National Waterworks and Sewerage Authority v NWSA Consolidated Unions, Et

Al
Date: August 31, 1964
Ponente: Bautista Angelo

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Facts:
NWSA (P) is a GOCC governed by RA 1383. NWSA Consolidated Unions (R) are
various labor organizations composed of laborers and employees of the NAWASA.
The intervenors are Centeno, et. al.
CIR conducted a hearing regarding the controversy between NWSA and NWSA
Consolidated Unions on the following:
Implementation of the 40-Hour Week Law (RA 1880); alleged violations of the
collective bargaining agreement dated December 28, 1956 concerning "distress pay";
minimum wage of P5.25; promotional appointments and filling of vacancies of newly
created positions; additional compensation for night work; wage increases to some
laborers and employees; and strike duration pay.
NWSA Consolidated Unions also raised the issue of whether the 25% additional
compensation for Sunday work should be included in computing the daily wage and
whether, in determining the daily wage of a monthly-salaried employee, the salary
should be divided by 30 days.
Intervenors issues: Additional compensation for night work and new demand for
overtime pay in favor of Jesus Centeno, Cesar Cabrera, Feliciano Duiguan, Cecilio
Remotigue, and other employees receiving P4,200.00 per annum or more.
Respondent Court ruled as follows:
The NAWASA is an agency not performing governmental functions and, therefore, is
liable to pay additional compensation for work on Sundays and legal holidays
conformably to Commonwealth Act No. 444, known as the Eight-Hour Labor Law,
even if said days should be within the staggered five work days authorized by the
President.
The intervenors do not fall within the category of "managerial employees" as
contemplated in Republic Act 2377 and so are not exempt from the coverage of the
Eight-Hour Labor Law.
Those intervenors attached to the General Auditing Office and the Bureau of Public
Works come within the purview of Commonwealth Act No. 444.
The computation followed by NAWASA in computing overtime compensation is
contrary to Commonwealth Act 444.
The undertime of a worker should not be set-off against the worker in determining
whether the latter has rendered service in excess of eight hours for that day.
In computing the daily wage of those employed on daily basis, the additional 25%
compensation for Sunday work should be included.
The computation used by the NAWASA for monthly salaried employees to wit,
dividing the monthly basic pay by 30 is erroneous.
The minimum wage awarded by respondent court way back on November 25, 1950 in
Case No. 359-V entitled MWD Workers Union v. Metropolitan Water District, applies
even to those who were employed long after the promulgation of the award and even
if their workers are hired only as temporary, emergency and casual workers for a
definite period and for a particular project.
The authority granted to NAWASA by the President to stagger the working days of its
workers should be limited exclusively to those specified in the authorization and
should not be extended to others who are not therein specified.

10. Under the collective bargaining agreement entered into between the NAWASA and
respondent unions on December 28, 1956, as well as under Resolution No. 29, series
of 1957 of the Grievance Committee, even those who work outside the sewerage
chambers should be paid 25% additional compensation as "distress pay."
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Issues, Held & Ratio:

I: WON NAWASA is performing governmental functions and, therefore, essentially a
service agency of the government
H: No. NAWASA, though a public corporation, does not perform governmental
functions. It performs proprietary functions, and hence, it is covered by
Commonwealth Act No. 444.
The National Waterworks and Sewerage Authority was not created for purposes of
local government. It was created for the "purpose of consolidating and centralizing all
waterworks, sewerage and drainage system in the Philippines under one control and
direction and general supervision."
Its functions are but mere ministrant functions of government which are aimed at
advancing the general interest of society.
I: WON NAWASA is a public utility and, therefore, exempted from paying additional
compensation for work on Sundays and legal holidays
H: NAWASA is a public utility. Although pursuant to Section 4 of Commonwealth Act
444 it is not obliged to pay an additional sum of 25% to its laborers for work done on
Sundays and legal holidays, YET IT MUST PAY said additional compensation by
virtue of the contractual obligation it assumed under the collective bargaining
agreement.
NAWASA is a public utility because its primary function is to construct, maintain and
operate water reservoirs and waterworks for the purpose of supplying water to the
inhabitants, as well as consolidate and centralize all water supplies and drainage
systems in the Philippines.
While under Commonwealth Act No. 444 a public utility is not required to pay
additional compensation to its employees and workers for work done on Sundays and
legal holidays, there is, however, no prohibition for it to pay such additional
compensation if it voluntarily agrees to do so. NAWASA committed itself to pay this
additional compensation. It must pay not because of compulsion of law but because
of contractual obligation. In the collective bargaining agreement entered into between
the NAWASA and respondent unions it was agreed that all existing benefits enjoyed
by the employees and laborers prior to its effectivity shall remain in force and shall
form part of the agreement, among which certainly is the 25% additional
compensation for work on Sundays and legal holidays therefore enjoyed by said
laborers and employees.
I: WON the intervenors are "managerial employees" within the meaning of Republic
Act 2377 and, therefore, not entitled to the benefits of Commonwealth Act No. 444, as
amended
H: No. The intervenors are not "managerial employees" as defined in Republic Act
No. 2377, hence they are covered by Commonwealth Act No. 444 (Eight Hour Labor
Law), as amended.
Discussion on Managerial Employees:
Section 2, RA 2377: This Act shall apply to all persons employed in any industry or
occupation, whether public or private with the exception of farm laborers, laborers
who prefer to be paid on piece work basis, managerial employees, outside sales
personnel, domestic servants, persons in the personal service of another and
members of the family of the employer working for him. The term "managerial

