G.R. No.
205300 benefits in relation thereto; and (2) they
FONTERRA BRANDS PHILS.,
INC., Petitioner,
vs.
LEONARDO1 LARGADO and TEOTIMO
ESTRELLADO, Respondents.
The Facts
Petitioner Fonterra Brands Phils., Inc.
(Fonterra) contracted the services of
Zytron Marketing and Promotions Corp.
(Z)rtron) for the marketing and promotion
of its milk and dairy products.
Pursuant to the contract, Zytron provided
Fonterra with trade merchandising
representatives (TMRs), including
respondents Leonardo Largado (Largado)
and Teotimo Estrellado (Estrellado).
Fonterra sent Zytron a letter terminating
its promotions contract. Fonterra then
entered into an agreement for manpower
supply with A.C. Sicat Marketing and
Promotional Services (A.C. Sicat). Desirous
of continuing their work as TMRs,
respondents submitted their job
applications with A.C. Sicat, which hired
them for a term of five (5) months,
beginning June 7, 2006 up to November 6,
2006.
When respondents’ 5-month contracts
with A.C. Sicat were about to expire, they
allegedly sought renewal thereof, but were
allegedly refused. This prompted
respondents to file complaints for illegal
dismissal, regularization, non-payment of
service incentive leave and 13th month
pay, and actual and moral damages,
against petitioner, Zytron, and A.C. Sicat.
The Labor Arbiter dismissed the complaint
and ruled that: (1) respondents were not
illegally dismissed. As a matter of fact, they
were the ones who refused to renew their
contract and that they voluntarily
complied with the requirements for them
to claim their corresponding monetary
were consecutively employed by Zytron
and A.C. Sicat, not by Fonterra. The
dispositive portion of the Decision2 reads:
The NLRC affirmed the Labor Arbiter,
finding that respondents’ separation from
Zytron was brought about by the
execution of the contract between
Fonterra and A.C. Sicat where the parties
agreed to absorb Zytron’s personnel,
including respondents. Too, respondents
failed to present any evidence that they
protested this set-up. Furthermore,
respondents failed to refute the allegation
that they voluntarily refused to renew
their contract with A.C. Sicat. Also,
respondents did not assert any claim
against Zytron and A.C. Sicat.
The NLRC decision was assailed in a
petition under Rule 65 before the CA.
Ruling on the petition, the CA, in the
questioned Decision,4 found that A.C. Sicat
satisfies the requirements of legitimate job
contracting, but Zytron does not.
According to the CA: (1) Zytron’s paid-in
capital of 250,000 cannot be considered as
substantial capital; (2) its Certificate of
Registration was issued by the DOLE
months after respondents’ supposed
employment ended; and (3) its claim that
it has the necessary tools and equipment
for its business is unsubstantiated.
Therefore, according to the CA,
respondents were Fonterra’s employees.
Additionally, the CA held that respondents
were illegally dismissed since Fonterra
itself failed to prove that their dismissal is
lawful. However, the illegal dismissal
should be reckoned from the termination
of their supposed employment with Zytron
on June 6, 2006. Furthermore,
respondents’ transfer to A.C. Sicat is
tantamount to a completely new
engagement by another employer. Lastly,
the termination of their contract with A.C.
Sicat arose from the expiration of their
respective contracts with the latter. The
CA, thus, ruled that Fonterra is liable to
respondents and ordered the
reinstatement of respondents without loss
of seniority rights, with full backwages,
and other benefits from the time of their
illegal dismissal up to the time of their
actual reinstatement.
Zytron and Fonterra moved for
reconsideration, but to no avail. Hence,
this petition.
The Issues
(1) whether or not Zytron and A.C. Sicat
are labor-only contractors, making
Fonterra the employer of herein
respondents; and (2) whether or not
respondents were illegally dismissed.
Our Ruling
We find merit in the petition.
As regards the CA’s conclusion that Zytron
is not a legitimate job contractor, We are
of the view that such is immaterial to the
resolution of the illegal dismissal issue for
one reason: We find that respondents
voluntarily terminated their employment
with Zytron, contrary to their allegation
that their employment with Zytron was
illegally terminated.
We do not agree with the CA that
respondents’ employment with Zytron was
illegally terminated.
As correctly held by the Labor Arbiter and
the NLRC, the termination of respondents’
employment with Zytron was brought
about by the cessation of their contracts
with the latter. We give credence to the
Labor Arbiter’s conclusion that
respondents were the ones who refused to
renew their contracts with Zytron, and the
NLRC’s finding that they themselves
acquiesced to their transfer to A.C. Sicat.
By refusing to renew their contracts with
Zytron, respondents effectively resigned
from the latter. Resignation is the
voluntary act of employees who are
compelled by personal reasons to
dissociate themselves from their
employment, done with the intention of
relinquishing an office, accompanied by
the act of abandonment.5
Here, it is obvious that respondents were
no longer interested in continuing their
employment with Zytron. Their voluntary
refusal to renew their contracts was
brought about by their desire to continue
their assignment in Fonterra which could
not happen in view of the conclusion of
Zytron’s contract with Fonterra. Hence, to
be able to continue with their assignment,
they applied for work with A.C. Sicat with
the hope that they will be able to continue
rendering services as TMRs at Fonterra
since A.C. Sicat is Fonterra’s new
manpower supplier. This fact is even
acknowledged by the CA in the assailed
Decision where it recognized the reason
why respondents applied for work at A.C.
Sicat. The CA stated that "[t]o continuously
work as merchandisers of Fonterra
products, [respondents] submitted their
job applications to A.C. Sicat x x x."6 This is
further bolstered by the fact that
respondents voluntarily complied with the
requirements for them to claim their
corresponding monetary benefits in
relation to the cessation of their
employment contract with Zytron.
In short, respondents voluntarily
terminated their employment with Zytron
by refusing to renew their employment
contracts with the latter, applying with
A.C. Sicat, and working as the latter’s
employees, thereby abandoning their
previous employment with Zytron. Too, it
is well to mention that for obvious
reasons, resignation is inconsistent with
illegal dismissal. This being the case,
Zytron cannot be said to have illegally
dismissed respondents, contrary to the
findings of the CA.
As regards respondents’ employment with
A.C. Sicat and its termination via non-
renewal of their contracts, considering
that in labor-only contracting, the law
creates an employer-employee
relationship between the principal and the
labor-only contractor’s employee as if such
employees are directly employed by the
principal employer, and considers the
contractor as merely the agent of the
principal,7 it is proper to dispose of the
issue on A.C. Sicat’s status as a job
contractor first before resolving the issue
on the legality of the cessation of
respondents’ employment.
In this regard, We defer to the findings of
the CA anent A.C. Sicat’s status as a
legitimate job contractor, seeing that it is
consistent with the rules on job
contracting and is sufficiently supported by
the evidence on record.
A person is considered engaged in
legitimate job contracting or
subcontracting if the following conditions
concur:
1.The contractor or subcontractor
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, and 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;
2.The contractor or subcontractor
has substantial capital or
investment; and
3.The agreement between the
principal and contractor or
subcontractor assures the
contractual employees entitlement
to all labor and occupational safety
and health standards, free exercise
of the right to self-organization,
security of tenure, and social and
welfare benefits.8
On the other hand, contracting is
prohibited when the contractor or
subcontractor merely recruits, supplies or
places workers to perform a job, work or
service for a principal and if any of the
following elements are present, thus:
1.The contractor or subcontractor
does not have substantial capital or
investment which relates to the job,
work or service to be performed and
the employees recruited, supplied or
placed by such contractor or
subcontractor are performing
activities which are directly related
to the main business of the
principal; or
2.The contractor does not exercise
the right to control over the
performance of the work of the
contractual employee.9
The CA correctly found that A.C. Sicat is
engaged in legitimate job contracting. It
duly noted that A.C. Sicat was able to
prove its status as a legitimate job
contractor for having presented the
following evidence, to wit:
1.Certificate of Business
Registration;
2.Certificate of Registration with the
Bureau of Internal Revenue;
3.Mayor’s Permit;
4.Certificate of Membership with
the Social Security System;
5.Certificate of Registration with the
Department of Labor and
Employment;
6.Company Profile; and
7.Certifications issued by its
clients.10
Furthermore, A.C. Sicat has substantial
capital, having assets totaling 5,926,155.76
as of December 31, 2006. Too, its
Agreement with Fonterra clearly sets forth
that A.C. Sicat shall be liable for the wages
and salaries of its employees or workers,
including benefits, premiums, and
protection due them, as well as remittance
to the proper government entities of all
withholding taxes, Social Security Service,
and Medicare premiums, in accordance
with relevant laws.
The appellate court further correctly held
that Fonterra’s issuance of Merchandising
Guidelines, stock monitoring and inventory
forms, and promo mechanics, for
compliance and use of A.C. Sicat’s
employees assigned to them, does not
establish that Fonterra exercises control
over A.C. Sicat. We agree with the CA’s
conclusion that these were imposed only
to ensure the effectiveness of the
promotion services to be rendered by the
merchandisers as it would be risky, if not
imprudent, for any company to completely
entrust the performance of the operations
it has contracted out.
These sufficiently show that A.C. Sicat
carries out its merchandising and
promotions business, independent of
Fonterra’s business.1âwphi1 Thus, having
settled that A.C. Sicat is a legitimate job
contractor, We now determine whether
the termination of respondents’
employment with the former is valid.
We agree with the findings of the CA that
the termination of respondents’
employment with the latter was simply
brought about by the expiration of their
employment contracts.
Foremost, respondents were fixed-term
employees. As previously held by this
Court, fixed-term employment contracts
are not limited, as they are under the
present Labor Code, to those by nature
seasonal or for specific projects with
predetermined dates of completion; they
also include those to which the parties by
free choice have assigned a specific date of
termination.11 The determining factor of
such contracts is not the duty of the
employee but the day certain agreed upon
by the parties for the commencement and
termination of the employment
relationship.12
In the case at bar, it is clear that
respondents were employed by A.C. Sicat
as project employees. In their employment
contract with the latter, it is clearly stated
that "[A.C. Sicat is] temporarily employing
[respondents] as TMR[s] effective June 6[,
2006] under the following terms and
conditions: The need for your service being
only for a specific project, your temporary
employment will be for the duration only
of said project of our client, namely to
promote FONTERRA BRANDS products x x
x which is expected to be finished on or
before Nov. 06, 2006."13
Respondents, by accepting the conditions
of the contract with A.C. Sicat, were well
aware of and even acceded to the
condition that their employment thereat
will end on said pre-determined date of
termination. They cannot now argue that
they were illegally dismissed by the latter
when it refused to renew their contracts
after its expiration. This is so since the
non-renewal of their contracts by A.C.
Sicat is a management prerogative, and
failure of respondents to prove that such
was done in bad faith militates against
their contention that they were illegally
dismissed. The expiration of their contract
with A.C. Sicat simply caused the natural
cessation of their fixed-term employment
thereat. We, thus, see no reason to disturb
the ruling of the CA in this respect.
G.R. No. 202961 February 4, 2015
EMER MILAN, RANDY MASANGKAY,
WILFREDO JAVIER, RONALDO DAVID,
BONIFACIO MATUNDAN, NORA
MENDOZA, et al., Petitioners,
vs.
NATIONAL LABOR RELATIONS
COMMISSION, ·SOLID MILLS, INC., and/or
PHILIP ANG, Respondents.
Facts:
Petitioners are respondent Solid Mills, Inc.'
s (Solid Mills) employees.1 They are
represented by the National Federation of
Labor Unions (NAFLU), their collective
bargaining agent.2
As Solid Mills’ employees, petitioners and
their families were allowed to occupy SMI
Village, a property owned by Solid
Mills.3 According to Solid Mills, this was
"[o]ut of liberality and for the convenience
of its employees . . . [and] on the condition
that the employees . . . would vacate the
premises anytime the Company deems
fit."4
In September 2003, petitioners were
informed that effective October 10, 2003,
Solid Mills would cease its operations due
to serious business losses.5 NAFLU
recognized Solid Mills’ closure due to
serious business losses in the
memorandum of agreement dated
September 1, 2003.6 The memorandum of
agreement provided for Solid Mills’ grant
of separation pay less accountabilities,
accrued sick leave benefits, vacation leave
benefits, and 13th month pay to the
employees.7 Pertinent portions of the
agreement provide:
WHEREAS, the COMPANY has incurred
substantial financial losses and is currently
experiencing further severe financial
losses;
WHEREAS, in view of such irreversible
financial losses, the COMPANY will cease
its operations on October 10, 2003;
WHEREAS, all employees of the COMPANY
on account of irreversible financial losses,
will be dismissed from employment
effective October 10, 2003;
In view thereof, the parties agree as
follows:
1. That UNION acknowledges that
the COMPANY is experiencing
severe financial losses and as a
consequence of which, management
is constrained to cease the
company’s operations.
2. The UNION acknowledges that
under Article 283 of the Labor Code,
separation pay is granted to
employees who are dismissed due
to closures or cessation of
operations NOT DUE to serious
business losses.
3. The UNION acknowledges that in
view of the serious business losses
the Company has been experiencing
as seen in their audited financial
statements, employees ARE NOT
granted separation benefits under
the law.
4. The COMPANY, by way of
goodwill and in the spirit of
generosity agrees to grant financial
assistance less accountabilities to
members of the Union based on
length of service to be computed as
follows: (Italics in this paragraph
supplied)
Number of days - 12.625 for every
year of service
5. In view of the above, the
members of the UNION will receive
such financial assistance on an equal
monthly installments basis based on
the following schedule:
 First Check due on January 5, 2004
and every 5th of the month
thereafter until December 5, 2004.
6. The COMPANY commits to pay
any accrued benefits the Union
members are entitled to, specifically
those arising from sick and vacation
leave benefits and 13th month pay,
less accountabilities based on the
following schedule:
One Time Cash Payment to be
distributed anywhere from. . . .
....
8. The foregoing agreement is
entered into with full knowledge by
the parties of their rights under the
law and they hereby bind
themselves not to conduct any
concerted action of whatsoever
kind, otherwise the grant of financial
assistance as discussed above will be
withheld.8 (Emphasis in the original)
Solid Mills filed its Department of Labor
and Employment termination report on
September 2, 2003.9
Later, Solid Mills, through Alfredo Jingco,
sent to petitioners individual notices to
vacate SMI Village.10
Petitioners were no longer allowed to
report for work by October 10,
2003.11 They were required to sign a
memorandum of agreement with release
and quitclaim before their vacation and
sick leave benefits, 13th month pay, and
separation pay would be
released.12 Employees who signed the
memorandum of agreement were
considered to have agreed to vacate SMI
Village, and to the demolition of the
constructed houses inside as condition for
the release of their termination benefits
and separation pay.13 Petitioners refused
to sign the documents and demanded to
be paid their benefits and separation
pay.14
Hence, petitioners filed complaints before
the Labor Arbiter for alleged non-payment
of separation pay, accrued sick and
vacation leaves, and 13th month
pay.15 They argued that their accrued
benefits and separation pay should not be
withheld because their payment is based
on company policy and
practice.16 Moreover, the 13th month pay
is based on law, specifically, Presidential
Decree No. 851.17 Their possession of Solid
Mills property is not an accountability that
is subject to clearance procedures.18 They
had already turned over to Solid Mills their
uniforms and equipment when Solid Mills
ceased operations.19
On the other hand, Solid Mills argued that
petitioners’ complaint was premature
because they had not vacated its
property.20
The Labor Arbiter ruled in favor of
petitioners.21 According to the Labor
Arbiter, Solid Mills illegally withheld
petitioners’ benefits and separation
pay.22 Petitioners’ right to the payment of
their benefits and separation pay was
vested by law and contract.23 The
memorandum of agreement dated
September 1, 2003 stated no condition to
the effect that petitioners must vacate
Solid Mills’ property before their benefits
could be given to them.24Petitioners’
possession should not be construed as
petitioners’ "accountabilities" that must be
cleared first before the release of
benefits.25 Their possession "is not by
virtue of any employer-employee
relationship."26 It is a civil issue, which is
outside the jurisdiction of the Labor
Arbiter.27
The dispositive portion of the Labor
Arbiter’s decision reads:
WHEREFORE, premises considered,
judgment is entered ORDERING
respondents SOLID MILLS, INC. and/or
PHILIP ANG (President), in solido to pay
the remaining 21 complainants:
1) 19 of which, namely EMER
MILAN, RAMON MASANGKAY,
ALFREDO JAVIER, RONALDO DAVID,
BONIFACIO MATUNDAN, NORA
MENDOZA, MYRNA IGCAS, RAUL DE
LAS ALAS, RENATO ESTOLANO, REX
S. DIMAFELIX, MAURA MILAN,
JESSICA BAYBAYON, ALFREDO
MENDOZA, ROBERTO IGCAS, ISMAEL
MATA, CARLITO DAMIAN, TEODORA
MAHILOM, MARILOU LINGA,
RENATO LINGA their separation pay
of 12.625 days’ pay per year of
service, pro-rated 13th month pay
for 2003 and accrued vacation and
sick leaves, plus 12% interest p.a.
from date of filing of the lead
case/judicial demand on 12/08/03
until actual payment and/or finality;
2) the remaining 2 of which,
complainants CLEOPATRA ZACARIAS,
as she already received on 12/19/03
her accrued 13th month pay for
2003, accrued VL/SL total amount
of P15,435.16, likewise, complainant
Jerry L. Sesma as he already
received his accrued 13th month
pay for 2003, SL/VL in the total
amount of P10,974.97, shall be paid
only their separation pay of 12.625
days’ pay per year of service but also
with 12% interest p.a. from date of
filing of the lead case/judicial
demand on 12/08/03 until actual
payment and/or finality, which
computation as of date, amount to
as shown in the attached
computation sheet.
3) Nine (9) individual complaintsviz.,
of Maria Agojo, Joey Suarez,
Ronaldo Vergara, Ronnie Vergara,
Antonio R. Dulo, Sr., Bryan D.
Durano, Silverio P. Durano, Sr.,
Elizabeth Duarte and Purificacion
Malabanan are DISMISSED WITH
PREJUDICE due to amicable
settlement, whereas, that of [RONIE
ARANAS], [EMILITO NAVARRO],
[NONILON PASCO], [GENOVEVA
PASCO], [OLIMPIO A. PASCO] are
DISMISSED WITHOUT PREJUDICE,
for lack of interest and/or failure to
prosecute.
The Computation and Examination unit is
directed to cause the computation of the
award in Pars. 2 and 3 above.28 (Emphasis
in the original)
Solid Mills appealed to the National Labor
Relations Commission.29 It prayed for,
among others, the dismissal of the
complaints against it and the reversal of
the Labor Arbiter’s decision.30
The National Labor Relations Commission
affirmed paragraph 3 of the Labor Arbiter’s
