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G.R. No.

144664 March 15, 2004


ASAN TRANSMSSON CORPORATON, petitioner,
vs.
The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROLAN
M. BACUNGAN as Voluntary Arbitrator, KSHN A. LALWAN, Union,
Union representative to the Panel Arbitrators; BSG NG ASAN
TRANSMSSON LABOR UNON (BATLU); HON. BENVENDO T.
LAGUESMA in his capacity as Secretary of Labor and Employment;
and DRECTOR CHTA G. CLNDRO in her capacity as Director of
Bureau of Working Conditions, respondents.
D E C S O N
CARPO-MORALES, J.:
Petitioner, Asian Transmission Corporation, seeks via
petition for certiorari under Rule 65 of the 1995 Rules of
Civil Procedure the nullification of the March 28, 2000
Decision
1
of the Court of Appeals denying its petition to
annul 1) the March 11, 1993 "Explanatory Bulletin"
2
of
the Department of Labor and Employment (DOLE)
entitled "Workers' Entitlement to Holiday Pay on April 9,
1993, Araw ng Kagitingan and Good Friday", which
bulletin the DOLE reproduced on January 23, 1998, 2)
the July 31, 1998 Decision
3
of the Panel of Voluntary
Arbitrators ruling that the said explanatory bulletin
applied as well to April 9, 1998, and 3) the September
18, 1998
4
Resolution of the Panel of Voluntary
Arbitration denying its Motion for Reconsideration.
The following facts, as found by the Court of Appeals,
are undisputed:
The Department of Labor and Employment (DOLE),
through Undersecretary Cresenciano B. Trajano, issued
an Explanatory Bulletin dated March 11, 1993 wherein it
clarified, inter alia, that employees are entitled to 200%
of their basic wage on April 9, 1993, whether unworked,
which[,] apart from being Good Friday [and, therefore, a
legal holiday], is also Araw ng Kagitingan [which is also
a legal holiday]. The bulletin reads:
"On the correct payment of holiday compensation on
April 9, 1993 which apart from being Good Friday is also
Araw ng Kagitingan, i.e., two regular holidays falling on
the same day, this Department is of the view that the
covered employees are entitled to at least two hundred
percent (200%) of their basic wage even if said holiday
is unworked. The first 100% represents the payment of
holiday pay on April 9, 1993 as Good Friday and the
second 100% is the payment of holiday pay for the same
date as Araw ng Kagitingan.
Said bulletin was reproduced on January 23, 1998, when
April 9, 1998 was both Maundy Thursday and Araw ng
Kagitingan x x x x
Despite the explanatory bulletin, petitioner [Asian
Transmission Corporation] opted to pay its daily paid
employees only 100% of their basic pay on April 9, 1998.
Respondent Bisig ng Asian Transmission Labor Union
(BATLU) protested.
n accordance with Step 6 of the grievance procedure of
the Collective Bargaining Agreement (CBA) existing
between petitioner and BATLU, the controversy was
submitted for voluntary arbitration. x x x x On July 31,
1998, the Office of the Voluntary Arbitrator rendered a
decision directing petitioner to pay its covered
employees "200% and not just 100% of their regular
daily wages for the unworked April 9, 1998 which covers
two regular holidays, namely, Araw ng Kagitignan and
Maundy Thursday." (Emphasis and underscoring
supplied)
Subject of interpretation in the case at bar is Article 94 of
the Labor Code which reads:
ART. 94. Right to holiday pay. - (a) Every worker shall
be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly
employing less than ten (10) workers;
(b) The employer may require an employee to work on
any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Year's
Day, Maundy Thursday, Good Friday, the ninth of April,
the first of May, the twelfth of June, the fourth of July, the
thirtieth of November, the twenty-fifth and thirtieth of
December and the day designated by law for holding a
general election,
which was amended by Executive Order No. 203 issued
on June 30, 1987, such that the regular holidays are
now:
1. New Year's Day January 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor
Day)
5. Labor Day May 1
6. ndependence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30
n deciding in favor of the Bisig ng Asian Transmission
Labor Union (BATLU), the Voluntary Arbitrator held that
Article 94 of the Labor Code provides for holiday pay for
every regular holiday, the computation of which is
determined by a legal formula which is not changed by
the fact that there are two holidays falling on one day,
like on April 9, 1998 when it was Araw ng Kagitingan and
at the same time was Maundy Thursday; and that that
the law, as amended, enumerates ten regular holidays
for every year should not be interpreted as authorizing a
reduction to nine the number of paid regular holidays
"just because April 9 (Araw ng Kagitingan) in certain
years, like 1993 and 1998, is also Holy Friday or Maundy
Thursday."
n the assailed decision, the Court of Appeals upheld the
findings of the Voluntary Arbitrator, holding that the
Collective Bargaining Agreement (CBA) between
petitioner and BATLU, the law governing the relations
between them, clearly recognizes their intent to consider
Araw ng Kagitingan and Maundy Thursday, on whatever
date they may fall in any calendar year, as paid legal
holidays during the effectivity of the CBA and that
"[t]here is no condition, qualification or exception for any
variance from the clear intent that all holidays shall be
compensated."
5

The Court of Appeals further held that "in the absence of
an explicit provision in law which provides for [a]
reduction of holiday pay if two holidays happen to fall on
the same day, any doubt in the interpretation and
implementation of the Labor Code provisions on holiday
pay must be resolved in favor of labor."
By the present petition, petitioners raise the following
issues:

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS
COMMTTED GRAVE ABUSE OF DSCRETON N ERRONEOUSLY
NTERPRETNG THE TERMS OF THE COLLECTVE BARGANNG
AGREEMENT BETWEEN THE PARTES AND SUBSTTUTNG TS
OWN JUDGMENT N PLACE OF THE AGREEMENTS MADE BY THE
PARTES THEMSELVES

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS
COMMTTED GRAVE ABUSE OF DSCRETON N HOLDNG THAT
ANY DOUBTS ABOUT THE VALDTY OF THE POLCES
ENUNCATED N THE EXPLANATORY BULLETN WAS LAD TO
REST BY THE RESSUANCE OF THE SAD EXPLANATORY
BULLETN

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS
COMMTTED GRAVE ABUSE OF DSCRETON N UPHOLDNG THE
VALDTY OF THE EXPLANATORY BULLETN EVEN WHLE
ADMTTNG THAT THE SAD BULLETN WAS NOT AN EXAMPLE
OF A JUDCAL, QUAS-JUDCAL, OR ONE OF THE RULES AND
REGULATONS THAT [Department of Labor and Employment] DOLE
MAY PROMULGATE
V
WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF
LABOR AND EMPLOYMENT (DOLE) BY SSUNG EXPLANATORY
BULLETN DATED MARCH 11, 1993, N THE GUSE OF PROVDNG
GUDELNES ON ART. 94 OF THE LABOR CODE, COMMTTED
GRAVE ABUSE OF DSCRETON, AS T LEGSLATED AND
NTERPRETED LEGAL PROVSONS N SUCH A MANNER AS TO
CREATE OBLGATONS WHERE NONE ARE NTENDED BY THE
LAW
V
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS
COMMTTED GRAVE ABUSE OF DSCRETON N SUSTANNG
THE SECRETARY OF THE DEPARTMENT OF LABOR N
RETERATNG TS EXPLANATORY BULLETN DATED MARCH 11,
1993 AND N ORDERNG THAT THE SAME POLCY OBTANED
FOR APRL 9, 1998 DESPTE THE RULNGS OF THE SUPREME
COURT TO THE CONTRARY
V
WHETHER OR NOT RESPONDENTS' ACTS WLL DEPRVE
PETTONER OF PROPERTY WTHOUT DUE PROCESS BY THE
"EXPLANATORY BULLETN" AS WELL AS EQUAL PROTECTON
OF LAWS
The petition is devoid of merit.
At the outset, it bears noting that instead of assailing the
Court of Appeals Decision by petition for review on
certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, petitioner lodged the present petition for
certiorari under Rule 65.
[S]ince the Court of Appeals had jurisdiction over the
petition under Rule 65, any alleged errors committed by
it in the exercise of its jurisdiction would be errors of
judgment which are reviewable by timely appeal and not
by a special civil action of certiorari. f the aggrieved
party fails to do so within the reglementary period, and
the decision accordingly becomes final and executory,
he cannot avail himself of the writ of certiorari, his
predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of
Appeals is a petition for review under Rule 45 and not a
special civil action under Rule 65 of the Rules of Court,
now Rule 45 and Rule 65, respectively, of the 1997
Rules of Civil Procedure. Rule 45 is clear that the
decisions, final orders or resolutions of the Court of
Appeals in any case, i.e., regardless of the nature of the
action or proceeding involved, may be appealed to this
Court by filing a petition for review, which would be but a
continuation of the appellate process over the original
case. Under Rule 45 the reglementary period to appeal
is fifteen (15) days from notice of judgment or denial of
motion for reconsideration.
x x x
For the writ of certiorari under Rule 65 of the Rules of
Court to issue, a petitioner must show that he has no
plain, speedy and adequate remedy in the ordinary
course of law against its perceived grievance. A remedy
is considered "plain, speedy and adequate" if it will
promptly relieve the petitioner from the injurious effects
of the judgment and the acts of the lower court or
agency. n this case, appeal was not only available but
also a speedy and adequate remedy.
6

