LABOR REVIEW WEEK 3 AND WEEK 4

Contents
III. Labor Standards .................................................................................................................................... 7
Coverage/Exclusions ..................................................................................................................................... 7

Art. 82, Labor Code ....................................................................................................................... 7

Book III, Rule I, Sec. 2, Implementing Rules (Labor Code) ............................................................ 7

David v. Macasio, G.R. No. 195466, July 2, 2014 ........................................................................... 8

Penaranda v. Baganga Plywood, G.R. No. 159577, May 3, 2006 ................................................... 19

Normal Hours of Work............................................................................................................................ 23

Art. 83, Labor Code ..................................................................................................................... 23

Book III, Rule 1, Secs. 3-4, Implementing Rules (Labor Code) ..................................................... 24

DO No. 65-04, Series of 2004 ...................................................................................................... 24

R.A. 8972, Sec. 6 .......................................................................................................................... 25

R.A. 10361, Secs. 20-21 ................................................................................................................ 25

CHED Memorandum Circular No. 40, Series of 2008.................................................................. 25

a.

Compressed Work Week .............................................................................................................. 26

DOLE Dept. Advisory No. 2, Series of 2004 ............................................................................... 26

DOLE Dept. Advisory No. 2, Series of 2009 ............................................................................... 29

DOLE Dept. Advisory No. 4, Series of 2010 ............................................................................... 32

Meal break ............................................................................................................................................... 33

Art. 85, Labor Code ..................................................................................................................... 33

Book III, Rule I, Sec. 7, Implementing Rules (Labor Code) .......................................................... 33

Letter-Opinion dated Nov. 27, 1989, Sec. Drilon to Kodak Philippines........................................ 34

Manual on Labor Standards 2004- Bureau of Working Conditions ............................................... 35

Sime Darby v. NLRC, G.R. No. 119205, April 15, 1998 ............................................................... 35

Pan Am v. Pan Am Employees, G.R. No. L-16275, February 23, 1961......................................... 39

Waiting Time ........................................................................................................................................... 41

Book III, Rule I, Sec. 5, Implementing Rules (Labor Code) .......................................................... 41

Arica v. NLRC, G.R. No. 78210, February 28, 1998 ..................................................................... 41

Overtime Work/Pay ................................................................................................................................ 48

Art. 87, Labor Code ..................................................................................................................... 48

Book III, Rule I, Secs. 8-11, Implementing Rules (Labor Code) ................................................... 48

See Manual on Labor Standards 2004- Bureau of Working Conditions ......................................... 49

Art. 88, Labor Code ..................................................................................................................... 50

Art. 89, Labor Code ..................................................................................................................... 50

No. 3, DOLE Handbook on Workers Statutory Monetary Benefits ............................................. 51

Pigcaulan v. Security and Credit, G.R. No. 173648, January 16, 2012 ............................................ 53

Night Work (R.A. 10151); Night Differential ........................................................................................... 60

R.A. 10151 ................................................................................................................................... 60

Part-time Work ........................................................................................................................................ 63

PAL v. Pascua, G.R. No. 143258, August 15, 2003....................................................................... 63

Perpetual Help Credit v. Faburada, G.R. No. 121948, October 8, 2001 ........................................ 69

CIT v. Ople, G.R. No. L-58870, December 18, 1987.................................................................... 73

UST v. NLRZ, G.R. No. 85519, February 15, 1990 .................................................................... 107

Lacuesta v. ADMU, G.R. No. 152777, December 9, 2005 .......................................................... 116

Saint Marys University v. C.A., G.R. No. 157788, March 8, 2005 ............................................... 121

See DOLE Handbook on Workers Statutory Monetary Benefits ?????........................................ 124

Contract for Piece of Work .................................................................................................................... 124

Art. 1713, Civil Code .................................................................................................................. 124

Wages ........................................................................................................................................................ 126

Arts. 97-98, Labor Code ............................................................................................................. 126

Wage v. Salary ........................................................................................................................................ 127

Equitable v. Sadac, G.R. No. 164772, June 8, 2006 ..................................................................... 127

Songco v. NLRC, G.R. Nos. 50999-501000, March 23, 1990...................................................... 145

Sugue v. Triumph International, G.R. No. 164804, January 30, 2009 .......................................... 150

International School v. Quisumbing, G.R. No. 128845, June 1, 2000 .......................................... 161

Atok-Big Association v. Atok-Big Wedge, G.R. No. L-7349, July 19, 1955 ................................. 166

Our Haus v. Parian, G.R. No. 204651, August 6, 2014 ............................................................... 171

Reyes v. NLRC, G.R. No. 160233, August 8, 2007 ..................................................................... 181

Book III, Rule VII-A.................................................................................................................. 188

DOLE D.O. No. 126-13, April 2013 .......................................................................................... 188

Minimum wage; Minimum wage setting ................................................................................................. 188

Art. 99, Labor Code ................................................................................................................... 188

R.A. 6727, Wage Rationalization Act .......................................................................................... 188

Book III, Rule VII, Sec. 1, Implementing Rules (Labor Code) .................................................... 188

NWPC Guidelines No. 1, Series of 2007 (June 19, 2007) ............................................................ 189

Employees Confederation v. NWPC, G.R. No. 96169, September 24, 1991 ............................... 189

Nasipit Integrated v. Nasipit Employees, G.R. No. 162411, June 27, 2008 ................................. 194

Minimum wage of workers paid by results.............................................................................................. 199

Workers paid by results ...................................................................................................................... 199

Art. 124, Labor Code ................................................................................................................. 199

Art. 101, Labor Code ................................................................................................................. 200

Book III, Rule VII-A, Implementing Rules (Labor Code)........................................................... 201

Tan v. Lagman, G.R. No. 151228, August 15, 2002 .................................................................... 201

Apprentices ........................................................................................................................................ 207

Learners ............................................................................................................................................. 207

Arts. 57-60, Labor Code ............................................................................................................. 207

Arts. 73-77, Labor Code ............................................................................................................. 208

Book II, Rule VI, Sec. 29, Implementing Rules (Labor Code) ..................................................... 209

Persons with disability ........................................................................................................................ 209

Arts. 78-81, Labor Code ............................................................................................................. 209

R.A. 7277, Magna Carta for Disabled Persons ............................................................................ 209

Commissions ......................................................................................................................................... 209

See Songco v. NLRC, G.R. Nos. 50999-501000, March 23, 1990 ............................................... 209

Soriano v. NLRC, G.R. No. L-75510, October 27, 1987............................................................. 215

Iran v. NLRC, G.R. No. 121927, April 22, 1998 ......................................................................... 219

Deductions from wages.............................................................................................................................. 220

Arts. 113-118, Labor Code ......................................................................................................... 220

Book III, Rule VIII, Secs. 10-11, Implementing Rules (Labor Code) .......................................... 220

Arts. 1706, 1708, Civil Code ....................................................................................................... 221

Art. 59, R.A. 6938, Cooperative Code of the Phils. ..................................................................... 221

Bluer Than Blue v. Esteban, G.R. No. 192582, April 7, 2014 ..................................................... 221

Nina Jewelry v. Trinidad, G.R. No. 188169, November 28, 2011................................................ 228

SHS Perforated v. Diaz, G.R. No. 185814, October 13, 2010 ..................................................... 240

Non-diminution of benefits........................................................................................................................ 251

Art. 100, Labor Code ................................................................................................................. 251

Wesleyan University v. Faculty, G.R. No. 181806, March 12, 2014 ............................................. 251

Vergara v. Coca-Cola, G.R. No. 176985, April 1, 2013 ............................................................... 257

Netlink v. Delmo, G.R. No. 160827, June 18, 2014 .................................................................... 260

Facilities v. Supplements ............................................................................................................................ 266

Art. 97 (f), Labor Code ............................................................................................................... 266

SLL International v. NLRC, G.R. No. 172161, March 2, 2011.................................................... 266

Mabeza v. NLRC, G.R. No. 118506, April 18, 1997 ................................................................... 271

See Our Haus v. Parian, G.R. No. 204651, August 6, 2014 ......................................................... 279

Wage distortion/rectification ..................................................................................................................... 288

Art. 124, Labor Code ................................................................................................................. 288

Metrobank v. NLRC, G.R. No. 102636, September 10, 1993 ..................................................... 290

Prubankers Assoc. v. Prudential Bank, G.R. No. 131247, January 25, 1999 ................................ 295

Bankard Employees v. NLRC, G.R. No. 140689, February 17, 2004 .......................................... 302

Divisor to determine daily rate ................................................................................................................... 309

Lim v. HMR Phils, G.R. No. 201483, August 4, 2014................................................................. 309

Arellano University Employees v. CA, G.R. No. 139940, September 19, 2006............................ 322

Leyeco IV v. Employees, G.R. No. 157775, October 19, 2007 ................................................... 328

Rest Periods ............................................................................................................................................... 336

Weekly rest day ...................................................................................................................................... 336

Art. 91, Labor Code ................................................................................................................... 336

Book III, Rule III, Implementing Rules (Labor Code) ................................................................ 336

Emergency rest day ................................................................................................................................ 338

Art. 92, Labor Code ................................................................................................................... 338

Book III, Rule III, Implementing Rules (Labor Code) ................................................................ 339

Art. 93, Labor Code ................................................................................................................... 339

Holiday pay/Premium pay ......................................................................................................................... 340

Coverage; exclusions .............................................................................................................................. 340
Art. 94, Labor Code ........................................................................................................................... 340
Book III, Rule IV, Implementing Rules (Labor Code) ......................................................................... 340
Jose Rizal College v. NLRC, G.R. No. 65482, December 1, 1987........................................................ 341
Insular Bank v. Inciong, G.R. No. L-52415, October 23, 1984 ........................................................... 345
No. 3, DOLE Handbook on Workers Statutory Monetary Benefits ................................................... 356
Teachers, piece workers, takay, seasonal workers, seafarers ..................................................................... 358

David v. Macasio, G.R. No. 195466, July 2, 2014 ....................................................................... 358

Tan v. Lagman, G.R. No. 151228, August 15, 2002 .................................................................... 369

Leaves ........................................................................................................................................................ 375

Service Incentive Leaves ........................................................................................................................ 375

Art. 95, Labor Code ................................................................................................................... 375

Book III, Rule V, Implementing Rules (Labor Code) ................................................................. 376

See David v. Macasio, G.R. No. 195466, July 2, 2014 ................................................................. 376

See CIT v. Ople, G.R. No. L-58870, December 18, 1987 ........................................................... 376

Maternity Leave ..................................................................................................................................... 411

Art. 133, Labor Code ................................................................................................................. 411

Sec. 14-A, Social Security Law (as amended)............................................................................... 412

No. 11, DOLE Handbook on Workers Statutory Monetary Benefits ......................................... 413

R.A. 10151, Sec. 4 ...................................................................................................................... 413

Paternity Leave....................................................................................................................................... 415

R.A. 8187, Paternity Leave Act ................................................................................................... 415

Revised Implementing Rules of R.A. 8187 (March 13, 1997) ...................................................... 416

Parental Leave (R.A. 8972) ..................................................................................................................... 419

R.A. 8972, Solo Parents Welfare Act ......................................................................................... 419

Implementing Rules, R.A. 8972 .................................................................................................. 423

Dela Cueva v. Omaga, A.M. No. P-08-2590, July 5, 2010 ........................................................... 423

Leave for VAWC victims (R.A. 9262) .................................................................................................... 428

Sec. 43, R.A. 9262, Anti-VAWC Act .......................................................................................... 428

Sec. 42, Implementing Rules, R.A. 9262 ..................................................................................... 428

Special Leave benefit for women ............................................................................................................ 429

Sec. 18, R.A. 9710, Magna Carta of Women ............................................................................... 429

Sec. 21, Rule IV, Implementing Rules, R.A. 9710 ....................................................................... 429

Sec. 7 (m), Rule II, Implementing Rules, R.A. 9710 .................................................................... 430

Service Charge ........................................................................................................................................... 430

Art. 96, Labor Code ................................................................................................................... 430

Book III, Rule V, Implementing Rules (Labor Code) .................................................................. 431

No. 7 (a), (c), DOLE Handbook on Workers Statutory Monetary Benefits................................ 432

Mayon Hotel v. Adana, G.R. No. 157634, May 16, 2005 .......................................................... 432

Philippine Hoteliers v. National Union, G.R. No. 181972, August 25, 2009.............................. 447

Thirteenth Month Pay ................................................................................................................................ 454

P.D. 851 ..................................................................................................................................... 454

Revised Guidelines on the Implementation of 13th Month Law .............................................. 458

Central Azucarera v. Labor Union, G.R. No. 188949, July 26, 2010 .......................................... 458

King of Kings Transport v. Mamac, G.R. No. 166208, June 29, 2007 ........................................ 463

Separation Pay............................................................................................................................................ 471

Arts. 283-284, Labor Code ........................................................................................................ 471

Sec. 32, Art. V, R.A. 10361......................................................................................................... 471

Manila Water v. Rosario, G.R. No. 188747, January 29, 2014 .................................................. 472

See Toyota v. NLRC, G.R. Nos. 158786 & 158789, October 19, 2007 ............................................... 477

Bani Rural Bank v. Guzman, G.R. No. 170904, November 13, 2013 ......................................... 503

PAL v. NLRC, G.R. No. 123294, October 20, 2010 ..................................................................... 512

Solidbank v. NLRC, G.R. No. 165951, March 30, 2010 .............................................................. 526

Escario v. NLRC, G.R. No. 160302, September 27, 2010 ........................................................... 534

Motorola Phils. v. Ambrocio G.R. No. 173279, March 20, 2009 ............................................... 541

Sec. 6, R.A. 9231 ........................................................................................................................ 546

Retirement Pay ........................................................................................................................................... 547

Art. 287, Labor Code ................................................................................................................. 547

Serrano v. Santos Transit, G.R. No. 187698, August 9, 2010 .................................................... 548

Eligir v. PAL, G.R. No. 181995, July 16, 2012 ............................................................................. 553

Grace Christian School v. Lavandera, G.R. No. 177845, August 20, 2014 ................................ 567

Unilever v. Rivera, G.R. No. 201701, June 3, 2013 .................................................................... 572

Women Workers ....................................................................................................................................... 579

Provisions against discrimination ......................................................................................................... 579
Art. 135, Labor Code ......................................................................................................................... 579

Chapter II, Sec. 4 (b), R.A. 9710, Magna Carta of Women ........................................................ 579

Rule II, Sec. 7 (c), Implementing Rules of R.A. 9710 ......................................................................... 580
Rule V, Sec. 25, Implementing Rules of R.A. 9710 ............................................................................ 580
Stipulations against marriage ............................................................................................................... 582
Art. 136, Labor Code ......................................................................................................................... 582
See Philippine Telegraph v. NLRC, G.R. No. 118978, May 23, 1997 ................................................. 582
See Duncan v. Glaxo, G.R. No. 162994, September 17, 2004 ........................................................... 590
Star Paper v. Simbol, G.R. No. 164774, April 12, 2006 ..................................................................... 596
Prohibited Acts...................................................................................................................................... 603
Art. 137, Labor Code ......................................................................................................................... 603
Del Monte v. Velasco, G.R. No. 153477, March 6, 2007 ................................................................... 603

Anti-Sexual Harassment Act, R.A. 7877 ................................................................................................ 609

Implementing Rules, RA 7877 (Civil Service) .................................................................................... 612
Domingo v. Rayala, GR 155831, February 18, 2008 .......................................................................... 613

III. Labor Standards

Coverage/Exclusions

Art. 82, Labor Code

BOOK THREE
CONDITIONS OF EMPLOYMENT
Title I
WORKING CONDITIONS AND REST PERIODS
Chapter I
HOURS OF WORK
Article 82. Coverage. The provisions of this Title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid by results as determined
by the Secretary of Labor in appropriate regulations.
As used herein, "managerial employees" refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff.
"Field personnel" shall refer to non-agricultural 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.

Book III, Rule I, Sec. 2, Implementing Rules (Labor Code)

SECTION 2. Exemption. The provisions of this Rule shall not apply to the following persons if they qualify
for exemption under the conditions set forth herein:
(a) Government employees whether employed by the National Government or any of its political
subdivision, including those employed in government-owned and/or controlled corporations;
(b) Managerial employees, if they meet all of the following conditions:

(c)

(d)

(e)

(f)

(1) Their primary duty consists of the management of the establishment in which they are
employed or of a department or sub-division thereof.
(2) They customarily and regularly direct the work of two or more employees therein.
(3) They have the authority to hire or fire employees of lower rank; or their suggestions and
recommendations as to hiring and firing and as to the promotion or any other change of
status of other employees, are given particular weight.
Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management
policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment; and
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision
thereof; or (ii) execute under general supervision work along specialized or technical lines
requiring special training, experience, or knowledge; or (iii) execute, under general
supervision, special assignments and tasks; and
(4) Who do not devote more than 20 percent of their hours worked in a work week to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2) and (3) above.
Domestic servants and persons in the personal service of another if they perform such services in
the employer's home which are usually necessary or desirable for the maintenance and
enjoyment thereof, or minister to the personal comfort, convenience, or safety of the employer
as well as the members of his employer's household.
Workers who are paid by results, including those who are paid on piece-work, "takay," "pakiao"
or task basis, and other non-time work if their output rates are in accordance with the standards
prescribed under Section 8, Rule VII, Book Three of these regulations, or where such rates have
been fixed by the Secretary of Labor and Employment in accordance with the aforesaid Section.
Non-agricultural field personnel if they regularly perform their duties away from the principal or
branch office or place of business of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty.

David v. Macasio, G.R. No. 195466, July 2, 2014

G.R. No. 195466

July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010 decision2 and
the January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision
annulled and set aside the May 26, 2010 decision4 of the National Labor Relations Commission

(NLRC)5 which, in turn, affirmed the April 30, 2009 Decision6 of the Labor Arbiter (LA). The LA's decision
dismissed respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing business
under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and 13th
month pay. He also claimed payment for moral and exemplary damages and attorneys fees. Macasio also
claimed payment for service incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995.
Macasio claimed that David exercised effective control and supervision over his work, pointing out that
David: (1) set the work day, reporting time and hogs to be chopped, as well as the manner by which he
was to perform his work; (2) daily paid his salary of P700.00, which was increased from P600.00 in
2007, P500.00 in 2006 andP400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added
that David owned the hogs delivered for chopping, as well as the work tools and implements; the latter
also rented the workplace. Macasio further claimed that David employs about twenty-five (25) butchers
and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten
employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis who is,
therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant to the provisions of the
Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out that Macasio: (1) usually
starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending on the
volume of the delivered hogs; (2) received the fixed amount of P700.00 per engagement, regardless of
the actual number of hours that he spent chopping the delivered hogs; and (3) was not engaged to report
for work and, accordingly, did not receive any fee when no hogs were delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his business only in 2005.
He pointed to the Certificate of Employment12 that David issued in his favor which placed the date of his
employment, albeit erroneously, in January 2000. Second, he reported for work every day which the
payroll or time record could have easily proved had David submitted them in evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as he hired the latter
on "pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon Macasios
request, only for overseas employment purposes. He pointed to the "Pinagsamang Sinumpaang
Salaysay,"14 executed by Presbitero Solano and Christopher (Antonio Macasios co-butchers), to
corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit. The LA gave
credence to Davids claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the following
facts to support this finding: (1) Macasio received the fixed amount of P700.00 for every work done,
regardless of the number of hours that he spent in completing the task and of the volume or number of
hogs that he had to chop per engagement; (2) Macasio usually worked for only four hours, beginning from
10:00 p.m. up to 2:00 a.m. of the following day; and (3) the P700.00 fixed wage far exceeds the then
prevailing daily minimum wage of P382.00. The LA added that the nature of Davids business as hog dealer
supports this "pakyaw" or task basis arrangement.

The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to overtime,
holiday, SIL and 13th month pay.
The NLRCs Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not
require Macasio to observe an eight hour work schedule to earn the fixed P700.00 wage; and that Macasio
had been performing a non-time work, pointing out that Macasio was paid a fixed amount for the
completion of the assigned task, irrespective of the time consumed in its performance. Since Macasio was
paid by result and not in terms of the time that he spent in the workplace, Macasio is not covered by the
Labor Standards laws on overtime, SIL and holiday pay, and 13th month pay under the Rules and
Regulations Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010
resolution,20prompting Macasio to elevate his case to the CA via a petition for certiorari.21
The CAs Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition and reversed the
NLRCs ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it nevertheless
found Macasio entitled to his monetary claims following the doctrine laid down in Serrano v. Severino
Santos Transit.23 The CA explained that as a task basis employee, Macasio is excluded from the coverage
of holiday, SIL and 13th month pay only if he is likewise a "field personnel." As defined by the Labor Code,
a "field personnel" is one who performs the work away from the office or place of work and whose regular
work hours cannot be determined with reasonable certainty. In Macasios case, the elements that
characterize a "field personnel" are evidently lacking as he had been working as a butcher at Davids "Yiels
Hog Dealer" business in Sta. Mesa, Manila under Davids supervision and control, and for a fixed working
schedule that starts at 10:00 p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three years, with
10% attorneys fees on the total monetary award. The CA, however, denied Macasios claim for moral and
exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration24 in the CAs January
31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task basis. Hence, the
latter is excluded from the coverage of holiday, SIL and 13th month pay. David reiterates his submissions
before the lower tribunals27 and adds that he never had any control over the manner by which Macasio
performed his work and he simply looked on to the "end-result." He also contends that he never
compelled Macasio to report for work and that under their arrangement, Macasio was at liberty to choose
whether to report for work or not as other butchers could carry out his tasks. He points out that Solano
and Antonio had, in fact, attested to their (David and Macasios) established "pakyawan" arrangement
that rendered a written contract unnecessary. In as much as Macasio is a task basis employee who is
paid the fixed amount of P700.00 per engagement regardless of the time consumed in the performance

 David argues that Macasio is not entitled to the benefits he claims. Also, he posits that because he
engaged Macasio on "pakyaw" or task basis then no employer-employee relationship exists between
them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially
when, as in this case, they are supported by substantial evidence. Hence, David posits that the CA erred
in reversing the labor tribunals findings and granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David would have this
Court believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to Davids
position, theP700.00 fee that he was paid for each day that he reported for work does not indicate a
"pakyaw" or task basis employment as this amount was paid daily, regardless of the number or pieces of
hogs that he had to chop. Rather, it indicates a daily-wage method of payment and affirms his regular
employment status. He points out that David did not allege or present any evidence as regards the quota
or number of hogs that he had to chop as basis for the "pakyaw" or task basis payment; neither did David
present the time record or payroll to prove that he worked for less than eight hours each day. Moreover,
David did not present any contract to prove that his employment was on task basis. As David failed to
prove the alleged task basis or "pakyawan" agreement, Macasio concludes that he was Davids employee.
Procedurally, Macasio points out that Davids submissions in the present petition raise purely factual
issues that are not proper for a petition for review on certiorari. These issues whether he (Macasio) was
paid by result or on "pakyaw" basis; whether he was a "field personnel"; whether an employer-employee
relationship existed between him and David; and whether David exercised control and supervision over
his work are all factual in nature and are, therefore, proscribed in a Rule 45 petition. He argues that the
CAs factual findings bind this Court, absent a showing that such findings are not supported by the
evidence or the CAs judgment was based on a misapprehension of facts. He adds that the issue of
whether an employer-employee relationship existed between him and David had already been settled by
the LA29 and the NLRC30 (as well as by the CA per Macasios manifestation before this Court dated
November 15, 2012),31 in his favor, in the separate illegal case that he filed against David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on holiday,
SIL and 13th month pay to a worker engaged on "pakyaw" or task basis. In the context of the Rule 65
petition before the CA, the issue is whether the CA correctly found the NLRC in grave abuse of discretion
in ruling that Macasio is entitled to these labor standards benefits.
The Courts Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule 65 proceeding,
this Courts power of review is limited to resolving matters pertaining to any perceived legal errors that
the CA may have committed in issuing the assailed decision. This is in contrast with the review for
jurisdictional errors, which we undertake in an original certiorari action. In reviewing the legal correctness

of the CA decision, we examine the CA decision based on how it determined the presence or absence of
grave abuse of discretion in the NLRC decision before it and not on the basis of whether the NLRC decision
on the merits of the case was correct.32 In other words, we have to be keenly aware that the CA undertook
a Rule 65 review, not a review on appeal, of the NLRC decision challenged before it.33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law raised against
the assailed CA decision.34
In this petition, David essentially asks the question whether Macasio is entitled to holiday, SIL and 13th
month pay. This one is a question of law. The determination of this question of law however is intertwined
with the largely factual issue of whether Macasio falls within the rule on entitlement to these claims or
within the exception. In either case, the resolution of this factual issue presupposes another factual
matter, that is, the presence of an employer-employee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter
on "pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task basis with
the lack of employment relationship. Impliedly, David asserts that their "pakyawan" or task basis
arrangement negates the existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does not
characterize the relationship that may exist between the parties, i.e., whether one of employment or
independent contractorship. Article 97(6) of the Labor Code defines wages as "xxx the remuneration or
earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which
is payable by an employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered[.]"35 In relation to Article 97(6), Article
10136 of the Labor Code speaks of workers paid by results or those whose pay is calculated in terms of the
quantity or quality of their work output which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis negates
employer-employee relationship, David would want the Court to engage on a factual appellate review of
the entire case to determine the presence or existence of that relationship. This approach however is not
authorized under a Rule 45 petition for review of the CA decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an employer-employee
but because of its finding that since Macasio is paid on pakyaw or task basis, then he is not entitled to SIL,
holiday and 13th month pay. Second, we consider it crucial, that in the separate illegal dismissal case
Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the existence of an employeremployee relationship.37
In other words, aside from being factual in nature, the existence of an employer-employee relationship is
in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review of a labor decision
rendered by the CA under 65, the narrow scope of inquiry is whether the CA correctly determined the
presence or absence of grave abuse of discretion on the part of the NLRC. In concrete question form, "did
the NLRC gravely abuse its discretion in denying Macasios claims simply because he is paid on a non-time
basis?"