dispositive portion, but reversed
paragraphs 1 and 2. Thus:
WHEREFORE, the Decision of Labor Arbiter
Renaldo O. Hernandez dated 10/17/05 is
AFFIRMED in so far as par. 3 thereof is
concerned but modified in that paragraphs
1 and 2 thereof are REVERSED and SET
ASIDE. Accordingly, the following
complainants, namely: Emir Milan, Ramon
Masangkay, Alfredo Javier, Ronaldo David,
Bonifacio Matundan, Nora Mendoza,
Myrna Igcas, Raul De Las Alas, Renato
Estolano, Rex S. Dimaf[e]lix, Maura Milan,
Jessica Baybayon, Alfredo Mendoza,
Roberto Igcas, Cleopatra Zacarias and Jerry
L. Sesma’s monetary claims in the form of
separation pay, accrued 13th month pay
for 2003, accrued vacation and sick leave
pays are held in abeyance pending
compliance of their accountabilities to
respondent company by turning over the
subject lots they respectively occupy at
SMI Village Sucat
Muntinlupa City, Metro Manila to herein
respondent company.31
The National Labor Relations Commission
noted that complainants Marilou Linga,
Renato Linga, IsmaelMata, and Carlito
Damian were already paid their respective
separation pays and
benefits.32 Meanwhile, Teodora Mahilom
already retired long before Solid Mills’
closure.33 She was already given her
retirement benefits.34
The National Labor Relations Commission
ruled that because of petitioners’ failure to
vacate Solid Mills’ property, Solid Mills was
justified in withholding their benefits and
separation pay.35 Solid Mills granted the
petitioners the privilege to occupy its
property on account of petitioners’
employment.36 It had the prerogative to
terminate such privilege.37 The termination
of Solid Mills and petitioners’ employer-
employee relationship made it incumbent
upon petitioners to turn over the property
to Solid Mills.38
Petitioners filed a motion for partial
reconsideration on October 18, 2010,39 but
this was denied in the November 30, 2010
resolution.40
Petitioners, thus, filed a petition for
certiorari41 before the Court of Appeals to
assail the National Labor Relations
Commission decision of August 31, 2010
and resolution of November 30, 2010.42
On January 31, 2012, the Court of Appeals
issued a decision dismissing petitioners’
petition,43 thus:
WHEREFORE, the petition is hereby
ordered DISMISSED.44
The Court of Appeals ruled that Solid Mills’
act of allowing its employees to make
temporary dwellings in its property was a
liberality on its part. It may be revoked any
time at its discretion.45 As a consequence
of Solid Mills’ closure and the resulting
termination of petitioners, the employer-
employee relationship between them
ceased to exist. There was no more reason
for them to stay in Solid Mills’
property.46 Moreover, the memorandum
of agreement between Solid Mills and the
union representing petitioners provided
that Solid Mills’ payment of employees’
benefits should be "less accountabilities."47
On petitioners’ claim that there was no
evidence that Teodora Mahilom already
received her retirement pay, the Court of
Appeals ruled that her complaint filed
before the Labor Arbiter did not include a
claim for retirement pay. The issue was
also raised for the first time on appeal,
which is not allowed.48 In any case, she
already retired before Solid Mills ceased its
operations.49
The Court of Appeals agreed with the
National Labor Relations Commission’s
deletion of interest since it found that
Solid Mills’ act of withholding payment of
benefits and separation pay was proper.
Petitioners’ terminal benefits and pay
were withheld because of petitioners’
failure to vacate Solid Mills’ property.50
Finally, the Court of Appeals noted that
Carlito Damian already received his
separation pay and benefits.51 Hence, he
should no longer be awarded these
claims.52
In the resolution promulgated on July 16,
2012, the Court of Appeals denied
petitioners’ motion for reconsideration.53
Petitioners raise in this petition the
following errors:
I
WHETHER OR NOT THE HONORABLE
COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT RULED
THAT PAYMENT OF THE MONETARY
CLAIMS OF PETITIONERS SHOULD BE
HELD IN ABEYANCE PENDING
COMPLIANCE OF THEIR
ACCOUNTABILITIES TO RESPONDENT
SOLID MILLS BY TURNING OVER THE
 SUBJECT LOTS THEY RESPECTIVELY
OCCUPY AT SMI VILLAGE, SUCAT,
MUNTINLUPA CITY.
II
WHETHER OR NOT THE HONORABLE
COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT
UPHELD THE RULING OF THE NLRC
DELETING THE INTEREST OF 12%
PER ANNUM IMPOSED BY THE
HONORABLE LABOR ARBITER
HERNANDEZ ON THE AMOUNTDUE
FROM THE DATE OF FILING OF THE
LEAD CASE/JUDICIAL DEMAND ON
DECEMBER 8, 2003 UNTIL ACTUAL
PAYMENT AND/OR FINALITY.
III
WHETHER OR NOT THE HONORABLE
COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT
UPHELD THE RULING OF THE NLRC
DENYING THE CLAIM OF TEODORA
MAHILOM FOR PAYMENT OF
RETIREMENT BENEFITS DESPITE
LACK OF ANY EVIDENCE THAT SHE
RECEIVED THE SAME.
IV
WHETHER OR NOT PETITIONER
CARLITO DAMIAN IS ENTITLED TO
HIS MONETARY BENEFITS FROM
RESPONDENT SOLID MILLS.54
Petitioners argue that respondent Solid
Mills and NAFLU’s memorandum of
agreement has no provision stating that
benefits shall be paid only upon return of
the possession of respondent Solid Mills’
property.55 It only provides that the
benefits shall be "less accountabilities,"
which should not be interpreted to include
such possession.56 The fact that majority of
NAFLU’s members were not occupants of
respondent Solid Mills’ property is
evidence that possession of the property
was not contemplated in the
agreement.57 "Accountabilities" should be
interpreted to refer only to
accountabilities that were incurred by
petitioners while they were performing
their duties as employees at the
worksite.58 Moreover, applicable laws,
company practice, or policies do not
provide that 13th month pay, and sick and
vacation leave pay benefits, may be
withheld pending satisfaction of liabilities
by the employee.59
Petitioners also point out that the National
Labor Relations Commission and the Court
of Appeals have no jurisdiction to declare
that petitioners’ act of withholding
possession of respondent Solid Mills’
property is illegal.60The regular courts have
jurisdiction over this issue.61 It is
independent from the issue of payment of
petitioners’ monetary benefits.62
For these reasons, and because, according
to petitioners, the amount of monetary
award is no longer in question, petitioners
are entitled to 12% interest per annum.63
Petitioners also argue that Teodora
Mahilom and Carlito Damian are entitled
to their claims. They insist that Teodora
Mahilom did not receive her retirement
benefits and that Carlito Damian did not
receive his separation benefits.64
Respondents Solid Mills and Philip Ang,in
their joint comment, argue that
petitioners’ failure to turn over respondent
Solid Mills’ property "constituted an
unsatisfied accountability" for which
reason "petitioners’ benefits could
rightfully be withheld."65 The term
"accountability" should be given its natural
and ordinary meaning.66 Thus, it should be
interpreted as "a state of being liable or
responsible," or "obligation."67 Petitioners’
differentiation between accountabilities
incurred while performing jobs at the
worksite and accountabilities incurred
outside the worksite is baseless because
the agreement with NAFLU merely stated
"accountabilities," without qualification.68
On the removal of the award of 12%
interest per annum, respondents argue
that such removal was proper since
respondent Solid Mills was justified in
withholding the monetary
claims.69 Respondents argue that Teodora
Mahilom had no more cause of action for
retirement benefits claim.70 She had
already retired more than a decade before
Solid Mills’ closure. She also already
received her retirement benefits in
1991.71 Teodora Mahilom’s claim was also
not included in the complaint filed before
the Labor Arbiter.It was improper to raise
this claim for the first time on appeal. In
any case, Teodora Mahilom’s claim was
asserted long after the three-year
prescriptive period provided in Article 291
of the Labor Code.72
Lastly, according to respondents, it would
be unjust if Carlito Damian would be
allowed to receive monetary benefits
again, which he, admittedly, already
received from Solid Mills.73
I
The National Labor Relations Commission
may preliminarily determine issues related
to rights arising from an employer-
employee relationship
The National Labor Relations Commission
has jurisdiction to determine,
preliminarily, the parties’ rights over a
property, when it is necessary to
determine an issue related to rights or
claims arising from an employer-employee
relationship.
Article 217 provides that the Labor Arbiter,
in his or her original jurisdiction, and the
National Labor Relations Commission, in its
appellate jurisdiction, may determine
issues involving claims arising from
employer employee relations. Thus:
ART. 217. JURISDICTION OF LABOR
ARBITERS AND THE COMMISSION. – (1)
Except as otherwise provided under this
Code, the Labor Arbiters shall have original
and exclusive jurisdiction to hear and
decide within thirty (30) calendar days
after the submission of the case by the
parties for decision without extension,
even in the absence of stenographic notes,
the following cases involving workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for
reinstatement, those cases that
workers may file involving wages,
rates of pay, hours of work and
other terms and conditions of
employment;
4. Claims for actual, moral,
exemplary and other forms of
damages arising from the employer-
employee relations;
5. Cases arising from any violation of
Article 264 of this Code, including
questions involving the legality of
strikes and lockouts; and
6. Except claims for Employees
Compensation, Social Security,
Medicare and maternity benefits, all
other claims, arising from employer-
employee relations including those
of persons in domestic or household
service, involving an amount
exceeding five thousand pesos
(P5,000.00), regardless of whether
accompanied with a claim for
reinstatement.
(2) The Commission shall have exclusive
appellate jurisdiction over all cases
decided by Labor Arbiters. (Emphasis
supplied)
Petitioners’ claim that they have the right
to the immediate release of their benefits
as employees separated from respondent
Solid Mills is a question arising from the
employer-employee relationship between
the parties.
Claims arising from an employer-employee
relationship are not limited to claims by an
employee. Employers may also have claims
against the employee, which arise from
the same relationship. In Bañez v.
Valdevilla,74 this court ruled that Article
217 of the Labor Code also applies to
employers’ claim for damages, which
arises from or is connected with the labor
issue. Thus: Whereas this Court in a
number of occasions had applied the
jurisdictional provisions of Article 217 to
claims for damages filed by employees, we
hold that by the designating clause "arising
from the employer-employee relations"
Article 217 should apply with equal force
to the claim of an employer for actual
damages against its dismissed employee,
where the basis for the claim arises from
or is necessarily connected with the fact of
termination, and should be entered as a
counterclaim in the illegal dismissal case.75
Bañez was cited in Domondon v. National
Labor Relations Commission.76 One of the
issues in Domondon is whether the Labor
Arbiter has jurisdiction to decide an issue
on the transfer of ownership of a vehicle
assigned to the employee. It was argued
that only regular courts have jurisdiction to
decide the issue.77
This court ruled that since the transfer of
ownership of the vehicle to the employee
was connected to his separation from the
employer and arose from the employer-
employee relationship of the parties, the
employer’s claim fell within the
LaborArbiter’s jurisdiction.78
As a general rule, therefore, a claim only
needs to be sufficiently connected to the
labor issue raised and must arise from an
employer employee relationship for the
labor tribunals to have jurisdiction.
In this case, respondent Solid Mills claims
that its properties are in petitioners’
possession by virtue of their status as its
employees. Respondent Solid Mills
allowed petitioners to use its property as
an act of liberality. Put in other words, it
would not have allowed petitioners to use
its property had they not been its
employees. The return of its properties in
petitioners’ possession by virtue of their
status as employees is an issue that must
be resolved to determine whether benefits
can be released immediately. The issue
raised by the employer is, therefore,
connected to petitioners’ claim for
benefits and is sufficiently intertwined
with the parties’ employer employee
relationship. Thus, it is properly within the
labor tribunals’ jurisdiction.
II
Institution of clearance procedures has
legal bases
Requiring clearance before the release of
last payments to the employee is a
standard procedure among employers,
whether public or private. Clearance
procedures are instituted to ensure that
the properties, real or personal, belonging
to the employer but are in the possession
of the separated employee, are returned
to the employer before the employee’s
departure.
As a general rule, employers are
prohibited from withholding wages from
employees. The Labor Code provides:
Art. 116. Withholding of wages and
kickbacks prohibited. It shall be unlawful
for any person, directly or indirectly, to
withhold any amount from the wages of a
worker or induce him to give up any part
of his wages by force, stealth, intimidation,
threat or by any other means whatsoever
without the worker’s consent.
The Labor Code also prohibits the
elimination or diminution of benefits.
Thus:
Art. 100. Prohibition against elimination or
diminution of benefits. Nothing in this
Book 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.
However, our law supports the employers’
institution of clearance procedures before
the release of wages. As an exception to
the general rule that wages may not be
withheld and benefits may not be
diminished, the Labor Code provides:
Art. 113. Wage deduction.No employer, in
his own behalf or in behalf of any person,
shall make any deduction from the wages
of his employees, except:
1. In cases where the worker is
insured with his consent by the
employer, and the deduction is to
recompense the employer for the
amount paid by him as premium on
the insurance;
2. For union dues, in cases where
the right of the worker or his union
to check-off has been recognized by
the employer or authorized in
writing by the individual worker
concerned; and
3. In cases where the employer is
authorized by law or regulations
issued by the Secretary of Labor and
Employment. (Emphasis supplied)
The Civil Code provides that the employer
is authorized to withhold wages for debts
due:
Article 1706. Withholding of the wages,
except for a debt due, shall not be made
by the employer.
"Debt" in this case refers to any obligation
due from the employee to the employer. It
includes any accountability that the
employee may have to the employer.
There is no reason to limit its scope to
uniforms and equipment, as petitioners
would argue.
More importantly, respondent Solid Mills
and NAFLU, the union representing
petitioners, agreed that the release of
petitioners’ benefits shall be "less
accountabilities."
"Accountability," in its ordinary sense,
means obligation or debt. The ordinary
meaning of the term "accountability" does
not limit the definition of accountability to
those incurred in the worksite. As long as
the debt or obligation was incurred by
virtue of the employer-employee
relationship, generally, it shall be included
in the employee’s accountabilities that are
subject to clearance procedures.
It may be true that not all employees
enjoyed the privilege of staying in
respondent Solid Mills’ property. However,
this alone does not imply that this privilege
when enjoyed was not a result of the
employer-employee relationship. Those
who did avail of the privilege were
employees of respondent Solid Mills.
Petitioners’ possession should, therefore,
be included in the term "accountability."
Accountabilities of employees are
personal. They need not be uniform
among all employees in order to be
included in accountabilities incurred by
virtue of an employer-employee
relationship. Petitioners do not
categorically deny respondent Solid Mills’
ownership of the property, and they do
not claim superior right to it. What can be
gathered from the findings of the Labor
Arbiter, National Labor Relations
Commission, and the Court of Appeals is
that respondent Solid Mills allowed the
use of its property for the benefit of
petitioners as its employees. Petitioners
were merely allowed to possess and use it
out of respondent Solid Mills’ liberality.
The employer may, therefore, demand the
property at will.79
The return of the property’s possession
became an obligation or liability on the
part of the employees when the employer-
employee relationship ceased. Thus,
respondent Solid Mills has the right to
withhold petitioners’ wages and benefits
because of this existing debt or liability. In
Solas v. Power and Telephone Supply
Phils., Inc., et al., this court recognized this
right of the employer when it ruled that
the employee in that case was not
constructively dismissed.80 Thus:
There was valid reason for respondents’
withholding of petitioner’s salary for the
month of February 2000. Petitioner does
not deny that he is indebted to his
employer in the amount of around
95,000.00. Respondents explained that
petitioner’s salary for the period of
February 1-15, 2000 was applied as partial
payment for his debt and for withholding
taxes on his income; while for the period
of February 15-28, 2000, petitioner was
already on absence without leave, hence,
was not entitled to any pay.81
The law does not sanction a situation
where employees who do not even assert
any claim over the employer’s property are
allowed to take all the benefits out of their
employment while they simultaneously
withhold possession of their employer’s
property for no rightful reason.
Withholding of payment by the employer
does not mean that the employer may
renege on its obligation to pay employees
their wages, termination payments, and
due benefits. The employees’ benefits are
also not being reduced. It is only subjected
to the condition that the employees return
properties properly belonging to the
employer. This is only consistent with the
equitable principle that "no one shall be
unjustly enriched or benefited at the
expense of another."82
For these reasons, we cannot hold that
petitioners are entitled to interest of their
withheld separation benefits. These
benefits were properly withheld by
respondent Solid Mills because of their
refusal to return its property.
III
Mahilom and Damian are not entitled to
the benefits claimed
Teodora Mahilom is not entitled to
separation benefits.
Both the National Labor Relations
Commission and the Court of Appeals
found that Teodora Mahilom already
retired long before respondent Solid Mills’
closure. They found that she already
received her retirement benefits. We have
no reason to disturb this finding. This court
is not a trier of facts. Findings of the
National Labor Relations Commission,
especially when affirmed by the Court of
Appeals, are binding upon this court.83
Moreover, Teodora Mahilom’s claim for
retirement benefits was not included in
her complaint filed before the Labor
Arbiter. Hence, it may not be raised in the
appeal.
Similarly, the National Labor Relations
Commission and the Court of Appeals
found that Carlito Damian already received
his terminal benefits. Hence, he may no
longer claim terminal benefits. The fact
that respondent Solid Mills has not yet
demolished Carlito Damian’s house in SMI
Village is not evidence that he did not
receive his benefits. Both the National
Labor Relations Commission and the Court
of Appeals found that he executed an
affidavit stating that he already received
the benefits.
Absent any showing that the National
Labor Relations Commission and the Court
of Appeals misconstrued these facts, we
will not reverse these findings.
Our laws provide for a clear preference for
labor. This is in recognition of the
asymmetrical power of those with capital
when they are left to negotiate with their
workers without the standards and
protection of law. In cases such as these,
the collective bargaining unit of workers (b) Legal holiday pay, premium pay for
are able to get more benefits and in special holidays;
exchange, the owners are able to continue
with the program of cutting their losses or
wind down their operations due to serious (c) Night premium;
business losses. The company in this case
did all that was required by law.