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employee" in this Act shall mean either (a) any person whose primary duty consists of
the management of the establishment in which he is employed or of a customarily
recognized department or subdivision thereof, or (b) ally officer or member of the
managerial staff.
Distinguishing Characteristic of Managerial Employees (RA 2377 Explanatory Note):
He is not subject to the rigid observance of regular office hours. The true worth of his
service does not depend so much on the time he spends in office but more on the
results he accomplishes. In fact, he is free to go out of office anytime.
Reason behind exemption: The philosophy behind the exemption of managerial
employees from the 8-Hour Labor Law is that such workers are not usually employed
for every hour of work but their compensation is determined considering their special
training, experience or knowledge which requires the exercise of discretion and
independent judgment, or perform work related to management policies or general
business operations along specialized or technical lines. For these workers it is not
feasible to provide a fixed hourly rate of pay or maximum hours of labor.
The intervenors are holding position of responsibility. One of them is the Secretary of
the Board of Directors. Another is the private secretary of the general manager.
Another is a public relations officer, and many other chiefs of divisions or sections and
others are supervisors and overseers. Respondent court, however, after examining
carefully their respective functions, duties and responsibilities found that their primary
duties do not bear any direct relation with the management of the NAWASA, nor do
they participate in the formulation of its policies nor in the hiring and firing of its
employees. The chiefs of divisions and sections are given ready policies to execute
and standard practices to observe for their execution. Hence, it concludes, they have
little freedom of action, as their main function is merely to carry out the company's
orders, plans and policies.
As a matter of fact, the intervenors are required to observe working hours and record
their time work and are not free to come and go to their offices, nor move about at
their own discretion.
I: WON respondent Court of Industrial Relations has jurisdiction to adjudicate
overtime pay considering that this issue was not among the demands of respondent
union in the principal case but was merely dragged into the case by the intervenors
H: Yes. The Court of Industrial Relations has jurisdiction to adjudicate overtime pay in
the case at bar there being an employer-employee relationship existing between
intervenors and petitioner.
SC has held time and again that disputes that call for the application of the 8-Hour
Labor Law are within the jurisdiction of the Court of Industrial Relations if they arise
while the employer-employee relationship still exists, it is clear that the matter subject
of intervention comes within the jurisdiction of respondent court.
In labor disputes technicalities of procedure should as much as possible be avoided
not only in the interest of labor but to avoid multiplicity of action.
I: WON those attached to the General Auditing Office and the Bureau of Public Works
come within the purview of Commonwealth Act No. 444, as amended
H: The GAO employees assigned to work in the NAWASA cannot be regarded as
employees of the NAWASA on matters relating to compensation. They are
employees of the national government and are not covered by the Eight-Hour Labor
Law. The same may be said of the employees of the Bureau of Public Works
assigned to work in the NAWASA.
Precedent: National Marketing Corporation, et al. v. Court of Industrial Relations
which ruled that members of audition force are not employees of now defunct
PRISCO but of the Auditor General, the one who appointed and supervised them.

6.

I: In determining whether one has worked in excess of eight hours, WON the
undertime for that day should be set off
H: No. The method used by the NAWASA in off-setting the overtime with the
undertime and at the same time charging said undertime to the accrued leave is
unfair.

This is unfair for under such method the employee is made to pay twice for his
undertime because his leave is reduced to that extent while he was made to pay for it
with work beyond the regular working hours. The proper method should be to deduct
the undertime from the accrued leave but pay the employee the overtime to which he
is entitled. This method also obviates the irregular schedule that would result if the
overtime should be set off against the undertime for that would place the schedule for
working hours dependent on the employee.
7. In computing the daily wage, WON the additional compensation for Sunday work
should be included
H: Yes. The differential pay for Sundays is a part of the legal wage. Hence, it was
correctly included in computing the weekly wages of those employees and laborers
who worked seven days a week and were regularly receiving the 25% salary
differential for a period of three months prior to the implementation of Republic Act
1880. This is so even if petitioner is a public utility in view of the contractual obligation
it has assumed on the matter.
8. I: What is the correct method to determine the equivalent daily wage of a monthly
salaried employee, especially in a firm which is a public utility?
H: In the computation of the daily wages of employees paid by the month distinction
should be made between government employees like the GAO employees and those
who are not. The computation for government employees is governed by Section 254
of the Revised Administrative Code (i.e. in making payments for part of a month, the
amount to be paid for each day shall be determined by dividing the monthly pay. Into
as many parts as there are days in the particular month) while for others the correct
computation is the monthly salary divided by the actual number of working hours in
the month or the regular monthly compensation divided by the number of working
days in the month.
9. I: Considering that the payment of night compensation is not by virtue of any statutory
provision but emanates only from an award of respondent Court of Industrial
Relations, whether the same can be made retroactive and cover a period prior to the
promulgation of the award
H: Yes. The Court of Industrial Relations did not err in ordering the payment of night
compensation from the time such services were rendered. The laborer must be
compensated for nighttime work as of the date the same was rendered.

It is of common occurrence that a working man who has already rendered night time
service takes him a long time before he can muster enough courage to confront his
employer with the demand for payment for it for fear of possible reprisal. It happens
that many months or years are allowed to pass by before he could be made to
present such claim against his employer, and so it is neither fair nor just that he be
deprived of what is due him simply because of his silence for fear of losing the means
of his livelihood.
10. I: WON minimum wage fixed and awarded by respondent Court of Industrial Relations
in another case (MWD Workers Union v. MWD CIR Case No. 359-V) applies to those
employed long after the promulgation thereof, whether hired as temporary,
emergency and casual workers for a definite period and for a specific project

H: Yes. The rates of minimum pay fixed in CIR Case No. 359-V are applicable not
only to those who were already in the service as of the date of the decision but also to
those who were employed subsequent to said date.
11. I: How should the collection bargaining agreement of December 28, 1956 and
Resolution No. 29, series of 1957 of the Grievance Committee be interpreted and
construed insofar as the stipulations therein contained relative to "distress pay" is
concerned?
H: All the laborers, whether assigned to the sewerage division or not who are actually
working inside or outside the sewerage chambers are entitled to distress pay.

CBA: Because of the peculiar nature of the function of those employees and laborers
of the Sewerage Division who actually work in the sewerage chambers, causing
"unusual distress" to them, they shall receive extra compensation equivalent to
twenty-five (25%) of their basic wage.

November 25, 1957 Agreement between labor and management: "Distress

Management agreed to pay effective October 1, 1956 25% additional compensation
for those who actually work in and outside sewerage chambers in accordance with
Resolution No. 9 (explaining CBA stipulation) of the Grievance Committee."

SC finds that those who are entitled to the distress pay are those employees and
laborers who work in the sewerage chambers whether they belong to the sewerage
division or not, and by sewerage chambers should be understood to mean as the
surroundings where the work is actually done, not necessarily "inside the sewerage
chambers." It is clear then that all the laborers whether of the sewerage division or not
assigned to work in and outside the sewerage chambers and suffer in unusual
distress because of the nature of their work are entitled to the extra compensatory.
And this conclusion is further bolstered by the findings of the industrial court regarding
the main activities of the sewerage division.
o Activities of sewerage division: (a) cooperation of the sewerage pumping stations; (b)
cleaning and maintenance of sewer mains; and (c) installation and repairs of house
sewer connections.
o The wet pits, trenches, manholes, which are full of sewage matters, are filthy sources
of germs and different diseases. They emit foul and filthy odor dangerous to health.
Those working in such places and exposed directly to the distress of contamination.
12. I: WON, under the first indorsement of the President of the Philippines dated August
12, 1957, which authorizes herein petitioner to stagger the working days of its
employees and laborers, those whose services are indispensably continuous
throughout the year may be staggered in the same manner as the pump, valve, filter
and chlorine operators, guards, watchmen, medical services, and those attached to
the recreational facilities.
H: There is no valid reason to disturb the finding of the Court of Industrial Relations
that the work of the personnel in the construction, sewerage, maintenance,
machineries and shops of petitioner is not continuous as to require staggering.