The records of the case show that following petitioner's
receipt on August 18, 2000 of a copy of the August 10,
2000 Resolution of the Court of Appeals denying its
Motion for Reconsideration, it filed the present petition
for certiorari on September 15, 2000, at which time the
Court of Appeals decision had become final and
executory, the 15-day period to appeal it under Rule 45
having expired.
Technicality aside, this Court finds no ground to disturb
the assailed decision.
Holiday pay is a legislated benefit enacted as part of the
Constitutional imperative that the State shall afford
protection to labor.
7
ts purpose is not merely "to prevent
diminution of the monthly income of the workers on
account of work interruptions. n other words, although
the worker is forced to take a rest, he earns what he
should earn, that is, his holiday pay."
8
t is also intended
to enable the worker to participate in the national
celebrations held during the days identified as with great
historical and cultural significance.
ndependence Day (June 12), Araw ng Kagitingan (April
9), National Heroes Day (last Sunday of August),
Bonifacio Day (November 30) and Rizal Day (December
30) were declared national holidays to afford Filipinos
with a recurring opportunity to commemorate the
heroism of the Filipino people, promote national identity,
and deepen the spirit of patriotism. Labor Day (May 1) is
a day traditionally reserved to celebrate the contributions
of the working class to the development of the nation,
while the religious holidays designated in Executive
Order No. 203 allow the worker to celebrate his faith with
his family.
As reflected above, Art. 94 of the Labor Code, as
amended, affords a worker the enjoyment of ten paid
regular holidays.
9
The provision is mandatory,
10

regardless of whether an employee is paid on a monthly
or daily basis.
11
Unlike a bonus, which is a management
prerogative,
12
holiday pay is a statutory benefit
demandable under the law. Since a worker is entitled to
the enjoyment of ten paid regular holidays, the fact that
two holidays fall on the same date should not operate to
reduce to nine the ten holiday pay benefits a worker is
entitled to receive.
t is elementary, under the rules of statutory construction,
that when the language of the law is clear and
unequivocal, the law must be taken to mean exactly
what it says.
13
n the case at bar, there is nothing in the
law which provides or indicates that the entitlement to
ten days of holiday pay shall be reduced to nine when
two holidays fall on the same day.
Petitioner's assertion that ellington v. Trajano
14
has
"overruled" the DOLE March 11, 1993 Explanatory
Bulletin does not lie. n ellington, the issue was
whether monthly-paid employees are entitled to an
additional day's pay if a holiday falls on a Sunday. This
Court, in answering the issue in the negative, observed
that in fixing the monthly salary of its employees,
ellington took into account "every working day of the
year including the holidays specified by law and
excluding only Sunday." n the instant case, the issue is
whether daily-paid employees are entitled to be paid for
two regular holidays which fall on the same day.
15

n any event, Art. 4 of the Labor Code provides that all
doubts in the implementation and interpretation of its
provisions, including its implementing rules and
regulations, shall be resolved in favor of labor. For the
working man's welfare should be the primordial and
paramount consideration.
16

Moreover, Sec. 11, Rule V, Book of the Omnibus
Rules to mplement the Labor Code provides that
"Nothing in the law or the rules shall justify an employer
in withdrawing or reducing any benefits, supplements or
payments for unworked regular holidays as provided in
existing individual or collective agreement or employer
practice or policy."
17

From the pertinent provisions of the CBA entered into by
the parties, petitioner had obligated itself to pay for the
legal holidays as required by law. Thus, the 1997-1998
CBA incorporates the following provision:
ARTCLE XV
PAD LEGAL HOLDAYS
The following legal holidays shall be paid by the
COMPANY as required by law:
1. New Year's Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. ndependence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)
10. General Election designated by law, if declared
public non-working holiday
11. National Heroes Day (Last Sunday of August)
Only an employee who works on the day immediately
preceding or after a regular holiday shall be entitled to
the holiday pay.
A paid legal holiday occurring during the scheduled
vacation leave will result in holiday payment in addition
to normal vacation pay but will not entitle the employee
to another vacation leave.
Under similar circumstances, the COMPANY will give a
day's wage for November 1st and December 31st
whenever declared a holiday. When required to work on
said days, the employee will be paid according to Art. V,
Sec. 3B hereof.
18

