due them as provided for by this Act
plus interest of one percent (1%) per month
retroactive to the effectivity of this Act (emphasis
supplied).
Extant in the records is the fact that petitioners had
persistently raised the matter of their exemption from
any liability for underpayment without substantiating
it by showing compliance with the aforecited
provision of law. It bears stressing that the NLRC
affirmed the Labor Arbiters award of salary
differentials due to underpayment on the ground that
de los Reyes claim therefor was not even denied or
rebutted by petitioners.
More importantly, NLRC correctly upheld the Labor
Arbiters finding that PLANAS employed around thirty
(30) workers.32 We have every reason to believe that
petitioners need at least thirty (30) persons to
conduct their business considering that Manager
Cohu did not submit any employment record to prove
otherwise. As employer, Manager Cohu ought to be
the keeper of the employment records of all his
workers. Thus, it was well within his means to refute
any monetary claim alleged to be unpaid.33 His
inability to produce the payrolls from their files
without any satisfactory explanation can be
interpreted no less as suppression of vital evidence
adverse to PLANAS.
e. enforcement of minimum wage provisions
60. Rajah Humabon Hotel vs Trajano
(1993) G.R. 100222-23
Facts:
Subsequent to the initial pleading filed by respondent-
employees before the regional director of DOLE for
redress in regard to underpaid wages and non-
payment of benefits, petitioners were instructed to
allow the inspection of the employment records of
respondents on April 4, 1989. However, no inspection
could be done on that date on account of the picket
staged by other workers. At the re-scheduled
examination after closure of petitioners' business on
April 16, 1989, instead of presenting the payrolls and
daily time records of private respondents, petitioner
Peter Po submitted a motion to dismiss on the
supposition that the regional director has no
jurisdiction over the case because the employer-
36
employee relationship had been served as a result of
the closure of petitioners' business, apart from the
fact that each of the claims of private respondents
exceeded the jurisdictional limit of P5,000.00 pegged
by Republic Act No. 6715 or the New Labor Relations
Law.
Issue:
Who between the Regional Director of DOLE and the
Labor Arbiter has jurisdictional competence over the
complaint of private respondents?
Held:
Regional Director had no jurisdiction over the case.
Section 2 of EO No. 111, promulgated on December
24, 1986, which amended Article 128(b) of the Labor
Code gives concurrent jurisdiction to both the
Secretary of Labor (or the various regional directors)
and the labor arbiters over money claims among the
other cases mentioned by Article 217 of the Labor
Code. This provision merely confirms/reiterates the
enforcement/adjudication authority of the Regional
Director over uncontested money claims in cases
where an employer-employee relationship still exists.
However, with the enactment of Republic Act No.
6715, which took effect on March 21, 1989 or seven
days after the complaint at bar was filed on March 14,
1989, Articles 129 and 217 of the Labor Code were
amended, there is no doubt that the regional
directors can try money claims only if the following
requisites concur:
(1) the claim is presented by an employee or person
employed in domestic or household service, or
househelper under the code;
(2) the claimant, no longer being employed, does
not seek reinstatement; and
(3) the aggregate money claim of the employee or
housekeeper does not exceed five thousand pesos
(P5,000.00). Thus, the power to hear and decide
employees' claims arising from employer-employee
relations, exceeding P5,000.00 for each employee
should be left to the Labor Arbiter as the exclusive
repository of the power to hear and decide such
claims.
In the instant case, a simple examination of the labor
arbiter's impugned order dated September 25, 1989
readily shows that the aggregate claims of each of the
twenty-five employees of petitioner are above the.
amount of P5,000.00 fixed by Republic Act No. 6715.
Therefore, the regional director had no jurisdiction
over the case. Hence, the petition is granted and the
public respondent is directed to refer the workers'
money claims to the appropriate Labor Arbiter for
proper disposition.
61. National Mines v. Marcopper
Facts:
On April 1, 1996, the Department of Environment and
Natural Resources (DENR) ordered the indefinite
suspension of MARCOPPERs operations for causing
damage to the environment
NAMAWU was the exclusive bargaining
representative of the rank-and-file workers of
MARCOPPER. On April 10, 1996, it filed a complaint
with the Regional Arbitration Branch No. IV of the
NLRC against MARCOPPER for nonpayment of wages,
separation pay, damages, and attorneys fees.
NAMAWU claimed that due to the indefinite
suspension of MARCOPPERs operations, its members
were not paid the wages due them for six months
(from April 12, 1996 to October 12, 1996) under Rule
X, Book III, Section 3(b) of the Implementing Rules and
Regulations of the Labor Code.[8] It further claimed
that its members are also entitled to be paid their
separation pay pursuant to their collective bargaining
agreement with MARCOPPER and pursuant to Book
IV, Rule I, 4(b) of the Labor Codes implementing
rules.
MARCOPPER denied liability, contending that
NAMAWU had not been authorized by the individual
employees the real parties-in-interest to file the
complaint; and that the complaint should be
dismissed for lack of certification of non-forum
shopping, for the pendency of another action
between the same parties, and for lack of factual and
legal basis.
Labor Arbiter Pedro C. Ramos ruled in NAMAWUs
favor in a decision dated March 14, 2000.[10] He
ordered MARCOPPER, John Loney and Steve Reed
(President and General Manager of the company,
respectively) to pay jointly and severally the rank-and-
file workers represented by NAMAWU and other
employees similarly situated, the following claims:
their wages for the suspension of operation for the
period April 12, 1996 to October 12, 1996; separation
pay; and attorneys fees. The wages and separation
pay amounted to forty-four million six hundred
twenty-two thousand eight hundred seventy-one and
02/100 pesos (P44,622,871.02), while the attorneys
fees amounted to four million four hundred sixty-two
thousand two hundred eighty-seven and 10/100
pesos (P4,462,287.10).
The NLRC dismissed MARCOPPERs appeal in a
Resolution dated February 28, 2002 for its failure to
post the appeal bond required by Article 223 of the
Labor Code.
The NLRC subsequently denied MARCOPPERs motion
for reconsideration.[11] MARCOPPER thus sought
relief from the CA through a petition for certiorari
under Rule 65 of the Rules of Court.
MARCOPPER reiterated that petitioner NAMAWUs
members were dismissed from employment on March
7, 1995 for their participation in a strike declared
37
illegal by the NLRC.[26] The dismissal was
subsequently affirmed by the CA in CA-G.R. SP No.
51059.[27] The CA decision in turn was affirmed by
this Court in its Resolution of July 12, 2000 in G.R. No.
143282, which Resolution was entered in the Book of
Entries of Judgment on December 27, 2000.
It insists that the strike case also considered the
separation pay of the NAMAWU members, as
expressly recognized in the NLRC decision.[29] It
stresses, too, that since the entitlement of NAMAWU
members to their money claims had already been
resolved and denied in a final and executory
judgment, it was unjust to declare the company liable
for money claims from April 12, 1996 to October 12,
1996 a period when the NAMAWU members were
no longer MARCOPPER employees.
MARCOPPER points out that it did not deliberately fail
to post the required appeal bond. It submits that it
filed in good faith a Motion to Dispense with the Filing
of an Appeal Bond[30] for the 615 employees, and at
the same time posted a bond for three
complainants[31] Apollo V. Saet, Rogelio Regencia,
and Jose Romasanta who were not included in the
strike case. It claims that the motion is similar to a
Motion to Reduce Bond that the NLRC should have
resolved first before it dismissed the appeal.
Issue: WON the CA erred in ruling that there was no
need for MARCOPPER to post an appeal bond, and in
ordering the NLRC to give due course to
MARCOPPERs appeal?
Held:
NO.
The environmental incident referred to in this illegal
strike ruling is the same environmental incident that
gave rise to the present complaint (In Re: Dispute in
Marcopper Mining, NLRC Case No. 106-95) that
NAMAWU filed on April 10, 1996. While the NLRC had
not yet ruled on the illegal strike case when the
present environmental incident complaint was filed,
the Labor Arbiters ruling on the latter complaint
came very much later, in fact long after both the NLRC
and the CA had ruled on the illegal strike case. The
NLRC denied the motion for reconsideration of its
November 11, 1996 decision in the illegal strike case
on June 11, 1997, while the CA issued its decision on
the same case on May 28, 1999. The Labor Arbiter
issued his decision on the present environmental
incident case only on March 14, 2000. Under this
sequence of rulings, the Labor Arbiter effectively
restored in the environmental incident case the same
separation pay award that the CA struck off from the
NLRC decision in the illegal strike case. In effect, the
Labor Arbiter disregarded the CA ruling and actually
reversed it.
Similarly interesting, as respondent MARCOPPER
alleged in its submissions, is the fact that
MARCOPPERs appeal to the NLRC was filed on April
10, 2000. The appeal was supported by a Motion to
Dispense with the Filing of an Appeal Bond with
respect to 615 NAMAWU members who were former
MARCOPPER employees who had been dismissed for
participation in an illegal strike. The NLRC did not
directly resolve MARCOPPERs motion but simply
dismissed the appeal two years later (or on February
28, 2002). In relation with this dismissal date, we find
it significant that the CA issued its decision declaring
the NAMAWU strike illegal and decreeing the
dismissal of NAMAWU officers and members as early
as May 28, 1999 in CA G.R. SP No. 51059. Our own
Decision on the illegal strike case came on July 12,
2000 and was entered in the Book of Entries of
Judgment on December 27, 2000.[33] Thus, the NLRC
was already burdened with knowledge of the final and
executory decision of no less than this Court
(confirming the March 7, 1995 dismissal of the striking
NAMAWU members) when the NLRC issued its
decision in the present case dismissing the
MARCOPPER appeal for failure to file an appeal bond
for the already dismissed workers. Thus, like the
Labor Arbiter below, the NLRC in effect sought to
negate what a higher tribunal, this Court no less, had
already affirmed and confirmed, i.e., the termination
of employment of 615 NAMAWU members.
In the context of the NLRC appeal bond that is directly
at issue, MARCOPPER had every reason to claim in its
April 10, 2000 appeal to the NLRC that it should be
excused from filing an appeal bond with respect to
the NAMAWU members who were no longer
company employees. The CA decision decreeing the
termination of employment of those involved in the
illegal strike case had already been issued at that
time. We subsequently ruled on the same issue
during the time the environmental incident case was
pending before the NLRC. Thus, when the NLRC
dismissed MARCOPPERs appeal for failure to file the
requisite appeal bond corresponding to the 615
NAMAWU members, the termination of employment
of these NAMAWU members was already a settled
matter that the NLRC was in no position to
disregard. In this light, the CA was correct in reversing
the dismissal of MARCOPPERs appeal for failure to
file an appeal bond. Pursued to its logical end, the CA
conclusions should lead to the dismissal of
NAMAWUs complaint with
respect to its 615 previously dismissed members.
62. PEOPLES BROADCASTING v. SECRETARY OF
LABOR
Facts
This is an instant petition for certiorari under Rule 65.
Respondent Juezan filed a complaint against Peoples
Broadcasting Service, Inc. (Bombo Radyo Phils., Inc.)
for illegal deduction, non-payment of service incentive
leave, 13th month pay, premium pay for holiday and
rest day and illegal diminution of benefits, delayed
payment of wages and non-coverage of SSS, PAG-IBIG
38
and Philhealth before the DOLE Regional Office No.
VII, Cebu City. As a response, the DOLE conducted a
plant level inspection. In the Inspection Report Form,
the Labor Inspector wrote under
Findings/Recommendations non-diminution of
benefits and Note: Respondent deny employer-
employee relationship with the complainant-see
Notice of Inspection results. In the Notice of
Inspection Results, the Labor Inspector noted that
according to the management representative,
complainant is a drama talent hired on a per drama
participation basis hence no employment
relationship existed between them.
Petitioner was required to rectify the violations within
5 days from receipt, to no avail. Thus, summary
investigations were conducted, where the parties
were ordered to submit their position papers.
DOLE Regional Director Sabulao ruled that respondent
is an employee of petitioner, and that the former is
entitled to his money claims amounting to
P203,726.30. Petitioner sought reconsideration of the
Order, which was denied. On appeal to the DOLE
Secretary, petitioner denied once more the existence
of employer-employee relationship. The Acting DOLE
Secretary dismissed the appeal on the ground that
petitioner did not post a cash or surety bond and
instead submitted a Deed of Assignment of Bank
Deposit.