At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship
exists baseless. Employing the control test,38 we find that such a relationship exist in the present case.
Even a factual review shows that Macasio is Davids employee
To determine the existence of an employer-employee relationship, four elements generally need to be
considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct. These elements or indicators
comprise the so-called "four-fold" test of employment relationship. Macasios relationship with David
satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement of
the employee." David categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated that
"nag apply po siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano and Antonio stated in their
"Pinagsamang Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel
David bilang butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama namin
siya sa aming trabaho."
Second, David paid Macasios wages.Both David and Macasio categorically stated in their respective
pleadings before the lower tribunals and even before this Court that the former had been paying the
latterP700.00 each day after the latter had finished the days task. Solano and Antonio also confirmed this
fact of wage payment in their "Pinagsamang Sinumpaang Salaysay."41 This satisfies the element of
"payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This power to
determine the work schedule obviously implies power of control. By having the power to control
Macasios work schedule, David could regulate Macasios work and could even refuse to give him any
assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasios work as to the means and
methods of performing it. In addition to setting the day and time when Macasio should report for work,
the established facts show that David rents the place where Macasio had been performing his tasks.
Moreover, Macasio would leave the workplace only after he had finished chopping all of the hog meats
given to him for the days task. Also, David would still engage Macasios services and have him report for
work even during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be expected to
observe certain rules and requirements and David would necessarily exercise some degree of control as
the chopping of the hog meats would be subject to his specifications. Also, since Macasio performed his
tasks at Davids workplace, David could easily exercise control and supervision over the former.
Accordingly, whether or not David actually exercised this right or power to control is beside the point as
the law simply requires the existence of this power to control 4243 or, as in this case, the existence of the
right and opportunity to control and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to an
employer-employee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis

At this point, we note that all three tribunals the LA, the NLRC and the CA found that Macasio was
engaged or paid on "pakyaw" or task basis. This factual finding binds the Court under the rule that factual
findings of labor tribunals when supported by the established facts and in accord with the laws, especially
when affirmed by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage
payment, is the non-consideration of the time spent in working. In a task-basis work, the emphasis is on
the task itself, in the sense that payment is reckoned in terms of completion of the work, not in terms of
the number of time spent in the completion of work.45 Once the work or task is completed, the worker
receives a fixed amount as wage, without regard to the standard measurements of time generally used in
pay computation.
In Macasios case, the established facts show that he would usually start his work at 10:00 p.m. Thereafter,
regardless of the total hours that he spent at the workplace or of the total number of the hogs assigned
to him for chopping, Macasio would receive the fixed amount of P700.00 once he had completed his task.
Clearly, these circumstances show a "pakyaw" or task basis engagement that all three tribunals uniformly
found.
In sum, the existence of employment relationship between the parties is determined by applying the
"four-fold" test; engagement on "pakyaw" or task basis does not determine the parties relationship as it
is simply a method of pay computation. Accordingly, Macasio is Davids employee, albeit engaged on
"pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio
is entitled to holiday, 13th month, and SIL pay.
On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule
IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No.
851. The NLRC, on the other hand, relied on Article 82 of the Labor Code and the Rules and Regulations
Implementing PD No. 851. Uniformly, these provisions exempt workers paid on "pakyaw" or task basis
from the coverage of holiday, SIL and 13th month pay.
In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well as on Section
1, Rule V of the IRR of the Labor Code and the Courts ruling in Serrano v. Severino Santos Transit.46 These
labor law provisions, when read together with the Serrano ruling, exempt those engaged on "pakyaw" or
task basis only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct interpretation
of these labor code provisions and the implementing rules; although, to conclude that the worker is
exempted or covered depends on the facts and in this sense, is a question of fact: first, whether Macasio
is a "field personnel"; and second, whether those engaged on "pakyaw" or task basis, but who are not
"field personnel," are exempted from the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered
under Rule 65 and framed in question form, the legal question is whether the CA correctly ruled that it

was grave abuse of discretion on the part of the NLRC to deny Macasios monetary claims simply because
he is paid on a non-time basis without determining whether he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor Code
- provisions governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] 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.
xxxx
"Field personnel" shall refer to non-agricultural 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. [emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and SIL
pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand and "workers
who are paid by results" on the other hand, are not covered by the Title I provisions. The wordings of
Article82 of the Labor Code additionally categorize workers "paid by results" and "field personnel" as
separate and distinct types of employees who are exempted from the Title I provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR47 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 (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who are
paid a fixed amount for performing work irrespective of the time consumed in the performance thereof.
[emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR48 pertinently
provides:
Art. 95. Right to service incentive. (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.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted from granting this benefit by the
Secretary of Labor and Employment after considering the viability or financial condition of such
establishment. [emphases ours]
xxxx
Section 1. Coverage. This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed
amount for performing work irrespective of the time consumed in the performance thereof. [emphasis
ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be
excluded from their coverage, an employee must be one of those that these provisions expressly exempt,
strictly in accordance with the exemption. Under the IRR, exemption from the coverage of holiday and SIL
pay refer to "field personnel and other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis[.]" Note that unlike Article 82 of the
Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged on task basis" as a
separate and distinct category from employees classified as "field personnel." Rather, these employees
are altogether merged into one classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those
who are engaged on task basis, per se, are excluded from the SIL and holiday payment since this is what
the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable interpretation of this
rule may be conceded to be within the discretion granted to the LA and NLRC as the quasi-judicial bodies
with expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase "those who are
engaged on task or contract basis" in the rule has already been interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular terms that they follow xxx Clearly,
petitioner's teaching personnel cannot be deemed field personnel which refers "to non-agricultural
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. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private respondents
are not entitled to the service incentive leave benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from
the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the holiday
and SIL pay) only if they qualify as "field personnel." The IRR therefore validly qualifies and limits the
general exclusion of "workers paid by results" found in Article 82 from the coverage of holiday and SIL

pay. This is the only reasonable interpretation since the determination of excluded workers who are paid
by results from the coverage of Title I is "determined by the Secretary of Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v.
Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive
leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to
those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules,
Service Incentive Leave shall not apply to employees classified as "field personnel." The phrase "other
employees whose performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather, it serves as an
amplification of the interpretation of the definition of field personnel under the Labor Code as those
"whose actual hours of work in the field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis, purely
commission basis." Said phrase should be related with "field personnel," applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by the particular terms that they
follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of
granting Macasios petition.
In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees engaged on task
or contract basis xxx are not automatically exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel."51 The Court explained that the phrase "including those
who are engaged on task or contract basis, purely commission basis" found in Section 1(d), Rule V of Book
III of the IRR should not be understood as a separate classification of employees to which SIL shall not be
granted. Rather, as with its preceding phrase - "other employees whose performance is unsupervised by
the employer" - the phrase "including those who are engaged on task or contract basis" serves to amplify
the interpretation of the Labor Code definition of "field personnel" as those "whose actual hours of work
in the field cannot be determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor
Code provisions and the IRR as exempting an employee from the coverage of Title I of the Labor Code
based simply and solely on the mode of payment of an employee. The NLRCs utter disregard of this
consistent jurisprudential ruling is a clear act of grave abuse of discretion.52 In other words, by dismissing
Macasios complaint without considering whether Macasio was a "field personnel" or not, the NLRC
proceeded based on a significantly incomplete consideration of the case. This action clearly smacks of
grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken
counsel from Serrano and earlier cases, they would have correctly reached a similar conclusion regarding
the payment of holiday pay since the rule exempting "field personnel" from the grant of holiday pay is
identically worded with the rule exempting "field personnel" from the grant of SIL pay. To be clear, the

phrase "employees engaged on task or contract basis "found in the IRR on both SIL pay and holiday pay
should be read together with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and
SIL pay, the presence (or absence) of employer supervision as regards the workers time and performance
is the key: if the worker is simply engaged on pakyaw or task basis, then the general rule is that he is
entitled to a holiday pay and SIL pay unless exempted from the exceptions specifically provided under
Article 94 (holiday pay) and Article95 (SIL pay) of the Labor Code. However, if the worker engaged on
pakyaw or task basis also falls within the meaning of "field personnel" under the law, then he is not
entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not
fall under the definition of "field personnel." The CAs finding in this regard is supported by the established
facts of this case: first, Macasio regularly performed his duties at Davids principal place of business;
second, his actual hours of work could be determined with reasonable certainty; and, third, David
supervised his time and performance of duties. Since Macasio cannot be considered a "field personnel,"
then he is not exempted from the grant of holiday, SIL pay even as he was engaged on "pakyaw" or task
basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRCs ruling
dismissing Macasios complaint for holiday and SIL pay for having been rendered with grave abuse of
discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that
the NLRC gravely abused its discretion in denying this benefit to Macasio.
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must
be one of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations
Implementing P.D. No. 85154 enumerates the exemptions from the coverage of 13th month pay benefits.
Under Section 3(e), "employers of those who are paid on xxx task basis, and those who are paid a fixed
amount for performing a specific work, irrespective of the time consumed in the performance
thereof"55 are exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations
Implementing PD No. 851 exempts employees "paid on task basis" without any reference to "field
personnel." This could only mean that insofar as payment of the 13th month pay is concerned, the law
did not intend to qualify the exemption from its coverage with the requirement that the task worker be a
"field personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the
payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the decision
dated November 22, 2010 and the resolution dated January 31, 2011 of the Court of Appeals in CA-G.R.
SP No. 116003.

SO ORDERED.

Penaranda v. Baganga Plywood, G.R. No. 159577, May 3, 2006

G.R. No. 159577

May 3, 2006

CHARLITO
vs.
BAGANGA PLYWOOD CORPORATION and HUDSON CHUA, Respondents.

PEARANDA, Petitioner,

DECISION
PANGANIBAN, CJ:
Managerial employees and members of the managerial staff are exempted from the provisions of the
Labor Code on labor standards. Since petitioner belongs to this class of employees, he is not entitled to
overtime pay and premium pay for working on rest days.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 27, 20032 and
July 4, 20033 Resolutions of the Court of Appeals (CA) in CA-GR SP No. 74358. The earlier Resolution
disposed as follows:
"WHEREFORE, premises considered, the instant petition is hereby DISMISSED."4
The latter Resolution denied reconsideration.
On the other hand, the Decision of the National Labor Relations Commission (NLRC) challenged in the CA
disposed as follows:
"WHEREFORE, premises considered, the decision of the Labor Arbiter below awarding overtime pay and
premium pay for rest day to complainant is hereby REVERSED and SET ASIDE, and the complaint in the
above-entitled case dismissed for lack of merit.5
The Facts
Sometime in June 1999, Petitioner Charlito Pearanda was hired as an employee of Baganga Plywood
Corporation (BPC) to take charge of the operations and maintenance of its steam plant boiler. 6 In May
2001, Pearanda filed a Complaint for illegal dismissal with money claims against BPC and its general
manager, Hudson Chua, before the NLRC.7
After the parties failed to settle amicably, the labor arbiter8 directed the parties to file their position
papers and submit supporting documents.9 Their respective allegations are summarized by the labor
arbiter as follows:
"[Pearanda] through counsel in his position paper alleges that he was employed by respondent
[Baganga] on March 15, 1999 with a monthly salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer
until he was illegally terminated on December 19, 2000. Further, [he] alleges that his services [were]

terminated without the benefit of due process and valid grounds in accordance with law. Furthermore,
he was not paid his overtime pay, premium pay for working during holidays/rest days, night shift
differentials and finally claims for payment of damages and attorneys fees having been forced to litigate
the present complaint.
"Upon the other hand, respondent [BPC] is a domestic corporation duly organized and existing under
Philippine laws and is represented herein by its General Manager HUDSON CHUA, [the] individual
respondent. Respondents thru counsel allege that complainants separation from service was done
pursuant to Art. 283 of the Labor Code. The respondent [BPC] was on temporary closure due to repair and
general maintenance and it applied for clearance with the Department of Labor and Employment,
Regional Office No. XI to shut down and to dismiss employees (par. 2 position paper). And due to the
insistence of herein complainant he was paid his separation benefits (Annexes C and D, ibid).
Consequently, when respondent [BPC] partially reopened in January 2001, [Pearanda] failed to reapply.
Hence, he was not terminated from employment much less illegally. He opted to severe employment
when he insisted payment of his separation benefits. Furthermore, being a managerial employee he is not
entitled to overtime pay and if ever he rendered services beyond the normal hours of work, [there] was
no office order/or authorization for him to do so. Finally, respondents allege that the claim for damages
has no legal and factual basis and that the instant complaint must necessarily fail for lack of merit."10
The labor arbiter ruled that there was no illegal dismissal and that petitioners Complaint was premature
because he was still employed by BPC.11 The temporary closure of BPCs plant did not terminate his
employment, hence, he need not reapply when the plant reopened.
According to the labor arbiter, petitioners money claims for illegal dismissal was also weakened by his
quitclaim and admission during the clarificatory conference that he accepted separation benefits, sick and
vacation leave conversions and thirteenth month pay.12
Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for working on
rest days, and attorneys fees in the total amount of P21,257.98.13
Ruling of the NLRC
Respondents filed an appeal to the NLRC, which deleted the award of overtime pay and premium pay for
working on rest days. According to the Commission, petitioner was not entitled to these awards because
he was a managerial employee.14
Ruling of the Court of Appeals
In its Resolution dated January 27, 2003, the CA dismissed Pearandas Petition for Certiorari. The
appellate court held that he failed to: 1) attach copies of the pleadings submitted before the labor arbiter
and NLRC; and 2) explain why the filing and service of the Petition was not done by personal service.15
In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that petitioner still
failed to submit the pleadings filed before the NLRC.16
Hence this Petition.17
The Issues
Petitioner states the issues in this wise:

"The [NLRC] committed grave abuse of discretion amounting to excess or lack of jurisdiction when it
entertained the APPEAL of the respondent[s] despite the lapse of the mandatory period of TEN DAYS.
"The [NLRC] committed grave abuse of discretion amounting to an excess or lack of jurisdiction when it
rendered the assailed RESOLUTIONS dated May 8, 2002 and AUGUST 16, 2002 REVERSING AND SETTING
ASIDE the FACTUAL AND LEGAL FINDINGS of the [labor arbiter] with respect to the following:
"I. The finding of the [labor arbiter] that [Pearanda] is a regular, common employee entitled to monetary
benefits under Art. 82 [of the Labor Code].
"II. The finding that [Pearanda] is entitled to the payment of OVERTIME PAY and OTHER MONETARY
BENEFITS."18
The Courts Ruling
The Petition is not meritorious.
Preliminary Issue:
Resolution on the Merits
The CA dismissed Pearandas Petition on purely technical grounds, particularly with regard to the failure
to submit supporting documents.
In Atillo v. Bombay,19 the Court held that the crucial issue is whether the documents accompanying the
petition before the CA sufficiently supported the allegations therein. Citing this case, Piglas-Kamao v.
NLRC20 stayed the dismissal of an appeal in the exercise of its equity jurisdiction to order the adjudication
on the merits.
The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to challenge the
finding that he was a managerial employee.21 In his Motion for Reconsideration, petitioner also submitted
the pleadings before the labor arbiter in an attempt to comply with the CA rules.22 Evidently, the CA could
have ruled on the Petition on the basis of these attachments. Petitioner should be deemed in substantial
compliance with the procedural requirements.
Under these extenuating circumstances, the Court does not hesitate to grant liberality in favor of
petitioner and to tackle his substantive arguments in the present case. Rules of procedure must be
adopted to help promote, not frustrate, substantial justice.23 The Court frowns upon the practice of
dismissing cases purely on procedural grounds.24 Considering that there was substantial compliance,25 a
liberal interpretation of procedural rules in this labor case is more in keeping with the constitutional
mandate to secure social justice.26
First Issue:
Timeliness of Appeal
Under the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter should be filed
within 10 days from receipt thereof.27
Petitioners claim that respondents filed their appeal beyond the required period is not substantiated. In
the pleadings before us, petitioner fails to indicate when respondents received the Decision of the labor

arbiter. Neither did the petitioner attach a copy of the challenged appeal. Thus, this Court has no means
to determine from the records when the 10-day period commenced and terminated. Since petitioner
utterly failed to support his claim that respondents appeal was filed out of time, we need not belabor
that point. The parties alleging have the burden of substantiating their allegations.28
Second Issue:
Nature of Employment
Petitioner claims that he was not a managerial employee, and therefore, entitled to the award granted by
the labor arbiter.
Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards. Labor
standards provide the working conditions of employees, including entitlement to overtime pay and
premium pay for working on rest days.29 Under this provision, managerial employees are "those whose
primary duty consists of the management of the establishment in which they are employed or of a
department or subdivision."30
The Implementing Rules of the Labor Code state that managerial employees are those who meet the
following conditions:
"(1) Their primary duty consists of the management of the establishment in which they are employed or
of a department or subdivision thereof;
"(2) They customarily and regularly direct the work of two or more employees therein;
"(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of
other employees are given particular weight."31
The Court disagrees with the NLRCs finding that petitioner was a managerial employee. However,
petitioner was a member of the managerial staff, which also takes him out of the coverage of labor
standards. Like managerial employees, officers and members of the managerial staff are not entitled to
the provisions of law on labor standards.32 The Implementing Rules of the Labor Code define members of
a managerial staff as those with the following duties and responsibilities:
"(1) The primary duty consists of the performance of work directly related to management policies of the
employer;
"(2) Customarily and regularly exercise discretion and independent judgment;
"(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of
the management of the establishment in which he is employed or subdivision thereof; or (ii) execute
under general supervision work along specialized or technical lines requiring special training, experience,
or knowledge; or (iii) execute under general supervision special assignments and tasks; and
"(4) who do not devote more than 20 percent of their hours worked in a workweek to activities which are
not directly and closely related to the performance of the work described in paragraphs (1), (2), and (3)
above."33
As shift engineer, petitioners duties and responsibilities were as follows:

"1. To supply the required and continuous steam to all consuming units at minimum cost.
"2. To supervise, check and monitor manpower workmanship as well as operation of boiler and
accessories.
"3. To evaluate performance of machinery and manpower.
"4. To follow-up supply of waste and other materials for fuel.
"5. To train new employees for effective and safety while working.
"6. Recommend parts and supplies purchases.
"7. To recommend personnel actions such as: promotion, or disciplinary action.
"8. To check water from the boiler, feedwater and softener, regenerate softener if beyond hardness limit.
"9. Implement Chemical Dosing.
"10. Perform other task as required by the superior from time to time."34
The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that petitioner was a member of
the managerial staff. His duties and responsibilities conform to the definition of a member of a managerial
staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing the
operation of the machines and the performance of the workers in the engineering section. This work
necessarily required the use of discretion and independent judgment to ensure the proper functioning of
the steam plant boiler. As supervisor, petitioner is deemed a member of the managerial staff.35
Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated that he
was the foreman responsible for the operation of the boiler.36 The term foreman implies that he was the
representative of management over the workers and the operation of the department.37 Petitioners
evidence also showed that he was the supervisor of the steam plant.38 His classification as supervisor is
further evident from the manner his salary was paid. He belonged to the 10% of respondents 354
employees who were paid on a monthly basis; the others were paid only on a daily basis.39
On the basis of the foregoing, the Court finds no justification to award overtime pay and premium pay for
rest days to petitioner.
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.

Normal Hours of Work

Art. 83, Labor Code

Article 83. Normal hours of work. The normal hours of work of any employee shall not exceed eight
(8) hours a day.

Health personnel in cities and municipalities with a population of at least one million (1,000,000) or in
hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular office hours
for eight (8) hours a day, for five (5) days a week, exclusive of time for meals, except where the
exigencies of the service require that such personnel work for six (6) days or forty-eight (48) hours, in
which case, they shall be entitled to an additional compensation of at least thirty percent (30%) of their
regular wage for work on the sixth day. For purposes of this Article, "health personnel" shall include
resident physicians, nurses, nutritionists, dietitians, pharmacists, social workers, laboratory
technicians, paramedical technicians, psychologists, midwives, attendants and all other hospital or
clinic personnel.
Article 84. Hours worked. Hours worked shall include (a) all time during which an employee is required
to be on duty or to be at a prescribed workplace; and (b) all time during which an employee is suffered
or permitted to work.
Rest periods of short duration during working hours shall be counted as hours worked.