WHEREFORE, the petition is hereby DSMSSED.
[G.R. No. 146775. January 30, 2002]
SAN MGUEL CORPORATON, petitioner, vs. THE HONORABLE
COURT OF APPEALS-FORMER THRTEENTH DVSON, HON.
UNDERSECRETARY JOSE M. ESPAOL, JR., Hon. CRESENCANO
B. TRAJANO, and HON. REGONAL DRECTOR ALLAN M.
MACARAYA, respondents.
D E C S O N
KAPUNAN, J.:
Assailed in the petition before us are the decision,
promulgated on 08 May 2000, and the resolution,
promulgated on 18 October 2000, of the Court of
Appeals in CA G.R. SP-53269.
The facts of the case are as follows:
On 17 October 1992, the Department of Labor and
Employment (DOLE), ligan District Office, conducted a
routine inspection in the premises of San Miguel
Corporation (SMC) in Sta. Filomena, ligan City. n the
course of the inspection, it was discovered that there
was underpayment by SMC of regular Muslim holiday
pay to its employees. DOLE sent a copy of the
inspection result to SMC and it was received by and
explained to its personnel officer Elena dela Puerta.
SMC contested the findings and DOLE conducted
summary hearings on 19 November 1992, 28 May 1993
and 4 and 5 October 1993. Still, SMC failed to submit
proof that it was paying regular Muslim holiday pay to its
employees. Hence, Alan M. Macaraya, Director V of
DOLE ligan District Office issued a compliance order,
dated 17 December 1993, directing SMC to consider
Muslim holidays as regular holidays and to pay both its
Muslim and non-Muslim employees holiday pay within
thirty (30) days from the receipt of the order.
SMC appealed to the DOLE main office in Manila but its
appeal was dismissed for having been filed late. The
dismissal of the appeal for late filing was later on
reconsidered in the order of 17 July 1998 after it was
found that the appeal was filed within the reglementary
period. However, the appeal was still dismissed for lack
of merit and the order of Director Macaraya was
affirmed.
SMC went to this Court for relief via a petition for
certiorari, which this Court referred to the Court of
Appeals pursuant to St. Martin Funeral Homes vs.
NLRC.
The appellate court, in the now questioned decision,
promulgated on 08 May 2000, ruled, as follows:
WHEREFORE, the Order dated December 17, 1993 of
Director Macaraya and Order dated July 17, 1998 of
Undersecretary Espaol, Jr. is hereby MODFED with
regards the payment of Muslim holiday pay from 200%
to 150% of the employee's basic salary. Let this case be
remanded to the Regional Director for the proper
computation of the said holiday pay.
SO ORDERED.
ts motion for reconsideration having been denied for
lack of merit, SMC filed a petition for certiorari before this
Court, alleging that:
PUBLC RESPONDENTS SEROUSLY ERRED AND
COMMTTED GRAVE ABUSE OF DSCRETON WHEN
THEY GRANTED MUSLM HOLDAY PAY TO NON-
MUSLM EMPLOYEES OF SMC-LCOCO AND
ORDERNG SMC TO PAY THE SAME RETROACTVE
FOR ONE (1) YEAR FROM THE DATE OF THE
PROMULGATON OF THE COMPLANCE ORDER
SSUED ON DECEMBER 17, 1993, T BENG
CONTRARY TO THE PROVSONS, NTENT AND
PURPOSE OF P.D. 1083 AND PREVALNG
JURSPRUDENCE.
THE SSUANCE OF THE COMPLANCE ORDER WAS
TANTED WTH GRAVE ABUSE OF DSCRETON N
THAT SAN MGUEL CORPORATON WAS NOT
ACCORDED DUE PROCESS OF LAW; HENCE, THE
ASSALED COMPLANCE ORDER AND ALL
SUBSEQUENT ORDERS, DECSON AND
RESOLUTON OF PUBLC RESPONDENTS WERE
ALL SSUED WTH GRAVE ABUSE OF DSCRETON
AND ARE VOD AB NTO.
THE HON. COURT OF APPEALS COMMTTED
GRAVE ABUSE OF DSCRETON WHEN T
DECLARED THAT REGONAL DRECTOR
MACARAYA, UNDERSECRETARY TRAJANO AND
UNDERSECRETARY ESPAOL, JR., WHO ALL
LKEWSE ACTED WTH GRAVE ABUSE OF
DSCRETON AND WTHOUT OR N EXCESS OF
THER JURSDCTON, HAVE JURSDCTON N
SSUNG THE ASSALED COMPLANCE ORDER AND
SUBSEQUENT ORDERS, WHEN N FACT THEY HAVE
NO JURSDCTON OR HAS LOST JURSDCTON
OVER THE HEREN LABOR STANDARD CASE.
At the outset, petitioner came to this Court via a petition
for certiorari under Rule 65 instead of an appeal under
Rule 45 of the 1997 Rules of Civil Procedure. n
National Irrigation Administration vs. Court of Appeals,
the Court declared:
x x x (S)ince the Court of Appeals had jurisdiction over
the petition under Rule 65, any alleged errors committed
by it in the exercise of its jurisdiction would be errors of
judgment which are reviewable by timely appeal and not
by a special civil action of certiorari. f the aggrieved
party fails to do so within the reglementary period, and
the decision accordingly becomes final and executory,
he cannot avail himself of the writ of certiorari, his
predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of
Appeals is a petition for review under Rule 45 and not a
special civil action under Rule 65 of the Rules of Court,
now Rule 45 and Rule 65, respectively, of the 1997
Rules of Civil Procedure. Rule 45 is clear that decisions,
final orders or resolutions of the Court of Appeals in any
case, i.e., regardless of the nature of the action or
proceeding involved, may be appealed to this Court by
filing a petition for review, which would be but a
continuation of the appellate process over the original
case. Under Rule 45 the reglementary period to appeal
is fifteen (15) days from notice of judgment or denial of
motion for reconsideration.
x x x
For the writ of certiorari under Rule 65 of the Rules of
Court to issue, a petitioner must show that he has no
plain, speedy and adequate remedy in the ordinary
course of law against its perceived grievance. A remedy
is considered "plain, speedy and adequate" if it will
promptly relieve the petitioner from the injurious effects
of the judgment and the acts of the lower court or
agency. n this case, appeal was not only available but
also a speedy and adequate remedy.
Well-settled is the rule that certiorari cannot be availed of
as a substitute for a lost appeal. For failure of petitioner
to file a timely appeal, the questioned decision of the
Court of Appeals had already become final and
executory.
n any event, the Court finds no reason to reverse the
decision of the Court of Appeals.
Muslim holidays are provided under Articles 169 and
170, Title , Book V, of Presidential Decree No. 1083,
otherwise known as the Code of Muslim Personal Laws,
which states:
Art. 169. Official Muslim holidays. - The following are
hereby recognized as legal Muslim holidays:
(a) 'Amun Jadid (New Year), which falls on the first day
of the first lunar month of Muharram;
(b) Maulid-un-Nabi (Birthday of the Prophet
Muhammad), which falls on the twelfth day of the third
lunar month of Rabi-ul-Awwal;
(c) Lailatul Isr al Mi'rj (Nocturnal Journey and
Ascension of the Prophet Muhammad), which falls on
the twenty-seventh day of the seventh lunar month of
Rajab;
(d) 'Id-ul-Fitr (Hari Raya Puasa), which falls on the first
day of the tenth lunar month of Shawwal,
commemorating the end of the fasting season; and
(e) 'Id-l-Adh (Hari Raya Haji),which falls on the tenth
day of the twelfth lunar month of Dh'l-Hijja.
Art. 170. Provinces and cities where officially observed. -
(1) Muslim holidays shall be officially observed in the
Provinces of Basilan, Lanao del Norte, Lanao del Sur,
Maguindanao, North Cotabato, ligan, Marawi, Pagadian,
and Zamboanga and in such other Muslim provinces and
cities as may hereafter be created;
(2) Upon proclamation by the President of the
Philippines, Muslim holidays may also be officially
observed in other provinces and cities.
The foregoing provisions should be read in conjunction
with Article 94 of the Labor Code, which provides:
Art. 94. Right to holiday pay. -
(a) Every worker shall be paid his regular daily
wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10)
workers;
(b) The employer may require an employee to work
on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate; x x x.
Petitioner asserts that Article 3(3) of Presidential Decree
No. 1083 provides that "(t)he provisions of this Code
shall be applicable only to Muslims x x x. However,
there should be no distinction between Muslims and
non-Muslims as regards payment of benefits for Muslim
holidays. The Court of Appeals did not err in sustaining
Undersecretary Espaol who stated:
Assuming arguendo that the respondent's position is
correct, then by the same token, Muslims throughout the
Philippines are also not entitled to holiday pays on
Christian holidays declared by law as regular
holidays. We must remind the respondent-appellant that
wages and other emoluments granted by law to the
working man are determined on the basis of the criteria
laid down by laws and certainly not on the basis of the
worker's faith or religion.
At any rate, Article 3(3) of Presidential Decree No. 1083
also declares that "x x x nothing herein shall be
construed to operate to the prejudice of a non-Muslim.
n addition, the Handbook on orkers' Statutory
Benefits, approved by then DOLE Secretary Bienvenido
E. Laguesma on 14 December 1999 categorically stated:
Considering that all private corporations, offices,
agencies, and entities or establishments operating within
the designated Muslim provinces and cities are required
to observe Muslim holidays, both Muslim and Christians
working within the Muslim areas may not report for work
on the days designated by law as Muslim holidays.
On the question regarding the jurisdiction of the
Regional Director Allan M. Macaraya, Article 128,
Section B of the Labor Code, as amended by Republic
Act No. 7730, provides:
"Article 128. Visitorial and enforcement power. -
x x x
(b) Notwithstanding the provisions of Article 129 and 217
of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the
Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based
on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course
of the inspection. The Secretary or his duly authorized
representative shall issue writs of execution to the
appropriate authority for the enforcement of their orders,
except in cases where the employer contests the
findings of the labor employment and enforcement
officer and raises issues supported by documentary
proofs which were not considered in the course of
inspection.
x x x
n the case before us, Regional Director Macaraya acted
as the duly authorized representative of the Secretary of
Labor and Employment and it was within his power to
issue the compliance order to SMC. n addition, the
Court agrees with the Solicitor General that the petitioner
did not deny that it was not paying Muslim holiday pay to
its non-Muslim employees. ndeed, petitioner merely
contends that its non-Muslim employees are not entitled
to Muslim holiday pay. Hence, the issue could be
resolved even without documentary proofs. n any case,
there was no indication that Regional Director Macaraya
failed to consider any documentary proof presented by
SMC in the course of the inspection.
Anent the allegation that petitioner was not accorded
due process, we sustain the Court of Appeals in finding
that SMC was furnished a copy of the inspection order
and it was received by and explained to its Personnel
Officer. Further, a series of summary hearings were
conducted by DOLE on 19 November 1992, 28 May
1993 and 4 and 5 October 1993. Thus, SMC could not
claim that it was not given an opportunity to defend itself.
Finally, as regards the allegation that the issue on
Muslim holiday pay was already resolved in NLRC CA
No. M-000915-92 (Napoleon E. Fernan vs. San Miguel
Corporation Beer Division and Leopoldo Zaldarriaga),
the Court notes that the case was primarily for illegal
dismissal and the claim for benefits was only incidental
to the main case. n that case, the NLRC Cagayan de
Oro City declared, in passing:
We also deny the claims for Muslim holiday pay for lack
of factual and legal basis. Muslim holidays are legally
observed within the area of jurisdiction of the present
Autonomous Region for Muslim Mindanao (ARMM),
particularly in the provinces of Maguindanao, Lanao del
Sur, Sulu and Tawi-Tawi. t is only upon Presidential
Proclamation that Muslim holidays may be officially
observed outside the Autonomous Region and generally
extends to Muslims to enable them the observe said
holidays.
The decision has no consequence to issues before us,
and as aptly declared by Undersecretary Espaol, it "can
never be a benchmark nor a guideline to the present
case x x x.
WHEREFORE, in view of the foregoing, the petition is
DSMSSED.
G.R. No. 114734 March 31, 2000
VVAN Y. MBUDO, petitioner,
vs.
NATONAL LABOR RELATONS COMMSSON, NTERNATONAL
NFORMATON SERVCES, NC. and GABREL LBRANDO,
respondents.
BUENA, J.:
This special civil action for certiorari seeks to set aside
the Decision
1
of the National Labor Relations
Commission (NLRC) promulgated on September 27,
1993 and its Order dated January 11, 1994, which
denied petitioner's motion for reconsideration.
Petitioner was employed as a data encoder by private
respondent nternational nformation Services, nc., a
domestic corporation engaged in the business of data
encoding and keypunching, from August 26, 1988 until
October 18, 1991 when her services were terminated.
From August 26, 1988 until October 18, 1991, petitioner
entered into thirteen (13) separate employment contracts
with private respondent, each contract lasting only far a
period of three (3) months. Aside from the basic hourly
rate, specific job contract number and period of
employment, each contract contains the following terms
and conditions:
a. This Contract is for a specific project/job contract only
and shall be effective for the period covered as above-
mentioned unless sooner terminated when the job
contract is completed earlier or withdrawn by client, or
when employee is dismissed for just and lawful causes
provided by law. The happening of any of these events
will automatically terminate this contract of employment.
b. Subject shall abide with the Company's rules and
regulations for its employees attached herein to form an
integral part hereof.
c. The nature of your job may require you to render
overtime work with pay so as not to disrupt the
Company's commitment of scheduled delivery dates
made on said job contract.n September 1991, petitioner
and twelve (12) other, employees of private respondent
allegedly agreed to the filing of a petition for certification
election involving the rank-and-file employees of private
respondent.
3
Thus, on October 8, 1991, Lakas
Manggagawa sa Pilipinas (LAKAS) filed a petition for
certification election with the Bureau of Labor Relations
(BLR), docketed as NCR-OD-M-9110-128.
4

Subsequently, on October 18, 1991, petitioner received
a termination letter from Edna Kasilag, Administrative
Officer of private respondent, allegedly "due to low
volume of work."
5

Thus, on May 25, 1992, petitioner filed a complaint for
illegal dismissal with prayer for service incentive leave
pay and 13th month differential pay, with the National
Labor Relations Commission, National Capital Region,
Arbitration Branch, docketed as NLRC-NCR Case No.
05-02912-92.
6

n her position paper dated August 3, 1992 and filed
before labor arbiter Raul T. Aquino, petitioner alleged
that her employment was terminated not due to the
alleged low volume of work but because she "signed a
petition for certification election among the rank and file
employees of respondents," thus charging private
respondent with committing unfair labor practices.
Petitioner further complained of non-payment of service
incentive leave benefits and underpayment of 13th
month pay.
7

On the other hand, private respondent, in its position
paper filed on July 16, 1992, maintained that it had valid
reasons to terminate petitioner's employment and
disclaimed any knowledge of the existence or formation
of a union among its rank-and-file employees at the time
petitioner's services were terminated.
8
Private
respondent stressed that its business ". . . relies heavily
on companies availing of its services. ts retention by
client companies with particular emphasis on data
encoding is on a project to project basis,"
9
usually lasting
for a period of "two (2) to five (5) months." Private
respondent further argued that petitioner's employment
was for a "specific project with a specified period of
engagement." According to private respondent, ". . . the
certainty of the expiration of complainant's engagement
has been determined at the time of their (sic)
engagement (until 27 November 1991) or when the
project is earlier completed or when the client
withdraws," as provided in the contract.
10
"The
happening of the second event [completion of the
project] has materialized, thus, her contract of
employment is deemed terminated per the Brent School
ruling."
11
Finally, private respondent averred that
petitioner's "claims for non-payment of overtime time
(sic) and service incentive leave [pay] are without factual
and legal basis."
12

n a decision dated August 25, 1992, labor arbiter Raul
T. Aquino, ruled in favor of petitioner, and accordingly
ordered her reinstatement without loss of seniority rights
and privileges, and the payment of backwages and
service incentive leave pay. The dispositive part of the
said decision reads:
WHEREFORE, responsive to the foregoing, judgment is
hereby rendered ordering respondents to immediately
reinstate complainant [petitioner herein] as a regular
employee to her former position without loss of seniority
rights and privileges and to pay backwages from the
time of dismissal up to the date of this decision, the
same to continue until complainant ['s] [petitioner herein]
actual reinstatement from (sic) the service. Respondents
are likewise ordered to pay complainant [petitioner
herein] service incentive leave pay computed as follows:
Backwages:
10/18/91 - 8/25/92 = 10.23 mos.
P118.00 x 26 x 10.23 mos. = P31, 385.64
Service Incentive Leave Pay
1989 = P89.00 x 5 days = P445.00
1990 = 106 x 5 days = P530.00
1991 = 118 x 5 days = P590.00