In resolving this issue, the industrial court justified the staggering of the work days of
those holding positions as pump operators, valve operators, filter operators, chlorine
operators, watchmen and guards, and those in the medical service for the reason that
the same was made pursuant to the authority granted by the President who in the
valid exercise of the powers conferred upon him by Republic Act No. 1880 could
prescribe the working days of employees and laborers in government-owned and
controlled corporations depending upon the exigencies of the service. The court,
however, stated that the staggering should not apply to the personnel in the
construction, sewerage, maintenance, machineries and shops because they work
below 365 days a year and their services are not continuous to require staggering.

SAN JUAN DE DIOS HOSPITAL EMPLOYEES ASSOCIATION-AFW et. al., petitioners, vs.NATIONAL LABOR
RELATIONS COMMISSION, et. al., respondents

G.R. No. 126383

November 28, 1997

FACTS:

Then Labor Secretary Franklin M. Drilon issued Policy Instruction No. 4 in line with R.A. 5901 which
requires that the covered hospital workers who used to work 7 days a week should be paid for such
number of days for working only 5 days or 40 hours a week.

Petitioners filed a complaint for the expeditious implementation and payment by respondent Juan De
Dios Hospital . The Labor Arbiter and NLRC both dismissed their complaints and MR was also denied.
Hence, this petition.

In said Policy Instruction, it was provided that: The Labor Code in its Article 83 adopts and
incorporates the basic provisions of RA 5901 and retains its spirit and intent which is to shorten the
workweek of covered hospital personnel and at the same time assure them of a full weekly wage.

ISSUE:
WON the intent of Art. 83, LCP, is that persons in subject hospitals and clinics who have completed the
40-hour/5-day workweek in any given workweek are entitled to a full weekly wage for seven days.

HELD:
No.
What Article 83 merely provides are: (1) the regular office hour of eight hours a day, five days per week
for health personnel, and (2) where the exigencies of service require that health personnel work for six
days or forty-eight hours then such health personnel shall be entitled to an additional compensation of
at least thirty percent of their regular wage for work on the sixth day.

There is nothing in the law that supports then Secretary of Labors assertion that personnel in subject
hospitals and clinics are entitled to a full weekly wage for seven (7) days if they have completed the 40hour/5-day workweek in any given workweek.

Also, if petitioners are entitled to two days off with pay, then there appears to be no sense at all why
Section 15 of the implementing rules grants additional compensation equivalent to the regular rate plus
at least twenty-five percent thereof for work performed on Sunday to health personnel, or an
additional straight-time pay which must be equivalent at least to the regular rate for work performed
in excess of forty hours a week.

This is a petition for certiorari to set aside the order dated November 10, 1979, of respondent Deputy Minister
of Labor, Amado G. Inciong, in NLRC case No. RB-IV-1561-76 entitled "Insular Bank of Asia and America
Employees' Union (complainant-appellee), vs. Insular Bank of Asia and America" (respondent-appellant), the
dispositive portion of which reads as follows:
t.hqw

xxx xxx xxx

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the
National Labor Relations Commission dated 20 June 1978 be, as it is hereby, set aside

and a new judgment. promulgated dismissing the instant case for lack of merit (p. 109
rec.).
The antecedent facts culled from the records are as follows:

Respondent bank did not appeal from the said decision. Instead, it complied with the order of Arbiter Ricarte T.
Soriano by paying their holiday pay up to and including January, 1976.
On December 16, 1975, Presidential Decree No. 850 was promulgated amending, among others, the
provisions of the Labor Code on the right to holiday pay to read as follows:
t.hqw

On June 20, 1975, petitioner filed a complaint against the respondent bank for the payment of holiday pay
before the then Department of Labor, National Labor Relations Commission, Regional Office No. IV in Manila.
Conciliation having failed, and upon the request of both parties, the case was certified for arbitration on July 7,
1975 (p. 18, NLRC rec.

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wages
during regular holidays, except in retail and service establishments regularly employing
less than ten (10) workers;

On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a decision in the above-entitled case, granting
petitioner's complaint for payment of holiday pay. Pertinent portions of the decision read:

(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

t.hqw

xxx xxx xxx

The records disclosed that employees of respondent bank were not paid their wages
on unworked regular holidays as mandated by the Code, particularly Article 208, to
wit:

(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 the thirtieth of December, and the day
designated by law for holding a general election.

t.hqw

Art. 208. 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 10 workers.
(b) The term "holiday" as used in this chapter, shall include:
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 the thirtieth of
December and the day designated by law for holding a general
election.

Accordingly, on February 16, 1976, by authority of Article 5 of the same Code, the Department of Labor (now
Ministry of Labor) promulgated the rules and regulations for the implementation of holidays with pay. The
controversial section thereof reads:
t.hqw

Sec. 2. Status of employees paid by the month. Employees who are uniformly paid
by the month, irrespective of the number of working days therein, with a salary of not
less than the statutory or established minimum wage shall be presumed to be paid for
all days in the month whether worked or not.
For this purpose, the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve" (italics supplied).
On April 23, 1976, Policy Instruction No. 9 was issued by the then Secretary of Labor (now Minister)
interpreting the above-quoted rule, pertinent portions of which read:
t.hqw

xxx xxx xxx

xxx xxx xxx
This conclusion is deduced from the fact that the daily rate of pay of the bank
employees was computed in the past with the unworked regular holidays as excluded
for purposes of determining the deductible amount for absences incurred Thus, if the
employer uses the factor 303 days as a divisor in determining the daily rate of monthly
paid employee, this gives rise to a presumption that the monthly rate does not include
payments for unworked regular holidays. The use of the factor 303 indicates the
number of ordinary working days in a year (which normally has 365 calendar days),
excluding the 52 Sundays and the 10 regular holidays. The use of 251 as a factor (365
calendar days less 52 Saturdays, 52 Sundays, and 10 regular holidays) gives rise
likewise to the same presumption that the unworked Saturdays, Sundays and regular
holidays are unpaid. This being the case, it is not amiss to state with certainty that the
instant claim for wages on regular unworked holidays is found to be tenable and
meritorious.
WHEREFORE, judgment is hereby rendered:
(a) xxx xxxx xxx
(b) Ordering respondent to pay wages to all its employees for all regular h(olidays
since November 1, 1974 (pp. 97-99, rec., underscoring supplied).