Book III, Rule 1, Secs. 3-4, Implementing Rules (Labor Code)

SECTION 3. Hours worked. The following shall be considered as compensable hours worked:
(a) All time during which an employee is required to be on duty or to be at the employer's premises
or to be at a prescribed work place; and
(b) All time during which an employee is suffered or permitted to work.
SECTION 4. Principles in determining hours worked. The following general principles shall govern in
determining whether the time spent by an employee is considered hours worked for purposes of this Rule:
(a) All hours are hours worked which the employee is required to give his employer, regardless of
whether or not such hours are spent in productive labor or involve physical or mental exertion.
(b) An employee need not leave the premises of the work place in order that his rest period shall not
be counted, it being enough that he stops working, may rest completely and may leave his work
place, to go elsewhere, whether within or outside the premises of his work place.
(c) If the work performed was necessary, or it benefited the employer, or the employee could not
abandon his work at the end of his normal working hours because he had no replacement, all time
spent for such work shall be considered as hours worked, if the work was with the knowledge of
his employer or immediate supervisor.
(d) The time during which an employee is inactive by reason of interruptions in his work beyond his
control shall be considered working time either if the imminence of the resumption of work
requires the employee's presence at the place of work or if the interval is too brief to be utilized
effectively and gainfully in the employee's own interest.

DO No. 65-04, Series of 2004

Hours of work include (1) all time during which a child is required to be at a prescribed workplace, and
(2) all time during which a child is suffered or permitted to work. Rest periods of short duration during
working hours shall be counted as hours worked.
Chapter 5 Hours of Work

SECTION 15. Hours of Work of a Working Child The following hours of work shall be observed for any
child allowed to work under Republic Act No. 9231 and these Rules:
(a) For a child below 15 years of age, the hours of work shall not be more than twenty 20 hours a week,
provided that the work shall not be more than four hours at any given day;
(b) For a child 15 years of age but below 18, the hours of work shall not be more than eight hours a day,
and in no case beyond 40 hours a week; and
(c) No child below 15 years of age shall be allowed to work between eight o clock in the evening and six
oclock in the morning of the following day and no child 15 years of age but below 18 shall be allowed to
work between ten oclock in the evening and six o clock in the morning of the following day.
Sleeping time as well as travel time of a child engaged in public entertainment or information from his/her
residence to his/her workplace shall not be included as hours worked without prejudice to the application
of existing rules on employees compensation.

R.A. 8972, Sec. 6

Section 6. Flexible Work Schedule. - The employer shall provide for a flexible working schedule for solo
parents: Provided, That the same shall not affect individual and company productivity: Provided,
further, That any employer may request exemption from the above requirements from the DOLE on
certain meritorious grounds

R.A. 10361, Secs. 20-21

SEC. 20. Daily Rest Period. The domestic worker shall be entitled to an aggregate daily rest period of
eight (8) hours per day.
SEC. 21. Weekly Rest Period. The domestic worker shall be entitled to at least twenty-four (24)
consecutive hours of rest in a week. The employer and the domestic worker shall agree in writing on the
schedule of the weekly rest day of the domestic worker:Provided, That the employer shall respect the
preference of the domestic worker as to the weekly rest day when such preference is based on religious
grounds. Nothing in this provision shall deprive the domestic worker and the employer from agreeing to
the following:
(a) Offsetting a day of absence with a particular rest day;
(b) Waiving a particular rest day in return for an equivalent daily rate of pay;
(c) Accumulating rest days not exceeding five (5) days; or
(d) Other similar arrangements.

CHED Memorandum Circular No. 40, Series of 2008

a. Compressed Work Week

DOLE Dept. Advisory No. 2, Series of 2004

DOLE Dept. Advisory No. 2, Series of 2009

DOLE Dept. Advisory No. 4, Series of 2010

Meal break

Art. 85, Labor Code

Article 85. Meal periods. Subject to such regulations as the Secretary of Labor may prescribe, it shall
be the duty of every employer to give his employees not less than sixty (60) minutes time-off for their
regular meals.

Book III, Rule I, Sec. 7, Implementing Rules (Labor Code)

SECTION 7. Meal and Rest Periods. Every employer shall give his employees, regardless of sex, not less
than one (1) hour time-off for regular meals, except in the following cases when a meal period of not less
than twenty (20) minutes may be given by the employer provided that such shorter meal period is credited
as compensable hours worked of the employee:
(a) Where the work is non-manual work in nature or does not involve strenuous physical exertion;
(b) Where the establishment regularly operates not less than sixteen (16) hours a day;
(c) In case of actual or impending emergencies or there is urgent work to be performed on machineries,
equipment or installations to avoid serious loss which the employer would otherwise suffer; and

(d) Where the work is necessary to prevent serious loss of perishable goods.
Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be considered as
compensable working time.

Letter-Opinion dated Nov. 27, 1989, Sec. Drilon to Kodak Philippines

The opinion of Secretary of Labor & Employment Franklin M. Drilon dated 27 November 1989
relative to the request of Kodak Philippines Inc. on shortened meal period, read in part as follows:
While as a general rule, the right to overtime pay as a result of a compensable shorter meal period
cannot be waived under existing laws, this Office will not interpose any objection to the request of the
employees provided the following conditions are met:
1. The employees voluntarily agree in writing to a shortened meal period of 30 minutes and are willing
to waive the overtime pay for such shortened meal period;
2. There will be no diminution whatsoever in the salary and other fringe benefits of the employees
existing before the effectivity of the shortened meal period;
3. The work of the employees does not involve strenuous physical exertion and they are provided with
adequate coffee breaks in the morning and afternoon;
4. The value of the benefits derived by the employees from the proposed work arrangement is equal to
or commensurate with the compensation due them for the shortened meal period as well as the overtime
pay for 30 minutes as determined by the employees concerned;
5. The overtimes pay of the employees will become due and demandable if ever they are permitted or
made to work beyond 4:30; and
The effectivity of the proposed working time arrangement shall be of temporary duration as determined
by the Secretary of Labor and Employment.

Manual on Labor Standards 2004- Bureau of Working Conditions

Sime Darby v. NLRC, G.R. No. 119205, April 15, 1998

FIRST DIVISION

[G.R. No. 119205. April 15, 1998]

SIME DARBY PILIPINAS, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (2ND
DIVISION) and SIME DARBY SALARIED EMPLOYEES ASSOCIATION (ALU-TUCP), respondents.
DECISION
BELLOSILLO, J.:
Is the act of management in revising the work schedule of its employees and discarding their paid lunch
break constitutive of unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and other
rubber products. Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an
association of monthly salaried employees of petitioner at its Marikina factory. Prior to the present
controversy, all company factory workers in Marikina including members of private respondent union
worked from 7:45 a.m. to 3:45 p.m. with a 30 minute paid on call lunch break.
On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its
monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality
Assurance Department working on shifts, a change in work schedule effective 14 September 1992 thus
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule factory office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday)
7:45 A.M. 11:45 P.M. (Saturday).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. 10:30 A.M. and
2:30 P.M. 3:30 P.M.
Lunch break will be between:
12:00 NN 1:00 P.M. (Monday to Friday).
Excluded from the above schedule are the Warehouse and QA employees who are on shifting. Their work
and break time schedules will be maintained as it is now.[1]
Since private respondent felt affected adversely by the change in the work schedule and discontinuance
of the 30-minute paid on call lunch break, it filed on behalf of its members a complaint with the Labor
Arbiter for unfair labor practice, discrimination and evasion of liability pursuant to the resolution of this
Court in Sime Darby International Tire Co., Inc. v. NLRC.[2]However, the Labor Arbiter dismissed the
complaint on the ground that the change in the work schedule and the elimination of the 30-minute paid
lunch break of the factory workers constituted a valid exercise of management prerogative and that the

new work schedule, break time and one-hour lunch break did not have the effect of diminishing the
benefits granted to factory workers as the working time did not exceed eight (8) hours.
The Labor Arbiter further held that the factory workers would be justly enriched if they continued to be
paid during their lunch break even if they were no longer on call or required to work during the break. He
also ruled that the decision in the earlier Sime Darby case[3] was not applicable to the instant case because
the former involved discrimination of certain employees who were not paid for their 30-minute lunch
break while the rest of the factory workers were paid; hence, this Court ordered that the discriminated
employees be similarly paid the additional compensation for their lunch break.
Private respondent appealed to respondent National Labor Relations Commission (NLRC) which sustained
the Labor Arbiter and dismissed the appeal.[4] However, upon motion for reconsideration by private
respondent, the NLRC, this time with two (2) new commissioners replacing those who earlier retired,
reversed its arlier decision of 20 April 1994 as well as the decision of the Labor Arbiter. [5] The NLRC
considered the decision of this Court in the Sime Darby case of 1990 as the law of the case wherein
petitioner was ordered to pay the money value of these covered employees deprived of lunch and/or
working time breaks. The public respondent declared that the new work schedule deprived the employees
of the benefits of time-honored company practice of providing its employees a 30-minute paid lunch
break resulting in an unjust diminution of company privileges prohibited by Art. 100 of the Labor Code, as
amended. Hence, this petition alleging that public respondent committed grave abuse of discretion
amounting to lack or excess of jurisdiction: (a) in ruling that petitioner committed unfair labor practice in
the implementation of the change in the work schedule of its employees from 7:45 a.m. 3:45 p.m. to 7:45
a.m. 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in holding that there was
diminution of benefits when the 30-minute paid lunch break was eliminated; (c) in failing to consider that
in the earlier Sime Darby case affirming the decision of the NLRC, petitioner was authorized to discontinue
the practice of having a 30-minute paid lunch break should it decide to do so; and (d) in ignoring
petitioners inherent management prerogative of determining and fixing the work schedule of its
employees which is expressly recognized in the collective bargaining agreement between petitioner and
private respondent.
The Office of the Solicitor General filed in lieu of comment a manifestation and motion recommending
that the petition be granted, alleging that the 14 August 1992 memorandum which contained the new
work schedule was not discriminatory of the union members nor did it constitute unfair labor practice on
the part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests
principally on their employer. In the instant case petitioner, as the employer, cites as reason for the
adjustment the efficient conduct of its business operations and its improved production.[6] It rationalizes
that while the old work schedule included a 30-minute paid lunch break, the employees could be called
upon to do jobs during that period as they were on call. Even if denominated as lunch break, this period
could very well be considered as working time because the factory employees were required to work if
necessary and were paid accordingly for working. With the new work schedule, the employees are now
given a one-hour lunch break without any interruption from their employer. For a full one-hour
undisturbed lunch break, the employees can freely and effectively use this hour not only for eating but
also for their rest and comfort which are conducive to more efficiency and better performance in their
work. Since the employees are no longer required to work during this one-hour lunch break, there is no

more need for them to be compensated for this period. We agree with the Labor Arbiter that the new
work schedule fully complies with the daily work period of eight (8) hours without violating the Labor
Code.[7] Besides, the new schedule applies to all employees in the factory similarly situated whether they
are union members or not.[8]
Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby
case[9] with the facts obtaining in this case. That ruling in the former case is not applicable here. The issue
in that case involved the matter of granting lunch breaks to certain employees while depriving the other
employees of such breaks. This Court affirmed in that case the NLRCs finding that such act of management
was discriminatory and constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of employees but only
the issue of whether the change of work schedule, which management deems necessary to increase
production, constitutes unfair labor practice. As shown by the records, the change effected by
management with regard to working time is made to apply to all factory employees engaged in the same
line of work whether or not they are members of private respondent union. Hence, it cannot be said that
the new scheme adopted by management prejudices the right of private respondent to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain
that goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives.[10] Thus, management is free to regulate,
according to its own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline,
dismissal and recall of workers.[11] Further, management retains the prerogative, whenever exigencies of
the service so require, to change the working hours of its employees. So long as such prerogative is
exercised in good faith for the advancement of the employers interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid agreements, this
Court will uphold such exercise.[12]
While the Constitution is committed to the policy of social justice and the protection of the working class,
it should not be supposed that every dispute will be automatically decided in favor of labor. Management
also has right which, as such, are entitled to respect and enforcement in the interest of simple fair
play. Although this Court has inclined more often than not toward the worker and has upheld his cause in
his conflicts with the employer, such as favoritism has not blinded the Court to the rule that justice is in
every case for the deserving, to be dispensed in the light of the established facts and the applicable law
and doctrine.[13]
WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations Commission dated
29 November 1994 is SET ASIDE and the decision of the Labor Arbiter dated 26 November 1993 dismissing
the complaint against petitioner for unfair labor practice is AFFIRMED.
SO ORDERED.
Davide, Jr., (Chairman), Vitug, Panganiban, and Quisumbing, JJ., concur.

Pan Am v. Pan Am Employees, G.R. No. L-16275, February 23, 1961

G.R. No. L-16275

February 23, 1961

PAN
AMERICAN
WORLD
AIRWAYS
vs.
PAN AMERICAN EMPLOYEES ASSOCIATION, respondent.
Ross,
Selph
Jose Espinas for respondent.

and

SYSTEM

Carrascoso

(PHILIPPINES), petitioner,

for

petitioner.

REYES, J.B.L., J.:

Appeal by certiorari from the decision of the Court of Industrial Relations in Case No. 1055-V dated
October 10, 1959, and its resolution en banc denying the motion for reconsideration filed by the
petitioner herein.
The dispositive portion of the appealed decision reads: .
WHEREFORE, the Court orders the Chief of the Examining Division or his representative to compute the
overtime compensation due the aforesaid fourteen (14) aircraft mechanic and the two employees from
the Communication Department based on the time sheet of said employees from February 23 1952 up to
and including July 15, 1958 and to submit his report within 30 days for further disposition by the Court;
and the company shall show to the Court Examiner such time sheets an other documents that may be
necessary in the aforesaid computation; and two (2) representatives for the company and two (2)
representatives for the union shall be chosen to help the Court Examiner in said computation.
The company is also ordered to permanently adopt the straight 8-hour shift inclusive of meal period which
is mutually beneficial to the parties.
SO ORDERED.
In this appeal, petitioner advances five proposition which, briefly, are as follows: (1) the Industrial Court
has no jurisdiction to order the payment of overtime compensation, it being a mere monetary claim
cognizable by regular courts; (2) the finding that the one-hour meal period should be considered overtime
work (deducting 15 minutes as time allotted for eating) is not supported by substantial evidence; (3) the
court below had no authority to delegate its judicial functions by ordering the Chief of the Examining
Division or his representative to compute the overtime pay; (4) the finding that there was no agreement
to withdraw Case No. 1055-V in consideration of the wage increases in the Collective Bargaining Contract
(Exh. "A") is not supported by substantial evidence; and (5) the court below had no authority to order the
company to adopt a straight 8-hour shift inclusive of meal period.
On the issue of jurisdiction over claims for overtime pay, we have since definitely ruled in a recent
decisions that the Industrial Court may properly take cognizance of such cases if, at the time of the
petition, the complainants were still in the service of the employer, or, having been separated from such
service, should ask for reinstatement; otherwise, such claims should be brought before the regular courts
(NASSCO v. CIR, et al., L-13888, April 29, 1960; FRISCO v. CIR, et al., L-13806, May 23, 1960; Board of

Liquidators, et al. vs. CIR, et al., L-15485, May 23, 1960; Sta. Cecilia, Sawmills Co. vs. CIR, L-14254 & L14255, May 27, 1960; Ajax International Corp. v. Seguritan, L-16038, October 25, 1960; Sampaguita
Pictures, Inc., et al. vs. CIR, L-16404, October 25, 1960). Since, in the instant case there is no question that
the employees claiming overtime compensation were still in the service of the company when the case
was filed, the jurisdiction of the Court of Industrial Relations cannot be assailed. In fact, since it is not
pretended that, thereafter, the complainants were discharged or otherwise terminated their relationship
with the company for any reason, all of said complainants could still be with the company up to the
present.
Petitioner herein claims that the one-hour meal period should not be considered as overtime work (after
deducting 15 minutes), because the evidence showed that complainants could rest completely, and were
not in any manner under the control of the company during that period. The court below found, on the
contrary, that during the so called meal period, the mechanics were required to stand by for emergency
work; that if they happened not to be available when called, they were reprimanded by the leadman; that
as in fact it happened on many occasions, the mechanics had been called from their meals or told to hurry
Employees Association up eating to perform work during this period. Far from being unsupported by
substantial evidence, the record clearly confirms the above factual findings of the Industrial Court.
Similarly, this Court is satisfied with the finding that there was no agreement to withdraw Case No. 1055V in consideration of the wage increases obtained by the, union and set forth in the Collective Bargaining
Agreement Exhibit "A". As reasoned out by the court below, such alleged agreement would have been
incorporated in the contract if it existed. The fact that the union filed a motion to dismiss without
prejudice, after the Collective Bargaining Contract had been signed, did not necessarily mean that it had
agreed to withdraw the case in consideration of the wage increases. The motion itself (Annex "B", Petition
for Certiorari) was expressly based on an understanding that the company would "formulate a schedule
of work which shall be in consonance with C. A. 444". All in all, there is substantial evidence in the record
to support the finding of the court below that no such agreement was made.
It is next contended that in ordering the Chief of the Examining Division or his representative to compute
the compensation due, the Industrial Court unduly delegated its judicial functions and thereby rendered
an incomplete decision. We do not believe so. Computation of the overtime pay involves a mechanical
function, at most. And the report would still have to be submitted to the Industrial Court for its approval,
by the very terms of the order itself. That there was no specification of the amount of overtime pay in the
decision did not make it incomplete, since this matter would necessarily be made clear enough in the
implementation of the decision (see Malate Taxicab & Garage, Inc. vs. CIR, et al., L-8718, May 11, 1956).
The Industrial Court's order for permanent adoption of a straight 8-hour shift including the meal period
was but a consequence of its finding that the meal hour was not one of complete rest, but was actually a
work hour, since for its duration, the laborers had to be on ready call. Of course, if the Company practices
in this regard should be modified to afford the mechanics a real rest during that hour (f. ex., by installing
an entirely different emergency crew, or any similar arrangement), then the modification of this part of
the decision may be sought from the Court below. As things now stand, we see no warrant for altering
the decision.
The judgment appealed from is affirmed. Costs against appellant.
Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion , Barrera, Paredes and Dizon, JJ., concur.

Waiting Time

Book III, Rule I, Sec. 5, Implementing Rules (Labor Code)

SECTION 5. Waiting time. (a) Waiting time spent by an employee shall be considered as working time
if waiting is an integral part of his work or the employee is required or engaged by the employer to
wait.cralaw
(b) An employee who is required to remain on call in the employer's premises or so close thereto that he
cannot use the time effectively and gainfully for his own purpose shall be considered as working while on
call. An employee who is not required to leave word at his home or with company officials where he may
be reached is not working while on call.

Arica v. NLRC, G.R. No. 78210, February 28, 1998

G.R. No. 78210 February 28, 1989

TEOFILO ARICA, DANILO BERNABE, MELQUIADES DOHINO, ABONDIO OMERTA, GIL
TANGIHAN, SAMUEL LABAJO, NESTOR NORBE, RODOLFO CONCEPCION, RICARDO RICHA,
RODOLFO NENO, ALBERTO BALATRO, BENJAMIN JUMAMOY, FERMIN DAAROL, JOVENAL
ENRIQUEZ, OSCAR BASAL, RAMON ACENA, JAIME BUGTAY, and 561 OTHERS, HEREIN
REPRESENTED
BY
KORONADO
B.
APUZEN,petitioners
vs.
NATIONAL LABOR RELATIONS COMMISSION, HONORABLE FRANKLIN DRILON,
HONORABLE CONRADO B. MAGLAYA, HONORABLE ROSARIO B. ENCARNACION, and
STANDARD (PHILIPPINES) FRUIT CORPORATION, respondents.
Koronado B. Apuzen and Jose C. Espinas for petitioners.
The Solicitor General for public respondent.
Dominguez & Paderna Law Offices Co. for private respondent.

PARAS, J.:
This is a petition for review on certiorari of the decision of the National Labor Relations Commission
dated December 12, 1986 in NLRC Case No. 2327 MC-XI-84 entitled Teofilo Arica et al. vs. Standard
(Phil.) Fruits Corporation (STANFILCO) which affirmed the decision of Labor Arbiter Pedro C. Ramos,
NLRC, Special Task Force, Regional Arbitration Branch No. XI, Davao City dismissing the claim of
petitioners.
This case stemmed from a complaint filed on April 9, 1984 against private respondent Stanfilco for
assembly time, moral damages and attorney's fees, with the aforementioned Regional Arbitration
Branch No. XI, Davao City.

After the submission by the parties of their respective position papers (Annex "C", pp. 30-40; Annex
"D", Rollo, pp. 41-50), Labor Arbiter Pedro C. Ramos rendered a decision dated October 9, 1985
(Annex 'E', Rollo, pp. 51-58) in favor of private respondent STANFILCO, holding that:
Given these facts and circumstances, we cannot but agree with respondent that the
pronouncement in that earlier case, i.e. the thirty-minute assembly time long practiced
cannot be considered waiting time or work time and, therefore, not compensable, has
become the law of the case which can no longer be disturbed without doing violence
to the time- honored principle of res-judicata.
WHEREFORE, in view of the foregoing considerations, the instant complaint should
therefore be, as it is hereby, DISMISSED.
SO ORDERED. (Rollo, p. 58)
On December 12, 1986, after considering the appeal memorandum of complainant and the opposition
of respondents, the First Division of public respondent NLRC composed of Acting Presiding
Commissioner Franklin Drilon, Commissioner Conrado Maglaya, Commissioner Rosario D.
Encarnacion as Members, promulgated its Resolution, upholding the Labor Arbiters' decision. The
Resolution's dispositive portion reads:
'Surely, the customary functions referred to in the above- quoted provision of the
agreement includes the long-standing practice and institutionalized non-compensable
assembly time. This, in effect, estopped complainants from pursuing this case.
The Commission cannot ignore these hard facts, and we are constrained to uphold the
dismissal and closure of the case.
WHEREFORE, let the appeal be, as it is hereby dismissed, for lack of merit.
SO ORDERED. (Annex "H", Rollo, pp. 86-89).
On January 15, 1987, petitioners filed a Motion for Reconsideration which was opposed by private
respondent (Annex "I", Rollo, pp. 90-91; Annex J Rollo, pp. 92-96).
Public respondent NLRC, on January 30, 1987, issued a resolution denying for lack of merit petitioners'
motion for reconsideration (Annex "K", Rollo, p. 97).
Hence this petition for review on certiorari filed on May 7, 1987.
The Court in the resolution of May 4, 1988 gave due course to this petition.
Petitioners assign the following issues:
1) Whether or not the 30-minute activity of the petitioners before the scheduled working
time is compensable under the Labor Code.
2) Whether or not res judicata applies when the facts obtaining in the prior case and in
the case at bar are significantly different from each other in that there is merit in the
case at bar.

