Framanlis Farms, Inc., et. al. v. Hon. Minister of Labor, et. al.
Ruling:
G.R. No. 72616-17 March 8, 1989
Case Doctrine: Productivity Standards
Minister did not err in requiring the petitioners to pay wage differentials to their
pakyaw workers who worked for at least eight hours daily and earned less than P8.00
per day.
Under Section 3 of PD No. 851, such benefits in the form of food or free electricity,
assuming they were given, were not a proper substitute for the 13th month pay
required by law. Neither may year-end rewards for loyalty and service be considered
in lieu of 13th month pay.
Facts: Eighteen (18) employees of Framanlis Farms, Inc. filed against their employer
two labor standard cases alleging that in 1977 to 1979 they were not paid emergency
cost of living allowance (ECOLA) minimum wage, 13th month pay, holiday pay, and
service incentive leave pay.
In their answer, Framanlis Farms alleged that the employees were not regular
workers on their hacienda but were migratory (sacadas) or pakyaw workers who
worked on-and-off and were hired seasonally, or only during the milling season, to do
piece-work on the farms, hence, they were not entitled to the benefits claimed by
them.
The Minister of Labor directed Framanlis Farms to pay the deficiency payment of
emergency living allowance and service incentive leave pay, holiday pay and social
amelioration bonus for 3 years for 1977 to 1979. Upon the petitioners' appeal of that
Order, the Deputy Minister of Labor modified it by ordering the employer to pay all
non-pakyaw workers their claim for holiday and incentive leave pay for the years
1977, 1978, all 'pakyaw' workers their pay differentials for the same period on days
they worked for at least eight (8) hours and earned below P8.06 daily, and all
complainants their 13th month pay for the years 1978 and 1979. The Deputy Minister
clarified that pakyaw workers were excluded from holiday and service incentive leave
pay.
Issue: Whether awarding pay differentials, holiday and service incentive leave for
pakyaw workers who are not regular employees but are merely paid on piece-rate,
contrary to Art. 82 of the Labor Code;
Whether or not Framanlis Farm is required to pay 13th month pay despite the fact
that they had substantially complied with the requirement by extending yearly
bonuses and other benefits in kind and in cash to the complainants, pursuant to
Section 3(c) of PD 851 which exempts the employer from paying 13th month pay
when its equivalent has already been given;
In 1976, PD No. 928 fixed a minimum wage of P7.00 for agricultural workers in any
plantation or agricultural enterprise irrespective of whether or not the worker was
paid on a piece-rate basis. However, effective July 1, 1978, the minimum wage was
increased to P8.00 (Sec. 1, PD 1389). Subsequently, PD 1614 provided for a P2.00
increase in the daily wage of all workers effective April 1, 1979. The petitioners admit
that those were the minimum rates prevailing then. Therefore, the respondent
Minister did not err in requiring the petitioners to pay wage differentials to their
pakyaw workers who worked for at least eight hours daily and earned less than P8.00
per day in 1978 to 1979.
With regard to the 13th month pay, petitioners admitted that they failed to pay their
workers 13th month pay in 1978 and 1979. However, they argued that they
substantially complied with the law by giving their workers a yearly bonus and other
non-monetary benefits amounting to not less than 1/12th of their basic salary, in the
form of food and free electricity.
Unfortunately, under Section 3 of PD No. 851, such benefits in the form of food or
free electricity, assuming they were given, were not a proper substitute for the 13th
month pay required by law. PD 851 provides:
Section 3. Employees covered — The Decree shall apply to all
employees except to:
xxx
The term 'its equivalent' as used in paragraph (c) hereof shall
include Christmas bonus, mid-year bonus, profit-sharing payments
and other cash bonuses amounting to not less than 1/12 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.xxx
Neither may year-end rewards for loyalty and service be considered in lieu of 13th
month pay. Section 10 of the Rules and Regulations Implementing Presidential
Decree No. 851 provides for the prohibition against reduction or elimination of
benefits or favorable practice being enjoyed by the employee.
Boie-Takeda Chemicals, Inc. vs. de la Serna
228 SCRA 329, Dec. 10, 1993
Facts: P.D. No. 851 provides for the Thirteen-Month Pay Law. Under Sec. 1 of said
law, “all employers are required to pay all their employees receiving basic salary of
not more than P 1,000.00 a month, regardless of the nature of the employment, and
such should be paid on December 24 of every year.” The Rules and Regulations
Implementing P.D. 851 contained provisions defining “13-month pay” and “basic
salary” and the employers exempted from giving it and to whom it is made applicable.