Petitioner elevated the case to the CA. Petitioner
maintained that there is no employer-employee
relationship had ever existed between it and
respondent because it was the drama directors and
producers who paid, supervised and disciplined
respondent. It also added that the case was beyond
the jurisdiction of the DOLE and should have been
considered by the Labor Arbiter because respondents
claim exceeded P5,000.00. The CA held that petitioner
was not deprived of due process as the essence
thereof is only an opportunity to be heard, which
petitioner had when it filed a motion for
reconsideration with the DOLE Secretary. Moreover,
the latter had the power to order and enforce
compliance with labor standard laws irrespective of
the amount of individual claims because the limitation
imposed by Article 29 of the Labor Code had been
repealed by Republic Act No. 7730. Petitioner sought
reconsideration of the decision but its motion was
denied.
Issue
1. Who has jurisdiction over respondents claim
the NLRC or the DOLE Secretary?
Ruling
The NLRC has jurisdiction over the claims.
Under Art. 129 of the Labor Code, the power
of the DOLE and its duly authorized hearing officers to
hear and decide any matter involving the recovery of
wages and other monetary claims and benefits was
qualified by the proviso that the complaint not include
a claim for reinstatement, or that the aggregate
money claims not exceed P5,000.00, RA No. 7730, or
an Act Further Strengthening the Visitorial and
Enforcement Powers of the Secretary of Labor, did
away with the P5,000.00 limitation, allowing the DOLE
Secretary to exercise its visitorial and enforcement
power for claims beyond P5,000.00. The only
qualification to this expanded power of the DOLE was
only that there still be an existing employer-employee
relationship.
It is conceded that if there is no employer-
employee relationship, whether it has been
terminated or it has not existed from the start, the
DOLE has no jurisdiction. Under Article 128(b) of the
Labor Code, as amended by R.A. No. 7730, the first
sentence reads, Notwithstanding the provisions of
Articles 129 and 217 of this Code to the contrary, and
in cases where the relationship of employer-employee
still exists, the Secretary of Labor and Employment or
his duly authorized representatives shall have the
power to issue compliance orders to give effect to the
labor standards provisions of this Code and other
labor legislation based on the findings of labor
employment and enforcement officers or industrial
safety engineers made in the course of inspection. It
is clear and beyond debate that an employer-
employee relationship must exist for the exercise of
the visitorial and enforcement power of the
DOLE. The question now arises, may the DOLE make a
determination of whether or not an employer-
employee relationship exists, and if so, to what
extent?
The first portion of the question must be
answered in the affirmative. The prior decision of this
Court in the present case accepts such answer, but
places a limitation upon the power of the DOLE, that
is, the determination of the existence of an employer-
employee relationship cannot be co-extensive with
the visitorial and enforcement power of the
DOLE. But even in conceding the power of the DOLE
to determine the existence of an employer-employee
relationship, the Court held that the determination of
the existence of an employer-employee relationship is
still primarily within the power of the NLRC, that any
finding by the DOLE is merely preliminary.
This conclusion must be revisited. No
limitation in the law was placed upon the power of
the DOLE to determine the existence of an employer-
employee relationship. No procedure was laid down
where the DOLE would only make a preliminary
finding, that the power was primarily held by the
NLRC. The law did not say that the DOLE would first
seek the NLRCs determination of the existence of an
employer-employee relationship, or that should the
existence of the employer-employee relationship be
disputed, the DOLE would refer the matter to the
NLRC. The DOLE must have the power to determine
whether or not an employer-employee relationship
exists, and from there to decide whether or not to
issue compliance orders in accordance with Article
128(b) of the Labor Code, as amended by R.A. No.
7730.
39
 The DOLE, in determining the existence of an
employer-employee relationship, has a ready set of
guidelines to follow, the same guide the courts
themselves use. The elements to determine the
existence of an employment relationship are: 1) the
selection and engagement of the employee; 2) the
payment of wages; 3) the power of dismissal; and 4)
the employers power to control the employees
conduct. The use of this test is not solely limited to
the NLRC. The DOLE Secretary, or his or her
representatives, can utilize the same test, even in the
course of inspection, making use of the same
evidence that would have been presented before the
NLRC.
The determination of the existence of an
employer-employee relationship by the DOLE must be
respected. The expanded visitorial and enforcement
power of the DOLE granted by R.A. No. 7730 would be
rendered nugatory if the alleged employer could, by
the simple expedient of disputing the employer-
employee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration
that at least a prima facie showing of the absence of
an employer-employee relationship be made to oust
the DOLE of jurisdiction. But it is precisely the DOLE
that will be faced with that evidence, and it is the
DOLE that will weigh it, to see if the same does
successfully refute the existence of an employer-
employee relationship.
If the DOLE makes a finding that there is an
existing employer-employee relationship, it takes
cognizance of the matter, to the exclusion of the
NLRC. The DOLE would have no jurisdiction only if the
employer-employee relationship has already been
terminated, or it appears, upon review, that no
employer-employee relationship existed in the first
place.
The Court, in limiting the power of the DOLE,
gave the rationale that such limitation would
eliminate the prospect of competing conclusions
between the DOLE and the NLRC. The prospect of
competing conclusions could just as well have been
eliminated by according respect to the DOLE findings,
to the exclusion of the NLRC, and this the Court
believes is the more prudent course of action to take.
This is not to say that the determination by
the DOLE is beyond question or review. Suffice it to
say, there are judicial remedies such as a petition for
certiorari under Rule 65 that may be availed of,
should a party wish to dispute the findings of the
DOLE.
It must also be remembered that the
power of the DOLE to determine the existence of an
employer-employee relationship need not necessarily
result in an affirmative finding. The DOLE may well
make the determination that no employer-employee
relationship exists, thus divesting itself of jurisdiction
over the case. It must not be precluded from being
able to reach its own conclusions, not by the parties,
and certainly not by this Court.
Under Article
128(b) of the Labor Code, as amended by R.A. No.
7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-
employee relationship in the exercise of its visitorial
and enforcement power, subject to judicial review,
not review by the NLRC. There is a view that
despite Article 128(b) of the Labor Code, as amended
by R.A. No. 7730, there is still a threshold amount set
by Articles 129 and 217 of the Labor Code when
money claims are involved, i.e., that if it is for
P5,000.00 and below, the jurisdiction is with the
Regional Director of the DOLE, under Article 129, and
if the amount involved exceeds P5,000.00, the
jurisdiction is with the Labor Arbiter, under Article
217. The view states that despite the wording of
Article 128(b), this would only apply in the course of
regular inspections undertaken by the DOLE, as
differentiated from cases under Articles 129 and 217,
which originate from complaints. There are several
cases, however, where the Court has ruled that Article
128(b) has been amended to expand the powers of
the DOLE Secretary and his duly authorized
representatives by R.A. No. 7730. In these cases, the
Court resolved that the DOLE had the jurisdiction,
despite the amount of the money claims
involved. Furthermore, in these cases, the inspection
held by the DOLE regional director was prompted
specifically by a complaint. Therefore, the initiation of
a case through a complaint does not divest the DOLE
Secretary or his duly authorized representative of
jurisdiction under Article 128(b).
To recapitulate, if a
complaint is brought before the DOLE to give effect to
the labor standards provisions of the Labor Code or
other labor legislation, and there is a finding by the
DOLE that there is an existing employer-employee
relationship, the DOLE exercises jurisdiction to the
exclusion of the NLRC. If the DOLE finds that there is
no employer-employee relationship, the jurisdiction is
properly with the NLRC. If a complaint is filed with
the DOLE, and it is accompanied by a claim for
reinstatement, the jurisdiction is properly with the
Labor Arbiter, under Article 217(3) of the Labor Code,
which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving
wages, rates of pay, hours of work, and other terms
and conditions of employment, if accompanied by a
claim for reinstatement. If a complaint is filed with
the NLRC, and there is still an existing employer-
employee relationship, the jurisdiction is properly
with the DOLE. The findings of the DOLE, however,
may still be questioned through a petition for
certiorari under Rule 65 of the Rules of Court.
In the present case, the finding of the
DOLE Regional Director that there was an employer-
employee relationship has been subjected to review
by this Court, with the finding being that there was no
employer-employee relationship between petitioner
and private respondent, based on the evidence
presented. Private respondent presented self-serving
allegations as well as self-defeating evidence. The
findings of the Regional Director were not based on
40
substantial evidence, and private respondent failed to
prove the existence of an employer-employee
relationship. The DOLE had no jurisdiction over the
case, as there was no employer-employee
relationship present. Thus, the dismissal of the
complaint against petitioner is proper.
63. Balladares v. Peak Ventures Corporation
G.R. No. 161794, June 16, 2009
589 SCRA 173
Facts:
Petitioners were employed by respondent
(Peak Ventures) as security guards and were assigned
at the premises of Yangco Market. They filed a
complaint for underpayment of wages against
respondent with DOLE. The DOLE conducted an
inspection on respondent and the following violations
were noted: a) underpayment of the minimum wage
and b) pertinent employment records were not
available at the time of inspection. The Regional
Director rendered judgement in favor of petitioners
and held respondent and Yangco Market jointly and
severally liable. Respondent appealed to the Secretary
of Labor, but the latter dismissed it. Respondent then
elevated the case to the CA. The CA ruled that the
Regional Director had no jurisdiction to hear and
decide the case because the claims exceeded
P5000.00 and the power to adjudicate such claims
belonged to the Labor Arbiter pursuant to Servandos,
Inc. v. Secretary of Labor. The CA reasoned that this
exclusive jurisdiction of the Labor Arbiters was
confirmed by Article 129 of the Labor Code, which
excludes from the jurisdiction of the Regional
Directors or any hearing officer of the DOLE the power
to hear and decide claims of employees arising from
employer-employee relations exceeding the amount
of P5000.00 for each employee.
Petitioners argue that the CA erred in
applying Article 129 instead of Article 128.
Respondent contended that the inspection conducted
by the DOLE using the "visitorial and enforcement
powers" of the Secretary did not, in any way, convert
the case to one falling under Article 128, otherwise,
there would be no need for Article 129.
Issue:
WON the Regional Director has jurisdiction
over the case.
Ruling:
It should be noted that petitioners complaint
involved underpayment of wages and other benefits.
The DOLE conducted an inspection, which yielded
proof of violations of labor standards. By the nature of
the complaint and from the result of the inspection,
the authority of the DOLE, under Article 128, came
into play regardless of the monetary value of the
claims involved. The extent of this authority and the
powers flowing therefrom are defined and set forth in
Article 128 of the Labor Code, as amended by RA
7730, the pertinent portions of which read as follows:
ART. 128. Visitorial and enforcement
power.(a) The Secretary of Labor or
his duly authorized representatives,
including labor regulation officers,
shall have access to employers
records and premises at any time of
the day or night whenever work is
being undertaken therein, and the
right to copy therefrom, to question
any employee and investigate any
fact, condition or matter which may
be necessary to determine violations
or which may aid in the enforcement
of this Code and of any labor law,
wage order or rules and regulations
issued pursuant thereto.
(b) Notwithstanding the
provisions of Articles 129 and 217 of
this Code to the contrary, and in cases
where the relationship of employer-
employee still exists, the Secretary of
Labor and Employment or his duly
authorized representatives shall have
the power to issue compliance orders
to give effect to the labor standards
provisions of this Code and other
labor legislation based on the findings
of labor employment and
enforcement officers or industrial
safety engineers made in the course
of inspection. The Secretary or his
duly authorized representatives shall
issue writs of execution to the
appropriate authority for the
enforcement of their orders, except in
cases where the employer contests
the finding of the labor employment
and enforcement officer and raises
issues supported by documentary
proofs which were not considered in
the course of inspection.
An order issued by the duly
authorized representative of the
Secretary of Labor and Employment
under this article may be appealed to
the latter. In case said order involves
a monetary award, an appeal by the
employer may be perfected only upon
the posting of a cash or surety bond
issued by a reputable bonding
company duly accredited by the
Secretary of Labor and Employment in
the amount equivalent to the
monetary award in the order
appealed from.
Reliance on the Servandos ruling is no longer
tenable in view of the enactment of RA 7730,
amending Article 128 (b) of the Labor Code. The
Secretary of Labor or his duly authorized
representatives is now empowered to hear and
41
decide, in a summary proceeding, any matter
involving the recovery of any amount of wages and
other monetary claims arising out of employer-
employee relations at the time of the inspection, even
if the amount of the money claim exceeds P5000.00.
In Cirineo Bowling Plaza, Inc. v. Sensing, it was
held that: the visitorial and enforcement powers of
the DOLE Regional director to order and enforce
compliance with labor standard laws can be exercised
even where the individual claim exceeds P5000.
