WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner,

vs.
WESLEYAN UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION, Respondent.
DECISION
DEL CASTILLO, J.:
A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate labor organization concerning the terms and
conditions of employment.1 Like any other contract, it has the force of law between the parties and, thus, should be complied with in good
faith.2 Unilateral changes or suspensions in the implementation of the provisions of the CBA, therefore, cannot be allowed without the consent of
both parties.
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25, 2007 Decision4 and the February 5, 2008
Resolution5 of the Court of Appeals (CA) in CA-G.R. SP No. 97053.
Factual Antecedents
Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly organized and existing under the laws of the
Philippines.6 Respondent Wesleyan University-Philippines Faculty and Staff Association, on the other hand, is a duly registered labor
organization7 acting as the sole and exclusive bargaining agent of all rank-and-file faculty and staff employees of petitioner.8
In December 2003, the parties signed a 5-year CBA9 effective June 1, 2003 until May 31, 2008.10
On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya), issued a Memorandum11 providing guidelines on
the implementation of vacation and sick leave credits as well as vacation leave commutation. The pertinent portions of the Memorandum read:
1. VACATION AND SICK LEAVE CREDITS
Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a qualified employee earns an equivalent of 1.25
days credit each for VL and SL. Vacation Leave and Sick Leave credits of 15 days become complete at the cut off date of May 31 of each
year. (Example, only a total of 5 days credit will be given to an employee for each of sick leave [or] vacation leave, as of month end
September, that is, 4 months from June to September multiplied by 1.25 days). An employee, therefore, who takes VL or SL beyond his
leave credits as of date will have to file leave without pay for leaves beyond his credit.
2. VACATION LEAVE COMMUTATION
Only vacation leave is commuted or monetized to cash. Vacation leave commutation is effected after the second year of continuous
service of an employee. Hence, an employee who started working June 1, 2005 will get his commutation on May 31, 2007 or thereabout.12
On August 25, 2005, respondent’s President, Cynthia L. De Lara (De Lara) wrote a letter13 to Atty. Maglaya informing him that respondent is not
amenable to the unilateral changes made by petitioner.14 De Lara questioned the guidelines for being violative of existing practices and the
CBA,15 specifically Sections 1 and 2, Article XII of the CBA, to wit:
ARTICLE XII
VACATION LEAVE AND SICK LEAVE
SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are entitled to receive shall enjoy fifteen (15) days
vacation leave with pay annually.
1.1 All unused vacation leave after the second year of service shall be converted into cash and be paid to the entitled employee at the end of each
school year to be given not later than August 30 of each year.
SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy fifteen (15) days sick leave with pay annually.16
On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which petitioner advised respondent to file a grievance
complaint on the implementation of the vacation and sick leave policy.17 In the same meeting, petitioner announced its plan of implementing a one-
retirement policy,18 which was unacceptable to respondent.
Ruling of the Voluntary Arbitrator
Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary Arbitrator. During the hearing, respondent
submitted affidavits to prove that there is an established practice of giving two retirement benefits, one from the Private Education Retirement
Annuity Association (PERAA) Plan and another from the CBA Retirement Plan. Sections 1, 2, 3 and 4 of Article XVI of the CBA provide:
ARTICLE XVI
SEPARATION, DISABILITY AND RETIREMENT PAY
SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all full-time, regular staff and tenured faculty of the
University, except the University President. Membership in the Plan shall commence on the first day of the month coincident with or next following
his statement of Regular/Tenured Employment Status.
SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each Member shall be as follows:
a. Faculty – The last day of the School Year, coincident with his attainment of age sixty (60) with at least five (years) of unbroken, credited
service.
b. Staff – Upon reaching the age of sixty (60) with at least five (5) years of unbroken, credited service.
SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior to his compulsory retirement. His number of
years of service in the University shall be the basis of computing x x x his retirement benefits regardless of his chronological age.
SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of the member’s final monthly salary for
compulsory retirement.
For optional retirement, the vesting schedule shall be:
x x x x19
On November 2, 2006, the Voluntary Arbitrator rendered a Decision declaring the one-retirement policy and the Memorandum dated August 16,
20

2005 contrary to law. The dispositive portion of the Decision reads:

WHEREFORE, the following award is hereby made:
1. The assailed University guidelines on the availment of vacation and sick leave credits and vacation leave commutation are contrary to
law. The University is consequently ordered to reinstate the earlier scheme, practice or policy in effect before the issuance of the said
guidelines on August 16, 2005;
2. The "one retirement" policy is contrary to law and is hereby revoked and rescinded. The University is ordered x x x to resume and
proceed with the established practice of extending to qualified employees retirement benefits under both the CBA and the PERAA Plan.
3. The other money claims are denied.21
Ruling of the Court of Appeals
Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the Rules of Court.
On September 25, 2007, the CA rendered a Decision22 finding the rulings of the Voluntary Arbitrator supported by substantial evidence. It also
affirmed the nullification of the one-retirement policy and the Memorandum dated August 16, 2005 on the ground that these unilaterally amended
the CBA without the consent of respondent.23 Thus:
WHEREFORE, the instant appeal is DISMISSED for lack of merit.
SO ORDERED.24
Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008 Resolution.25
Issues
Hence, this recourse by petitioner raising the following issues:
a.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s ruling that the Affidavits submitted by
Respondent WU-PFSA are substantial evidence as defined by the rules and jurisprudence that would substantiate that Petitioner WU-P has long
been in the practice of granting its employees two (2) sets of Retirement Benefits.
b.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s ruling that a university practice of granting its
employees two (2) sets of Retirement Benefits had already been established as defined by the law and jurisprudence especially in light of the
illegality and lack of authority of such alleged grant.
c.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s ruling that it is incumbent upon Petitioner WU-P
to show proof that no Board Resolution was issued granting two (2) sets of Retirement Benefits.
d.
Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005 Memorandum of Petitioner WU-P for being contrary to
extant policy.26
Petitioner’s Arguments
Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA Plan are one and the same.27 It maintains that
there is no established company practice or policy of giving two retirement benefits to its employees.28 Assuming, without admitting, that two
retirement benefits were released,29 petitioner insists that these were done by mere oversight or mistake as there is no Board Resolution authorizing
their release.30 And since these benefits are unauthorized and irregular, these cannot ripen into a company practice or policy.31 As to the affidavits
submitted by respondent, petitioner claims that these are self-serving declarations,32 and thus, should not be given weight and credence.33
In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the guidelines on the implementation of vacation and
sick leave credits as well as vacation leave commutation, is valid because it is in full accord with existing policy.34
Respondent’s Arguments
Respondent belies the claims of petitioner and asserts that there are two retirement plans as the PERAA Retirement Plan, which has been
implemented for more than 30 years, is different from the CBA Retirement Plan.35 Respondent further avers that it has always been a practice of
petitioner to give two retirement benefits36 and that this practice was established by substantial evidence as found by both the Voluntary Arbitrator
and the CA.37
As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary to the CBA and existing practices as it added
qualifications or limitations which were not agreed upon by the parties.38
Our Ruling
The Petition is bereft of merit.
The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from eliminating or reducing the benefits received
by their employees. This rule, however, applies only if the benefit is based on an express policy, a written contract, or has ripened into a
practice.40 To be considered a practice, it must be consistently and deliberately made by the employer over a long period of time.41
An exception to the rule is when "the practice is due to error in the construction or application of a doubtful or difficult question of law."42 The error,
however, must be corrected immediately after its discovery;43 otherwise, the rule on Non-Diminution of Benefits would still apply.
The practice of giving two retirement
benefits to petitioner’s employees is
supported by substantial evidence.
In this case, respondent was able to present substantial evidence in the form of affidavits to support its claim that there are two retirement plans.
Based on the affidavits, petitioner has been giving two retirement benefits as early as 1997.44 Petitioner, on the other hand, failed to present any
evidence to refute the veracity of these affidavits. Petitioner’s contention that these affidavits are self-serving holds no water. The retired employees
of petitioner have nothing to lose or gain in this case as they have already received their retirement benefits. Thus, they have no reason to perjure
themselves. Obviously, the only reason they executed those affidavits is to bring out the truth. As we see it then, their affidavits, corroborated by the
affidavits of incumbent employees, are more than sufficient to show that the granting of two retirement benefits to retiring employees had already
ripened into a consistent and deliberate practice.
Moreover, petitioner’s assertion that there is only one retirement plan as the CBA Retirement Plan and the PERAA Plan are one and the same is
not supported by any evidence. There is nothing in Article XVI of the CBA to indicate or even suggest that the "Plan" referred to in the CBA is the
PERAA Plan. Besides, any doubt in the interpretation of the provisions of the CBA should be resolved in favor of respondent. In fact, petitioner’s
assertion is negated by the announcement it made during the LMC Meeting on February 8, 2006 regarding its plan of implementing a "one-
retirement plan." For if it were true that petitioner was already implementing a one-retirement policy, there would have been no need for such
announcement. Equally damaging is the letter-memorandum45 dated May 11, 2006, entitled "Suggestions on the defenses we can introduce to
justify the abolition of double retirement policy," prepared by the petitioner’s legal counsel.
These circumstances, taken together, bolster the finding that the two-retirement policy is a practice. Thus, petitioner cannot, without the consent of
1âwphi1

respondent, eliminate the two-retirement policy and implement a one-retirement policy as this would violate the rule on non-diminution of benefits.
As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is illegal or unauthorized and that the benefits were
erroneously given by the previous administration. No evidence, however, was presented by petitioner to substantiate its allegations.
Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as affirmed by the CA, that there is substantial
evidence to prove that there is an existing practice of giving two retirement benefits, one under the PERAA Plan and another under the CBA
Retirement Plan.
The Memorandum dated August 16,
2005 is contrary to the existing CBA.
Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August 16, 2005 is contrary to the existing CBA.
Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days sick leave and 15 days vacation leave with pay
every year and that after the second year of service, all unused vacation leave shall be converted to cash and paid to the employee at the end of
each school year, not later than August 30 of each year.
The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are not automatic as leave credits would be earned
on a month-to-month basis. This, in effect, limits the available leave credits of an employee at the start of the school year. For example, for the first
four months of the school year or from June to September, an employee is only entitled to five days vacation leave and five days sick
leave.46 Considering that the Memorandum dated August 16, 2005 imposes a limitation not agreed upon by the parties nor stated in the CBA, we
agree with the CA that it must be struck down.
In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no doubt on the intention of the parties, the literal
meaning of the stipulation shall govem.47
However, if there is doubt in its interpretation, it should be resolved in favor of labor,48 as this is mandated by no less than the Constitution.49
WHEREFORE, the Petition is hereby DENIED. The assailed September 25, 2007 Decision and the February 5, 2008 Resolution of the Court of
Appeals in CA-G.R. SP No. 97053 are hereby AFFIRMED.
SO ORDERED.

G.R. No. 101761. March 24, 1993.