The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily
employees. In the case of monthly, only those whose monthly salary did not yet include
payment for the ten (10) paid legal holidays are entitled to the benefit.
Under the rules implementing P.D. 850, this policy has been fully clarified to eliminate
controversies on the entitlement of monthly paid employees, The new determining rule
is this: If the monthly paid employee is receiving not less than P240, the maximum
monthly minimum wage, and his monthly pay is uniform from January to December, he
is presumed to be already paid the ten (10) paid legal holidays. However, if deductions
are made from his monthly salary on account of holidays in months where they occur,
then he is still entitled to the ten (10) paid legal holidays. ..." (emphasis supplied).
Respondent bank, by reason of the ruling laid down by the aforecited rule implementing Article 94 of the Labor
Code and by Policy Instruction No. 9, stopped the payment of holiday pay to an its employees.
On August 30, 1976, petitioner filed a motion for a writ of execution to enforce the arbiter's decision of August
25, 1975, whereby the respondent bank was ordered to pay its employees their daily wage for the unworked
regular holidays.
On September 10, 1975, respondent bank filed an opposition to the motion for a writ of execution alleging,
among others, that: (a) its refusal to pay the corresponding unworked holiday pay in accordance with the

award of Labor Arbiter Ricarte T. Soriano dated August 25, 1975, is based on and justified by Policy Instruction
No. 9 which interpreted the rules implementing P. D. 850; and (b) that the said award is already repealed by
P.D. 850 which took effect on December 16, 1975, and by said Policy Instruction No. 9 of the Department of
Labor, considering that its monthly paid employees are not receiving less than P240.00 and their monthly pay
is uniform from January to December, and that no deductions are made from the monthly salaries of its
employees on account of holidays in months where they occur (pp. 64-65, NLRC rec.).
On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of issuing a writ of execution, issued an order
enjoining the respondent bank to continue paying its employees their regular holiday pay on the following
grounds: (a) that the judgment is already final and the findings which is found in the body of the decision as
well as the dispositive portion thereof is res judicata or is the law of the case between the parties; and (b) that
since the decision had been partially implemented by the respondent bank, appeal from the said decision is no
longer available (pp. 100-103, rec.).
On November 17, 1976, respondent bank appealed from the above-cited order of Labor Arbiter Soriano to the
National Labor Relations Commission, reiterating therein its contentions averred in its opposition to the motion
for writ of execution. Respondent bank further alleged for the first time that the questioned order is not
supported by evidence insofar as it finds that respondent bank discontinued payment of holiday pay beginning
January, 1976 (p. 84, NLRC rec.).
On June 20, 1978, the National Labor Relations Commission promulgated its resolution en banc dismissing
respondent bank's appeal, the dispositive portion of which reads as follows:
t.hqw

In view of the foregoing, we hereby resolve to dismiss, as we hereby dismiss,

respondent's appeal; to set aside Labor Arbiter Ricarte T. Soriano's order of 18 October
1976 and, as prayed for by complainant, to order the issuance of the proper writ of
execution (p. 244, NLRC rec.).
Copies of the above resolution were served on the petitioner only on February 9, 1979 or almost eight. (8)
months after it was promulgated, while copies were served on the respondent bank on February 13, 1979.
On February 21, 1979, respondent bank filed with the Office of the Minister of Labor a motion for
reconsideration/appeal with urgent prayer to stay execution, alleging therein the following: (a) that there
is prima facie evidence of grave abuse of discretion, amounting to lack of jurisdiction on the part of the
National Labor Relations Commission, in dismissing the respondent's appeal on pure technicalities without
passing upon the merits of the appeal and (b) that the resolution appealed from is contrary to the law and
jurisprudence (pp. 260-274, NLRC rec.).
On March 19, 1979, petitioner filed its opposition to the respondent bank's appeal and alleged the following
grounds: (a) that the office of the Minister of Labor has no jurisdiction to entertain the instant appeal pursuant
to the provisions of P. D. 1391; (b) that the labor arbiter's decision being final, executory and unappealable,
execution is a matter of right for the petitioner; and (c) that the decision of the labor arbiter dated August 25,
1975 is supported by the law and the evidence in the case (p. 364, NLRC rec.).
On July 30, 1979, petitioner filed a second motion for execution pending appeal, praying that a writ of
execution be issued by the National Labor Relations Commission pending appeal of the case with the Office of
the Minister of Labor. Respondent bank filed its opposition thereto on August 8, 1979.
On August 13, 1979, the National Labor Relations Commission issued an order which states:

Hence, this petition for certiorari charging public respondent Amado G. Inciong with abuse of discretion
amounting to lack or excess of jurisdiction.
The issue in this case is: whether or not the decision of a Labor Arbiter awarding payment of regular holiday
pay can still be set aside on appeal by the Deputy Minister of Labor even though it has already become final
and had been partially executed, the finality of which was affirmed by the National Labor Relations
Commission sitting en banc, on the basis of an Implementing Rule and Policy Instruction promulgated by the
Ministry of Labor long after the said decision had become final and executory.
WE find for the petitioner.
I
WE agree with the petitioner's contention that Section 2, Rule IV, Book III of the implementing rules and Policy
Instruction No. 9 issued by the then Secretary of Labor are null and void since in the guise of clarifying the
Labor Code's provisions on holiday pay, they in effect amended them by enlarging the scope of their exclusion
(p. 1 1, rec.).
Article 94 of the Labor Code, as amended by P.D. 850, provides:

t.hqw

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. ...
The coverage and scope of exclusion of the Labor Code's holiday pay provisions is spelled out under Article
82 thereof which reads:
t.hqw

Art. 82. Coverage. The provision of this Title shall apply to employees in all
establishments and undertakings, whether for profit or not, but not to government
employees, managerial employees, field personnel members of the family of the
employer who are dependent on him for support domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
... (emphasis supplied).
From the above-cited provisions, it is clear that monthly paid employees are not excluded from the benefits of
holiday pay. However, the implementing rules on holiday pay promulgated by the then Secretary of Labor
excludes monthly paid employees from the said benefits by inserting, under Rule IV, Book Ill of the
implementing rules, Section 2, which provides that: "employees who are uniformly paid by the month,
irrespective of the number of working days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month whether worked or not. "

t.hqw

The Chief, Research and Information Division of this Commission is hereby directed to
designate a Socio-Economic Analyst to compute the holiday pay of the employees of
the Insular Bank of Asia and America from April 1976 to the present, in accordance with
the Decision of the Labor Arbiter dated August 25, 1975" (p. 80, rec.).
On November 10, 1979, the Office of the Minister of Labor, through Deputy Minister Amado G. Inciong, issued
an order, the dispositive portion of which states:
t.hqw

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the
National Labor Relations Commission dated 20 June 1978 be, as it is hereby, set aside
and a new judgment promulgated dismissing the instant case for lack of merit (p. 436,
NLRC rec.).

