REPUBLIC PLANTERS BANK now known as PNB REPUBLIC BANK

petitioner,vs.NLRCandANTONIOG.SANTOS,respondents.
FACTS:
ANTONIOG. SANTOSwasemployedbyRepublicPlantersBank, now
knownasPNBRepublicBank(PNBRB),forthirtyone(31)yearsandfifteen(15)
daysoccupyingvariouspositions.
Atthetimeofhisretirementon31May1990hewasaDepartmentManager
withamonthlysalaryof P8,965.00andaccumulatedleavecreditsoftwohundred
andseventytwo(272)days.
Hereceivedagratuitypayof P434,468.52outofwhich P20,615.62was
deductedfortaxesdue.
Santos filed the instant suit for underpayment of gratuity pay, non
payment of accumulated sick and vacation leaves, midyear and yearend
bonuses,financialassistance,atthesametimeclaimingdamagesandattorney's
fees.
TheLaborArbiterfoundforcomplainantSantos
OnAppeal,NLRCaffirmed.Hencethepetition.
ISSUE:
WhetherornotAntonioG.SantosisentitledtotheawardofP661,210.63
and, that the award to Santos of midyear and yearend bonuses, moral and
exemplarydamagesandattorney'sfeeshasnolegalbasis. Petitionerarguesthat
Santosisnotentitledtotheawardashesigneda Release,WaiverandQuitclaim
thereforwhenhereceivedhisgratuitypayofP434,468.52.
RULING:
Yes
Antonio G. Santos in entitled to the amount of P423,661.00, less the
applicabletaxes.
Aquitclaimbyanemployeeinfavorofhisemployeramountstoavalidand
bindingcompromiseagreementbetweenthem.Anagreementvoluntarilyentered

intowhichrepresentsareasonablesettlementisbindingonthepartiesandmaynot
laterbedisownedsimplybecauseofachangeofmind.
Ontheotherhand,Quitclaimsareineffectivetobarrecoveryforthefull
measure of the worker's rights and that acceptance thereof does not amount to
estoppel.Generally,quitclaimsbylaborersarefrowneduponascontrarytopublic
policy.Andthefactthattheconsiderationgiveninexchangethereofwasverymuch
lessthantheamountclaimedrendersthequitclaimnullandvoid.
Intheinstantcase,thetotalamountclaimedbySantosis P908,022.65of
which only P434,468.52 was received by him. Considering that the Release,
WaiverandQuitclaim wassignedbySantosunderprotestasfoundbytheLabor
ArbiterandtheNLRC,andthedifferencebetweentheamountclaimedandthatpaid
cannotinanywaybeconsiderednegligible,itispropertorecomputeanddetermine
theexactamountoftheretirementbenefitsdueprivaterespondent.
Inthecasebeforeus,wefindthedifferenceinvolvedisconsiderablybigand
substantial. The total of the claim is P908,022.65. Deducting therefrom the
amountofP434,468.52alreadyreceivedbyrespondentSantosleavesadifferenceof
P473,554.13whichisevenmorethanwhathehadbeengiven.
PNBRB avers that the NLRC gravely abused its discretion when it
computedthegratuitypayofSantosatP661,210.63basedonthesalaryrateofthe
nexthigherrankonthetheorythatheacquiredavestedrightoveritpursuanttothe
19711973CollectiveBargainingAgreement(CBA). Petitionerpositsthatasthe
CBAhadlongexpireditcouldnolongerbeusedasbasisincomputingthegratuity
payofitsretiringofficers;instead,thecomputationshouldbebasedonthepractice
andpolicyofthebankeffectiveatthetimeoftheemployee'sretirement.
InRepublicPlantersBankv.NationalLaborRelationsCommissionwhich,
coincidentally, emanated from a similar set of facts. In that case, Macario de
GuzmanresignedfromPNBRBon3June1985. Thefollowingdayhefileda
complaint with the Department of Labor and Employmentfor underpayment of
gratuity pay, underpaymentof unusedleaves andnonpayment ofaccrued leave
credits.DeGuzmanbewailedtheerroneouscomputationofhisgratuitypayandthe
cashvalueofhisaccumulatedleavecredits,andmaintainedthatitshouldhavebeen
based on the provisions of the 19711973 CBA instead of the 19821985 CBA
enteredintobetweenPNBRBanditsrankandfileemployees. Infindingforde
Guzmanweruled
Priortoprivaterespondent'sresignation,therewereothermanagerial
employeeswhoresignedand/orretiredfrompetitioner'semploywhoreceivedtheir
correspondinggratuitybenefitsandthecashvalueoftheiraccumulatedleavecredits