3) Whether or not there is finality in the decision of Secretary Ople in view of the
compromise agreement novating it and the withdrawal of the appeal.
4) Whether or not estoppel and laches lie in decisions for the enforcement of labor
standards (Rollo, p. 10).
Petitioners contend that the preliminary activities as workers of respondents STANFILCO in the
assembly area is compensable as working time (from 5:30 to 6:00 o'clock in the morning) since these
preliminary activities are necessarily and primarily for private respondent's benefit.
These preliminary activities of the workers are as follows:
(a) First there is the roll call. This is followed by getting their individual work
assignments from the foreman.
(b) Thereafter, they are individually required to accomplish the Laborer's Daily
Accomplishment Report during which they are often made to explain about their
reported accomplishment the following day.
(c) Then they go to the stockroom to get the working materials, tools and equipment.
(d) Lastly, they travel to the field bringing with them their tools, equipment and
materials.
All these activities take 30 minutes to accomplish (Rollo, Petition, p. 11).
Contrary to this contention, respondent avers that the instant complaint is not new, the very same
claim having been brought against herein respondent by the same group of rank and file employees
in the case of Associated Labor Union and Standard Fruit Corporation, NLRC Case No. 26-LS-XI-76
which was filed way back April 27, 1976 when ALU was the bargaining agent of respondent's rank and
file workers. The said case involved a claim for "waiting time", as the complainants purportedly were
required to assemble at a designated area at least 30 minutes prior to the start of their scheduled
working hours "to ascertain the work force available for the day by means of a roll call, for the purpose
of assignment or reassignment of employees to such areas in the plantation where they are most
needed." (Rollo, pp. 64- 65)
Noteworthy is the decision of the Minister of Labor, on May 12, 1978 in the aforecited case (Associated
Labor Union vs. Standard (Phil.) Fruit Corporation, NLRC Case No. 26-LS-XI-76 where significant
findings of facts and conclusions had already been made on the matter.
The Minister of Labor held:
The thirty (30)-minute assembly time long practiced and institutionalized by mutual
consent of the parties under Article IV, Section 3, of the Collective Bargaining
Agreement cannot be considered as waiting time within the purview of Section 5, Rule
I, Book III of the Rules and Regulations Implementing the Labor Code. ...
Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice of
the employees, and the proceedings attendant thereto are not infected with
complexities as to deprive the workers the time to attend to other personal pursuits.
They are not new employees as to require the company to deliver long briefings

regarding their respective work assignments. Their houses are situated right on the
area where the farm are located, such that after the roll call, which does not necessarily
require the personal presence, they can go back to their houses to attend to some
chores. In short, they are not subject to the absolute control of the company during this
period, otherwise, their failure to report in the assembly time would justify the company
to impose disciplinary measures. The CBA does not contain any provision to this effect;
the record is also bare of any proof on this point. This, therefore, demonstrates the
indubitable fact that the thirty (30)-minute assembly time was not primarily intended for
the interests of the employer, but ultimately for the employees to indicate their
availability or non-availability for work during every working day. (Annex "E", Rollo, p.
57).
Accordingly, the issues are reduced to the sole question as to whether public respondent National
Labor Relations Commission committed a grave abuse of discretion in its resolution of December 17,
1986.
The facts on which this decision was predicated continue to be the facts of the case in this questioned
resolution of the National Labor Relations Commission.
It is clear that herein petitioners are merely reiterating the very same claim which they filed through
the ALU and which records show had already long been considered terminated and closed by this
Court in G.R. No. L-48510. Therefore, the NLRC can not be faulted for ruling that petitioners' claim is
already barred by res-judicata.
Be that as it may, petitioners' claim that there was a change in the factual scenario which are
"substantial changes in the facts" makes respondent firm now liable for the same claim they earlier
filed against respondent which was dismissed. It is thus axiomatic that the non-compensability of the
claim having been earlier established, constitute the controlling legal rule or decision between the
parties and remains to be the law of the case making this petition without merit.
As aptly observed by the Solicitor General that this petition is "clearly violative of the familiar principle
of res judicata. There will be no end to this controversy if the light of the Minister of Labor's decision
dated May 12, 1979 that had long acquired the character of finality and which already resolved that
petitioners' thirty (30)-minute assembly time is not compensable, the same issue can be re-litigated
again." (Rollo, p. 183)
This Court has held:
In this connection account should be taken of the cognate principle that res
judicata operates to bar not only the relitigation in a subsequent action of the issues
squarely raised, passed upon and adjudicated in the first suit, but also the ventilation
in said subsequent suit of any other issue which could have been raised in the first but
was not. The law provides that 'the judgment or order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in relation
thereto, conclusive between the parties and their successors in interest by title
subsequent to the commencement of the action .. litigating for the same thing and in
the same capacity.' So, even if new causes of action are asserted in the second action
(e.g. fraud, deceit, undue machinations in connection with their execution of the
convenio de transaccion), this would not preclude the operation of the doctrine of res
judicata. Those issues are also barred, even if not passed upon in the first. They could
have been, but were not, there raised. (Vda. de Buncio v. Estate of the late Anita de
Leon, 156 SCRA 352 [1987]).

Moreover, as a rule, the findings of facts of quasi-judicial agencies which have acquired expertise
because their jurisdiction is confined to specific matters are accorded not only respect but at times
even finality if such findings are supported by substantial evidence (Special Events & Central Shipping
Office Workers Union v. San Miguel Corporation, 122 SCRA 557 [1983]; Dangan v. NLRC, 127 SCRA
706 [1984]; Phil. Labor Alliance Council v. Bureau of Labor Relations, 75 SCRA 162 [1977]; Mamerto
v. Inciong, 118 SCRA 265 (1982]; National Federation of Labor Union (NAFLU) v. Ople, 143 SCRA
124 [1986]; Edi-Staff Builders International, Inc. v. Leogardo, Jr., 152 SCRA 453 [1987]; Asiaworld
Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]).
The records show that the Labor Arbiters' decision dated October 9, 1985 (Annex "E", Petition) pointed
out in detail the basis of his findings and conclusions, and no cogent reason can be found to disturb
these findings nor of those of the National Labor Relations Commission which affirmed the same.
PREMISES CONSIDERED, the petition is DISMISSED for lack of merit and the decision of the
National Labor Relations Commission is AFFIRMED.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur.

Separate Opinions

SARMIENTO, J., Dissenting:

It is my opinion that res judicata is not a bar.
The decision penned by then Minister Blas Ople in ALU v. STANFILCO (NLRC Case No. 26-LS-XI76) relied upon by the respondents as basis for claims of res judicata, is not, to my mind, a controlling
precedent. In that case, it was held that the thirty-minute "waiting time" complained of was a mere
"assembly time" and not a waiting time as the term is known in law, and hence, a compensable hour
of work. Thus:
The thirty (30)-minute assembly time long practiced and institutionalized by mutual
consent of the parties under Article IV, Section 3, of the Collective Bargaining
Agreement cannot be considered as 'waiting time' within the purview of Section 5, Rule
1, Book III of the Rules and Regulations Implementing the Labor Code. ...
Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice of
the employees, and the proceedings attendant thereto are not infected with
complexities as to deprive the workers the time to attend to other personal pursuits.
They are not new employees as to require the company to deliver long briefings
regarding their respective work assignments. Their houses are situated right on the
area where the farms are located, such that after the roll call, which does not
necessarily require the personal presence, they can go back to their houses to attend
to some chores.

In short, they are not subject to the absolute control of the company during this period,
otherwise, their failure to report in the assembly time would justify the company to
impose disciplinary measures. The CBA does not contain any provision to this effect;
the record is also bare of any proof on this point. This, therefore, demonstrates the
indubitable fact that the thirty (30)-minute assembly time was not primarily intended for
the interests of the employer, but ultimately for the employees to indicate their
availability or non-availability for work during every working day. (Decision, 6.)
Precisely, it is the petitioners' contention that the assembly time in question had since undergone
dramatic changes, thus:
(a) First there is the roll call. This is followed by getting their individual work
assignments from the foreman.
(b) Thereafter,they are individually required to accomplish the Laborer's Daily
Accomplishment Report during which they are often made to explain about their
reported accomplishment the following day.
(c) Then they go to the stockroom to get the working materials, tools and equipment.
(d) Lastly, they travel to the field bringing with them their tools, equipment and
materials. (Supra, 4-5.)
The petitioners have vehemently maintained that in view thereof, the instant case should be
distinguished from the first case. And I do not believe that the respondents have successfully rebutted
these allegations. The Solicitor General relies solely on the decision of then Minister Ople, the decision
the petitioners precisely reject in view of the changes in the conditions of the parties. The private
respondent on the other hand insists that these practices were the same practices taken into account
in ALU v. STANFILCO. If this were so, the Ople decision was silent thereon.
It is evident that the Ople decision was predicated on the absence of any insinuation of obligatoriness
in the course or after the assembly activities on the part of the employees.(" . . [T]hey are not subject
to the absolute control of the company during this period, otherwise, their failure to report in the
assembly time would justify the company to impose disciplinary measures;" supra, 6.) As indicated,
however, by the petitioners, things had since changed, and remarkably so, and the latter had since
been placed under a number of restrictions. My considered opinion is that the thirty-minute assembly
time had become, in truth and fact, a "waiting time" as contemplated by the Labor Code.
I vote, then, to grant the petition.

Separate Opinions
SARMIENTO, J., Dissenting:
It is my opinion that res judicata is not a bar.

The decision penned by then Minister Blas Ople in ALU v. STANFILCO (NLRC Case No. 26-LS-XI76) relied upon by the respondents as basis for claims of res judicata, is not, to my mind, a controlling
precedent. In that case, it was held that the thirty-minute "waiting time" complained of was a mere
"assembly time" and not a waiting time as the term is known in law, and hence, a compensable hour
of work. Thus:
The thirty (30)-minute assembly time long practiced and institutionalized by mutual
consent of the parties under Article IV, Section 3, of the Collective Bargaining
Agreement cannot be considered as 'waiting time' within the purview of Section 5, Rule
1, Book III of the Rules and Regulations Implementing the Labor Code. ...
Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice of
the employees, and the proceedings attendant thereto are not infected with
complexities as to deprive the workers the time to attend to other personal pursuits.
They are not new employees as to require the company to deliver long briefings
regarding their respective work assignments. Their houses are situated right on the
area where the farms are located, such that after the roll call, which does not
necessarily require the personal presence, they can go back to their houses to attend
to some chores.
In short, they are not subject to the absolute control of the company during this period,
otherwise, their failure to report in the assembly time would justify the company to
impose disciplinary measures. The CBA does not contain any provision to this effect;
the record is also bare of any proof on this point. This, therefore, demonstrates the
indubitable fact that the thirty (30)-minute assembly time was not primarily intended for
the interests of the employer, but ultimately for the employees to indicate their
availability or non-availability for work during every working day. (Decision, 6.)
Precisely, it is the petitioners' contention that the assembly time in question had since undergone
dramatic changes, thus:
(a) First there is the roll call. This is followed by getting their individual work
assignments from the foreman.
(b) Thereafter,they are individually required to accomplish the Laborer's Daily
Accomplishment Report during which they are often made to explain about their
reported accomplishment the following day.
(c) Then they go to the stockroom to get the working materials, tools and equipment.
(d) Lastly, they travel to the field bringing with them their tools, equipment and
materials. (Supra, 4-5.)
The petitioners have vehemently maintained that in view thereof, the instant case should be
distinguished from the first case. And I do not believe that the respondents have successfully rebutted
these allegations. The Solicitor General relies solely on the decision of then Minister Ople, the decision
the petitioners precisely reject in view of the changes in the conditions of the parties. The private
respondent on the other hand insists that these practices were the same practices taken into account
in ALU v. STANFILCO. If this were so, the Ople decision was silent thereon.
It is evident that the Ople decision was predicated on the absence of any insinuation of obligatoriness
in the course or after the assembly activities on the part of the employees.(" . . [T]hey are not subject

to the absolute control of the company during this period, otherwise, their failure to report in the
assembly time would justify the company to impose disciplinary measures;" supra, 6.) As indicated,
however, by the petitioners, things had since changed, and remarkably so, and the latter had since
been placed under a number of restrictions. My considered opinion is that the thirty-minute assembly
time had become, in truth and fact, a "waiting time" as contemplated by the Labor Code.
I vote, then, to grant the petition.

Overtime Work/Pay

Art. 87, Labor Code

Article 87. Overtime work. Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, an additional compensation equivalent to his regular wage plus
at least twenty-five percent (25%) thereof. Work performed beyond eight hours on a holiday or rest day
shall be paid an additional compensation equivalent to the rate of the first eight hours on a holiday or rest
day plus at least thirty percent (30%) thereof.

Book III, Rule I, Secs. 8-11, Implementing Rules (Labor Code)

SECTION 8. Overtime pay. Any employee covered by this Rule who is permitted or required to work
beyond eight (8) hours on ordinary working days shall be paid an additional compensation for the
overtime work in the amount equivalent to his regular wage plus at least twenty-five percent (25%)
thereof.
SECTION 9. Premium and overtime pay for holiday and rest day work. (a) Except employees referred to
under Section 2 of this Rule, an employee who is permitted or suffered to work on special holidays or on
his designated rest days not falling on regular holidays, shall be paid with an additional compensation as
premium pay of not less than thirty percent (30%) of his regular wage. For work performed in excess of
eight (8) hours on special holidays and rest days not falling on regular holidays, an employee shall be paid
an additional compensation for the overtime work equivalent to his rate for the first eight hours on a
special holiday or rest day plus at least thirty percent (30%) thereof.
(b) Employees of public utility enterprises as well as those employed in non-profit institutions and
organizations shall be entitled to the premium and overtime pay provided herein, unless they are
specifically excluded from the coverage of this Rule as provided in Section 2 hereof.
(c) The payment of additional compensation for work performed on regular holidays shall be governed by
Rule IV, Book Three, of these Rules.
SECTION 10. Compulsory overtime work. In any of the following cases, an employer may require any of
his employees to work beyond eight (8) hours a day, provided that the employee required to render
overtime work is paid the additional compensation required by these regulations:
(a) When the country is at war or when any other national or local emergency has been declared by
Congress or the Chief Executive;

(b) When overtime work is necessary to prevent loss of life or property, or in case of imminent danger
to public safety due to actual or impending emergency in the locality caused by serious accident,
fire, floods, typhoons, earthquake, epidemic or other disaster or calamities;
(c) When there is urgent work to be performed on machines, installations, or equipment, in order to
avoid serious loss or damage to the employer or some other causes of similar nature;
(d) When the work is necessary to prevent loss or damage to perishable goods;
(e) When the completion or continuation of work started before the 8th hour is necessary to prevent
serious obstruction or prejudice to the business or operations of the employer; or
(f) When overtime work is necessary to avail of favorable weather or environmental conditions
where performance or quality of work is dependent thereon.cralaw
In cases not falling within any of these enumerated in this Section, no employee may be made to work
beyond eight hours a day against his will.

See Manual on Labor Standards 2004- Bureau of Working Conditions

Art. 88, Labor Code

Article 88. Undertime not offset by overtime. Undertime work on any particular day shall not be offset by
overtime work on any other day. Permission given to the employee to go on leave on some other day of
the week shall not exempt the employer from paying the additional compensation required in this
Chapter.

Art. 89, Labor Code

Article 89. Emergency overtime work. Any employee may be required by the employer to perform
overtime work in any of the following cases:
When the country is at war or when any other national or local emergency has been declared by the
National Assembly or the Chief Executive;
When it is necessary to prevent loss of life or property or in case of imminent danger to public safety due
to an actual or impending emergency in the locality caused by serious accidents, fire, flood, typhoon,
earthquake, epidemic, or other disaster or calamity;
When there is urgent work to be performed on machines, installations, or equipment, in order to avoid
serious loss or damage to the employer or some other cause of similar nature;
When the work is necessary to prevent loss or damage to perishable goods; and
Where the completion or continuation of the work started before the eighth hour is necessary to prevent
serious obstruction or prejudice to the business or operations of the employer.
Any employee required to render overtime work under this Article shall be paid the additional
compensation required in this Chapter.

No. 3, DOLE Handbook on Workers Statutory Monetary Benefits

Pigcaulan v. Security and Credit, G.R. No. 173648, January 16, 2012

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION

ABDULJUAHID R. PIGCAULAN,
Petitioner,

G.R. No. 173648

Present:
- versus -

CORONA, C.J., Chairperson,

LEONARDO-DE CASTRO,
DEL CASTILLO,
ABAD, and
VILLARAMA, JR., JJ.

SECURITY and CREDIT

INVESTIGATION, INC. and/or
RENE AMBY REYES ,
Promulgated:
Respondents.
January 16, 2012
x-------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
It is not for an employee to prove non-payment of benefits to which he is entitled by law. Rather, it is on
the employer that the burden of proving payment of these claims rests.
This Petition for Review on Certiorari[1] assails the February 24, 2006 Decision[2] of the Court of Appeals
(CA) in CA-G.R. SP No. 85515, which granted the petition for certiorarifiled therewith, set aside the March
23, 2004[3] and June 14, 2004[4] Resolutions of the National Labor Relations Commission (NLRC), and
dismissed the complaint filed by Oliver R. Canoy (Canoy) and petitioner Abduljuahid R. Pigcaulan
(Pigcaulan) against respondent Security and Credit Investigation, Inc. (SCII) and its General Manager,
respondent Rene Amby Reyes.Likewise assailed is the June 28, 2006 Resolution[5] denying Canoys and
Pigcaulans Motion for Reconsideration.[6]
Factual Antecedents
Canoy and Pigcaulan were both employed by SCII as security guards and were assigned to SCIIs different
clients. Subsequently, however, Canoy and Pigcaulan filed with the Labor Arbiter separate
complaints[7] for underpayment of salaries and non-payment of overtime, holiday, rest day, service
incentive leave and 13th month pays. These complaints were later on consolidated as they involved the
same causes of action.
Canoy and Pigcaulan, in support of their claim, submitted their respective daily time records reflecting the
number of hours served and their wages for the same. They likewise presented itemized lists of their
claims for the corresponding periods served.
Respondents, however, maintained that Canoy and Pigcaulan were paid their just salaries and other
benefits under the law; that the salaries they received were above the statutory minimum wage and the
rates provided by the Philippine Association of Detective and Protective Agency Operators (PADPAO) for
security guards; that their holiday pay were already included in the computation of their monthly salaries;

that they were paid additional premium of 30% in addition to their basic salary whenever they were
required to work on Sundays and 200% of their salary for work done on holidays; and, that Canoy and
Pigcaulan were paid the corresponding 13th month pay for the years 1998 and 1999. In support thereof,
copies of payroll listings[8]and lists of employees who received their 13th month pay for the periods
December 1997 to November 1998 and December 1998 to November 1999[9] were presented. In addition,
respondents contended that Canoys and Pigcaulans monetary claims should only be limited to the past
three years of employment pursuant to the rule on prescription of claims.
Ruling of the Labor Arbiter
Giving credence to the itemized computations and representative daily time records submitted by Canoy
and Pigcaulan, Labor Arbiter Manuel P. Asuncion awarded them their monetary claims in his
Decision[10] dated June 6, 2002. The Labor Arbiter held that the payroll listings presented by the
respondents did not prove that Canoy and Pigcaulan were duly paid as same were not signed by the latter
or by any SCII officer. The 13th month payroll was, however, acknowledged as sufficient proof of payment,
for it bears Canoys and Pigcaulans signatures. Thus, without indicating any detailed computation of the
judgment award, the Labor Arbiter ordered the payment of overtime pay, holiday pay, service incentive
leave pay and proportionate 13th month pay for the year 2000 in favor of Canoy and Pigcaulan, viz:
WHEREFORE, the respondents are hereby ordered to pay the complainants: 1) their salary differentials in
the amount of P166,849.60 for Oliver Canoy and P121,765.44 for Abduljuahid Pigcaulan; 2) the sum
of P3,075.20 for Canoy and P2,449.71 for Pigcaulan for service incentive leave pay and; [3]) the sum
of P1,481.85 for Canoy and P1,065.35 for Pigcaulan as proportionate 13th month pay for the year 2000.
The rest of the claims are dismissed for lack of sufficient basis to make an award.
SO ORDERED.[11]

Ruling of the National Labor Relations Commission

Respondents appealed to the NLRC. They alleged that there was no basis
for the awards made because aside from the self-serving itemized computations, no representative daily
time record was presented by Canoy and Pigcaulan. On the contrary, respondents asserted that the
payroll listings they submitted should have been given more probative value. To strengthen their cause,
they attached to their Memorandum on Appeal payrolls[12] bearing the individual signatures of Canoy and
Pigcaulan to show that the latter have received their salaries, as well as copies of transmittal letters[13] to
the bank to show that the salaries reflected in the payrolls were directly deposited to the ATM accounts
of SCIIs employees.
The NLRC, however, in a Resolution[14] dated March 23, 2004, dismissed the appeal and held that the
evidence show underpayment of salaries as well as non-payment of service incentive leave
benefit. Accordingly, the Labor Arbiters Decision was sustained. The motion for reconsideration thereto
was likewise dismissed by the NLRC in a Resolution[15] dated June 14, 2004.
Ruling of the Court of Appeals

In respondents petition for certiorari with prayer for the issuance of a temporary restraining order and
preliminary injunction[16] before the CA, they attributed grave abuse of discretion on the part of the NLRC
in finding that Canoy and Pigcaulan are entitled to salary differentials, service incentive leave pay and
proportionate 13th month pay and in arriving at amounts without providing sufficient bases therefor.
The CA, in its Decision[17] dated February 24, 2006, set aside the rulings of
both the Labor Arbiter and the NLRC after noting that there were no factual and legal bases mentioned in
the questioned rulings to support the conclusions made. Consequently, it dismissed all the monetary
claims of Canoy and Pigcaulan on the following rationale:
First. The Labor Arbiter disregarded the NLRC rule that, in cases involving money awards and at all events,
as far as practicable, the decision shall embody the detailed and full amount awarded.
Second. The Labor Arbiter found that the payrolls submitted by SCII have no probative value for being
unsigned by Canoy, when, in fact, said payrolls, particularly the payrolls from 1998 to 1999 indicate the
individual signatures of Canoy.
Third. The Labor Arbiter did not state in his decision the substance of the evidence adduced by Pigcaulan
and Canoy as well as the laws or jurisprudence that would show that the two are indeed entitled to the
salary differential and incentive leave pays.
Fourth. The Labor Arbiter held Reyes liable together with SCII for the payment of the claimed salaries and
benefits despite the absence of proof that Reyes deliberately or maliciously designed to evade SCIIs
alleged financial obligation; hence the Labor Arbiter ignored that SCII has a corporate personality separate
and distinct from Reyes. To justify solidary liability, there must be an allegation and showing that the
officers of the corporation deliberately or maliciously designed to evade the financial obligation of the
corporation.[18]

Canoy and Pigcaulan filed a Motion for Reconsideration, but same was denied by the CA in a
Resolution[19] dated June 28, 2006.
Hence, the present Petition for Review on Certiorari.
Issues
The petition ascribes upon the CA the following errors:
I. The Honorable Court of Appeals erred when it dismissed the complaint on mere alleged failure of the
Labor Arbiter and the NLRC to observe the prescribed form of decision, instead of remanding the case for
reformation of the decision to include the desired detailed computation.
II. The Honorable Court of Appeals erred when it [made] complainants suffer the consequences of the
alleged non-observance by the Labor Arbiter and NLRC of the prescribed forms of decisions considering
that they have complied with all needful acts required to support their claims.
III. The Honorable Court of Appeals erred when it dismissed the complaint allegedly due to absence of
legal and factual [bases] despite attendance of substantial evidence in the records.[20]

It is well to note that while the caption of the petition reflects both the names of Canoy and Pigcaulan as
petitioners, it appears from its body that it is being filed solely by Pigcaulan. In fact, the Verification and
Certification of Non-Forum Shopping was executed by Pigcaulan alone.
In his Petition, Pigcaulan submits that the Labor Arbiter and the NLRC are not strictly bound by the
rules. And even so, the rules do not mandate that a detailed computation of how the amount awarded
was arrived at should be embodied in the decision. Instead, a statement of the nature or a description of
the amount awarded and the specific figure of the same will suffice.Besides, his and Canoys claims were
supported by substantial evidence in the form of the handwritten detailed computations which the Labor
Arbiter termed as representative daily time records, showing that they were not properly compensated
for work rendered. Thus, the CA should have remanded the case instead of outrightly dismissing it.
In their Comment,[21] respondents point out that since it was only Pigcaulan who filed the petition, the CA
Decision has already become final and binding upon Canoy. As to Pigcaulans arguments, respondents
submit that they were able to present sufficient evidence to prove payment of just salaries and benefits,
which bits of evidence were unfortunately ignored by the Labor Arbiter and the NLRC. Fittingly, the CA
reconsidered these pieces of evidence and properly appreciated them. Hence, it was correct in dismissing
the claims for failure of Canoy and Pigcaulan to discharge their burden to disprove payment.
Pigcaulan, this time joined by Canoy, asserts in his Reply[22] that his filing of the present petition redounds
likewise to Canoys benefit since their complaints were consolidated below.As such, they maintain that
any kind of disposition made in favor or against either of them would inevitably apply to the other. Hence,
the institution of the petition solely by Pigcaulan does not render the assailed Decision final as to
Canoy. Nonetheless, in said reply they appended Canoys affidavit[23] where he verified under oath the
contents and allegations of the petition filed by Pigcaulan and also attested to the authenticity of its
annexes. Canoy, however, failed to certify that he had not filed any action or claim in another court or
tribunal involving the same issues. He likewise explains in said affidavit that his absence during the
preparation and filing of the petition was caused by severe financial distress and his failure to inform
anyone of his whereabouts.
Our Ruling
The assailed CA Decision is considered final as to Canoy.