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NBSR SUPERVISORY
UNION, (PACIWU) TUCP, respondents.
Jose Mario C. Bunag for petitioner.
The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.
Zoilo V. de la Cruz for private respondent.
DECISION
REGALADO, J p:
The main issue presented for resolution in this original petition for certiorari is whether supervisory employees, as defined in Article 212 (m), Book V
of the Labor Code, should be considered as officers or members of the managerial staff under Article 82, Book III of the same Code, and hence are
not entitled to overtime rest day and holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and controlled by the Government, operates
three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant to
Proclamation No. 50. 1 Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar Refinery, namely, the
Technical Assistant to the Refinery Operations Manager, Shift Sugar Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant,
Cost Accountant, Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations Chemist, Shift Electrical Supervisor,
General Services Supervisor, Instrumentation Supervisor, Community Development Officer, Employment and Training Supervisor, Assistant Safety
and Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head of Inventory Control Section, Shift
Process Supervisor, Day Maintenance Supervisor and Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-and-file to department heads. The JE
Program was designed to rationalized the duties and functions of all positions, reestablish levels of responsibility, and recognize both wage and
operational structures. Jobs were ranked according to effort, responsibility, training and working conditions and relative worth of the job. As a result,
all positions were re-evaluated, and all employees including the members of respondent union were granted salary adjustments and increases in
benefits commensurate to their actual duties and functions.
We glean from the records that for about ten years prior to the JE Program, the members of respondent union were treated in the same manner as
rank-and file employees. As such, they used to be paid overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of
the Labor Code as amended. With the implementation of the JE Program, the following adjustments were made: (1) the members of respondent
union were re-classified under levels S-5 to S-8 which are considered managerial staff for purposes of compensation and benefits; (2) there was an
increase in basic pay of the average of 50% of their basic pay prior to the JE Program, with the union members now enjoying a wide gap
(P1,269.00 per month) in basic pay compared to the highest paid rank-and-file employee; (3) longevity pay was increased on top of alignment
adjustments; (4) they were entitled to increased company COLA of P225.00 per month; (5) there was a grant of P100.00 allowance for rest
day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized pursuant to Republic Act NO. 6715 allowing
supervisory employees to form their own unions, as the bargaining representative of all the supervisory employees at the NASUREFCO Batangas
Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990, the members of herein respondent union filed a complainant
with the executive labor arbiter for non-payment of overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as follows:
"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby directed to —
1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday pay enjoyed by them instead of the P100.00
special allowance which was implemented on June 11, 1988; and
2. pay the individual members of complainant union the difference in money value between the P100.00 special allowance and the overtime pay,
rest day pay and holiday pay that they ought to have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor ruled that the along span of time during which the benefits were being paid to the
supervisors has accused the payment thereof to ripen into contractual obligation; at the complainants cannot be estopped from questioning the
validity of the new compensation package despite the fact that they have been receiving the benefits therefrom, considering that respondent union
was formed only a year after the implementation of the Job Evaluation Program, hence there was no way for the individual supervisors to express
their collective response thereto prior to the formation of the union; and the comparative computations presented by the private respondent union
showed that the P100.00 special allowance given NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day
pay and holiday pay not been discontinued, which arrangement, therefore, amounted to a diminution of benefits.
On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National Labor Relations Commission (NLRC) affirmed the
decision of the labor arbiter on the ground that the members of respondent union are not managerial employees, as defined under Article 212 (m)
of the Labor Code and, therefore, they are entitled to overtime, rest day and holiday pay. Respondent NLRC declared that these supervisory
employees are merely exercising recommendatory powers subject to the evaluation, review and final action by their department heads; their
responsibilities do not require the exercise of discretion and independent judgment; they do not participate in the formulation of management
policies nor in the hiring or firing of employees; and their main function is to carry out the ready policies and plans of the corporation. 3
Reconsideration of said decision was denied in a resolution of public respondent dated August 30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent commission committed a grave abuse of
discretion in refusing to recognized the fact that the members of respondent union are members of the managerial staff who are not entitled to
overtime, rest day and holiday pay; and in making petitioner assume the "double burden" of giving the benefits due to rank-and-file employees
together with those due to supervisors under the JE Program.
We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly issue.
The primordial issue to be resolved herein is whether the members of respondent union are entitled to overtime, rest day and holiday pay. Before
this can be resolved, however it must of necessity be ascertained first whether or not the union members, as supervisory employees, are to be
considered as officers or members of the managerial staff who are exempt from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees, as defined employees, as defined under Article 212(m), Book
V of the Labor Code on Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer,
suspend, lay-off, recall, discharged, assign or discipline employees. Supervisory employees are those who, in the interest of the employer
effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of those above definitions are considered rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay, and in ruling that the latter are not
managerial employees, adopted the definition stated in the aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining whether or not the members of respondent union are entitled to overtime, rest day and
holiday pay, said employees should be considered as "officers or members of the managerial staff" as defined under Article 82, Book III of the
Labor Code on "Working Conditions and Rest Periods" and amplified in Section 2, Rule I, Book III of the Rules to Implement the Labor Code, to wit:
"Art. 82 Coverage. — The provisions of this title shall apply to employees in all establishments and undertakings whether for profit or not, but not to
government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by the Secretary of Labor in
Appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof, and to other officers or members of the managerial staff." (Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they qualify for exemption under the condition set forth
herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as to the hiring and firing and
as to the promotion or any other change of status of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the management of the establishment in
which he is employed or subdivision thereof; or (ii) execute under general supervision work along specialized or technical lines requiring special
training, experience, or knowledge; or (iii) execute under general supervision special assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are not directly and closely related to the
performance of the work described in paragraphs (1), (2), and above."
It is the submission of petitioner that while the members of respondent union, as supervisors, may not be occupying managerial positions, they are
clearly officers or members of the managerial staff because they meet all the conditions prescribed by law and, hence, they are not entitled to
overtime, rest day and supervisory employees under Article 212 (m) should be made to apply only to the provisions on Labor Relations, while the
right of said employees to the questioned benefits should be considered in the light of the meaning of a managerial employee and of the officers or
members of the managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book III of the implementing rules. In other
words, for purposes of forming and joining unions, certification elections, collective bargaining, and so forth, the union members are supervisory
employees. In terms of working conditions and rest periods and entitlement to the questioned benefits, however, they are officers or members of
the managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor
dispute will be automatically decided in favor of labor. Management also has its own rights which, as such, are entitled to respect and enforcement
in the interest of simple fair play. Out of its concern for those with less privileges in life, this Court has inclined more often than not toward the
worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule that justice is in every case
for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. 5
This is one such case where we are inclined to tip the scales of justice in favor of the employer.
The question whether a given employee is exempt from the benefits of the law is a factual one dependent on the circumstances of the particular
case, In determining whether an employee is within the terms of the statutes, the criterion is the character of the work performed, rather than the
title of the employee's position. 6
Consequently, while generally this Court is not supposed to review the factual findings of respondent commission, substantial justice and the
peculiar circumstances obtaining herein mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily show that these supervisory employees are under
the direct supervision of their respective department superintendents and that generally they assist the latter in planning, organizing, staffing,
directing, controlling communicating and in making decisions in attaining the company's set goals and objectives. These supervisory employees are
likewise responsible for the effective and efficient operation of their respective departments. More specifically, their duties and functions include,
among others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes employee shifting scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends disciplinary action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends necessary action for their development/advancement;
5) represents the superintendent or the department when appointed and authorized by the former;
6) coordinates and communicates with other inter and intra department supervisors when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality of service and working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and followed by all NASUREFCO employees, recommends
revisions or modifications to said rules when deemed necessary, and initiates and prepares reports for any observed abnormality within the
refinery;
10) supervises the activities of all personnel under him and goes to it that instructions to subordinates are properly implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities which ineluctably qualify them as
officers or members of the managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.: (1)
their primary duty consists of the performance of work directly related to management policies of their employer; (2) they customarily and regularly
exercise discretion and independent judgment; (3) they regularly and directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are employed (4) they execute, under general supervision, work along specialized
or technical lines requiring special training, experience, or knowledge; (5) they execute, under general supervision, special assignments and tasks;
and (6) they do not devote more than 20% of their hours worked in a work-week to activities which are not directly and clearly related to the
performance of their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members should be considered as officers and
members of the managerial staff and are, therefore, exempt from the coverage of Article 82. Perforce, they are not entitled to overtime, rest day
and holiday.
The distinction made by respondent NLRC on the basis of whether or not the union members are managerial employees, to determine the latter's
entitlement to the questioned benefits, is misplaced and inappropriate. It is admitted that these union members are supervisory employees and this
is one instance where the nomenclatures or titles of their jobs conform with the nature of their functions. Hence, to distinguish them from a
managerial employee, as defined either under Articles 82 or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually
involved here seeks a determination of whether or not these supervisory employees ought to be considered as officers or members of the
managerial staff. The distinction, therefore, should have been made along that line and its corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned benefits to the union members has ripened into
a contractual obligation.
A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to the rank-and-file employees such as overtime,
rest day and holiday pay, simply because they were treated in the same manner as rank-and-file employees, and their basic pay was nearly on the
same level as those of the latter, aside from the fact that their specific functions and duties then as supervisors had not been properly defined and
delineated from those of the rank-and-file. Such fact is apparent from the clarification made by petitioner in its motion for reconsideration 8 filed with
respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991, wherein, it lucidly explained:
"But, complainants no longer occupy the same positions they held before the JE Program. Those positions formerly classified as 'supervisory' and
found after the JE Program to be rank-and-file were classified correctly and continue to receive overtime, holiday and restday pay. As to them, the
practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-defined and in most cases their organizational
positions re-designated to confirm their superior rank and duties. Thus, after the JE program, complainants cannot be said to occupy the same
positions." 9
It bears mention that this positional submission was never refuted nor controverted by respondent union in any of its pleadings filed before herein
public respondent or with this Court. Hence, it can be safely concluded therefrom that the members of respondent union were paid the questioned
benefits for the reason that, at that time, they were rightfully entitled thereto. Prior to the JE Program, they could not be categorically classified as
members or officers of the managerial staff considering that they were then treated merely on the same level as rank-and-file. Consequently, the
payment thereof could not be construed as constitutive of voluntary employer practice, which cannot be now be unilaterally withdrawn by petitioner.
To be considered as such, it should have been practiced over a long period of time, and must be shown to have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowingly
fully well that said employees are not covered by the law requiring payment thereof. 11 In the case at bar, respondent union failed to sufficiently
establish that petitioner has been motivated or is wont to give these benefits out of pure generosity.
B. It remains undisputed that the implementation of the JE Program, the members of private respondent union were re-classified under levels S-5
S-8 which were considered under the program as managerial staff purposes of compensation and benefits, that they occupied re-evaluated
positions, and that their basic pay was increased by an average of 50% of their basic salary prior to the JE Program. In other words, after the JE
Program there was an ascent in position, rank and salary. This in essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in salary. 12
Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which attach and pertain exclusively to their
positions. Entitlement to the benefits provided for by law requires prior compliance with the conditions set forth therein. With the promotion of the
members of respondent union, they occupied positions which no longer met the requirements imposed by law. Their assumption of these positions
removed them from the coverage of the law, ergo, their exemption therefrom.
As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits which attach to their former positions,
there was nothing to prevent them from refusing to accept their promotions and their corresponding benefits. As the sating goes by, they cannot
have their cake and eat it too or, as petitioner suggests, they could not, as a simple matter of law and fairness, get the best of both worlds at the
expense of NASUREFCO.
Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of management, provided it is done in good faith. In the
case at bar, private respondent union has miserably failed to convince this Court that the petitioner acted implementing the JE Program. There is
no showing that the JE Program was intended to circumvent the law and deprive the members of respondent union of the benefits they used to
receive.
Not so long ago, on this particular score, we had the occasion to hold that:
". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all aspects of employment. This flows from the
established rule that labor law does not authorize the substitution of the judgment of the employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so long as it is exercised in good faith for the advancement of the employer's interest and
not for the purpose of defeating on circumventing the rights of employees under special laws or valid agreement and are not exercised in a
malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite." 13
WHEREFORE, the impugned decision and resolution of respondent National Labor Relations Commission promulgated on July 19, 1991 and
August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE for having been rendered and adopted with grave abuse of discretion, and
the basic complaint of private respondent union is DISMISSED.
PHILIPPINE APPLIANCE CORPORATION (PHILACOR), petitioner,
vs.
THE COURT OF APPEALS, THE HONORABLE SECRETARY OF LABOR BIENVENIDO E. LAGUESMA and UNITED PHILACOR WORKERS
UNION-NAFLU, respondents.
DECISION
YNARES-SANTIAGO, J.:
Before us is an appeal by certiorari under Rule 45 of the Rules of Court which seeks to set aside the decision1 of the Court of Appeals in CA-G.R.
SP No. 59011, denying due course to petitioner Philippine Appliance Corporation’s partial appeal, as well as the Resolution2 of the same court,
dated August 10, 2001, denying the motion for reconsideration.
Petitioner is a domestic corporation engaged in the business of manufacturing refrigerators, freezers and washing machines. Respondent United
Philacor Workers Union-NAFLU is the duly elected collective bargaining representative of the rank-and-file employees of petitioner. During the
collective bargaining negotiations between petitioner and respondent union in 1997 (for the last two years of the collective bargaining agreement
covering the period of July 1, 1997 to August 31, 1999), petitioner offered the amount of four thousand pesos (P4,000.00) to each employee as an
"early conclusion bonus". Petitioner claims that this bonus was promised as a unilateral incentive for the speeding up of negotiations between the
parties and to encourage respondent union to exert their best efforts to conclude a CBA. Upon conclusion of the CBA negotiations, petitioner
accordingly gave this early signing bonus.3
In view of the expiration of this CBA, respondent union sent notice to petitioner of its desire to negotiate a new CBA. Petitioner and respondent
union began their negotiations. On October 22, 1999, after eleven meetings, respondent union expressed dissatisfaction at the outcome of the
negotiations and declared a deadlock. A few days later, on October 26, 1999, respondent union filed a Notice of Strike with the National
Conciliation and Mediation Board (NCMB), Region IV in Calamba, Laguna, due to the bargaining deadlock.4
A conciliation and mediation conference was held on October 30, 1999 at the NCMB in Imus, Cavite, before Conciliator Jose L. Velasco. The
conciliation meetings started with eighteen unresolved items between petitioner and respondent union. At the meeting on November 20, 1999,
respondent union accepted petitioner’s proposals on fourteen items,5 leaving the following items unresolved: wages, rice subsidy, signing, and
retroactive bonus.6
Petitioner and respondent union failed to arrive at an agreement concerning these four remaining items. On January 18, 2000, respondent union
went on strike at the petitioner’s plant at Barangay Maunong, Calamba, Laguna and at its washing plant at Parañaque, Metro Manila. The strike
lasted for eleven days and resulted in the stoppage of manufacturing operations as well as losses for petitioner, which constrained it to file a
petition before the Department of Labor and Employment (DOLE). Labor Secretary Bienvenido Laguesma assumed jurisdiction over the dispute
and, on January 28, 2000, ordered the striking workers to return to work within twenty-four hours from notice and directed petitioner to accept back
the said employees.7
On April 14, 2000, Secretary Laguesma issued the following Order:8
In view of the foregoing, we fix the wage increases at P30 per day for the first year and P25 for the second year.
The rice subsidy and retroactive pay base are maintained at their existing levels and rates.
Finally, this Office rules in favor of Company’s proposal on signing bonus. We believe that a P3,000 bonus is fair and reasonable under
the circumstances.
WHEREFORE, premises considered, Philippine Appliance Corporation and United Philacor Workers Union-NAFLU are hereby directed to
conclude a Collective Bargaining Agreement for the period July 1, 1999 to June 30, 2001. The agreement is to incorporate the disposition
set forth above and includes other items already agreed upon in the course of negotiation and conciliation.
SO ORDERED. (Emphasis supplied)
On April 27, 2000, petitioner filed a Partial Motion for Reconsideration9 stating that while it accepted the decision of Secretary Laguesma, it took
exception to the award of the signing bonus. Petitioner argued that the award of the signing bonus was patently erroneous since it was not part of
the employees’ salaries or benefits or of the collective bargaining agreement. It is not demandable or enforceable since it is in the nature of an
incentive. As no CBA was concluded through the mutual efforts of the parties, the purpose for the signing bonus was not served. On May 22, 2000,
Secretary Laguesma issued an Order10 denying petitioner’s motion. He ruled that while the bargaining negotiations might have failed and the
signing of the agreement was delayed, this cannot be attributed solely to respondent union. Moreover, the Secretary noted that the signing bonus
was granted in the previous CBA.
On June 2, 2000, petitioner filed a Petition for Certiorari with the Court of Appeals docketed as CA-G.R. SP No. 59011 which was dismissed. The
Labor Secretary’s award of the signing bonus was affirmed since petitioner itself offered the same as an incentive to expedite the CBA negotiations.
This offer was not withdrawn and was still outstanding when the dispute reached the DOLE. As such, petitioner can no longer adopt a contrary
stand and dispute its own offer.
Petitioner filed a Motion for Reconsideration but the same was denied. Hence this petition for review raising a lone issue, to wit:
THE HONORABLE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT RENDERED A
DECISION NOT IN ACCORD WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT, SPECIFICALLY THE CALTEX
DOCTRINE OF 1997.
The petition is meritorious.
Petitioner invokes the doctrine laid down in the case of Caltex v. Brillantes,11 where it was held that the award of the signing bonus by the Secretary
of Labor was erroneous. The said case involved similar facts concerning the CBA negotiations between Caltex (Philippines), Inc. and the Caltex
Refinery Employees Association (CREA). Upon referral of the dispute to the DOLE, then Labor Secretary Brillantes ruled, inter alia:
Fifth, specifically on the issue of whether the signing bonus is covered under the "maintenance of existing benefits" clause, we find that a
clarification is indeed imperative. Despite the expressed provision for a signing bonus in the previous CBA, we uphold the principle that
the award for a signing bonus should partake the nature of an incentive and premium for peaceful negotiations and amicable resolution of
disputes which apparently are not present in the instant case. Thus, we are constrained to rule that the award of signing bonus is not
covered by the "maintenance of existing benefits" clause.
On appeal to this Court, it was held:
Although proposed by [CREA], the signing bonus was not accepted by [Caltex Philippines, Inc.]. Besides, a signing bonus is not a benefit
which may be demanded under the law. Rather, it is now claimed by petitioner under the principle of "maintenance of existing benefits" of
the old CBA. However, as clearly explained by [Caltex], a signing bonus may not be demanded as a matter of right. If it is not agreed upon
by the parties or unilaterally offered as an additional incentive by [Caltex], the condition for awarding it must be duly satisfied. In the
present case, the condition sine qua non for its grant—a non-strike— was not complied with.
In the case at bar, two things militate against the grant of the signing bonus: first, the non-fulfillment of the condition for which it was offered, i.e., the
speedy and amicable conclusion of the CBA negotiations; and second, the failure of respondent union to prove that the grant of the said bonus is a
long established tradition or a "regular practice" on the part of petitioner. Petitioner admits, and respondent union does not dispute, that it offered an
"early conclusion bonus" or an incentive for a swift finish to the CBA negotiations. The offer was first made during the 1997 CBA negotiations and
then again at the start of the 1999 negotiations. The bonus offered is consistent with the very concept of a signing bonus.
In the case of MERALCO v. The Honorable Secretary of Labor,12 we stated that the signing bonus is a grant motivated by the goodwill generated
when a CBA is successfully negotiated and signed between the employer and the union. In that case, we sustained the argument of the Solicitor
General, viz:
When negotiations for the last two years of the 1992-1997 CBA broke down and the parties sought the assistance of the NCMB, but which
failed to reconcile their differences, and when petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of Labor in the
resolution of the labor dispute, whatever goodwill existed between petitioner MERALCO and respondent union disappeared. . . .
Verily, a signing bonus is justified by and is the consideration paid for the goodwill that existed in the negotiations that culminated in the
signing of a CBA.13
In the case at bar, the CBA negotiation between petitioner and respondent union failed notwithstanding the intervention of the NCMB. Respondent
union went on strike for eleven days and blocked the ingress to and egress from petitioner’s two work plants. The labor dispute had to be referred
to the Secretary of Labor and Employment because neither of the parties was willing to compromise their respective positions regarding the four
remaining items which stood unresolved. While we do not fault any one party for the failure of the negotiations, it is apparent that there was no
more goodwill between the parties and that the CBA was clearly not signed through their mutual efforts alone. Hence, the payment of the signing
bonus is no longer justified and to order such payment would be unfair and unreasonable for petitioner.
Furthermore, we have consistently ruled that a bonus is not a demandable and enforceable obligation.14 True, it may nevertheless be granted on
equitable considerations as when the giving of such bonus has been the company’s long and regular practice.15 To be considered a "regular
practice," however, the giving of the bonus should have been done over a long period of time, and must be shown to have been consistent and
deliberate.16 The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the
benefits knowing fully well that said employees are not covered by the law requiring payment thereof.17 Respondent does not contest the fact that
petitioner initially offered a signing bonus only during the previous CBA negotiation. Previous to that, there is no evidence on record that petitioner
ever offered the same or that the parties included a signing bonus among the items to be resolved in the CBA negotiation. Hence, the giving of
such bonus cannot be deemed as an established practice considering that the same was given only once, that is, during the 1997 CBA negotiation.
WHEREFORE, premises considered, the instant petition is GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 59011 affirming
the Order of the Secretary of Labor and Employment, directing petitioner Philippine Appliance Corporation to pay each of its employees a signing
bonus in the amount of Three Thousand Pesos (P3,000.00), is hereby REVERSED and SET ASIDE. No pronouncement as to costs.
SO ORDERED.