The preferential treatment given by our (d) Bereavement leave pay;

law to labor, however, is not a license for
abuse.84 It is not a signal to commit acts of
unfairness that will unreasonably infringe
(e) Union leave pay;
on the property rights of the company.
Both labor and employer have social
utility, and the law is not so biased that it
does not find a middle ground to give each (f) Maternity leave pay;
their due.

Clearly, in this case, it is for the workers to

return their housing in exchange for the (g) Paternity leave pay;
release of their benefits.1âwphi1 This is
what they agreed upon. It is what is fair in
the premises. (h) Company vacation and sick leave pay;
and

SEVILLA TRADING COMPANY, petitioner,

vs. A.V.A. TOMAS E. SEMANA, SEVILLA (i) Cash conversion of unused company
TRADING WORKERS UNIONSUPER, vacation and sick leave.
respondents.

Facts:
For two to three years prior to 1999,
petitioner Sevilla Trading Company (Sevilla
Trading, for short), a domestic corporation
engaged in trading business, organized and
existing under Philippine laws, added to
the base figure, in its computation of the
13th-month pay of its employees, the
amount of other benefits received by the
employees which are beyond the basic
pay. These benefits included:
(a) Overtime premium for regular
overtime, legal and special holidays;
Petitioner claimed that it entrusted the
preparation of the payroll to its office staff,
including the computation and payment of
the 13th-month pay and other benefits.
When it changed its person in charge of
the payroll in the process of computerizing
its payroll, and after audit was conducted,
it allegedly discovered the error of
including non-basic pay or other benefits
in the base figure used in the computation
of the 13th-month pay of its employees. It
cited the Rules and Regulations
Implementing P.D. No. 851 (13th-Month
Pay Law), effective December 22, 1975,
Sec. 2(b) which stated that:
Basic salary shall include all remunerations c) Night premium;
or earnings paid by an employer to an
employee for services rendered but may
not include cost-of-living allowances d) Bereavement leave pay;
granted pursuant to P.D. No. 525 or Letter
of Instruction No. 174, profit-sharing
payments, and all allowances and e) Union leave pay;
monetary benefits which are not
considered or integrated as part of the
regular or basic salary of the employee at f) Maternity leave pay;
the time of the promulgation of the
Decree on December 16, 1975.
g) Paternity leave pay;

Petitioner then effected a change in the

computation of the thirteenth month pay, h) Company vacation and sick leave pay;
as follows: and

13th-month pay = net basic pay i) Cash conversion of unused vacation/sick

leave.
12 months

Hence, the new computation reduced the

where:
employees thirteenth month pay. The daily
piece-rate workers represented by private
respondent Sevilla Trading Workers Union
net basic pay = gross pay (non-basic pay or
SUPER (Union, for short), a duly organized
other benefits)
and registered union, through the
Grievance Machinery in their Collective
Bargaining Agreement, contested the new
Now excluded from the base figure used in
computation and reduction of their
the computation of the thirteenth month
thirteenth month pay. The parties failed to
pay are the following:
resolve the issue.

a) Overtime premium for regular overtime,

On March 24, 2000, the parties submitted
legal and special holidays;
the issue of whether or not the exclusion
of leaves and other related benefits in the
computation of 13th-month pay is valid to
b) Legal holiday pay, premium pay for
respondent Accredited Voluntary
special holidays;
Arbitrator Tomas E. Semana (A.V.A.
Semana, for short) of the National
Conciliation and Mediation Board, for
consideration and resolution.
The Union alleged that petitioner violated
the rule prohibiting the elimination or
diminution of employees benefits as
provided for in Art. 100 of the Labor Code,
as amended. They claimed that paid
leaves, like sick leave, vacation leave,
paternity leave, union leave, bereavement
leave, holiday pay and other leaves with
pay in the CBA should be included in the
base figure in the computation of their
13th-month pay.
On the other hand, petitioner insisted that
the computation of the 13th-month pay is
based on basic salary, excluding benefits
such as leaves with pay, as per P.D. No.
851, as amended. It maintained that, in
adjusting its computation of the 13th-
month pay, it merely rectified the mistake
its personnel committed in the previous
years.
A.V.A. Semana decided in favor of the
Union. The dispositive portion of his
Decision reads as follows:
WHEREFORE, premises considered, this
Voluntary Arbitrator hereby declared that:
1. The company is hereby ordered to
include sick leave and vacation leave,
paternity leave, union leave, bereavement
leave and other leave with pay in the CBA,
premium for work done on rest days and
special holidays, and pay for regular
holidays in the computation of the 13th-
month pay to all covered and entitled
employees;
2. The company is hereby ordered to pay
corresponding backwages to all covered
and entitled employees arising from the
exclusion of said benefits in the
computation of 13th-month pay for the
year 1999.
Petitioner received a copy of the Decision
of the Arbitrator on December 20, 2000. It
filed before the Court of Appeals, a
Manifestation and Motion for Time to File
Petition for Certiorari on January 19, 2001.
A month later, on February 19, 2001, it
filed its Petition for Certiorari under Rule
65 of the 1997 Rules of Civil Procedure for
the nullification of the Decision of the
Arbitrator. In addition to its earlier
allegations, petitioner claimed that
assuming the old computation will be
upheld, the reversal to the old
computation can only be made to the
extent of including non-basic benefits
actually included by petitioner in the base
figure in the computation of their 13th-
month pay in the prior years. It must
exclude those non-basic benefits which, in
the first place, were not included in the
original computation. The appellate court
denied due course to, and dismissed the
petition.
ISSUE:
1. THE DECISION OF THE RESPONDENT
COURT TO REVERT TO THE OLD
COMPUTATION OF THE 13TH-MONTH PAY
ON THE BASIS THAT THE OLD
COMPUTATION HAD RIPENED INTO
PRACTICE IS WITHOUT LEGAL BASIS.
2. IF SUCH BE THE CASE, COMPANIES HAVE
NO MEANS TO CORRECT ERRORS IN
COMPUTATION WHICH WILL CAUSE
GRAVE AND IRREPARABLE DAMAGE TO
EMPLOYERS.[4]
First, we uphold the Court of Appeals in
ruling that the proper remedy from the
adverse decision of the arbitrator is a
petition for review under Rule 43 of the
1997 Rules of Civil Procedure, not a
petition for certiorari under Rule 65.
Section 1 of Rule 43 states:
RULE 43
Appeals from the Court of Tax Appeals and
Quasi-Judicial Agencies to the Court of
Appeals
SECTION 1. Scope. This Rule shall apply to
appeals from judgments or final orders of
the Court of Tax Appeals and from awards,
judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in
the exercise of its quasi-judicial functions.
Among these agencies are the Civil Service
Commission, Central Board of Assessment
Appeals, Securities and Exchange
Commission, Office of the President, Land
Registration Authority, Social Security
Commission, Civil Aeronautics Board,
Bureau of Patents, Trademarks and
Technology Transfer, National
Electrification Administration, Energy
Regulatory Board, National
Telecommunications Commission,
Department of Agrarian Reform under
Republic Act No. 6657, Government
Service Insurance System, Employees
Compensation Commission, Agricultural
Inventions Board, Insurance Commission,
Philippine Atomic Energy Commission,
Board of Investments, Construction
Industry Arbitration Commission, and
voluntary arbitrators authorized by law.
[Emphasis supplied.]
It is elementary that the special civil action
of certiorari under Rule 65 is not, and
cannot be a substitute for an appeal,
where the latter remedy is available, as it
was in this case. Petitioner Sevilla Trading
failed to file an appeal within the fifteen-
day reglementary period from its notice of
the adverse decision of A.V.A. Semana. It
received a copy of the decision of A.V.A.
Semana on December 20, 2000, and
should have filed its appeal under Rule 43
of the 1997 Rules of Civil Procedure on or
before January 4, 2001. Instead, petitioner
filed on January 19, 2001 a Manifestation
and Motion for Time to File Petition for
Certiorari, and on February 19, 2001, it
filed a petition for certiorari under Rule 65
of the 1997 Rules of Civil Procedure.
Clearly, petitioner Sevilla Trading had a
remedy of appeal but failed to use it.
A special civil action under Rule 65 of the
Rules of Court will not be a cure for failure
to timely file a petition for review on
certiorari under Rule 45 (Rule 43, in the
case at bar) of the Rules of Court. Rule 65
is an independent action that cannot be
availed of as a substitute for the lost
remedy of an ordinary appeal, including
that under Rule 45 (Rule 43, in the case at
bar), especially if such loss or lapse was
occasioned by ones own neglect or error in
the choice of remedies.[5]
Thus, the decision of A.V.A. Semana had
become final and executory when
petitioner Sevilla Trading filed its petition
for certiorari on February 19, 2001. More
particularly, the decision of A.V.A. Semana
became final and executory upon the lapse
of the fifteen-day reglementary period to
appeal, or on January 5, 2001. Hence, the
Court of Appeals is correct in holding that
it no longer had appellate jurisdiction to
alter, or much less, nullify the decision of
A.V.A. Semana.
Even assuming that the present petition
for certiorari under Rule 65 of the 1997
Rules of Civil Procedure is a proper action,
we still find no grave abuse of discretion
amounting to lack or excess of jurisdiction
committed by A.V.A. Semana. Grave abuse
of discretion has been interpreted to mean
such capricious and whimsical exercise of
judgment as is equivalent to lack of
jurisdiction, or, in other words where the
power is exercised in an arbitrary or
despotic manner by reason of passion or
personal hostility, and it must be so patent
and gross as to amount to an evasion of
positive duty or to a virtual refusal to
perform the duty enjoined or to act at all
in contemplation of law.[6] We find
nothing of that sort in the case at bar.
On the contrary, we find the decision of
A.V.A. Semana to be sound, valid, and in
accord with law and jurisprudence. A.V.A.
Semana is correct in holding that
petitioners stance of mistake or error in
the computation of the thirteenth month
pay is unmeritorious. Petitioners
submission of financial statements every
year requires the services of a certified
public accountant to audit its finances. It is
quite impossible to suggest that they have
discovered the alleged error in the payroll
only in 1999. This implies that in previous
years it does not know its cost of labor and
operations. This is merely basic cost
accounting. Also, petitioner failed to
adduce any other relevant evidence to
support its contention. Aside from its bare
claim of mistake or error in the
computation of the thirteenth month pay,
petitioner merely appended to its petition
a copy of the 1997-2002 Collective
Bargaining Agreement and an alleged
corrected computation of the thirteenth
month pay. There was no explanation
whatsoever why its inclusion of non-basic
benefits in the base figure in the
computation of their 13th-month pay in
the prior years was made by mistake,
despite the clarity of statute and
jurisprudence at that time.
The instant case needs to be distinguished
from Globe Mackay Cable and Radio Corp.
vs. NLRC,[7] which petitioner Sevilla
Trading invokes. In that case, this Court
decided on the proper computation of the
cost-of-living allowance (COLA) for
monthly-paid employees. Petitioner
Corporation, pursuant to Wage Order No.
6 (effective 30 October 1984), increased
the COLA of its monthly-paid employees by
multiplying the P3.00 daily COLA by 22
days, which is the number of working days
in the company. The Union disagreed with
Absent clear administrative guidelines,
the computation, claiming that the daily
Petitioner Corporation cannot be faulted
COLA rate of P3.00 should be multiplied by
for erroneous application of the law . . .
30 days, which has been the practice of
the company for several years. We upheld
the contention of the petitioner
In the above quoted case, the grant by the
corporation. To answer the Unions
employer of benefits through an
contention of company practice, we ruled
erroneous application of the law due to
that:
absence of clear administrative guidelines
is not considered a voluntary act which
cannot be unilaterally discontinued. Such
Payment in full by Petitioner Corporation
is not the case now. In the case at bar, the
of the COLA before the execution of the
Court of Appeals is correct when it pointed
CBA in 1982 and in compliance with Wage
out that as early as 1981, this Court has
Orders Nos. 1 (26 March 1981) to 5 (11
held in San Miguel Corporation vs.
June 1984), should not be construed as
Inciong[8] that:
constitutive of voluntary employer
practice, which cannot now be unilaterally
withdrawn by petitioner. To be considered
Under Presidential Decree 851 and its
as such, it should have been practiced over
implementing rules, the basic salary of an
a long period of time, and must be shown
employee is used as the basis in the
to have been consistent and deliberate . . .
determination of his 13th-month pay. Any
The test of long practice has been
compensations or remunerations which
enunciated thus:
are deemed not part of the basic pay is
excluded as basis in the computation of
the mandatory bonus.
. . . Respondent Company agreed to
continue giving holiday pay knowing fully
well that said employees are not covered
Under the Rules and Regulations
by the law requiring payment of holiday
Implementing Presidential Decree 851, the
pay. (Oceanic Pharmacal Employees Union
following compensations are deemed not
[FFW] vs. Inciong, 94 SCRA 270 [1979])
part of the basic salary:

Moreover, before Wage Order No. 4, there

a) Cost-of-living allowances granted
was lack of administrative guidelines for
pursuant to Presidential Decree 525 and
the implementation of the Wage Orders. It
Letter of Instruction No. 174;
was only when the Rules Implementing
Wage Order No. 4 were issued on 21 May
1984 that a formula for the conversion of
b) Profit sharing payments;
the daily allowance to its monthly
equivalent was laid down.
c) All allowances and monetary benefits
which are not considered or integrated as
part of the regular basic salary of the
employee at the time of the promulgation
of the Decree on December 16, 1975.
Under a later set of Supplementary Rules
and Regulations Implementing Presidential
Decree 851 issued by the then Labor
Secretary Blas Ople, overtime pay,
earnings and other remunerations are
excluded as part of the basic salary and in
the computation of the 13th-month pay.
The exclusion of cost-of-living allowances
under Presidential Decree 525 and Letter
of Instruction No. 174 and profit sharing
payments indicate the intention to strip
basic salary of other payments which are
properly considered as fringe benefits.
Likewise, the catch-all exclusionary phrase
all allowances and monetary benefits
which are not considered or integrated as
part of the basic salary shows also the
intention to strip basic salary of any and all
additions which may be in the form of
allowances or fringe benefits.
Moreover, the Supplementary Rules and
Regulations Implementing Presidential
Decree 851 is even more empathic in
declaring that earnings and other
remunerations which are not part of the
basic salary shall not be included in the
computation of the 13th-month pay.
While doubt may have been created by
the prior Rules and Regulations
Implementing Presidential Decree 851
which defines basic salary to include all
remunerations or earnings paid by an
employer to an employee, this cloud is
dissipated in the later and more
controlling Supplementary Rules and
Regulations which categorically, exclude
from the definition of basic salary earnings
and other remunerations paid by employer
to an employee. A cursory perusal of the
two sets of Rules indicates that what has
hitherto been the subject of a broad
inclusion is now a subject of broad
exclusion. The Supplementary Rules and
Regulations cure the seeming tendency of
the former rules to include all
remunerations and earnings within the
definition of basic salary.
The all-embracing phrase earnings and
other remunerations which are deemed
not part of the basic salary includes within
its meaning payments for sick, vacation, or
maternity leaves, premium for works
performed on rest days and special
holidays, pay for regular holidays and night
differentials. As such they are deemed not
part of the basic salary and shall not be
considered in the computation of the
13th-month pay. If they were not so
excluded, it is hard to find any earnings
and other remunerations expressly
excluded in the computation of the 13th-
month pay. Then the exclusionary
provision would prove to be idle and with
no purpose.
In the light of the clear ruling of this Court,
there is, thus no reason for any mistake in
the construction or application of the law.
When petitioner Sevilla Trading still
included over the years non-basic benefits
of its employees, such as maternity leave
pay, cash equivalent of unused vacation
and sick leave, among others in the
computation of the 13th-month pay, this
may only be construed as a voluntary act
on its part. Putting the blame on the
petitioners payroll personnel is
inexcusable.
In Davao Fruits Corporation vs. Associated
Labor Unions, we likewise held that:[9]
The Supplementary Rules and Regulations
Implementing P.D. No. 851 which put to
rest all doubts in the computation of the
thirteenth month pay, was issued by the
Secretary of Labor as early as January 16,
1976, barely one month after the
effectivity of P.D. No. 851 and its
Implementing Rules. And yet, petitioner
computed and paid the thirteenth month
pay, without excluding the subject items
therein until 1981. Petitioner continued its
practice in December 1981, after
promulgation of the aforequoted San
Miguel decision on February 24, 1981,
when petitioner purportedly discovered its
mistake.
From 1975 to 1981, petitioner had freely,
voluntarily and continuously included in
the computation of its employees
thirteenth month pay, without the
payments for sick, vacation and maternity
leave, premium 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
Sec. 10 of the Rules and Regulations
Implementing P.D. No. 851, and Art. 100 of
the Labor Code of the Philippines which
prohibit the diminution or elimination by
the employer of the employees existing
benefits. [Tiangco vs. Leogardo, Jr., 122
SCRA 267 (1983)]
With regard to the length of time the
company practice should have been
exercised to constitute voluntary employer
practice which cannot be unilaterally
withdrawn by the employer, we hold that
jurisprudence has not laid down any rule
requiring a specific minimum number of
years. In the above quoted case of Davao
Fruits Corporation vs. Associated Labor
Unions,[10] the company practice lasted
for six (6) years. In another case, Davao
Integrated Port Stevedoring Services vs.
Abarquez,[11] the employer, for three (3)
years and nine (9) months, approved the
commutation to cash of the unenjoyed
portion of the sick leave with pay benefits
of its intermittent workers. While in
Tiangco vs. Leogardo, Jr.,[12] the employer
carried on the practice of giving a fixed
monthly emergency allowance from
November 1976 to February 1980, or three
(3) years and four (4) months. In all these
cases, this Court held that the grant of
these benefits has ripened into company
practice or policy which cannot be
peremptorily withdrawn. In the case at
bar, petitioner Sevilla Trading kept the
practice of including non-basic benefits
such as paid leaves for unused sick leave
and vacation leave in the computation of
their 13th-month pay for at least two (2)
years. This, we rule likewise constitutes
voluntary employer practice which cannot
be unilaterally withdrawn by the employer
without violating Art. 100 of the Labor
Code:
Art. 100. Prohibition against elimination or
diminution of benefits. Nothing in this
Book 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.
G.R. No. 85073 August 24, 1993
DAVAO FRUITS
CORPORATION, petitioner,
vs.
ASSOCIATED LABOR UNIONS (ALU) for in
behalf of all the rank-and-file
workers/employees of DAVAO FRUITS
CORPORATION and NATIONAL LABOR
RELATIONS COMMISSION, respondents.
Facts:
On December 28, 1982 respondent
Associated Labor Unions (ALU), for and in
behalf of all the rank-and-file workers and
employees of petitioner, filed a complaint
(NLRC Case No. 1791-MC-XI-82) before the
Ministry of Labor and Employment,
Regional Arbitration Branch XI, Davao City,
against petitioner, for "Payment of the
Thirteenth-Month Pay Differentials."
Respondent ALU sought to recover from
petitioner the thirteenth month pay
differential for 1982 of its rank-and-file
employees, equivalent to their sick,
vacation and maternity leaves, premium
for work done on rest days and special
holidays, and pay for regular holidays
which petitioner, allegedly in disregard of
company practice since 1975, excluded
from the computation of the thirteenth
month pay for 1982.
In its answer, petitioner claimed that it
erroneously included items subject of the
complaint in the computation of the
thirteenth month pay for the years prior to
1982, upon a doubtful and difficult
question of law. According to petitioner,
this mistake was discovered only in 1981
after the promulgation of the Supreme
Court decision in the case of San Miguel
Corporation v. Inciong (103 SCRA 139).
A decision was rendered on March 7, 1984
by Labor Arbiter Pedro C. Ramos, in favor
of respondent ALU. The dispositive portion
of the decision reads as follows:
WHEREFORE, in view of all the
foregoing considerations,
judgment is hereby rendered
ordering respondent to pay
the 1982 — 13th month pay
differential to all its rank-and-
file workers/employees
herein represented by
complainant Union (Rollo, p.
32).
Petitioner appealed the decision of the
Labor Arbiter to the NLRC, which affirmed
the said decision accordingly dismissed the
appeal for lack of merit.
Petitioner elevated the matter to this
Court in a petition for review under Rule
45 of the Revised Rules of Court. This error
notwithstanding and in the interest of
justice, this Court resolved to treat the
instant petition as a special civil action
for certiorari under Rule 65 of the Revised
Rules of Court (P.D. No. 1391, Sec. 5; Rules
Implementing P.D. No. 1391, Rule II, Sec.
7; Cando v. National Labor Relations
Commission, 189 SCRA 666 [1990]: Pearl S.
Buck Foundation, Inc. v. National Labor
Relations Commission, 182 SCRA 446
[1990]).
The crux of the present controversy is
whether in the computation of the
thirteenth month pay given by employers
to their employees under P.D.
No. 851, payments for sick, vacation and
maternity leaves, premiums for work done
on rest days and special holidays, and pay
for regular holidays may be excluded in the
computation and payment thereof,
regardless of long-standing company
practice.
Presidential Decree No. 851, promulgated
on December 16, 1975, mandates all
employers to pay their employees a
thirteenth month pay. How this pay shall
be computed is set forth in Section 2 of the
"Rules and Regulations Implementing
Presidential Decree No. 851," thus:
SECTION 2. . . .
(a) "Thirteenth month pay"
shall mean one twelfth (1/12)
of the basic salary of an
employee within a calendar
year.
(b) "Basic Salary" shall include
all renumerations or earnings
paid by an employer to an
employee for services
rendered but may not include
cost of living allowances
granted pursuant to
Presidential Decree No. 525 or
Letter of Instructions No. 174,
profit-sharing payments, and
all allowances and monetary
benefits which are not
considered or integrated as
part of the regular or basic
salary of the employee at the
time of the promulgation of
the Decree on December 16,
1975.
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 renumerations which
are not part of the basic salary
shall not be included in the
computation of the 13th
month pay.
Clearly, the term "basic salary" includes
renumerations or earnings paid by the
employer to employee, but excludes cost-
of-living allowances, profit-sharing
payments, and all allowances and
monetary benefits which have not been
considered as part of the basic salary of
the employee as of December 16, 1975.
The exclusion of cost-of-living allowances
and profit sharing payments shows the
intention to strip "basic salary" of
payments which are otherwise considered
as "fringe" benefits. This intention is
emphasized in the catch all phrase "all
allowances and monetary benefits which
are not considered or integrated as part of
the basic salary." Basic salary, therefore
does not merely exclude the benefits
expressly mentioned but all payments
which may be in the form of "fringe"
benefits or allowances (San Miguel
Corporation v. Inciong, supra, at 143-144).
In fact, the Supplementary Rules and
Regulations Implementing P.D. No. 851 are
very emphatic in declaring that overtime
pay, earnings and other renumerations
shall be excluded in computing the
thirteenth month pay.
In other words, whatever compensation an
employee receives for an eight-hour work
daily or the daily wage rate in the basic
salary. Any compensation or remuneration
other than the daily wage rate is excluded.
It follows therefore, that payments for
sick, vacation and maternity leaves,
premium for work done on rest days
special holidays, as well as pay for regular
holidays, are likewise excluded in
computing the basic salary for the purpose
of determining the thirteen month pay.
Petitioner claims that the mistake in the
interpretation of "basic salary" was caused
by the opinions, orders and rulings
rendered by then Acting Labor Secretary
Amado C. Inciong, expressly including the
subject items in computing the thirteenth
month pay. The inclusion of these items is
clearly not sanctioned under P.D. No. 851,
the governing law and its implementing
rules, which speak only of "basis salary" as
the basis for determining the thirteenth
month pay.
Moreover, whatever doubt arose in the
interpretation of P.D. No. 851 was erased
by the Supplementary Rules and
Regulations which clarified the definition
of "basic salary."
As pointed out in San Miguel Corporation
v. Inciong, (supra):
While doubt may have been
created by the prior Rules and
Regulations and
Implementing Presidential
Decree 851 which defines
basic salary to include all
remunerations or
earnings paid by an employer
to an employee, this cloud is
dissipated in the later and
more controlling
Supplementary Rules and
Regulations which
categorically, exclude from
the definition of basic salary
earnings and other
remunerations paid by
employer to an employee. A
cursory perusal of the two
sets of Rules indicates that
what has hitherto been the
subject of broad inclusion is
now a subject of broad
exclusion. The Supplementary
Rules and Regulations cure
the seeming tendency of the
former rules to include all
remunerations and earnings
within the definition of basic
salary.
The all-embracing phrase
"earnings and other
remunerations which are
deemed not part of the basic
salary includes within its
meaning payments for sick,
vacation, or maternity leaves,
premium for work performed
on rest days and special
holidays, pay for regular
holidays and night
differentials. As such they are
deemed not part of the basic
salary and shall not be
considered in the
computation of the 13th-
month pay. If they were not
so excluded, it is hard to find
any "earnings and other
remunerations" expressly
excluded in computation of
the 13th month-pay. Then the
exclusionary provision would
prove to be idle and with
purpose.
The "Supplementary Rules and Regulations
Implementing P.D. No. 851," which put to
rest all doubts in the computation of the
thirteenth month pay, was issued by the
Secretary of Labor as early as January 16,
1976, barely one month after the
effectivity of P.D. No. 851 and its
Implementing Rules. And yet, petitioner
computed and paid the thirteenth month
pay, without excluding the subject items
therein until 1981. Petitioner continued its
practice in December 1981, after
promulgation of the afore-quoted San
Miguel decision on February 24, 1981,
when petitioner purportedly "discovered"
its mistake.
From 1975 to 1981, petitioner had freely,
voluntarily and continuously included in
the computation of its employees'
thirteenth month pay, the payments for
sick, vacation and maternity leaves,
premiums for work done on rest days and
special holidays, and pay for regular
holidays. The considerable length of time
the questioned items had been included
by petitioner indicates a unilateral and
voluntary act on its part, sufficient in itself
to negate any claim of mistake.
A company practice favorable to the
employees had indeed been established
and the payments made pursuant thereto,
ripened into benefits enjoyed by them.
And any benefit and supplement being
enjoyed by the employees cannot be
reduced, diminished, discontinued or
eliminated by the employer, by virtue of
Section 10 of the Rules and Regulations
Implementing P.D. No. 851, and Article
100 of the labor of the Philippines, which
prohibit the diminution or elimination by
the employer of the employees' existing
benefits (Tiangco v. Leogardo, Jr., 122
SCRA 267, [1983]).
Petitioner cannot invoke the principle
of solutio indebiti which as a civil law
concept that is not applicable in Labor
Law. Besides, in solutio indebiti, the
obligee is required to return to the obligor
whatever he received from the latter (Civil
Code of the Philippines, Arts. 2154 and
2155). Petitioner in the instant case, does
not demand the return of what it paid
respondent ALU from 1975 until 1981; it
merely wants to "rectify" the error it made
over these years by excluding unilaterally
from the thirteenth month pay in 1982 the
items subject of litigation. Solutio indebiti,
therefore, is not applicable to the instant
case.
G.R. No. 102132. March 19, 1993.
DAVAO INTEGRATED PORT STEVEDORING
SERVICES, petitioner, vs. RUBEN V.
ABARQUEZ, in his capacity as an accredited
Voluntary Arbitrator and THE
ASSOCIATION OF TRADE UNIONS (ATU-
TUCP), respondents.
SYLLABUS
1. LABOR LAWS AND SOCIAL LEGISLATION;
LABOR RELATIONS; COLLECTIVE
BARGAINING AGREEMENT; DEFINED;
NATURE THEREOF; CONSTRUCTION TO BE
PLACED THEREON. — A collective
bargaining agreement (CBA), as used in
Article 252 of the Labor Code, refers to a
contract executed upon request of either
the employer or the exclusive bargaining
representative incorporating the
agreement reached after negotiations with
respect to wages, hours of work and all
other terms and conditions of
employment, including proposals for
adjusting any grievances or questions
arising under such agreement. While the
terms and conditions of a CBA constitute
the law between the parties, it is not,
however, an ordinary contract to which is
applied the principles of law governing
ordinary contracts. A CBA, as a labor
contract within the contemplation of
Article 1700 of the Civil Code of the
Philippines which governs the relations
between labor and capital, is not merely
contractual in nature but impressed with
public interest, thus, it must yield to the
common good. As such, it must be
construed liberally rather than narrowly
and technically, and the courts must place
a practical and realistic construction upon
it, giving due consideration to the context
in which it is negotiated and purpose
which it is intended to serve.
2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. —
It is thus erroneous for petitioner to isolate
Section 1, Article VIII of the 1989 CBA from
the other related section on sick leave with
pay benefits, specifically Section 3 thereof,
in its attempt to justify the discontinuance
or withdrawal of the privilege of
commutation or conversion to cash of the
unenjoyed portion of the sick leave benefit
to regular intermittent workers. The
manner they were deprived of the
privilege previously recognized and
extended to them by petitioner-company
during the lifetime of the CBA of October
16, 1985 until three (3) months from its
renewal on April 15, 1989, or a period of
three (3) years and nine (9) months, is not
only tainted with arbitrariness but likewise
discriminatory in nature. It must be noted
that the 1989 CBA has two (2) sections on
sick leave with pay benefits which apply to
two (2) distinct classes of workers in
petitioner's company, namely: (1) the
regular non-intermittent workers or those
workers who render a daily eight-hour
service to the company and are governed
by Section 1, Article VIII of the 1989 CBA;
and (2) intermittent field workers who are
members of the regular labor pool and the
present regular extra labor pool as of the
signing of the agreement on April 15, 1989
or those workers who have irregular
working days and are governed by Section
3, Article VIII of the 1989 CBA. It is not
disputed that both classes of workers are
entitled to sick leave with pay benefits
provided they comply with the conditions
set forth under Section 1 in relation to the
last paragraph of Section 3, to wit: (1) the
employee-applicant must be regular or
must have rendered at least one year of
service with the company; and (2) the
application must be accompanied by a
certification from a company-designated
physician. the phrase "herein sick leave
privilege," as used in the last sentence of
Section 1, refers to the privilege of having
a fixed 15-day sick leave with pay which, as
mandated by Section 1, only the non-