We have examined the petition and find that same was filed by Pigcaulan solely on his own behalf. This is
very clear from the petitions prefatory which is phrased as follows:
COMES NOW Petitioner Abduljuahid R. Pigcaulan, by counsel, unto this Honorable Court x x x. (Emphasis
supplied.)

Also, under the heading Parties, only Pigcaulan is mentioned as petitioner and consistent with this, the
body of the petition refers only to a petitioner and never in its plural form petitioners.Aside from the fact
that the Verification and Certification of Non-Forum Shopping attached to the petition was executed by
Pigcaulan alone, it was plainly and particularly indicated under the name of the lawyer who prepared the

same, Atty. Josefel P. Grageda, that he is the Counsel for Petitioner Adbuljuahid Pigcaulan only. In view of
these, there is therefore, no doubt, that the petition was brought only on behalf of Pigcaulan. Since no
appeal from the CA Decision was brought by Canoy, same has already become final and executory as to
him.
Canoy cannot now simply incorporate in his affidavit a verification of the contents and allegations of the
petition as he is not one of the petitioners therein. Suffice it to state that it would have been different had
the said petition been filed in behalf of both Canoy and Pigcaulan. In such a case, subsequent submission
of a verification may be allowed as non-compliance therewith or a defect therein does not necessarily
render the pleading, or the petition as in this case, fatally defective.[24] The court may order its submission
or correction, or act on the pleading if the attending circumstances are such that strict compliance with
the Rule may be dispensed with in order that the ends of justice may be served thereby. Further, a
verification is deemed substantially complied with when one who has ample knowledge to swear to the
truth of the allegations in the complaint or petition signs the verification, and when matters alleged in the
petition have been made in good faith or are true and correct.[25] However, even if it were so, we note
that Canoy still failed to submit or at least incorporate in his affidavit a certificate of non-forum shopping.
The filing of a certificate of non-forum shopping is mandatory so much so
that non-compliance could only be tolerated by special circumstances and compelling reasons.[26] This
Court has held that when there are several petitioners, all of them must execute and sign the certification
against forum shopping; otherwise, those who did not sign will be dropped as parties to the case.[27] True,
we held that in some cases, execution by only one of the petitioners on behalf of the other petitioners
constitutes substantial compliance with the rule on the filing of a certificate of non-forum shopping on
the ground of common interest or common cause of action or defense.[28] We, however, find that common
interest is not present in the instant petition. To recall, Canoys and Pigcaulans complaints were
consolidated because they both sought the same reliefs against the same respondents. This does not,
however, mean that they share a common interest or defense. The evidence required to substantiate
their claims may not be the same. A particular evidence which could sustain Canoys action may not
effectively serve as sufficient to support Pigcaulans claim.
Besides, assuming that the petition is also filed on his behalf, Canoy failed to show any reasonable cause
for his failure to join Pigcaulan to personally sign the Certification of Non-Forum Shopping. It is his duty,
as a litigant, to be prudent in pursuing his claims against SCII, especially so, if he was indeed suffering from
financial distress. However, Canoy failed to advance any justifiable reason why he did not inform anyone
of his whereabouts when he knows that he has a pending case against his former employer. Sadly, his lack
of prudence and diligence cannot merit the courts consideration or sympathy. It must be emphasized at
this point that procedural rules should not be ignored simply because their non-observance may result in
prejudice to a partys substantial rights. The Rules of Court should be followed except only for the most
persuasive of reasons.[29]
Having declared the present petition as solely filed by Pigcaulan, this Court shall consider the subsequent
pleadings, although apparently filed under his and Canoys name, as solely filed by the former.
There was no substantial evidence to support the grant of overtime pay.

The Labor Arbiter ordered reimbursement of overtime pay, holiday pay, service incentive leave pay and
13th month pay for the year 2000 in favor of Canoy and Pigcaulan. The Labor Arbiter relied heavily on the
itemized computations they submitted which he considered as representative daily time records to

substantiate the award of salary differentials. The NLRC then sustained the award on the ground that
there was substantial evidence of underpayment of salaries and benefits.
We find that both the Labor Arbiter and the NLRC erred in this regard. The handwritten itemized
computations are self-serving, unreliable and unsubstantial evidence to sustain the grant of salary
differentials, particularly overtime pay. Unsigned and unauthenticated as they are, there is no way of
verifying the truth of the handwritten entries stated therein. Written only in pieces of paper and solely
prepared by Canoy and Pigcaulan, these representative daily time records, as termed by the Labor Arbiter,
can hardly be considered as competent evidence to be used as basis to prove that the two were underpaid
of their salaries. We find nothing in the records which could substantially support Pigcaulans contention
that he had rendered service beyond eight hours to entitle him to overtime pay and during Sundays to
entitle him to restday pay. Hence, in the absence of any concrete proof that additional service beyond the
normal working hours and days had indeed been rendered, we cannot affirm the grant of overtime pay
to Pigcaulan.
Pigcaulan is entitled to holiday pay, service incentive leave pay and proportionate 13th month pay for year
2000.

However, with respect to the award for holiday pay, service incentive leave
pay and 13th month pay, we affirm and rule that Pigcaulan is entitled to these benefits.
Article 94 of the Labor Code provides that:
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;
xxxx

While Article 95 of the Labor Code provides:

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 of five days with pay.
xxxx

Under the Labor Code, Pigcaulan is entitled to his regular rate on holidays even if he does not
work.[30] Likewise, express provision of the law entitles him to service incentive leave benefit for he
rendered service for more than a year already. Furthermore, under Presidential Decree No. 851,[31] he
should be paid his 13th month pay. As employer, SCII has the burden of proving that it has paid these
benefits to its employees.[32]
SCII presented payroll listings and transmittal letters to the bank to show that Canoy and Pigcaulan
received their salaries as well as benefits which it claimed are already integrated in the employees
monthly salaries. However, the documents presented do not prove SCIIs allegation. SCII failed to show
any other concrete proof by means of records, pertinent files or similar documents reflecting that the

specific claims have been paid. With respect to 13th month pay, SCII presented proof that this benefit was
paid but only for the years 1998 and 1999. To repeat, the burden of proving payment of these monetary
claims rests on SCII, being the employer. It is a rule that one who pleads payment has the burden of
proving it. Even when the plaintiff alleges non-payment, still the general rule is that the burden rests on
the defendant to prove payment, rather than on the plaintiff to prove non-payment.[33] Since SCII failed
to provide convincing proof that it has already settled the claims, Pigcaulan should be paid his holiday pay,
service incentive leave benefits and proportionate 13th month pay for the year 2000.
The CA erred in dismissing the claims instead of remanding the case to the Labor Arbiter for a detailed
computation of the judgment award.

Indeed, the Labor Arbiter failed to provide sufficient basis for the monetary
awards granted. Such failure, however, should not result in prejudice to the substantial rights of the
party. While we disallow the grant of overtime pay and restday pay in favor of Pigcaulan, he is
nevertheless entitled, as a matter of right, to his holiday pay, service incentive leave pay and 13 th month
pay for year 2000. Hence, the CA is not correct in dismissing Pigcaulans claims in its entirety.
Consistent with the rule that all money claims arising from an employer-employee relationship shall be
filed within three years from the time the cause of action accrued,[34] Pigcaulan can only demand the
amounts due him for the period within three years preceding the filing of the complaint in
2000. Furthermore, since the records are insufficient to use as bases to properly compute Pigcaulans
claims, the case should be remanded to the Labor Arbiter for a detailed computation of the monetary
benefits due to him.
WHEREFORE, the petition is GRANTED. The Decision dated
February 24, 2006 and Resolution dated June 28, 2006 of the Court of Appeals in CA-G.R. SP No. 85515
are REVERSED and SET ASIDE. Petitioner Abduljuahid R. Pigcaulan is hereby declared ENTITLED to holiday
pay and service incentive leave pay for the years 1997-2000 and proportionate 13th month pay for the
year 2000.
The case is REMANDED to the Labor Arbiter for further proceedings to determine the exact amount and
to make a detailed computation of the monetary benefits due Abduljuahid R. Pigcaulan which Security
and Credit Investigation Inc. should pay without delay.
SO ORDERED.

Night Work (R.A. 10151); Night Differential

R.A. 10151
REPUBLIC ACT NO. 10151
AN ACT ALLOWING THE EMPLOYMENT OF NIGIIT WORKERS, THEREBY REPEALING ARTICLES 130 AND
131 OF PRESIDENTIAL DECREE NUMBER FOUR HUNDRED FORTY-TWO, AS AMENDED, OTHERWISE
KNOWN AS THE LABOR CODE OF THE PHILIPPINES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
Section 1. Article 130 of the Labor Code is hereby repealed.
Section 2. Article 131 of the Labor Code is hereby repealed.
Section 3. The subsequent articles in Book Three, Title III, Chapter I to Chapter IV of Presidential Decree
No. 442 are hereby renumbered accordingly.
Section 4. A new chapter is hereby inserted after Book Three, Title III of Presidential Decree No. 442, to
read as follows:
"Chapter
"Employment of Night Workers

"Article 154. Coverage. - This chapter' shall apply to all persons, who shall be employed or permitted or
suffered to work at night, except those employed in agriculture, stock raising, fishing, maritime transport
and inland navigation, during a period of not less than seven (7) consecutive hours, including the interval
from midnight to five o'clock in the morning, to be determined by the Secretary of Labor and Employment,
after consulting the workers' representatives/labor organizations and employers.
"'Night worker' means any employed person whose work requires performance of a substantial number
of hours of night work which exceeds a specified limit. This limit shall be fixed by the Secretary of Labor
after consulting the workers' representatives/labor organizations and employers."
"Article 155. Health Assessment. - At their request, workers shall have the right to undergo a health
assessment without charge and to receive advice on how to reduce or avoid health problems associated
with their work:
"(a) Before taking up an assignment as a night worker;
"(b) At regular intervals during such an assignment; and
"(c) If they experience health problems during such, an assignment which are not caused by factors other
than the performance of night work.
"With the exception of a finding of unfitness for night work, the findings of such assessments shall not be
transmitted to others without the workers' consent and shall not be used to their detriment."
"Article 156. Mandatory Facilities. - Suitable firstaid facilities shall be made available for workers
performing night work, including arrangements where such workers, where necessary, can be taken
immediately to a place for appropriate treatment. The employers are likewise required to provide safe
and healthful working conditions and adequate or reasonable facilities such as sleeping or resting quarters
in the establishment and transportation from the work premises to the nearest point of their residence
subject to exceptions and guidelines to be provided by the DOLE."
"Article 157. Transfer. - Night workers who are certified as unfit for night work, due to health reasons,
shall be transferred, whenever practicable, to a similar job for which they are fit to work.
"If such transfer to a similar job is not practicable, these workers shall be granted the same benefits as
other workers who are unable to work, or to secure employment during such period.

"A night worker certified as temporarily unfit for night work shall be given the same protection against
dismissal or notice of dismissal as other workers who are prevented from working for reasons of health."
"Article 158. Women Night Workers. - Measures shall be taken to ensure that an alternative to night work
is available to women workers who would otherwise be called upon to perform such work:
"(a) Before and after childbirth, for a period of at least sixteen (16) weeks, which shall be divided between
the time before and after childbirth;
"(b) For additional periods, in respect of winch a medical certificate IS produced stating that said additional
periods are necessary for the health of the mother or child:
"(1) During pregnancy;
"(2) During a specified time beyond the period, after childbirth is fixed pursuant to subparagraph (a)
above, the length of which shall be determined by the DOLE after consulting the labor organizations and
employers.
"During the periods referred to in this article:
"(i) A woman worker shall not be dismissed or given notice of dismissal, except for just or authorized
causes provided for in this Code that are not connected with pregnancy, childbirth and childcare
responsibilities.
"(ii) A woman worker shall not lose the benefits regarding her status, seniority, and access to promotion
which may attach to her regular night work position.
"Pregnant women and nursing mothers may be allowed to work .at night only if a competent physician,
other than the company physician, shall certify their fitness to render night work, and specify, in the case
of pregnant employees, the period of the pregnancy that they can safely work.
"The measures referred to in this article may include transfer to day work where this is possible, the
provision of social security benefits or an extension of maternity leave.
"The provisions of this article shall not leave the effect of reducing the protection and benefits connected
with maternity leave under existing laws."
"Article 159. Compensation. The compensation for night workers in the form of working time, pay or
similar benefits shall recognize the exceptional nature of night work."
"Article 160. Social Services. - Appropriate social services shall be provided for night workers and, where
necessary, for workers performing night work."
"Article 161. Night Work Schedules. - Before introducing work schedules requiring the services of night
workers, the employer shall consult the workers' representatives/labor organizations concerned on the
details of such schedules and the forms of organization of night work that are best adapted to the
establishment and its personnel, as well as on the occupational health measures and social services which
are required. In establishments employing night workers, consultation shall take place regularly."
Section 5. The subsequent articles starting from Book Four, Title I, Chapter I of Presidential Decree No.
442 are hereby renumbered accordingly.

Section 6. Application. - The measures referred to in this chapter shall be applied not later than six (6)
months from the effectivity of this Act.
Section 7. Guidelines. - The DOLE shall promulgate appropriate regulations in addition to existing ones to
ensure protection, safety and welfare of night workers.
Section 8. Penalties. - Any violation of this Act, and the rules and regulations issued pursuant hereof shall
be punished with a fine of not less than Thirty thousand pesos (P30,000.00) nor more than Fifty thousand
pesos (P50,000.00) or imprisonment of not less than six (6) months, or both, at the discretion of the court.
If the offense is committed by a corporation, trust, firm, partnership at association, or other entity, the
penalty shall be imposed upon the guilty officer or officers of such corporation, trust, firm, partnership or
association, or entity.
Section 9. Separability Clause. - If any portion of this Act is declared unconstitutional, the same shall not
affect the validity and effectivity of the other provisions not affected thereby.
Section 10. Repealing Clause. - All laws, acts, decrees, executive orders, rules and regulations or other
issuances or parts thereof, which are inconsistent with this Act, are hereby modified and repealed.
Section 11. Effectivity Clause. - This Act shall take effect after fifteen (15) days following its publication in
two (2) national newspapers of general circulation.

Part-time Work

PAL v. Pascua, G.R. No. 143258, August 15, 2003

SECOND DIVISION
[G.R. No. 143258. August 15, 2003]
PHILIPPINE AIRLINES, INC., petitioner, vs. JOSELITO PASCUA, ROBERT ABION, IRENEO ACOSTA, GARY
NEPOMUCENO, JASON PALAD, CEFERINO de la CRUZ, JOEL SALGADO, WILFREDO RIVERA, ALEXANDER
ANORE, FERNANDO BACCAY, EDILBERTO FAUNE, REYMAR KALAW, GARY G. MARASIGAN, RODOLFO
ODO, JONATHAN RENGO, ARTHUR APOSTOL, EDUARDO BALICASAN, MATHIAS GLEAN,
ALINORMAN HARANGOTE, CRISANTO CASTILLO, REX MARION CUERPO, EDGARDO del PRADO,
RICARDO HERNANDEZ, PEDRO MERCADO JR., CESAR PAYOYO, RONALDO QUEROL, MAURELIO SIERRA,
MANUEL VILLELA, LOUISEN FELIPE, LOBENEDICTO TIMBREZA, ANTONIO CABUG, ELISEO ESPIRITU,
ARNEL BAUTISTA,ANTHONY ROBLES, DENNIS ARANDIA, CHARLIE BALUBAL, RHODERIC BITAS,
ORLANDO CANDA, CHARLIE de la CRUZ, RIQUESENDO de la FUENTE, RENO DUQUE, JONATHAN FEBRE,
ALVIN RIBERTA, NATHANIEL MALABAS, JUANITO SERUMA, FREDERICH de ASIS, ROMMEL ESTRADA,
SYDFREY EVARISTO, ERICSON INTAL, FERDINAND GALANG, RUBEN PEROLINA, ROBERT McBURNEY,
ENRIQUE SORIANO, ALVIN MANALAYSAY, NEMESIO MAALA, RAUL NEPOMUCENO, SAMUEL REYES,
ERWIN MINA, MANUEL REYES, REYNALDO ORAPA, TEODORICO PADELIO, RANDY PIMENTEL, WILLIAM
PATRIMONIO, JOEL RAMOS, OLEGARIO REYES, RAUL OCULTO, ROGELIO OLQUINDO, and LARRY
VILLAFLOR. respondents.
DECISION

QUISUMBING, J.:
For review is the decision dated January 26, 2000[1] of the Court of Appeals and its May 23,
2000[2] resolution in CA-G.R. SP No. 50351. The appellate court dismissed the petition for certiorari filed
by petitioner to challenge the NLRC decision dated January 23, 1998,[3] in NLRC NCR CA No. 010598-96,
and likewise denied their motion for reconsideration.
The antecedent facts, as summarized by the Court of Appeals and borne by the records, are as follows:
In April, August, and September of 1992, PAL hired private respondents as station attendants on a four or
six-hour work-shift a day at five to six days a week.
The primary duty of private respondents who were assigned to PALs Air services Department and
ASD/CARGO was to load cargo to departing, and unload cargo from arriving PAL international flights as
well as flights of Cathay Pacific, Northwest Airlines and Thai Airlines with which PAL had service
contract[s].
On certain occasions, PAL compelled private respondents to work overtime because of urgent
necessity. The contracts with private respondents were extended twice, the last of which appears to have
been for an indefinite period.
On February 3, 1994, private respondent Joselito Pascua, in his and on behalf of other 79 part-time station
attendants, filed with the Department of Labor and Employment a complaint for:
(1) Regularization
(2) Underpayment of wages
(3) Overtime pay
(4) Thirteenth month pay
(5) Service incentive leave pay
(6) Full time of eight hours employment
(7) Recovery of benefits due to regular employees
(8) Night differential pay
(9) Moral damages and
(10) Attorneys fees,
which was docketed as NLRC NCR Case No. 00-02-00953-94.
During the pendency of the case, PAL President Jose Antonio Garcia and PAL Chairman & Corporate
Executive Officer Carlos G. Dominguez converted the employment status of private respondents from
temporary part-time to regular part-time.
On February 24, 1995, private respondents dropped their money claim then pending before the Office of
Executive Labor Arbiter Guanio, thus leaving for consideration their complaint for regularization conversion of their employment status from part-time to regular (working on an 8-hour shift).

Finding private respondents remaining cause of action was rendered moot and academic by their
supervening regularization and denying their prayer that their status as regular employees be given
retroactive effect to six months after their stint as temporary contractual employees, the Executive Labor
Arbiter dismissed private respondents complaint.
On appeal, the NLRC, finding for private respondents, declared them as regular employees of PAL with an
eight-hour work-shift. The pertinent portions of the NLRC decision reads:
Respondent admits that complainants have been performing functions that are considered necessary or
desirable in the usual business of PAL. There is no clear showing, however, that complainants employment
had been fixed for a particular project or undertaking the completion or termination of which has been
determined at the time of their engagement. Neither is there a clear showing that the work or services
which they performed, was seasonal in nature and their employment for the duration of the
season. Complainants were simply hired as part-time employees at the ASD and at the ASD/CARGO to do
ramp services.
Complainants can therefore be considered as casual employees for a definite period during the first year
of their employment and, thereafter, as regular employees of respondents by operation of law. As such,
they should be entitled to the compensation and other benefits provided in the Collective Bargaining
Agreement for regular employees from or day after one year [of] service. Having been paid less than what
they should receive, complainants are therefore, entitled to the differentials.[4]
Petitioner promptly filed a motion for reconsideration of the NLRC decision, which was denied in an order
dated October 12, 1998. Consequently, petitioner filed with the Court of Appeals a special civil action for
certiorari to annul the NLRC decision. On January 26, 2000, the Court of Appeals dismissed the said
petition and by resolution issued on May 23, 2000, denied petitioners motion for reconsideration.
Hence, this appeal by certiorari where petitioner assigns the following errors:
-ITHE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE NLRC DECISION WHICH RULED ON THE
MERITS OF THE COMPLAINT, DESPITE THE FACT THAT THE CAUSE OF ACTION HAS ALREADY BECOME
MOOT AND ACADEMIC WHEN THE PETITIONER ACCORDED REGULAR STATUS TO THE RESPONDENTS
DURING THE ARBITRATION PROCEEDINGS.
- II EVEN IF WE ASSUME FOR THE SAKE OF ARGUMENT THAT THE COMPLAINT HAS NOT BEEN RENDERED
MOOT AND ACADEMIC, STILL THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION
OF THE NLRC WHICH COMPELLED THE PETITIONER TO CHANGE THE RESPONDENTS EMPLOYMENT STATUS
FROM PART-TIME TO FULL-TIME.[5]
Two principal issues need resolution: (1) Did petitioners act of converting respondents status from
temporary to regular employees render the original complaint for regularization moot and academic? (2)
Did the appellate court err when it upheld the decision of the NLRC to accord respondents regular fulltime employment although petitioner, in the exercise of its management prerogative, requires only parttime services?