SUPREME STEEL CORPORATION, Petitioner,

vs.
NAGKAKAISANG MANGGAGAWA NG SUPREME INDEPENDENT UNION (NMS-IND-APL), Respondent.
DECISION
NACHURA, J.:
This petition for review on certiorari assails the Court of Appeals (CA) Decision1 dated September 30, 2008, and Resolution dated December 4,
2008, which affirmed the finding of the National Labor Relations Commission (NLRC) that petitioner violated certain provisions of the Collective
Bargaining Agreement (CBA).
Petitioner Supreme Steel Pipe Corporation is a domestic corporation engaged in the business of manufacturing steel pipes for domestic and foreign
markets. Respondent Nagkakaisang Manggagawa ng Supreme Independent Union is the certified bargaining agent of petitioner’s rank-and-file
employees. The CBA2 in question was executed by the parties to cover the period from June 1, 2003 to May 31, 2008.
The Case
On July 27, 2005, respondent filed a notice of strike with the National Conciliation and Mediation Board (NCMB) on the ground that petitioner
violated certain provisions of the CBA. The parties failed to settle their dispute. Consequently, the Secretary of Labor certified the case to the NLRC
for compulsory arbitration pursuant to Article 263(g) of the Labor Code.
Respondent alleged eleven CBA violations, delineated as follows:
A. Denial to four employees of the CBA- provided wage increase
Article XII, Section 1 of the CBA provides:
Section 1. The COMPANY shall grant a general wage increase, over and above to all employees, according to the following schedule:
A. Effective June 1, 2003 ₱14.00 per working day;
B. Effective June 1, 2004 ₱12.00 per working day; and
C. Effective June 1, 2005 ₱12.00 per working day.3
Respondent alleged that petitioner has repeatedly denied the annual CBA increases to at least four individuals: Juan Niño, Reynaldo Acosta,
Rommel Talavera, and Eddie Dalagon. According to respondent, petitioner gives an anniversary increase to its employees upon reaching their first
year of employment. The four employees received their respective anniversary increases and petitioner used such anniversary increase to justify
the denial of their CBA increase for the year.4
Petitioner explained that it has been the company’s long standing practice that upon reaching one year of service, a wage adjustment is granted,
and, once wages are adjusted, the increase provided for in the CBA for that year is no longer implemented. Petitioner claimed that this practice was
not objected to by respondent as evidenced by the employees’ pay slips.5
Respondent countered that petitioner failed to prove that, as a matter of company practice, the anniversary increase took the place of the CBA
increase. It contended that all employees should receive the CBA stipulated increase for the years 2003 to 2005.6
B. Contracting-out labor
Article II, Section 6 of the CBA provides:
Section 6. Prohibition of Contracting Out of Work of Members of Bargaining Unit. Thirty (30) days from the signing of this CBA, contractual
employees in all departments, except Warehouse and Packing Section, shall be phased out. Those contractual employees who are presently in the
workforce of the COMPANY shall no longer be allowed to work after the expiration of their contracts without prejudice to being hired as
probationary employees of the COMPANY.7
Respondent claimed that, contrary to this provision, petitioner hired temporary workers for five months based on uniformly worded employment
contracts, renewable for five months, and assigned them to almost all of the
departments in the company. It pointed out that, under the CBA, temporary workers are allowed only in the Warehouse and Packing Section;
consequently, employment of contractual employees outside this section, whether direct or agency-hired, was absolutely prohibited. Worse,
petitioner never regularized them even if the position they occupied and the services they performed were necessary and desirable to its business.
Upon the expiration of their contracts, these workers would be replaced with other workers with the same employment status. This scheme is a
clear circumvention of the laws on regular employment. 8
Respondent argued that the right to self-organization goes beyond the maintenance of union membership. It emphasized that the CBA maintains a
union shop clause which gives the regular employees 30 days within which to join respondent as a condition for their continued employment.
Respondent maintained that petitioner’s persistent refusal to grant regular status to its employees, such as Dindo Buella, who is assigned in the
Galvanizing Department, violates the employees’ right to self-organization in two ways: (1) they are deprived of a representative for collective
bargaining purposes; and (2) respondent is deprived the right to expand its membership. Respondent contended that a union’s strength lies in its
number, which becomes crucial especially during negotiations; after all, an employer will not bargain seriously with a union whose membership
constitutes a minority of the total workforce of the company. According to respondent, out of the 500 employees of the company, only 147 are union
members, and at least 60 employees would have been eligible for union membership had they been recognized as regular employees.9
For its part, petitioner admitted that it hired temporary workers. It purportedly did so to cope with the seasonal increase of the job orders from
abroad. In order to comply with the job orders, petitioner hired the temporary workers to help the regular workers in the production of steel pipes.
Petitioner maintained that these workers do not affect respondent’s membership. Petitioner claimed that it agreed to terminate these temporary
employees on the condition that the regular employees would have to perform the work that these employees were performing, but respondent
refused. Respondent’s refusal allegedly proved that petitioner was not contracting out the services being performed by union members. Finally,
petitioner insisted that the hiring of temporary workers is a management prerogative.10
C. Failure to provide shuttle service
Petitioner has allegedly reneged on its obligation to provide shuttle service for its employees pursuant to Article XIV, Section 7 of the CBA, which
provides:
Section 7. Shuttle Service. As per company practice, once the company vehicle used for the purpose has been reconditioned.11
Respondent claimed that the company vehicle which would be used as shuttle service for its employees has not been reconditioned by petitioner
since the signing of the CBA on February 26, 2004.12 Petitioner explained that it is difficult to implement this provision and simply denied that it has
reneged on its obligation.13
D. Refusal to answer for the medical expenses incurred by three employees
Respondent asserted that petitioner is liable for the expenses incurred by three employees who were injured while in the company premises. This
liability allegedly stems from Article VIII, Section 4 of the CBA which provides:
Section 4. The COMPANY agrees to provide first aid medicine and first aid service and consultation free of charge to all its employees.14
According to respondent, petitioner’s definition of what constitutes first aid service is limited to the bare minimum of treating injured employees
while still within the company premises and referring the injured employee to the Chinese General Hospital for treatment, but the travel expense in
going to the hospital is charged to the employee. Thus, when Alberto Guevarra and Job Canizares, union members, were injured, they had to pay
₱90.00 each for transportation expenses in going to the hospital for treatment and going back to the company thereafter. In the case of Rodrigo
Solitario, petitioner did not even shoulder the cost of the first aid medicine, amounting to ₱2,113.00, even if he was injured during the company
sportsfest, but the amount was deducted, instead, from his salary. Respondent insisted that this violates the above cited provision of the CBA.15
Petitioner insisted that it provided medicine and first aid assistance to Rodrigo Solitario. It alleged that the latter cannot claim hospitalization
1avvphi1

benefits under Article VIII, Section 116 of the CBA because he was not confined in a hospital.17
E. Failure to comply with the time-off with pay provision
Article II, Section 8 of the CBA provides:
Section 8. Time-Off with Pay. The COMPANY shall grant to the UNION’s duly authorized representative/s or to any employee who are on duty, if
summoned by the UNION to testify, if his/her presence is necessary, a paid time-off for the handling of grievances, cases, investigations, labor-
management conferences provided that if the venue of the case is outside Company premises involving [the] implementation and interpretation of
the CBA, two (2) representatives of the UNION who will attend the said hearing shall be considered time-off with pay. If an employee on a night
shift attends grievance on labor-related cases and could not report for work due to physical condition, he may avail of union leave without need of
the two (2) days prior notice.18
Respondent contended that under the said provision, petitioner was obliged to grant a paid time-off to respondent’s duly authorized representative
or to any employee who was on duty, when summoned by respondent to testify or when the employee’s presence was necessary in the grievance
hearings, meetings, or investigations.19
Petitioner admitted that it did not honor the claim for wages of the union officers who attended the grievance meetings because these meetings
were initiated by respondent itself. It argued that since the union officers
were performing their functions as such, and not as employees of the company, the latter should not be liable. Petitioner further asserted that it is
not liable to pay the wages of the union officers when the meetings are held beyond company time (3:00 p.m.). It claimed that time-off with pay is
allowed only if the venue of the meeting is outside company premises and the meeting involves the implementation and interpretation of the CBA.20
In reply, respondent averred that the above quoted provision does not make a qualification that the meetings should be held during office hours
(7:00 a.m. to 3:00 p.m.); hence, for as long as the presence of the employee is needed, time spent during the grievance meeting should be paid.21
F. Visitors’ free access to company premises Respondent charged petitioner with violation of Article II, Section 7 of the CBA which provides:
Section 7. Free Access to Company Premises. Local Union and Federation officers (subject to company’s security measure) shall be allowed
during working hours to enter the COMPANY premises for the following reasons:
a. To investigate grievances that have arisen;
b. To interview Union Officers, Stewards and members during reasonable hours; and
c. To attend to any meeting called by the Management or the UNION.22
G. Failure to comply with reporting time-off provision
Respondent maintained that a brownout is covered by Article XII, Section 3 of the CBA which states:
Section 3. Reporting Time-Off. The employees who have reported for work but are unable to continue working because of emergencies such as
typhoons, flood, earthquake, transportation strike, where the COMPANY is affected and in case of fire which occurs in the block where the home of
the employee is situated and not just across the street and serious illness of an immediate member of the family of the employee living with him/her
and no one in the house can bring the sick family member to the hospital, shall be paid as follows:
a. At least half day if the work stoppage occurs within the first four (4) hours of work; and
b. A whole day if the work stoppage occurs after four (4) hours of work.23
Respondent averred that petitioner paid the employees’ salaries for one hour only of the four-hour brownout that occurred on July 25, 2005 and
refused to pay for the remaining three hours. In defense, petitioner simply insisted that brownouts are not included in the above list of
emergencies.24
Respondent rejoined that, under the principle of ejusdem generis, brownouts or power outages come within the "emergencies" contemplated by the
CBA provision. Although brownouts were not specifically identified as one of the emergencies listed in the said CBA provision, it cannot be denied
that brownouts fall within the same kind or class of the enumerated emergencies. Respondent maintained that the intention of the provision was to
compensate the employees for occurrences which are beyond their control, and power outage is one of such occurrences. It insisted that the list of
emergencies is not an exhaustive list but merely gives an idea as to what constitutes an actual emergency that is beyond the control of the
employee.25
H. Dismissal of Diosdado Madayag
Diosdado Madayag was employed as welder by petitioner. He was served a Notice of Termination dated March 14, 2005 which read:
Please consider this as a Notice of Termination of employment effective March 14, 2005 under Art. 284 of the Labor Code and its Implementing
Rules.
This is based on the medical certificate submitted by your attending physician, Lucy Anne E. Mamba, M.D., Jose R. Reyes Memorial Medical
Center dated March 7, 2005 with the following diagnosis:
‘Diabetes Mellitus Type 2’
Please be guided accordingly.26
Respondent contended that Madayag’s dismissal from employment is illegal because petitioner failed to obtain a certification from a competent
public authority that his disease is of such nature or at such stage that it cannot be cured within six months even after proper medical treatment.
Petitioner also failed to prove that Madayag’s continued employment was prejudicial to his health or that of his colleagues.27
Petitioner, on the other hand, alleged that Madayag was validly terminated under Art. 28428 of the Labor Code and that his leg was amputated by
reason of diabetes, which disease is not work-related. Petitioner claimed that it was willing to pay Madayag 13 days for every year of service but
respondent was asking for additional benefits.29
I. Denial of paternity leave benefit to two employees
Article XV, Section 2 of the CBA provides:
Section 2. Paternity Leave. As per law[,] [t]he Company shall, as much as possible, pay paternity leave within 2 weeks from submission of
documents.30
Petitioner admitted that it denied this benefit to the claimants for failure to observe the requirement provided in the Implementing Rules and
Regulations of Republic Act No. 8187 (Paternity Leave Act of 1995), that is, to notify the employer of the pregnancy of their wives and the expected
date of delivery.31
Respondent argued that petitioner is relying on technicalities by insisting that the denial was due to the two employees’ failure to notify it of the
pregnancy of their respective spouses. It maintained that the notification requirement runs counter to the spirit of the law. Respondent averred that,
on grounds of social justice, the oversight to notify petitioner should not be dealt with severely by denying the two claimants this benefit.32
J. Discrimination and harassment
According to respondent, petitioner was contemptuous over union officers for protecting the rights of union members. In an affidavit executed by
Chito Guadaña, union secretary, he narrated that Alfred Navarro, Officer-in-Charge of the Packing Department, had been harsh in dealing with his
fellow employees and would even challenge some workers to a fight. He averred that Navarro had an overbearing attitude during work and
grievance meetings. In November 2004, Navarro removed Guadaña, a foreman, from his position and installed another foreman from another
section. The action was allegedly brought about by earlier grievances against Navarro’s abuse. Petitioner confirmed his transfer to another section
in violation of Article VI, Section 6 of the CBA,33 which states in part:
Section 6. Transfer of Employment. – No permanent positional transfer outside can be effected by the COMPANY without discussing the grounds
before the Grievance Committee. All transfer shall be with advance notice of two (2) weeks. No transfer shall interfere with the employee’s exercise
of the right to self-organization.34
Respondent also alleged that Ariel Marigondon, union president, was also penalized for working for his fellow employees. One time, Marigondon
inquired from management about matters concerning tax discrepancies because it appeared that non-taxable items were included as part of
taxable income. Thereafter, Marigondon was transferred from one area of operation to another until he was allegedly forced to accept menial jobs
of putting control tags on steel pipes, a kind of job which did not require his 16 years of expertise in examining steel pipes.35
Edgardo Masangcay, respondent’s Second Vice President, executed an affidavit wherein he cited three instances when his salary was withheld by
petitioner. The first incident happened on May 28, 2005 when petitioner refused to give his salary to his wife despite presentation of a proof of
identification (ID) and letter of authorization. On June 18, 2005, petitioner also refused to release his salary to Pascual Lazaro despite submission
of a letter of authority and his ID and, as a result, he was unable to buy medicine for his child who was suffering from asthma attack. The third
instance happened on June 25, 2005 when his salary was short of ₱450.00; this amount was however released the following week.36
Petitioner explained that the transfer of the employee from one department to another was the result of downsizing the Warehouse Department,
which is a valid exercise of management prerogative. In Guadaña’s case, Navarro denied that he was being harsh but claimed that he merely
wanted to stress some points. Petitioner explained that Guadaña was transferred when the section where he was assigned was phased out due to
the installation of new machines. Petitioner pointed out that the other workers assigned in said section were also transferred.37
For the petitioner, Emmanuel Mendiola, Production Superintendent, also executed an affidavit attesting that the allegation of Ariel Marigondon, that
he was harassed and was a victim of discrimination for being respondent’s President, had no basis. Marigondon pointed out that after the job order
was completed, he was reassigned to his original shift and group.38
Petitioner also submitted the affidavits of Elizabeth Llaneta Aguilar, disbursement clerk and hiring staff, and Romeo T. Sy, Assistant Personnel
Manager. Aguilar explained that she did not mean to harass Masangcay, but she merely wanted to make sure that he would receive his salary.
Affiant Sy admitted that he refused to release Masangcay’s salary to a woman who presented herself as his (Masangcay’s) wife since nobody could
attest to it. He claimed that such is not an act of harassment but a precautionary measure to protect Masangcay’s interest.39
K. Non-implementation of COLA in Wage Order Nos. RBIII-10 and 11
Respondent posited that any form of wage increase granted through the CBA should not be treated as compliance with the wage increase given
through the wage boards. Respondent claimed that, for a number of years, petitioner has complied with Article XII, Section 2 of the CBA which
provides:
Section 2. All salary increase granted by the COMPANY shall not be credited to any future contractual or legislated wage increases. Both increases
shall be implemented separate and distinct from the increases stated in this Agreement. It should be understood by both parties that contractual
salary increase are separate and distinct from legislated wage increases, thus the increase brought by the latter shall be enjoyed also by all
covered employees.40
Respondent maintained that for every wage order that was issued in Region 3, petitioner never hesitated to comply and grant a similar increase.
Specifically, respondent cited petitioner’s compliance with Wage Order No. RBIII-10 and grant of the mandated ₱15.00 cost of living allowance
(COLA) to all its employees. Petitioner, however, stopped implementing it to non-minimum wage earners on July 24, 2005. It contended that this
violates Article 100 of the Labor Code which prohibits the diminution of benefits already enjoyed by the workers and that such grant of benefits had
already ripened into a company practice.41
Petitioner explained that the COLA provided under Wage Order No. RBIII-10 applies to minimum wage earners only and that, by mistake, it
implemented the same across the board or to all its employees. After realizing its mistake, it stopped integrating the COLA to the basic pay of the
workers who were earning above the minimum wage.42
The NLRC’s Ruling
 Out of the eleven issues raised by respondent, eight were decided in its favor; two (denial of paternity leave benefit and discrimination of union
members) were decided in favor of petitioner; while the issue on visitor’s free access to company premises was deemed settled during the
mandatory conference. The dispositive portion of the NLRC Decision dated March 30, 2007 reads:
WHEREFORE, Supreme Steel Pipe Corporation (the Company) is hereby ordered to:
1) implement general wage increase to Juan Niño, Eddie Dalagon and Rommel Talavera pursuant to the CBA in June 2003, 2004 and
2005;
2) regularize workers Dindo Buella and 60 other workers and to respect CBA provision on contracting-out labor;
3) recondition the company vehicle pursuant to the CBA;
4) answer for expenses involved in providing first aid services including transportation expenses for this purpose, as well as to reimburse
Rodrigo Solitario the sum of ₱2,113.00;
5) pay wages of union members/officers who attended grievance meetings as follows:
1) D. Serenilla - ₱115.24375
2) D. Miralpes - ₱115.80625
3) E. Mallari - ₱108.7625
4) C. Cruz - ₱114.65313

