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Wages; Wages vs. Salary; Subject to Attachment (1994) SUGGESTED ANSWER:

Distinguish "salary" from "wages." Are these subject to attachment and I agree, with some conditions. In computing separation pay, the monthly salary
execution? should include commissions because commissions received by a salesman is
part of his salary.
But for allowances to be included as part of salary, they should be for services
The term "WAGES" applies to compensation for manual labor, skilled or rendered or to be rendered, like a cost of living allowance. But transportation
unskilled, while salary denotes a compensation for a higher degree of and representation allowances are not considered as part of salary because
employment. (Gaa vs. Court of Appeals, 140 SCRA 304), they are to meet expenses for transportation and representation. Thus, cost of
ALTERNATIVE ANSWER: living allowances, but not transportation or representation allowances, shall be
included as part of salary in the computation of separation pay.
"WAGES" are those paid to any employee as his remuneration or earnings
payable by an employer for work done or to be done, or for services rendered
or to be rendered. QUESTION NO. 3
On the other hand, "SALARY" is used in the law that provides for a 13th-month Wages; Employee‘s Wage; Facilities (2010)
pay. In this law, basic salary includes all remuneration or earnings paid by an
employer to his employees for services rendered, but does not include A worked as a room boy in La Mallorca Hotel. He sued for underpayment of
allowances or monetary benefits which are not considered or integrated as wages before the NLRC, alleging that he was paid below the minimum wage.
part of the regular or basic salary. (Art. 97(f), Labor Code; Sec, 2(b), P.D. No. The employer denied any underpayment, arguing that based on long standing,
851) unwritten policy, the Hotel provided food and lodging to its housekeeping
employees, the costs of which were partly shouldered by it and the balance
2) Under Article 1708 of the Civil Code, only "wages" are exempt from was charged to the employees. The employees’ corresponding share in the
attachment or execution. Salaries are not exempt from attachment or costs was thus deducted from their wages. The employer concluded that such
execution. (Gaa vs. Court of Appeals, 140 SCRA 304). valid deduction naturally resulted in the payment of wages below the
prescribed minimum. If you were the Labor Arbiter, how would you rule?
Explain. (3%)
Wages; Computation of Basic Salary (1997)

Robert Suarez is a salesman for Star Pharmaceuticals, Star Pharmaceuticals

has applied with the Department of Labor and Employment for clearance to SUGGESTED ANSWER:
terminate (by way of retrenchment) the services of Suarez due to financial I will rule in favor of A.
losses. Robert Suarez, aside from his monthly salary, receives commissions
on the sales he makes. He also receives allowances. The existing CBA Even if food and lodging were provided and considered as facilities by the
between Star Pharmaceuticals and the union, of which Robert Suarez is a employer, the employer could not deduct such facilities from its workers‘
member, states that any employee separated from employment for causes not wages without compliance with law (Mayon Hotel & Restaurant v. Adana, 458
due to the fault of the employee shall receive from the company a retirement SCRA 609 [2005]).
gratuity in an amount equivalent to one month's salary per year of service.
In Mabeza v. NLRC (271 SCRA 670 [1997]), the Supreme Court held that the
Robert Suarez contends that in computing his separation pay, his sales employer simply cannot deduct the value form the employee‘s wages without
commission and his allowances should be included in the monthly salary. Do satisfying the following: (a) proof that such facilities are customarily furnished
you agree? by the trade; b) the provision of deductible facilities is voluntarily accepted in
writing by the employee; and (c) the facilities are charged at fair and SUGGESTED ANSWER:
reasonable value.
Yes. The granting of a bonus is a management prerogative, something given
in addition to what is ordinarily received by or strictly due the recipient.
QUESTION NO. 4 An employer, like Suerte Co., cannot be forced to distribute bonuses when it
can no longer afford to pay. To hold otherwise would be to penalize the
Wages; Employee‘s Wage; Facilities (2013) employer for his past generosity. [Producers Bank of the Phil. v NLRC, 355
Gamma Company pays its regular employees P350.00 a day, and houses SCRA 489, (2001)]
them in a dormitory inside its factory compound in Manila. Gamma Company
also provides them with three full meals a day.
In the course of a routine inspection, a Department of Labor and Employment
(DOLE) Inspector noted that the workers' pay is below the prescribed minimum Wages; Bonus (2003)
wage of P426.00 plus P30.00 allowance, and thus required Gamma Company
to pay wage differentials. XYZ Employees Association filed a complaint against ABC Bank for wrongful
diminution of benefits. It alleged that the bank had been providing for a mid-
Gamma Company denies any liability, explaining that after the market value of year bonus equivalents onemonth basic pay and a Christmas bonus equivalent
the company-provided board and lodging are added to the employees' P350 to one-month basic pay since 1971. Upon the effectivity of Presidential Decree
cash daily wage, the employees' effective daily rate would be way above the (P.D.) No. 851 in 1975 which granted the 13th month pay, the bank started
minimum pay required by law. The company counsel further points out that the giving its employees a one-month basic pay as mid-year bonus, one-month
employees are aware that their food and lodging form part of their salary, and basic pay as Christmas bonus, and one-month basic pay as 13th month pay.
have long accepted the arrangement. In 1980, the bank was placed under conservatorship and by virtue of a
monetary board resolution of the Central Bank, the bank only gave one month
Is the company's position legally correct? (8%) basic pay mandated by P.D. 851, and it no longer gave its employees the
traditional mid-year and Christmas bonuses. Could ABC Bank be compelled,
given the circumstances, to continue paying its employees the traditional
SUGGESTED ANSWER: midyear and Christmas bonuses in addition to the 13th month pay?