intermittent workers are entitled to. This
fixed 15-day sick leave with pay benefit
should be distinguished from the variable
number of days of sick leave, not to
exceed 15 days, extended to intermittent
workers under Section 3 depending on the
number of hours of service rendered to
the company, including overtime pursuant
to the schedule provided therein. It is only
fair and reasonable for petitioner-
company not to stipulate a fixed 15-day
sick leave with pay for its regular
intermittent workers since, as the term
"intermittent" implies, there is irregularity
in their work-days. Reasonable and
practical interpretation must be placed on
contractual provisions. Interpetatio fienda
est ut res magis valeat quam pereat. Such
interpretation is to be adopted, that the
thing may continue to have efficacy rather
than fail.
3. ID.; ID.; ID.; SICK LEAVE BENEFITS;
NATURE AND PURPOSE. — Sick leave
benefits, like other economic benefits
stipulated in the CBA such as maternity
leave and vacation leave benefits, among
others, are by their nature, intended to be
replacements for regular income which
otherwise would not be earned because
an employee is not working during the
period of said leaves. They are non-
contributory in nature, in the sense that
the employees contribute nothing to the
operation of the benefits. By their nature,
upon agreement of the parties, they are
intended to alleviate the economic
condition of the workers.
4. ID.; ID.; JURISDICTION OF VOLUNTARY
ARBITRATOR; CASE AT BAR. — Petitioner-
company's objection to the authority of
the Voluntary Arbitrator to direct the
commutation of the unenjoyed portion of
the sick leave with pay benefits of
intermittent workers in his decision is
misplaced. Article 261 of the Labor Code is
clear. The questioned directive of the
herein public respondent is the necessary
consequence of the exercise of his arbitral
power as Voluntary Arbitrator under
Article 261 of the Labor Code "to hear and
decide all unresolved grievances arising
from the interpretation or implementation
of the Collective Bargaining Agreement."
We, therefore, find that no grave abuse of
discretion was committed by public
respondent in issuing the award (decision).
Moreover, his interpretation of Sections 1
and 3, Article VIII of the 1989 CBA cannot
be faulted with and is absolutely correct.
5. ID.; CONDITIONS OF EMPLOYMENT;
PROHIBITION AGAINST ELIMINATION OR
DIMINUTION OF BENEFITS; BENEFITS
GRANTED PURSUANT TO COMPANY
PRACTICE OR POLICY CANNOT BE
PEREMPTORILY WITHDRAWN. —
Whatever doubt there may have been
early on was clearly obliterated when
petitioner-company recognized the said
privilege and paid its intermittent workers
the cash equivalent of the unenjoyed
portion of their sick leave with pay
benefits during the lifetime of the CBA of
October 16, 1985 until three (3) months
from its renewal on April 15, 1989. Well-
settled is it that the said privilege of
commutation or conversion to cash, being
an existing benefit, the petitioner-
company may not unilaterally withdraw, or
diminish such benefits. It is a fact that
petitioner-company had, on several
instances in the past, granted and paid the
cash equivalent of the unenjoyed portion
of the sick leave benefits of some
intermittent workers. Under the
circumstances, these may be deemed to
have ripened into company practice or
policy which cannot be peremptorily
withdrawn.
DECISION
ROMERO, J p:
In this petition for certiorari, petitioner
Davao Integrated Port Services
Corporation seeks to reverse the Award 1
issued on September 10, 1991 by
respondent Ruben V. Abarquez, in his
capacity as Voluntary Arbitrator of the
National Conciliation and Mediation Board,
Regional Arbitration Branch XI in Davao
City in Case No. AC-211-BX1-10-003-91
which directed petitioner to grant and
extend the privilege of commutation of the
unenjoyed portion of the sick leave with
pay benefits to its intermittent field
workers who are members of the regular
labor pool and the present regular extra
pool in accordance with the Collective
Bargaining Agreement (CBA) executed
between petitioner and private
respondent Association of Trade Unions
(ATU-TUCP), from the time it was
discontinued and henceforth.
Facts:
Petitioner Davao Integrated Port
Stevedoring Services (petitioner-company)
and private respondent ATU-TUCP (Union),
the exclusive collective bargaining agent of
the rank and file workers of petitioner-
company, entered into a collective
bargaining agreement (CBA) on October
16, 1985 which, under Sections 1 and 3,
Article VIII thereof, provide for sick leave
with pay benefits each year to its
employees who have rendered at least one
(1) year of service with the company, thus:
"ARTICLE VIII
Section 1. Sick Leaves — The Company
agrees to grant 15 days sick leave with pay
each year to every regular non-
intermittent worker who already rendered
at least one year of service with the
company. However, such sick leave can
only be enjoyed upon certification by a
company designated physician, and if the
same is not enjoyed within one year
period of the current year, any unenjoyed
portion thereof, shall be converted to cash
and shall be paid at the end of the said one
year period. And provided however, that
only those regular workers of the company
whose work are not intermittent, are
entitled to the herein sick leave privilege.
xxx xxx xxx
Section 3. — All intermittent field workers
of the company who are members of the
Regular Labor Pool shall be entitled to
vacation and sick leaves per year of service
with pay under the following schedule
based on the number of hours rendered
including overtime, to wit:
Hours of Service Per Vacation Sick Leave
Calendar Year Leave
Less than 750 NII NII
751 — 825 6 days 6 days
826 — 900 7 7
901 — 925 8 8
926 — 1,050 9 9
1,051 — 1,125 10 10
1,126 — 1,200 11 11
1,201 — 1,275 12 12
1,276 — 1,350 13 13
1,351 — 1,425 14 14
1,426 — 1,500 15 15
The conditions for the availment of the
herein vacation and sick leaves shall be in
accordance with the above provided
Sections 1 and 2 hereof, respectively."
Upon its renewal on April 15, 1989, the
provisions for sick leave with pay benefits
were reproduced under Sections 1 and 3,
Article VIII of the new CBA, but the
coverage of the said benefits was
expanded to include the "present Regular
Extra Labor Pool as of the signing of this
Agreement." Section 3, Article VIII, as
revised, provides, thus:
"Section 3. — All intermittent field workers
of the company who are members of the
Regular Labor Pool and present Regular
Extra Labor Pool as of the signing of this
agreement shall be entitled to vacation
and sick leaves per year of service with pay
under the following schedule based on the
number of hours rendered including
overtime, to wit:
Hours of Service Per Vacation Sick Leave
Calendar Year Leave
Less than 750 NII NII
751 — 825 6 days 6 days
826 — 900 7 7
901 — 925 8 8
926 — 1,050 9 9
1,051 — 1,125 10 10
1,126 — 1,200 11 11
1,201 — 1,275 12 12
1,276 — 1,350 13 13
1,351 — 1,425 14 14
1,426 — 1,500 15 15
The conditions for the availment of the
herein vacation and sick leaves shall be in
accordance with the above provided
Sections 1 and 2 hereof, respectively."
During the effectivity of the CBA of
October 16, 1985 until three (3) months
after its renewal on April 15, 1989, or until
July 1989 (a total of three (3) years and
nine (9) months), all the field workers of
petitioner who are members of the regular
labor pool and the present regular extra
labor pool who had rendered at least 750
hours up to 1,500 hours were extended
sick leave with pay benefits. Any
unenjoyed portion thereof at the end of
the current year was converted to cash
and paid at the end of the said one-year
period pursuant to Sections 1 and 3,
Article VIII of the CBA. The number of days
of their sick leave per year depends on the
number of hours of service per calendar
year in accordance with the schedule
provided in Section 3, Article VIII of the
CBA.
The commutation of the unenjoyed
portion of the sick leave with pay benefits
of the intermittent workers or its
conversion to cash was, however,
discontinued or withdrawn when
petitioner-company under a new assistant
manager, Mr. Benjamin Marzo (who
replaced Mr. Cecilio Beltran, Jr. upon the
latter's resignation in June 1989), stopped
the payment of its cash equivalent on the
ground that they are not entitled to the
said benefits under Sections 1 and 3 of the
1989 CBA.
The Union objected to the said
discontinuance of commutation or
conversion to cash of the unenjoyed sick
leave with pay benefits of petitioner's
intermittent workers contending that it is a
deviation from the true intent of the
parties that negotiated the CBA; that it
would violate the principle in labor laws
that benefits already extended shall not be
taken away and that it would result in
discrimination between the non-
intermittent and the intermittent workers
of the petitioner-company.
Upon failure of the parties to amicably
settle the issue on the interpretation of
Sections 1 and 3, Article VIII of the 1989
CBA, the Union brought the matter for
voluntary arbitration before the National
Conciliation and Mediation Board,
Regional Arbitration Branch XI at Davao
City by way of complaint for enforcement
of the CBA. The parties mutually
designated public respondent Ruben
Abarquez, Jr. to act as voluntary arbitrator.
After the parties had filed their respective
position papers, 2 public respondent
Ruben Abarquez, Jr. issued on September
10, 1991 an Award in favor of the Union
ruling that the regular intermittent
workers are entitled to commutation of
their unenjoyed sick leave with pay
benefits under Sections 1 and 3 of the
1989 CBA, the dispositive portion of which
reads:
"WHEREFORE, premises considered, the
management of the respondent Davao
Integrated Port Stevedoring Services
Corporation is hereby directed to grant
and extend the sick leave privilege of the
commutation of the unenjoyed portion of
the sick leave of all the intermittent field
workers who are members of the regular
labor pool and the present extra pool in
accordance with the CBA from the time it
was discontinued and henceforth.
SO ORDERED."
Petitioner-company disagreed with the
aforementioned ruling of public
respondent, hence, the instant petition.
Petitioner-company argued that it is clear
from the language and intent of the last
sentence of Section 1, Article VIII of the
1989 CBA that only the regular workers
whose work are not intermittent are
entitled to the benefit of conversion to
cash of the unenjoyed portion of sick
leave, thus: ". . . And provided, however,
that only those regular workers of the
Company whose work are not intermittent
are entitled to the herein sick leave
privilege."
Petitioner-company further argued that
while the intermittent workers were paid
the cash equivalent of their unenjoyed sick
leave with pay benefits during the previous
management of Mr. Beltran who
misinterpreted Sections 1 and 3 of Article
VIII of the 1985 CBA, it was well within
petitioner-company's rights to rectify the
error it had committed and stop the
payment of the said sick leave with pay
benefits. An error in payment, according to
petitioner-company, can never ripen into a
practice.
We find the arguments unmeritorious.
A collective bargaining agreement (CBA),
as used in Article 252 of the Labor Code,
refers to a contract executed upon request
of either the employer or the exclusive
bargaining representative incorporating
the agreement reached after negotiations
with respect to wages, hours of work and
all other terms and conditions of
employment, including proposals for
adjusting any grievances or questions
arising under such agreement.
While the terms and conditions of a CBA
constitute the law between the parties, 3
it is not, however, an ordinary contract to
which is applied the principles of law
governing ordinary contracts. 4 A CBA, as a
labor contract within the contemplation of
Article 1700 of the Civil Code of the
Philippines which governs the relations
between labor and capital, is not merely
contractual in nature but impressed with
public interest, thus, it must yield to the
common good. As such, it must be
construed liberally rather than narrowly
and technically, and the courts must place
a practical and realistic construction upon
it, giving due consideration to the context
in which it is negotiated and purpose
which it is intended to serve. 5
It is thus erroneous for petitioner to isolate
Section 1, Article VIII of the 1989 CBA from
the other related section on sick leave with
pay benefits, specifically Section 3 thereof,
in its attempt to justify the discontinuance
or withdrawal of the privilege of
commutation or conversion to cash of the
unenjoyed portion of the sick leave benefit
to regular intermittent workers. The
manner they were deprived of the
privilege previously recognized and
extended to them by petitioner-company
during the lifetime of the CBA of October
16, 1985 until three (3) months from its
renewal on April 15, 1989, or a period of
three (3) years and nine (9) months, is not
only tainted with arbitrariness but likewise
discriminatory in nature. Petitioner-
company is of the mistaken notion that
since the privilege of commutation or
conversion to cash of the unenjoyed
portion of the sick leave with pay benefits
is found in Section 1, Article VIII, only the
regular non-intermittent workers and no
other can avail of the said privilege
because of the proviso found in the last
sentence thereof.
It must be noted that the 1989 CBA has
two (2) sections on sick leave with pay
benefits which apply to two (2) distinct
classes of workers in petitioner's company,
namely: (1) the regular non-intermittent
workers or those workers who render a
daily eight-hour service to the company
and are governed by Section 1, Article VIII
of the 1989 CBA; and (2) intermittent field
workers who are members of the regular
labor pool and the present regular extra
labor pool as of the signing of the
agreement on April 15, 1989 or those
workers who have irregular working days
and are governed by Section 3, Article VIII
of the 1989 CBA.
It is not disputed that both classes of
workers are entitled to sick leave with pay
benefits provided they comply with the
conditions set forth under Section 1 in
relation to the last paragraph of Section 3,
to wit: (1) the employee-applicant must be
regular or must have rendered at least one
year of service with the company; and (2)
the application must be accompanied by a
certification from a company-designated
physician.
Sick leave benefits, like other economic
benefits stipulated in the CBA such as
maternity leave and vacation leave
benefits, among others, are by their
nature, intended to be replacements for
regular income which otherwise would not
be earned because an employee is not
working during the period of said leaves. 6
They are non-contributory in nature, in the
sense that the employees contribute
nothing to the operation of the benefits. 7
By their nature, upon agreement of the
parties, they are intended to alleviate the
economic condition of the workers.
After a careful examination of Section 1 in
relation to Section 3, Article VIII of the
1989 CBA in light of the facts and
circumstances attendant in the instant
case, we find and so hold that the last
sentence of Section 1, Article VIII of the
1989 CBA, invoked by petitioner-company
does not bar the regular intermittent
workers from the privilege of
commutation or conversion to cash of the
unenjoyed portion of their sick leave with
pay benefits, if qualified. For the phrase
"herein sick leave privilege," as used in the
last sentence of Section 1, refers to the
privilege of having a fixed 15-day sick leave
with pay which, as mandated by Section 1,
only the non-intermittent workers are
entitled to. This fixed 15-day sick leave
with pay benefit should be distinguished
from the variable number of days of sick
leave, not to exceed 15 days, extended to
intermittent workers under Section 3
depending on the number of hours of
service rendered to the company,
including overtime pursuant to the
schedule provided therein. It is only fair
and reasonable for petitioner-company
not to stipulate a fixed 15-day sick leave
with pay for its regular intermittent
workers since, as the term "intermittent"
implies, there is irregularity in their work-
days. Reasonable and practical
interpretation must be placed on
contractual provisions. Interpetatio fienda
est ut res magis valeat quam pereat. Such
interpretation is to be adopted, that the
thing may continue to have efficacy rather
than fail. 8
We find the same to be a reasonable and
practical distinction readily discernible in
Section 1, in relation to Section 3, Article
VIII of the 1989 CBA between the two
classes of workers in the company insofar
as sick leave with pay benefits are
concerned. Any other distinction would
cause discrimination on the part of
intermittent workers contrary to the
intention of the parties that mutually
agreed in incorporating the questioned
provisions in the 1989 CBA.
Public respondent correctly observed that
the parties to the CBA clearly intended the
same sick leave privilege to be accorded
the intermittent workers in the same way
that they are both given the same
treatment with respect to vacation leaves -
non-commutable and non-cumulative. If
they are treated equally with respect to
vacation leave privilege, with more reason
should they be on par with each other with
respect to sick leave privileges. 9 Besides,
if the intention were otherwise, during its
renegotiation, why did not the parties
expressly stipulate in the 1989 CBA that
regular intermittent workers are not
entitled to commutation of the unenjoyed
portion of their sick leave with pay
benefits?
Whatever doubt there may have been
early on was clearly obliterated when
petitioner-company recognized the said
privilege and paid its intermittent workers
the cash equivalent of the unenjoyed
portion of their sick leave with pay
benefits during the lifetime of the CBA of
October 16, 1985 until three (3) months
from its renewal on April 15, 1989. Well-
settled is it that the said privilege of
commutation or conversion to cash, being
an existing benefit, the petitioner-
company may not unilaterally withdraw, or
diminish such benefits. 10 It is a fact that
petitioner-company had, on several
instances in the past, granted and paid the
cash equivalent of the unenjoyed portion
of the sick leave benefits of some
intermittent workers. 11 Under the
circumstances, these may be deemed to
have ripened into company practice or
policy which cannot be peremptorily
withdrawn. 12
Moreover, petitioner-company's objection
to the authority of the Voluntary
Arbitrator to direct the commutation of
the unenjoyed portion of the sick leave
with pay benefits of intermittent workers
in his decision is misplaced. Article 261 of
the Labor Code is clear. The questioned
directive of the herein public respondent is
the necessary consequence of the exercise
of his arbitral power as Voluntary
Arbitrator under Article 261 of the Labor
Code "to hear and decide all unresolved
grievances arising from the interpretation
or implementation of the Collective
Bargaining Agreement." We, therefore,
find that no grave abuse of discretion was
committed by public respondent in issuing
the award (decision). Moreover, his
interpretation of Sections 1 and 3, Article
VIII of the 1989 CBA cannot be faulted with
and is absolutely correct.
WHEREFORE, in view of the foregoing, the
petition is DISMISSED. The award
(decision) of public respondent dated
September 10, 1991 is hereby AFFIRMED.
No costs.
SO ORDERED.
G.R. No. 176985 April 1, 2013
RICARDO E. VERGARA, JR., Petitioner,
vs.
COCA-COLA BOTTLERS PHILIPPINES,
INC., Respondent.
DECISION
PERALTA, J.:
Before Us is a petition for review on