P 1,565.00
Total P 32,950.64
=========
SO ORDERED.
13

n his decision, the labor arbiter found petitioner to be a
regular employee, ruling that "[e]ven if herein
complainant [petitioner herein] had been obstensively
(sic) hired for a fixed period or for a specific undertaking,
she should be considered as [a] regular employee of the
respondents in conformity with the provisions (sic) laid
down under Article 280 of the Labor Code," 14 after
finding that ". . . [i]t is crystal clear that herein
complainant [petitioner herein] performed a job which
are (sic) usually necessary or desirable in the usual
business of respondent [s]." 15 The labor arbiter further
denounced ". . . the purpose behind the series of
contracts which respondents required complainant to
execute as a condition of employment was to evade the
true intent and spirit of the labor laws for the workingmen
. . . ."
16
Furthermore, the labor arbiter concluded that
petitioner was illegally dismissed because the alleged
reason for her termination, that is, low volume of work, is
"not among the just causes for termination recognized
by law,"
17
hence, he ordered her immediate
reinstatement without loss of seniority rights and with full
backwages. With regard to the service incentive leave
pay, the labor arbiter decided ". . . to grant the same for
failure of the respondents to fully controvert said claims."
18
Lastly, the labor arbiter rejected petitioner's claim for
13th month pay ". . . since complainant [petitioner
herein] failed to fully substantiate and argued (sic) the
same." On appeal, the NLRC reversed the decision of
the labor arbiter in a
decision
20
promulgated on September 27, 1993, the
dispositive part of which reads:
WHEREFORE, the appealed decision is hereby set
aside. The complaint for illegal dismissal is hereby
dismissed for being without merit. Complainant's
[petitioner herein] claim for service incentive leave pay is
hereby remanded for further arbitration.
SO ORDERED.
21

The NLRC ruled that "[t]here is no question that the
complainant [petitioner herein], viewed in relation to said
Article 280 of the [Labor] Code, is a regular employee
judging from the function and/or work for which she was
hired. . . . But this does not necessarily mean that the
complainant [petitioner herein] has to be guaranteed a
tenurial security beyond the period for which she was
hired."
22
The NLRC held that ". . . the complainant
[petitioner herein], while hired as a regular worker, is
statutorily guaranteed, in her tenurial security, only up to
the time the specific project for which she was hired is
completed."
23
Hence, the NLRC concluded that "[w]ith
the specific project "at RCBC 014" admittedly completed,
the complainant [petitioner herein] has therefore no valid
basis in charging illegal dismissal for her concomittant
(sic) dislocation."
24

n an Order dated January 11, 1994, the NLRC denied
petitioner's motion for reconsideration.
25

n this petition for certiorari, petitioner, for and in her
behalf, argues that (1) the public respondent "committed
grave abuse of discretion when it ignored the findings of
Labor Arbiter Raul Aquino based on the evidence
presented directly before him, and when it made findings
of fact that are contrary to or not supported by
evidence,"
26
(2) "[p]etitioner was a "regular employee,"
NOT a "project employee" as found by public respondent
NLRC,"
27
(3) "[t]he termination of petition (sic) was
tainted with unfair labor practice,"
28
and (4) the public
respondent "committed grave abuse of discretion in
remanding the awarded service incentive leave pay for
further arbitration."
29

The petition is impressed with merit.
We agree with the findings of the NLRC that petitioner is
a project employee. The principal test for determining
whether an employee is a project employee or a regular
employee is whether the project employee was assigned
to carry out a specific project or undertaking, the
duration and scope of which were specified at the time
the employee was engaged for that project.
30
A project
employee is one whose employment has been fixed for
a specific project or undertaking, the completion or
termination of which has been determined at the time of
the engagement of the employee or where the work or
service to be performed is seasonal in nature and the
employment is for the duration of the season.
31
n the
instant case, petitioner was engaged to perform activities
which were usually necessary or desirable in the usual
business or trade of the employer, as admittedly,
petitioner worked as a data encoder for private
respondent, a corporation engaged in the business of
data encoding and keypunching, and her employment
was fixed for a specific project or undertaking the
completion or termination of which had been determined
at the time of her engagement, as may be observed from
the series of employment contracts
32
between petitioner
and private respondent, all of which contained a
designation of the specific job contract and a specific
period of employment.wphi.nt
However, even as we concur with the NLRC's findings
that petitioner is a project employee, we have reached a
different conclusion. n the recent case of Maraguinot, Jr.
vs. NLRC,
33
we held that "[a] project employee or a
member of a work pool may acquire the status of a
regular employee when the following concur:
1) There is a continuous rehiring of project employees
even after [the] cessation of a project;
34
and
2) The tasks performed by the alleged "project
employee" are vital, necessary and indispensable to the
usual business or trade of the employer.
35

The evidence on record reveals that petitioner was
employed by private respondent as a data encoder,
performing activities which are usually necessary or
desirable in the usual business or trade of her employer,
continuously for a period of more than three (3) years,
from August 26, 1988 to October 18,
1991
36
and contracted for a total of thirteen (13)
successive projects. We have previously ruled that
"[h]owever, the length of time during which the employee
was continuously re-hired is not controlling, but merely
serves as a badge of regular employment."
37
Based on
the foregoing, we conclude that petitioner has attained
the status of a regular employee of private respondent.
At this point, we reiterate with emphasis that:
xxx xxx xxx
At this time, we wish to allay any fears that this decision
unduly burdens an employer by imposing a duty to re-
hire a project employee even after completion of the
project for which he was hired. The import of this
decision is not to impose a positive and sweeping
obligation upon the employer to re-hire project
employees. hat this decision merely accomplishes is a
judicial recognition of the employment status of a project
or work pool employee in accordance with what is fait
accompli, i.e., the continuous re-hiring by the employer
of project or work pool employees who perform tasks
necessary or desirable to the employer's usual business
or trade. Let it not be said that this decision "coddles"
labor, for as Lao
38
has ruled, project or work pool
employees who have gained the status of regular
employees are subject to the "no work-no pay" principle,
to repeat:
A work pool may exist although the workers in the pool
do not receive salaries and are free to seek other
employment during temporary breaks in the business,
provided that the worker shall be available when called
to report for a project. Although primarily applicable to
regular seasonal workers, this set-up can likewise be
applied to project workers insofar as the effect of
temporary cessation of work is concerned. This is
beneficial to both the employer and employee for it
prevents the unjust situation of "coddling labor at the
expense of capital" and at the same time enables the
workers to attain the status of regular employees.
The Court's ruling here is meant precisely to give life to
the constitutional policy of strengthening the labor
sector, but, we stress, not at the expense of
management. Lest it be misunderstood, this ruling does
not mean that simply because an employee is a project
or work pool employee even outside the construction
industry, he is deemed, ipso jure, a regular employee. All
that we hold today is that once a project or work pool
employee has been: () continuously, as opposed to
intermittently, re-hired by the same employer for the
same tasks or nature of tasks; and (2) these tasks are
vital, necessary and indispensable to the usual business
or trade of the employer, then the employee must be
deemed a regular employee, pursuant to Article 280 of
the Labor Code and jurisprudence. To rule otherwise
would allow circumvention of labor laws in industries not
falling within the ambit of Policy Instruction No. Policy
Department Order No. , hence allowing the prevention
of acquisition of tenurial security by project or work pool
employees who have already gained the status of
regular employees by the employer's conduct.
39

(emphasis supplied)
Being a regular employee, petitioner is entitled to
security of tenure and could only be dismissed for a just
or authorized cause, as provided in Article 279 of the
Labor Code, as amended:
Art. 279. Security of Tenure n cases of regular
employment, the employer shall not terminate the
services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed
from the time his compensation was withheld from him
up to the time of his actual reinstatement.
The alleged causes of petitioner's dismissal (low volume
of work and belatedly, completion of project) are not
valid causes for dismissal under Articles 282 and 283 of
the Labor Code. Thus, petitioner is entitled to
reinstatement without loss of seniority rights and other
privileges, and to her full backwages, inclusive of
allowances, and to her other benefits or their monetary
equivalent computed from the time her compensation
was withheld from her up to the time of her actual
reinstatement. However, complying with the principles of
"suspension of work" and "no work, no pay" between the
end of one project and the start of a new one, in
computing petitioner's backwages, the amounts
corresponding to what could have been earned during
the periods from the date petitioner was dismissed until
her reinstatement when private respondent was not
undertaking any project, should be deducted.
With regard to petitioner's claim for service incentive
leave pay, we agree with the labor arbiter that petitioner
is entitled to service incentive leave pay, as provided in
Article 95 of the Labor Code, which reads:
Art. 95 Right to service incentive leave
(a) Every employee who has rendered at least one year
of service shall be entitled to a yearly service incentive
leave of five days with pay.
xxx xxx xxx
Having already worked for more than three (3) years at
the time of her unwarranted dismissal, petitioner is
undoubtedly entitled to service incentive leave benefits,
computed from 1989 until the date of her actual
reinstatement. As we ruled in the recent case of
Fernandez vs. NLRC,
40
"[s]ince a service incentive
leave is clearly demandable after one year of service
whether continuous or broken or its equivalent period,
and it is one of the "benefits" which would have accrued
if an employee was not otherwise illegally dismissed, it is
fair and legal that its computation should be up to the
date of reinstatement as provided under Section [Article]
279 of the Labor Code, as amended, which reads:
Art. 279. Security of Tenure. An employee who is
unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation is
withheld from him up to the time of his actual
reinstatement." (emphasis supplied).
WHEREFORE, the instant petition is GRANTED. The
assailed decision of the National Labor Relations
Commission in NLRC NCR CA No. 003845-92 dated
September 27, 1993, as well as its Order dated January
11, 1994, are hereby ANNULLED and SET ASDE for
having been rendered with grave abuse of discretion,
and the decision of the Labor Arbiter in NLRC NCR
Case No. 05-02912-92 is RENSTATED with
MODFCATON as above-stated, with regard to
computation of back wages and service incentive leave
pay.wphi.nt