5) J. Patalbo - ₱161.0625

6) J.J. Muñoz - ₱111.19375

7) C. Guadaña - ₱56.94375

8) J. Patalbo - ₱161.0625
9) E. Mallari - ₱108.7625

10) C. Guadaña - ₱113.8875

11) A. Marigondon - ₱170.30625

12) A. Marigondon - ₱181.66

13) A. Marigondon - ₱181.66

14) E. Masangcay - ₱175.75

15) A. Marigondon - ₱181.66

16) E. Masangcay - ₱175.75
17) A. Marigondon - ₱181.66

18) F. Servano - ₱174.02

19) R. Estrella - ₱181.50

20) A. Marigondon - ₱181.66

6) pay workers their salary for the 3 hours of the 4 hour brownout as follows:
1) Alagon, Jr., Pedro - ₱130.0875
2) Aliwalas, Cristeto - ₱108.5625

3) Baltazar, Roderick - ₱ 90.1875

4) Bañez, Oliver - ₱ 90.9375

5) Prucal, Eduardo - ₱126.015

6) Calimquin, Rodillo - ₱131.0362

7) Clave, Arturo - ₱125.64

8) Cadavero, Rey - ₱108.5625

9) De Leon, Romulo - ₱124.35

10) Lactao, Noli - ₱126.015

11) Layco, Jr., Dandino - ₱130.5375

12) Legaspi, Melencio - ₱127.63

13) Quiachon, Rogelio - ₱130.5525

14) Sacmar, Roberto - ₱108.9375

15) Tagle, Farian - ₱129.3375
 16) Villavicencio, Victor - ₱126.015

17) Agra, Romale - ₱126.015

18) Basabe, Luis - ₱128.5575

19) Bornasal, Joel - ₱127.53

20) Casitas, Santiago - ₱128.5575

21) Celajes, Bonifacio - ₱128.1825

22) Avenido, Jerry - ₱133.2487

23) Gagarin, Alfredo - ₱108.9375

24) Layson, Paulo - ₱131.745

25) Lledo, Asalem - ₱128.5575

26) Marigondon, Ariel - ₱131.745

27) Orcena, Sonnie - ₱126.015
28) Servano, Fernando - ₱126.015

29) Versola, Rodrigo - ₱126.015

7) reinstate Diosdado Madayag to his former position without loss of seniority rights and to pay full backwages and other benefits from 14
March 2005, date of dismissal, until the date of this Decision; if reinstatement is impossible[,] to pay separation pay of one month pay for
every year of service in addition to backwages;
8) dismiss the claim for paternity leave for failure of claimants to observe the requirements;
9) dismiss the charge of harassment and discrimination for lack of merit; and to
10) continue to implement COLA under Wage Order Nos. [RBIII]-10 & 11 across the board.
The issue on Visitors’ Free Access to Company Premises is dismissed for being moot and academic after it was settled during the scheduled
conferences.
SO ORDERED.43
Forthwith, petitioner elevated the case to the CA, reiterating its arguments on the eight issues resolved by the NLRC in respondent’s favor.
The CA’s Ruling
On September 30, 2008, the CA rendered a decision dismissing the petition, thus:
WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED, for lack of merit. The
assailed Decision dated March 30, 2007 and Resolution dated April 28, 2008 of the National Labor Relations Commission in NLRC NCR CC No.
000305-05 are hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.44
According to the CA, petitioner failed to show that the NLRC committed grave abuse of discretion in finding that it violated certain provisions of the
CBA. The NLRC correctly held that every employee is entitled to the wage increase under the CBA despite receipt of an anniversary increase. The
CA concluded that, based on the wording of the CBA, which uses the words "general increase" and "over and above," it cannot be said that the
parties have intended the anniversary increase to be given in lieu of the CBA wage increase.45
The CA declared that the withdrawal of the COLA under Wage Order No. RBIII-10 from the employees who were not minimum wage earners
amounted to a diminution of benefits because such grant has already ripened into a company practice. It pointed out that there was no ambiguity or
doubt as to who were covered by the wage order. Petitioner, therefore, may not invoke error or mistake in extending the COLA to all employees
and such act can only be construed as "as a voluntary act on the part of the employer."46 The CA opined that, considering the foregoing, the ruling
in Globe Mackay Cable and Radio Corp. v. NLRC47 clearly did not apply as there was no doubtful or difficult question involved in the present case.48
The CA sustained the NLRC’s interpretation of Art. VIII, Section 4 of the CBA as including the expenses for first aid medicine and transportation
cost in going to the hospital. The CA stressed that the CBA should 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 was negotiated and the purpose which it
intended to serve.49
Based on the principle of liberal construction of the CBA, the CA likewise sustained the NLRC’s rulings on the issues pertaining to the shuttle
service, time-off for attendance in grievance meetings/hearings, and time-off due to brownouts.50
The CA further held that management prerogative is not unlimited: it is subject to limitations found in law, a CBA, or the general principles of fair
play and justice. It stressed that the CBA provided such limitation on management prerogative to contract-out labor, and compliance with the CBA
is mandated by the express policy of the law.51
Finally, the CA affirmed the NLRC’s finding that Madayag’s dismissal was illegal. It emphasized that the burden to prove that the employee’s
disease is of such nature or at such stage that it cannot be cured within a period of six months rests on the employer. Petitioner failed to submit a
certification from a competent public authority attesting to such fact; hence, Madayag’s dismissal is illegal.52
Petitioner moved for a reconsideration of the CA’s decision. On December 4, 2008, the CA denied the motion for lack of merit.53
Dissatisfied, petitioner filed this petition for review on certiorari, contending that the CA erred in finding that it violated certain provisions of the CBA.
The Court’s Ruling
The petition is partly meritorious.
It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and compliance therewith is mandated by the
express policy of the law. If the terms of a CBA are clear and there is no doubt as to the intention of the contracting parties, the literal meaning of its
stipulation shall prevail.54 Moreover, the CBA must be construed liberally rather than narrowly and technically and the Court must place a practical
and realistic construction upon it.55 Any doubt in the interpretation of any law or provision affecting labor should be resolved in favor of labor.56
Upon these well-established precepts, we sustain the CA’s findings and conclusions on all the issues, except the issue pertaining to the denial of
the COLA under Wage Order No. RBIII-10 and 11 to the employees who are not minimum wage earners.
The wording of the CBA on general wage increase cannot be interpreted any other way: The CBA increase should be given to all employees "over
and above" the amount they are receiving, even if that amount already includes an anniversary increase. Stipulations in a contract must be read
together, not in isolation from one another.57 Consideration of Article XIII, Section 2 (non-crediting provision), bolsters such interpretation. Section 2
states that "[a]ll salary increase granted by the company shall not be credited to any future contractual or legislated wage increases." Clearly then,
even if petitioner had already awarded an anniversary increase to its employees, such increase cannot be credited to the "contractual" increase as
provided in the CBA, which is considered "separate and distinct."
Petitioner claims that it has been the company practice to offset the anniversary increase with the CBA increase. It however failed to prove such
material fact. Company practice, just like any other fact, habits, customs, usage or patterns of conduct must be proven. The offering party must
allege and prove specific, repetitive conduct that might constitute evidence of habit,58 or company practice. Evidently, the pay slips of the four
employees do not serve as sufficient proof.
Petitioner’s excuse in not providing a shuttle service to its employees is unacceptable. In fact, it can hardly be considered as an excuse. Petitioner
simply says that it is difficult to implement the provision. It relies on the fact that "no time element [is] explicitly stated [in the CBA] within which to
fulfill the undertaking." We cannot allow petitioner to dillydally in complying with its obligation and take undue advantage of the fact that no period is
provided in the CBA. Petitioner should recondition the company vehicle at once, lest it be charged with and found guilty of unfair labor practice.
Petitioner gave a narrow construction to the wording of the CBA when it denied (a) reimbursement for the first-aid medicines taken by Rodrigo
Solitario when he was injured during the company sportsfest and the transportation cost incurred by Alberto Guevara and Job Canizares in going to
the hospital, (b) payment of the wages of certain employees during the time they spent at the grievance meetings, and (c) payment of the
employees’ wages during the brownout that occurred on July 25, 2002. As previously stated, the CBA must be construed liberally rather than
narrowly and technically. It is the duty of the courts to place a practical and realistic construction upon the CBA, giving due consideration to the
context in which it is negotiated and the purpose which it is intended to serve. Absurd and illogical interpretations should be avoided.59 A CBA, like
any other contract, must be interpreted according to the intention of the parties.60
The CA was correct in pointing out that the concerned employees were not seeking hospitalization benefits under Article VIII, Section 1 of the CBA,
but under Section 4 thereof; hence, confinement in a hospital is not a prerequisite for the claim. Petitioner should reimburse Solitario for the first aid
medicines; after all, it is the duty of the employer to maintain first- aid medicines in its premises.61 Similarly, Guevara and Canizares should also be
reimbursed for the transportation cost incurred in going to the hospital. The Omnibus Rules Implementing the Labor Code provides that, where the
employer does not have an emergency hospital in its premises, the employer is obliged to transport an employee to the nearest hospital or clinic in
case of emergency.62
We likewise agree with the CA on the issue of nonpayment of the time-off for attending grievance meetings. The intention of the parties is obviously
to compensate the employees for the time that they spend in a grievance meeting as the CBA provision categorically states that the company will
pay the employee "a paid time-off for handling of grievances, investigations, labor-management conferences." It does not make a qualification that
such meeting should be held during office hours or within the company premises.
The employees should also be compensated for the time they were prevented from working due to the brownout. The CBA enumerates some of
the instances considered as "emergencies" and these are "typhoons, flood earthquake, transportation strike." As correctly argued by respondent,
the CBA does not exclusively enumerate the situations which are considered "emergencies." Obviously, the key element of the provision is that
employees "who have reported for work are unable to continue working" because of the incident. It is therefore reasonable to conclude that
brownout or power outage is considered an "emergency" situation.
Again, on the issue of contracting-out labor, we sustain the CA. Petitioner, in effect, admits having hired "temporary" employees, but it maintains
that it was an exercise of management prerogative, necessitated by the increase in demand for its product.
Indeed, jurisprudence recognizes the right to exercise management prerogative. Labor laws also discourage interference with an employer's
judgment in the conduct of its business. For this reason, the Court often declines to interfere in legitimate business decisions of employers. The law
must protect not only the welfare of employees, but also the right of employers.63 However, the exercise of management prerogative is not
unlimited. Managerial prerogatives are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play
and justice.64 The CBA is the norm of conduct between the parties and, as previously stated, compliance therewith is mandated by the express
policy of the law.65
The CBA is clear in providing that temporary employees will no longer be allowed in the company except in the Warehouse and Packing Section.
Petitioner is bound by this provision. It cannot exempt itself from compliance by invoking management prerogative. Management prerogative must
take a backseat when faced with a CBA provision. If petitioner needed additional personnel to meet the increase in demand, it could have taken
measures without violating the CBA.
Respondent claims that the temporary employees were hired on five-month contracts, renewable for another five months. After the expiration of the
contracts, petitioner would hire other persons for the same work, with the same employment status.
Plainly, petitioner’s scheme seeks to prevent employees from acquiring the status of regular employees. But the Court has already held that, where
from the circumstances it is apparent that the periods of employment have been imposed to preclude acquisition of security of tenure by the
employee, they should be struck down or disregarded as contrary to public policy and morals.66 The primary standard to determine a regular
employment is the reasonable connection between the particular activity performed by the employee in relation to the business or trade of the
employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. If the employee has been
performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity, if not indispensability, of that activity to the business of the employer.
Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists.67
We also uphold the CA’s finding that Madayag’s dismissal was illegal. It is already settled that the burden to prove the validity of the dismissal rests
upon the employer. Dismissal based on Article 284 of the Labor Code is no different, thus:
The law is unequivocal: the employer, before it can legally dismiss its employee on the ground of disease, must adduce a certification from a
competent public authority that the disease of which its employee is suffering is of such nature or at such a stage that it cannot be cured within a
period of six months even with proper treatment.
xxxx
In Triple Eight Integrated Services, Inc. v. NLRC, the Court explains why the submission of the requisite medical certificate is for the employer’s
compliance, thus:
The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral
and arbitrary determination by the employer of the gravity or extent of the employee’s illness and thus defeat the public policy on the protection of
labor.
x x x x68
However, with respect to the issue of whether the COLA under Wage Order Nos. RBIII-10 and 11 should be implemented across the board, we
hold a different view from that of the CA. No diminution of benefits would result if the wage orders are not implemented across the board, as no
such company practice has been established.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is diminution of benefits
when it is shown that: (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.69
To recall, the CA arrived at its ruling by relying on the fact that there was no ambiguity in the wording of the wage order as to the employees
covered by it. From this, the CA concluded that petitioner actually made no error or mistake, but acted voluntarily, in granting the COLA to all its
employees. It therefore took exception to the Globe Mackay case which, according to it, applies only when there is a doubtful or difficult question
involved.
The CA failed to note that Globe Mackay primarily emphasized that, for the grant of the benefit to be considered voluntary, "it should have been
practiced over a long period of time, and must be shown to have been consistent and deliberate."70 The fact that the practice must not have been
due to error in the construction or application of a doubtful or difficult question of law is a distinct requirement.
The implementation of the COLA under Wage Order No. RBIII-10 across the board, which only lasted for less than a year, cannot be considered as
having been practiced "over a long period of time." While it is true that jurisprudence has not laid down any rule requiring a specific minimum
number of years in order for a practice to be considered as a voluntary act of the employer, under existing jurisprudence on this matter, an act
carried out within less than a year would certainly not qualify as such. Hence, the withdrawal of the COLA Wage Order No. RBIII-10 from the
salaries of non-minimum wage earners did not amount to a "diminution of benefits" under the law.
There is also no basis in enjoining petitioner to implement Wage Order No. RBIII-11 across the board. Similarly, no proof was presented showing
that the implementation of wage orders across the board has ripened into a company practice. In the same way that we required petitioner to prove
the existence of a company practice when it alleged the same as defense, at this instance, we also require respondent to show proof of the
company practice as it is now the party claiming its existence. Absent any proof of specific, repetitive conduct that might constitute evidence of the
practice, we cannot give credence to respondent’s claim. The isolated act of implementing a wage order across the board can hardly be considered
a company practice,71 more so when such implementation was erroneously made.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The CA Decision September 30, 2008 and Resolution dated
December 4, 2008 are AFFIRMED with MODIFICATION that the order for petitioner to continue implementing Wage Order No. RBIII-10 and 11
across the board is SET ASIDE. Accordingly, item 10 of the NLRC Decision dated March 30, 2007 is modified to read "dismiss the claim for
implementation of Wage Order Nos. RBIII-10 and 11 to the employees who are not minimum wage earners."
SO ORDERED.