certiorari under Rule 45 of the Rules of
Civil Procedure assailing the January 9,
2007 Decision1 and March 6, 2007
Resolution2 of the Court of Appeals (CA) in
CA .. G.R. SP No. 94622, which affirmed the
January 31, 2006 Decision3 and March 8,
2006 Resolution4 of the National Labor
Relations Commission (NLRC) modifying
the September 30, 2003 Decision5 of the
Labor Arbiter (LA) by deleting the sales
management incentives in the
computation of petitioner's retirement
benefits.
Petitioner Ricardo E. Vergara, Jr. was an
employee of respondent Coca-Cola
Bottlers Philippines, Inc. from May 1968
until he retired on January 31, 2002 as a
District Sales Supervisor (DSS) for Las Piñas
City, Metro Manila. As stipulated in
respondent’s existing Retirement Plan
Rules and Regulations at the time, the
Annual Performance Incentive Pay of
RSMs, DSSs, and SSSs shall be considered
in the computation of retirement benefits,
as follows: Basic Monthly Salary + Monthly
Average Performance Incentive (which is
the total performance incentive earned
during the year immediately preceding ÷
12 months) × No. of Years in Service.6
Claiming his entitlement to an additional
PhP474,600.00 as Sales Management
Incentives (SMI)7 and to the amount of
PhP496,016.67 which respondent allegedly
deducted illegally, representing the unpaid
accounts of two dealers within his
jurisdiction, petitioner filed a complaint
before the NLRC on June 11, 2002 for the
payment of his "Full Retirement Benefits,
Merit Increase, Commission/Incentives,
Length of Service, Actual, Moral and
Exemplary Damages, and Attorney’s
Fees."8
After a series of mandatory conference,
both parties partially settled with regard
the issue of merit increase and length of
service.9 Subsequently, they filed their
respective Position Paper and Reply
thereto dealing on the two remaining
issues of SMI entitlement and illegal
deduction.
On September 30, 2003, the LA rendered a
Decision10 in favor of petitioner, directing
respondent to reimburse the amount
illegally deducted from petitioner’s
retirement package and to integrate
therein his SMI privilege. Upon appeal of
respondent, however, the NLRC modified
the award and deleted the payment of
SMI.
Petitioner then moved to partially execute
the reimbursement of illegal deduction,
which the LA granted despite respondent’s
opposition.11 Later, without prejudice to
the pendency of petitioner’s petition for
certiorari before the CA, the parties
executed a Compromise Agreement12 on
October 4, 2006, whereby petitioner
acknowledged full payment by respondent
of the amount of PhP496,016.67 covering
the amount illegally deducted.
The CA dismissed petitioner’s case on
January 9, 2007 and denied his motion for
reconsideration two months thereafter.
Hence, this present petition to resolve the
singular issue of whether the SMI should
be included in the computation of
petitioner’s retirement benefits on the
ground of consistent company practice.
Petitioner insistently avers that many DSSs
who retired without achieving the sales
and collection targets were given the
average SMI in their retirement package.
We deny.
This case does not fall within any of the
recognized exceptions to the rule that only
questions of law are proper in a petition
for review on certiorari under Rule 45 of
the Rules of Court. Settled is the rule that
factual findings of labor officials, who are
deemed to have acquired expertise in
matters within their respective jurisdiction,
are generally accorded not only respect
but even finality, and bind us when
supported by substantial
evidence.13Certainly, it is not Our function
to assess and evaluate the evidence all
over again, particularly where the findings
of both the CA and the NLRC coincide.
In any event, even if this Court would
evaluate petitioner's arguments on its
supposed merits, We still find no reason to
disturb the CA ruling that affirmed the
NLRC. The findings and conclusions of the
CA show that the evidence and the
arguments of the parties had all been
carefully considered and passed upon.
There are no relevant and compelling facts
to justify a different resolution which the
CA failed to consider as well as no factual
conflict between the CA and the NLRC
decisions.
Generally, employees have a vested right
over existing benefits voluntarily granted
to them by their employer.14Thus, any
benefit and supplement being enjoyed by
the employees cannot be reduced,
diminished, discontinued or eliminated by
the employer.15 The principle of non-
diminution of benefits is actually founded
on the Constitutional mandate to protect
the rights of workers, to promote their
welfare, and to afford them full
protection.16 In turn, said mandate is the
basis of Article 4 of the Labor Code which
states that "all doubts in the
implementation and interpretation of this
Code, including its implementing rules and
regulations, shall be rendered in favor of
labor."17
There is diminution of benefits when the
following requisites are present: (1) the
grant or benefit is founded on a policy or
has ripened into a practice over a long
period of time; (2) the practice is
consistent and deliberate; (3) the practice
is not due to error in the construction or
application of a doubtful or difficult
question of law; and (4) the diminution or
discontinuance is done unilaterally by the
employer.18
To be considered as a regular company
practice, the employee must prove by
substantial evidence that the giving of the
benefit is done over a long period of time,
and that it has been made consistently and
deliberately.19Jurisprudence has not laid
down any hard-and-fast rule as to the
length of time that company practice
should have been exercised in order to
constitute voluntary employer
practice.20 The common denominator in
previously decided cases appears to be the
regularity and deliberateness of the grant
of benefits over a significant period of
time.21 It requires an indubitable showing
that the employer agreed to continue
giving the benefit knowing fully well that
the employees are not covered by any
provision of the law or agreement
requiring payment thereof.22 In sum, the
benefit must be characterized by
regularity, voluntary and deliberate intent
of the employer to grant the benefit over a
considerable period of time.23
Upon review of the entire case records,
We find no substantial evidence to prove
that the grant of SMI to all retired DSSs
regardless of whether or not they qualify
to the same had ripened into company
practice. Despite more than sufficient
opportunity given him while his case was
pending before the NLRC, the CA, and even
to this Court, petitioner utterly failed to
adduce proof to establish his allegation
that SMI has been consistently,
deliberately and voluntarily granted to all
retired DSSs without any qualification or
conditions whatsoever. The only two
pieces of evidence that he stubbornly
presented throughout the entirety of this
case are the sworn statements of Renato
C. Hidalgo (Hidalgo) and Ramon V.
Velazquez (Velasquez), former DSSs of
respondent who retired in 2000 and 1998,
respectively. They claimed that the SMI
was included in their retirement package
even if they did not meet the sales and
collection qualifiers.24 However,
juxtaposing these with the evidence
presented by respondent would reveal the
frailty of their statements.
The declarations of Hidalgo and Velazquez
were sufficiently countered by respondent
through the affidavits executed by Norman
R. Biola (Biola), Moises D. Escasura
(Escasura), and Ma. Vanessa R. Balles
(Balles).25 Biola pointed out the various
stop-gap measures undertaken by
respondent beginning 1999 in order to
arrest the deterioration of its accounts
receivables balance, two of which relate to
the policies on the grant of SMI and to the
change in the management structure of
respondent upon its re-acquisition by San
Miguel Corporation. Escasura represented
that he has personal knowledge of the
circumstances behind the retirement of
Hidalgo and Velazquez. He attested that
contrary to petitioner’s claim, Hidalgo was
in fact qualified for the SMI. As for
Velazquez, Escasura asserted that even if
he (Velazquez) did not qualify for the SMI,
respondent’s General Manager in its
Calamba plant still granted his (Velazquez)
request, along with other numerous
concessions, to achieve industrial peace in
the plant which was then experiencing
labor relations problems. Lastly, Balles
confirmed that petitioner failed to meet
the trade receivable qualifiers of the SMI.
She also cited the cases of Ed Valencia
(Valencia) and Emmanuel Gutierrez
(Gutierrez), both DSSs of respondent who
retired on January 31, 2002 and December
30, 2002, respectively. She noted that,
unlike Valencia, Gutierrez also did not
receive the SMI as part of his retirement
pay, since he failed to qualify under the
policy guidelines. The verity of all these
statements and representations stands
and holds true to Us, considering that
petitioner did not present any iota of proof
to debunk the same.1âwphi1
Therefore, respondent's isolated act of
including the SMI in the retirement
package of Velazquez could hardly be
classified as a company practice that may
be considered an enforceable obligation.
To repeat, the principle against diminution
of benefits is applicable only if the grant or
benefit is founded on an express policy or
has ripened into a practice over a long
period of time which is consistent and
deliberate; it presupposes that a company
practice, policy and tradition favorable to
the employees has been clearly
established; and that the payments made
by the company pursuant to it have
ripened into benefits enjoyed by
them.26 Certainly, a practice or custom is,
as a general rule, not a source of a legally
demandable or enforceable
right.27 Company practice, just like any
other fact, habits, customs, usage or
patterns of conduct, must be proven by
the offering party who must allege and
establish specific, repetitive conduct that
might constitute evidence of habit or
company practice.28
To close, We rule that petitioner could
have salvaged his case had he step up to
disprove respondent’s contention that he
miserably failed to meet the collection
qualifiers of the SMI. Respondent argues
that −
An examination of the Company’s aged
trial balance reveals that petitioner did not
meet the trade receivable qualifier. On the
contrary, the said trial balance reveals that
petitioner had a large amount of
uncollected overdue accounts. For the
year 2001, his percentage collection
efficiency for current issuance was at an
average of 13.5% a month as against the
required 70%. For the same, petitioner’s
collection efficiency was at an average of
60.25% per month for receivables aged 1-
30 days, which is again, way below the
required 90%. For receivables aged 31-60
days during said year, petitioner’s
collection efficiency was at an average of
56.17% per month, which is approximately
half of the required 100%. Worse, for
receivables over 60 days old, petitioner’s
average collection efficiency per month
was a reprehensively low 14.10% as
against the required 100%.29
The above data was repeatedly raised by
respondent in its Rejoinder (To
Complainant’s Reply) before the
LA,30Memorandum of Appeal31 and
Opposition (To Complainant-Appellee’s
Motion for Reconsideration)32 before the
NLRC, and Comment (On the
Petition),33 Memorandum (For the Private
Respondent),34 and Comment (On the
Motion for Reconsideration)35 before the
CA. Instead of frontally rebutting the data,
petitioner treated them with deafening
silence; thus, reasonably and logically
implying lack of evidence to support the
contrary.
WHEREFORE, the petition is DENIED. The
January 9, 2007 Decision and March 6,
2007 Resolution of the Court of Appeals in
CA-G.R. SP No. 94622, which affirmed the
January 31, 2006 Decision and March 8,
2006 Resolution of the NLRC deleting the
LA's inclusion of sales management
incentives in the computation of
petitioner's retirement benefits, is hereby
AFFIRMED.
SO ORDERED.
G.R. No. 88168 August 30, 1990
TRADERS ROYAL BANK, petitioner,
vs.
NATIONAL LABOR RELATIONS
COMMISSION & TRADERS ROYAL BANK
EMPLOYEES UNION, respondents.
San Juan, Gonzalez, San Agustin & Sinense
for petitioner.
E.N.A. Cruz, Enfero & Associates for private
respondent.
GRIÑO-AQUINO, J.:
This petition for certiorari seeks to nullify
or set aside the decision dated September
2, 1988 of the National Labor Relations
Commission, which found the petitioner,
Traders Royal Bank (or TRB), guilty of
diminution of benefits due the private
respondents and ordered it to pay the said
employees' claims for differentials in their
holiday, mid-year, and year-end bonuses.
On November 18, 1986, the Union,
through its president, filed a letter-
complaint against TRB with the
Conciliation Division of the Bureau of
Labor Relations claiming that:
First, the management of TRB
per memo dated October 10,
1986 paid the employees their
HOLIDAY PAY, but has
withheld from the Union the
basis of their computation.
Second, the computation in
question, has allegedly
decreased the daily salary rate
of the employees. This
diminution of existing benefits
has decreased our overtime
rate and has affected the
employees' take home pay.
Third, the diminution of
benefits being enjoyed by the
employees since time
immemorial, e.g. mid-year
bonus, from two (2) months
gross pay to two (2) months
basic and year-end bonus
from three (3) months gross
to only two (2) months.
Fourth, the refusal by
management to recall active
union members from the
branches which were being
transferred without prior
notice, solely at the instance
of the branch manager. (p.
26, Rollo.)
In its answer to the union's complaint, TRB
pointed out that the NLRC, not the Bureau
of Labor Relations, had jurisdiction over
the money claims of the employees.
On March 24, 1987, the Secretary of Labor
certified the complaint to the NLRC for
resolution of the following issues raised by
the complainants:
l) The Management of TRB per
memo dated October 10,
1986 paid the employees their
holiday pay but has withheld
from the union the basis of
their computation.
2) The computation in
question has allegedly
decreased the daily salary rate
of the employees. This
diminution of existing benefits
has decreased our overtime
rate and has affected the
employees' take home pay.
3) The diminution of benefits
being enjoyed by the
employees since the (sic)
immemorial, e.g. mid-year
bonus, from two (2) months
gross pay to two (2) months
basic and year-end bonus
from three (3) months gross
to only two (2) months.
4) The refusal by management
to recall active union
members from the branches
which were being transferred
without prior notice, solely at
the instance of the branch,
manager. (p. 28, Rollo.)
In the meantime, the parties who had
been negotiating for a collective
bargaining agreement, agreed on the
terms of the CBA, to wit:
1. The whole of the bonuses
given in previous years is not
demandable, i.e., there is no
diminution, as to be liable for
a differential, if the bonus
given is less than that in
previous years.
2. Since only two months
bonus is guaranteed, only to
that extent are bonuses
deemed part of regular
compensation.
 3. As regards the third and
fourth bonuses, they are
entirely dependent on the
income of the bank, and not
demandable as part of
compensation. (pp. 67-
68, Rollo.)
Despite the terms of the CBA, however,
the union insisted on pursuing the case,
arguing that the CBA would apply
prospectively only to claims arising after its
effectivity.
Petitioner, on the other hand, insisted that
it had paid the employees holiday pay. The
practice of giving them bonuses at year's
end, would depend on how profitable the
operation of the bank had been. Generally,
the bonus given was two (2) months basic
mid-year and two (2) months gross end-
year.
On September 2, 1988, the NLRC rendered
a decision in favor of the employees, the
dispositive portion of which reads:
WHEREFORE, judgment is
hereby rendered in favor of
the petitioner and ordering
respondent bank to pay
petitioner members-
employees the following:
1. Holiday differential for the
period covering l983-1986 as
embodied in Resolution No.
4984-1986 of respondent's
Board of Directors but to start
from November 11, 1983 and
using the Divisor 251 days in
determining the daily rate of
the employees;
2. Mid-year bonus differential
representing the difference
between two (2) months
gross pay and two (2) months
basic pay and end-year bonus
differential of one (1) month
gross pay for 1986.
The claim for holiday
differential for the period
earlier than November 11,
1983 is hereby dismissed, the
same having prescribed.
Likewise, the charge of unfair
labor practice against the
respondent company is
hereby dismissed for lack of
merit. (pp. 72-73, Rollo.)
A motion for reconsideration was filed by
TRB but it was denied. Hence, this petition
for certiorari.
There is merit in the petitioner's
contention that the NLRC gravely abused
its discretion in ordering it to pay mid-
year/year-end bonus differential for 1986
to its employees.
A bonus is "a gratuity or act of liberality of
the giver which the recipient has no right
to demand as a matter of right" (Aragon
vs. Cebu Portland Cement Co., 61 O.G.
4597). "It is something given in addition to
what is ordinarily received by or strictly
due the recipient." The granting of a bonus
is basically a management prerogative
which cannot be forced upon the
employer "who may not be obliged to
assume the onerous burden of granting
bonuses or other benefits aside from the
employee's basic salaries or wages" . . .
(Kamaya Point Hotel vs. National Labor
Relations Commission, Federation of Free
Workers and Nemia Quiambao, G.R. No.
75289, August 31, 1989).
It is clear from the above-cited rulings that
the petitioner may not be obliged to pay
bonuses to its employees. The matter of
giving them bonuses over and above their
lawful salaries and allowances is entirely
dependent on the profits, if any, realized
by the Bank from its operations during the
past year.
From 1979-1985, the bonuses were less
because the income of the Bank had
decreased. In 1986, the income of the
Bank was only 20.2 million pesos, but the
Bank still gave out the usual two (2)
months basic mid-year and two months
gross year-end bonuses. The petitioner
pointed out, however, that the Bank
weakened considerably after 1986 on
account of political developments in the
country. Suspected to be a Marcos-owned
or controlled bank, it was placed under
sequestration by the present
administration and is now managed by the
Presidential Commission on Good
Government (PCGG).
In the light of these submissions of the
petitioner, the contention of the Union
that the granting of bonuses to the
employees had ripened into a company
practice that may not be adjusted to the
prevailing financial condition of the Bank
has no legal and moral bases. Its fiscal
condition having declined, the Bank may
not be forced to distribute bonuses which
it can no longer afford to pay and, in
effect, be penalized for its past generosity
to its employees.
Private respondent's contention, that the
decrease in the midyear and year-end
bonuses constituted a diminution of the
employees' salaries, is not correct, for
bonuses are not part of labor standards in
the same class as salaries, cost of living
allowances, holiday pay, and leave
benefits, which are provided by the Labor
Code.
WHEREFORE, the petition for certiorari is
granted. The decision of the National
Labor Relations Commission is modified by
deleting the award of bonus differentials
to the employees for 1986. In other
respects, the decision is affirmed. Costs
against the respondent union.
SO ORDERED.
G.R. No. 92174 December 10, 1993
BOIE-TAKEDA CHEMICALS, INC.,
petitioner,
vs.
HON. DIONISIO DE LA SERNA, Acting