Fernandez v. Nlrc

G.R. No. 152427. August 9, 2005
NTEGRATED CONTRACTOR AND PLUMBNG WORKS, NC.,
Petitioners,
vs.
NATONAL LABOR RELATONS COMMSSON and GLEN SOLON,
Respondent.
D E C S O N
QUSUMBNG, J.:
This petition for review assails the Decision
1
dated
October 30, 2001 of the Court of Appeals and its
Resolution
2
dated February 28, 2002 in CA-G.R. SP No.
60136, denying the petitioner's motion for
reconsideration for lack of merit. The decision affirmed
the National Labor Relations Commission (NLRC) which
declared private respondent Glen Solon a regular
employee of the petitioner and awarded him 13th month
pay, service incentive leave pay, reinstatement to his
former position with full backwages from the time his
salary was withheld until his reinstatement.
Petitioner is a plumbing contractor. ts business depends
on the number and frequency of the projects it is able to
contract with its clients.
3

Private respondent Solon worked for petitioner. His
employment records is as follows:
December 14, 1994 up to January 14, 1995 St. Charbel
Warehouse
February 1, 1995 up to April 30, 1995 St. Charbel
Warehouse
May 23, 1995 up to June 23, 1995 St. Charbel
Warehouse
August 15, 1995 up to October 31, 1995 St. Charbel
Warehouse
November 2, 1995 up to January 31, 1996 St. Charbel
Warehouse
May 13, 1996 up to June 15, 1996 Ayala Triangle
August 27, 1996 up to November 30, 1996 St. Charbel
Warehouse
4

July 14, 1997 up to November 1997 CPW Warehouse
November 1997 up to January 5, 1998 Cathedral
Heights
January 6, 1998 Rockwell Center
5

On February 23, 1998, while private respondent was
about to log out from work, he was informed by the
warehouseman that the main office had instructed them
to tell him it was his last day of work as he had been
terminated. When private respondent went to the
petitioner's office on February 24, 1998 to verify his
status, he found out that indeed, he had been
terminated. He went back to petitioner's office on
February 27, 1998 to sign a clearance so he could claim
his 13th month pay and tax refunds. However, he had
second thoughts and refused to sign the clearance when
he read the clearance indicating he had resigned. On
March 6, 1998, he filed a complaint alleging that he was
illegally dismissed without just cause and without due
process.
6

n a Decision dated February 26, 1999, the Labor Arbiter
ruled that private respondent was a regular employee
and could only be removed for cause. Petitioner was
ordered to reinstate private respondent to his former
position with full backwages from the time his salary was
withheld until his actual reinstatement, and pay him
service incentive leave pay, and 13th month pay for
three years in the amount of P2,880 and P14,976,
respectively.
Petitioner appealed to the National Labor Relations
Commission (NLRC), which ruled:
WHEREFORE, prescinding from the foregoing and in
the interest of justice, the decision of the Labor Arbiter is
hereby AFFRMED with a MODFCATON that the 13th
month pay should be given only for the year 1997 and
portion of 1998. Backwages shall be computed from the
time he was illegally dismissed up to the time of his
actual reinstatement. Likewise, service incentive leave
pay for three (3) years is also awarded to appellee in the
amount of P2,880.00.
SO ORDERED.
7

Petitioner's Motion for Reconsideration was denied.
8

Petitioner appealed to the Court of Appeals, alleging that
the NLRC committed grave abuse of discretion in finding
that the private respondent was a regular employee and
in awarding 13th month pay, service incentive leave pay,
and holiday pay to the private respondent despite
evidence of payment. The said petition was dismissed
for lack of merit.
9

Before us now, petitioner raises the following issues: (1)
Whether the respondent is a project employee of the
petitioner or a regular employee; and (2) Whether the
Court of Appeals erred seriously in awarding 13th month
pay for the entire year of 1997 and service incentive
leave pay to the respondent and without taking
cognizance of the evidence presented by petitioner.
10

The petitioner asserts that the private respondent was a
project employee. Thus, when the project was
completed and private respondent was not re-assigned
to another project, petitioner did not violate any law since
it was petitioner's discretion to re-assign the private
respondent to other projects.
11

Article 280 of the Labor Code states:
The provisions of written agreement of the contrary
notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be
regular where the employee has been engaged to
perform activities which are usually necessary or
desirable in the usual business or trade of the employer,
except where the employment has been fixed for a
specific project or undertaking the completion or
termination of which has been determined at the time of
the engagement of the employee or where the work or
services to be performed is seasonal in nature and the
employment is for the duration of the season. (talics
supplied.)
We held in Tomas Lao Construction v. NLRC
12
that the
principal test in determining whether an employee is a
"project employee" or "regular employee," is, whether he
is assigned to carry out a "specific project or
undertaking," the duration (and scope) of which are
specified at the time the employee is engaged in the
project.
13
"Project" refers to a particular job or
undertaking that is within the regular or usual business
of the employer, but which is distinct and separate and
identifiable from the undertakings of the company. Such
job or undertaking begins and ends at determined or
determinable times.
14

n our review of the employment contracts of private
respondent, we are convinced he was initially a project
employee. The services he rendered, the duration and
scope of each project are clear indications that he was
hired as a project employee.
We concur with the NLRC that while there were several
employment contracts between private respondent and
petitioner, in all of them, private respondent performed
tasks which were usually necessary or desirable in the
usual business or trade of petitioner. A review of private
respondent's work assignments patently showed he
belonged to a work pool tapped from where workers are
and assigned whenever their services were needed. n a
work pool, the workers do not receive salaries and are
free to seek other employment during temporary breaks
in the business. They are like regular seasonal workers
insofar as the effect of temporary cessation of work is
concerned. This arrangement is beneficial to both the
employer and employee for it prevents the unjust
situation of "coddling labor at the expense of capital" and
at the same time enables the workers to attain the status
of regular employees.
15
Nonetheless, the pattern of re-
hiring and the recurring need for his services are
sufficient evidence of the necessity and indispensability
of such services to petitioner's business or trade.
16

n Maraguinot, Jr. v. NLRC
17
we ruled that once a project
or work pool employee has been: (1) continuously, as
opposed to intermittently, re-hired by the same employer
for the same tasks or nature of tasks; and (2) these
tasks are vital, necessary and indispensable to the usual
business or trade of the employer, then the employee
must be deemed a regular employee.
n this case, did the private respondent become a
regular employee then?
The test to determine whether employment is regular or
not is the reasonable connection between the particular
activity performed by the employee in relation to the
usual business or trade of the employer. Also, if the
employee has been performing the job for at least one
year, even if the performance is not continuous or
merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient
evidence of the necessity, if not indispensability of that
activity to the business.
18
Thus, we held that where the
employment of project employees is extended long after
the supposed project has been finished, the employees
are removed from the scope of project employees and
are considered regular employees.
19

While length of time may not be the controlling test for
project employment, it is vital in determining if the
employee was hired for a specific undertaking or tasked
to perform functions vital, necessary and indispensable
to the usual business or trade of the employer. Here,
private respondent had been a project employee several
times over. His employment ceased to be coterminous
with specific projects when he was repeatedly re-hired
due to the demands of petitioner's business.
20
Where
from the circumstances it is apparent that periods have
been imposed to preclude the acquisition of tenurial
security by the employee, they should be struck down as
contrary to public policy, morals, good customs or public
order.
21

Further, Policy nstructions No. 20 requires employers to
submit a report of an employee's termination to the
nearest public employment office every time his
employment was terminated due to a completion of a
project. The failure of the employer to file termination
reports is an indication that the employee is not a project
employee.
22
Department Order No. 19 superseding
Policy nstructions No. 20 also expressly provides that
the report of termination is one of the indications of
project employment.
23
n the case at bar, there was only
one list of terminated workers submitted to the
Department of Labor and Employment.
24
f private
respondent was a project employee, petitioner should
have submitted a termination report for every completion
of a project to which the former was assigned.
Juxtaposing private respondent's employment history,
vis the requirements in the test to determine if he is a
regular worker, we are constrained to say he is.
As a regular worker, private respondent is entitled to
security of tenure under Article 279 of the Labor Code
25

and can only be removed for cause. We found no valid
cause attending to private respondent's dismissal and
found also that his dismissal was without due process.
Additionally, Article 277(b) of the Labor Code provides
that
... Subject to the constitutional right of workers to
security of tenure and their right to be protected against
dismissal except for a just and authorized cause and
without prejudice to the requirement of notice under
Article 283 of this Code, the employer shall furnish the
worker whose employment is sought to be terminated a
written notice containing a statement of the causes for
termination and shall afford the latter ample opportunity
to be heard and to defend himself with the assistance of
his representative if he so desires in accordance with
company rules and regulations promulgated pursuant to
guidelines set by the Department of Labor and
Employment.
The failure of the petitioner to comply with these
procedural guidelines renders its dismissal of private
respondent, illegal. An illegally dismissed employee is
entitled to reinstatement with full backwages, inclusive of
allowances, and to his other benefits computed from the
time his compensation was withheld from him up to the
time of his actual reinstatement, pursuant to Article 279
of the Labor Code.
However, we note that the private respondent had been
paid his 13th month pay for the year 1997. The Court of
Appeals erred in granting the same to him.
Article 95(a) of the Labor Code governs the award of
service incentive leave. t provides that every employee
who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days
with pay, and Section 3, Rule V, Book of the
mplementing Rules and Regulations, defines the term
"at least one year of service" to mean service within 12
months, whether continuous or broken reckoned from
the date the employee started working, including
authorized absences and paid regular holidays, unless
the working days in the establishment as a matter of
practice or policy, or that provided in the employment
contract is less than 12 months, in which case said
period shall be considered as one year. Accordingly,
private respondent's service incentive leave credits of
five days for every year of service, based on the actual
service rendered to the petitioner, in accordance with
each contract of employment should be computed up to
the date of reinstatement pursuant to Article 279 of the
Labor Code.
26