However, if the labor standards case is
covered by the exception clause in Article 128 (b) of
the Labor Code, then the Regional Director will have
to endorse the case to the appropriate Arbitration
Branch of the NLRC. In order to divest the Regional
Director or his representatives of jurisdiction, the
following elements must be present: (a) that the
employer contests the findings of the labor
regulations officer and raises issues thereon; (b) that
in order to resolve such issues, there is a need to
examine evidentiary matters; and (c) that such
matters are not verifiable in the normal course of
inspection. The rules also provide that the employer
shall raise such objections during the hearing of the
case or at any time after receipt of the notice of
inspection results.
In this case, respondent did not contest the
findings of the labor regulations officer. Even during
the hearing, respondent never denied that petitioners
were not paid correct wages and benefits. This was, in
fact, even admitted by respondent in its petition filed
before the CA.
64. Meteoro vs. Creative Creatures, Inc.
G.R. No. 171275, July 13, 2009
Creative Creatures (CC) is a domestic corporation
engaged in the business of providing set designs and
set construction services for television exhibitions,
concerts, theatrical performances, motion pictures
and the like. It primarily caters to the production
design requirements of ABS-CBN Broadcasting
Corporation. On the other hand, petitioners were
hired by CC on various dates as artists, carpenters and
welders. They were tasked to design, create,
assemble, set-up and dismantle props, and provide
sound effects to CCs various TV programs and
movies.
Petitioners filed complaints for non-payment of night
shift differential pay, overtime pay, holiday pay, 13th
month pay, premium pay for Sundays and/or rest
days, service incentive leave pay, paternity leave pay,
educational assistance, rice benefits, and illegal
and/or unauthorized deductions from salaries against
respondent, before the DOLE. In its position paper, CC
argued that the DOLE-NCR had no jurisdiction over
the complaint of the petitioners because of the
absence of an employer-employee relationship. It
added that petitioners were freelance individuals,
performing special services with skills and expertise
inherently exclusive to them like actors, actresses,
directors, producers, and script writers, such that they
were treated as special types of workers. Petitioners,
on the other hand, averred that they were employees
of respondent, as the elements of an employer-
employee relationship existed.
Meanwhile, petitioners filed a complaint for illegal
dismissal against CC, with prayer for payment of
overtime pay, premium pay for holiday and rest day,
holiday pay, service incentive leave pay, 13th month
pay and attorneys fees before the NLRC. DOLE
Regional Director Lim issued an Order directing CC to
pay petitioners the total amount of P2,694,709.00
representing unpaid 13th month pay, vacation and sick
leave benefits, regular holiday pay, rest day and
holiday premiums, overtime pay, educational
allowance, and rice allowance. The Regional Director
sustained petitioners claim on the existence of an
employer-employee relationship using the
determinants set forth by the Labor Code, specifically,
the elements of control and supervision, power of
dismissal, payment of wages, and the selection and
engagement of employees. He added that since the
petitioners had worked for more than one year doing
the same routine work, they were regular employees
with respect to the activity in which they were
employed. Lastly, he upheld the DOLE-NCRs
jurisdiction to hear and determine cases in violation of
labor standards law.
The DOLE Secretary affirmed the findings of the DOLE
Regional Director. On appeal, the CA declared the
Orders issued by the DOLE Secretary as null and void.
While recognizing the visitorial and enforcement
powers of the Regional Director and his jurisdiction to
entertain money claims, the CA noted that Article 128
of the Labor Code provides an instance when he may
be divested of jurisdiction. The CA pointed out that
CC had consistently disputed the existence of
employer-employee relationship, thereby placing the
case beyond the jurisdiction of the Regional Director.
ISSUE: Which body/tribunal has jurisdiction over
petitioners money claims --- the DOLE Secretary or
his duly authorized representative, or the NLRC.
RULING: The NLRC has jurisdiction.
The DOLE Secretary and her authorized
representatives, such as the DOLE-NCR Regional
Director, have jurisdiction to enforce compliance with
labor standards laws under the broad visitorial and
enforcement powers conferred by Article 128 of the
Labor Code, and expanded by Republic Act (R.A.) No.
7730, to wit:
Art. 128. Visitorial and Enforcement
Power
(a) The Secretary of Labor or his duly
authorized representatives, including
42
 labor regulation officers, shall have
access to employers records and
premises at anytime of the day or
night whenever work is being
undertaken therein, and the right to
copy therefrom, to question any
employee and investigate any fact,
condition or matter which may be
necessary to determine violations or
which may aid in the enforcement of
this Code and of any labor law, wage
order or rules and regulations issued
pursuant thereto.
(b) Notwithstanding the provisions of
Article 129 and 217 of this Code to
the contrary, and in cases where the
relationship of employer-employee
relation still exists, the Secretary of
Labor and Employment or his duly
authorized representatives shall have
the power to issue compliance orders
to give effect to the labor standards
provisions of this Code and other
labor legislation based on the findings
of labor employment and
enforcement officers or industrial
safety engineers made in the course
of inspection. The Secretary or his
duly authorized representatives shall
issue writs of execution, to the
appropriate authority for the
enforcement of their orders, except in
cases where the employer contests
the findings of the labor employment
and enforcement officer and raises
issues supported by documentary
proofs which were not considered in
the course of inspection.
xxxx
As it is now worded, and as consistently held in a
number of cases, the visitorial and enforcement
powers of the Secretary, exercised through his
representatives, encompass compliance with all labor
standards laws and other labor legislation, regardless
of the amount of the claims filed by workers.
It is well to note that the Regional Directors visitorial
and enforcement powers have undergone a series of
amendments. Confusion was engendered with the
promulgation of the decision in Servandos Inc. v.
Secretary of Labor and Employment. In that case, this
Court held that to harmonize Articles 217 (a) (6), 129,
and 128 of the Labor Code, the Secretary of Labor
should be deemed as clothed with plenary visitorial
powers to order the inspection of all establishments
where labor is employed, and to look into all possible
violations of labor laws and regulations; but the
power to hear and decide employees claims
exceeding P5,000.00 for each employee should be left
to the Labor Arbiter as the exclusive repository of the
power to hear and decide such claims.
Jurisprudence, however, rendered the Servando ruling
inapplicable. In Guico, Jr. v. Quisumbing, Allied
Investigation Bureau, Inc. v. Sec. of Labor, and Cirineo
Bowling Plaza, Inc. v. Sensing, we had occasion to
explain that while it is true that under Articles 129 and
217 of the Labor Code, the Labor Arbiter has
jurisdiction to hear and decide cases where the
aggregate money claim of each employee exceeds
P5,000.00, these provisions of law do not
contemplate or cover the visitorial and enforcement
powers of the Secretary of Labor or his duly
authorized representatives. Thus, we upheld the
jurisdiction of the Regional Director, notwithstanding
the fact that the amount awarded exceeded
P5,000.00 per employee.
In order to do away with the jurisdictional limitations
imposed by the Servando ruling and to finally settle
any lingering doubts on the extent of the visitorial and
enforcement powers of the Secretary of Labor and
Employment, R.A. 7730 was enacted, amending
Article 128 (b) to its present formulation, so as to free
it from the jurisdictional restrictions found in Articles
129 and 217.
This notwithstanding, the power of the Regional
Director to hear and decide the monetary claims of
employees is not absolute. The last sentence of
Article 128 (b) of the Labor Code, otherwise known as
the exception clause, provides an instance when the
Regional Director or his representatives may be
divested of jurisdiction over a labor standards case.
Under prevailing jurisprudence, the so-called
exception clause has the following elements, all of
which must concur:
(a) that the employer contests the findings of the
labor regulations officer and raises issues thereon;
(b) that in order to resolve such issues, there
is a need to examine evidentiary matters; and
(c) that such matters are not verifiable in the
normal course of inspection.
In the present case, the CA aptly applied the
exception clause. At the earliest opportunity,
respondent registered its objection to the findings of
the labor inspector. The labor inspector, in fact,
noted in its report that respondent alleged that
petitioners were contractual workers and/or
independent and talent workers without control or
supervision and also supplied with tools and
apparatus pertaining to their job. In its position
paper, respondent again insisted that petitioners
were not its employees. It then questioned the
Regional Directors jurisdiction to entertain the matter
before it, primarily because of the absence of an
employer-employee relationship. Finally, it raised the
same arguments before the Secretary of Labor and
the appellate court. It is, therefore, clear that
43
respondent contested and continues to contest the
findings and conclusions of the labor inspector.
In the case at bar, whether or not petitioners were
independent contractors/project employees/free
lance workers is a question of fact that necessitates
the examination of evidentiary matters not verifiable
in the normal course of inspection. Indeed, the
contracts of independent services, as well as the
check vouchers, were kept and maintained in or about
the premises of the workplace and were, therefore,
verifiable in the course of inspection. However,
respondent likewise claimed that petitioners were not
precluded from working outside the service contracts
they had entered into with it (respondent); and that
there were instances when petitioners abandoned
their service contracts with the respondent, because
they had to work on another project with a different
company. Undoubtedly, the resolution of these issues
requires the examination of evidentiary matters not
verifiable in the normal course of inspection. Verily,
the Regional Director and the Secretary of Labor are
divested of jurisdiction to decide the case.
We would like to emphasize that to contest means
to raise questions as to the amounts complained of or
the absence of violation of labor standards laws; or, as
in the instant case, issues as to the complainants right
to labor standards benefits. To be sure, raising lack of
jurisdiction alone is not the contest contemplated
by the exception clause. It is necessary that the
employer contest the findings of the labor regulations
officer during the hearing or after receipt of the
notice of inspection results. More importantly, the
key requirement for the Regional Director and the
DOLE Secretary to be divested of jurisdiction is that
the evidentiary matters be not verifiable in the course
of inspection. Where the evidence presented was
verifiable in the normal course of inspection, even if
presented belatedly by the employer, the Regional
Director, and later the DOLE Secretary, may still
examine it; and these officers are not divested of
jurisdiction to decide the case.
In sum, respondent contested the findings of the
labor inspector during and after the inspection and
raised issues the resolution of which necessitated the
examination of evidentiary matters not verifiable in
the normal course of inspection. Hence, the Regional
Director was divested of jurisdiction and should have
endorsed the case to the appropriate Arbitration
Branch of the NLRC. Considering, however, that an
illegal dismissal case had been filed by petitioners
wherein the existence or absence of an employer-
employee relationship was also raised, the CA
correctly ruled that such endorsement was no longer
necessary.
f. form, time, place and manner
65. CONGSON vs. NLRC
G.R. No. 114250. April 5, 1995.*
Facts:
Petitioner, owner of southern fishing industry hired
private respondents on various dates as regular piece
rate workers uniformly paid at a rate of P1.00 per
tuna weighing 30 to 80 kilos per movement. There
work was to unload tuna from the fishing boats to the
storage plant and to load the processed tuna for
shipment.
During the first week of June 1990 (6 years and, to
some workers, 10 years from employment), when
petitioner notified his workers of the proposal to
reduce the rate per tuna movement due to scarcity of
tuna, private respondents resisted. When they
reported the next day, they were informed that they
had been replaced by new workers. When they
requested for a dialogue with the management, they
were instructed to wait for further notice. They
waited for the notice of dialogue for a full week but in
vain.
On 15 June 1990, private respondents filed a case
against petitioner before the NLRC Sub-Regional
Arbitration Branch No. XI in General Santos City for
underpayment of wages (non-compliance with Rep.
Act Nos. 6640 and 6727, alleging that their average
income did not exceed P1,000) and non-payment of
overtime pay, 13th month pay, holiday pay, rest day
pay, and five (5)-day service incentive leave pay; and
for constructive dismissal. On 2 July 1990, another
complaint was filed by private respondents claiming
separation pay should their complaint for constructive
dismissal be upheld.
The Labor Arbiter finds private respondents to have
been constructively dismissed hereby directed
petitioner to their respective separation pay and
monetary claims for salary differentials, 13th month
pay and service incentive leave pay. The claims for
overtime pay, holiday pay and rest day pay are,
however, dismissed for lack of factual basis.
On appeal, NLRC affirmed Labor Arbiters findings and
monetary awards. Petitioner's MR and supplemental
motion for reconsideration were denied.
On appeal before the SC, petitioner argues that in
arriving at the daily wage of complainants, the value
of the tuna intestine and liver, which the latter gets as
part of their salary, should be included.