Petitioner contends that the NLRC could not change respondents status from part-time to full-time
employment because respondents merely prayed in their original complaint for regular status as opposed
to temporary or casual employment. Respondents temporary part-time status was already converted by
petitioner to regular part-time status at the arbitration level, to put an end to the controversy. That being
the case, the labor arbiter ordered the dismissal of the complaint for having become moot and academic,
because the relief sought was already granted even prior to the termination of the dispute. Clearly, says
petitioner, respondents cause of action for regularization had been extinguished when petitioner
accorded the respondents regular status.[6] It was grave abuse as well as error for the NLRC to touch the
merits of an issue in effect already mooted at the arbiters level, according to petitioner.
On the second issue, petitioner argues that the NLRC could not lawfully impose the change of employment
status of respondents from part-time to full-time employees.[7] It has no authority or power to do
so. According to petitioner, management of its business is a matter that falls within the exclusive domain
of the employer. As such, only the employer, and no one else, should determine the number of employees
to be hired, the type of employees to be engaged, and the qualifications of each and every employee. The
employer could engage part-time employees if its operational needs require such part-time
employees. The NLRC should not substitute its judgment for that of the employer in this regard, says
petitioner.[8]
Respondents, in their comment, aver that the conversion of their employment status from part-time
temporary to part-time regular did not render inutile their original complaint, as in fact they have
consistently asked for full-time regularization. According to respondents, in their pleadings they
repeatedly sought not only regularization but in fact they also asked entitlement to benefits of regular
full-time employees. Further, respondents claim that since petitioner needs the services of private
respondents for eight (8) hours or more a day, it is with evident bad faith that petitioner continues to
categorize them as mere part-timers rather than full-timers so the company could avoid payment of
corresponding benefits due to respondents.[9]
On the first issue that the original complaint was rendered moot and academic by the subsequent
regularization of respondents while the action was pending before the labor arbiter, we find that the
petitioners assertion is not entirely true nor accurate. Petitioner insists that all respondents sought was
the conversion of their temporary employment status to regular employment, without asking for a change
from part-time to full time status. This claim, however, is belied by the very complaint initially filed with
the labor arbiter. As stated by the OSG in its comment to the petition filed with the Court of Appeals,
which we now quote aptly:
However, a thorough scrutiny of the appeal reveals that despite its lack of preciseness, private
respondents were, in fact, ultimately assailing their part-time status, not just the retroactive date of their
regularization as part-time employees. They contradicted the Labor Arbiters perception that hiring of
part-time employees was justified by the peculiar nature of airport operations. Besides, even petitioner
understood the heart of the appeal when it observed in their Answer to Appeal that [a]ll that they wanted
is to be converted to full time status.
The pleadings filed by private respondents consistently show that they wanted to become regular fulltime employees, not only regular part-time employees. Although they repeatedly said regular employees,
not specifying whether it should be regular part-time or regular full-time, their intention should be read
from the entirety of all their pleadings. Private respondents have consistently alleged that despite their

part-time status, they actually work more than 8 hours daily. Private respondent Joselito Pascua
confirmed this when he testified on November 24, 1995 (TSN, November 24, 1995, pp. 35-36). Ultimately,
they want to be entitled to the many collective bargaining agreement (CBA) benefits which would be
possible only if they were regular full-time employees since regular part-time employees are covered by
the Personnel Policies and Procedures Manual, the relevant portion of which was introduced only for the
first time in this Court. While regular part-time employees have their own package of benefits, it is safe
to infer that the benefits under the CBA are better, being a result of negotiation, than those provided
under the Personnel Policies and Procedures Manual which are unilaterally handed down by petitioner.[10]
An issue becomes moot and academic when it ceases to present a justiciable controversy, so that a
declaration on the issue would be of no practical use or value. In that situation, there is no actual
substantial relief to which respondents would be entitled and which would be negated by the dismissal
of their original complaint.[11] Here, it is readily apparent that the dismissal of the original complaint by
the labor arbiter would negate the substantial relief to which respondents would have been entitled. They
seek regular full-time employment and this claim is fully set forth in the original complaint. They
specifically prayed for entitlement to benefits due to a regular full-time employee with seniority
rights.[12] The mere regularization of respondents would still not entitle them to all benefits under the
CBA, which regular full-time employees enjoy. In fact, regular part-time employees are covered by the
benefits under Personnel Policies and Procedures Manual, not the CBA. The dismissal then of the
complaint by the labor arbiter is reversible error, and the NLRC still acted within its power and authority
as a quasi-judicial agency in finding that respondents deserve more than just being regular employees but
must be regular full-time employees.
We now come to the second issue, which touches on the valid exercise of management
prerogative. According to petitioner, NLRC encroached upon this exclusive sphere of managerial decision,
when it ruled that respondents should be made regular full-time employees instead of regular part-time
employees, and the appellate court thereby erred in sustaining the NLRC.This contention does not quite
ring true, much less persuade us. It must be borne in mind that the exercise of management prerogative
is not absolute. While it may be conceded that management is in the best position to know its operational
needs, the exercise of management prerogative cannot be utilized to circumvent the law and public policy
on labor and social justice. That prerogative accorded management could not
defeat the very purpose for which our labor laws exist: to balance the conflicting interests of labor and
management, not to tilt the scale in favor of one over the other, but to guaranty that labor and
management stand on equal footing when bargaining in good faith with each other. By its very nature,
encompassing as it could be, management prerogative must be exercised always with the principles of
fair play at heart and justice in mind.
Records show that respondents were first hired to work for a period of one year. Notwithstanding the fact
that respondents perform duties that are usually necessary or desirable in the usual trade or business of
petitioner, respondents were considered temporary employees as their engagement was fixed for a
specific period. However, equally borne by the records, is the fact that respondents employment was
extended for more than two years. Evidently, there was a continued and repeated necessity for their
services, which puts to naught the contention that respondents, beyond the one-year period, still
continued to be temporary part-time employees. Article 280 of the Labor Code[13] provides that any
employee who has rendered at least one year of service, whether such service is continuous or broken,

shall be considered a regular employee with respect to the activity in which he is employed, and his
employment shall continue while such activity actually exists.
The NLRC decision now assailed is one based on substantial evidence, which is that amount of relevant
evidence that a reasonable mind might accept as adequate to justify a conclusion.[14] It bears stressing
that findings of fact of quasi-judicial agencies like the NLRC which have acquired expertise in the specific
matters entrusted to their jurisdiction are accorded by this Court not only respect but even finality if they
are supported by substantial evidence.[15] Here we find no compelling reason to go against the factual
findings of the NLRC. The parties had ample opportunity to present below the necessary evidence and
arguments in furtherance of their causes, and it is presumed that the quasi-judicial body rendered its
decision taking into consideration the evidence and arguments thus presented. Such being the case, it is
likewise presumed that the official duty of the NLRC to render its decision was regularly
performed.[16] Petitioner has not shown any compelling justification to warrant reversal of the NLRC
findings. Absent any showing of patent error, or that the NLRC failed to consider a fact of substance that
if considered would warrant a different result, we yield to the factual conclusions of that quasi-judicial
agency. More so, when as here, these NLRC conclusions are affirmed by the appellate court.
It is basic to the point of being elementary that nomenclatures assigned to a contract shall be disregarded
if it is apparent that the attendant circumstances do not support their use or designation. The same is true
with greater force concerning contracts of employment, imbued as they are with public interest. Although
respondents were initially hired as part-time employees for one year, thereafter the over-all
circumstances with respect to duties assigned to them, number of hours they were permitted to work
including over-time, and the extension of employment beyond two years can only lead to one conclusion:
that they should be declared full-time employees. Thus, not without sufficient and substantial reasons,
the claim of management prerogative by petitioner ought to be struck down for being contrary to law and
policy, fair play and good faith.
In sum, we are in agreement with the Court of Appeals that the NLRC did not commit grave abuse of
discretion simply because it overturned the labor arbiters decision. Grave abuse of discretion is
committed when the judgment is rendered in a capricious, whimsical, arbitrary or despotic manner. An
abuse of discretion does not necessarily follow just because there is a reversal by the NLRC of the decision
of the labor arbiter. Neither does variance in the evidentiary assessment by the NLRC and by the labor
arbiter warrant as a matter of course another full review of the facts. The NLRCs decision, so long as it is
not bereft of evidentiary support from the records, deserves respect from the Court.[17]
WHEREFORE, the petition is DENIED for lack of merit. The decision dated January 26, 2000 of the Court of
Appeals and its resolution dated May 23, 2000, in CA-G.R. SP No. 50351 are AFFIRMED. Costs against
petitioner.
SO ORDERED.
Bellosillo, (Chairman), Austria-Martinez, and Tinga, JJ., concur.
Callejo, Sr., J., on leave.

Perpetual Help Credit v. Faburada, G.R. No. 121948, October 8, 2001

G.R. No. 121948

October 8, 2001

PERPETUAL
HELP
CREDIT
COOPERATIVE,
INC., petitioner,
vs.
BENEDICTO FABURADA, SISINITA VILLAR, IMELDA TAMAYO, HAROLD CATIPAY, and the NATIONAL
LABOR RELATIONS COMMISSION, Fourth Division, Cebu City, respondents.
SANDOVAL-GUTIERREZ, J.:
On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold Catipay, private
respondents, filed a complaint against the Perpetual Help Credit Cooperative, Inc. (PHCCI), petitioner, with
the Arbitration Branch, Department of Labor and Employment (DOLE), Dumaguete City, for illegal
dismissal, premium pay on holidays and rest days, separation pay, wage differential, moral damages, and
attorney's fees.
Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the ground that there is no
employer-employee relationship between them as private respondents are all members and co-owners
of the cooperative. Furthermore, private respondents have not exhausted the remedies provided in the
cooperative by-laws.
On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that Article 121 of R.A.
No. 6939, otherwise known as the Cooperative Development Authority Law which took effect on March
26, 1990, requires conciliation or mediation within the cooperative before a resort to judicial proceeding.
On the same date, the Labor Arbiter denied petitioner's motion to dismiss, holding that the case is
impressed with employer-employee relationship and that the law on cooperatives is subservient to the
Labor Code.
On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring complainants illegally
dismissed, thus respondent is directed to pay Complainants backwages computed from the time they
were illegally dismissed up to the actual reinstatement but subject to the three year backwages rule,
separation pay for one month for every year of service since reinstatement is evidently not feasible
anymore, to pay complainants 13th month pay, wage differentials and Ten Percent (10%) attorney's fees
from the aggregate monetary award. However, complainant Benedicto Faburada shall only be awarded
what are due him in proportion to the nine and a half months that he had served the respondent, he being
a part-time employee. All other claims are hereby dismissed for lack of merit.
The computation of the foregoing awards is hereto attached and forms an integral part of this decision."
On appeal,1 the NLRC affirmed the Labor Arbiter's decision.

Hence, this petition by the PHCCI.

The issue for our resolution is whether or not respondent judge committed grave abuse of discretion in
ruling that there is an employer-employee relationship between the parties and that private respondents
were illegally dismissed.
Petitioner PHCCI contends that private respondents are its members and are working for it as volunteers.
Not being regular employees, they cannot sue petitioner.
In determining the existence of an employer-employee relationship, the following elements are
considered: (1 ) the selection and engagement of the worker or the power to hire; (2) the power to
dismiss; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct,
with the latter assuming primacy in the overall consideration. No particular form of proof is required to
prove the existence of an employer-employee relationship. Any competent and relevant evidence may
show the relationship.2
The above elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca, Jr., its Manager,
hired private respondents to work for it. They worked regularly on regular working hours, were assigned
specific duties, were paid regular wages and made to accomplish daily time records just like any other
regular employee. They worked under the supervision of the cooperative manager. But unfortunately,
they were dismissed.
That an employer-employee exists between the parties is shown by the averments of private respondents
in their respective affidavits, carefully considered by respondent NLRC in affirming the Labor Arbiter's
decision, thus:
Benedicto Faburada Regular part-time Computer programmer/ operator. Worked with the Cooperative
since June 1, 1988 up to December 29, 1989. Work schedule: Tuesdays and Thursdays, from 1:00 p.m. to
5:30 p.m. and every Saturday from 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m. and for at least three (3) hours
during Sundays. Monthly salary: P1,000.00 from June to December 1988; P1,350.00 - from January to
June 1989; and P1,500.00 from July to December 1989. Duties: Among others, Enter data into the
computer; compute interests on savings deposits, effect mortuary deductions and dividends on fixed
deposits; maintain the masterlist of the cooperative members; perform various forms for mimeographing;
and perform such other duties as may be assigned from time to time.
Sisinita Vilar Clerk. Worked with the Cooperative since December 1, 1987 up to December 29,
1989.Work schedule: Regular working hours. Monthly salary: P500.00 from December 1, 1987 to
December 31, 1988; P1,000.00 from January 1, 1989 to June 30, 1989; and P1,150.00 from July 1,
1989 to December 31, 1989. Duties: Among others, Prepare summary of salary advances, journal
vouchers, daily summary of disbursements to respective classifications; schedule loans; prepare checks
and cash vouchers for regular and emergency loans; reconcile bank statements to the daily summary of
disbursements; post the monthly balance of fixed and savings deposits in preparation for the computation
of interests, dividends, mortuary and patronage funds; disburse checks during regular and emergency
loans; and perform such other bookkeeping and accounting duties as may be assigned to her from time
to time.
Imelda C. Tamayo Clerk. Worked with the Cooperative since October 19, 1987 up to December 29,
1989. Work schedule: Monday to Friday - 8:00 to 11:30 a.m and 2:00 to 5:30 p.m.; every Saturday 8:00

to 11:30 a.m and 1:00 to 4:00 p.m; and for one Sunday each month - for at least three (3) hours. Monthly
salary: P60.00 from October to November 1987; P250.00 for December 1987; P500.00 from January
to December 1988; P950 from January to June 1989; and P1,000.00 from July to December 1989.Duties:
Among others, pick up balances for the computation of interests on savings deposit, mortuary, dividends
and patronage funds; prepare cash vouchers; check petty cash vouchers; take charge of the preparation
of new passbooks and ledgers for new applicants; fill up members logbook of regular depositors, junior
depositors and special accounts; take charge of loan releases every Monday morning; assist in the posting
and preparation of deposit slips; receive deposits from members; and perform such other bookkeeping
and accounting duties as may be assigned her from time to time.
Harold D. Catipay Clerk. Worked with the Cooperative since March 3 to December 29, 1989. Work
schedule: Monday to Friday 8:00 to 11:30 a.m. and 2:00 to 5:30 p.m.; Saturday 8:00 to 11:30 a.m.
and 1:00 to 4:00 p.m.; and one Sunday each month for at least three (3) hours. Monthly salary: P900.00
from March to June 1989; P1,050.00 - from July to December 1989. Duties: Among others,
Bookkeeping, accounting and collecting duties, such as, post daily collections from the two (2) collectors
in the market; reconcile passbooks and ledgers of members in the market; and assist the other clerks in
their duties.
All of them were given a memorandum of termination on January 2, 1990, effective December 29, 1989.
We are not prepared to disregard the findings of both the Labor Arbiter and respondent NLRC, the same
being supported by substantial evidence, that quantum of evidence required in quasi judicial proceedings,
like this one.
Necessarily, this leads us to the issue of whether or not private respondents are regular employees. Article
280 of the Labor Code provides for three kinds of employees: (1) regular employees or those who have
been engaged to perform activities which are usually necessary or desirable in the usual business or trade
of the employer; (2) project employees or those 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; and (3) casual employees or those who are neither regular
nor project employees.3 The employees who are deemed regular are: (a) those who have been engaged
to perform activities which are usually necessary or desirable in the usual trade or business of the
employer; and (b) those casual employees who have rendered at least one (1 ) year of service, whether
such service is continuous or broken, with respect to the activity in which they are employed.4 Undeniably,
private respondents were rendering services necessary to the day-to-day operations of petitioner PHCCI.
This fact alone qualified them as regular employees.
All of them, except Harold D. Catipay, worked with petitioner for more than one (1) year: Benedicto
Faburada, for one and a half (1 1/2) years; Sisinita Vilar, for two (2) years; and Imelda C. Tamayo, for two
(2) years and two (2) months. That Benedicto Faburada worked only on a part-time basis, does not mean
that he is not a regular employee. One's regularity of employment is not determined by the number of
hours one works but by the nature and by the length of time one has been in that particular
job.5 Petitioner's contention that private respondents are mere volunteer workers, not regular
employees, must necessarily fail. Its invocation of San Jose City Electric Cooperative vs. Ministry of Labor
and Employment (173 SCRA 697, 703 (1989) is misplaced. The issue in this case is whether or not the

employees-members of a cooperative can organize themselves for purposes of collective bargaining, not
whether or not the members can be employees. Petitioner missed the point
As regular employees or workers, private respondents are entitled to security of tenure. Thus, their
services may be terminated only for a valid cause, with observance of due process.
The valid causes are categorized into two groups: the just causes under Articles 282 of the Labor Code and
the authorized causes under Articles 283 and 284 of the same Code. The just causes are: (1) serious
misconduct or willful disobedience of lawful orders in connection with the employee's work; (2) gross or
habitual neglect of duties; (3) fraud or willful breach of trust; (4) commission of a crime or an offense
against the person of the employer or his immediate family member or representative; and, analogous
cases. The authorized causes are: (1) the installation of labor-saving devices; (2) redundancy; (3)
retrenchment to prevent losses; and (4) closing or cessation of operations of the establishment or
undertaking, unless the closing is for the purpose of circumventing the provisions of law. Article 284
provides that an employer would be authorized to terminate the services of an employee found to be
suffering from any disease if the employee's continued employment is prohibited by law or is prejudicial
to his health or to the health of his fellow employees6
Private respondents were dismissed not for any of the above causes. They were dismissed because
petitioner considered them to be mere voluntary workers, being its members, and as such work at its
pleasure. Petitioner thus vehemently insists that their dismissal is not against the law.
Procedural due process requires that the employer serve the employees to be dismissed two (2) written
notices before the termination of their employment is effected: (a) the first, to apprise them of the
particular acts or omissions for which their dismissal is sought and (b) the second, to inform them of the
decision of the employer that they are being dismissed.7 In this case, only one notice was served upon
private respondents by petitioner. It was in the form of a Memorandum signed by the Manager of the
Cooperative dated January 2, 1990 terminating their services effective December 29, 1989. Clearly,
petitioner failed to comply with the twin requisites of a valid notice.
We hold that private respondents have been illegally dismissed.
Petitioner contends that the labor arbiter has no jurisdiction to take cognizance of the complaint of private
respondents considering that they failed to submit their dispute to the grievance machinery as required
by P.D. 175 (strengthening the Cooperative Movement) 8 and its implementing rules and regulations
under LOI 23. Likewise, the Cooperative Development Authority did not issue a Certificate of NonResolution pursuant to Section 8 of R.A. 6939 or the Cooperative Development Authority Law.
As aptly stated by the Solicitor General in his comment, P.D. 175 does not provide for a grievance
machinery where a dispute or claim may first be submitted. LOI 23 refers to instructions to the Secretary
of Public Works and Communications to implement immediately the recommendation of the Postmaster
General for the dismissal of some employees of the Bureau of Post. Obviously, this LOI has no relevance
to the instant case.
Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines) provides the procedure how
cooperative disputes are to be resolved, thus:

ART. 121. Settlement of Disputes. Disputes among members, officers, directors, and committee
members, and intra-cooperative disputes shall, as far as practicable, be settled amicably in accordance
with the conciliation or mediation mechanisms embodied in the by-laws of the cooperative, and in
applicable laws.
Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent
jurisdiction."
Complementing this Article is Section8 of R.A. No. 6939 (Cooperative Development Authority Law) which
reads:
SEC. 8 Mediation and Conciliation. Upon request of either or both parties, the Authority shall mediate
and conciliate disputes within a cooperative or between cooperatives: Provided, That if no mediation or
conciliation succeeds within three (3) months from request thereof, a certificate of non-resolution shall
be issued by the Commission prior to the filing of appropriate action before the proper courts.
The above provisions apply to members, officers and directors of the cooperative involved in disputes
within a cooperative or between cooperatives.
There is no evidence that private respondents are members of petitioner PHCCI and even if they are, the
dispute is about payment of wages, overtime pay, rest day and termination of employment. Under Art.
217 of the Labor Code, these disputes are within the original and exclusive jurisdiction of the Labor Arbiter.
As illegally dismissed employees, private respondents are therefore entitled to reinstatement without loss
of seniority rights and other privileges and to full backwages, inclusive of allowances, plus other benefits
or their monetary equivalent computed from the time their compensation was withheld from them up to
the time of their actual reinstatement.9 Since they were dismissed after March 21, 1989, the effectivity
date of R.A. 671510 they are granted full backwages, meaning, without deducting from their backwages
the earnings derived by them elsewhere during the period of their illegal dismissal.11 If reinstatement is
no longer feasible, as when the relationship between petitioner and private respondents has become
strained, payment of their separation pay in lieu of reinstatement is in order.12
WHEREFORE, the petition is hereby DENIED. The decision of respondent NLRC is AFFIRMED, with
modification in the sense that the backwages due private respondents shall be paid in full, computed from
the time they were illegally dismissed up to the time of the finality of this Decision.13
SO ORDERED.
Melo, Vitug and Panganiban, JJ., concur.

CIT v. Ople, G.R. No. L-58870, December 18, 1987

CORTES, J.:
Six cases involving various private schools, their teachers and non-teaching school personnel, and even
parents with children studying in said schools, as well as the then Minister of Labor and Employment, his
Deputy, the National Labor Relations Commission, and the then Minister of Education, Culture and Sports,
have been consolidated in this single Decision in order to dispose of uniformly the common legal issue
raised therein, namely, the allocation of the incremental proceeds of authorized tuition fee increases of

private schools provided for in section 3 (a) of Presidential Decree No. 451, and thereafter, under the
Education Act of 1982 (Batas Pambansa Blg. 232).
Specifically, the common problem presented by these cases requires an interpretation of section 3(a) of
Pres. Decree No. 451 which states:
SEC. 3. Limitations. The increase in tuition or other school fees or other charges as well as the new fees
or charges authorized under the next preceding section shall be subject to the following conditions;
(a) That no increase in tuition or other school fees or charges shall be approved unless sixty (60%)per
centum of the proceeds is allocated for increase in salaries or wages of the members of the faculty and all
other employees of the school concerned, and the balance for institutional development, student
assistance and extension services, and return to investments: ProvidedThat in no case shall the return to
investments exceed twelve (12%) per centum of the incremental proceeds;
xxx xxx xxx
In addition, there is also a need for a pronouncement on the effect of the subsequent enactment of B.P.
Blg. 232 which provides for the allocation of tuition fee increases in section 42 thereof.
In a nutshell, the present controversy was precipitated by the claims of some school personnel for
allowances and other benefits and the refusal of the private schools concerned to pay said allowances
and benefits on the ground that said items should be deemed included in the salary increases they had
paid out of the 60% portion of the proceeds from tuition fee increases provided for in section 3 (a) of Pres.
Decree No. 451. The interpretation and construction of laws being a matter of judicial power and duty
[Marbury v. Madison, 1 Cranch 137 (1803); Endencia v. David, 93 Phil. 696 (1953)], this Court has been
called upon to resolve the controversy.
In the process of reading and at times, having to decipher, the numerous pleadings filed in the six cases,
the Court found that the main issue has been approached by the parties from almost diametrical points,
thereby bringing into focus three sub-issues: first, whether or not allowances and other fringe benefits of
faculty members and other school employees may be charged against the 60% portion of the tuition fee
increases provided for in section 3(a) of Pres. Dec. No. 451: second, whether or not the same items may
be charged against said portion under the provisions of B.P. Blg. 232: and, third, whether or not schools
and their employees may enter into a collective bargaining agreement allocating more than 60% of said
incremental proceeds for salary increases and other benefits of said employees. After these sub-issues
have been resolved, the Court will tackle the other incidents attending the individual cases, seriatim.
The factual antecedents that brought these cases before this Tribunal are as follows:
I.. FACTUAL BACKGROUND OF EACH CASE
A.
CEBU INSTITUTE OF TECHNOLOGY CASE
This case originated from a Complaint filed with the Regional Office No. VII of the Ministry of Labor on
February 11, 1981 against petitioner Cebu Institute of Technology (CIT) by private respondents, Panfilo
Canete, et al., teachers of CIT, for non-payment of: a) cost of living allowances (COLA) under Pres. Dec.
Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th) month pay differentials and c) service incentive