WHEREFORE, the assailed Decision dated October 30,
2001 and the Resolution dated February 28, 2002 of the
Court of Appeals in CA-G.R. SP No. 60136, are
AFFRMED with MODFCATON. The petitioner is
hereby ORDERED to (1) reinstate the respondent with
no loss of seniority rights and other privileges; and (2)
pay respondent his backwages, 13th month pay for the
year 1998 and Service ncentive Leave Pay computed
from the date of his illegal dismissal up to the date of his
actual reinstatement. Costs against petitioner.
SO ORDERED.
G.R. No. 151966 July 8, 2005
JPL MARKETNG PROMOTONS, Petitioner,
vs.
COURT OF APPEALS, NATONAL LABOR RELATONS
COMMSSON, NOEL GONZALES, RAMON ABESA and
FAUSTNO ANNPOT, Respondents.
D E C S O N
Tinga, J.:
This is a petition for review of the Decision
1
of the Court
of Appeals in CA-G.R. SP No. 62631 dated 03 October
2001 and its Resolution
2
dated 25 January 2002 denying
petitioner's Motion for Reconsideration, affirming the
Resolution of the National Labor Relations Commission
(NLRC), Second Division, dated 27 July 2000, awarding
separation pay, service incentive leave pay, and 13th
month pay to private respondents.
JPL Marketing and Promotions (hereinafter referred to
as "JPL") is a domestic corporation engaged in the
business of recruitment and placement of workers. On
the other hand, private respondents Noel Gonzales,
Ramon Abesa and Faustino Aninipot were employed
by JPL as merchandisers on separate dates and
assigned at different establishments in Naga City and
Daet, Camarines Norte as attendants to the display of
California Marketing Corporation (CMC), one of
petitioner's clients.
On 13 August 1996, JPL notified private respondents
that CMC would stop its direct merchandising activity in
the Bicol Region, sabela, and Cagayan Valley effective
15 August 1996.
3
They were advised to wait for further
notice as they would be transferred to other clients.
However, on 17 October 1996,
4
private respondents
Abesa and Gonzales filed before the National Labor
Relations Commission Regional Arbitration Branch
(NLRC) Sub V complaints for illegal dismissal, praying
for separation pay, 13th month pay, service incentive
leave pay and payment for moral damages.
5
Aninipot
filed a similar case thereafter.
After the submission of pertinent pleadings by all of the
parties and after some clarificatory hearings, the
complaints were consolidated and submitted for
resolution. Executive Labor Arbiter Gelacio L. Rivera, Jr.
dismissed the complaints for lack of merit.
6
The Labor
Arbiter found that Gonzales and Abesa applied with and
were employed by the store where they were originally
assigned by JPL even before the lapse of the six (6)-
month period given by law to JPL to provide private
respondents a new assignment. Thus, they may be
considered to have unilaterally severed their relation with
JPL, and cannot charge JPL with illegal dismissal.
7
The
Labor Arbiter held that it was incumbent upon private
respondents to wait until they were reassigned by JPL,
and if after six months they were not reassigned, they
can file an action for separation pay but not for illegal
dismissal.
8
The claims for 13th month pay and service
incentive leave pay was also denied since private
respondents were paid way above the applicable
minimum wage during their employment.
9

Private respondents appealed to the NLRC. n its
Resolution,
10
the Second Division of the NLRC agreed
with the Labor Arbiter's finding that when private
respondents filed their complaints, the six-month period
had not yet expired, and that CMC's decision to stop its
operations in the areas was beyond the control of JPL,
thus, they were not illegally dismissed. However, it found
that despite JPL's effort to look for clients to which
private respondents may be reassigned it was unable to
do so, and hence they are entitled to separation pay.
11

Setting aside the Labor Arbiter's decision, the NLRC
ordered the payment of:
1. Separation pay, based on their last salary rate and
counted from the first day of their employment with the
respondent JPL up to the finality of this judgment;
2. Service ncentive Leave pay, and 13th month pay,
computed as in No.1 hereof.
12

Aggrieved, JPL filed a petition for certiorari under Rule
65 of the Rules of Court with the Court of Appeals,
imputing grave abuse of discretion on the part of the
NLRC. t claimed that private respondents are not by law
entitled to separation pay, service incentive leave pay
and 13th month pay.
The Court of Appeals dismissed the petition and affirmed
in toto the NLRC resolution. While conceding that there
was no illegal dismissal, it justified the award of
separation pay on the grounds of equity and social
justice.
13
The Court of Appeals rejected JPL's argument
that the difference in the amounts of private
respondents' salaries and the minimum wage in the
region should be considered as payment for their service
incentive leave and 13th month pay.
14
Notwithstanding
the absence of a contractual agreement on the grant of
13th month pay, compliance with the same is mandatory
under the law. Moreover, JPL failed to show that it was
exempt from paying service incentive leave pay. JPL
filed a motion for reconsideration of the said resolution,
but the same was denied on 25 January 2002.
15

n the instant petition for review, JPL claims that the
Court of Appeals committed reversible error in rendering
the assailed Decision and Resolution.
16
The instant case
does not fall under any of the instances where
separation pay is due, to wit: installation of labor-saving
devices, redundancy, retrenchment or closing or
cessation of business operation,
17
or disease of an
employee whose continued employment is prejudicial to
him or co-employees,
18
or illegal dismissal of an
employee but reinstatement is no longer feasible.
19

Meanwhile, an employee who voluntarily resigns is not
entitled to separation unless stipulated in the
employment contract, or the collective bargaining
agreement, or is sanctioned by established practice or
policy of the employer.
20
t argues that private
respondents' good record and length of service, as well
as the social justice precept, are not enough to warrant
the award of separation pay. Gonzales and Aninipot
were employed by JPL for more than four (4) years,
while Abesa rendered his services for more than two (2)
years, hence, JPL claims that such short period could
not have shown their worth to JPL so as to reward them
with payment of separation pay.
21

n addition, even assuming arguendo that private
respondents are entitled to the benefits awarded, the
computation thereof should only be from their first day of
employment with JPL up to 15 August 1996, the date of
termination of CMC's contract, and not up to the finality
of the 27 July 2000 resolution of the NLRC.
22
To
compute separation pay, 13th month pay, and service
incentive leave pay up to 27 July 2000 would negate the
findings of both the Court of Appeals and the NLRC that
private respondents were not unlawfully terminated.
23

Additionally, it would be erroneous to compute service
incentive leave pay from the first day of their
employment up to the finality of the NLRC resolution
since an employee has to render at least one (1) year of
service before he is entitled to the same. Thus, service
incentive leave pay should be counted from the second
year of service.
24

On the other hand, private respondents maintain that
they are entitled to the benefits being claimed as per the
ruling of this Court in Serrano v. NLRC, et al.
25
They
claim that their dismissal, while not illegal, was tainted
with bad faith.
26
They allege that they were deprived of
due process because the notice of termination was sent
to them only two (2) days before the actual termination.
27

Likewise, the most that JPL offered to them by way of
settlement was the payment of separation pay of seven
(7) days for every year of service.
28

Replying to private respondents' allegations, JPL
disagrees that the notice it sent to them was a notice of
actual termination. The said memo merely notified them
of the end of merchandising for CMC, and that they will
be transferred to other clients.
29
Moreover, JPL is not
bound to observe the thirty (30)-day notice rule as there
was no dismissal to speak of. JPL counters that it was
private respondents who acted in bad faith when they
sought employment with another establishment, without
even the courtesy of informing JPL that they were
leaving for good, much less tender their resignation.
30
n
addition, the offer of seven (7) days per year of service
as separation pay was merely an act of magnanimity on
its part, even if private respondents are not entitled to a
single centavo of separation pay.
31

The case thus presents two major issues, to wit: whether
or not private respondents are entitled to separation pay,
13th month pay and service incentive leave pay, and
granting that they are so entitled, what should be the
reckoning point for computing said awards.
Under Arts. 283 and 284 of the Labor Code, separation
pay is authorized only in cases of dismissals due to any
of these reasons: (a) installation of labor saving devices;
(b) redundancy; (c) retrenchment; (d) cessation of the
employer's business; and (e) when the employee is
suffering from a disease and his continued employment
is prohibited by law or is prejudicial to his health and to
the health of his co-employees. However, separation pay
shall be allowed as a measure of social justice in those
cases where the employee is validly dismissed for
causes other than serious misconduct or those reflecting
on his moral character, but only when he was illegally
dismissed.
32
n addition, Sec. 4(b), Rule , Book V of the
mplementing Rules to mplement the Labor Code
provides for the payment of separation pay to an
employee entitled to reinstatement but the establishment
where he is to be reinstated has closed or has ceased
operations or his present position no longer exists at the
time of reinstatement for reasons not attributable to the
employer.
The common denominator of the instances where
payment of separation pay is warranted is that the
employee was dismissed by the employer.
33
n the
instant case, there was no dismissal to speak of. Private
respondents were simply not dismissed at all, whether
legally or illegally. What they received from JPL was not
a notice of termination of employment, but a memo
informing them of the termination of CMC's contract with
JPL. More importantly, they were advised that they were
to be reassigned. At that time, there was no severance
of employment to speak of.
Furthermore, Art. 286 of the Labor Code allows the bona
fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months,
wherein an employee/employees are placed on the so-
called "floating status." When that "floating status" of an
employee lasts for more than six months, he may be
considered to have been illegally dismissed from the
service. Thus, he is entitled to the corresponding
benefits for his separation, and this would apply to
suspension either of the entire business or of a specific
component thereof.
34