Issue:
Should the value of the tuna intestines and liver be
part in the computation of private respondents
salary?
Ruling:
No. Petitioner's practice of paying the private
respondents the minimum wage by means of legal
tender combined with tuna liver and intestines runs
counter to the Labor Code:
Article 102. Forms of Payment. No.
employer shall pay the wages of an employee
by means of, promissory notes, vouchers,
coupons, tokens tickets, chits, or any object
44
 other than legal tender, even when expressly
requested by the employee.
Payment of wages by check or money order
shall be allowed when such manner of
payment is customary on the date of
effectivity of this Code, or is necessary as
specified in appropriate regulations to be
issued by the Secretary of Labor or as
stipulated in a collective bargaining
agreement. (Emphasis supplied)
The fact that said method of paying the minimum
wage was not only agreed upon by both parties in the
employment agreement but even expressly requested
by private respondents, does not shield petitioner.
Article 102 of the Labor Code is clear. Wages shall be
paid only by means of legal tender. The only instance
when an employer is permitted to pay wages informs
other than legal tender, that is, by checks or money
order, is when the circumstances prescribed in the
second paragraph of Article 102 are present.
66. North Davao Mining vs NLRC (1996) 254 SCRA
721
Facts:
Respondent Wilfredo Guillema is among several
employees of petitioner who were separated by
reason of the companys closure on May 31, 1992,
and who were the complainants in the cases before
the respondent labor arbiter. Petitioner completely
ceased operations due to serious business reverses.
From 1988 until its closure in 1992, petitioner
suffered net losses averaging three billion pesos per
year, for each of the five years prior to its closure.
Five months prior to its closure, its total liabilities had
exceeded its assets by 20.392 billion pesos. When it
ceased operations, its remaining employees were
separated and given the equivalent of 12.5 days pay
for every year of service, computed on their basic
monthly pay, in addition to the commutation to cash
of their unused vacation and sick leaves. However,
during the life of the petitioner corporation, from the
beginning of its operations in 1981 until its closure in
1992, it had been giving separation pay equivalent to
thirty days pay for every year of service. Moreover,
the employees had to collect their salaries at a bank in
Tagum, Davao del Norte, around 58 kilometers from
their workplace and about 2 hours travel time by
public transportation. Such arrangement lasted from
1981 up to 1990.
Subsequently, a complaint was filed with respondent
labor arbiter by respondent Wilfredo Guillema and
271 other separated employees for (1) additional
separation pay of 17.5 days for every year of service;
(2) back wages equivalent to two days a month; (3)
transportation allowance; (4) hazard pay; (5) housing
allowance; (6) food allowance; (7) post-employment
medical clearance; and (8) future medical allowance,
all of which amounted to P58,022,878.31.
The Labor Arbiter rendered a decision ordering
petitioner North Davao to pay the complainants a
total of P10,240,517.75 the breakdown:
(a) Additional separation pay of 17.5 days for every
year of service;
(b) Backwages equivalent to two (2) days a month
times the number of years of service but not to
exceed three (3) years;
(c) Transportation allowance at P80 a month times the
number of years of service but not to exceed three (3)
years.
Attorneys fees equivalent to ten percent (10%)
thereof were also granted.
On appeal, respondent NLRC affirmed the decision in
toto. Petitioner North Davaos motion for
reconsideration was likewise denied. Hence, the
petition for certiorari under Rule 65.
Issue: WON the time spent in collecting wages in a
place other than the place of employment is
compensable notwithstanding that the same is done
during official time.
Held: Yes. Hours spent by complainants in collecting
salaries shall be considered compensable hours
worked.
It is undisputed that because of security reasons, from
the time of its operations, petitioner NDMC
maintained its policy of paying its workers at a bank in
Tagum, Davao del Norte, which usually took the
workers about two and a half (2 1/2) hours of travel
from the place of work and such travel time is not
official. Records also show that on February 12, 1992,
when an inspection was conducted by the
Department of Labor and Employment at the
premises of petitioner NDMC at Amacan, Maco,
Davao del Norte, it was found out that petitioners had
violated labor standards law, one of which is the place
of payment of wages.
Section 4, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code provides that:
Place of payment. - (a) As a general rule, the
place of payment shall be at or near the place
of undertaking. Payment in a place other than
the workplace shall be permissible only under
the following circumstances: (1) When
payment cannot be effected at or near the
place of work by reason of the deterioration
of peace and order conditions, or by reason of
actual or impending emergencies caused by
fire, flood, epidemic or other calamity
rendering payment thereat impossible; (2)
When the employer provides free
transportation to the employees back and
forth; and (3) Under any analogous
circumstances; provided that the time spent
by the employees in collecting their wages
shall be considered as compensable hours
worked.
Considering further the distance between Amacan,
Maco to Tagum which is 2 hours by travel and the
risks in commuting all the time in collecting
complainants salaries, would justify the granting of
backwages equivalent to 2 days in a month.
Related Issue:
45
 1. WON private respondents are entitled to
transportation expenses in the absence of
evidence that these expenses were incurred.
R: Yes. Corollary to the above findings, and for
equitable reasons, the Court likewise held
respondents liable for the transportation expenses
incurred by complainants at P40.00 round trip fare
during pay days. It is petitioners burden or duty to
present evidence of compliance of the law on labor
standards, rather than for private respondents to
prove that they were not paid/provided by petitioners
of their backwages and transportation expenses.
67. BUSINESS SERVICES OF THE FUTURE TODAY, INC.
vs. CA
G.R. No. 157133. January 30, 2006.*
FACTS: Mailboxes, Etc. (Davao) is the local franchisee
of Mailboxes, Etc. (MBE), a US-based corporation
operating business support and communication
service centers worldwide. It is operated locally by
petitioner Business Services of the Future Today, Inc.
(BSFTI), whose stockholders are petitioner Ramon
Allado and his nominees. Allado hired private
respondents, spouses Gilbert and Ma. Celestina
Veruasa, as manager and assistant manager,
respectively, for a compensation package of P15,000
monthly. Due to lack of funds from BSFTI, however,
the employee spouses contend that they were not
paid their salaries amounting to P142,613.93 from
March 1997 to January 8, 1998.
On January 8, 1998, Allado personally gave
notices of termination effective immediately to the
spouses. They gave as reason, the negative cashflow
and BSFTIs failure to infuse additional capital to the
business. No written notice of closure of business was
given to the Department of Labor and Employment
(DOLE). On or about March 20, 1998, Allado gave the
spouses P13,125 as partial payment of their salaries.
Despite repeated demands, the petitioners did not
pay the balance of P129,488.93 due to the spouses.
Hence, the spouses filed a complaint for illegal
dismissal before the labor arbiter.
Petitioners version: Allado and Leo G. Dominguez
invited Gilbert Veruasa to invest in a business under
the franchise of MBE. At that time, Allado had already
organized BSFTI although its registration was still
pending with the Securities and Exchange Commission
(SEC). Gilbert submitted his counter-proposal stating,
among others, that he would: (1) manage the
business; and (2) contribute as equity, the assets and
goodwill of his former business enterprise, Fax
Business Shop, worth P300,000. Allado and
Dominguez accepted the counter-proposal. Gilbert
submitted a report seeking confirmation of his
investment in BSFTI. The parties then signed a
Shareholders Agreement which recognized Gilberts
P300,000 contribution. Petitioners, however, aver
that all signed copies, which were entrusted to
Gilbert, could no longer be located. The parties also
agreed that Gilberts wife, Celestina, would assist in
the management of the business for which they
would receive compensation of P15,000 monthly.
During its first year of operations, BSFTI
suffered losses amounting to P1,145,461.43. The
following year, it experienced further cash problems.
The owners failed to attract other investors. As the
owners were no longer willing to infuse additional
capital, Gilbert Veruasa and petitioners decided to
close shop. Although all employees were informed of
the companys closure and their termination, Gilbert
failed to inform the DOLE. Instead, he took
possession of important company records as well as
the properties which he contributed earlier to BSFTI.
LA DECISION: The Labor Arbiter ruled the dismissal of
the spouses illegal. The Labor Arbiter ruled that the
spouses were employees of BSFTI since all the
elements of an employer-employee relationship were
present. Neither was there any showing that the
spouses were stockholders. Further, the Labor Arbiter
said it was unlikely that petitioners did not have a
copy of the alleged Shareholders Agreement, if
indeed there was such an agreement evidencing the
spouses participation in the business. Nor did BSFTIs
articles of incorporation show that the spouses were
incorporators. Thus, their dismissal of the spouses
should have been in accordance with the Labor Code.
Although the employees were given notices of
termination, DOLE was not provided a notice of
closure. The Labor Arbiter awarded the spouses
P496,897.46 representing their separation pay,
backwages, and 13th month pay, plus 10% attorneys
fees.
Upon appeal by both parties, the National
Labor Relations Commission (NLRC) dismissed the
case and ruled:
NLRC RULING: (1) Gilbert was both a BSFTI employee
and stockholder as evidenced by his communications
to BSFTIs other stockholders; (2) BSFTI was not
obliged to pay separation benefits to the spouses
since there was a valid closure of business due to
serious financial losses; (3) the spouses were not
entitled to backwages since as manager, it was
Gilberts duty to notify the DOLE of the closure; (4)
there was no basis for awarding 13th month pay; and
(5) there was no basis for the claim for unpaid salaries
since there were petty cash vouchers showing full
payment of the spouses salaries.
On appeal, the Court of Appeals reversed the NLRC
and reinstated the decision of the Labor Arbiter with
modification (deleted the award of separation pay).
CA RULING: The spouses were employees of BSFTI
since all the essential elements of an employer-
employee relationship were present. There was no
evidence that Gilbert was a stockholder other than
the petitioners bare allegation that the parties had
entered into a Shareholders Agreement. Moreover,
it was not Gilberts duty, but petitioners to notify the
DOLE of the closure. Absent such notice, the dismissal
was without effect. Nevertheless, it disallowed the
payment of separation pay since the closure was due
to serious financial losses. Instead, it ordered the
46
payment of backwages and unpaid salaries, for lack of
proof that the salaries were paid.
ISSUES : 1. Were the spouses employees or
stockholders of BSFTI?
2. Whether or not the requirement of filing of
written notice of closure of business with the
Department of Labor and Employment is not
applicable and unnecessary in this case.
3. Whether or not employee Gilbert Veruasa
consented to his dismissal.
4. Were the respondents validly dismissed?
5. Are they entitled to 13th month pay,
backwages, separation pay as well as unpaid salaries?
RULING: 1. The spouses were employees of BSFTI.
Both parties admitted that Gilbert and Celestina were
hired as BSFTIs manager and assistant manager,
respectively, with P15,000 monthly salary and all the
essential elements of employer-employee relationship
are present.
2. NO. Notice of closure to the DOLE is
mandatory. It allows the DOLE to ascertain whether
the closure and/or dismissals were done in good faith
and not a pretext for evading obligations to the
employees. This requirement protects the workers
right to security of tenure. Failure to comply with this
requirement taints the dismissal. This rule, however,
admits of exceptions. If the employee consented to
his retrenchment due to the closure or cessation of
operation, the required prior notice to the DOLE is not
necessary as the employee thereby acknowledges the
existence of a valid cause for termination of his
employment.
3. NO. The evidence shows that he did not.
Although only his correspondences with the
petitioners suggest that he was a stockholder of
BSFTI, there is no showing that he participated in the
alleged stockholders meeting where the companys
closure was discussed. The self-serving Joint Affidavit
of Allado and Dominguez attesting that Gilbert
participated in the meeting discussing the closure is
insufficient. The minutes of such meeting would have
been better. Further, the SEC certification dated
November 9, 1999, provided that BSFTI did not submit
any communication signifying the termination of its
corporate life nor its non-operation for 1998, giving
rise to serious doubts that such meeting ever took
place. Hence, there is no convincing evidence to show
that Gilbert consented to his dismissal and for these
reasons the petitioners should have submitted a
written notice of BSFTIs closure to the DOLE.