Public respondent maintains that "(T)he rules implementing P. D. 850 and Policy Instruction No. 9 were issued
to clarify the policy in the implementation of the ten (10) paid legal holidays. As interpreted, 'unworked' legal
holidays are deemed paid insofar as monthly paid employees are concerned if (a) they are receiving not less
than the statutory minimum wage, (b) their monthly pay is uniform from January to December, and (c) no
deduction is made from their monthly salary on account of holidays in months where they occur. As explained
in Policy Instruction No, 9, 'The ten (10) paid legal holidays law, to start with, is intended to benefit principally
daily paid employees. In case of monthly, only those whose monthly salary did not yet include payment for the
ten (10) paid legal holidays are entitled to the benefit' " (pp. 340-341, rec.). This contention is untenable.

It is elementary in 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. In the case at bar, the provisions of the Labor
Code on the entitlement to the benefits of holiday pay are clear and explicit - it provides for both the coverage
of and exclusion from the benefits. In Policy Instruction No. 9, the then Secretary of Labor went as far as to
categorically state that the benefit is principally intended for daily paid employees, when the law clearly states
that every worker shall be paid their regular holiday pay. This is a flagrant violation of the mandatory directive
of Article 4 of the Labor Code, which states that "All doubts in the implementation and interpretation of the
provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor."
Moreover, it shall always be presumed that the legislature intended to enact a valid and permanent statute
which would have the most beneficial effect that its language permits (Orlosky vs. Haskell, 155 A. 112.)

made clear that where an administrative order betrays

inconsistency or repugnancy to the provisions of the Act, 'the
mandate of the Act must prevail and must be followed. Justice
Barrera, speaking for the Court in Victorias Milling inc. vs.
Social Security Commission, citing Parker as well as Davis did
tersely sum up the matter thus: "A rule is binding on the Courts
so long as the procedure fixed for its promulgation is followed
and its scope is within the statutory authority granted by the
legislature, even if the courts are not in agreement with the
policy stated therein or its innate wisdom. ... On the other hand,
administrative interpretation of the law is at best merely
advisory, for it is the courts that finally determine chat the law
means."

Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority granted by Article 5 of the
Labor Code authorizing him to promulgate the necessary implementing rules and regulations.

"It cannot be otherwise as the Constitution limits the authority of

the President, in whom all executive power resides, to take care
that the laws be faithfully executed. No lesser administrative
executive office or agency then can, contrary to the express
language of the Constitution assert for itself a more extensive
prerogative. Necessarily, it is bound to observe the
constitutional mandate. There must be strict compliance with
the legislative enactment. Its terms must be followed the statute
requires adherence to, not departure from its provisions. No
deviation is allowable. In the terse language of the present
Chief Justice, an administrative agency "cannot amend an act
of Congress." Respondents can be sustained, therefore, only if
it could be shown that the rules and regulations promulgated by
them were in accordance with what the Veterans Bill of Rights
provides" (Phil. Apparel Workers Union vs. National Labor
Relations Commission, supra, 463, 464, citing Teozon vs.
Members of the Board of Administrators, PVA 33 SCRA 585;
see also Santos vs. Hon. Estenzo, et al, 109 Phil. 419; Hilado
vs. Collector of Internal Revenue, 100 Phil. 295; Sy Man vs.
Jacinto & Fabros, 93 Phil. 1093; Olsen & Co., Inc. vs. Aldanese
and Trinidad, 43 Phil. 259).

Public respondent vehemently argues that the intent and spirit of the holiday pay law, as expressed by the
Secretary of Labor in the case of Chartered Bank Employees Association v. The Chartered Bank (NLRC Case
No. RB-1789-75, March 24, 1976), is to correct the disadvantages inherent in the daily compensation system
of employment holiday pay is primarily intended to benefit the daily paid workers whose employment and
income are circumscribed by the principle of "no work, no pay." This argument may sound meritorious; but,
until the provisions of the Labor Code on holiday pay is amended by another law, monthly paid employees are
definitely included in the benefits of regular holiday pay. As earlier stated, the presumption is always in favor of
law, negatively put, the Labor Code is always strictly construed against management.
While it is true that the contemporaneous construction placed upon a statute by executive officers whose duty
is to enforce it should be given great weight by the courts, still if such construction is so erroneous, as in the
instant case, the same must be declared as null and void. It is the role of the Judiciary to refine and, when
necessary, correct constitutional (and/or statutory) interpretation, in the context of the interactions of the three
branches of the government, almost always in situations where some agency of the State has engaged in
action that stems ultimately from some legitimate area of governmental power (The Supreme Court in Modern
Role, C. B. Swisher 1958, p. 36).
Thus. in the case of Philippine Apparel Workers Union vs. National Labor Relations Commission (106 SCRA
444, July 31, 1981) where the Secretary of Labor enlarged the scope of exemption from the coverage of a
Presidential Decree granting increase in emergency allowance, this Court ruled that:
t.hqw

... the Secretary of Labor has exceeded his authority when he included paragraph (k) in
Section 1 of the Rules implementing P. D. 1 1 23.
xxx xxx xxx
Clearly, the inclusion of paragraph k contravenes the statutory authority granted to the
Secretary of Labor, and the same is therefore void, as ruled by this Court in a long line
of cases . . . ..
t.hqw

The recognition of the power of administrative officials to

promulgate rules in the administration of the statute, necessarily
limited to what is provided for in the legislative enactment, may
be found in the early case of United States vs. Barrios decided
in 1908. Then came in a 1914 decision, United States vs.
Tupasi Molina (29 Phil. 119) delineation of the scope of such
competence. Thus: "Of course the regulations adopted under
legislative authority by a particular department must be in
harmony with the provisions of the law, and for the sole purpose
of carrying into effect its general provisions. By such
regulations, of course, the law itself cannot be extended. So
long, however, as the regulations relate solely to carrying into
effect the provisions of the law, they are valid." In 1936,
in People vs. Santos, this Court expressed its disapproval of an
administrative order that would amount to an excess of the
regulatory power vested in an administrative official We
reaffirmed such a doctrine in a 1951 decision, where we again