G.R. No. 188949 July 26, 2010

CENTRAL AZUCARERA DE TARLAC, Petitioner,
vs.
CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision1 dated May 28, 2009, and the
Resolution2 dated July 28, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 106657.
The factual antecedents of the case are as follows:
Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while respondent is a legitimate labor organization which
serves as the exclusive bargaining representative of petitioner’s rank-and-file employees. The controversy stems from the interpretation of the term
"basic pay," essential in the computation of the 13th-month pay.
The facts of this case are not in dispute. In compliance with Presidential Decree (P.D.) No. 851, petitioner granted its employees the mandatory
thirteenth (13th) - month pay since 1975. The formula used by petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided
by twelve (12). Included in petitioner’s computation of the Total Basic Annual Salary were the following: basic monthly salary; first eight (8) hours
overtime pay on Sunday and legal/special holiday; night premium pay; and vacation and sick leaves for each year. Throughout the years, petitioner
used this computation until 2006.3
On November 6, 2004, respondent staged a strike. During the pendency of the strike, petitioner declared a temporary cessation of operations. In
December 2005, all the striking union members were allowed to return to work. Subsequently, petitioner declared another temporary cessation of
operations for the months of April and May 2006. The suspension of operation was lifted on June 2006, but the rank-and-file employees were
allowed to report for work on a fifteen (15) day-per-month rotation basis that lasted until September 2006. In December 2006, petitioner gave the
employees their 13th-month pay based on the employee’s total earnings during the year divided by 12.4
Respondent objected to this computation. It averred that petitioner did not adhere to the usual computation of the 13th-month pay. It claimed that
the divisor should have been eight (8) instead of 12, because the employees worked for only 8 months in 2006. It likewise asserted that petitioner
did not observe the company practice of giving its employees the guaranteed amount equivalent to their one month pay, in instances where the
computed 13th-month pay was less than their basic monthly pay.5
Petitioner and respondent tried to thresh out their differences in accordance with the grievance procedure as provided in their collective bargaining
agreement. During the grievance meeting, the representative of petitioner explained that the change in the computation of the 13th-month pay was
intended to rectify an error in the computation, particularly the concept of basic pay which should have included only the basic monthly pay of the
employees.6
For failure of the parties to arrive at a settlement, respondent applied for preventive mediation before the National Conciliation and Mediation
Board. However, despite four (4) conciliatory meetings, the parties still failed to settle the dispute. On March 29, 2007, respondent filed a complaint
against petitioner for money claims based on the alleged diminution of benefits/erroneous computation of 13th-month pay before the Regional
Arbitration Branch of the National Labor Relations Commission (NLRC).7
On October 31, 2007, the Labor Arbiter rendered a Decision8 dismissing the complaint and declaring that the petitioner had the right to rectify the
error in the computation of the 13th-month pay of its employees.9 The fallo of the Decision reads:
WHEREFORE, premises considered, the complaint filed by the complainants against the respondents should be DISMISSED with prejudice for
utter lack of merit.
SO ORDERED.10
Respondents filed an appeal. On August 14, 2008, the NLRC rendered a Decision11 reversing the Labor Arbiter. The dispositive portion of the
Decision reads:
WHEREFORE, the decision appealed is reversed and set aside and respondent-appellee Central Azucarera de Tarlac is hereby ordered to adhere
to its established practice of granting 13th[-] month pay on the basis of gross annual basic which includes basic pay, premium pay for work in rest
days and special holidays, night shift differential and paid vacation and sick leaves for each year.
Additionally, respondent-appellee is ordered to observe the guaranteed one[-]month pay by way of 13th month pay.
SO ORDERED. 12
Petitioner filed a motion for reconsideration. However, the same was denied in a Resolution dated November 27, 2008. Petitioner then filed a
petition for certiorari under Rule 65 of the Rules of Court before the CA.13
On May 28, 2009, the CA rendered a Decision14 dismissing the petition, and affirming the decision and resolution of the NLRC, viz.:
WHEREFORE, the foregoing considered, the petition is hereby DISMISSED and the assailed August 14, 2008 Decision and November 27, 2008
Resolution of the NLRC, are hereby AFFIRMED. No costs.
SO ORDERED.15
Aggrieved, petitioner filed the instant petition, alleging that the CA committed a reversible error in affirming the Decision of the NLRC, and praying
that the Decision of the Labor Arbiter be reinstated.
The petition is denied for lack of merit.
The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an additional income based on wage but not part of the wage. It is
equivalent to one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year. All rank-and-file employees, regardless of
their designation or employment status and irrespective of the method by which their wages are paid, are entitled to this benefit, provided that they
have worked for at least one month during the calendar year. If the employee worked for only a portion of the year, the 13th-month pay is computed
pro rata.16
Petitioner argues that there was an error in the computation of the 13th-month pay of its employees as a result of its mistake in implementing P.D.
No. 851, an error that was discovered by the management only when respondent raised a question concerning the computation of the employees’
13th-month pay for 2006. Admittedly, it was an error that was repeatedly committed for almost thirty (30) years. Petitioner insists that the length of
time during which an employer has performed a certain act beneficial to the employees, does not prove that such an act was not done in error. It
maintains that for the claim of mistake to be negated, there must be a clear showing that the employer had freely, voluntarily, and continuously
performed the act, knowing that he is under no obligation to do so. Petitioner asserts that such voluntariness was absent in this case.17
The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975, defines 13th-month pay and basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this issuance:
(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.
On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was issued. The Supplementary Rules clarifies that
overtime pay, earnings, and other remuneration that are not part of the basic salary shall not be included in the computation of the 13th-month pay.
On November 16, 1987, the Revised Guidelines on the Implementation of the 13th-Month Pay Law was issued. Significantly, under this Revised
Guidelines, it was specifically stated that the minimum 13th-month pay required by law shall not be less than one-twelfth (1/12) of the total basic
salary earned by an employee within a calendar year. 1avvphi1

Furthermore, the term "basic salary" of an employee for the purpose of computing the 13th-month pay was interpreted to include all remuneration
or earnings paid by the employer for services rendered, but does not include allowances and monetary benefits which are not 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.
Based on the foregoing, it is clear that there could have no erroneous interpretation or application of what is included in the term "basic salary" for
purposes of computing the 13th-month pay of employees. From the inception of P.D. No. 851 on December 16, 1975, clear-cut administrative
guidelines have been issued to insure uniformity in the interpretation, application, and enforcement of the provisions of P.D. No. 851 and
its implementing regulations.
As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based on the employees’ gross annual earnings which included the
basic monthly salary, premium pay for work on rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty
(30) years and has ripened into a company policy or practice which cannot be unilaterally withdrawn.
Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits given to employees cannot be taken back or
reduced unilaterally by the employer because the benefit has become part of the employment contract, written or unwritten. 18 The rule against
diminution of benefits applies if it is shown that the grant of the benefit is based on an express policy or has ripened into a practice over a long
period of time and that the practice is consistent and deliberate. Nevertheless, the rule will not apply if the practice is due to error in the construction
or application of a doubtful or difficult question of law. But even in cases of error, it should be shown that the correction is done soon after discovery
of the error.19
The argument of petitioner that the grant of the benefit was not voluntary and was due to error in the interpretation of what is included in the basic
salary deserves scant consideration. No doubtful or difficult question of law is involved in this case. The guidelines set by the law are not difficult to
decipher. The voluntariness of the grant of the benefit was manifested by the number of years the employer had paid the benefit to its employees.
Petitioner only changed the formula in the computation of the 13th-month pay after almost 30 years and only after the dispute between the
management and employees erupted. This act of petitioner in changing the formula at this time cannot be sanctioned, as it indicates a badge of
bad faith.
Furthermore, petitioner cannot use the argument that it is suffering from financial losses to claim exemption from the coverage of the law on 13th-
month pay, or to spare it from its erroneous unilateral computation of the 13th-month pay of its employees. Under Section 7 of the Rules and
Regulations Implementing P.D. No. 851, distressed employers shall qualify for exemption from the requirement of the Decree only upon prior
authorization by the Secretary of Labor.20 In this case, no such prior authorization has been obtained by petitioner; thus, it is not entitled to claim
such exemption.
WHEREFORE, the Decision dated May 28, 2009 and the Resolution dated July 28, 2009 of the Court of Appeals in CA-G.R. SP No. 106657 are
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 152456 April 28, 2004
SEVILLA TRADING COMPANY, petitioner,
vs.
A.V.A. TOMAS E. SEMANA, SEVILLA TRADING WORKERS UNION–SUPER, respondents.
DECISION
PUNO, J.:
On appeal is the Decision1 of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001 sustaining the Decision2 of Accredited
Voluntary Arbitrator Tomas E. Semana dated 13 November 2000, as well as its subsequent Resolution3 dated 06 March 2002 denying petitioner’s
Motion for Reconsideration.
The facts of the case are as follows:
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;
(b) Legal holiday pay, premium pay for special holidays;
(c) Night premium;
(d) Bereavement leave pay;
(e) Union leave pay;
(f) Maternity leave pay;
(g) Paternity leave pay;
(h) Company vacation and sick leave pay; and
(i) Cash conversion of unused company vacation and sick leave.
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 or earnings paid by an employer to an employee for services rendered but may not include
cost-of-living allowances granted pursuant to P.D. No. 525 or Letter of Instruction 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.
Petitioner then effected a change in the computation of the thirteenth month pay, as follows:
net basic pay
13th-month pay =
12 months
where:
net basic pay = gross pay – (non-basic pay or other benefits)
Now excluded from the base figure used in the computation of the thirteenth month pay are the following:
a) Overtime premium for regular overtime, legal and special holidays;
b) Legal holiday pay, premium pay for special holidays;
c) Night premium;
d) Bereavement leave pay;
e) Union leave pay;
f) Maternity leave pay;
g) Paternity leave pay;
h) Company vacation and sick leave pay; and
i) Cash conversion of unused vacation/sick leave.
Hence, the new computation reduced the employees’ thirteenth month pay. The daily piece-rate workers represented by private respondent Sevilla
Trading Workers Union – SUPER (Union, for short), a duly organized and registered union, through the Grievance Machinery in their Collective
Bargaining Agreement, contested the new computation and reduction of their thirteenth month pay. The parties failed to resolve the issue.
On March 24, 2000, the parties submitted the issue of "whether or not the exclusion of leaves and other related benefits in the computation of 13th-
month pay is valid" to respondent Accredited Voluntary 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.
Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds of its appeal, as follows:
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 one’s 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 petitioner’s stance of mistake or error in the computation of the thirteenth month pay is unmeritorious. Petitioner’s 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 ₱3.00 daily
COLA by 22 days, which is the number of working days in the company. The Union disagreed with the computation, claiming that the daily COLA
rate of ₱3.00 should be multiplied by 30 days, which has been the practice of the company for several years. We upheld the contention of the
petitioner corporation. To answer the Union’s contention of company practice, we ruled that:
Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in compliance with Wage Orders Nos.
1 (26 March 1981) to 5 (11 June 1984), should not be construed as constitutive of voluntary employer practice, which cannot now be
unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced over a long period of time, and must be
shown to have been consistent and deliberate . . . The test of long practice has been enunciated thus:
. . . Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are not covered by the
law requiring payment of holiday pay." (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, 94 SCRA 270 [1979])
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the Wage Orders. It was only
when the Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a formula for the conversion of the daily allowance to
its monthly equivalent was laid down.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law . . .
In the above quoted case, the grant by the employer of benefits through an erroneous application of the law due to absence of clear administrative
guidelines is not considered a voluntary act which cannot be unilaterally discontinued. Such is not the case now. In the case at bar, the Court of
Appeals is correct when it pointed out that as early as 1981, this Court has held in San Miguel Corporation vs. Inciong8 that:
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 Instruction 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 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 petitioner’s 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.
IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001 and its
Resolution dated 06 March 2002 are hereby AFFIRMED.
SO ORDERED.
REYNALDO TIANGCO and VICTORIA TIANGCO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the Ministry of Labor and Employment, AURELIO ILUSTRISIMO, ABRAHAM
GILBUENA, ROGELIO CARABIO, JESUS GILBUENA, PEPITO GILBUENA, DOMINADOR LASERNA, CLEMENTE VILLARUEL, RUSTOM
OFQUERIA, ERNESTO DIONG, GRACIANO DURANA, AGUEDO MARABE, SOLOMON CLARIN, ALCAFONE ESGANA, JUAN CASTRO,
ANTONIO GILBUENA, GREGORIO LAYLAY, DANIEL CABRERA, ROBERTO BAYON-ON, ELIAS ESCARAN, ERNESTO BATOY, EDDIE
BATOBALANOS, TOMAS CAPALAR, JUAN GIHAPON, JOSE OFQUERIA, FRUTO GIHAPON, PEPITO BATOY, and SERAFIO
YADAWON, respondents.
Florencio Pineda for petitioners.
The Solicitor General for respondents.

CONCEPCION, JR., J.:

Petition for certiorari and prohibition, with preliminary injunction and/or restraining order, to annul and set aside the order of the respondent Deputy
Minister of Labor which modified and affirmed the order of Director of the National Capitol Region of the Ministry of Labor directing the petitioners to
pay the private respondents their legal holiday pay, service incentive pay, and differentials in their emergency cost of living allowances.
The petitioner, Reynaldo Tiangco, is a fishing operator who owns the Reynaldo Tiangco Fishing Company and a fleet of fishing vessels engaged in
deep-sea fishing which operates from Navotas, Rizal. His business is capitalized at P2,000,000.00, 1 while the petitioner, Victoria Tiangco, is a fish
broker whose business is capitalized at P100,000.00.2
The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom Ofqueria, Ernesto Diong, Jesus
Gilbuena, Clemente (Emerenciano) Villaruel, Dominador Lacerna, and Graciano Durana, are batillos engaged by the petitioner Reynaldo Tiangco
to unload the fish catch from the vessels and take them to the Fish Stall of the petitioner Victoria Tiangco. The private respondents, Eddie
Batobalanos, Aguedo Marabe, Gregorio Laylay, Fruto Gihapon, Solomon Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan Castro,
Alcafone Esgana, Tomas Capalar, Antonio Gilbuena, Ernesto Batoy, Serafio Yadawon, Juan Gihapon, Elias Escaran and Roberto Bayon-on, were
batillos engaged by Victoria Tiangco. 3 The work of these batillos were limited to days of arrival of the fishing vessels and their working days in a
month are comparatively few. Their working hours average four (4) hours a day.
On April 8, 1980, the private respondents filed a complaint against the petitioners with the Ministry of Labor and Employment for non-payment of
their legal holiday pay and service incentive leave pay, as well as underpayment of their emergency cost of living allowances which used to be paid
in full irrespective of their working days, but which were reduced effective February, 1980, in contravention of Article 100 of the new Labor Code
which prohibits the elimination or diminution of existing benefits. 4
The petitioners denied the laborers' contention, claiming that the laborers were all given, in addition to their regular daily wage, a daily extra pay in
amounts ranging from 30 centavos to 10 pesos which are sufficient to offset the laborers' claim for service incentive leave and legal holiday pay. As
regards the claim for emergency allowance differentials, the petitioners admitted that they discontinued their practice of paying their employees a
fixed monthly allowance, and effective February, 1980, they no longer paid allowances for non-working days. They argued, however, that no law
was violated as their refusal to pay allowances for non-working days is in consonance with the principle of "no work, no allowance"; and that they
could not pay private respondents a fixed monthly allowance without risking the viability of their business. 5
Resolving the case, the Director of the National Capitol Region of the Ministry of Labor and Employment ruled that the daily extra pay given to
private respondents was a ,'production incentive benefit", separate and distinct from the service incentive leave pay and legal holiday pay, payment
of which cannot be used to offset a benefit provided by law, and ordered the petitioners to pay the private respondents their service incentive leave
pay and legal holiday pay. However, he denied the laborers' claim for differentials in the emergency cost of living allowance for the reason that the
emergency cost of living allowance accrues only when the laborers actually work following the principle of "no work, no pay," and private
respondents are not entitled to a fixed monthly allowance since they work on a part time basis which average only four (4) days a week. The private
respondents should not be paid their allowances during non-working days. 6
From this order, both parties appealed.
On May 22, 1981, the respondent Deputy Minister of Labor and Employment modified the order and directed the petitioners to restore and pay the
individual respondents their fixed monthly allowance from March, 1980 and to pay them the amount of P58,860.00, as underpayment of their living
allowance from May, 1977 to February 21, 1980. 7
When their motion for the reconsideration of the above order was denied, the petitioners interposed the present recourse.
The petitioners claim that the respondent Deputy Minister of Labor and Employment acted in excess of jurisdiction, or with grave abuse of
discretion in ordering them to pay the private respondents a fixed monthly allowance from March, 1980, despite the "no work, no pay," law; the
private respondents' consent to receive an allowance for days worked for, as stated in their appeal; and the findings of the Director of the National
Capitol Region that private respondents work for other employers and are part-time employees of the petitioners.
Indeed, the record shows that the private respondents work for the petitioners on a part-time basis and their work average only four (4) days a
week. It is not also disputed that the private respondents work for more than one employer so that the private respondents should be paid their
living allowance only for the days they actually worked in a week or month and all the employers of the employee shall share proportionately in the
payment of the allowance of the employee. Section 12 of the Rules and Regulations implementing P.D. 525 which made mandatory the payment of
emergency cost of living allowances to workers in the private section, provides, as follows:
Section 12. Allowance on Daily Paid & Part — Time employees. — Employees who are paid on a daily basis shall be paid their
allowances for the number of days they actually worked in a week or month, on the basis of the scales provided in Section 7
hereof.
In case of part-time employment, the allowances shall be paid in the amount proportionate to the time worked by the employee,
or higher. If employed by more than one employer, all employers of such employee shall share proportionately in the payment of
the allowance of the employee.
Section 11 of the Rules implementing P.D. 1123, increasing the emergency allowance under P.D. 525, also provides, as follows:
Section 11. Allowances of full-time and part-time employees. — Employees shall be paid in full the monthly allowances on the
basis of the scales provided in Section 3 hereof, regardless of the number of their regular working days, if they incur no absence
during the month. If they incur absences, the amounts corresponding to their absences may be deducted from the monthly
allowance.
In case of part-time employment, the allowance to be paid shall be proportionate to the time worked by the employee. This
requirement shall apply to any employee with more than one employer.
However, the respondent Deputy Minister of Labor and Employment correctly ruled that since the petitioners had been paying the private
respondents a fixed monthly emergency allowance since November, 1976 up to February, 1980, as a matter of practice and/or verbal agreement
between the petitioners and the private respondents, the discontinuance of the practice and/or agreement unilaterally by the petitioners
contravened the provisions of the Labor Code, particularly Article 100 thereof which prohibits the elimination or diminution of existing benefits.
Section 15 of the Rules on P.D. 525 and Section 16 of the Rules on P. D. 1123 also prohibits the diminution of any benefit granted to the
employees under existing laws, agreements, and voluntary employer practice. Section 15 of the Rules on P.D. 525 provides, as follows:
Section 15. Relation to Agreement. — Nothing herein shall prevent the employer and his employees from entering into any
agreement with terms more favorable to the employees than those provided therein, or be construed to sanction the diminution
of any benefit granted to the employees under existing laws, agreements, and voluntary employer practice.
Section 16 of the Rules on P.D. 1123 similarly prohibits diminution of benefits. It provides, as follows:
Section 16. Relation to other agreements. — Nothing herein shall prevent employers from granting allowances to their
employees in excess of those provided under the Decree and the Rules nor shall it be construed to countenance any reduction
of benefits already being enjoyed.
The petitioners further claim that the respondent Deputy Minister of Labor and Employment erred in ordering them to pay the amount of P58,860.00
to the private respondents as underpayment of respondents' allowances from May, 1977 to February 20, 1980. The petitioners contend that the
emergency cost of living allowances of the private respondents had been paid in full.
We find no merit in the contention. However, a revision of the amount due the private respondents is in order for the reason that the respondent
Deputy Minister of Labor and Employment failed to take into consideration, in computing the amount due each worker, the fact that the private
respondents are employed by two different individuals whose businesses are divergent and capitalized at various amounts, contrary to the
provisions of P.D. 525 and subsequent amendatory decrees, wherein the amount of the emergency cost of living allowance to be paid to a worker
is made to depend upon the capitalization of the business of his employer or its total assets, whichever is higher. Thus, Section 7 of the Rules and
Regulations implementing P.D. 525 reads, as follows:
Section 7. Amount of Allowances. — Every covered employer shall give to each of his employees who is receiving less than
P600.00 a month not less than the following allowances;
(a) P50.00 where the authorized capital stock or total assets, whichever is applicable and higher, is 71 million or more;
(b) P30.00 where the authorized capital stock or total assets, whichever is applicable and higher is at least P100,000.00 but less
than P 1miilion and
(c) P15.00 where the authorized capital stock or total assets, whichever is applicable and higher, is less than P100,000.00.
Nothing herein shall prevent employers from granting allowances to their employees who will receive more than P600.00 a
month, including the allowances. An employer, however, may grant his employees an allowance which if added to their monthly
salary, will not yield to them more than P600.00 a month.
In this case, the private respondents admit that only ten (10) of them, namely: Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham
Gilbuena, Rustom Ofquiera, Ernesto Diong, Jesus Gilbuena, Emerenciano Villaruel, Dominador Lacerna, and Graciano Durana, were employees of
the petitioner Reynaldo Tiangco, while the remaining seventeen (17) were employed by the petitioner Victoria Tiangco. 8 Accordingly, the workers of
the petitioner Victoria Tiangco, whose business as fish broker is capitalized at P100,000.00, 9 should receive a lesser amount of allowance (P30.00)
than those workers employed by the petitioner Reynaldo Tiangco whose business, as a fishing operator with a fleet of fishing vessels, is capitalized
at more than P2,000,000.00, and are entitled to receive a fixed monthly allowance of P50.00 a month, each.
After P.D. 525, the following amendatory decrees, directing the payment of additional allowances to employees, were promulgated:
1. P.D. 1123. providing for an across-the-board increase of P60.00 a month effective May 1, 1977;
2. P.D. 1614, which directed the payment of P60.00 monthly allowance effective April 1, 1979;
3. P.D. 1634, which provided for the payment of an additional P60.00 a month effective September 1, 1979, and another P30.00
a month beginning January 1, 1980; and
4. P.D. 1678,which directed the payment of an additional P2.00 a day from February 21, 1980.
Hence, for the period from November, 1976 to April 30, 1977, the petitioner Victoria Tiangco should pay her workers a fixed monthly allowance of P
30.00, while the workers of the petitioner Reynaldo Tiangco were entitled to a fixed monthly allowance of P50.00, each. The record shows that
during this period, the petitioner Victoria Tiangco was paying her workers a monthly allowance of P30.00 each. 10 Accordingly, there was no
underpayment for this period insofar as her batillos are concerned. The petitioner Reynaldo Tiangco, however, paid his employees P30.00, instead
of P50.00, as mandated by law. 11 Therefore, there was an underpayment of P20.00 a month for each batillo under his employ. For the 6-month
period, he should pay his workers differentials in the amount of P120.00 each.
For the period from May, 1977 to March 1979, the workers of the petitioner Victoria Tiangco were entitled to a fixed monthly allowance of P90.00 in
view of the promulgation of P.D. 1123 which granted an across-the-board increase of P60.00 a month in their allowances. For this period, however,
the said petitioner paid her workers only P60.00 a month, or a difference of P30.00 a month. 12 There was, therefore, an underpayment of P690.00
for every batillo under her employ for the 23-month period.
With the addition of P60.00 across-the-board increase in their allowances, the workers of the petitioner Reynaldo Tiangco were entitled to receive a
fixed monthly allowance of P110.00. However, the record shows that his workers were only paid P60.00 a month, 13 or a difference of P50.00 a
month. Consequently, each batillo hired by him should be paid a differential of P1,150.00 for the 23-month period.
For the period from April, 1979 to August, 1979, the employees of the petitioner Victoria Tiangco were entitled to a fixed monthly allowance of
P150.00 while the workers employed by the petitioner Reynaldo Tiangco were entitled to an allowance of P170.00, pursuant to P.D. 1614. The
record shows, however, that both petitioners paid their workers only P120.00 a month. 14 There was a difference of P30.00 a month in the case of
the petitioner Victoria Tiangco, and P50.00, a month, in the case of the petitioner Reynaldo Tiangco. Hence, for this period, the petitioner Victoria
Tiangco should pay the amount of P150.00 to each batillo in her employ, while the petitioner Reynaldo Tiangco should pay the amount of P250.00,
as differentials in the cost of living allowances of the workers under his employ.
Upon the promulgation of P.D. 1634, directing the payment of an additional P60.00 a month effective September, 1979 and another P30.00
effective January 1, 1980, the workers of the petitioner Victoria Tiangco were entitled to receive a fixed monthly allowance of P210.00 a month from
September, 1979, and P340.00, a month beginning January, 1980. The workers of the petitioner Reynaldo Tiangco, upon the other hand, were
entitled to a monthly allowance of P230.00, effective September, 1979, and P260.00, a month beginning January, 1980. The record shows,
however, that both petitioners paid their workers the amounts of P180.00 a month for the months of September to December, 1979, 15 and P210.00
a month for the months of January and February, 1980. 16 There was underpayment, therefore, in the allowances of the workers of the petitioner
Victoria Tiangco in the amount of P30.00, a month, for the months of September, 1979 to February, 1980, or P180.00 for each batillo in her employ.
The private respondents hired by the petitioner Reynaldo Tiangco, upon the other hand, are entitled to differentials in the amount of P50.00 a
month for the same period, or P300.00 each.
Then, beginning February, 21, 1980, the workers should be paid an additional P2.00, a day, pursuant to P.D. 1678. The record shows that the
petitioners had complied with this requirement. 17 The petitioners, however, failed to pay the fixed monthly allowance of their workers which was
P240.00, in the case of the workers employed by the petitioner Victoria Tiangco, and P260.00, in the case of the workers of the petitioner Reynaldo
Tiangco. Thus, for the month of March, 1980, the petitioner Victoria Tiangco paid her workers varying amounts, the lowest of which was P30.00,
paid to Eddie Batobalanos and Fruto Gihapon, and the highest of which was P210.00, paid to Juan Gihapon and Roberto Bayonon. 18 Hence, there
was underpayment in their emergency cost of living allowances. But, since, the respondents employed by Victoria Tiangco are wining to accept
P50.00 a month as differentials for the months of March, 1980 to May, 1980, 19 the workers employed by her should be paid P50.00, each, for the
month of March, 1980, except Juan Gihapon and Roberto Bayon-on who should be paid P30.00, each, for the said month, having received the
amount of P210.00, each as allowance for that month.
For the month of April, 1980, the workers of the petitioner, Victoria Tiangco, were paid varying amounts ranging from P120.00 to P210.00. 20 Hence,
there was also underpayment in their allowances. Accordingly, they should be paid the amount of P50.00, each, except for Juan Gihapon, Antonio
Gilbuena, Juan Castro, and Aguedo Marabe, who should be paid P40.00, each, and Solomon Clarin, Daniel Cabrera, and Gregorio Laylay who
should be paid P30.00 each.
For the month of May, 1980, the petitioner Victoria Tiangco, paid her workers varying amounts less that what was provided for by law. 21 Hence,
they should be paid the amount of P50.00, each, for this month.
The petitioner, Reynaldo Tiangco, also paid the employees varying amounts, ranging from P210.00 to P250.00, as emergency cost of living
allowance, for the month of March, 22, 1980. 22 Since they were entitled to a fixed monthly allowance of P260.00, each, there was underpayment in
their cost of living allowances. Accordingly, the petitioner should pay the respondent Pepito Gilbuena the amount of P50.00; the respondents
Dominador Lacerna and Graciano Durano, the amount of P40.00, each; the respondent Ernesto Diong, the amount of P30.00; the respondents
Rustom Ofqueria and Aurelio Ilustrisimo, the amount of P20.00, each; and the respondents Abraham Gilbuena, Jesus Gilbuena, Rogelio Carabio,
and Emerenciano Villaruel, the amount of P10.00 each.
For the month of April, 1980, the workers of the petitioner Reynaldo Tiangco, were not also paid their emergency cost of living allowance in
full. 23 Hence, the said petitioner should pay his workers the amount of P30.00 each, except for Pepito Gilbuena, who should be paid the amount of
P50.00, and Rustom Ofqueria, Jesus Gilbuena, and Graciano Durano, who are entitled to only P40.00 each.
The petitioner, Reynaldo Tiangco did not also pay his workers their full cost of living allowance for the month of May, 1980. The workers were paid
varying amounts of P130.00 to P150.00, instead of P260.00, as required by law. 24 Hence, they should be paid the amunt of P50.00 each for the
month of May, 1980.
WHEREFORE, the petitioners Victoria Tiangco and Reynaldo Tiangco should be, as they are hereby, ordered to PAY the private respondents the
following amounts as differentials in their emergency cost of living allowance:
Petitioner Victoria Tiangco:
1. Eddie Pl,170.00
Batobalanos.............

2. Aguedo 1,160.00
Morabe.................

3. Gregorio 1,150.00
Laylay..................

4. Fruto 1,170.00
Gihapon.....................

5. Solomon 1,150.00
Clarin ...................

6. Pepito 1,170.00
Batoy........................

7. Jose 1,170.00
Ofqueria.......................

8. Daniel 1,150.00
Cabrera.....................

9. Juan 1,160.00
Castro..........................

10. Alcafone 1,170.00

Esgana.................

11. Tomas 1,170.00

Capalar ....................

12. Antonio 1,160.00

Gilbuena................

13. Ernesto 1,170.00

Batoy......................

14. Serapio 1,150.00

Yadawon................

15. Juan 1,140.00

Gihapon.......................

16. Elias 1,150.00

Escaran ......................
 17. Roberto Bayon- 1,130.00
on..............
Petitioner Reynaldo Tiangco:
1. Aurelio P
Ilustrisimo............ l,920.00

2. Pepito 1,970.00
Gilbuena.................

3. Rogelio 1,910.00
Carabio.................

4. Abraham 1,910.00
Gilbuena.............

5. Rustom 1,930.00
Ofqueria................

6. Ernesto 1,930.00
Diong....................

7. Jesus 1,920.00
Gilbuena...................

8. Emerenciano 1,910.00
Villaruel........

9. Dominador 1,940.00
Lacerna............

10. Graciano 1,950.00

Durano.................
With this modification, the judgment appealed from is AFFIRMED in all other respects. With costs against the petitioners.
SO ORDERED.

GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and JESUS SANTIAGO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY EMPLOYEES UNION and EDA CONCEPCION, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners.
Edwin D. Dellaban for private respondents.