Secretary of the Department of Labor and
Employment, respondent.
G.R. No. L-102552 December 10, 1993
PHILIPPINE FUJI XEROX CORP., petitioner,
vs.
CRESENCIANO B. TRAJANO,
Undersecretary of the Department of
Labor and Employment, and PHILIPPINE
FUJI XEROX EMPLOYEES UNION,
respondents.
Herrera, Laurel, De los Reyes, Roxas &
Teehankee for Boie-Takeda Chemicals, Inc.
and Phil Xerox Corp.
The Solicitor General for public
respondents.
NARVASA, C.J.:
What items or items of employee
remuneration should go into the
computation of thirteenth month pay is
the basic issue presented in these
consolidated petitions. Otherwise stated,
the question is whether or not the
respondent labor officials in computing
said benefit, committed "grave abuse of
discretion amounting to lack of
jurisdiction," by giving effect to Section 5
of the Revised Guidelines on the
implementation of the Thirteenth Month
Pay (Presidential Decree No. 851)
promulgated by then Secretary of Labor
and Employment, Hon. Franklin Drilon, and
overruling petitioner's contention that said
provision constituted a usurpation of
legislative power because not justified by
or within the authority of the law sought
to be implemented besides being violative
of the equal protection of the law clause of
the Constitution.
Resolution of the issue entails, first, a
review of the pertinent provisions of the
laws and implementing regulations.
Sections 1 and 2 of Presidential Decree No.
851, the Thirteenth Month Pay Law, read
as follows:
Sec 1. All employees are
hereby required to pay all
their employees receiving
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.
Sec. 2. Employers already
paying their employees a 13th
month pay or its equivalent
are not covered by this
Decree.
The Rules and Regulations Implementing
P.D. 851 promulgated by then Labor
Minister Blas Ople on December 22, 1975
contained the following relevant
provisions relative to the concept of
"thirteenth month pay" and the employers
exempted from giving it, to wit:
Sec. 2. Definition of certain
terms. — . . .
a) "Thirteenth month pay"
shall mean one twelfth (1/12)
of the basic salary of an
employee within a calendar
year;
b) "Basic Salary" shall include
all remunerations 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.
Sec. 3. Employers covered. —
. . . (The law applies) to all
employers except to:
xxx xxx xxx
c) Employers already paying
their employers a 13-month
pay or more in calendar year
or is equivalent at the time of
this issuance;
xxx xxx xxx
e) Employers of those who are
paid on purely commission,
boundary, or task basis, and
those who are paid a fixed
amount for performing a
specific work, irrespective of
the time consumed in the
performance thereof, except
where the workers are paid
on piece-rate basis in which
case the employer shall be
covered by this issuance
insofar as such workers are
concerned.
xxx xxx xxx
The term "its equivalent" as
used in paragraph (c) shall
include Christmas bonus, mid-
year bonus, profit-sharing
payments and other cash
bonuses amounting to not
less than 1/12th of the basic
salary but shall not include
cash and stock dividends, cost
of living allowances and all
other allowances regularly
 enjoyed by the employee, as
well as non-monetary
benefits. Where an employer
pays less than 1/12th of the
employee's basic salary, the
employer shall pay the
difference.
Supplementary Rules and Regulations
implementing P.D. 851 were subsequently
issued by Minister Ople which inter alia set
out items of compensation not included in
the computation of the 13th month
pay, viz.:
Sec. 4. Overtime pay, earnings
and other remunerations
which are not part of the basic
salary shall not be included in
the computation of the 13th
month pay.
On August 13, 1986, President Corazon C.
Aquino promulgated Memorandum Order
No. 28, which contained a single provision
modifying Presidential Decree No. 851 by
removing the salary ceiling of P1,000.00 a
month set by the latter, as follows:
Section 1 of Presidential
Decree No. 851 is hereby
modified to the extent that all
employers are hereby
required to pay all their rank-
and-file employees a 13th
month pay not later than
December 24, of every year.
Slightly more than a year later, on
November 16, 1987, Revised Guidelines on
the Implementation of the 13th Month Pay
Law were promulgated by then Labor
Secretary Franklin Drilon which, among
other things, defined with particularity
what remunerative items were and were
not embraced in the concept of 13th
month pay, and specifically dealt with
employees who are paid a fixed or
guaranteed wage plus commission. The
relevant provisions read:
4. Amount and payment of
13th Month Pay.
xxx xxx xxx
The basic salary of an
employee for the purpose of
computing the 13th month
pay shall include all
remunerations or earnings
paid by the employer for
services rendered but does
not include allowances and
monetary benefits which are
not considered or integrated
as part of the regular or basic
salary, such as the cash
equivalent of unused vacation
and sick leave credits,
overtime, premium, night
differential and holiday pay,
and cost-of-living allowances.
However, these salary-related
benefits should be included as
part of the basic salary in the
computation of the 13th
month pay if by individual or
collective agreement,
company practice or policy,
the same are treated as part
of the basic salary of the
employees.
xxx xxx xxx
5. 13th Month Pay for Certain
Types of Employees.
(a) Employees Paid by Results.
— Employees who are paid on
piece work basis are by law
entitled to the 13th month
pay.
Employees who are paid a
fixed or guaranteed wage plus
commission are also entitled
to the mandated 13th month
pay based on their total
earnings during the calendar
year, i.e., on both their fixed
 or guaranteed wage and
commission.
This was the state of the law when the
controversies at bar arose out of the
following antecedents:
(RE G.R. No. 92174) A routine inspection
was conducted on May 2, 1989 in the
premises of petitioner Boie-Takeda
Chemicals, Inc. by Labor
and Development Officer Reynaldo B.
Ramos under Inspection Authority
No. 4-209-89. Finding that Boie-Takeda
had not been including the commissions
earned by its medical representatives in
the computation of their 13th month pay,
Ramos served a Notice of Inspection
Results 1 on Boie-Takeda through its
president, Mr. Benito Araneta, requiring
Boie-Takeda within ten (10) calendar days
from notice to effect restitution or
correction of "the underpayment of 13th
month pay for the year(s) 1986, 1987 and
1988 of Med Rep (Revised Guidelines on
the Implementation of 13th month pay #
5) in the total amount of P558,810.89."
Boie-Takeda wrote the Labor Department
contesting the Notice of Inspection
Results, and expressing the view "that the
commission paid to our medical
representatives are not to be included in
the computation of the 13th month pay . .
. (since the) law and its implementing rules
speak of REGULAR or BASIC salary and
therefore exclude all other remunerations
which are not part of the REGULAR salary."
It pointed out that, "if no sales is (sic)
made under the effort of a particular
representative, there is no commission
during the period when no sale was
transacted, so that commissions are not
and cannot be legally defined as regular in
nature. 2
Regional Director Luna C. Piezas directed
Boie-Takeda to appear before his Office on
June 9 and 16, 1989. On the appointed
dates, however, and despite due notice,
no one appeared for Boie-Takeda, and the
matter had perforce to be resolved on the
basis of the evidence at hand. On July 24,
1989, Director Piezas issued an
Order 3directing Boie-Takeda:
. . . to pay . . . (its) medical
representatives and its
managers the total amount of
FIVE HUNDRED SIXTY FIVE
THOUSAND SEVEN HUNDRED
FORTY SIX AND FORTY SEVEN
CENTAVOS (P565,746.47)
representing underpayment
of thirteenth (13th) month
pay for the years 1986, 1987,
1988, inclusive, pursuant to
the . . . revised guidelines
within ten (10) days from
receipt of this Order.
A motion for reconsideration 4 was
seasonably filed by Boie-Takeda under
date of August 3, 1989. Treated as an
appeal, it was resolved on
January 17, 1990 by then Acting Labor
Secretary Dionisio de la Serna, who
affirmed the July 24, 1989 Order with
modification that the sales commissions
earned by Boie-Takeda's medical
representatives before August 13, 1989,
the effectivity date of Memorandum Order
No. 28 and its Implementing Guidelines,
shall be excluded in the computation of
their 13th month pay. 5
Hence the petition docketed as G.R. No.
92174.
(RE G.R. No. 102552) A similar Routine
Inspection was conducted in the premises
of Philippine Fuji Xerox Corp. on
September 7, 1989 pursuant to Routine
Inspection Authority No. NCR-LSED-RI-494-
89. In his Notice of Inspection
Results, 6 addressed to the Manager, Mr.
Nicolas O. Katigbak, Senior Labor and
Employment Officer Nicanor M. Torres
noted the following violation committed
by Philippine Fuji Xerox Corp., to wit:
 Underpayment of 13th month
pay of 62 employees, more or
less — pursuant to Revised
Guidelines on the
Implementation of the 13th
month pay law for the period
covering 1986, 1987 and
1988.
Philippine Fuji Xerox was requested to
effect rectification and/or restitution of
the noted violation within five (5) working
days from notice.
No action having been taken thereon by
Philippine Fuji Xerox,
Mr. Eduardo G. Gonzales, President of the
Philxerox Employee Union, wrote then
Labor Secretary Franklin Drilon requesting
a follow-up of the inspection findings.
Messrs. Nicolas and Gonzales were
summoned to appear before Labor
Employment and Development Officer
Mario F. Santos, NCR Office, Department
of Labor for a conciliation conference.
When no amicable settlement was
reached, the parties were required to file
their position papers.
Subsequently, Regional Director Luna C.
Piezas issued an Order dated August 23,
1990, 7 disposing as follows:
WHEREFORE, premises
considered, Respondent
PHILIPPINE FUJI XEROX is
hereby ordered to restitute to
its salesmen the portion of
the 13th month pay which
arose out of the non-
implementation of the said
revised guidelines, ten (10)
days from receipt hereof,
otherwise,
MR. NICANOR TORRES, the
SR. LABOR EMPLOYMENT
OFFICER is hereby Ordered to
proceed to the premises of
the Respondent for the
purpose of computing the
said deficiency (sic) should
respondent fail to heed his
Order.
Philippine Fuji Xerox appealed the
aforequoted Order to the Office of the
Secretary of Labor. In an Order dated
October 120, 1991, Undersecretary
Cresenciano B. Trajano denied the appeal
for lack of merit. Hence, the petition in
G.R. No. 102552, which was ordered
consolidated with G.R. No. 92174 as
involving the same issue.
In their almost identically-worded
petitioner, petitioners, through common
counsel, attribute grave abuse of
discretion to respondent labor officials
Hon. Dionisio dela Serna and
Undersecretary Cresenciano B. Trajano in
issuing the questioned Orders of January
17, 1990 and October 10, 1991,
respectively. They maintain that under P.D.
851, the 13th month pay is based solely on
basic salary. As defined by the law itself
and clarified by the implementing and
Supplementary Rules as well as by the
Supreme Court in a long line of decisions,
remunerations which do not form part of
the basic or regular salary of an employee,
such as commissions, should not be
considered in the computation of the 13th
month pay. This being the case, the
Revised Guidelines on the Implementation
of the 13th Month Pay Law issued by then
Secretary Drilon providing for the inclusion
of commissions in the 13th month pay,
were issued in excess of the statutory
authority conferred by P.D. 851. According
to petitioners, this conclusion becomes
even more evident when considered in
light of the opinion rendered by Labor
Secretary Drilon himself in "In Re: Labor
Dispute at the Philippine Long Distance
Telephone Company" which affirmed the
contemporaneous interpretation by then
Secretary Ople that commissions are
excluded from the basic salary. Petitioners
further contend that assuming that
Secretary Drilon did not exceed the
statutory authority conferred by P.D. 851,
still the Revised Guidelines are null and
void as they violate the equal protection of
the law clause.
Respondents through the Office of the
Solicitor General question the propriety of
petitioners' attack on the constitutionality
of the Revised Guidelines in a petition
for certiorari which, they contend, should
be confined purely to the correction of
errors and/or defects of jurisdiction,
including matters of grave abuse of
discretion amounting to lack or excess of
jurisdiction and not extend to a collateral
attack on the validity and/or
constitutionality of a law or statute. They
aver that the petitions do not advance any
cogent reason or state any valid ground to
sustain the allegation of grave abuse of
discretion, and that at any rate, P.D. No.
851, otherwise known as the 13th Month
Pay Law has already been amended by
Memorandum Order No. 28 issued by
President Corazon C. Aquino on August 13,
1986 so that commissions are now
imputed into the computation of the 13th
Month Pay. They add that the Revised
Guidelines issued by then Labor Secretary
Drilon merely clarified a gray area
occasioned by the silence of the law as to
the nature of commissions; and worked no
violation of the equal protection clause of
the Constitution, said Guidelines being
based on reasonable classification.
Respondents point to the case of Songco
vs. National Labor Relations Commission,
183 SCRA 610, wherein the Court declared
that Article 97(f) of the Labor Code is
explicit that commission is included in the
definition of the term "wage".
We rule for the petitioners.
Contrary to respondents' contention,
Memorandum Order No. 28 did not repeal,
supersede or abrogate P.D. 851. As may be
gleaned from the language of the
Memorandum Order No. 28, it merely
"modified" Section 1 of the decree by
removing the P1,000.00 salary ceiling. The
concept of 13th Month Pay as envisioned,
defined and implemented under P.D. 851
remained unaltered, and while entitlement
to said benefit was no longer limited to
employees receiving a monthly basic salary
of not more than P1,000.00, said benefit
was, and still is, to be computed on the
basic salary of the employee-recipient as
provided under P.D. 851. Thus, the
interpretation given to the term "basic
salary" as defined in P.D. 851 applies
equally to "basic salary" under
Memorandum Order No. 28.
In the case of San Miguel Corp. vs. Inciong,
103 SCRA 139, this Court delineated the
coverage of the term "basic salary" as used
in P.D. 851. We said at some length:
Under Presidential Decree
851 and its implementing
rules, the basic salary of an
employee is used as the basis
in the determination of his
13th month pay. Any
compensations or
remunerations which are
deemed not part of the basic
pay is excluded as basis in the
computation of the
mandatory bonus.
Under the Rules and
Regulations implementing
Presidential Decree 851, the
following compensations are
deemed not part of the basic
salary:
a) Cost-of-living
allowances
granted pursuant
to Presidential
Decree 525 and
Letter of
Instructions No.
174;
b) Profit-sharing
payments;
 c) All allowances
and monetary
benefits which
are not
considered or
integrated as part
of the regular
basic salary of
the employee at
the time of the
promulgation of
the Decree on
December 16,
1975.
Under a later set of
Supplementary Rules and
Regulations Implementing
Presidential Decree 851
Presidential Decree 851
issued by then Labor
Secretary Blas Ople, overtime
pay, earnings and other
remunerations are excluded
as part of the basic salary and
in the computation of the
13th month pay.
The exclusion of the cost-of-
living allowances under
Presidential Decree 525 and
Letter of Instructions No. 174,
and profit-sharing payments
indicate the intention to strip
basic salary of other payments
which are properly considered
as "fringe" benefits. Likewise,
the catch-all exclusionary
phrase "all allowances and
monetary benefits which are
not considered or integrated
as part of the basic salary"
shows also the intention to
strip basic salary of any and all
additions which may be in the
form of allowances or "fringe"
benefits.
Moreover, the Supplementary
Rules and Regulations
Implementing Presidential
Decree 851 is even more
emphatic in declaring that
earnings and other
remunerations which are not
part of the basic salary shall
not be included in the
computation of the 13th-
month pay.
While doubt may have been
created by the prior Rules and
Regulations Implementing
Presidential Decree 851 which
defines basic salary to include
all remunerations or earnings
paid by an employer to an
employee, this cloud is
dissipated in the later and
more controlling
Supplementary Rules and
Regulations which
categorically exclude from the
definitions of basic salary
earnings and other
remunerations paid by an
employer to an employee. A
cursory perusal of the two
sets of Rules indicates that
what has hitherto been the
subject of a broad inclusion is
now a subject of broad
exclusion. The Supplementary
Rules and Regulations cure
the seeming tendency of the
former rules to include all
remunerations and earnings
within the definition of basic
salary.
The all embracing phrase
"earnings and other
remunerations" which are
deemed not part of the basic
salary includes within its
meaning payments for sick,
vacation, or maternity leaves,
premium for works performed
on rest days and special
holidays, pays for regular
holidays and night
differentials. As such they are
deemed not part of the basic
salary and shall not be
considered in the
computation of the 13th-
month pay. If they were not
excluded, it is hard to find any
"earnings and other
remunerations" expressly
excluded in the computation
of the 13th month pay. Then
the exclusionary provision
would prove to be idle and
with no purpose.
This conclusion finds strong
support under the Labor Code
of the Philippines. To cite a
few provisions:
Art. 87. Overtime Work. Work
may be performed beyond
eight (8) hours a day provided
that the employee is paid for
the overtime work, additional
compensation equivalent to
his regular wage plus at least
twenty-five (25%) percent
thereof.
It is clear that overtime pay is
an additional compensation
other than and added to the
regular wage or basic salary,
for reason of which such is
categorically excluded from
the definition of basic salary
under the Supplementary
Rules and Regulations
Implementing Presidential
Decree 851.
In Article 93 of the same
Code, paragraph
c) work performed on any
special holiday shall be paid
an additional compensation of
at least thirty percent (30%)
of the regular wage of the
employee.
It is likewise clear the
premiums for special holiday
which is at least 30% of the
regular wage is an additional
pay other than and added to
the regular wage or basic
salary. For similar reason, it
shall not be considered in the
computation of the 13th
month pay.
Quite obvious from the foregoing is that
the term "basic salary" is to be understood
in its common, generally-accepted
meaning, i.e., as a rate of pay for a
standard work period exclusive of such
additional payments as bonuses and
overtime. 8 This is how the term was also
understood in the case of Pless v. Franks,
308 S.W. 2nd. 402, 403, 202 Tenn. 630,
which held that in statutes providing that
pension should not less than 50 percent of
"basic salary" at the time of retirement,
the quoted words meant the salary that an
employee (e.g., a policeman) was receiving
at the time he retired without taking into
consideration any extra compensation to
which he might be entitled for extra
work. 9
In remunerative schemes consisting of a
fixed or guaranteed wage plus