Supplementary Rules and Regulations Implementing P.D. 851 were subsequently
issued by Minister Ople which inter alia set items of compensation not included in
the computation of 13-month pay. (overtime pay, earnings and other remunerations
which are not part of basic salary shall not be included in the computation of 13-
month pay). Pres. Corazon Aquino promulgated on August 13, 1985 M.O. No. 28,
containing a single provision that modifies P.D. 851 by removing the salary ceiling of
P 1,000.00 a month. More than a year later, Revised Guidelines on the
Implementation of the 13-month pay law was promulgated by the then Labor
Secretary Franklin Drilon, among other things, defined particularly what
remunerative items were and were not included in the concept of 13-month pay, and
specifically dealt with employees who are paid a fixed or guaranteed wage plus
commission or commissions were included in the computation of 13th month pay)
A routine inspection was conducted in the premises of petitioner. Finding
that petitioner had not been including the commissions earned by its medical
representatives in the computation of their 1-month pay, a Notice of Inspection
Result was served on petitioner to effect restitution or correction of “the
underpayment of 13-month pay for the years, 1986 to 1988 of Medical
representatives. Petitioner wrote the Labor Department contesting the Notice of
Inspection Results, and expressing the view that the commission paid to its medical
representatives are not to be included in the computation of the 13-moth pay since
the law and its implementing rules speak of REGULAR or BASIC salary and therefore
exclude all remunerations which are not part of the REGULAR salary. Regional Dir.
Luna Piezas issued an order for the payment of underpaid 13-month pay for the years
1986, 1987 and 1988. A motion for reconsideration was filed and the then Acting
labor Secretary Dionisio de la Serna affirmed the order with modification that the
sales commission earned of medical representatives before August 13, 1989
(effectivity date of MO 28 and its implementing guidelines) shall be excluded in the
computation of the 13-month pay.
Similar routine inspection was conducted in the premises of Phil. Fuji Xerox
where it was found there was underpayment of 13th month pay since commissions
were not included. 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.
ISSUE: Whether or not commissions are included in the computation of 13-month
pay
HELD: NO. Contrary to respondent’s contention, M.O No. 28 did not repeal,
supersede or abrogate P.D. 851. As may be gleaned from the language of MO No. 28,
it merely “modified” Section 1 of the decree by removing the P 1,000.00 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 P
1,000.00 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” was defined in PD 851 applies equally to “basic salary” under M.O.
No. 28. 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. In remunerative schemes consists 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 of other
related transactions. They are, as such, additional pay, which the SC has made clear
do not from part of the “basic salary.”
Moreover, the Supreme Court said that, 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.
EASTERN TELECOM PHILIPPINES, INC. VS EASTERN TELECOM EMPLOYEES
UNION
Date of Decision: FEBRUARY 8, 2011
G.R. Number: G.R. No. 185665
Topic: BENEFITS OF EMPLOYEES
Subtopic: BONUSES
Facts: Eastern Telecom Philippines, Inc. (ETPI) plans to defer payment of the 2003
14th, 15th and 16th month bonuses sometime in April 2004. The company's main
ground in postponing the payment of bonuses is due to allege continuing
deterioration of company's financial position which started in the year 2000.
However, ETPI while postponing payment of bonuses sometime in April 2004, such
payment would also be subject to availability of funds.
The union strongly opposed the deferment in payment of the bonuses by filing a
preventive mediation complaint with the NCMB on July 3, 2003, the purpose of
which complaint is to determine the date when the bonus should be paid.
In the conference held at the NCMB, ETPI reiterated its stand that payment of the
bonuses would only be made in April 2004 to which date of payment, the union
agreed. Subsequently, the company made a sudden turnaround in its position by
declaring that they will no longer pay the bonuses until the issue is resolved through
compulsory arbitration.
Thus, on April 26, 2004, the union filed a Notice of Strike on the ground of unfair
labor practice for failure of ETPI to pay the bonuses in gross violation of the economic
provision of the existing CBA.
On May 19, 2004, the Secretary of Labor and Employment, finding that the company
is engaged in an industry considered vital to the economy and any work disruption
thereat will adversely affect not only its operation but also that of the other business
relying on its services, certified the labor dispute for compulsory arbitration.
Acting on the certified labor dispute, a hearing was called on July 16, 2004 wherein
the parties have submitted that the issues for resolution. Thereafter, they were
directed to submit their respective position papers and evidence in support thereof
after which submission, they agreed to have the case considered submitted for
decision.