pursuanttotheprovisionsoftheoldCBAof197173despiteitsexpirationin1976.
AmongthemwereSimplicioManaloandMiguelCalimbaswhoresignedon15
March1977and15July1978,respectively.Withsuchapracticeandpolicy,
petitionercannotrefusetopayprivaterespondenthisgratuitybenefitsundertheold
CBA.UnderSection14(a),Rule1oftheRulesandRegulationsImplementing
BookVIoftheLaborCode,itisprovided:
Sec.14.RetirementBenefits.(a)Anemployeewhoisretiredpursuanttoa
bonafideretirementplanorinaccordancewiththeapplicableindividualor
collectiveagreementorestablishedemployerpolicyshallbeentitledtoallthe
retirementbenefitsprovidedthereinxxx."(Italicssupplied)

to give the benefits after the expiration of the 19711973 CBA. Under these
circumstances,thegrantingofthegratuitypayonthebasisofthesalaryrateofthe
ranknexthighermaybedeemedtohaveripenedintocompanypracticeorpolicy
whichcannolongerbeperemptorilywithdrawn.Anybenefitandsupplementbeing
enjoyed by the employees cannot be reduced, diminished, discontinued or
eliminated by the employer by virtue of Sec. 10 of the Rules and Regulations
ImplementingP.D.No.851andArt.100oftheLaborCodewhich prohibitthe
diminution or elimination by the employer of the employees' existing benefits.
Leavecreditsshouldlikewisebecomputedbasedontheupgradedsalaryrate,i.e.,
thesalaryrateofthenexthigherrankinconformitywiththeprovisionsofthe1971
1973CBAwhichinpartread

Theforegoingprovisionexplicitlystatesthatacompanypracticeorpolicyisalabor
standardindeterminingtheretirementbenefitsofitsemployees.

Section14.TheBankagreestogranttoeachregularsupervisoremployeeuponhis
retirement,resignationorseparationwithoutcauseafterJuly1,1969,thefollowing
benefits:

Thepetitioner'stheorythatthecomputationofthebenefitsofprivaterespondent
shouldbebasedonthe198285CBAwhichwastheoneenforcedatthetimeofhis
resignationisuntenable.SaidCBAwasenteredintobypetitionerwithitsrankand
fileemployees.Privaterespondentisamanagerialemployeewho,byexpress
provisionoflaw,isexceptedfromthecoverageoftheaforesaidcontract

a)Gratuitypayequivalenttoone(1)monthsalaryplusthecorrespondingliving
allowanceoftheranknexthigherthantherankofsuchsupervisoratthetimeofhis
retirement,resignationorseparationwithoutcause,foreveryyearofserviceinthe
Bank,providedthatthesaidsupervisorhasatleastfive(5)yearsofcontinuous
servicewiththeBank.

SincenonewCBAhadbeenenteredintobetweenthemanagerialemployeesand
petitionerupontheexpirationofthesaid197173CBA,privaterespondenthas
acquiredavestedrighttothesaidestablishedpolicyofpetitionerinapplyingthe
197173CBAtoretiringorresigningexecutivesofmanagerialemployees.Such
rightcannotbecurtailedordiminished.

b)Thecashequivalentoftheaccumulatedsickandvacationleavessincethetime
ofhisinitialemploymentwiththeBank.

Wemaintainthesamedictuminthecasebeforeus. PNBRBinsistson
disowning anypractice orpolicy ofgranting gratuitypay toits retiringofficers
basedonthesalaryrateofthenexthigherrank.Itadmittedhoweverthatitgranted
gratuitypayonthebasisofthesalaryrateofthenexthigherrankbutonlyinthe
caseofSimplicioManalo.Astootherinstanceswhenitgrantedgratuitypaybased
onthesalaryrateofthenexthigherrank,PNBRBexplainsthatthosewerenot
voluntarilydonebutwereinlawfulcompliancewithcourtorders.
Apunctiliousperusaloftherecordsleadsustothesameconclusion,i.e.,
thatPNBRBhasadoptedthepolicyofgrantinggratuitybenefitstoits retiring
officersbasedonthesalaryrateofthenexthigherrank. Itcontinuedtoadopt
this practice even after the expiration of the 19711973 CBA. The grant was
consistentanddeliberatealthoughpetitionerknewfullywellthatitwasnotrequired

Underthissection,onlythegratuitypayisexpresslyentitledtobecomputed
basedonthesalaryrateoftheranknexthigher.Inthisinstance,itmaybeworthto
lookintothereasonswhichmotivatedthepartiestoenterintotheaboveagreement.
The conversion of leave credits into their cash equivalent is aimed primarily to
encourage workers to work continuously and with dedication for the company.
Companiesofferincentives,suchastheconversionoftheaccumulatedleavecredits
into their cash equivalent, to lure employees to stay with the company. Leave
creditsarenormallyconvertedintotheircashequivalentbasedonthelastprevailing
salary received by the employee. Considering all these, the accumulated leave
creditsshouldbeconvertedbasedontheupgradedsalaryoftheretiree,whichisthe
salaryrateoftheranknexthigher.
PNBRBaversthatithassufficientlyestablishedthatthesalaryofanofficer
ispeggedtoaminimumormaximumdependingonhisperformanceappraisalin
accordancewiththeExecutiveCompensationSalaryStructure(ECSS)effective1
May 1987. Since Santos' latest performance rating was only satisfactory, his