commission, the fixed or guaranteed wage
is patently the "basic salary" for this is
what the employee receives for a standard
work period. Commissions are given for
extra efforts exerted in consummating
sales or other related transactions. They
are, as such, additional pay, which this
Court has made clear do not form part of
the "basic salary."
Respondents would do well to distinguish
this case from Songco vs. National Labor
Relations Commission, supra, upon which
they rely so heavily. What was involved
therein was the term "salary" without the
restrictive adjective "basic". Thus, in said
case, we construed the term in its generic
sense to refer to all types of "direct
remunerations for services rendered,"
including commissions. In the same case,
we also took judicial notice of the fact
"that some salesmen do not receive any
basic salary but depend on commissions
and allowances or commissions alone,
although an employer-employee
relationship exists," which statement is
quite significant in that it speaks of a "basic
salary" apart and distinct from
"commissions" and "allowances". Instead
of supporting respondents' stand, it would
appear that Songco itself recognizes that
commissions are not part of "basic salary."
In including commissions in the
computation of the 13th month pay, the
second paragraph of Section 5(a) of the
Revised Guidelines on the Implementation
of the 13th Month Pay Law unduly
expanded the concept of "basic salary" as
defined in P.D. 851. It is a fundamental
rule that implementing rules cannot add to
or detract from the provisions of the law it
is designed to implement. Administrative
regulations adopted under legislative
authority by a particular department must
be in harmony with the provisions of the
law they are intended to carry into effect.
They cannot widen its scope. An
administrative agency cannot amend an
act of Congress. 10
Having reached this conclusion, we deem
it unnecessary to discuss the other issues
raised in these petitions.
WHEREFORE, the consolidated petitions
are hereby GRANTED. The second
paragraph of Section 5 (a) of the Revised
Guidelines on the Implementation of the
13th Month Pay Law issued on November
126, 1987 by then Labor Secretary Franklin
M. Drilon is declared null and void as being
violative of the law said Guidelines were
issued to implement, hence issued with
grave abuse of discretion correctible by
the writ of prohibition and certiorari. The
assailed Orders of January 17, 1990 and
October 10, 1991 based thereon are SET
ASIDE.
SO ORDERED.
G.R. Nos. 92981-83 January 9, 1992
INTERNATIONAL PHARMACEUTICALS,
INC., petitioner,
vs.
HON. SECRETARY OF LABOR and
ASSOCIATED LABOR UNION
(ALU), respondents.
E.B. Ramos & Associates for petitioner.
Celso C. Reales for private respondent.
REGALADO, J.:
The issue before us is whether or not the
Secretary of the Department of Labor and
Employment has the power to assume
jurisdiction over a labor dispute and its
incidental controversies, including unfair
labor practice cases, causing or likely to
cause a strike or lockout in an industry
indispensable to the national interest.
The operative facts which culminated in
the present recourse are undisputed.
Prior to the expiration on January 1, 1989
of the collective bargaining agreement
between petitioner International
Pharmaceuticals, Inc. (hereafter,
Company) and the Associated Labor Union
(Union, for brevity), the latter submitted to
the Company its economic and political
demands. These were not met by the
Company, hence a deadlock ensued.
On June 27, 1989, the Union filed a notice
of strike with Regional Office No. VII of the
National Conciliation and Mediation Board,
Department of Labor and Employment,
which was docketed as NCMB-RBVII-NS-
06-050-89. After all conciliation efforts had
failed, the Union went on strike on August
8, 1989 and the Company's operations
were completely paralyzed.
Subsequently, three other labor cases
involving the same parties were filed with
the National Labor Relations Commission
(NLRC) to wit:
1. International
Pharmaceuticals,
Inc. vs. Associated Labor
Union, NLRC Case No. VII-09-
0810-89, 1a petition for
injunction and damages with
temporary restraining order
filed by the Company against
the Union and some of its
members for picketing the
Company's establishment in
Cebu, Davao, and Metro
Manila allegedly without the
required majority of the
employees approving and
agreeing to the strike and
with simulated strike votes, in
direct violation of the
provisions of their collective
bargaining agreement and in
total and complete defiance
of the provisions of the Labor
Code;
2. Associated Labor Union
vs. International
Pharmaceuticals, Inc., et al.,
NLRC Case No-VII-08-0715-
89, 2 a complaint for unfair
labor practice with prayer for
damages and attorney's fees
filed by the Union against the
Company, its personnel
manager, and the Workers
Alliance of Trade Unions
(WATU) as a result of the
Company's refusal to include
the sales workers in the
bargaining unit resulting in a
deadlock in the bargaining
negotiations; for coddling the
respondent WATU as a
separate bargaining agent of
the sales workers despite a
contrary ruling of the Med-
Arbiter; and undue
interference by the Company
in the right of the workers to
self-organization through
harassment and dispersal of a
peaceful picket during the
strike; and
3. International
Pharmaceuticals, Inc., et
al. vs. Associated Labor Union,
NLRC Case No. VII-08-0742-
89, 3 a petition to declare the
strike illegal with prayer for
damages filed by the
Company alleging, among
others, that the notice of
strike filed by the Union with
the National Conciliation and
Mediation Board did not
conform with the
requirements of the Labor
Code, and that the Union, in
violation of the Labor Code
provisions on the conduct of
the strike, totally blockaded
and continued to blockade
the ingress and egress of the
Company's premises by
human barricades, placards,
benches and other
obstructions, completely
paralyzing its business
operations.
Meanwhile, considering that the Company
belongs to an industry indispensable to
national interest, it being engaged in the
manufacture of drugs and pharmaceuticals
and employing around 600 workers, then
Acting Secretary of Labor, Ricardo C.
Castro, invoking Article 263 (g) of the
Labor Code, issued an order dated
September 26, 1989 assuming jurisdiction
over the aforesaid case docketed as
NCMB-RBVII-NS-06-050-89 and directing
the parties to return to the status
quo before the work stoppage. The
decretal portion of the order reads:
 WHEREFORE, PREMISES
CONSIDERED, this Office
hereby assumes jurisdiction
over the labor dispute at the
International
Pharmaceuticals,
Incorporated pursuant to
Article 263 (g) of the Labor
Code, as amended.
Accordingly, all striking
workers are hereby directed
to return to work and
management to accept them
under the same terms and
conditions prevailing before
the work stoppage, within
twenty four (24) hours from
receipt of this Order.
Management is directed to
post copies of this Order in
three (3) conspicuous places
in the company premises.
The parties are likewise
ordered to cease and desist
from committing any and all
acts that will prejudice either
party and aggravate the
situation as well as the
normalization of operations.
SO ORDERED. 4
On January 15, 1990, the Union filed a
motion in NCMB-RBVII-NS-06-050-85, the
case over which jurisdiction had been
assumed by the Secretary of Labor and
Employment (hereafter referred to as the
Secretary), seeking the consolidation of
the three NLRC cases (NLRC Cases Nos. VII-
09-0810-89, VII-08-0715-89, and VII-08-
0742-89) with the first stated case.
In an order dated January 31, 1990,
Secretary of Labor Ruben D. Torres
granted the motion and ordered the
consolidation of the three NLRC cases with
NCMB-RBVII-NS-06-050-89, as follows:
WHEREFORE, finding the
Associated Labor Union's
Motion to be meritorious, the
same is granted and NLRC
Cases Nos. VII-09-0810-89,
VII-08-0715-89 and VII-08-
0742-89 are hereby ordered
consolidated with the instant
proceedings. The Labor
Arbiter handling the same is
directed to immediately
transmit the records of the
said cases to the Asst.
Regional Director, DOLE
Regional Office No. 7 who has
been designated to hear and
receive the evidence of the
parties.
SO ORDERED. 5
The Company's subsequent motion for
reconsideration of the order consolidating
the cases was denied by the Secretary on
March 5, 1990. 6 Thereafter, the Assistant
Regional Director of Regional Office No.
VII, as directed, assumed jurisdiction over
the consolidated cases and set the same
for reception of evidence.
Petitioner Company now comes to this
Court assailing the aforesaid orders and
alleging grave abuse of discretion on the
part of the public respondent in the
issuance thereof. The Union, as the
bargaining agent of the rank and file
workers of the Company, was impleaded
as the private respondent.
Petitioner Company submits that the
exclusive jurisdiction to hear and decide
the three NLRC cases above-specified is
vested in the labor arbiter as provided in
paragraph (a) (1) and (5) of Article 217 of
the Labor Code.
Moreover, petitioner insists that there is
nothing in Article 263 (g) of the Labor Code
which directs the labor arbiter to hold in
abeyance all proceedings in the NLRC
cases and await instruction from the
Secretary. Otherwise, so it postulates,
Section 6, Rule V of the Revised Rules of
the NLRC which is invoked by the Secretary
is null and void since it orders the
cessation of all proceedings before the
labor arbiter and orders him to await
instructions from the Secretary in labor
disputes where the Secretary bas assumed
jurisdiction, thereby amending Article 263
(g) of the Labor Code by enlarging the
jurisdiction of the Secretary.
Petitioner further contends that,
granting arguendo that Section 6, Rule V of
the Revised Rules of the NLRC is in
accordance with Article 263 (g) of the
Labor Code, still the Secretary should not
have ordered the consolidation of the
three unfair labor practice cases with
NCMB-RBVII-NS-06-050-89, since the
Secretary assumed jurisdiction only over
the deadlock in the negotiation of the
collective bargaining agreement and the
petition for contempt as a result of the
said deadlock.
Respondents, on the other band, assert
that the authority to assume jurisdiction
over labor disputes, vested in the
Secretary by Article 263 (g) of the Labor
Code, extends to all questions and
incidents arising therein causing or likely to
cause strikes or lockouts in industries
indispensable to national interest.
Moreover, respondents counter that
Section 6, Rule V of the Revised Rules of
the NLRC is in accordance with Article 263
(g) of the Labor Code, notwithstanding the
provisions of Article 217 of the Labor Code.
To rule otherwise, they point out, would
encourage splitting of jurisdiction,
multiplicity of suits, and possible
conflicting findings and decisions which
could only result in delay and
complications in the disposition of the
labor disputes.
It was also stressed that the three NLRC
cases which respondent Secretary ordered
consolidated with the labor dispute over
which he had assumed jurisdiction arose
from or are directly related to and are
incidents of the said labor dispute.
Finally, respondents invoke the rule that all
doubts in the implementation and
interpretation of the Labor Code
provisions should be resolved in favor of
labor. By virtue of the assailed orders, the
Union and its members were relieved of
the burden of having to litigate their
interrelated cases in different fora.
There are three governing labor law
provisions which are determinative of the
present issue of jurisdiction, viz.:
1. Article 217 (a) (1) and (5) of the Labor
Code which provides:
Art. 217. Jurisdiction of Labor
Arbiters and the Commission
— (a) Except as otherwise
provided under this Code the
Labor Arbiters shall have
original and exclusive
jurisdiction to hear and decide
. . . the following cases
involving all workers. . . .
1. Unfair labor practice cases;
xxx xxx xxx
5. Cases arising from any
violation of Article 264 of this
Code, including questions
involving the legality of strikes
and lockouts; . . .
2. Article 263 (g) of the Labor Code which
declares:
(g) When, in his opinion, there
exists a labor dispute causing
or likely to cause a strike of
lockout in an industry
indispensable to the national
interest, the Secretary of
Labor and Employment may
assume jurisdiction over the
dispute and decide it or
 certify the same to the
Commission for compulsory
arbitration. . . .
3. Section 6, Rule V of the Revised Rules of
the NLRC which states:
Sec. 6. Disposition of cases. —
...
Provided, that when the
Minister (Secretary) of Labor
and Employment has assumed
jurisdiction over a strike or
lockout dispute or certified
the same to the Commission,
the parties to such dispute
shall immediately inform the
Minister (Secretary) or the
Commission as the case may
be, of all cases between them
pending before any Regional
Arbitration Branch, and the
Labor Arbiter handling the
same of such assumption or
certification, whereupon all
proceedings before the Labor
Arbiter concerning such cases
shall cease and the Labor
Arbiter shall await
instructions from the Minister
(Secretary) or the
Commission.
The foregoing provisions persuade us that
the Secretary did not gravely abuse his
discretion when he issued the questioned
orders.
As early as 1913, this Court laid down
in Herrera vs. Baretto, et al., 7 the
fundamental normative rule that
jurisdiction is the authority to bear and
determine a cause — the right to act in a
case. However, this should be
distinguished from the exercise of
jurisdiction. The authority to decide a case
at all and not the decision rendered
therein is what makes up jurisdiction.
Where there is jurisdiction over the person
and the subject matter, the decision of all
other questions arising in the case is but
an exercise of that jurisdiction. 8
In the present case, the Secretary was
explicitly granted by Article 263 (g) of the
Labor Code the authority to assume
jurisdiction over a labor dispute causing or
likely to cause a strike or lockout in an
industry indispensable to the national
interest, and decide the same accordingly.
Necessarily, this authority to assume
jurisdiction over the said labor dispute
must include and extend to all questions
and controversies arising therefrom,
including cases over which the labor
arbiter has exclusive jurisdiction.
Moreover, Article 217 of the Labor Code is
not without, but contemplates, exceptions
thereto. This is evident from the opening
proviso therein reading "(e)xcept as
otherwise provided under this Code . . ."
Plainly, Article 263 (g) of the Labor Code
was meant to make both the Secretary (or
the various regional directors) and the
labor arbiters share jurisdiction, subject to
certain conditions. 9 Otherwise, the
Secretary would not be able to effectively
and efficiently dispose of the primary
dispute. To hold the contrary may even
lead to the absurd and undesirable result
wherein the Secretary and the labor
arbiter concerned may have diametrically
opposed rulings. As we have said, "(i)t is
fundamental that a statute is to be read in
a manner that would breathe life into it,
rather than defeat it." 10
In fine, the issuance of the assailed orders
is within the province of the Secretary as
authorized by Article 263 (g) of the Labor
Code and Article 217 (a) (1) and (5) of the
same Code, taken conjointly and rationally
construed to subserve the objective of the
jurisdiction vested in the Secretary.
Our pronouncement on this point should
be distinguished from the situation which
obtained and our consequent ruling
in Servando's, Inc. vs. The Secretary of
Labor and Employment, et al. 11 wherein
we referred to the appropriate labor
arbiter a case previously decided by the
Secretary. The said case was declared to
be within the exclusive jurisdiction of the
labor arbiter since the aggregate claims of
each of the employees involved exceeded
P5,000.00. In Servando, the Secretary
invoked his visitorial and enforcement
powers to assume jurisdiction over the
case, the exclusive and original jurisdiction
of which belongs to the labor arbiter. We
said that to uphold the Secretary would
empower him, under his visitorial powers,
to hear and decide an employee's claim of
more than P5,000.00. We held that he
could not do that and we, therefore,
overruled him.
In the present case, however, by virtue of
Article 263 (g) of the Labor Code, the
Secretary has been conferred jurisdiction
over cases which would otherwise be
under the original and exclusive
jurisdiction of labor arbiters. There was an
existing labor dispute as a result of a
deadlock in the negotiation for a collective
bargaining agreement and the consequent
strike, over which the Secretary assumed
jurisdiction pursuant to Article 263 (g) of
the Labor Code. The three NLRC cases
were just offshoots of the stalemate in the
negotiations and the strike. We, therefore,
uphold the Secretary's order to
consolidate the NLRC cases with the labor
dispute pending before him and his
subsequent assumption of jurisdiction over
the said NLRC cases for him to be able to
competently and efficiently dispose of the
dispute in its totality.
Petitioner's thesis that Section 6, Rule V of
the Revised Rules of the NLRC is null and
void has no merit. The aforesaid rule has
been promulgated to implement and
enforce Article 263 (g) of the Labor Code.
The rule is in harmony with the objectives
sought to be achieved by Article 263 (g) of
the Labor Code, particularly the Secretary's
assumption of jurisdiction over a labor
dispute and his subsequent disposition of
the same in the most expeditious and
conscientious manner. To be able to
completely dispose of a labor dispute, all
its incidents would have to be taken into
consideration. Clearly, the purpose of the
questioned regulation is to carry into
effect the broad provisions of Article 263
(g) of the Labor Code.
By and large, Section 6, Rule V of the
Revised Rules of the NLRC is germane to
the objects and purposes of Article 263 (g)
of the Labor Code, and it is not in
contradiction with but conforms to the
standards the latter requires. Thus, we
hold that the terms of the questioned
regulation are within the statutory power
of the Secretary to promulgate as a
necessary implementing rule or regulation
for the enforcement and administration of
the Labor Code, in accordance with Article
5 of the same Code.
Besides, to uphold petitioner Company's
arguments that the NLRC cases are alien
and totally separate and distinct from the
deadlock in the negotiation of the
collective bargaining agreement is to
sanction split jurisdiction which is
obnoxious to the orderly administration of
justice. 12
Moreover, the rule is that all doubts in the
interpretation and implementation of
labor laws should be resolved in favor of
labor. In upholding the assailed orders of
the Secretary, the Court is only giving
meaning to this rule. The Court should
help labor authorities provide workers
immediate access to their rights and
benefits, without being hampered by
arbitration or litigation processes that
prove to be not only nerve-wracking, but
financially burdensome in the long
run. 13 Administrative rules of procedure
should be construed liberally in order to
promote their object and assist the parties,
especially the workingman, in obtaining
just, speedy, and inexpensive
determination of their respective claims
and defenses. By virtue of the assailed
orders. The Union and its members are
relieved of the burden of litigating their
interrelated cases in different tribunals.

WHEREFORE. there being no grave abuse

of discretion committed by the Secretary
of Labor and Employment, the petition at
bar is hereby DISMISSED.

SO ORDERED.