4. YES. Article 283 of the Labor Code is the
applicable law. It states,
ART. 283.Closure of
establishment and reduction of
personnel. The employer may also
terminate the employment of any
employee due to the installation of
labor saving devices, redundancy,
retrenchment to prevent losses or the
closing or cessation of operation of
the establishment or undertaking
unless the closing is for the purpose
of circumventing the provisions of this
Title, by serving a written notice on
the worker and the Ministry of Labor
and Employment at least one (1)
month before the intended date
thereof. In case of termination due to
the installation of labor saving devices
or redundancy, the worker affected
thereby shall be entitled to a
separation pay equivalent to at least
his one (1) month pay or to at least
one (1) month pay for every year of
service, whichever is higher. In case of
retrenchment to prevent losses and in
cases of closures or cessation of
operations of establishment or
undertaking not due to serious
business losses or financial reverses,
the separation pay shall be equivalent
to one (1) month pay or at least one-
half (1/2) month pay for every year of
service, whichever is higher. A
fraction of at least six (6) months shall
be considered as one (1) whole year.
For the cessation of business operations due
to serious business losses or financial reverses to be
valid, the employer must give the employee and the
DOLE written notices 30 days prior to the effectivity of
his separation.
In Agabon v. National Labor Relations
Commission, we ruled that where the dismissal is for
an authorized cause, the lack of statutory due process
should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify
the employee, in the form of nominal damages, for
the violation of his right to statutory due process. The
amount of such damages is addressed to the sound
discretion of the Court, taking into account the
relevant circumstances. In Jaka Food Processing
Corporation v. Pacot, we noted that the sanction
should be stiffer because the dismissal process was
initiated by the employers exercise of its
management prerogative.
The NLRC and the Court of Appeals were
unanimous in finding that BSFTIs closure was
bonafide. The records before us revealed that it
suffered losses from 1996 to 1998. Juxtaposing the
facts of this case vis the applicable law and
jurisprudence, P40,000 as nominal damages would be
sufficient to vindicate each respondents right to due
process. A violation of that right suffices to support an
award of nominal damages.
5. NO. In view of the valid dismissal, there is,
thus, no basis for awarding the spouses P12,787.50 as
13th month pay and separation pay. The Labor Arbiter
and the NLRC found that the spouses advances
exceeded their unpaid salaries by P43,402.54. The
NLRC even noted that Annexes 18 to 341 of the
47
petitioners Position Paper contained the petty cash
vouchers evidencing payment of their salaries up to
December 29, 1997. Interestingly, the spouses argued
in their Position Paper that they were not paid their
monthly salary of P15,000 from March 1997 to January
8, 1998. Their total claim for unpaid salaries therefore
amounted to P129,488.93, minus the P13,125 which
Allado paid to them. Yet, in their Motion for Partial
Clarification/Reconsideration, they admitted that their
total advances amounted to P178,075.95. Hence,
based on their admitted advances, they were overpaid
by P48,587.02. This is even a larger amount than what
was arrived at by the Labor Arbiter and the NLRC. Said
amount of P48,587.02 should be paid back to
petitioners, to prevent unjust enrichment.
SC RULING: WHEREFORE, the instant petition
is PARTIALLY GRANTED. Accordingly, the assailed
Decision dated April 16, 2002, as well as the
Resolution dated January 15, 2003, of the Court of
Appeals in CA-G.R. SP No. 66733, are SET ASIDE, and a
new one entered upholding the legality of the
dismissal. Petitioners are ORDERED to pay each of
the private respondents the amount of P40,000, or a
total of P80,000 for the spouses representing nominal
damages. Private respondents, however, are also
ORDERED to refund to petitioners the amount of
P48,587.02, which is the amount of admitted
advances taken by the Veruasa spouses exceeding the
amount of their unpaid salaries.
68. FIVE J TAXI vs NLRC
FACTS: Private respondents Domingo Maldigan and
Gilberto Sabsalon were hired by the petitioners as taxi
drivers2 and, as such, they worked for 4 days weekly
on a 24-hour shifting schedule. Aside from the daily
boundary of P700.00 for air-conditioned taxi or
P450.00 for non-air-conditioned taxi, they were also
required to pay P20.00 for car washing, and to further
make a P15.00 deposit to answer for any deficiency in
their boundary, for every actual working day.
On September 22, 1991, Sabsalon failed to remit his
boundary of P700.00 for the previous day. Also, he
abandoned his taxicab in Makati without fuel refill
worth P300.00. Despite repeated requests of
petitioners for him to report for work, he adamantly
refused. Afterwards it was revealed that he was
driving a taxi for Bulaklak Company.
Sometime in 1989, Maldigan requested petitioners for
the reimbursement of his daily cash deposits for 2
years, but herein petitioners told him that not a single
centavo was left of his deposits as these were not
even enough to cover the amount spent for the
repairs of the taxi he was driving. This was allegedly
the practice adopted by petitioners to recoup the
expenses incurred in the repair of their taxicab units.
When Maldigan insisted on the refund of his deposit,
petitioners terminated his services. Sabsalon, on his
part, claimed that his termination from employment
was effected when he refused to pay for the washing
of his taxi seat covers. On November 27, 1991, private
respondents filed a complaint with the Manila
Arbitration Office of the National Labor Relations
Commission charging petitioners with illegal dismissal
and illegal deductions.
1. Does the daily deposits made by respondents
to defray any shortage in their boundary
covered by the general prohibition in Article
114 of the Labor Code.
NO. Article 114 of the Labor Code provides as follows:
Article 114. Deposits for loss or
damage.No employer shall require
his worker to make deposits from
which deductions shall be made for
the reimbursement of loss of or
damage to tools, materials, or
equipment supplied by the
employer, except when the
employer is engaged in such trades,
occupations or business where the
practice of making deposits is a
recognized one, or is necessary or
desirable as determined by the
Secretary of Labor in appropriate
rules and regulations.
It can be deduced therefrom that the said article
provides the rule on deposits for loss or damage to
tools, materials or equipment supplied by the
employer. Clearly the same does not apply to or
permit deposits not to defray any deficiency which
the taxi driver may incur in the remittance of his
boundary. Also, when private respondents stopped
working for petitioners, the alleged purpose for which
petitioners required such unauthorized deposits no
longer existed. In other case, any balance due to
private respondents after proper accounting must be
returned to them with legal interest.
However, the unrebutted evidence with regard to the
claim of Sabsalon, shows that from 1987-1991,
Sabsalon was able to withdraw his deposits through
vales or he incurred shortages, such that he is even
indebted to petitioners in the amount of P3,448.00.
With respect to Maldigans deposits, nothing was
mentioned questioning the same even in the present
petition.
We accordingly agree with the recommendation of
the Solicitor General that since the evidence shows
that he had not withdrawn the same, he should be
reimbursed the amount of his accumulated cash
deposits.
2. With respect to the P20.00 cash wash
payments, does Article 114 apply?
NO. On the matter of the car wash payments, the
labor arbiter had this to say in his decision: Anent the
issue of illegal deductions, there is no dispute that as
a matter of practice in the taxi industry, after a tour of
duty, it is incumbent upon the driver to restore the
unit he has driven to the same clean condition when
he took it out, and as claimed by the respondents
(petitioners in the present case), complainant(s)
(private respondents herein) were made to shoulder
the expenses for washing, the amount doled out was
paid directly to the person who washed the unit, thus
we find nothing illegal in this practice, much more
48
(sic) to consider the amount paid by the driver as
illegal deduction in the context of the law.6
Consequently, private respondents are not entitled to
the refund of the P20.00 car wash payments they
made. It will be noted that there was nothing to
prevent private respondents from cleaning the taxi
units themselves, if they wanted to save their P20.00.
Also, as the Solicitor General correctly noted, car
washing after a tour of duty is a practice in the taxi
industry, and is, in fact, dictated by fair play.
g. prohibitions
69. Jardin vs. National Labor Relations Commission
FACTS: Petitioners were drivers of private respondent,
Philjama International, Inc., a domestic corporation
engaged in the operation of Goodman Taxi.
Petitioners used to drive private respondents taxicabs
every other day on a 24-hour work schedule under
the boundary system. Under this arrangement, the
petitioners earned an average of P400.00 daily.
Nevertheless, private respondent admittedly regularly
deducts from petitioners daily earnings the amount
of P30.00 supposedly for the washing of the taxi units.
Believing that the deduction is illegal, petitioners
decided to form a labor union to protect their rights
and interests.
Upon learning about the plan of petitioners, private
respondent refused to let petitioners drive their
taxicabs when they reported for work on August 6,
1991, and on succeeding days. Petitioners suspected
that they were singled out because they were the
leaders and active members of the proposed union.
Aggrieved, petitioners filed with the labor arbiter a
complaint against private respondent for unfair labor
practice, illegal dismissal and illegal deduction of
washing fees.
1. Is the deduction of P30.00 from the wages of
the taxi driver for the washing of the taxi
units legal.
YES. With regard to the amount deducted daily by
private respondent from petitioners for washing of
the taxi units, we view the same as not illegal in the
context of the law. We note that after a tour of duty,
it is incumbent upon the driver to restore the unit he
has driven to the same clean condition when he took
it out. Car washing after a tour of duty is indeed a
practice in fee taxi industry and is in fact dictated by
fair play.25, the drivers are not entitled to
reimbursement of washing charges.
2. Is there Employer-employee relationship
between the taxi-driver and the owner of the
taxi in a boundary system type of contract?
In a number of cases decided by this Court,19 we
ruled that the relationship between jeepney
owners/operators on one hand and jeepney drivers
on the other under the boundary system is that of
employer-employee and not of lessor-lessee. We
explained that in the lease of chattels, the lessor loses
complete control over the chattel leased although the
lessee cannot be reckless in the use thereof,
otherwise he would be responsible for the damages
to the lessor. In the case of jeepney owners/operators
and jeepney drivers, the former exercise supervision
and control over the latter. The management of the
business is in the owners hands. The owner as holder
of the certificate of public convenience must see to it
that the driver follows the route prescribed by the
franchising authority and the rules promulgated as
regards its operation. Now, the fact that the drivers
do not receive fixed wages but get only that in excess
of the so-called boundary they pay to the
owner/operator is not sufficient to withdraw the
relationship between them from that of employer and
employee. We have applied by analogy the
abovestated doctrine to the relationships between
bus owner/operator and bus conductor,20 auto-
calesa owner/operator and driver,21 and recently
between taxi owners/operators and taxi drivers.22
Hence, petitioners are undoubtedly employees of
private respondent because as taxi drivers they
perform activities which are usually necessary or
desirable in the usual business or trade of their
employer.
70. APEX MINING COMPANY, INC. vs.NLRC
G.R. No. 86200 February 25, 1992
Facts:
Respondent Sandigan ng Manggagawang
Pilipino filed before the Labor Arbiter a claim for
Emergency Cost of Living Allowance (ECOLA)
differential against petitioner Apex Mining Company,
Inc. ("Apex") alleging that Apex had paid its
employees in its Maco, Davao del Norte operations,
between November 1, 1954 until March 28, 1985, an
aggregate cumulative daily ECOLA of only P15.00
which was P2.00 below the cumulative minimum
ECOLA of P17.00 (for non-agricultural workers)
established under Wage Order No. 6 and that
petitioner had belatedly granted the additional P2.00
starting on March 29, 1985 only. Apex denied having
failed to comply with Wage Order No. 6, contending
that it had, by previous agreement, incorporated the
alleged P2.00 deficiency into the basic salary of its
employees. Sandigan denies that such an agreement
had been made, but conceded that a P2.00 increase in
basic salary had been made by Apex, in compliance
with a provision of the CBA then in force between
Apex and Sandigan, and not in fulfillment of Apex's
obligation under Wage Order No. 6. Sandigan pointed
out that Wage Order No. 6 had taken effect on
November 1984, several months after the P2.00 had
been integrated by Apex into the basic salary of its
employees.
Sandigan contended that to consider the
P2.00 increase in basic salary effective February 1,
1984 provided by the CBA as compliance with the
requirements of Wage Orders Nos. 5 and 6, would be
to violate Article 100 of the Labor Code.
49
 Art. 100. Prohibition against
elimination or diminution of benefits Nothing in
(Book Three Conditions of Employment) shall be
construed to eliminate or in any way diminish
supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code.
Sec. 6. Non-diminution of benefits. The
statutory minimum wage rates shall be exclusive of
whatever supplements and other benefits the workers
are enjoying without cost at the time of the effectivity
of this Order.
On May 19, 1987, the Labor Arbiter held that
the wage increase given in accordance with the CBA
could not be credited as compliance with increases
mandated in the Wage Orders, and ordered petitioner
Apex to pay respondent Sandigan the claimed ECOLA
differential of P2.00 for the period from November 1,
1984 until March 28, 1985. On appeal, the NLRC
affirmed the Labor Arbiter's ruling.
Issue: Is there a violation on the prohibition against
elimination or diminution of benefits?