leave. By virtue of an Order issued by the then Deputy Minister of Labor Carmelo C. Noriel, a labormanagement committee composed of one representative each from the Ministry of Labor and
Employment (MOLE), the Minister of Education, Culture and Sports (MECS), and two representatives each
from CIT and from the teachers was created. Said committee was to ascertain compliance with the legal
requirements for the payment of COLA, thirteenth (13th) month pay and service incentive leave [Rollo, p.
84].
The position taken by CIT during the conference held by the labor management committee was that it
had paid the allowances mandated by various decrees but the same had been integrated in the teacher's
hourly rate. It alleged that the payment of COLA by way of salary increases is in line with Pres. Dec. No.
451. It also claimed in its position paper that it had paid thirteenth month pay to its employees and that
it was exempt from the payment of service incentive leave to its teachers who were employed on contract
basis [Rollo, pp. 85-86].
After the report and recommendation of the committee, herein public respondent, then Minister of Labor
and Employment issued the assailed Order dated September 29, 1981 and held that the basic hourly rate
designated in the Teachers' Program is regarded as the basic hourly rate of teachers exclusive of the COLA,
and that COLA should not be taken from the 60% incremental proceeds of the approved increase in tuition
fee. The dispositive portion of the Order reads:
PREMISES CONSIDERED, CIT is hereby ordered to pay its teaching staff the following:
1) COLA under P.D.'s 525 and 1123 from February 1978 up to 1981;
2) COLA under P.D.'s l6l4,1634,1678 and l7l3;and
3) Service incentive leave from l978 upto l981.
CIT is further directed to integrate into the basic salaries of its teachers and (sic) COLA under P.D.'s 525
and 1123 starting on January 1981, pursuant to P.D. 1751. For purposes of integration, the hourly rate
shown in its Teachers' Program for school year 198182 shall be considered as the basic hourly rate.
SO ORDERED.
Petitioner assails the aforesaid Order in this Special Civil Action of certiorari with Preliminary Injunction
and/or Restraining Order. The Court issued a Temporary Restraining Order on December 7, 1981 against
the enforcement of the questioned Order of the Minister of Labor and Employment.
B.
DIVINE WORD COLLEGE OF LEGAZPI CASE
Upon a complaint filed by ten faculty members for alleged non-compliance by herein petitioner Divine
Word College of Legazpi with, among others, Pres. Dec. No. 451, i.e., allowances were charged to the 60%
incremental proceeds of tuition fee increase, the Labor Regulation Section of Regional Office No. V
(Legazpi City) of the Ministry of Labor and Employment conducted an inspection of the employment
records of said school. On the basis of the report on the special inspection that the school did not comply
with Pres. Dec. No. 451, herein respondent Regional Director issued an Order dated May 30, 1983,
requiring compliance by the Divine Word College. The latter filed a Memorandum of Appeal from said
Order which the Regional Director treated as a Motion for Reconsideration. Upon failure of the school to

comply with the aforesaid Order, another Order (August 2, 1983) was issued by herein respondent
Regional Director requiring herein petitioner to pay the faculty members- complainants (herein private
respondents) the amounts indicated therein or the total sum of Six Hundred Seventeen Thousand Nine
Hundred Sixty Seven Pesos and Seventy Seven Centavos (P 617,967.77). Petitioner's Motion for
Reconsideration of the Order was denied.
On appeal, the respondent Deputy Minister of Labor and Employment affirmed the Order of the Regional
Director, viz:
xxx xxx xxx
Coming now to the substantial merit of the case, we share the view that the emergency allowances due
the complainants under the several presidential decrees (PD's 525, 1123, etc.) cannot be charged by the
respondent against the 60% of the incremental proceeds from increase in tuition fees authorized under
PD 451, not only because as per decision of the Supreme Court (UE vs. UE Faculty Association, et. al., G.R.
No. 57387, September 30, 1982) said allowances whether mandated by law or secured by collective
bargaining should be taken only from the return to investment referred to in the decree if the school has
no other resources to grant the allowances but not from the 60% incremental proceeds, but also because
to hold otherwise would, to our mind, inevitably result in the loss of one benefit due the complainantsthat is the salary or wage increase granted them by PD 451.
In other words, we believe that by paying the complainants' allowances out of the 60% incremental
proceeds intended for their salary increase they are practically being deprived of one benefit-their share
in the 60% incremental proceeds in terms of salary or wage increase.
WHEREFORE, for the reasons abovestated, the Order appealed from is hereby AFFIRMED, and the appeal
DISMISSED, for lack of merit.
SO ORDERED.
(Annex "K " to Petition; Rollo, p. 108, 110).
This special civil action of certiorari and Prohibition with Preliminary Injunction questions the
interpretation of, and application by the respondent Deputy Minister, of the provisions of Pres. Dec. No.
45 1, as set forth in the assailed Order.
On March 25, 1985, after considering the allegations, issues and arguments adduced in the Petition as
well as the Comment thereon of the public respondent and dispensing with the private respondents'
Comment, the Court resolved to dismiss the Petition for lack of merit (Rollo, p. 198). On April 26, 1985,
petitioner filed a Motion for Reconsideration with Motion to Consider the Case En Banc. On June 26, 1985
the First Division of the Court referred the case to the Court En Banc for consolidation with G.R. No. 70832,
entitled "Gregorio T. Fabros, et al vs. Hon. Jaime C. Laya, etc. " since it involves the same issue on the
application of 60% incremental proceeds of authorized tuition fee increases [Rollo, p. 235]. The Court EN
BANC resolved to accept the case. (Resolution of July 16, 1985). These cases were further consolidated
with other cases involving the same issues.
C.
FAR EASTERN UNIVERSITY CASE

On December 17, 1978, petitioner Union filed with the Ministry of Labor and Employment a complaint
against respondent University for non-payment of legal holiday pay and under-payment of the thirteenth
(13th) month pay. On July 7, 1979, while the case was pending, the Union President, in his personal
capacity, filed another complaint for violation of Pres. Dec. No. 451 against the same respondent.
The two cases were forthwith consolidated and jointly heard and tried. On March 10, 1980, Labor Arbiter
Ruben A. Aquino promulgated a decision the dispositive portion of which is quoted hereunder:
RESPONSIVE TO THE FOREGOING, respondent is hereby directed, within ten (10) days from receipt hereof,
to:
1. To (sic) pay the paid legal holidays that it withdrew since January 14, 1976 up to the present; and
2. Pay the 13th month pay differential of complainant's for the covered period December 16, 1975 to
December 17, 1978, date of filing of complaint for non-payment of legal holiday pay and under payment
of the 13th month pay, and thereafter. Barred forever are money claims beyond three (3) years from the
time the course (sic) of action occurred. Respondent's formula on transportation allowance which was
deducted from the 13th month pay is thus subject to this prescriptive period, for purposes of computation
of differentials for the 13th month pay.
The claim under PD 451 is hereby dismissed for lack of merit.
SO ORDERED.
(Annex " E " to Petition; Rollo, p. 55, 65-66).
Both parties appealed the decision of the Labor Arbiter. On September 18, 1984, the respondent
Commission disposed of the appeal in the following manner:
RESPONSIVE TO THE FOREGOING, the Decision of Labor Arbiter Ruben A. Aquino in the instant case dated
March 10, 1980 is hereby Modified in the sense that complainant's claims for legal holiday pay and 13th
month pay are likewise dismissed for lack of merit and the dismissal of the claim under P.D. 451 is hereby
Affirmed en (sic) toto.
(Annex "A" to Petition: Rollo, p. 24, 35).
Petitioner's Motion for Reconsideration dated September 29, 1984 was denied for lack of merit on
November 8, 1984. Before this Court is the petition on certiorari filed by the Union assailing the
abovementioned decision of the Commissioner.
D.
FABROS CASE
This petition is in the nature of a class suit brought by petitioners in behalf of the faculty members and
other employees of more than 4000 private schools nationwide. Petitioners seek to enjoin the
implementation of paragraphs 7 to 7.5 of MECS Order No. 5, series of 1985 on the ground that the said
order is null and void for being contrary to Pres. Dec. No. 451 and the rulings of the Supreme Court in the
cases of University of the East v. UE Faculty Association [G.R. No. L-57387, September 20, 1982, 117 SCRA
5541, University of Pangasinan Faculty Union v. University of Pangasinan and NLRC [G.R. No. 63122,

February 20, 1984, 127 SCRA 691 ], St. Louis University Faculty Club v. NLRC and St. Louis University [G.R.
No. 65585, September 28, 1984, 132 SCRA 380].
On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was signed into law. On the
matter of tuition and other school fees of private schools, section 42 of said law provides as follows:
Sec. 42. Tuition and other School Fees. Each private School shall determine its rate of tuition and other
school fees or charges. The rates and charges adopted by schools pursuant to this provision shall be
collectible, and their application or use authorized subject to rules and regulations promulgated by the
Ministry of Education, Culture and Sports. (Emphasis supplied).
Invoking section 42 of B.P. Blg. 232, among others, as its legal basis, the then Minister of Education Jaime
C. Laya promulgated on April 1, 1985 the disputed MECS Order No. 25, s. 1985 entitled Rules and
Regulations To Implement the Provisions of B.P. Blg. 232. The Education Act of 1982, Relative to Student
Fees for School Year 1985-1986. The relevant portions of said Order are quoted hereunder:
7. Application or Use of Tuition and
Other School Fees or Charges.
7.1. The proceeds from tuition fees and other school charges as well as other income of each school shall
be treated as an institutional fund which shall be administered and managed for the support of school
purposes strictly: Provided, That for the purpose of generating additional financial resources or income
for the operational support and maintenance of each school two or more schools may pool their
institutional funds, in whole or in part, subject to the prior approval of their respective governing boards.
7.2. Tuition fees shag be used to cover the general expenses of operating the school in order to allow it to
meet the minimum standards required by the Ministry or any other higher standard, to which the school
aspires. They may be used to meet the costs of operation for maintaining or improving the quality of
instruction/training/research through improved facilities and through the payment of adequate and
competitive compensation for its faculty and support personnel, including compliance with mandated
increases in personnel compensation and/or allowance.
7.3. Tuition fees shag be used to cover minimum and necessary costs including the following: (a)
compensation of school personnel such as teaching or academic staff, school administrators, academic
non-teaching personnel, and non-academic personnel, (b) maintenance and operating expenses, including
power and utilities, rentals, depreciation, office supplies; and (c) interest expenses and installment
payments on school debts.
7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries or wages,
allowances and fringe benefits of faculty and support staff, including cost of living allowance, imputed
costs of contributed services, thirteenth (13th) month pay, retirement fund contributions, social security,
medicare, unpaid school personnel claims and payments as may be prescribed by mandated wage orders.
collective bargaining agreements and voluntary employer practices, Provided That increases in fees
specifically authorized for the purposes listed in paragraph 4.3.3 hereof shall be used entirely for those
purposes. (Italics supplied).
7.5. Other student fees and charges as may be approved, including registration, library, laboratory,
athletic, application, testing fees and charges shall be used exclusively for the indicated purposes,

including (a) the acquisition and maintenance of equipment, furniture and fixtures, and buildings, (b) the
payment of debt amortization and interest charges on debt incurred for school laboratory, athletic, or
other purposes, and (c) personal services and maintenance and operating expenses incurred to operate
the facilities or services for which fees and charges are collected.
The Petition prayed for the issuance of a temporary restraining order which was granted by this Court
after hearing. The dispositive portion of the resolution dated May 28, 1985 reads as follows:
After due consideration of the allegations of the petition dated May 22, 1985 and the arguments of the
parties, the Court Resolved to ISSUE, effective immediately and continuing until further orders from this
Court, a TEMPORARY RESTRAINING ORDER enjoining the respondent from enforcing or implementing
paragraphs 7.4 to 7.5 of MECS Order No. 25, s. 1985, which provide for the use and application of sixty
per centum (60%) of the increases in tuition and other school fees or charges authorized by public
respondent for the school year 1985-1986 in a manner inconsistent with section 3(a), P.D. No. 451, (which
allocates such 60% of the increases exclusively "for increases in salaries or wages of the members of the
faculty and other employees of the school concerned.") and directing accordingly that such 60% of the
authorized increases shall be held in escrow by the respective colleges and universities, i.e., shall be kept
intact and not disbursed for any purpose pending the Court's resolution of the issue of the validity of the
aforementioned MECS Order in question.
(Rollo, p. 21).
In the same resolution, the Philippine Association of Colleges and Universities (PACU) was impleaded as
respondent.
Subsequent to the issuance of this resolution, four (4) schools, represented in this petition, moved for the
lifting of the temporary restraining order as to them. In separate resolutions, this Court granted their
prayers.
Ateneo de Manila University, De La Sale University (Taft Avenue) and De La Salle University-South, through
their respective counsels, manifested that for the school year 1985-1986, tuition fee increase was
approved by the MECS and that on the basis of Pres. Dec. No. 451, 60% of the tuition fee increases shall
answer for salary increase. However, a budgeted salary increase, exclusive of living allowances and other
benefits, was approved for the same school year which when computed amounts to more than the 60%.
This Court granted the motions in separate resolutions lifting the temporary restraining order with respect
to these schools in order that they may proceed with the implementation of the general salary increase
for their employees.
In the case of St. Louis University, its Faculty Club, Administrative Personnel Association and the University
itself joined in a petition seeking for leave that 49% of the increase in tuition and other fees for school
year 1985-1986 be released. Petitioners manifested that the remaining balance shall continue to be held
in escrow by the University.
In a resolution dated January 28, 1986, the Court resolved as follows:
Accordingly, the Temporary Restraining Order issued by this Court on May 28, 1985 is hereby ordered
LIFTED with respect to Saint Louis University of Baguio City in order that it may proceed immediately with
the implementation of salary increases for its employees.

D.
BISCOCHO CASE
The Espiritu Santo Parochial School and the Espiritu Santo Parochial School Faculty Association were
parties to a labor dispute which arose from a deadlock in collective bargaining. The parties entered into
conciliation proceedings. The union went on strike after efforts at the conciliation failed. Subsequently, a
return to work agreement was forged between the parties and both agreed to submit their labor dispute
to the jurisdiction of the Minister of Labor.
In the exercise of his power to assume jurisdiction, the Ministry of Labor and Employment issued an Order
dated April 14, 1986 which provides for the following:
IN CONSIDERATION OF ALL THE FOREGOING, the Ministry hereby declares the strike staged by the Union
to be legal and orders the following:
a) the School to submit the pertinent record of employment of Romualdo Noriego to the Research and
Information Division of the NLRC for computation of his underpayment of wages and for the parties to
abide by the said computation;
b) the School to submit all pertinent record of collections of tuition fee increases for school year (sic) 19821983, 1983-1984 and 1984-1985 to the Research and Information Division of the NLRC for proper
computation and for equal distribution of the amount to all employees and teachers during the
abovementioned school year (sic) as their salary adjustment under P.D. 461;
c) the parties to wait for the final resolution of the illegal dismissal (case) docketed as NLRC NCR Case No.
5-1450-85 and to abide by the said resolution;
d) to furnish the MECS a copy of this order for them to issue the guidelines in the implementation of
PRODED Program;
e) the parties to execute a collective bargaining agreement with an economic package equivalent to 90%
of the proceeds from tuition fee increases for school year 1985-1986 and another 90% for school year
1986-1987 and 85% for school year 1987-1988. The amount aforementioned shall be divided equally to all
members of the bargaining unit as their respective salary adjustments. Such other benefits being enjoyed
by the members of the bargaining unit prior to the negotiation of the CBA shall remain the same and shall
not be reduced.
f) the School to deduct the amount equivalent to ten (10%) per cent of the backwages payable to all
members of the bargaining unit as negotiation fee and to deliver the same to the Union Treasurer for
proper disposition (Emphasis supplied).
SO ORDERED.
(Rollo, pp. 16-17)
Pursuant to the said order, private respondent Union agreed to incorporate in their proposed collective
bargaining agreement (CBA) with the School the following:
2) The Union and School Administration will incorporate the following in their CBA -

1) The computation of the tuition fee increase shall be gross to gross from which the corresponding
percentage of 90% will be taken. The resulting amount will be divided among 141.5 employees for 198586 and 132.5 employees for 1986-87.
1/2 of the resulting increase will be added to basic and divided by 13.3 to arrive at monthly increase in
basic. The other 1/2 will be divided by 12.3 to arrive at monthly increase in living allowance.
xxx xxx xxx
4) xxx
Upon request/demand of the Union, School win deduct from backwages of managerial employees and
others outside the bargaining unit what Union win charge its own members in the form of attorney's fees,
special assessment and union dues/agency fee.
5) The signing of the CBA and payment of backwages and others shall be on November 26, 1986 at the
Espiritu Santo Parochial School Library.
(Rollo, pp. 3-4).
The herein petitioners, Jasmin Biscocho and 26 others, all employees and faculty members of the
respondent School, filed the present petition for prohibition to restrain the implementation of the April
14, 1986 Order of respondent Labor Minister as well as the agreements arrived at pursuant thereto. They
contend that said Order and agreements affect their rights to the 60% incremental proceeds under Pres.
Dec. No. 451 which provide for the exclusive application of the 60% incremental proceeds to basic salary.
Acting on the petitioners' prayer, this Court immediately issued a temporary restraining order on
November 25, 1986 ". . . enjoining the respondents from enforcing, implementing and proceeding with
the questioned order of April 14, 1986 and collective bargaining agreement executed between
respondents Union and the School Administration in pursuance thereof." [Rollo, p. 20].
F.
VALMONTE CASE
This Petition was filed by parents with children studying at respondent school, Espiritu Santo Parochial
School to nullify the Order dated April 14, 1986 issued by public respondent, then Minister of Labor and
Employment, specifically paragraphs (e) and (f) thereof, quoted in the Biscocho case.
The award contained in the said Order is the result of the assumption of jurisdiction by the public
respondent over a labor dispute involving the private respondents school and faculty association. The
latter had earlier filed a notice of strike because of a bargaining deadlock on the demands of its members
for additional economic benefits. After numerous conciliation conferences held while the union was on
strike, the parties voluntarily agreed that the public respondent shall assume jurisdiction over all the
disputes between them. As to the subject matter of the instant case, the public respondent found that
the latest proposals of the respondent school was to give 85% of the proceeds from tuition fee increases
for the school years to be divided among the teachers and employees as salary adjustments. What the
respondent faculty association offered to accept was a package of 95% for school year 1985-1986, 90%
for school year 1986- 1987. The respondent school offered to strike the middle of the two positions, hence

the Order complained of by the petitioners [See Annex "A", Petition; Rollo, pp. 9, 14-15; Comment of the
Respondent Faculty Association: Rollo, p. 26].
II. RESOLUTION OF THE COMMON LEGAL ISSUE
This long-drawn controversy has sadly placed on the balance diverse interests, opposed yet intertwined,
and all deserving, and demanding, the protection of the State. On one arm of the balance hang the
economic survival of private schools and the private school system, undeniably performing a
complementary role in the State's efforts to maintain an adequate educational system in the country.
Perched precariously on the other arm of the same balance is the much-needed financial uplift of
schoolteachers, extolled for all times as the molders of the minds of youth, hence of every nation's future.
Ranged with them with needs and claims as insistent are other school personnel. And then, anxiously
waiting at the sidelines, is the interest of the public at large, and of the State, in the continued availability
to all who desire it, high-standard education consistent with national goals, at a reasonable and affordable
price.
Amidst these opposing forces the task at hand becomes saddled with the resultant implications that the
interpretation of the law would bear upon such varied interests. But this Court can not go beyond what
the legislature has laid down. Its duty is to say what the law is as enacted by the lawmaking body. That is
not the same as saying what the law should be or what is the correct rule in a given set of circumstances.
It is not the province of the judiciary to look into the wisdom of the law nor to question the policies
adopted by the legislative branch. Nor is it the business of this Tribunal to remedy every unjust situation
that may arise from the application of a particular law. It is for the legislature to enact remedial legislation
if that be necessary in the premises. But as always, with apt judicial caution and cold neutrality, the Court
must carry out the delicate function of interpreting the law, guided by the Constitution and existing
legislation and mindful of settled jurisprudence. The Court's function is therefore limited, and accordingly,
must confine itself to the judicial task of saying what the law is, as enacted by the lawmaking body.
FIRST SUB-ISSUE
A. Whether or not allowances and other fringe benefits of employees may be charged against the 60%
portion of the incremental proceeds provided for in sec. 3(a) of Pres. Dec. No. 451.
1. Arguments raised in the Cebu Institute of Technology case
In maintaining its position that the salary increases it had paid to its employees should be considered to
have included the COLA, Cebu Institute of Technology (CIT) makes reference to Pres. Dec. No. 451 and its
Implementing Rules. The line of reasoning of the petitioner appears to be based on the major premise
that under said decree and rules, 60% of the incremental proceeds from tuition fee increases may be
applied to salaries, allowances and other benefits of teachers and other school personnel. In support of
this major premise, petitioner cites various implementing rules and regulations of the then Minister of
Education, Culture and Sports, to the effect that 60% of the incremental proceeds may be applied to
salaries, allowances and other benefits for members of the faculty and other school personnel [Petition
citing Implementing Rules and Regulations of Pres. Dec. No. 451 of various dates; Rollo, pp. 318-320].
Petitioner concludes that the salary increases it had granted the CIT teachers out of the 60% portion of
the incremental proceeds of its tuition fee increases from 1974-1980 pursuant to Pres. Dec. No. 451 and

the MECS implementing rules and regulations must be deemed to have included the COLA payable to said
employees for those years [Rollo, pp. 911].
With leave of Court, the Philippine Association of Colleges and Universities, filed its Memorandum as
Intervenor in support of the proposition that schools may pay the COLA to faculty members and other
employees out of the 60% of the increase in tuition fees. In addition to the arguments already set forth in
the memorandum of the petitioner CIT, intervenor PACU attacks the Decision of this Court in University
of the East v. University of the East Faculty Association et. all G.R. No. 57387 as "not doctrinal" and
inapplicable to the CIT case. The Court held in the UE case, which was promulgated on September 30,
1982, during the pendency of these cases, that:
... allowances and benefits should be chargeable to the return to investment referred to in Sec. 3(a), if the
schools should happen to have no other resources than incremental proceeds of authorized tuition fee
increases ... (See Dispositive Portion of the Decision)
Intervenor PACU alleges that the aforecited U.E. decision does not categorically rule that COLA and other
fringe benefits should not be charged against the 60% incremental proceeds of the authorized tuition fee
increase.
The Solicitor General, on the other hand, argues in support of the Order of the public respondent that
Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee increases exclusively for salary increases of
teachers and non- teaching supportive personnel of the school concerned, and that the Decree does not
provide that said salary increases would take the place of the COLA [Rollo, p. 244-245]. He cites as
authority for this stance, two (2) memoranda of the then President dated June 6, 1978 and March 30,
1979 both of which provide that the 60% incremental proceeds of tuition fee increases "shall be allocated
for the increase in the salaries of teachers and supportive personnel. " Anent the U.E. case, the Solicitor
General states that the Supreme Court in deciding said case took note of the stand of the Office of the
President that the 60% incremental proceeds shall be solely applied to salaries of faculty members and
employees.
On August 7, 1986, considering the supervening events, including the change of administration, that have
transpired during the pendency of these cases, the Court required the Solicitor General to state whether
or not he maintains the action and position taken by his predecessor-in-office. In his Compliance with said
Resolution, the Solicitor General Manifested the position that:
a. If the tuition fee increase was collected during the effectivity oil Presidential Decree No. 451, 60%
thereof shall answer exclusively for salary increase of school personnel. Other employment benefits shall
be covered by the 12% allocated for return of investment, this is in accordance with the ruling of this
Honorable Court in University of the East vs. U.E. Faculty Association, et. al (117 SCRA 554), ... and
reiterated in University of Pangasinan Faculty Union v. University of Pangasinan, et. al. (127 SCRA 691)
and St. Louis Faculty Club u. NLRC (132 SCRA 380).
b. If the salary increase was collected during the effectivity of Batas Pambansa Blg. (sic) 232, 60% thereof
shall answer not only for salary increase of school personnel but also for other employment benefits.
(Rollo, at pp. 513-514)
2. Arguments raised in the Divine Word College Case