As clearly borne out by the records of this case, private
respondents sought employment from other
establishments even before the expiration of the six (6)-
month period provided by law. As they admitted in their
comment, all three of them applied for and were
employed by another establishment after they received
the notice from JPL.
35
JPL did not terminate their
employment; they themselves severed their relations
with JPL. Thus, they are not entitled to separation pay.
The Court is not inclined in this case to award separation
pay even on the ground of compassionate justice. The
Court of Appeals relied on the cases
36
wherein the Court
awarded separation pay to legally dismissed employees
on the grounds of equity and social consideration. Said
cases involved employees who were actually dismissed
by their employers, whether for cause or not. Clearly, the
principle applies only when the employee is dismissed
by the employer, which is not the case in this instance.
n seeking and obtaining employment elsewhere, private
respondents effectively terminated their employment
with JPL.
n addition, the doctrine enunciated in the case of
Serrano
37
cited by private respondents has already been
abandoned by our ruling in Agabon v. National Labor
Relations Commission.
38
There we ruled that an
employer is liable to pay indemnity in the form of nominal
damages to a dismissed employee if, in effecting such
dismissal, the employer failed to comply with the
requirements of due process. However, private
respondents are not entitled to the payment of damages
considering that there was no violation of due process in
this case. JPL's memo dated 13 August 1996 to private
respondents is not a notice of termination, but a mere
note informing private respondents of the termination of
CMC's contract and their re-assignment to other clients.
The thirty (30)-day notice rule does not apply.
Nonetheless, JPL cannot escape the payment of 13th
month pay and service incentive leave pay to private
respondents. Said benefits are mandated by law and
should be given to employees as a matter of right.
Presidential Decree No. 851, as amended, requires an
employer to pay its rank and file employees a 13th
month pay not later than 24 December of every year.
However, employers not paying their employees a 13th
month pay or its equivalent are not covered by said
law.
39
The term "its equivalent" was defined by the law's
implementing guidelines as including Christmas bonus,
mid-year bonus, cash bonuses and other payment
amounting to not less than 1/12 of the basic salary but
shall not include cash and stock dividends, cost-of-living-
allowances and all other allowances regularly enjoyed by
the employee, as well as non-monetary benefits.
40

On the other hand, service incentive leave, as provided
in Art. 95 of the Labor Code, is a yearly leave benefit of
five (5) days with pay, enjoyed by an employee who has
rendered at least one year of service. Unless specifically
excepted, all establishments are required to grant
service incentive leave to their employees. The term "at
least one year of service" shall mean service within
twelve (12) months, whether continuous or broken
reckoned from the date the employee started working.
41

The Court has held in several instances that "service
incentive leave is clearly demandable after one year of
service."
42

Admittedly, private respondents were not given their
13th month pay and service incentive leave pay while
they were under the employ of JPL. nstead, JPL
provided salaries which were over and above the
minimum wage. The Court rules that the difference
between the minimum wage and the actual salary
received by private respondents cannot be deemed as
their 13th month pay and service incentive leave pay as
such difference is not equivalent to or of the same import
as the said benefits contemplated by law. Thus, as
properly held by the Court of Appeals and by the NLRC,
private respondents are entitled to the 13th month pay
and service incentive leave pay.
However, the Court disagrees with the Court of Appeals'
ruling that the 13th month pay and service incentive
leave pay should be computed from the start of
employment up to the finality of the NLRC resolution.
While computation for the 13th month pay should
properly begin from the first day of employment, the
service incentive leave pay should start a year after
commencement of service, for it is only then that the
employee is entitled to said benefit. On the other hand,
the computation for both benefits should only be up to 15
August 1996, or the last day that private respondents
worked for JPL. To extend the period to the date of
finality of the NLRC resolution would negate the absence
of illegal dismissal, or to be more precise, the want of
dismissal in this case. Besides, it would be unfair to
require JPL to pay private respondents the said benefits
beyond 15 August 1996 when they did not render any
service to JPL beyond that date. These benefits are
given by law on the basis of the service actually
rendered by the employee, and in the particular case of
the service incentive leave, is granted as a motivation for
the employee to stay longer with the employer. There is
no cause for granting said incentive to one who has
already terminated his relationship with the employer.
The law in protecting the rights of the employees
authorizes neither oppression nor self-destruction of the
employer. t should be made clear that when the law tilts
the scale of justice in favor of labor, it is but recognition
of the inherent economic inequality between labor and
management. The intent is to balance the scale of
justice; to put the two parties on relatively equal
positions. There may be cases where the circumstances
warrant favoring labor over the interests of management
but never should the scale be so tilted if the result is an
injustice to the employer. Justitia nemini neganda est
(Justice is to be denied to none).
43

WHEREFORE, the petition is GRANTED N PART. The
Decision and Resolution of the Court of Appeals in CA-
G.R. SP No. 62631 are hereby MODFED. The award of
separation pay is deleted. Petitioner is ordered to pay
private respondents their 13th month pay commencing
from the date of employment up to 15 August 1996, as
well as service incentive leave pay from the second year
of employment up to 15 August 1996. No
pronouncement as to costs.
G.R. No. 117460 January 6, 1997
REPUBLC PLANTERS BANK now known as PNB-REPUBLC BANK,
petitioner,
vs.
NATONAL LABOR RELATONS COMMSSON and ANTONO G.
SANTOS, respondents.
BELLOSLLO, J.:
ANTONO G. SANTOS was employed by Republic
Planters Bank, now known as PNB-Republic Bank
(PNB-RB), for thirty-one (31) years and fifteen (15) days
occupying various positions. At the time of his retirement
on 31 May 1990 he was a Department Manager with a
monthly salary of P8,965.00 and accumulated leave
credits of two hundred and seventy-two (272) days. He
received a gratuity pay of P434,468.52 out of which
P20,615.62 was deducted for taxes due.
Santos filed the instant suit for underpayment of gratuity
pay, non-payment of accumulated sick and vacation
leaves, mid-year and year-end bonuses, financial
assistance, at the same time claiming damages and
attorney's fees.
The Labor Arbiter found for complainant Santos and this
finding was affirmed by the National Labor Relations
Commission (NLRC) on appeal.
PNB-RB alleges in this petition that the resolution of
NLRC is contrary to the evidence and existing
jurisprudence; that NLRC gravely abused its discretion
when it upheld the order of the Labor Arbiter awarding
P661,210.63 to Santos; and, that the award to Santos of
mid-year and year-end bonuses, moral and exemplary
damages and attorney's fees has no legal basis.
Petitioner argues that Santos is not entitled to the award
as he signed a Release, aiver and Quitclaim therefor
when he received his gratuity pay of P434,468.52.
We are not unaware that a quitclaim by an employee in
favor of his employer amounts to a valid and binding
compromise agreement between them.
1
An agreement
voluntarily entered into which represents a reasonable
settlement is binding on the parties and may not later be
disowned simply because of a change of mind.
2

On the other hand, we are not also unmindful of the
principle that quitclaims are ineffective to bar recovery
for the full measure of the worker's rights
3
and that
acceptance thereof does not amount to estoppel.
4

Generally, quitclaims by laborers are frowned upon as
contrary to public policy.
5
And the fact that the
consideration given in exchange thereof was very much
less than the amount claimed renders the quitclaim null
and void.
6
n the instant case, the total amount claimed
by Santos is P908,022.65 of which only P434,468.52
was received by him. Considering that the Release,
aiver and Quitclaim was signed by Santos under
protest as found by the Labor Arbiter and the NLRC, and
the difference between the amount claimed and that paid
cannot in any way be considered negligible, we deem it
proper to recompute and determine the exact amount of
the retirement benefits due private respondent. We
perceive the waiver under the facts of the case to
dangerously encroach on the entrenched domain of
public policy.
Petitioner invokes Periquet v. National Labor Relations
Commission
7
to thwart private respondent's claim.
Unfortunately, the case does not provide the desired
relief. n Periquet, the consideration for the quitclaim was
found to be credible and reasonable. n the case before
us, we are unable to make such finding for the difference
involved is considerably big and substantial. The total of
the claim is P908,022.65. Deducting therefrom the
amount of P434,468.52 already received by respondent
Santos leaves a difference of P473,554.13 which is even
more than what he had been given.
PNB-RB avers that the NLRC gravely abused its
discretion when it computed the gratuity pay of Santos at
P661,210.63 based on the salary rate of the next higher
rank on the theory that he acquired a vested right over it
pursuant to the 1971-1973 Collective Bargaining
Agreement (CBA). Petitioner posits that as the CBA had
long expired it could no longer be used as basis in
computing the gratuity pay of its retiring officers; instead,
the computation should be based on the practice and
policy of the bank effective at the time of the employee's
retirement.
We cannot agree. Not so long ago we resolved exactly
the same issues in Republic Planters Bank v. National
Labor Relations Commissions
8
which, coincidentally,
emanated from a similar set of facts. n that case,
Macario de Guzman resigned from PNB-RB on 3 June
1985. The following day he filed a complaint with the
Department of Labor and Employment for underpayment
of gratuity pay, underpayment of unused leaves and
non-payment of accrued leave credits. De Guzman
bewailed the erroneous computation of his gratuity pay
and the cash value of his accumulated leave credits, and
maintained that it should have been based on the
provisions of the 1971-1973 CBA instead of the 1982-
1985 CBA entered into between PNB-RB and its rank-
and-file employees. n finding for de Guzman we ruled