This ruling of the Court was recently reiterated in the case of American Wire & Cable Workers Union (TUPAS)
vs. The National Labor Relations Commission and American Wire & Cable Co., Inc., G.R. No. 53337,
promulgated on June 29, 1984.
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the Labor Code and Policy
instruction No. 9 issued by the then Secretary of Labor must be declared null and void. Accordingly, public
respondent Deputy Minister of Labor Amado G. Inciong had no basis at all to deny the members of petitioner
union their regular holiday pay as directed by the Labor Code.
II
It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano dated August 25, 1975, had already
become final, and was, in fact, partially executed by the respondent bank.
However, public respondent maintains that on the authority of De Luna vs. Kayanan, 61 SCRA 49, November
13, 1974, he can annul the final decision of Labor Arbiter Soriano since the ensuing promulgation of the
integrated implementing rules of the Labor Code pursuant to P.D. 850 on February 16, 1976, and the issuance
of Policy Instruction No. 9 on April 23, 1976 by the then Secretary of Labor are facts and circumstances that
transpired subsequent to the promulgation of the decision of the labor arbiter, which renders the execution of
the said decision impossible and unjust on the part of herein respondent bank (pp. 342-343, rec.).
This contention is untenable.
To start with, unlike the instant case, the case of De Luna relied upon by the public respondent is not a labor
case wherein the express mandate of the Constitution on the protection to labor is applied. Thus Article 4 of

the Labor Code provides that, "All doubts in the implementation and interpretation of the provisions of this
Code, including its implementing rules and regulations, shall be resolved in favor of labor and Article 1702 of
the Civil Code provides that, " In case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.

Regala vs. WCC, decided jointly, 77 SCRA 297; Vitug vs. Republic, 75 SCRA 436; Ramos vs. Republic, 69
SCRA 576).
In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422, 423, October 31, 1961, where the lower
court modified a final order, this Court ruled thus:
t.hqw

Consequently, contrary to public respondent's allegations, it is patently unjust to deprive the members of
petitioner union of their vested right acquired by virtue of a final judgment on the basis of a labor statute
promulgated following the acquisition of the "right".

xxx xxx xxx

The lower court was thus aware of the fact that it was thereby altering or modifying its
order of January 8, 1959. Regardless of the excellence of the motive for acting as it
did, we are constrained to hold however, that the lower court had no authorities to
make said alteration or modification. ...

On the question of whether or not a law or statute can annul or modify a judicial order issued prior to its
promulgation, this Court, through Associate Justice Claro M. Recto, said:
t.hqw

xxx xxx xxx

xxx xxx xxx
We are decidedly of the opinion that they did not. Said order, being unappealable,
became final on the date of its issuance and the parties who acquired rights thereunder
cannot be deprived thereof by a constitutional provision enacted or promulgated
subsequent thereto. Neither the Constitution nor the statutes, except penal laws
favorable to the accused, have retroactive effect in the sense of annulling or modifying
vested rights, or altering contractual obligations" (China Ins. & Surety Co. vs. Judge of
First Instance of Manila, 63 Phil. 324, emphasis supplied).
In the case of In re: Cunanan, et al., 19 Phil. 585, March 18, 1954, this Court said: "... when a court renders a
decision or promulgates a resolution or order on the basis of and in accordance with a certain law or rule then
in force, the subsequent amendment or even repeal of said law or rule may not affect the final decision, order,
or resolution already promulgated, in the sense of revoking or rendering it void and of no effect." Thus, the
amendatory rule (Rule IV, Book III of the Rules to Implement the Labor Code) cannot be given retroactive
effect as to modify final judgments. Not even a law can validly annul final decisions (In re: Cunanan, et al.,
Ibid).

The equitable considerations that led the lower court to take the action complained of
cannot offset the dem ands of public policy and public interest which are also
responsive to the tenets of equity requiring that an issues passed upon in decisions
or final orders that have become executory, be deemed conclusively disposed of and
definitely closed for, otherwise, there would be no end to litigations, thus setting at
naught the main role of courts of justice, which is to assist in the enforcement of the
rule of law and the maintenance of peace and order, by settling justiciable
controversies with finality.
xxx xxx xxx
In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March 30, 1982, this Court said:
xxx xxx xxx

Furthermore, the facts of the case relied upon by the public respondent are not analogous to that of the case
at bar. The case of De Luna speaks of final and executory judgment, while iii the instant case, the final
judgment is partially executed. just as the court is ousted of its jurisdiction to annul or modify a judgment the
moment it becomes final, the court also loses its jurisdiction to annul or modify a writ of execution upon its
service or execution; for, otherwise, we will have a situation wherein a final and executed judgment can still be
annulled or modified by the court upon mere motion of a panty This would certainly result in endless litigations
thereby rendering inutile the rule of law.
Respondent bank counters with the argument that its partial compliance was involuntary because it did so
under pain of levy and execution of its assets (p. 138, rec.). WE find no merit in this argument. Respondent
bank clearly manifested its voluntariness in complying with the decision of the labor arbiter by not appealing to
the National Labor Relations Commission as provided for under the Labor Code under Article 223. A party who
waives his right to appeal is deemed to have accepted the judgment, adverse or not, as correct, especially if
such party readily acquiesced in the judgment by starting to execute said judgment even before a writ of
execution was issued, as in this case. Under these circumstances, to permit a party to appeal from the said
partially executed final judgment would make a mockery of the doctrine of finality of judgments long enshrined
in this jurisdiction.
Section I of Rule 39 of the Revised Rules of Court provides that "... execution shall issue as a matter of right
upon the expiration of the period to appeal ... or if no appeal has been duly perfected." This rule applies to
decisions or orders of labor arbiters who are exercising quasi-judicial functions since "... the rule of execution
of judgments under the rules should govern all kinds of execution of judgment, unless it is otherwise provided
in other laws" Sagucio vs. Bulos 5 SCRA 803) and Article 223 of the Labor Code provides that "... decisions,
awards, or orders of the Labor Arbiter or compulsory arbitrators are final and executory unless appealed to the
Commission by any or both of the parties within ten (10) days from receipt of such awards, orders, or
decisions. ..."
Thus, under the aforecited rule, the lapse of the appeal period deprives the courts of jurisdiction to alter the
final judgment and the judgment becomes final ipso jure (Vega vs. WCC, 89 SCRA 143, citing Cruz vs. WCC,
2 PHILAJUR 436, 440, January 31, 1978; see also Soliven vs. WCC, 77 SCRA 621; Carrero vs. WCC and