MELENCIO-HERRERA, J.:
A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin respondents from enforcing the Decision of 10 March 1986 of the National Labor Relations Commission (NLRC), in
NCR Case No. 1-168-85 entitled "FFW-Globe Mackay Employees Union, et al., vs. Globe Mackay Cable & Radio Corporation, et al.," the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE and another one issued:
1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of cost-of-living allowance;
2. Ordering respondents-appellees to pay complainants-appellants their back allowances reckoned from the time of illegal
deduction; and
3. Ordering respondents-appellees from further illegally deducting the allowances of complainants-appellants.
SO ORDERED.
Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while Commissioner Cleto T. Villaltuya dissented and voted to
affirm in toto the Labor Arbiter's Decision.
On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from enforcing the assailed Decision. On 2 September 1987,
we gave due course to the petition and required the submittal of memoranda, by the parties, which has been complied with.
The facts follow:
Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of non-agricultural workers in the private sector.
Petitioner corporation complied with the said Wage Order by paying its monthly-paid employees the mandated P3.00 per day COLA. However, in
computing said COLA, Petitioner Corporation multiplied the P 3.00 daily COLA by 22 days, which is the number of working days in the company.
Respondent Union disagreed with the computation of the monthly COLA claiming that the daily COLA rate of P3.00 should be multiplied by 30 days
to arrive at the monthly COLA rate. The union alleged furthermore that prior to the effectivity of Wage Order No. 6, Petitioner Corporation had been
computing and paying the monthly COLA on the basis of thirty (30) days per month and that this constituted an employer practice, which should not
be unilaterally withdrawn.
After several grievance proceedings proved futile, the Union filed a complaint against Petitioner Corporation, its President, F. White, and Vice-
President, J. Santiago, for illegal deduction, underpayment, unpaid allowances, and violation of Wage Order No. 6. Petitioners White and Santiago
were sought to be held personally liable for the money claims thus demanded.
Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding that since the individual petitioners acted in their
corporate capacity they should not have been impleaded; and that the monthly COLA should be computed on the basis of twenty two (22) days,
since the evidence showed that there are only 22 paid days in a month for monthly-paid employees in the company. His reasoning, inter alia, was
as follows:
To compel the respondent company to use 30 days in a month to compute the allowance and retain 22 days for vacation and
sick leave, overtime pay and other benefits is inconsistent and palpably unjust. If 30 days is used as divisor, then it must be used
for the computation of all benefits, not just the allowance. But this is not fair to complainants, not to mention that it will
contravene the provision of the parties' CBA.
On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner Corporation was guilty of illegal deductions, upon
the following considerations: (1) that the P3.00 daily COLA under Wage Order No. 6 should be paid and computed on the basis of thirty (30) days
instead of twenty-two (22) days since workers paid on a monthly basis are entitled to COLA on Saturdays, Sundays and legal holidays "even if
unworked;" (2) that the full allowance enjoyed by Petitioner Corporation's monthly-paid employees before the CBA executed between the parties in
1982 constituted voluntary employer practice, which cannot be unilaterally withdrawn; and (3) that petitioners White and Santiago were properly
impleaded as respondents in the case below.
Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.
We are constrained to reverse the reversal.
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:
Section 5. Allowance for Unworked Days.
All covered employees shall be entitled to their daily living allowance during the days that they are paid their basic wage, even if
unworked. (Emphasis supplied)
The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In other words, the payment of COLA is mandated
only for the days that the employees are paid their basic wage, even if said days are unworked. So that, on the days that employees are not paid
their basic wage, the payment of COLA is not mandated. As held in University of Pangasinan Faculty Union vs. University of Pangasinan, L-63122,
February 20, 1984, 127 SCRA 691):
... it is evident that the intention of the law is to grant ECOLA upon the payment of basic wages. Hence, we have the principle of
'No Pay, No ECOLA.
Applied to monthly-paid employees if their monthly salary covers all the days in a month, they are deemed paid their basic wages for all those days
and they should be entitled to their COLA on those days "even if unworked," as the NLRC had opined. Peculiar to this case, however, is the
circumstance that pursuant to the Collective Bargaining Agreement (CBA) between Petitioner Corporation and Respondent Union, the monthly
basic pay is computed on the basis of five (5) days a week, or twenty two (22) days a month. Thus, the pertinent provisions of that Agreement read:
Art. XV(a)—Eight net working hours shall constitute the regular work day for five days.
Art. XV(b)—Forty net hours of work, 5 working days, shall constitute the regular work week.
Art. XVI, Sec. 1(b)—All overtime worked in excess of eight net hours daily or in excess of 5 days weekly shall be computed on
hourly basis at the rate of time and one half.
The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for purposes of computing overtime pay, the monthly
wage is divided by the number of actual work days in a month and then, by eight (8) working hours. If a monthly-paid employee renders overtime
work, he is paid his basic salary rate plus one-half thereof. For example, after examining the specimen payroll of employee Jesus L. Santos, the
Labor Arbiter found:
the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base pay plus 50% premium. This is over and
above his monthly basic pay as supported by the fact that base pay was paid. If the 6th and 7th days of the week are deemed
paid even if unworked and included in the monthly salary, Santos should not have been paid his base pay for Saturday and
Sunday but should have received only the 50% overtime premium.
Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that in computing the vacation and sick leaves of
the employees, Petitioner Corporation consistently used twenty-two (22) days.
Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work week, it will have to be held that the COLA
should be computed on the basis of twenty two (22) days, which is the period during which the monthly-paid employees of Petitioner Corporation
receive their basic wage. The CBA is the law between the parties and, if not acceptable, can be the subject of future re-negotiation.
2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in compliance with Wage Orders Nos. 1 (26
March 1981) to 5 (11 June 1984), should not be construed as constitutive of voluntary employer practice, which cannot now be unilaterally
withdrawn by petitioner. To be considered as such, it should have been practiced over a long period of time, and must be shown to have been
consistent and deliberate. Adequate proof is wanting in this respect. The test of long practice has been enunciated thus:
... Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are not covered by the
law requiring payment of holiday pay.' (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, L-50568, November 7, 1979,
94 SCRA 270). (Emphasis ours)
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the Wage Orders. It was only when the
Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a formula for the conversion of the daily allowance to its monthly
equivalent was laid down, thus:
Section 3. Application of Section 2--
xxx xxx xxx
(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678 and 1713:
xxx xxx xxx
(3) For workers who do not work and are not considered paid on Saturdays and Sundays:
P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)
As the Labor Arbiter had analyzed said formula:
Under the aforecited formula/guideline, issued for the first time, when applied to a company like respondent which observes a 5-
day work week (or where 2 days in a week, not necessarily Saturday and Sunday, are not considered paid), the monthly
equivalent of a daily allowance is arrived at by multiplying the daily allowance by 262 divided by 12. This formula results in the
equivalent of 21.8 days in a month.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law. Payment may be said to have
been made by reason of a mistake in the construction or application of a "doubtful or difficult question of law." (Article 2155, 1 in relation to Article
2154 2 of the Civil Code). Since it is a past error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit
under Article 100 of the Labor Code3 may be said to have resulted by virtue of the correction.
With the conclusions thus reached, there is no further need to discuss the liability of the officers of Petitioner Corporation.
WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission, dated 10 March 1986, is SET ASIDE, and the
Decision of the Labor Arbiter, dated 9 May 1985, is hereby REINSTATED. The Temporary Restraining Order heretofore issued is hereby made
permanent.
SO ORDERED.
TSPIC CORPORATION, petitioner,
vs.
TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY DURIAS,1 CLAIRE EVELYN VELEZ, JANICE
OLAGUIR, JERICO ALIPIT, GLEN BATULA, SER JOHN HERNANDEZ, RACHEL NOVILLAS, NIMFA ANILAO, ROSE SUBARDIAGA,
VALERIE CARBON, OLIVIA EDROSO, MARICRIS DONAIRE, ANALYN AZARCON, ROSALIE RAMIREZ, JULIETA ROSETE, JANICE NEBRE,
NIA ANDRADE, CATHERINE YABA, DIOMEDISA ERNI,2 MARIO SALMORIN, LOIDA COMULLO,3 MARIE ANN DELOS SANTOS,4 JUANITA
YANA, and SUZETTE DULAY, respondents.
DECISION
VELASCO, JR., J.:
The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor should always govern dealings between labor
and management. Seemingly conflicting provisions should be harmonized to arrive at an interpretation that is within the parameters of the law,
compassionate to labor, yet, fair to management.
In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to annul and set aside the October 22, 2003
Decision5 and April 23, 2004 Resolution6 of the Court of Appeals (CA) in CA-G.R. SP No. 68616, which affirmed the September 13, 2001
Decision7 of Accredited Voluntary Arbitrator Josephus B. Jimenez in National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57.
TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve the communication, automotive, data
processing, and aerospace industries. Respondent TSPIC Employees Union (FFW) (Union), on the other hand, is the registered bargaining agent
of the rank-and-file employees of TSPIC. The respondents, Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir,
Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire,
Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo,
Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, are all members of the Union.
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)8 for the years 2000 to 2004. The CBA included a provision on
yearly salary increases starting January 2000 until January 2002. Section 1, Article X of the CBA provides, as follows:
Section 1. Salary/ Wage Increases.––Employees covered by this Agreement shall be granted salary/wage increases as follows:
a) Effective January 1, 2000, all employees on regular status and within the bargaining unit on or before said date shall be
granted a salary increase equivalent to ten percent (10%) of their basic monthly salary as of December 31, 1999.
b) Effective January 1, 2001, all employees on regular status and within the bargaining unit on or before said date shall be
granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of December 31, 2000.
c) Effective January 1, 2002, all employees on regular status and within the bargaining unit on or before said date shall be
granted a salary increase equivalent to eleven percent (11%) of their basic monthly salary as of December 31, 2001.
The wage salary increase of the first year of this Agreement shall be over and above the wage/salary increase, including the wage
distortion adjustment, granted by the COMPANY on November 1, 1999 as per Wage Order No. NCR-07.
The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases under
future Wage Orders, that may be issued after Wage Order No. NCR-07, and shall be considered as correction of any wage distortion that
may have been brought about by the said future Wage Orders. Thus the wage/salary increases in 2001 and 2002 shall be deemed as
compliance to future wage orders after Wage Order No. NCR-07.
Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary. Accordingly, the
following nine (9) respondents (first group) who were already regular employees received the said increase in their salary: Maria Fe Flores, Fe
Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, and Rachel Novillas.9
The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a particular salary increase
shall receive a proportionate part of the increase upon attainment of their regular status. Sec. 2 of the CBA provides:
SECTION 2. Regularization Increase.––A covered daily paid employee who acquires regular status within the year subsequent to the
effectivity of a particular salary/wage increase mentioned in Section 1 above shall be granted a salary/wage increase in proportionate
basis as follows:
Regularization Period Equivalent Increase
- 1st Quarter 100%
- 2nd Quarter 75%
- 3 Quarter
rd 50%
- 4 Quarter
th 25%
Thus, a daily paid employee who becomes a regular employee covered by this Agreement only on May 1, 2000, i.e., during the second
quarter and subsequent to the January 1, 2000 wage increase under this Agreement, will be entitled to a wage increase equivalent to
seventy-five percent (75%) of ten percent (10%) of his basic pay. In the same manner, an employee who acquires regular status on
December 1, 2000 will be entitled to a salary increase equivalent to twenty-five percent (25%) of ten percent (10%) of his last basic pay.
On the other hand, any monthly-paid employee who acquires regular status within the term of the Agreement shall be granted
regularization increase equivalent to 10% of his regular basic salary.
Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order No. NCR-0810 (WO
No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary
employees, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta
Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and
Suzette Dulay (second group), were increased to PhP 250.00 effective November 1, 2000.
On various dates during the last quarter of 2000, the above named 17 employees attained regular employment11 and received 25% of 10% of their
salaries as granted under the provision on regularization increase under Article X, Sec. 2 of the CBA.
In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first group), who were senior
to the above-listed recently regularized employees, received less wages.
On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPIC’s Human Resources Department notified 24
employees,12 namely: Maria Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen Batula, Claire Evelyn Velez,
Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta
Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, and Marie Ann Delos Santos, that due to an
error in the automated payroll system, they were overpaid and the overpayment would be deducted from their salaries in a staggered basis, starting
February 2001. TSPIC explained that the correction of the erroneous computation was based on the crediting provision of Sec. 1, Art. X of the
CBA.
The Union, on the other hand, asserted that there was no error and the deduction of the alleged overpayment from employees constituted
diminution of pay. The issue was brought to the grievance machinery, but TSPIC and the Union failed to reach an agreement.
Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or not the acts of the management in
making deductions from the salaries of the affected employees constituted diminution of pay.
On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction made by TSPIC violated Art. 10013 of the
Labor Code. The fallo reads:
WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence, judgment is hereby rendered in favor of the
Union and the named individual employees and against the company, thereby ordering the [TSPIC] to pay as follows:
1) to the sixteen (16) newly regularized employees named above, the amount of P12,642.24 a month or a total of P113,780.16
for nine (9) months or P7,111.26 for each of them as well as an additional P12,642.24 (for all), or P790.14 (for each), for every
month after 30 September 2001, until full payment, with legal interests for every month of delay;
2) to the nine (9) who were hired earlier than the sixteen (16); also named above, their respective amount of entitlements,
according to the Union’s correct computation, ranging from P110.22 per month (or P991.98 for nine months) to P450.58 a month
(or P4,055.22 for nine months), as well as corresponding monthly entitlements after 30 September 2001, plus legal interests
until full payment,
3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as corresponding monthly entitlements after 30
September 2001, plus legal interest until full payment,
4) Attorney’s fees equal to 10% of all the above monetary awards.
The claim for exemplary damages is denied for want of factual basis.
The parties are hereby directed to comply with their joint voluntary commitment to abide by this Award and thus, submit to this Office
jointly, a written proof of voluntary compliance with this DECISION within ten (10) days after the finality hereof.
SO ORDERED.14
TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001.
Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP No. 68616. The appellate court, through its
October 22, 2003 Decision, dismissed the petition and affirmed in toto the decision of the voluntary arbitrator. The CA declared TSPIC’s
computation allowing PhP 287 as daily wages to the newly regularized employees to be correct, noting that the computation conformed to WO No.
8 and the provisions of the CBA. According to the CA, TSPIC failed to convince the appellate court that the deduction was a result of a system error
in the automated payroll system. The CA explained that when WO No. 8 took effect on November 1, 2000, the concerned employees were still
probationary employees who were receiving the minimum wage of PhP 223.50. The CA said that effective November 1, 2000, said employees
should have received the minimum wage of PhP 250. The CA held that when respondents became regular employees on November 29, 2000, they
should be allowed the salary increase granted them under the CBA at the rate of 25% of 10% of their basic salary for the year 2000; thereafter, the
12% increase for the year 2001 and the 10% increase for the year 2002 should also be made applicable to them.15
TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23, 2004 Resolution.
TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPIC’s decision to deduct the alleged overpayment from
the salaries of the affected members of the Union constitute diminution of benefits in violation of the Labor Code?
TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by the CA, was flawed, inasmuch as it completely
disregarded the "crediting provision" contained in the last paragraph of Sec. 1, Art. X of the CBA.
We find TSPIC’s contention meritorious.
A Collective Bargaining Agreement is the law between the parties
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its
provisions.16 We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization and the employer
concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a
CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the
parties and compliance therewith is mandated by the express policy of the law. 17
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of
their stipulations shall control.18 However, sometimes, as in this case, though the provisions of the CBA seem clear and unambiguous, the parties
sometimes arrive at conflicting interpretations. Here, TSPIC wants to credit the increase granted by WO No. 8 to the increase granted under the
CBA. According to TSPIC, it is specifically provided in the CBA that "the salary/wage increase for the year 2001 shall be deemed inclusive of the
mandated minimum wage increases under future wage orders that may be issued after Wage Order No. 7." The Union, on the other hand, insists
that the "crediting" provision of the CBA finds no application in the present case, since at the time WO No. 8 was issued, the probationary
employees (second group) were not yet covered by the CBA, particularly by its crediting provision.
As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued.19 Littera necat spiritus vivificat. An instrument must
be interpreted according to the intention of the parties. It is the duty of the courts to place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and the purpose which it is intended to serve.20 Absurd and illogical interpretations should also
be avoided. Considering that the parties have unequivocally agreed to substitute the benefits granted under the CBA with those granted under
wage orders, the agreement must prevail and be given full effect.
Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective January 1, 2001, all employees on regular status
and within the bargaining unit on or before said date shall be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as
of December 31, 2000. The 12% salary increase is granted to all employees who (1) are regular employees and (2) are within the bargaining unit.
Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the increase in salary granted under WO No. 7 and
the correction of the wage distortion for November 1999.
The last paragraph, on the other hand, states the specific condition that the wage/salary increases for the years 2001 and 2002 shall be deemed
inclusive of the mandated minimum wage increases under future wage orders, that may be issued after WO No. 7, and shall be considered as
correction of the wage distortions that may be brought about by the said future wage orders. Thus, the wage/salary increases in 2001 and 2002
shall be deemed as compliance to future wage orders after WO No. 7.
Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It, however, clashes with the last paragraph which
specifically states that the salary increases for the years 2001 and 2002 shall be deemed inclusive of wage increases subsequent to those granted
under WO No. 7. It is a familiar rule in interpretation of contracts that conflicting provisions should be harmonized to give effect to all.21 Likewise,
when general and specific provisions are inconsistent, the specific provision shall be paramount to and govern the general provision.22 Thus, it may
be reasonably concluded that TSPIC granted the salary increases under the condition that any wage order that may be subsequently issued shall
be credited against the previously granted increase. The intention of the parties is clear: As long as an employee is qualified to receive the 12%
increase in salary, the employee shall be granted the increase; and as long as an employee is granted the 12% increase, the amount shall be
credited against any wage order issued after WO No. 7.
Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart crediting provision. They have received their
regularization increases under Art. X, Sec. 2 of the CBA and the yearly increase for the year 2001. They should not then be allowed to avoid the
crediting provision which is an accompanying condition.
Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the minimum wage, was issued after WO No. 7.
Thus, respondents rightfully received the 12% salary increase for the year 2001 granted in the CBA; and consequently, TSPIC rightfully credited
that 12% increase against the increase granted by WO No. 8.
Proper formula for computing the salaries for the year 2001
Thus, the proper computation of the salaries of individual respondents is as follows:
(1) With regard to the first group of respondents who attained regular employment status before the effectivity of WO No. 8, the computation is as
follows:
For respondents Jerico Alipit and Glen Batula:23
Wage rate before WO No. 8………………………… PhP 234.67
Increase due to WO No. 8
setting the minimum wage at PhP 250.……………... 15.33
Total Salary upon effectivity of WO No. 8…………. PhP 250.00
Increase for 2001 (12% of 2000 salary)…….....……. PhP 30.00
Less the wage increase under WO No. 8……………. 15.33
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8.. PhP 14.67
Wage rate by December 2000………………………. PhP 250.00
Plus total difference between the wage increase for 2001 and the
increase granted under WO No. 8…….. 14.67
Total (Wage rate range beginning January 1, 2001) PhP 264.67
For respondents Ser John Hernandez and Rachel Novillas:24
Wage rate range before WO No. 8………………….. PhP 234.68
Increase due to WO No. 8
setting the minimum wage at PhP 250……………… 15.32
Total Salary upon effectivity of WO No. 8.………… PhP 250.00
Increase for 2001 (12% of 2000 salary)…………….. PhP 30.00
Less the wage increase under WO No. 8…………… 15.32
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8… PhP 14.68
Wage rate by December 2000………………………. PhP 250.00
Plus total difference between the wage increase for 2001 and the
increase granted under WO No. 8…… 14.68
Total (Wage rate range beginning January 1, 2001) PhP 264.68
For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:25
Wage rate range before WO No. 8………….. PhP 240.26
Increase due to WO No. 8
setting the minimum wage at PhP 250……… 9.74
Total Salary upon effectivity of WO No. 8…. PhP 250.00
Increase for 2001 (12% of 2000 salary)…………… PhP 30.00
Less the wage increase under WO No. 8…………… 9.74
Total difference between the wage increase for 2001
and the increase granted under WO No. 8………… PhP 20.26
Wage rate by December 2000……………………… PhP 250.00
Plus total difference between the wage increase for 2001 and the
increase granted under WO No. 8…… 20.26
Total (Wage rate range beginning January 1, 2001) PhP 270.26
For respondents Ma. Fe Flores and Fe Capistrano:26
Wage rate range before WO No. 8…………… PhP 245.85
Increase due to WO No. 8
setting the minimum wage at PhP 250……….. 4.15
Total Salary upon effectivity of WO No. 8…... PhP 250.00
Increase for 2001 (12% of 2000 salary)…………… PhP 30.00
Less the wage increase under WO No. 8………......... 4.15
Total difference between the wage increase for 2001
and the increase granted under WO No. 8………… PhP 25.85
 Wage rate by December 2000……………………… PhP 250.00
Plus total difference between the wage increase for 2001 and the
increase granted under WO No. 8…… 25.85
Total (Wage rate range beginning January 1, 2001) PhP 275.85
(2) With regard to the second group of employees, who attained regular employment status after the implementation of WO No. 8, namely: Nimfa
Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia
Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, the proper
computation of the salaries for the year 2001, in accordance with the CBA, is as follows:
Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum wage before WO No. 8 from the minimum wage
per the wage order to arrive at the wage increase, thus:
Minimum Wage per Wage Order………….. PhP 250.00
Wage rate before Wage Order…………….. 223.50
Wage Increase………………………………. PhP 26.50
Upon attainment of regular employment status, the employees’ salaries were increased by 25% of 10% of their basic salaries, as provided for in
Sec. 2, Art. X of the CBA, thus resulting in a further increase of PhP 6.25, for a total of PhP 256.25, computed as follows:
Wage rate after WO No. 8………………………………. PhP 250.00
Regularization increase (25 % of 10% of basic salary) 6.25
Total (Salary for the end of year 2000)…………………. PhP 256.25
To compute for the increase in wage rates for the year 2001, get the increase of 12% of the employees’ salaries as of December 31, 2000; then
subtract from that amount, the amount increased in salaries as granted under WO No. 8 in accordance with the crediting provision of the CBA, to
arrive at the increase in salaries for the year 2001 of the recently regularized employees. Add the result to their salaries as of December 31, 2000
to get the proper salary beginning January 1, 2001, thus:
Increase for 2001 (12% of 2000 salary)………………... PhP 30.75
Less the wage increase under WO No. 8………………. 26.50
Difference between the wage increase
for 2001 and the increase granted under WO No. 8…… PhP 4.25
Wage rate after regularization increase………………... PhP 256.25
Plus total difference between the wage increase and
the increase granted under WO No. 8…………………. 4.25
Total (Wage rate beginning January 1, 2001)…………. PhP 260.50
With these computations, the crediting provision of the CBA is put in effect, and the wage distortion between the first and second group of
employees is cured. The first group of employees who attained regular employment status before the implementation of WO No. 8 is entitled to
receive, starting January 1, 2001, a daily wage rate within the range of PhP 264.67 to PhP 275.85, depending on their wage rate before the
implementation of WO No. 8. The second group that attained regular employment status after the implementation of WO No. 8 is entitled to receive
a daily wage rate of PhP 260.50 starting January 1, 2001.
Diminution of benefits
TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered deductions from their salaries does not
constitute diminution of benefits.
We agree with TSPIC.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is diminution of benefits
when it is shown that: (1) the grant or benefit is founded on a policy or has ripened into a practice over a long period; (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.27
As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error was immediately rectified by TSPIC upon
its discovery. We have ruled before that an erroneously granted benefit may be withdrawn without violating the prohibition against non-diminution of
benefits. We ruled in Globe-Mackay Cable and Radio Corp. v. NLRC:
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law. Payment may be said
to have been made by reason of a mistake in the construction or application of a "doubtful or difficult question of law". (Article 2155, in
relation to Article 2154 of the Civil Code). Since it is a past error that is being corrected, no vested right may be said to have arisen nor
any diminution of benefit under Article 100 of the Labor Code may be said to have resulted by virtue of the correction.28
Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the salary increase for the year 2001 against
the salary increase granted under WO No. 8, all in accordance with the CBA.
Hence, any amount given to the employees in excess of what they were entitled to, as computed above, may be legally deducted by TSPIC from
the employees’ salaries. It was also compassionate and fair that TSPIC deducted the overpayment in installments over a period of 12 months
starting from the date of the initial deduction to lessen the burden on the overpaid employees. TSPIC, in turn, must refund to individual respondents
any amount deducted from their salaries which was in excess of what TSPIC is legally allowed to deduct from the salaries based on the
computations discussed in this Decision.
As a last word, it should be reiterated that though it is the state’s responsibility to afford protection to labor, this policy should not be used as an
instrument to oppress management and capital.29 In resolving disputes between labor and capital, fairness and justice should always prevail. We
ruled in Norkis Union v. Norkis Trading that in the resolution of labor cases, we have always been guided by the State policy enshrined in the
Constitution: social justice and protection of the working class. Social justice does not, however, mandate that every dispute should be
automatically decided in favor of labor. In any case, justice is to be granted to the deserving and dispensed in the light of the established facts and
the applicable law and doctrine.30
WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National Conciliation and Mediation Board Case
No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in CA-G.R. SP No. 68616 are hereby AFFIRMED with MODIFICATION. TSPIC is
hereby ORDERED to pay respondents their salary increases in accordance with this Decision, as follows:
 Name of Employee Daily Wage Rate No. of Working No. of Months in Total Salary for
Days in a Month a Year 2001
Nimfa Anilao 260.5 26 12 81,276.00
Rose Subardiaga 260.5 26 12 81,276.00
Valerie Carbon 260.5 26 12 81,276.00
Olivia Edroso 260.5 26 12 81,276.00
Maricris Donaire 260.5 26 12 81,276.00
Analyn Azarcon 260.5 26 12 81,276.00
Rosalie Ramirez 260.5 26 12 81,276.00
Julieta Rosete 260.5 26 12 81,276.00
Janice Nebre 260.5 26 12 81,276.00
Nia Andrade 260.5 26 12 81,276.00
Catherine Yaba 260.5 26 12 81,276.00
Diomedisa Erni 260.5 26 12 81,276.00
Mario Salmorin 260.5 26 12 81,276.00
Loida Camullo 260.5 26 12 81,276.00
Marie Ann Delos Santos 260.5 26 12 81,276.00
Juanita Yana 260.5 26 12 81,276.00
Suzette Dulay 260.5 26 12 81,276.00
Jerico Alipit 264.67 26 12 82,577.04
Glen Batula 264.67 26 12 82,577.04
Ser John Hernandez 264.68 26 12 82,580.16
Rachel Novillas 264.68 26 12 82,580.16
Amy Durias 270.26 26 12 84,321.12
Claire Evelyn Velez 270.26 26 12 84,321.12
Janice Olaguir 270.26 26 12 84,321.12
Maria Fe Flores 275.85 26 12 86,065.20
Fe Capistrano 275.85 26 12 86,065.20
The award for attorney’s fees of ten percent (10%) of the total award is MAINTAINED.
SO ORDERED.