gratuitypayshouldbebasedontheminimumandnotonthemaximumamountof
therateofthesalaryoftheranknexthigher.Inthisregard,wequotewithapproval
theCommentoftheSolicitorGeneralthat
Nothingintheprovisionsofthe1971CBAfromwhichemanatedtheonerank
higherpolicyindicatesaminimumormaximumrangeofthenexthigherrank.
Instead,whatisprovidedisanunqualifiedonerankhigherconcept.Petitioneris,
therefore,precludedfromdrawingadistinctionwherenonehasbeenstatedinthe
contract.Besides,assumingthatanambiguitydoesexist,thesamemustberesolved
inthelightofArticle1702oftheCivilCodethat:Incaseofdoubt,thelabor
legislationandalllaborcontractsshallbeconstruedinfavorofthesafetyanddecent
livingforthelaborer.Suchshouldbeliberallyconstruedinfavorofthepersons
intendedtobebenefitedthereby.
Moreover,petitioner,byinvokingthesalarystructureandcriteriaforpromotionas
basisfordeterminingtheamountofgratuityhasconfusedthetwodistinctconcepts
ofgratuityandsalary.Gratuitypay,unlikesalary,ispaidtothebeneficiaryfor
thepastservicesorfavorrenderedpurelyoutofthegenerosityofthegiveror
grantor.Gratuity,therefore,isnotintendedtopayaworkerforactualservices
renderedorforactualperformance.Itisamoneybenefitorbountygivento
theworker,thepurposeofwhichistorewardemployeeswhohaverendered
satisfactoryservicetothecompany.Salary,ontheotherhand,isapartof
laborstandardlawbasedontheactualamountofworkrenderedorthe
numberofdaysworkedovertheperiodofyears.Hence,petitioner'sattemptto
applythesalarystructuretodeterminegratuitywoulderadicatetheveryessenceofa
gratuityaward,andmakeitpartakeofthecharacterofawageorsalarygivenonthe
basisofactualworkorperformance.Suchwasnevertheintendmentofthelawand
wouldruncountertoessentialsocialjustice.
Additionally,computingthegratuitypaybasedontheperformanceratingof
theretiringofficerisapracticethatisverylikelysusceptibletoabuseashewillbe
placedatthemercyofthemembersoftheperformanceappraisalcommittee.
AstotheClaimofSantosforbonusescorrespondingtotheyears1985,
1986andmidyearof1987hasalreadyprescribed.Thisiscorrect.Article291of
theLaborCode,
Allmoneyclaimsarisingfromemployeremployeerelationsaccruingduringthe
effectivityofthisCodeshallbefiledwithinthree(3)yearsfromthetimethecauseof
actionaccrued;otherwisetheyshallbeforeverbarred.

SinceSantosfiledhiscomplaintonlyon12July1990,hisclaimfor1985
(midyear and yearend), 1986 (midyear and yearend), and 1987 (midyear)
bonusesalreadyprescribed. Asregardsbonusesfor1987(yearend),1988(mid
yearandyearend),1989(midyearandyearend),and1990(midyear),weagree
withpetitionerthattheseshouldbebasedontheexistingsalaryrateatthetimeof
theiraccrual.Therecordshowshoweverthatin1988Santoswasfoundguiltyofan
administrative charge. Hence, in consonance with existing company policy, the
1988(midyearandyearend)bonusshouldbeforfeitedinfavoroftheBank.
Onthematterofmoralandexemplarydamages,thesameisamustconsideringthat
petitionerisguiltyofbadfaithbyitscontinuedrefusaltopayhisclaimsdespitethe
finalrulingsoftheSupremeCourtinsimilarothercasesearliercited,petitionerhas
showntobeantilabor.Consequently,privaterespondenthadsufferedmental
anguishandsleeplessnightsandtherefore,shouldbeentitledtomoraldamages.
Basicgratuitypay:
Applicablemonthlyrate(P15,840.00)xlengthofservice(31yearsand15days)=
P15,840.00x31years..........P491,040.00
P15,840x15/251days...........P946.00
P491,986.00
LeaveCredits:
P15,840x272x12/251205,983.00
AccruedBonuses:
1987yearendonly..................1,300.00
1988forfeited(dueadm.case).
1989midyear/yearend...........11,380.00
1990midyearonly..................8,965.00
21,645.00
P719,614.00
Less:Gratuityalreadyreceived......P434,468.00
Balance:...............................285,146.00
Add:Moraldamages.....................50,000.00
Exemplarydamages..............50,000.00
Attorney'sFees.....................38,515.00
Total..............................................P423,661.00