Ruling: None.
Both Wage Order No. 5 and Wage Order No. 6
expressly allowed the crediting of increases in wages
or allowances granted under collective bargaining
agreements towards compliance with increases in
ECOLA requirements prescribed by those Wage
Orders. The creditability provisions in Wage Orders
Nos. 5 and 6 (as well as the parallel provisions in
Wage Orders Nos. 2, 3 and 4) are grounded in an
important public policy. That public policy may be
seen to be the encouragement of employers to grant
wage and allowance increases to their employees
higher than the minimum rates of increases
prescribed by statute or administrative regulation. To
obliterate the creditability provisions in the Wage
Orders through interpretation or otherwise, and to
compel employers simply to add on legislated
increases in salaries or allowances without regard to
what is already being paid, would be to penalize
employers who grant their workers more than the
statutorily prescribed minimum rates of increases.
Clearly, this would be counter-productive so far as
securing the interests of labor is concerned. The
creditability provisions in the Wage Orders prevent
the penalizing of employers who are industry leaders
and who do not wait for statutorily prescribed
increases in salary or allowances and pay their
workers more than what the law or regulations
require.
Clearly, the prohibition against elimination or
diminution of benefits set out in Article 100 of the
Labor Code is specifically concerned with benefits
already enjoyed at the time of the promulgation of
the Labor Code. Article 100 does not, in other words,
purport to apply to situations arising after the
promulgation date of the Labor Code. Section 6 of the
Rules Implementing Wage Order No. 6 relates to
"supplements and other benefits" which employees
are already "enjoying without cost at the time of the
effectivity of [Wage] Order [No. 6]." Such benefits
which employees are already enjoying "without
cost" could not, under Section 6, suddenly be
ascribed monetary value so as to offset or diminish
increases in the minimum wage rates prescribed by
statute. Clearly, once more, Section 6 does not relate
to the problem at hand.
Petitioner Apex having lawfully credited the
P2.00 increase in basic salary towards compliance of
the increase in ECOLA prescribed by Wage Orders
Nos. 5 and 6, it follows that respondent Sandigan's
claim to a differential in ECOLA lacks basis in fact and
in law.
71. Kamaya Point Hotel vs. NLRC
GR 86200, Feb 25, 1992
Facts: Respondent Memia Quiambao with thirty
others who are members of private respondent
Federation of Free Workers (FFW) were employed by
petitioner as hotel crew. On the basis of the
profitability of the company's business operations,
management granted a 14th month pay to its
employees starting in 1979. In January 1982,
operations ceased to give way to the hotel's
conversion into a training center for Libyan scholars. .
However, due to technical and financing problems,
the Libyans pre-terminated the program on July 7,
1982, leaving petitioner without any business, aside
from the fact that it was not paid for the use of the
hotel premises and in addition had to undertake
repairs of the premises damaged by the Libyan
students. Although petitioner reopened the hotel
premises to the public, it was not able to pick-up its
lost patronage. In a couple of months it effected a
retrenchment program until finally on January 7,
1984, it totally closed its business. On April 18, 1983,
private respondent Federation of Free Workers (FFW);
a legitimate labor organization, filed a complaint
against petitioner for illegal suspension, violation of
the CBA and non-payment of the 14th month pay.
Executive Labor Arbiter ordered Kamaya Point Hotel
to pay the 14th month pay for 1982 of all its rank and
file employees and to pay the monetary equivalent of
the benefits of then existing Collective Bargaining
Agreement which will expire on 1 July 1984.
NLRC set aside the award of monetary benefits under
the CBA but affirmed the grant of the 14th month pay
for the reason that it already ripened into a company
practice which respondent company cannot withdraw
unilaterally without violating article 100 of the Labor
Code.
Issue: Whether or not respondents are entitled the
14th month pay in 1982?
50
Ruling: There is no law that mandates the payment of
the 14th month pay neither is there stipulation as to
such extra remuneration in the CBA. The granting of
the 14th month pay is a management prerogative
which cannot be forced upon the employer. It is
patently obvious that Article 100 is clearly without
applicability. The date of effectivity of the Labor Code
is May 1, 1974. In the case at bar, petitioner extended
its 14th month pay beginning 1979 until 1981. What is
demanded is payment of the 14th month pay for
1982. Indubitably from these facts alone, Article 100
of the Labor Code cannot apply.
72. Davao fruits corp. v. assoc. labor unions
G.R. no. 85073
August 24, 1993
FACTS:
Respondent Associated Labor Unions (ALU) filed a
complaint before the Ministry of Labor and
Employment, Regional Arbitration Branch XI, Davao
City, against petitioner, for "Payment of
theThirteenth-Month Pay Differentials." Respondent
ALU sought to recover from petitioner the thirteenth
month pay differential for 1982 of its rank-and-file
employees, equivalent to their sick, vacation and
maternity leaves, premium for work done on rest days
and special holidays, and pay for regular holidays
which petitioner, allegedly in disregard of company
practice since 1975, excluded from the computation
of the thirteenth month pay for 1982.
In its answer, petitioner claimed that it erroneously
included items subject of the complaint in the
computation of the thirteenth month pay for the
years prior to 1982, upon a doubtful and difficult
question of law. Subsequently, the Labor Arbiter
rendered a decision in favour of respondent ALU,
ordering herein petitioner to pay the 1982
13th month pay differential to all its rank-and-file
workers/employees. Consequently, petitioner
appealed the decision of the Labor Arbiter to the
NLRC, which affirmed the decision and accordingly
dismissed the appeal for lack of merit. Hence, the
case at bar.
Issue: Whether or not in the computation of the
thirteenth month pay given by employers to their
employees under P.D. No. 851, payments for sick,
vacation and maternity leaves, premiums for work
done on rest days and special holidays, and pay for
regular holidays may be excluded in the computation
and payment thereof, regardless of long-standing
company practice.
Ruling:
Presidential Decree No. 851, promulgated on
December 16, 1975, mandates all employers to pay
their employees a thirteenth month pay. How this pay
shall be computed is set forth in Section 2 of the
"Rules and Regulations Implementing Presidential
Decree No. 851," thus:
SECTION 2. . . .
(a) "Thirteenth month pay" shall
mean one twelfth (1/12) of the basic
salary of an employee within a
calendar year.
(b) "Basic Salary" shall include all
renumerations or earnings paid by an
employer to an employee for services
rendered but may not include cost of
living allowances granted pursuant to
Presidential Decree No. 525 or Letter
of Instructions No. 174, profit-sharing
payments, and all allowances and
monetary benefits which are not
considered or integrated as part of
the regular or basic salary of the
employee at the time of the
promulgation of the Decree on
December 16, 1975.
The Department of Labor and Employment issued on
January 16, 1976 the "Supplementary Rules and
Regulations Implementing P.D. No. 851" which in
paragraph 4 thereof further defines the term "basic
salary," thus:
4. Overtime pay, earnings and other
remunerations which are not part of
the basic salary shall not be included
in the computation of the 13th month
pay.
The term "basic salary" includes remunerations or
earnings paid by the employer to employee, but
excludes cost-of-living allowances, profit-sharing
payments, and all allowances and monetary benefits
which have not been considered as part of the basic
salary of the employee as of December 16, 1975. The
exclusion of cost-of-living allowances and profit
sharing payments shows the intention to strip "basic
salary" of payments which are otherwise considered
as "fringe" benefits. This intention is emphasized in
the catch all phrase "all allowances and monetary
benefits which are not considered or integrated as
part of the basic salary." Basic salary, therefore does
not merely exclude the benefits expressly mentioned
but all payments which may be in the form of "fringe"
benefits or allowances (San Miguel Corporation v.
Inciong, supra, at 143-144). In fact, the Supplementary
Rules and Regulations Implementing P.D. No. 851 are
very emphatic in declaring that overtime pay,
earnings and other remunerations shall be excluded in
computing the thirteenth month pay.
In other words, whatever compensation an employee
receives for an eight-hour work daily or the daily wage
rate in the basic salary. Any compensation or
51
remuneration other than the daily wage rate is
excluded. It follows therefore, that payments for sick,
vacation and maternity leaves, premium for work
done on rest days special holidays, as well as pay for
regular holidays, are likewise excluded in computing
the basic salary for the purpose of determining the
thirteen month pay.
HOWEVER, From 1975 to 1981, petitioner had freely,
voluntarily and continuously included in the
computation of its employees' thirteenth month pay,
the payments for sick, vacation and maternity
leaves, premiums for work done on rest days and
special holidays, and pay for regular holidays. The
considerable length of time the questioned items
had been included by petitioner indicates a
unilateral and voluntary act on its part, sufficient in
itself to negate any claim of mistake.
A company practice favorable to the employees had
indeed been established and the payments made
pursuant thereto, ripened into benefits enjoyed by
them. And any benefit and supplement being
enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the
employer, by virtue of Section 10 of the Rules and
Regulations Implementing P.D. No. 851, and Article
100 of the labor of the Philippines, which prohibit
the diminution or elimination by the employer of the
employees' existing benefits (Tiangco v. Leogardo,
Jr., 122 SCRA 267, [1983]).
DECISION:
WHEREFORE, finding no grave abuse of discretion on
the part of the NLRC, the petition is hereby
DISMISSED, and the questioned decision of
respondent NLRC is AFFIRMED accordingly.
73. Manila Banking Corp. v. NLRC
GR. No. 107487 & 107902
September 29, 1997
FACTS:
On June 5, 1984, petitioner Manila Banking
Corporation (Manilabank) was placed under
comptrollership by then Central Bank Governor Jose
B. Fernandez in view of the banks financial distress,
liquidity problems and had incurred chronic reserve
deficiencies against deposit liabilities.
Private respondents filed a complaint against
Manilabank and its statutory receiver with the
arbitration branch of the NLRC claiming entitlement
to the following additional benefits alleged to have
accrued from 1984 to their effective dates of
termination: (a) Wage increases; (b) Christmas
bonuses; (c) Mid-year bonuses; (d) Profit sharing; (e)
Car and travel plans; (f) Gasoline allowances; (g)
Differentials on accrued leaves, retirement and other
bonuses; (h) Longevity pay and loyalty pay; (i)
Medical, dental and optical benefits; and (j) Uniform
allowances. Such claim to entitlement of the
foregoing benefits was based on Manilabanks alleged
practice, policy and tradition of awarding said
benefits.
Manilabank, on its part, alleged that the additional
benefits sought are without basis in fact and in law. It
argued that the same are conferred by management
only when it deems necessary to do so. The award of
the said benefits is in the nature of a "management
prerogative" which, it contended, can be withheld by
management upon a clear showing that the company
is not in a position to grant them either because of
financial difficulties or circumstances which do not
warrant conferment of such benefits. And since it was
experiencing financial distress, it claimed that it was in
no position to give the benefits sought.
ISSUE:
Was the award by the NLRC of P193,338,212.33 to
herein private respondents correct?
RULING:
On the 10 items awarded to herein private
respondents which represent additional benefits, they
having already been paid separation and retirement
benefits, we rule as follows:
First. The award of 5% profit sharing of
petitioner banks net profits for the years
1985 and 1986 is deleted as there were
clearly no profits to share during that period
given the banks financial status in 1985 and
1986 when it was operating on net losses.
Second. The award of wage increases and
Christmas and mid-year, bonuses from 1985
to 1988, being in the nature of gratuities and
dependent as they on the petitioners
liberality and capability to give, is likewise
deleted for same reasons above stated.
Third. The award of differentials on accrued
leaves, retirement benefits and Christmas and
mid-year bonuses is also deleted as a
necessary and logical consequence of the
denial of the wage increases and Christmas
and mid-year bonuses.
Fourth. The award of medical, dental and
optical benefits is well-taken and, therefore,
affirmed.
Fifth. The claim for travel plans for 23 senior
officers, and car plans and gasoline
allowances for 23 senior officers, 15 senior
managers and 54 assistant managers may
only be granted to those officers who have
not yet availed of the said benefit subject to
the proper determination by the labor arbiter.
52
 Sixth and last. Claims for longevity pay, loyalty
bonuses and uniform allowance of P600.00
for 1985 may be granted given the apparent
loyalty and allegiance shown by herein private
respondents to petitioner bank despite rough
sailing during the said period of time.