On April 28, 2005, the NLRC issued its Resolution dismissing ETEU's complaint and
held that ETPI could not be forced to pay the union members the bonuses for the
year 2003 and the 14th month bonus for the year 2004 inasmuch as the payment of
these additional benefits was basically a management prerogative, being an act of
generosity and munificence on the part of the company and contingent upon the
realization of profits.
The CA declared that the Side Agreements of the 1998 and 2001 CBA created a
contractual obligation on ETPI to confer the subject bonuses to its employees without
qualification or condition. It also found that the grant of said bonuses has already
ripened into a company practice and their denial would amount to diminution of the
employees' benefits.
Issue: Whether or not ETPI is liable to pay 14th, 15th and 16th month bonuses for the
year 2003 and 14th month bonus for the year 2004 to the members of respondent
union.
Decision: From a legal point of view, a bonus is a gratuity or act of liberality of the
giver which the recipient cannot demand as a matter of right. The grant 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. However, a
bonus becomes a demandable or enforceable obligation if the additional
compensation is granted without any conditions imposed for its payment. In such
case, the bonus is treated as part of the wage, salary or compensation of the employee.
In this case, there is no dispute that Eastern Telecommunications Phils., Inc. and
Eastern Telecoms Employees Union agreed on the inclusion of a provision for the
grant of 14th, 15th and 16th month bonuses in the 1998-2001 CBA Side Agreement,
as well as in their 2001-2004 CBA Side Agreement, which contained no qualification
for its payment. There were no conditions specified in the CBA Side Agreements for
the grant of the bonus. There was nothing in the relevant provisions of the CBA
which made the grant of the bonus dependent on the company's financial standing or
contingent upon the realization of profits. There was also no statement that if the
company derives no profits, no bonus will be given to the employees. In fine, the
payment of these bonuses was not related to the profitability of business operations.
Consequently, the giving of the subject bonuses cannot be peremptorily withdrawn
by Eastern Telecommunications Phils., Inc. without violating Article 100 of the Labor
Code, which prohibits the unilateral elimination or diminution of benefits by the
employer. The rule is settled that any benefit and supplement being enjoyed by the
employees cannot be reduced, diminished, discontinued or eliminated by the
employer.
LEPANTO CERAMICS INC v LEPANTO CERAMICS EMPLOYEES’ ASSOCIATION
2 March 2010 | Carpio, J.
FACTS: 1998, P (engaged in buying and selling ceramic tiles and similar products)
gave 3k bonus to employees who are members of R, a legitimate labor organization.
1999, CBA: Grants Christmas package/bonus for members of R. The
Christmas bonus was one of the enumerated “existing benefit, practice of traditional
rights” which “shall remain in full force and effect.”
Section 8. – All other existing benefits, practice of
traditional rights consisting of Christmas Gift package/bonus,
reimbursement of transportation expenses in case of breakdown of
service vehicle and medical services and safety devices by virtue of
company policies by the UNION and employees shall remain in
full force and effect.
Section 1. EFFECTIVITY. This agreement shall
become effective on September 1, 1999 and shall remain
in full force and effect without change for a period of
four (4) years or up to August 31, 2004 except as to the
representation aspect which shall be effective for a
period of five (5) years. It shall bind each and every
employee in the bargaining unit including the present
and future officers of the Union.
1999, 2000 and 2001, the bonus was not in cash. Instead, P gave each of the members
of R Tile Redemption Certificates equivalent to P3,000.00 (OMG so useful <3). The
bonus for the year 2002 is the root of the present dispute. P gave a year-end cash
benefit of P600 and offered a cash advance to interested employees equivalent to one
(1) month salary payable in one year. The R objected and argued that this was in
violation of the CBA it executed with the petitioner.
Settlement, mediation failed. In voluntary arbitration, R noted that in a speech during
the Christmas celebration, one of the company’s top executives assured the employees
of said bonus. However, the Human Resources Development Manager informed
them that the traditional bonus would not be given as the company’s earnings were
intended for the payment of its bank loans.
P’s arguments:
1. Extra compensation was based on available resources for a given year and the
workers are not entitled to a bonus if the company does not make profits.
2. P incurred net losses for the years 2001 and 2002 totaling to P1.5 billion; and since
1999, when the CBA was signed, the company’s accumulated losses amounted to
over P2.7 billion.
3. Grant of a one (1) month salary cash advance was not meant to take the place of a
bonus but was meant to show the company’s sincere desire to help its employees
despite its precarious financial condition.