No, the following requisites were not complied with:

(A) Proof that such facilities are customarily furnished by the trade SUGGESTED ANSWER:

(B) The provision of deductible facilities is voluntarily accepted by the No. The grant of a bonus is a prerogative, not an obligation, of the employer.
employee (Traders Royal Bank v. NLRC. 189 SCRA 274 (1990). The matter of giving a
bonus over and above that which is required by law is entirely dependent on
(C) The facilities are charged at the fair and reasonable value. Mere availment the financial capability of the employer to give it. (Businessday v. NLRC. 221
is not sufficient to allow deduction from the employees‘ wages. (Mayon Hotel SCRA 9 (1993).
& restaurant v. Adarna, 458 SCRA 609 [2005]).
Hence, given the circumstances, ABC Bank cannot be compelled to continue
QUESTION NO. 5 paying its employees the traditional mid-year and Christmas bonuses in
Wages; Bonus (2002) addition to the 13th month pay.

The projected bonus for the employees of Suerte Co. was 50% of their
monthly compensation. Unfortunately, due to the slump in the business, the
president reduced the bonus to 5% of their compensation. Can the company
unilaterally reduce the amount of bonus? Explain briefly. (2%)
QUESTION NO. 7 policy, and cannot anymore be removed. (Sevilla Trading v. Semana, 428
SCRA 239 [2004]) This is deliberate, consistent and practiced over a long
Wages; Bonus; Nature (1995) period of time
What is a bonus? When is it demandable as a matter of right? Explain.
A bonus is money given in addition to an employee's usual compensation. It Lito was anticipating the bonus he would receive for 2013. Aside from the 13th
may be given as a gratuity, as an act of liberality. But a bonus is demandable month pay, the company has been awarding him and his other co-employees
as a matter of right if it is made a legal obligation by law or in a collective a two to three months bonus for the last 10 years. However, because of poor
bargaining agreement or in a contract of employment or by its having been over-all sales performance for the year, the company unilaterally decided to
given for such a long time such that the receipt of a bonus has ripened into a pay only a one month bonus in 2013. Is Lito’s employer legally allowed to
right reduce the bonus? (2014 Bar Question)


Inter-Garments Co. manufactures garments for export and requires its Yes. A bonus is an act of generosity granted by an enlightened employer to
employees to render overtime work ranging from two to three hours a day to spur the employee to greater efforts for the success of the business and
meet its clients' deadlines. Since 2009, it has been paying its employees on realization of bigger profits. The granting of a bonus is a management
overtime an additional 35% of their hourly rate for work rendered in excess of prerogative, something given in addition to what is ordinarily received by or
their regular eight working hours. strictly due the recipient. Thus, a bonus is not a demandable and enforceable
Due to the slowdown of its export business in 2012, Inter-Garments had to obligation, except when it is made part of the wage, salary or compensation of
reduce its overtime work; at the same time, it adjusted the overtime rates so the employee. It may, therefore, be withdrawn, unless they have been made
that those who worked overtime were only paid an additional 25%instead of a part of the wage or salary or compensation of the employees, a matter which
the previous 35%. To replace the workers' overtime rate loss, the company is not in the facts of the case (American Wire and Cable Daily Rated
granted a one-time 5% across-the-board wage increase. Employees Union v. American

Vigilant Union, the rank-and-file bargaining agent, charged the company with Wire and Cable Co., Inc. and the Court of Appeals, G.R. No. 155059, April 29,
Unfair Labor Practice on the ground that (1) no consultations had been made 2005).
on who would render overtime work; and (2) the unilateral overtime pay rate
reduction is a violation of Article 100 (entitled Prohibition Against Elimination
or Diminution of Benefits) of the Labor Code. SUGGESTED ALTERNATIVE ANSWER:

Is the union position meritorious? (2013 Bar Questions) No. Having been enjoyed for the last 10 years, the granting of the bonus has
ripened into a company practice or policy which can no longer be peremptorily
withdrawn. Art. 100 of the Labor Code prohibits the diminution or elimination
SUGGESTED ANSWER: by the employer of the employees' existing benefits.