HINATUAN MINING CORPORATION AND/OR THE MANAGER, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MARGOT BATISTER, respondents.

PUNO, J.:
This case stemmed from a complaint filed by private respondent MARGOT BATISTER for separation pay with prayer for moral and exemplary
damages against her employer, petitioner HINATUAN MINING CORPORATION.
The records show that private respondent was employed by petitioner on July 20, 1981. She rose from the ranks to become the company's chief
chemist. Her duty was to examine and analyze the nickel content of ores in petitioner's mine site in Hinatuan, Talavera, Surigao del Norte, before
they are shipped to Japan.
In November and December, 1991, petitioner sent private respondent on a training grant to Japan to enhance her skills. Her training cost
P175,000.00. After the training, private respondent returned to the Philippines and resumed working for petitioner.
On January 25, 1993, a year after her training, private respondent tendered her resignation effective February 15, 1993. As reason therefor, she
declared that "the need to be with my family always compel me to take this action."1
Petitioner reminded private respondent that she had to stay with the company for three (3) more years in exchange for the expenses it incurred for
her training in Japan. Private respondent was unmoved. She proceeded with her resignation and asked for separation pay. Petitioner denied her
request and instead offered to give her financial assistance in the amount of P20,000.00.
Private respondent thus filed a complaint with the labor arbiter claiming separation pay and damages against petitioner. She alleged that pursuant
to the existing collective bargaining agreement (CBA) in the company, she could have availed of the optional retirement plan considering her eleven
and a half (11 1/2) years of continuous service, but she chose to resign since she would get a higher compensation in the form of separation pay.
She cited the cases of her former co-employees, Marcial P. Lor and Rizalino Alcantara, who were both given separation pay by petitioner despite
their voluntary resignation.
Petitioner opposed private respondent's claim for separation benefits on the grounds that: (1) the provisions regarding retirement or separation
benefits under the CBA do not apply to managerial officers and non-union members like private respondent; (2) private respondent is not entitled to
separation pay for she voluntarily resigned from service; (3) she did not comply with the 30-day advance notice when she tendered her resignation
on January 25, 1993, and; (4) petitioner spent P175,000.00 for her training in Japan and as per the company's policy, private respondent, as
beneficiary of a training grant, should work with the company for at least four (4) years.
In a Decision, dated August 10, 1993, Labor Arbiter Marissa Macaraig-Guiller dismissed the complaint and ruled that private respondent, as
resigning employee, is not entitled to severance benefits. She held that there was no company policy to this effect.2
Private respondent appealed to the National Labor Relations Commission and invoked a 1990 NLRC decision in the case of Rizalino Alcantara
v. Hinatuan Mining Corporation.3 In said case, Alcantara occupied the position of property officer when he voluntarily resigned from petitioner
company on July 30, 1988. He was thus a managerial employee and a non-union member (like private respondent) when his resignation took
effect. Alcantara demanded that he be paid the same severance benefits as given to former Administrative Manager Colonel Acuba and former
Resident Mine Manager Engineer Rogelio Bayutas, both of whom also voluntarily resigned from the company. When his request was denied,
Alcantara filed a complaint with the labor arbiter who ruled in his favor. Alcantara was awarded severance pay after finding that there was a
company practice to this effect. The NLRC affirmed this decision on appeal.
In line with its ruling in Alcantara, public respondent NLRC reversed the labor arbiter's decision and adjudged petitioner liable to private respondent
for the payment of: (1) separation pay (of P122,748.00) equivalent to one month salary per year of service; (2) attorney's fees equivalent to 10% of
the aforesaid monetary award or P12,274.00; and (3) moral and exemplary damages in the amount of P50,000.00 and P25,000.00, respectively.4
Petitioner's motion for reconsideration was denied. Hence this petition.
We affirm the judgment of public respondent NLRC, with modification.
It is well to note that there is no provision in the Labor Code which grants separation pay to voluntarily resigning employees. Separation pay may be
awarded only in cases when the termination of employment is due to: (a) installation of labor saving devices, (b) redundancy, (c) retrenchment, (d)
closing or cessation of business operations,5 (e) disease of an employee and his continued employment is prejudicial to himself or his co-
employees,6 or (f) when an employee is illegally dismissed but reinstatement is no longer feasible.7 In fact, the rule is that an employee who
voluntarily resigns from employment is not entitled in the separation pay,8 except when it is sanctioned by established employer practice of policy.9
In the case at bar, it has been shown beyond doubt that there is an established employer practice of awarding separation pay to resigning
employees. Private respondent is similarly situated as Alcantara who was also a managerial employee of petitioner company and a non-union
member when he voluntarily resigned from the service. Alcantara was awarded separation pay by the Labor Arbiter (which decision was affirmed
by the NLRC) after finding that the previous resigning officers of petitioner company (namely, Administrative Officer Colonel Acuba, Asst. Mine
Accountant Mr. Garrido, and Resident Mine Manager Engr. Rogelio Bayutas) were given separation pay. As correctly ruled by the NLRC, to hold
that private respondent is not entitled to separation pay would unduly discriminate against her.
Petitioner insists that private respondent's case is different for the other resigning managerial officers cited by private respondent did not undergo
training overseas immediately prior to their resignation.
We cannot subscribe to petitioner's contention. The records confirm that Resident Mine Manager Engr. Bayutas was also provided a training grant
in Japan but he resigned less than two (2) years after the completion of his training. Nonetheless, he was granted separation pay by petitioner
company. Moreover, petitioner itself admitted that unlike its other trainees, private respondent did not sign any contract binding herself to stay with
petitioner for four (4) years after undergoing the training. 10 Neither was it a company policy considering that, as discussed earlier, Engr. Bayutas,
likewise a beneficiary of a training grant, was allowed to resign two (2) years after his training. Thus, we see no valid reason why private
respondent's separation pay should be withheld from her.
However, as to the actual amount of separation pay, we find that the NLRC erred in computing the same at the rate of one (1) month pay for every
year of service. Private respondent does not dispute that the separation pay granted to previously resigned employees Marcial Lor and Rosario
Alcantara amounted only to one-half (1/2) month pay per year of service. Hence, following the same precedent, the computation of private
respondent's separation pay should be reduced to one-half (1/2) month pay for every year of service.
We also hold that the award of damages to private respondent is supported by evidence. Petitioner, without just and valid cause, unduly withheld
from private respondent her separation pay although it has previously granted the same to its resigning employees similarly situated as private
respondent.
IN VIEW WHEREOF, the impugned Decision of public respondent National Labor Relations Commission is AFFIRMED, with the MODIFICATION
that private respondent's separation pay should be computed at the rate of one-half (1/2) month pay for every year of service. The records of this
case are remanded to NLRC for recomputation of private public respondent separation pay. No Cost.
SO ORDERED.