The granting of a bonus is basically a management
prerogative which cannot be forced upon the
employer who may not be obliged to assume the
onerous burden of granting bonuses or other benefits
aside from the employee's basic salaries or wages,
especially so if it is incapable of doing so. By
definition, a "bonus" is a gratuity or act of liberality of
the giver which the recipient has no right to demand
as a matter of right. It is something given in addition
to what is ordinarily received by or strictly due the
recipient. The granting of a bonus is basically a
management prerogative which cannot be forced
upon the employer who may not be obliged to
assume the onerous burden of granting bonuses or
other benefits aside from the employee's basic
salaries or wages, especially so if it is incapable of
doing so.
It is evident, therefore, that petitioner bank was
operating on net losses from the years 1984, 1985 and
1986, thus, resulting to its eventual closure in 1987
and liquidation in 1988. Clearly, there was no success
in business or realization of profits to speak of that
would warrant the conferment of additional benefits
sought by private respondents. No company should
be compelled to act liberally and confer upon its
employees additional benefits over and above those
mandated by law when it is plagued by economic
difficulties and financial losses. No act of enlightened
generosity and self-interest can be exacted from near
empty, if not empty, coffers.
With respect to G.R. No. 107487, the same is
dismissed, the issues raised therein having been
rendered moot and academic by the foregoing
disquisitions and disposition. Besides, it is beyond
dispute that employees indeed enjoy first preference
in the event of bankruptcy or liquidation of an
employers business.
Petitioner Manilabank is not the proper party to raise
the issue of failure to comply with the requirement of
Article 110 of the Labor Code on the declaration of
bankruptcy or judicial liquidation, it being the debtor
in this case.
Assuming that private respondents are lawfully
entitled to the monetary claims awarded by the Labor
Arbiter and the NLRC, to which they are, and that the
assets of petitioner bank are indeed insufficient to pay
all its liabilities, it is the other creditors of Manilabank,
if any there be, who possess the personality to oppose
the claims of the private respondents on the ground
of the non-happening of the condition sine qua non
under Article 110 (declaration of bankruptcy or
judicial liquidation). This is as it should be considering
that it is the other creditors of Manilabank, and not
Manilabank itself, who stand to be prejudiced by a
premature payment of the private respondents
claims, for they may be left with no other assets or
with too little assets of the petitioner at the end of
the day with which to satisfy their own claims. The
protective mantle of Article 110 (on the requirement
of declaration of bankruptcy or judicial liquidation)
cannot be claimed by the petitioner-debtor
Manilabank in behalf of the other creditors for they
do not share a community of interest with each other.
74. MERALCO V. SECRETARY OF LABOR AND
EMPLOYMENT
FACTS:
MEWA is the duly recognized labor organization of the
rank-and-file employees of MERALCO.
On September 7, 1995, MEWA informed MERALCO of
its intention to re-negotiate the terms and conditions
of their existing 1992-1997 Collective Bargaining
Agreement (CBA) covering the remaining period of
two years starting from December 1, 1995 to
November 30, 1997.[1] MERALCO signified its
willingness to re-negotiate through its letter dated
October 17, 1995[2] and formed a CBA negotiating
panel for the purpose. On November 10, 1995,
MEWA submitted its proposal[3] to MERALCO, which,
in turn, presented a counter-proposal. Thereafter,
collective bargaining negotiations proceeded.
However, despite the series of meetings between the
negotiating panels of MERALCO and MEWA, the
parties failed to arrive at terms and conditions
acceptable to both of them.
On April 23, 1996, MEWA filed a Notice of Strike with
the National Capital Region Branch of the National
Conciliation and Mediation Board (NCMB) of the
Department of Labor and Employment (DOLE) which
was docketed as NCMB-NCR-NS-04-152-96, on the
grounds of bargaining deadlock and unfair labor
practices. The NCMB then conducted a series of
conciliation meetings but the parties failed to reach
an amicable settlement. Faced with the imminence of
a strike, MERALCO on May 2, 1996, filed an Urgent
Petition[4] with the Department of Labor and
Employment which was docketed as OS-AJ No.
0503[1]96 praying that the Secretary assume
jurisdiction over the labor dispute and to enjoin the
striking employees to go back to work.
In this petition for certiorari, the Manila Electric
Company (MERALCO) seeks to annul the orders of the
Secretary of labor dated August 19, 1996 and
December 28, 1996, wherein the Secretary required
MERALCO and its rank and file union- the Meralco
Workers Association (MEWA) to execute a collective
bargaining agreement (CBA) for the remainder of the
parties 1992-1997 CBA cycle, and to incorporate in
53
this new CBA the Secretarys dispositions on the
disputed economic and non-economic issues.
MERALCO questions the Secretarys award of
Christmas bonuses on the ground that what it had
given its employees were special bonuses to mark or
celebrate special occasions, such as when the Asia
Money Magazine recognized MERALCO as the best
managed company in Asia.
It is MERALCOs position that the Secretary erred
when he recognized that there was an established
practice of giving a two-month Christmas bonus
based on the fact that bonuses were given on or
about Christmas time. It points out that the
established practice attributed to MERALCO was
neither for a considerable period of time nor identical
in either amount or purpose. The purpose and title of
the grants were never the same except for the
Christmas bonuses of 1988 and 1989, and were not in
the same amounts.
ISSUE:
Whether or not the giving of Christmas bonus to
employees was an established practice of MERALCO,
which can no longer be withdrawn by the company.
RULING:
As a rule, a bonus is not a demandable and
enforceable obligation;[29] it may nevertheless be
granted on equitable consideration[30] as when the
giving of such bonus has been the companys long and
regular practice.[31] To be considered a regular
practice, the giving of the bonus should have been
done over a long period of time, and must be shown
to have been consistent and deliberate.[32] Thus we
have ruled in National Sugar Refineries Corporation
vs. NLRC:[33]
The test or rationale of this rule on long practice
requires an indubitable showing that the employer
agreed to continue giving the benefits knowing fully
well that said employees are not covered by the law
requiring payment thereof.
In the case at bar, the record shows the MERALCO,
aside from complying with the regular 13th month
bonus, has further been giving its employees an
additional Christmas bonus at the tail-end of the year
since 1988. While the special bonuses differed in
amount and bore different titles, it can not be denied
that these were given voluntarily and continuously on
or about Christmas time. The considerable length of
time MERALCO has been giving the special grants to
its employees indicates a unilateral and voluntary act
on its part, to continue giving said benefits knowing
that such act was not required by law.
Indeed, a company practice favorable to the
employees has been established and the payments
made by MERALCO pursuant thereto ripened into
benefits enjoyed by the employees. Consequently,
the giving of the special bonus can no longer be
withdrawn by the company as this would amount to a
diminution of the employees existing benefits.[34]
We can not, however, affirm the Secretarys award of
a two-month special Christmas bonus to the
employees since there was no recognized company
practice of giving a two-month special grant. The
two-month special bonus was given only in 1995 in
recognition of the employees prompt and efficient
response during the calamities. Instead, a one-month
special bonus, We believe, is sufficient, this being
merely a generous act on the part of MERALCO.
75. Honda Philippines Inc., vs Samahang
Manggagawa sa Honda
(2005) G.R. 145561
Facts:
The case stems from the collective bargaining
agreement between Honda and the respondent union
that it granted the computation of 14th month pay as
the same as 13th month pay. Honda continues the
practice of granting financial assistance covered every
December each year of not less than 100% of the
basic salary. In the latter part of 1998, the parties
started to re-negotiate for the fourth and fifth years
of the CBA. The union filed a notice of strike on the
ground of unfair labor practice for deadlock.
DOLE assumed jurisdiction over the case and certified
it to the NLRC for compulsory arbitration. The striking
employees were ordered to return to work and
management to accept them back under the same
terms prior to the strike staged. Honda issued a
memorandum of the new computation of the
13month pay to be granted to all its employees
whereby the 31 long strikes shall be considered
unworked days for purpose of computing the said
benefits. The amount equivalent to 12 of the
employees' basic salary shall be deducted from these
bonuses, with a commitment that in the event that
the strike is declared legal, Honda shall pay the
amount.
The respondent union opposed the pro-rated
computation of bonuses. This issue was submitted to
voluntary arbitration where it ruled that the
company's implementation of the pro-rated
computation is invalid.
Decision of Voluntary arbitrator and Appellate Court
54
The appellate court affirmed the decision dated May
2, 2000 rendered by the Voluntary Arbitrator who
ruled that petitioner Honda Philippines, Inc.s (Honda)
pro-rated payment of the 13th and 14th month pay
and financial assistance to its employees was invalid.
Decision of the CA
WHEREFORE, in view of all foregoing premises being
duly considered and evaluated, it is hereby ruled that
the Companys implementation of pro-rated 13th
Month pay, 14th Month pay and Financial Assistance
[is] invalid. The Company is thus ordered to compute
each provision in full month basic pay and pay the
amounts in question within ten (10) days after this
Decision shall have become final and executory.
The three (3) days Suspension of the twenty one (21)
employees is hereby affirmed.
Hondas Motion for Partial Reconsideration was
denied in a resolution dated May 22, 2000. Thus, a
petition was filed with the Court of Appeals, however,
the petition was dismissed for lack of merit.
Issue:
WON the pro-rated computation of the 13th and
14th month pays and other bonuses in question is
valid and lawful.
Ruling:
The pro-rated computation is invalid. The pro-rated
computation of Honda as a company policy has not
ripened into a company practice and it was the first
time they implemented such practice. The payment of
the 13th month pay in full month payment by Honda
has become an established practice. The length of
time where it should be considered in practice is not
being laid down by jurisprudence. The voluntary act of
the employer cannot be unilaterally withdrawn
without violating Article 100 of the Labor Code.
The court also rules that the withdrawal of the benefit
of paying a full month salary for 13th month pay
constitute a violation of Article 100 of the Labor Code.
Lastly, the foregoing interpretation of law and
jurisprudence is more in keeping with the underlying
principle for the grant of this benefit. It is primarily
given to alleviate the plight of workers and to help
them cope with the exorbitant increases in the cost of
living. To allow the pro-ration of the 13th month pay in
this case is to undermine the wisdom behind the law
and the mandate that the workingmans welfare
should be the primordial and paramount
consideration. What is more, the factual milieu of this
case is such that to rule otherwise inevitably results to
dissuasion, if not a deterrent, for workers from the
free exercise of their constitutional rights to self-
organization and to strike in accordance with law.
WHEREFORE, the instant petition is DENIED. The
decision and the resolution of the Court of Appeals
affirming the decision rendered by the Voluntary
Arbitrator on May 2, 2000, are hereby
AFFIRMED in toto.
76. Phil. Veterans Bank v. NLRC
[G.R. No.130439. October 26, 1999]
Facts:
In 1983, petitioner Philippine Veterans Bank was
placed under receivership by the Central Bank (now
Bangko Sentral). Petitioner was subsequently placed
under liquidation on 15 June 1985. Consequently, its
employees, including private respondent Dr. Jose
Teodorico V. Molina, were terminated from work and
given their respective separation pay and other
benefits. To assist in the liquidation, some of
petitioners former employees were rehired, among
them Molina, whose re-employment commenced on
15 June 1985. On 11 May 1991, MOLINA filed a
complaint against members of the liquidation team.
The complaint demanded the implementation of
Wage Orders Nos. NCR-01 and NCR-02 (hereafter
W.O. 1 and W.O. 2) as well as moral damages and
attorneys fees in the amount of P300,000.
Meanwhile, W.O. 1 took effect on November 1990,
prescribing a P17-increase in the daily wage of
employees whose monthly salary did not exceed
P3,802.08. On the other hand, W.O. 2 became
mandated a P12-increase in the daily wage of
employees whose monthly salary did not exceed
P4,319.16. Molina claimed that his salary should have
been adjusted in compliance with said wage orders.
The liquidation team countered that MOLINA was not
entitled to any salary increase because he was already
receiving a monthly salary of P6,654.60.
Labor Arbiter rejected the 26.16 factor used by the
liquidators in computing the daily wage of MOLINA,
adopting instead the factor of 365 days.
Consequently, they were ordered to pay Molina the
wage differentials due him under W.O. 1 and W.O. 2.
On appeal, the NLRC sustained the labor arbiters
ruling after concluding that Molina was a regular
employee of petitioner with a basic monthly salary of
P3,754.60 at the time of his dismissal on 31 January
1992. He was, therefore, entitled to the wage
increases mandated by the aforesaid wage orders.
Issue:
Whether Molina is entitled to wage increase
computation that used the 365 days factor.