The allegation of ULP by the Union is not meritorious. The selection as to who
would render overtime work is a management prerogative.

However, the charge of the Union on the diminution of benefits (violation of

Article 100 of the Labor Code) appears to be meritorious. Since three (3) years
have already lapsed, the overtime rate of 35% has ripened into practice and
QUESTION NO. 10 the State to afford full protection to labor and promote full employment. (Linton
Commercial Co. v. Hellera, 535 SCRA 434)
Far East Bank (FEB) is one of the leading banks in the country. Its
compensation and bonus packages are top of the industry. For the last 6 As to the withheld productivity-based bonuses, Katrina is deemed to have
years, FEB had been providing the following bonuses across-the-board to all earned them because of her excellent performance ratings for three quarters.
its employees: On this basis, they cannot be withheld without violating the Principle of Non-
Diminution of Benefits.
(a) 13th month pay;
Moreover, it is evident from the facts of the case that what was withdrawn by
(b) 14th to 18th month pay; FEB was a productivity bonus. Protected by RA 6791 which mandates that the
(c) Christmas basket worth P6,000; monetary value of the productivity improvement be shared with the employees,
the “productivity-based incentive” scheme of FEB cannot just be withdrawn
(d) Gift check worth P4,000; and (e) Productivity-based incentive ranging from without the consent of its affected employees.
a 20o/o to 40% increase in gross monthly salary for all employees who would
receive an evaluation of "Excellent" for 3 straight quarters in the same year.

Because of its poor performance over-all, FEB decided to cut back on the LKG Garments Inc. makes baby clothes for export. As part of its measures to
bonuses this year and limited itself to the following: meet its orders, LKG requires its employees to work beyond eight (8) hours
everyday, from Monday to Saturday. It pays its employees an additional 35%
of their regular hourly wage for work rendered in excess of eight (8) hours per
day. Because of additional orders, LKG now requires two (2) shifts of workers
(a) 13th month pay; with both shifts working beyond eight (8) hours but only up to a maximum of
(b) 14th month pay; four (4) hours. Carding is an employee who used to render up to six (6) hours
of overtime work before the change in schedule. He complains that the change
(c) Christmas basket worth P4,000; and adversely affected him because now he can only earn up to a maximum of four
(4) hours worth of overtime pay. Does Carding have a cause of action against
(d) Gift check worth P2,000 the company? (2015 Bar Question)

Katrina, an employee of FEB, who had gotten a rating of "Excellent" for the
last 3 quarters was looking forward to the bonuses plus the productivity
incentive bonus. After learning that FEB had modified the bonus scheme, she SUGGESTED ANSWER:
objected. Is Katrina's objection justified? Explain. (2015 Bar Question)
NO. A change in work schedule is a management prerogative of LKG. Thus,
Carding has no cause of action against LKG if, as a result of its change to two
(2) shifts, he now can only expect a maximum of four (4) hours overtime work.
SUGGESTED ANSWER: Besides, Art. 97 of the Labor Code does not guarantee

Carding a certain number of hours of overtime work. In Manila Jockey

Katrina’s objection is justified. Employees’ Union v. Manila Jockey Club (517 SCRA 707), the Supreme Court
held that the basis of overtime claim is an employee’s having been “permitted
Having enjoyed the across-the-board bonuses, Katrina has earned a vested to work”. Otherwise, as in this case, such is not demandable.
right. Hence, none of them can be withheld or reduced. In the problem, the
company has not proven it’s alleged losses to be substantial. Permitting
reduction of pay at the slightest indication of losses is contrary to the policy of