t.hqw

In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically stated that the rule is
absolute that after a judgment becomes final by the expiration of the period provided by
the rules within which it so becomes, no further amendment or correction can be made
by the court except for clerical errors or mistakes. And such final judgment is
conclusive not only as to every matter which was offered and received to sustain or
defeat the claim or demand but as to any other admissible matter which must have
been offered for that purpose (L-7044, 96 Phil. 526). In the earlier case of Contreras
and Ginco vs. Felix and China Banking Corp., Inc. (44 O.G. 4306), it was stated
that the rule must be adhered to regardless of any possible injustice in a particular
case for (W)e have to subordinate the equity of a particular situation to the overmastering need of certainty and immutability of judicial pronouncements
xxx xxx xxx
III
The despotic manner by which public respondent Amado G. Inciong divested the members of the petitioner
union of their rights acquired by virtue of a final judgment is tantamount to a deprivation of property without
due process of law Public respondent completely ignored the rights of the petitioner union's members in
dismissing their complaint since he knew for a fact that the judgment of the labor arbiter had long become final
and was even partially executed by the respondent bank.
A final judgment vests in the prevailing party a right recognized and protected by law under the due process
clause of the Constitution (China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63 Phil. 324). A final
judgment is "a vested interest which it is right and equitable that the government should recognize and protect,
and of which the individual could no. be deprived arbitrarily without injustice" (Rookledge v. Garwood, 65 N.W.
2d 785, 791).

lt is by this guiding principle that the due process clause is interpreted. Thus, in the pithy language of then
Justice, later Chief Justice, Concepcion "... acts of Congress, as well as those of the Executive, can deny due
process only under pain of nullity, and judicial proceedings suffering from the same flaw are subject to the
same sanction, any statutory provision to the contrary notwithstanding (Vda. de Cuaycong vs. Vda. de
Sengbengco 110 Phil. 118, emphasis supplied), And "(I)t has been likewise established that a violation of a
constitutional right divested the court of jurisdiction; and as a consequence its judgment is null and void and
confers no rights" (Phil. Blooming Mills Employees Organization vs. Phil. Blooming Mills Co., Inc., 51 SCRA
211, June 5, 1973).
Tested by and pitted against this broad concept of the constitutional guarantee of due process, the action of
public respondent Amado G. Inciong is a clear example of deprivation of property without due process of law
and constituted grave abuse of discretion, amounting to lack or excess of jurisdiction in issuing the order dated
November 10, 1979.
WHEREFORE, THE PETITION IS HEREBY GRANTED, THE ORDER OF PUBLIC RESPONDENT IS SET
ASIDE, AND THE DECISION OF LABOR ARBITER RICARTE T. SORIANO DATED AUGUST 25, 1975, IS
HEREBY REINSTATED.
UNION OF FILIPRO EMPLOYEES (UFE), petitioner,
vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTL PHILIPPINES, INC.
(formerly FILIPRO, INC.), respondents.
Jose C. Espinas for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.

Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor
Code, that their sales personnel are not field personnel and are therefore entitled to holiday pay, and that the
use of 251 as divisor is an established employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay
award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however,
that the company's sales personnel are field personnel and, as such, are not entitled to holiday pay. He
likewise ruled that with the grant of 10 days' holiday pay, the divisor should be changed from 251 to 261 and
ordered the reimbursement of overpayment for overtime, night differential, vacation and sick leave pay due to
the use of 251 days as divisor.
Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated
the two motions as appeals and forwarded the case to the NLRC which issued a resolution dated May 25,
1987 remanding the case to the respondent arbitrator on the ground that it has no jurisdiction to review
decisions in voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended by Section 10,
Batas Pambansa Blg. 130 and as implemented by Section 5 of the rules implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case
reasoning that he had no more jurisdiction to continue as arbitrator because he had resigned from service
effective May 1, 1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to holiday pay; and

GUTIERREZ, JR., J.:

2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261
days and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night
differential, vacation and sick leave pay.

This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of
the divisor in the computation of benefits from 251 to 261 days.

The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor
Code. The respondent company controverts this assertion.

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor
Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations
respecting claims of its monthly paid employees for holiday pay in the light of the Court's decision in Chartered
Bank Employees Association v. Ople (138 SCRA 273 [1985]).

Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "nonagritultural employees who regularly perform their duties away from the principal place of business or branch
office of the employer and whose actual hours of work in the field cannot be determined with reasonable
certainty."

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration and
appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.

The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be
determined with reasonable certainty."

On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:

It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office
and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject
only to the exclusions and limitations specified in Article 82 and such other legal
restrictions as are provided for in the Code. (Rollo,
p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of
salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter
referred to as sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay
award of overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251
divisor. (Rollo, pp. 138-145)

The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales
personnel's working hours which can be determined with reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in the field be reasonably
ascertained. The company has no way of determining whether or not these sales personnel, even if they
report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in
between in actual field work.
We concur with the following disquisition by the respondent arbitrator:

The requirement for the salesmen and other similarly situated employees to report for
work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the realm of
work in the field as defined in the Code but an exercise of purely management
prerogative of providing administrative control over such personnel. This does not in
any manner provide a reasonable level of determination on the actual field work of the
employees which can be reasonably ascertained. The theoretical analysis that
salesmen and other similarly-situated workers regularly report for work at 8:00 a.m.
and return to their home station at 4:00 or 4:30 p.m., creating the assumption that their
field work is supervised, is surface projection. Actual field work begins after 8:00
a.m., when the sales personnel follow their field itinerary, and ends immediately before
4:00 or 4:30 p.m. when they report back to their office. The period between 8:00 a.m.
and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope
and result of which are subject to their individual capacity and industry and which
"cannot be determined with reasonable certainty." This is the reason why effective
supervision over field work of salesmen and medical representatives, truck drivers and
merchandisers is practically a physical impossibility. Consequently, they are excluded
from the ten holidays with pay award. (Rollo, pp. 36-37)
Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable
certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:
Rule IV Holidays with Pay

The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2)
good collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work;
(5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the
difficulty in measuring their actual hours of field work. These employees are evaluated by the result of their
work and not by the actual hours of field work which are hardly susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to
discuss the nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F.
2d 202, the Court stated:
The reasons for excluding an outside salesman are fairly apparent. Such a salesman,
to a greater extent, works individually. There are no restrictions respecting the time he
shall work and he can earn as much or as little, within the range of his ability, as his
ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject to
the personal supervision of his employer, and his employer has no way of knowing the
number of hours he works per day.
While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for
their exclusion as field personnel from holiday pay benefits also applies.