SC Ruling:
Molina is entitled to the wage increase computation
using the 365 days as factor. The documents attached
show that the Bank has been consistently using the
factor of 365 days in computing your equivalent
monthly salary prior to its being placed under
receivership by the Central Bank. This is evident in the
wage and allowance increases granted under previous
Presidential Decrees and Wage Orders, which were
55
given by the Bank on monthly basis, i.e., where the
rest days are unworked but paid. This is also indicated
in the appointment and service records of bank
personnel who started out as daily paid employees
and were eventually promoted as permanent
employees with fixed monthly salaries. However,
when R.A. 6640 went into force, the Bank unilaterally
reduced the factor to 262 instead of maintaining
factor 365 as was the practice/policy long before the
effectivity of the Act. And when R.A 6727 took effect,
the Bank reverted to the old practice/policy of using
factor 365 days in computing your equivalent monthly
rate salary.
May we add that the old practice of the bank in using
factor 365 days in a year in determining equivalent
monthly salary cannot unilaterally be changed by your
employer without the consent of the employees, such
practice being now a part of the terms and conditions
of your employment. An employment agreement,
whether written or unwritten, is a bilateral contract
and as such either party thereto cannot change or
amend the terms thereof without the consent of the
other party thereto.
It is clear that respondent is entitled to the wage
increase under R.A. 6440 computed on the basis of
365 paid days and to the corresponding salary
differentials as a result of the application of this
factor. Evidently, the use of the 365 factor is binding
and conclusive, forming as it did part of the
employment contract. To abandon such policy and
revert to its old practice of using the 26.16 factor
would be a diminution of a labor benefit, which is
prohibited by the Labor Code. It cannot be doubted
that the 365 factor favors petitioners employees
because it results in a higher determination of their
monthly salary.
77. PRODUCERS BANK OF THE PHILIPPINES v. NLRC
Facts
This is a special civil action for certiorari with prayer
for preliminary injunction and/or restraining order.
Private respondent filed a complaint with the
Arbitration Branch, National Capital Region, NLRC,
charging petitioner with diminution of benefits, non-
compliance with Wage Order No. 6 and non-payment
of holiday pay. In addition, private respondent prayed
for damages.
Labor Arbiter de Castro found private respondents
claims to be unmeritorious and dismissed its
complaint. In a complete reversal, however, the NLRC
granted all of private respondents claims, except for
damages. Petitioner filed a Motion for Partial
Reconsideration, which was denied by the NLRC in a
Resolution.
The Court granted petitioners prayer for a temporary
restraining order enjoining respondents from
executing the Decision and Resolution of the NLRC.
Issue
1. Can petitioner be compelled to give private
respondent with bonuses?
2. Did the petitioner comply with the law in giving
13th month pay to private respondent?
3. Did the petitioner comply with Wage Order No. 6?
4. Did the petitioner comply with Article 94 of the
Labor Code (specifically on the 314 divisor)?
5. Is private respondent entitled to damages?
Ruling
1. NO.
As to the bonuses, private respondent argues that
the mid-year and Christmas bonuses, by reason of
their having been given for thirteen consecutive
years, have ripened into a vested right and, as
such, can no longer be unilaterally withdrawn by
petitioner without violating Article 100 of
Presidential Decree No. 4429 which prohibits the
diminution or elimination of benefits already
being enjoyed by the employees. Although private
respondent concedes that the grant of a bonus is
discretionary on the part of the employer, it
argues that, by reason of its long and regular
concession, it may become part of the employees
regular compensation.
On the other hand, petitioner asserts that it
cannot be compelled to pay the alleged bonus
differentials due to its depressed financial
condition, as evidenced by the fact that in 1984 it
was placed under conservatorship by the
Monetary Board. Moreover, petitioner points out
that the collective bargaining agreement of the
parties does not provide for the payment of any
mid-year or Christmas bonus. On the contrary,
Section 4 of the collective bargaining agreement
states that:
Acts of Grace. Any other benefits or privileges
which are not expressly provided in this
Agreement, even if now accorded or
hereafter accorded to the employees, shall be
deemed purely acts of grace dependent upon
the sole judgment and discretion of the BANK
to grant, modify or withdraw.
A bonus is an amount granted and paid to an
employee for his industry and loyalty which
contributed to the success of the employer's
business and made possible the realization of
profits. It is an act of generosity granted by an
enlightened employer to spur the employee to
greater efforts for the success of the business and
realization of bigger profits. The granting of a
bonus is a management prerogative, something
given in addition to what is ordinarily received by
or strictly due the recipient. Thus, a bonus is not a
demandable and enforceable obligation, except
when it is made part of the wage, salary or
compensation of the employee.
However, an employer cannot be forced to
distribute bonuses which it can no longer afford
56
 to pay. To hold otherwise would be to penalize
the employer for his past generosity.
It was established by the Labor Arbiter and the
NLRC and admitted by both parties that petitioner
was placed under conservatorship by the
Monetary Board. Petitioner was not only
experiencing a decline in its profits, but was
reeling from tremendous losses triggered by a
bank-run which began in 1983. In such a
depressed financial condition, petitioner cannot
be legally compelled to continue paying the same
amount of bonuses to its employees.
2. YES.
As to the 13th month pay, the NLRC adopted the
position taken by private respondent and held
that the conservator was not justified in
diminishing or not paying the 13th month pay and
that petitioner should have instead applied for an
exemption, in accordance with Section 7 of P.D.
No. 851, as amended by P.D. No. 1364, but that it
did not do so.
Petitioner argues that it is not covered by P.D. No.
851 since the mid-year and Christmas bonuses it
has been giving its employees from 1984 to 1988
exceeds the basic salary for one month (except for
1985 where a total of one month basic salary was
given). Hence, this amount should be applied
towards the satisfaction of the 13th month pay,
pursuant to Section 2 of P.D. No. 851.
P.D. No. 851 requires all employers to pay their
employees receiving a basic salary of not more
than P1,000.00 a month, regardless of the nature
of the employment, a 13th month pay, not later
than December 24 of every year. However,
employers already paying their employees a 13th
month pay or its equivalent are not covered by
the law. The term equivalent shall be construed
to include Christmas bonus, mid-year bonus, cash
bonuses and other payments amounting to not
less than 1/12 of the basic salary. The intention of
the law was to grant some reliefnot to all
workersbut only to those not actually paid a
13th month salary or what amounts to it, by
whatever name called. It was not envisioned that
a double burden would be imposed on the
employer already paying his employees a 13th
month pay or its equivalent whether out of pure
generosity or on the basis of a binding agreement.
To impose upon an employer already giving his
employees the equivalent of a 13th month pay
would be to penalize him for his liberality and in
all probability, the employer would react by
withdrawing the bonuses or resist further
voluntary grants for fear that if and when a law is
passed giving the same benefits, his prior
concessions might not be given due credit.
In the case at bar, it is noted that, for each and
every year involved, the total amount given by
petitioner would still exceed, or at least be equal
to, one month basic salary and thus, may be
considered as an equivalent of the 13th month
pay mandated by P.D. No. 851.
3. Wage Order No.6 increased the statutory
minimum wage of workers, with different
increases being specified for agricultural
plantation and non-agricultural workers. The bone
of contention, however, involves Section 4
thereof which reads:
All wage increase in wage and/or allowance
granted by employers between June 17, 1984
and the effectivity of this Order shall be
credited as compliance with the minimum
wage and allowance adjustments prescribed
herein, provided that where the increases are
less than the applicable amount provided in
this Order, the employer shall pay the
difference. Such increases shall not include
anniversary wage increases provided in
collective bargaining agreements unless the
agreement expressly provide otherwise.
On November 16, 1984, the parties entered into a
CBA providing for the following salary
adjustments:
Article VIII. Section 1. Salary Adjustments.
Cognizant of the effects of, among others,
price increases of oil and other commodities
on the employees wages and earnings, and
the certainty of continued governmental or
statutory actions adjusting employees
minimum wages, earnings, allowances,
bonuses and other fringe benefits, the parties
have formulated and agreed on the following
highly substantial packaged increases in salary
and allowance which take into account and
cover a) any deflation in income of employees
because of such price increases and inflation
and b) the expected governmental response
thereto in the form of statutory adjustments
in wages, allowances and benefits, during the
next three (3) years of this Agreement:
(i) Effective March 1, 1984 - P225.00 per
month as salary increase plus P100.00 per
month as increase in allowance to employees
within the bargaining unit on March 1, 1984.
(ii) Effective March 1,1985 -P125.00 per
month as salary increase plus P100.00 per
month as increase in allowance to employees
within the bargaining unit on March 1,1985.
(iii) Effective March 1,1986 -P125.00 per
month as salary increase plus P100.00 per
month as increase in allowance to employees
within the bargaining unit on March 1, 1986.
The CBA of the parties also included a provision
on the chargeability of such salary or allowance
increases against government-ordered or
legislated income adjustments:
Section 2. Pursuant to the MOLE Decision
dated October 2, 1984 and Order dated
October 24, 1984, the first-year salary and
allowance increases shall be chargeable
against adjustments under Wage Order No. 5,
57
 which took effect on June 16, 1984. The the Labor Arbiter found that the divisor used by
charge ability of the foregoing salary increases petitioner in arriving at the employees daily rate
against government-ordered or legislated for the purpose of computing salary-related
income adjustments subsequent to Wage benefits is 314. This finding was not disputed by
Order No. 5 shall be determined on the basis the NLRC. However, the divisor was reduced to
of the provisions of such government orders 303 by virtue of an inter-office memorandum.
or legislation. The Labor Arbiter observed that the reduction of
Petitioner argues that it complied with Wage the divisor to 303 was for the sole purpose of
Order No. 6 because the first year salary and increasing the employees overtime pay and was
allowance increase provided for under the CBA not meant to replace the use of 314 as the divisor
can be credited against the wage and allowance in the computation of the daily rate for salary-
increase mandated by such wage order. Under related benefits.
Wage Order No. 6, all increases in wages or In Union of Filipro Employees v. Vivar, the Court
allowances granted by the employer between held that the divisor assumes an important role
June 17, 1984 and November 1, 1984 shall be in determining whether or not holiday pay is
credited as compliance with the wage and already included in the monthly paid employees
allowance adjustments prescribed therein. salary and in the computation of his daily rate.
Petitioner asserts that although the CBA was
The divisor of 314 is arrived at by subtracting all
signed by the parties on November 16, 1984, the
Sundays from the total number of calendar days
first year salary and allowance increase was made
in a year, since Saturdays are considered paid rest
to take effect retroactively, beginning from March
days, as stated in the inter-office memorandum.
1, 1984 until February 25, 1985. Petitioner
Thus, the use of 314 as a divisor leads to the
maintains that this period encompasses the
inevitable conclusion that the ten legal holidays
period of creditability provided for under Wage
are already included therein. Moreover, the Court
Order No. 6 and that, therefore, the balance
agrees with the Labor Arbiter that the reduction
remaining after applying the first year salary and
of the divisor to 303 was done for the sole
allowance increase in the collective bargaining
purpose of increasing the employees overtime
agreement to the increase mandated by Wage
pay, and was not meant to exclude holiday pay
Order No. 5, in the amount of P125.00, should be
from the monthly salary of petitioners
made chargeable against the increase prescribed
employees. In fact, it was expressly stated in the
by Wage Order No. 6, and if not sufficient,
inter-office memorandum that the divisor of 314
petitioner is willing to pay the difference.
will still be used in the computation for cash
On the other hand, private respondent contends conversion and in the determination of the daily
that the first year salary and allowance increases rate.
under the collective bargaining agreement cannot
5. As to damages, the NLRC was correct in ruling that
be applied towards the satisfaction of the
there is no basis to support the same.
increases prescribed by Wage Order No. 6
because the former were not granted within the
period of creditability provided for in such wage
order.
The creditability provision in Wage Order No. 6 is
based on important public policy, the
encouragement of employers to grant wage and
allowance increases to their employees higher
than the minimum rates of increases prescribed
by statute or administrative regulation. It would
be inconsistent with the rationale underlying the
creditability provision of Wage Order No. 6 if,
after applying the first year increase to Wage
Order No. 5, the balance was not made
chargeable to the increases under Wage Order
No. 6 for the fact remains that petitioner actually
granted wage and allowance increases sufficient
to cover the increases mandated by Wage Order
No. 5 and part of the increases mandated by
Wage Order No. 6.
4. Article 94 of the Labor Code provides that every
worker shall be paid his regular daily wage during
regular holidays and that the employer may
require an employee to work on any holiday but
such employee shall be paid a compensation
equivalent to twice his regular rate. In this case,
58