Wages; 13th month pay (1994) 2.) After the 1981 San Miguel ruling, the High Court decided the case of
Philippine Duplicators Inc. vs. NLRC, on 11 November 1993, Accordingly,
Concepcion Textile Co. included the overtime pay, night-shift differential pay, management may undertake to exclude sick leave, vacation leave, maternity
and the like in the computation of its employees' 13th-month pay. leave, premium pay for regular holiday, night differential pay and cost of
Subsequently, with the promulgation of the decision of the Supreme Court in living allowance. Sales commissions, however, should be included based on
the case of San Miguel Corporation vs. Inciong (103 SCRA 139) holding that the settled rule as earlier enunciated in Songco vs. NLRC, 183 SCRA 610.
these other monetary claims should not be included in the computation of the
13thmonth pay, Concepcion Textile Co. sought to recover under the principle
of solutio indebiti its overpayment of its employees' 13th-month pay, by
debiting against future 13th-month payments whatever excess amounts it had QUESTION NO. 13
previously made. Wages; 13th month pay (1998)
(1) Is the Company's action tenable? What would be your advice to your client, a manufacturing company, who asks
(2) With respect to the payment of the 13th-month pay after the San for your legal opinion on whether or not the 13th Month Pay Law (Presidential
Miguel Corporation, ruling, what arrangement, if any, must the Company make Decree No. 851) covers a casual employee who is paid a dally wage? (5%)
in order to exclude from the 13th-month pay all earnings and remunerations SUGGESTED ANSWER
other than the basic pay.
I will advise the manufacturing company to pay the casual employee 13th
SUGGESTED ANSWER: Month Pay if such casual employee has worked for at least one (1) month
The Company's action is not tenable. The principle of salutio indebiti which is during a calendar year. The law on the 13th Month Pay provides that
a civil law concept is not applicable in labor law. Thus, solutio indebiti is not employees are entitled to the benefit of said law regardless of their designation
applicable to the instant case, (Davao Fruits Corporations vs. National Labor or employment status.
Relations Commission, et at. 225 SCRA 562) The Supreme Court ruled in Jackson BuildingCondominium Corporation v.
ALTERNATIVE ANSWERS: NLRC, 246 SCRA 329, (1995) interpreting P.D. No. 851, as follows: xxx
employees are entitled to the thirteenthmonth pay benefits regardless of their
a) The Company's action would be tenable if payment was done by mistake, designation and irrespective of the method by which their wages are paid.
In which case recovery can be done under the principle of solutio indebiti. But
if there was no mistake, the Company's action would be untenable because it
would violate Article 100 of the Labor Code which prohibits elimination or QUESTION NO. 14
diminution of benefits.
In computing for 13th month pay, Balagtas Company used as basis both the
b) No. The Company's action is not tenable. The grant by Concepcion Textile employee’s regular base pay and the cash value of his unused vacation and
Co. of a better formula, more favorable to the employee, constituted a valid sick leaves. After two and a half years, it announced that it had made a mistake
offer by the company as the offerer and the employees as the offeree. There and was discontinuing such practice. Is the management action legally
having been a meeting of the minds of the parties, the rights and obligations justified?
arising therefrom were valid. Thus, any amount received by virtue thereof
could not be recovered, much less taken away unilaterally. The principle does (A) Yes, since 13th month pay should only be one-twelfth of the regular pay.
not apply to the case at bar.
(B) No, since the erroneous computation has ripened into an established,
nonwithdrawable practice.

(C) Yes, an error is not a deliberate decision, hence may be rectified.

(D) No, employment benefits can be withdrawn only through a CBA are not entitled to Service Incentive Leave. A taxi driver paid under the
negotiation. Boundary System is an ―unsupervised‖ employee.


Who among the following is not entitled to 13th month pay? “Piece rate employees” are those who are paid by results or other non-time
basis. As such they are NOT entitled to overtime pay for work done beyond
(A) Stephanie, a probationary employee of a cooperative bank who rendered eight hours if
six (6) months of service during the calendar year before filing her resignation;
(A) their workplace is away from the company's principal place of work.
(B) Rafael, the secretary of a Senator;
(B) they fail to fill up time sheets.
(C) Selina, a cook employed by and who lives with an old maid and who also
tends the sari-sari store of the latter; (C) the product pieces they do are not countable.

(D) Roger, a house gardener who is required to report to work only thrice a (D) the piece rate formula accords with the labor department‘s approved
week. rates.


Retirement Benefits; Boundary System (2012)

No. IX. a. Dennis was a taxi driver who was being paid on the "boundary"
system basis. He worked tirelessly for Cabrera Transport Inc. for fourteen (14)
years until he waseligible for retirement. He was entitled to retirement benefits.
During the entire duration of his service, Dennis was not given his 13th month
pay or his service incentive leave pay.

Is Dennis entitled to 13th month pay and service leave incentive pay? Explain.


No, a taxi driver paid under the ―boundary system‖ is not entitled to a 13th
and SIL pay.

Hence, his retirement pay should be computed solely on the basis of his salary.
Specifically, Sec. 3 (e) of the Rules and Regulations implementing P.D. 851
excludes form the obligation of 13th Month Pay ―Employees of those who are
paid on xxx boundary ―basis.

On the other hand, Sec. 1(d), Rule V, Book III of the Omnibus Rule provides
that those ―employees whose performance is unsupervised by the employer‖