Prior to private respondent's resignation, there were
other managerial employees who resigned and/or retired
from petitioner's employ who received their
corresponding gratuity benefits and the cash value of
their accumulated leave credits pursuant to the
provisions of the old CBA of 1971-73 despite its
expiration in 1976. Among them were Simplicio Manalo
and Miguel Calimbas who resigned on 15 March 1977
and 15 July 1978, respectively. With such a practice and
policy, petitioner cannot refuse to pay private respondent
his gratuity benefits under the old CBA. Under Section
14(a), Rule 1 of the Rules and Regulations mplementing
Book V of the Labor Code, it is provided:
Sec. 14. Retirement Benefits. (a) An employee who is
retired pursuant to a bonafide retirement plan or in
accordance with the applicable individual or collective
agreement or established employer policy shall be
entitled to all the retirement benefits provided therein . . .
(Emphasis supplied).
The foregoing provision explicitly states that a company
practice or policy is a labor standard in determining the
retirement benefits of its employees.
The petitioner's theory that the computation of the
benefits of private respondent should be based on the
1982-85 CBA which was the one enforced at the time of
his resignation is untenable. Said CBA was entered into
by petitioner with its rank-and-file employees. Private
respondent is a managerial employee who, by express
provision of law, is excepted from the coverage of the
aforesaid contract. Private respondent was not a party
thereto and could not be bound thereby.
Since no new CBA had been entered into between the
managerial employees and petitioner upon the expiration
of the said 1971-73 CBA, private respondent has
acquired a vested right to the said established policy of
petitioner in applying the 1971-73 CBA to retiring or
resigning executives of managerial employees. Such
right cannot be curtailed or diminished.
9

We maintain the same dictum in the case before us.
PNB-RB insists on disowning any practice or policy of
granting gratuity pay to its retiring officers based on the
salary rate of the next higher rank. t admitted however
that it granted gratuity pay on the basis of the salary rate
of the next higher rank but only in the case of Simplicio
Manalo. As to other instances when it granted gratuity
pay based on the salary rate of the next higher rank,
PNB-RB explains that those were not voluntarily done
but were in lawful compliance with court orders.
PNB-RB asserts that our findings in the Republic
Planters Bank v. National Labor Relations Commission
10
were definitely erroneous as they
were contrary to law and the facts of the case. Thus, the
error should not be perpetuated.
11

A punctilious perusal of the records leads us to the same
conclusion, i.e., that PNB-RB has adopted the policy of
granting gratuity benefits to its retiring officers based on
the salary rate of the next higher rank. t continued to
adopt this practice even after the expiration of the 1971-
1973 CBA. The grant was consistent and deliberate
although petitioner knew fully well that it was not
required to give the benefits after the expiration of the
1971-1973 CBA. Under these circumstances, the
granting of the gratuity pay on the basis of the salary
rate of the rank next higher may be deemed to have
ripened into company practice or policy which can no
longer be peremptorily withdrawn.
12
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 mplementing P.D. No. 851 and Art. 100 of
the Labor Code which prohibit the diminution or
elimination by the employer of the employees' existing
benefits.
13
Leave credits should likewise be computed
based on the upgraded salary rate, i.e., the salary rate of
the next higher rank in conformity with the provisions of
the 1971-1973 CBA which in part read
Sec. 14. The Bank agrees to grant to each regular
supervisor employee upon his retirement, resignation or
separation without cause after July 1, 1969, the following
benefits:
a) Gratuity pay equivalent to one (1) month salary plus
the corresponding living allowance of the rank next
higher than the rank of such supervisor at the time of his
retirement, resignation or separation without cause, for
every year of service in the Bank, provided that the said
supervisor has at least five (5) years of continuous
service with the Bank.
b) The cash equivalent of the accumulated sick and
vacation leaves since the time of his initial employment
with the Bank.
14

Under this section, only the gratuity pay is expressly
entitled to be computed based on the salary rate of the
rank next higher. This however should not be interpreted
in isolation. n this instance, it may be worth to look into
the reasons which motivated the parties to enter into the
above agreement. The conversion of leave credits into
their cash equivalent is aimed primarily to encourage
workers to work continuously and with dedication for the
company. Companies offer incentives, such as the
conversion of the accumulated leave credits into their
cash equivalent, to lure employees to stay with the
company. Leave credits are normally converted into their
cash equivalent based on the last prevailing salary
received by the employee. Considering all these, the
accumulated leave credits should be converted based
on the upgraded salary of the retiree, which is the salary
rate of the rank next higher.
PNB-RB avers that it has sufficiently established that the
salary of an officer is pegged to a minimum or maximum
depending on his performance appraisal in accordance
with the Executive Compensation Salary Structure
15

(ECSS) effective 1 May 1987. Since Santos' latest
performance rating was only satisfactory, his gratuity pay
should be based on the minimum and not on the
maximum amount of the rate of the salary of the rank
next higher. n this regard, we quote with approval the
Comment of the Solicitor General that
Nothing in the provisions of the 1971 CBA from which
emanated the one rank higher policy indicates a
minimum or maximum range of the next higher rank.
nstead, what is provided is an unqualified one rank
higher concept. Petitioner is, therefore, precluded from
drawing a distinction where none has been stated in the
contract. Besides, assuming that an ambiguity does
exist, the same must be resolved in the light of Article
1702 of the Civil Code that: n case of doubt, the labor
legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer. Such
should be liberally construed in favor of the persons
intended to be benefited thereby.
Moreover, petitioner, by invoking the salary structure and
criteria for promotion as basis for determining the
amount of gratuity has confused the two distinct
concepts of gratuity and salary. Gratuity pay, unlike
salary, is paid to the beneficiary for the past services or
favor rendered purely out of the generosity of the giver
or grantor. Gratuity, therefore, is not intended to pay a
worker for actual services rendered or for actual
performance. t is a money benefit or bounty given to the
worker, the purpose of which is to reward employees
who have rendered satisfactory service to the company.
Salary, on the other hand, is a part of labor standard law
based on the actual amount of work rendered or the
number of days worked over the period of years. Hence,
petitioner's attempt to apply the salary structure to
determine gratuity would eradicate the very essence of a
gratuity award, and make it partake of the character of a
wage or salary given on the basis of actual work or
performance. Such
was never the intendment of the law and would run
counter to essential social justice.
16

Additionally, computing the gratuity pay based on the
performance rating of the retiring officer is a practice that
is very likely susceptible to abuse as he will be placed at
the mercy of the members of the performance appraisal
committee.
Petitioner argues that the claim of Santos for bonuses
corresponding to the years 1985, 1986 and mid-year of
1987 has already prescribed. This is correct. Article 291
of the Labor Code states in part
All money claims arising from employer-employee
relations accruing during the effectivity of this Code shall
be filed within three (3) years from the time the cause of
action accrued; otherwise they shall be forever barred.
Since Santos filed his complaint only on 12 July 1990,
his claim for 1985 (mid-year and year-end), 1986 (mid-
year and year-end), and 1987 (mid-year) bonuses
already prescribed. As regards bonuses for 1987 (year-
end), 1988 (mid-year and year-end), 1989 (mid-year and
year-end), and 1990 (mid-year), we agree with petitioner
that these should be based on the existing salary rate at
the time of their accrual. The record shows however that
in 1988 Santos was found guilty of an administrative
charge. Hence, in consonance with existing company
policy, the 1988 (mid-year and year-end) bonus should
be forfeited in favor of the Bank.
17

As regards the award of moral and exemplary damages,
as well as attorney's fees, we quote with approval the
Comment of private respondent thus
On the matter of moral and exemplary damages, the
same is a must considering that petitioner is guilty of bad
faith by its continued refusal to pay his claims despite
the final rulings of the Supreme Court in similar other
cases earlier cited. By refusing to abide by the doctrinal
pronouncements of the Highest Tribunal, petitioner has
shown to be anti-labor. This stubborn attitude is not only
contemptible but also contrary to morals, good customs
and public policy. Regardless of its own thinking on the
issues presented vis-a-vis the judicial pronouncements
already made, petitioner is duty-bound to respect the
Supreme Court decisions which have become part of the
law of the land.
Consequently, private respondent had suffered mental
anguish and sleepless nights and therefore, should be
entitled to moral damages. And to serve as example for
the public good so that others similarly inclined could be
dissuaded from adopting the same detestable practice,
petitioner should also be sanctioned in the form of
exemplary damages.
n addition, petitioner had continuously and openly
declared that it will continuously deny the existence of
said policy as it was based on erroneous assumption of
facts, and private respondent is not at all surprised that
petitioner has been throwing all kinds of blockade or
obstacle, so as to stop a snowball application of the
Supreme Court decision. Such act of the petitioner of
arrogantly defying a well-laid down jurisprudence on the
issue at hand (resulted) to the great prejudice of private
respondent's interest. The delay on the part of the
petitioner to rectify its error and grant private respondent
what is really due him must have certainly caused undue
damages on the part of the latter. Such defiant attitude
does not really set good example on how one should
abide by the decision of the highest tribunal of the land.
xxx xxx xxx
Private respondent has been dragged into this case
because petitioner refuses and arrogantly defies the
doctrine of stare decisis that had long set in, compelling
private respondent to litigate. n this regard, private
respondent's award for attorney's fees is proper.
18

ACCORDNGLY, the 30 June 1993 Decision of the
Labor Arbiter and the 30 August 1994 Resolution of the
National Labor Relations Commission are AFFRMED
with the modification that petitioner PNB-REPUBLC
BANK is ordered to pay private respondent Antonio G.
Santos the amount of P423,661.00, less the applicable
taxes, computed as follows:
Basic gratuity Day:
Applicable monthly rate (P15,840.00)
x length of service (31 years and
15 days) =
P15,840.00 x 31 years P491,040.00
P15,840.00 x 15/251 days 946.00

P491,986.00
Leave credits:
P15,840 x 272 x 12/251 205,983.00
Accrued Bonuses:
1987-year-end only P1,300.00
19

1988-forfeited (due adm. case)
1989-mid year/year-end 11,380.00
20

1990-mid-year only 8,965.00
21


21,645.00

P719,614.00
Less: Gratuity already received 434,468.00

Balance P285,146.00
Add: Moral damages 50,000.00
Exemplary damages 50,000.00
Attorney's fees 38,515.00

Total P423,661.00
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