Sec. 1. Coverage This rule shall apply to all employees except:

xxx xxx xxx
(e) Field personnel and other employees whose time and performance is unsupervised
by the employer . . . (Emphasis supplied)
While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner
nevertheless attempted to show that its affected members are not covered by the abovementioned rule. The
petitioner asserts that the company's sales personnel are strictly supervised as shown by the SOD (Supervisor
of the Day) schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).
Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another
element to the Labor Code definition of field personnel. The clause "whose time and performance is
unsupervised by the employer" did not amplify but merely interpreted and expounded the clause "whose actual
hours of work in the field cannot be determined with reasonable certainty." The former clause is still within the
scope and purview of Article 82 which defines field personnel. Hence, in deciding whether or not an
employee's actual working hours in the field can be determined with reasonable certainty, query must be made
as to whether or not such employee's time and performance is constantly supervised by the employer.
The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time
and performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel
are out of the office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.
Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work
by an employee through the imposition of sanctions on absenteeism contained in the company circular of
March 15, 1984.
The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on
their performance is proof that their actual hours of work in the field can be determined with reasonable
certainty.
The Court thinks otherwise.

The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday
pay, the divisor should be changed from 251 to 261 days to include the additional 10 holidays and the
employees should reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:
. . . The new doctrinal policy established which ordered payment of ten holidays
certainly adds to or accelerates the basis of conversion and computation by ten days.
With the inclusion of ten holidays as paid days, the divisor is no longer 251 but 261 or
262 if election day is counted. This is indeed an extremely difficult legal question of
interpretation which accounts for what is claimed as falling within the concept of
"solutio indebti."
When the claim of the Union for payment of ten holidays was granted, there was a
consequent need to abandon that 251 divisor. To maintain it would create an
impossible situation where the employees would benefit with additional ten days with
pay but would simultaneously enjoy higher benefits by discarding the same ten days
for purposes of computing overtime and night time services and considering sick and
vacation leave credits. Therefore, reimbursement of such overpayment with the use of
251 as divisor arises concomitant with the award of ten holidays with pay. (Rollo, p. 34)
The divisor assumes an important role in determining whether or not holiday pay is already included in the
monthly paid employee's salary and in the computation of his daily rate. This is the thrust of our
pronouncement in Chartered Bank Employees Association v. Ople (supra). In that case, We held:
It is argued that even without the presumption found in the rules and in the policy
instruction, the company practice indicates that the monthly salaries of the employees
are so computed as to include the holiday pay provided by law. The petitioner contends
otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered
Bank, in computing overtime compensation for its employees, employs a "divisor" of
251 days. The 251 working days divisor is the result of subtracting all Saturdays,
Sundays and the ten (10) legal holidays from the total number of calendar days in a

year. If the employees are already paid for all non-working days, the divisor should be
365 and not 251.

Court therein reasoned that, in the guise of clarifying the Labor Code's provisions on holiday pay, the
aforementioned implementing rule and policy instruction amended them by enlarging the scope of their
exclusion. The Chartered Bank case reiterated the above ruling and added the "divisor" test.

In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:
monthly rate x 12 months

However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the
presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation of the
IBAA case on October 23, 1984 was in compliance with these presumably valid rule and policy instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to
be given to a legislative or executive act subsequently declared invalid:

251 days
xxx xxx xxx
Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro
indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor should have been
261.
It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure
for the purpose of computing overtime and night differential pay and commutation of sick and vacation leave
credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate
which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To
maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the
employee's annual salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if
prior to the grant of holiday pay, the employee's annual salary is P25,100, then dividing such figure by 251
days, his daily rate is P100.00 After the payment of 10 days' holiday pay, his annual salary already includes
holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00.
There is thus no merit in respondent Nestle's claim of overpayment of overtime and night differential pay and
sick and vacation leave benefits, the computation of which are all based on the daily rate, since the daily rate
is still the same before and after the grant of holiday pay.
Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor
must fail in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this
Code, including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4).
Moreover, prior to September 1, 1980, when the company was on a 6-day working schedule, the divisor used
by the company was 303, indicating that the 10 holidays were likewise not paid. When Filipro shifted to a 5day working schebule on September 1, 1980, it had the chance to rectify its error, if ever there was one but did
not do so. It is now too late to allege payment by mistake.
Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1,
1974. This ruling was not questioned by the petitioner union as obviously said decision was favorable to it.
Technically, therefore, respondent Nestle should have filed a separate petition raising the issue of effectivity of
the holiday pay award. This Court has ruled that an appellee who is not an appellant may assign errors in his
brief where his purpose is to maintain the judgment on other grounds, but he cannot seek modification or
reversal of the judgment or affirmative relief unless he has also appealed. (Franco v. Intermediate Appellate
Court, 178 SCRA 331 [1989], citing La Campana Food Products, Inc. v. Philippine Commercial and Industrial
Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully settle the issues so that the execution of the
Court's decision in this case may not be needlessly delayed by another petition, the Court resolved to take up
the matter of effectivity of the holiday pay award raised by Nestle.
Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when
the Chartered Bank decision, promulgated on August 28, 1985, became final and executory, and not from the
date of effectivity of the Labor Code. Although the Court does not entirely agree with Nestle, we find its claim
meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter
referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and
Policy Instruction No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976,
respectively, and which excluded monthly paid employees from holiday pay benefits, are null and void. The

. . . It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with. This
is so as until after the judiciary, in an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have acted under it and may have
changed their positions. What could be more fitting than that in a subsequent litigation
regard be had to what has been done while such legislative or executive act was in
operation and presumed to be valid in all respects. It is now accepted as a doctrine that
prior to its being nullified, its existence as a fact must be reckoned with. This is merely
to reflect awareness that precisely because the judiciary is the government organ
which has the final say on whether or not a legislative or executive measure is valid, a
period of time may have elapsed before it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to deprive the law of its quality of
fairness and justice then, if there be no recognition of what had transpired prior to such
adjudication.
In the language of an American Supreme Court decision: "The actual existence of a
statute, prior to such a determination of [unconstitutionality], is an operative fact and
may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity
may have to be considered in various aspects, with respect to particular relations,
individual and corporate, and particular conduct, private and official." (Chicot County
Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This language has
been quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and
the decision inManila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more
recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez
v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)
The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and
resulting unfairness must be avoided. It is now almost the end of 1991. To require various companies to reach
back to 1975 now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under
the facts of this case.
Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit
validity of the implementing rule and policy instruction before this Court nullified them, and thinking that it was
not obliged to give holiday pay benefits to its monthly paid employees, may have been moved to grant other
concessions to its employees, especially in the collective bargaining agreement. This possibility is bolstered by
the fact that respondent Nestle's employees are among the highest paid in the industry. With this
consideration, it would be unfair to impose additional burdens on Nestle when the non-payment of the holiday
benefits up to 1984 was not in any way attributed to Nestle's fault.
The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the
Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of
promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing
holiday pay shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984.
In all other respects, the order of the respondent arbitrator is hereby AFFIRMED.