4. CBA provision on a “Christmas gift/bonus” refers to alternative benefits.
5. Even if CBA contained an unconditional obligation to grant the bonus, the present
difficult economic times had already legally released it therefrom pursuant to Article
1267 of the Civil Code.
Voluntary arbitrator, CA, and now SC all rule for R.
ISSUE WON P required to pay R’s Christmas bonus – YES
RULING
A “bonus” is a gratuity or act of liberality. It is given in addition to what is ordinarily
received by or strictly due the recipient. It is granted to an employee for his industry
and loyalty which contributed to the success of the employer’s business and made
possible the realization of profits. It helps to spur the employee to greater efforts.
Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be
enforceable, it must have been promised by the employer and expressly agreed upon
by the parties. Given that the bonus in this case is integrated in the CBA, it is now a
demandable obligation. By its incorporation in the CBA, the Christmas bonus due is
more than just an act of generosity but a contractual obligation. In labor law the CBA
is the law between the parties and they are obliged to comply with its provisions.
CBA reveals that the same provides for the “Christmas gift package/bonus” without
qualification. Terse and clear, the said provision did not state that the bonus depends
on the petitioner’s financial standing.
It is noteworthy that in 1998 and 1999 Financial Statements, P took note that “the
1997 financial crisis in the Asian region adversely affected the Philippine economy.”
It is clear P was aware of the imminence and possibility of business losses owing to
the 1997 financial crisis. In 1998, petitioner suffered a net loss of 14M. Yet it gave a
3k bonus.
All given, business losses are a feeble ground to repudiate obligation under CBA. The
rule is settled that any benefit and supplement enjoyed by employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of
non-diminution of benefits is founded on the constitutional mandate to protect the
rights of workers and to promote their welfare and to afford labor full protection.
The Court is fully aware that implementation to the letter of the subject CBA
provision may further deplete petitioner’s resources. Petitioner’s remedy though lies
not in the Court’s invalidation of the provision but in the parties’ clarification of the
same in subsequent CBA negotiations.
NESTOR J. BALLADARES, ET. AL. VS. PEAK VENTURES CORPORATION AND
YANGCOMARKET OWNERS ASSOCIATION
G.R. No. 161794, June 16, 2009

FACTS: Balladares and co-petitioners were hired as security guards by Peak Ventures
and were assigned at the premises of Yangco Market. They filed a complaint for
underpayment of wages against Peak Ventures with the DOLE. The Regional Director
of DOLE rendered judgment in favor of petitioners and ruled that Peak Ventures and
Yangco Market are solidarily liable to petitioners, said decision was upheld by
Secretary of Labor. On certiorari, the Court of Appeals, ruled that Regional Director
has no jurisdiction over the case because the claims of each petitioners exceeded
PHP5,000, therefore power to adjudicate such claims belong to the Labor Arbiter.

ISSUE: Whether the Regional Director correctly assume jurisdiction over the case?

RULING: Yes, under Art. 128 of the Labor Code on Visitorial and Enforcement
Powers. The Regional Director correctly assume jurisdiction over the case. The
complaint involved underpayment of wages. In order to verify the allegations in the
complaint, DOLE conducted an inspection which yielded proof of violations of labor
standards. By nature of the complaint and from the result of the inspection the
authority of the DOLE under Art. 128 of Labor Code came into play regardless of
monetary value of claims involved. The Secretary of Labor or his duly authorized
representatives is now empowered to hear and decide in summary proceeding, any
matter involving the recovery of amount of wages and other monetary claims arising
out of employer-employee relationship at the time of inspections, even if the amount
of money claims exceed PHP5000.

The Regional Director correctly assumed jurisdiction over the money claims of
petitioners even if the claims exceeded PHP5,000. Said jurisdiction was in accordance
with Art. 128(b) of the Labor Code and the case does not fall under the exception
clause. We must take note that the doctrine in the Servando case is no longer
controlling upon the amendment of Art. 128 by RA 7730, Secretary of Labor or his
duly authorized representative is now empowered to hear and decide money claims
arising out of employer-employee relationship at the time of inspection. In this case,
Peak Ventures did not contest the findings of Regional Director, it even admitted
before the Court of Appeals that petitioners were not paid correct wages and as a
defense tried to pass the buck to Yangco Market, therefore the case does not fall
under the exceptions provided in Art. 128 (b) of the Labor Code which would have
divested Regional Director of jurisdiction over the case.