Petitioner Divine Word College of Legazpi (DWC) advances the theory that the COLA, 13th month pay and
other personnel benefits decreed by law, must be deemed chargeable against the 60% portion allocated
for increase of salaries or wages of faculty and all other school employees. In support of this stance,
petitioner points out that said personnel benefits are not included in the enumeration of the items for
which the balance (less 60%) or 40% portion of the incremental proceeds may be alloted under section
3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30. Petitioner likewise cites the interpretation of the respondent
Minister of Education, Culture and Sports embodied in the Implementing Rules and Regulations of P.D.
451, DEC Issuance, May 13, 1987; Rollo, p. 30], that the 60% incremental proceeds of authorized tuition
fee increases may be applied to increases in emoluments and/or benefits for members of faculty,
including staff and administrative employees of the school as the valid interpretation of the law, as against
that made by the respondent Deputy Minister of Labor in the assailed Order. If the latter interpretation is
upheld, petitioner would go as far as questioning the constitutionality of Pres. Dec. No. 451 upon the
ground that the same discriminates against the petitioner and other private schools as a class of
employers. According to the petitioner, the discrimination takes the form of requiring said class of
employers to give 60% of their profits to their employees in addition to the COLA mandated by law, while
other employers have to contend only with salary increases and COLA [Petition; Rollo, p. 46].
With regard to the Decision of this Court in the U.E. case, petitioner claims exemption therefrom upon
the ground that the Court's interpretation of a law cannot be applied retroactively to parties who have
relied upon the previous administrative interpretation which has not been declared invalid or
unconstitutional [Petition; Rollo, pp. 50-51 1. Petitioner further argues on this point that if the court had
intended to invalidate the MECS interpretation of the Decree, it should have positively stated so in the
Decision [Petition; Rollo, p. 50].
The Comment of the public respondents cite as settled jurisprudence applicable to the case at bar, the
ruling of this Court in the U.E. case, supra, which was reiterated in the subsequent cases of University of
Pangasinan Faculty Union v. University of Pangasinan et all and St. Louis Faculty Club v. NLRC, et al.
Public respondents Deputy Minister of Labor and Employment and Regional Director of the MOLE (Region
V) likewise attack the validity of the Revised Implementing Rules and Regulations of Pres. Dec. No. 451
cited by the petitioner insofar as said rules direct the allotment of the 60% of incremental proceeds from
tuition fee hikes for retirement plan, faculty development and allowances. They argue that said rules and
regulations were invalid for having been promulgated in excess of the rule-making authority of the then
Minister of Education under Pres. Dec. No. 451 which mandates that the 60% of incremental proceeds
from tuition fee hikes should be allotted solely for salary increases [Comment; Rollo, pp. 184-185]. Finally,
with respect to the issue on the allege unconstitutionality of Pres. Dec. No. 451, the public respondents
posit that a legislation (such as Pres. Dec. No. 451) which affects a particular class does not infringe the
constitutional guarantee of equal protection of the law as long as it applies uniformly and without
discrimination to everyone of that class [Comment; Rollo, p. 14].
3. Arguments raised in the Far Eastern University case
It is the petitioner's contention that in respect of Pres. Dec. No. 451, the decision of the NLRC is a defiance
of the rulings of this Court in the cases of University of the East v. U.E. Faculty, Association et al. and of
University of Pangasinan Faculty Union v. University of Pangasinan and NLRC (supra). The Union submits
that monetary benefits, other than increases in basic salary, are not chargeable to the 60% incremental
proceeds.

The respondent University in its Comment dated June 13, 1982 refers to Article 97(f) of the Labor Code
which provides a definition of the term "wages" to support its position that "salaries or wages" as used in
Pres. Dec. No. 451 should be interpreted to include other benefits in terms of money.
As mentioned in the Cebu Institute of Technology case, the Solicitor General filed its Compliance with this
Court's resolution dated August 7, 1986 requiring him to manifest whether public respondents maintain
the position they have taken in these consolidated cases. The resolution of September 25, 1986 required
petitioners to Comment on said Compliance.
The Comment dated December 6, 1986 was received by this Court after petitioner Union was required to
show cause why no disciplinary action should be taken against them for failure to comply earlier. The
Union agreed with the position taken by the Solicitor General that under Pres. Dec. No. 451, 60% of the
tuition fee increases, shall answer exclusively for salary increase. However, it expressed disagreement with
the opinion that during the effectivity of B.P. Blg. 232, the 60% ncremental proceeds shall answer not only
for salary increases but also for other employment benefits. The Union argues that whereas "Pres. Dec.
No. 451 is a law on a particular subject, viz., increase of tuition fee by educational institutions and how
such increase shall be allocated B.P. Blg. 232 is not a law on a particular subject of increase of tuition fee .
. . ; at most it is a general legislation on tuition fee as it touches on such subject in general, " [Comment on
Compliance; Rollo, p. 376], Suppletory to its argument that B.P. Blg. 232 did not impliedly repeal Pres.
Dec. No. 451, the Union also invokes the principle that a special or particular law cannot be repealed by a
general law.
RESOLUTION OF THE FIRST SUB-ISSUE
This Court has consistently held, beginning with the University of the East case, that if the schools have no
resources other than those derived from tuition fee increases, allowances and benefits should be charged
against the proceeds of tuition fee increases which the law allows for return on investments under section
3(a) of Pres. Dec. No. 451, therefore, not against the 60% portion allocated for increases in salaries and
wages (See 117 SCRA at 571). This ruling was reiterated in the University of Pangasinan case and in
the Saint Louis University case.
There is no cogent reason to reverse the Court's ruling in the aforecited cases. Section 3(a) of Pres. Dec.
No. 451 imposes among the conditions for the approval of tuition fee increases, the allocation of 60% per
cent of the incremental proceeds thereof for increases in salaries or wages of school personnel and not for
any other item such as allowances or other fringe benefits. As aptly put by the Court in University of
Pangasinan Faculty Union v. University of Pangasinan, supra:
... The sixty (60%) percent incremental proceeds from the tuition increase are to be devoted entirely to
wage or salary increases which means increases in basic salary. The law cannot be construed to include
allowances which are benefits over and above the basic salaries of the employees. To charge such benefits
to the 60% incremental proceeds would be to reduce the increase in basic salary provided by law, an
increase intended also to help the teachers and other workers tide themselves and their families over
these difficult economic times. [Italics supplied] (127 SCRA 691, 702).
This interpretation of the law is consistent with the legislative intent expressed in the Decree itself, i.e.,
to alleviate the sad plight of private schools and that of their personnel wrought by slump in enrollment
and increasing operational costs on the part of the schools, and the increasing costs of living on the part

of the personnel (Preamble, Pres. Dec. No. 451). While coming to the aid of the private school system by
simplifying the procedure for increasing tuition fees, the Decree imposes as a condition for the approval
of any such increase in fees, the allocation of 60% of the incremental proceeds thereof, to increases in
salaries or wages of school personnel. This condition makes for a quid pro quo of the approval of any
tuition fee hike by a school, thereby assuring the school personnel concerned, of a share in its proceeds.
The condition having been imposed to attain one of the main objectives of the Decree, which is to help
the school personnel cope with the increasing costs of living, the same cannot be interpreted in a sense
that would diminish the benefit granted said personnel.
In the light of existing laws which exclude allowances from the basic salary or wage in the computation of
the amount of retirement and other benefits payable to an employee, this Court will not adopt a different
meaning of the terms "salaries or wages" to mean the opposite, i.e. to include allowances in the concept
of salaries or wages.
As to the alleged implementing rules and regulations promulgated by the then MECS to the effect that
allowances and other benefits may be charged against the 60% portion of the proceeds of tuition fee
increases provided for in Section 3(a) of Pres. Dec. No. 45 1, suffice it to say that these were issued ultra
vires, and therefore not binding upon this Court.
The rule-making authority granted by Pres. Dec. No. 451 is confined to the implementation of the Decree
and to the imposition of limitations upon the approval of tuition fee increases, to wit:
SEC. 4. Rules and Regulations. The Secretary of Education and Culture is hereby authorized, empowered
and directed to issue the requisite rules and regulations for the effective implementation of this Decree.
He may, in addition to the requirements and limitations provided for under Sections 2 and 3 hereof,
impose other requirements and limitations as he may deem proper and reasonable.
The power does not allow the inclusion of other items in addition to those for which 60% of the proceeds
of tuition fee increases are allocated under Section 3(a) of the Decree.
Rules and regulations promulgated in accordance with the power conferred by law would have the force
and effect of law [Victorias Milling Company, Inc. v. Social Security Commission, 114 Phil. 555 (1962)] if
the same are germane to the subjects of the legislation and if they conform with the standards prescribed
by the same law [People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450]. Since the
implementing rules and regulations cited by the private schools adds allowances and other benefits to the
items included in the allocation of 60% of the proceeds of tuition fee increases expressly provided for by
law, the same were issued in excess of the rule-making authority of said agency, and therefore without
binding effect upon the courts. At best the same may be treated as administrative interpretations of the
law and as such, they may be set aside by this Court in the final determination of what the law means.
SECOND SUB-ISSUE
B. Whether or not allowances and other fringe benefits may be charged against the 60% portion of the
incremental proceeds of tuition fee increases upon the effectivity of the Education Act of 1982 (B.P. Blg.
232).
1. Arguments raised in the Fabros case

In assailing MECS Order No. 25, s. 1985, petitioners argue that the matter of allocating the proceeds from
tuition fee increases is still governed by Pres. Dec. No. 451. It is their opinion that section 42 of B.P. Blg.
232 did not repeal Pres. Dec. No. 451 for the following reasons: first, there is no conflict between section
42 of B.P. Blg. 232 and section 3(a) of Pres. Dec. No. 451 or any semblance of inconsistency to deduce a
case of a repeal by implication: second, Pres. Dec. No. 451 is a specific law upon a particular subject-the
purposes and distribution of the incremental proceeds of tuition fee increases, while B.P. Blg. 232 is a
general law on the educational system; as such, a specific law is not repealed by a subsequent general law
in the absence of a clear intention; and third, Pres. Dec. No. 451 is still the only law on the subject of
tuition fee increases there being no prescription or provision in section 42 of B.P. Blg. 232 or elsewhere in
the law. They furthermore aver that the disputed MECS Order which imposed additional burdens against
the 60% incremental proceeds of tuition fee increases are not provided in either Pres. Dec. No. 451 or B.P.
Blg. 232. The logical result as intimated by petitioners is that the inclusion of paragraph 7.4 and related
paragraphs 7 to 7.3 and 7.5 in the questioned MECS order contravenes the statutory authority granted to
the public respondent, and the same are therefore, void.
Respondent PACU takes the contrary view contending that MECS Order No. 25, s. 1985, complies with the
mandate of section 42 of B.P. Blg. 232 which law had already repealed Pres. Dec. No. 451. PACU notes
that the University of the East case invoked by petitioners is not applicable because the issue in that case
does not involve the effect of B.P. Blg. 232 on Pres. Dec. No. 451.
The Solicitor General, representing the public respondent, after giving a summary of the matters raised
by petitioner and respondent PACU, points out that the decisive issue in this case is whether B.P. Big. 232
has repealed Pres. Dec. No. 451 because on the answer to this question depends the validity of MECS
Order No. 25, s. 1985. Public respondent holds the view consistent with that of PACU on the matter of
B.P. Blg. 232 having repealed Pres. Dec. No. 451. To support this contention, the Solicitor General
compared the respective provisions of the two laws to show the inconsistency and incompatibility which
would result in a repeal by implication.
RESOLUTION OF THE SECOND SUB-ISSUE
On the matter of tuition fee increases section 42 of B.P. Blg. 232 provides:
SEC. 42. Tuition and Other School Fees. Each private school shall determine its rate of tuition and other
school fees or charges. The rates and charges adopted by schools pursuant to this provision shall be
collectible and their application or use authorized, subject to rules and regulations promulgated by the
Ministry of Education, Culture and Sports. (Emphasis supplied).
The enactment of B.P. Blg. 232 and the subsequent issuance of MECS Order No. 25, s. 1985 revived the
old controversy on the application and use of the incremental proceeds from tuition fee increases. As can
be gleaned from the pleadings and arguments of the parties in these cases, one side, composed of the
teachers and other employees of the private schools, insist on the applicability of section 3(a) of Pres. Dec.
No. 451 as interpreted arid applied in the University of the East, University of Pangasinan and St Louis
University cases, while the private schools uphold the view that the matter of allocating the incremental
proceeds from tuition fee increases is governed by section 42 of B.P. Blg. 232 as implemented by the MECS
Rules and Regulations. As stated, the latter's argument is premised on the allegation that B.P. Blg. 232
impliedly repealed Pres. Dec. No. 451.

On the second sub-issue, therefore, this Court upholds the view taken by the Solicitor General in
the Fabroscase, that the decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec. No. 451.
In recognition of the vital role of private schools in the country's educational system, the government has
provided measures to regulate their activities. As early as March 10, 1917, the power to inspect private
schools, to regulate their activities, to give them official permits to operate under certain conditions and
to revoke such permits for cause was granted to the then Secretary of Public Instruction by Act No. 2706
as amended by Act No. 3075 and Commonwealth Act No. 180. Republic Act No. 6139, enacted on August
31, 1970, provided for the regulation of tuition and other fees charged by private schools in order to
discourage the collection of exorbitant and unreasonable fees. In an effort to simplify the "cumbersome
and time consuming" procedure prescribed under Rep. Act No. 6139 and "to alleviate the sad plight of
private schools," Pres. Dec. No. 451 was enacted on May 11, 1974. While this later statute was being
implemented, the legislative body envisioned a comprehensive legislation which would introduce changes
and chart directions in the educational system, hence, the enactment of B.P. Blg. 232. What then was the
effect of B.P. Blg. 232 on Pres. Dec. No. 451?
The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly section 3(a)
thereof, finds evident irreconcilable differences.
Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other school fees or
charges by private schools is lodged with the Secretary of Education and Culture (Sec. 1), where section
42 of B.P. Blg. 232 liberalized the procedure by empowering each private school to determine its rate of
tuition and other school fees or charges.
Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee increases shall be applied
or used to augment the salaries and wages of members of the faculty and other employees of the school,
while B.P. Blg. 232 provides that the increment shall be applied or used in accordance with the regulations
promulgated by the MECS.
A closer look at these differences leads the Court to resolve the question in favor of repeal. As pointed
out by the Solicitor General, three aspects of the disputed provisions of law support the above
conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to apportion the
incremental proceeds of the tuition fee increases; such power is delegated to the Ministry of Education
and Culture under B.P. Blg. 232.Second, Pres. Dec. No. 451 limits the application or use of the increment
to salary or wage increase, institutional development, student assistance and extension services and
return on investment, whereas B.P. Blg. 232 gives the MECS discretion to determine the application or
use of the increments. Third, the extent of the application or use of the increment under Pres. Dec. No.
451 is fixed at the pre-determined percentage allocations; 60% for wage and salary increases, 12% for
return in investment and the balance of 28% to institutional development, student assistance and
extension services, while under B.P. Blg. 232, the extent of the allocation or use of the increment is
likewise left to the discretion of the MECS.
The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451 is apparent in the
second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42 of B.P. Blg. 232 which
cover the same subject matter, are so clearly inconsistent and incompatible with each other that there is
no other conclusion but that the latter repeals the former in accordance with section 72 of B.P. Blg. 232
to wit:

Sec. 72. Repealing clause. All laws or parts thereof inconsistent with any provision of this Act shall be
deemed repealed or modified, as the case may be.
Opinion No. 16 of the Ministry of Justice dated January 29, 1985, quoted below, supports the above
conclusion:
Both P.D. No. 451 and B.P. Blg. 232 deal with the imposition of tuition and other school fees or charges
and their use and application, although the latter is broader in scope as it covers other aspects of the
education system. We note substantial differences or inconsistencies between the provisions of the two
laws. P.D. No. 451 prescribes certain limitations in the increase of tuition and other school fees and their
application, whereas the latter law, B.P. Blg. 232 s silent on the matter. Under P.D. 451, rates of
tuition/school fees need prior approval of the Secretary of Education, Culture (now Minister of Education,
Culture and Sports), who also determines the reasonable rates for new school fees, whereas under B.P.
Blg. 232, each private school determines its rate of tuition and other school fees or charges. P.D. No. 451
authorizes the Secretary of Education and Culture to issue requisite rules and regulations to implement
the said Decree and for that purpose, he is empowered to impose other requirements and limitations as
he may deem proper and reasonable in addition to the limitations prescribed by the Decree for increases
in tuition fees and school charges, particularly, the limitations imposed in the allocation of increases in
fees and charges, whereas under B.P. Blg. 232, the collection and application or use of rates and charges
adopted by the school are subject to rules and regulations promulgated by the Ministry of Education,
Culture and Sports without any mention of the statutory limitations on the application or use of the fees
or charges. The authority granted to private schools to determine its rates of tuition and unconditional
authority vested in the Ministry of Education, Culture and Sports to determine by rules and regulations
the collection and application or use of tuition or fees rates and charges under B.P. Big. 232 constitute
substantial and irreconcilable incompatibility with the provisions of P.D. No. 451, which should be for that
reason deemed to have been abrogated by the subsequent legislation.
Moreover, B.P. Blg. 232 is a comprehensive legislation dealing with the establishment and maintenance
of an integrated system of education and as such, covers the entire subject matter of the earlier law, P.D.
No. 451. The omission of the limitations or conditions imposed in P.D. No. 451 for increases in tuition fees
and school charges is an indication of a legislative intent to do away with the said limitations or conditions.
(Crawford, supra, p. 674). It has also been said that
an act which purports to set out in full all that it intends to contain, operates as a repeal of anything
omitted which was contained in the old act and not included in the amendatory act." (People vs. Almuete
69 SCRA 410; People vs. Adillo 68 SCRA 90) (Ministry of Justice, Op. No. 16, s. 1985).
Having concluded that under B.P. Big. 232 the collection and application or use of tuition and other school
fees are subject only to the limitations under the rules and regulations issued by the Ministry, the crucial
point now shifts to the said implementing rules.
The guidelines and regulations on tuition and other school fees issued after the enactment of B.P. Blg. 232
consistently permit the charging of allowances and other benefits against the 60% incremental proceeds.
Such was the tenor in the MECS Order No. 23, s. 1983; MECS Order No. 15, s. 1984; MECS Order No. 25,
s. 1985; MECS Order No. 22, s. 1986; and DECS Order No. 37, s. 1987. The pertinent portion of the latest
order reads thus:

In any case of increase at least sixty percent (60%) of the incremental proceeds should be allocated for
increases in or provisions for salaries or wages, allowances and fringe benefits of faculty and other staff,
including accruals to cost of living allowance, 13th month pay, social security, medicare and retirement
contribution and increases as may be provided in mandated wage orders, collective bargaining
agreements or voluntary employer practices.
The validity of these orders, particularly MECS Order No. 25, s. 1985, is attacked on the ground that the
additional burdens charged against ". . . the 60% of the proceeds of the increases in tuition fees constitute
both as [sic] an excess of statutory authority and as (sic) a substantial impairment of the accrued, existing
and protected rights and benefits of the members of faculty and non-academic personnel of private
schools." Memorandum for Petitioners, Rollo, p. 1911. Petitioners alleged that these additional burdens
under the MECS Order are not provided in the law itself, either in section 42 of B.P. Blg. 232 or section
3(a) of Pres. Dec. No. 451, except increases in salaries in the latter provision.
Section 42 of B.P. Blg. 232 grants to the Minister of Education (now Secretary of Education) rule-making
authority to fill in the details on the application or use of tuition fees and other school charges. In the
same vein is section 70 of the same law which states:
SEC. 70. Rule-making Authority. The Minister of Education, Culture and Sports charged with the
administration and enforcement of this Act, shall promulgate the necessary implementing rules and
regulations.
Contrary to the petitioners' insistence that the questioned rules and regulations contravene the statutory
authority granted to the Minister of Education, this Court finds that there was a valid exercise of rulemaking authority.
The statutory grant of rule-making power to administrative agencies like the Secretary of Education is a
valid exception to the rule on non-delegation of legislative power provided two conditions concur,
namely: 1) the statute is complete in itself, setting forth the policy to be executed by the agency, and 2)
said statute fixes a standard to which the latter must conform [Vigan Electric Light Co., Inc. v. Public Service
Commission, G.R. No. L-19850, January 30, 1964, and Pelaez v. Auditor General, G. R. No. L-23825,
December 24, 1965].
The Education Act of 1982 is "an act providing for the establishment and maintenance of an integrated
system for education " with the following basic policy:
It is the policy of the State to establish and maintain a complete, adequate and integrated system of
education relevant to the goals of national development. Toward this end, the government shall ensure,
within the context of a free and democratic system, maximum contribution of the educational system to
the attainment of the following national development goals:
1. To achieve and maintain an accelerating rate of economic development and social progress;
2. To assure the maximum participation of all the people in the attainment and enjoyment of the benefits
of such growth; and
3. To achieve and strengthen national unity and consciousness and preserve, develop and promote
desirable cultural, moral and spiritual values in a changing world.

The State shall promote the right of every individual to relevant quality education, regardless of sex, age,
creed, socioeconomic status, physical and mental conditions, racial or ethnic origin, political or other
affiliation. The State shall therefore promote and maintain equality of access to education as well as the
enjoyment of the benefits of education by all its citizens.
The State shall promote the right of the nation's cultural communities in the exercise of their right to
develop themselves within the context of their cultures, customs, traditions, interests and belief, and
recognizes education as an instrument for their maximum participation in national development and in
ensuring their involvement in achieving national unity. (Section 3, Declaration of Basic Policy).
With the foregoing basic policy as well as, specific policies clearly set forth in its various provisions, the
Act is complete in itself and does not leave any part of the policy-making, a strictly legislative function, to
any administrative agency.
Coming now to the presence or absence of standards to guide the Minister of Education in the exercise
of rule-making power, the pronouncement in Edu v. Ericta [G.R. No. L-32096, October 24, 1970, 35 SCRA
481, 497] is relevant:
The standard may be either expressed or implied. If the former, the non-delegation objection is easily
met. The standard though does not have to be spelled out specifically. It could be impliedfrom the policy
and purpose of the act considered as a whole. In the Reflector Law, clearly the legislative objective is
public safety. What is sought to be attained as in Calalang v. Williams is "safe transit upon the roads."
(Italics supplied).
Thus, in the recent case of Tablarin et al. v. Hon. Gutierrez, et al. (G.R. No. 78164, July 31, 1987], the Court
held that the necessary standards are set forth in Section 1 of the 1959 Medical Act, i.e., "the
standardization and regulation of medical education" as well as in other provisions of the Act. Similarly,
the standards to be complied with by Minister of Education in this case may be found in the various
policies set forth in the Education Act of 1982.
MECS Order No. 25, s. 1985 touches upon the economic relationship between some members and
elements of the educational community, i.e., the private schools and their faculty and support staff. In
prescribing the minimum percentage of tuition fee increments to be applied to the salaries, allowances
and fringe benefits of the faculty and support staff, the Act affects the economic status and the living and
working conditions of school personnel, as well as the funding of the private schools.
The policies and objectives on the welfare and interests of the various members of the educational
community are found in section 5 of B.P. Blg. 232. which states:
SEC. 5. Declaration of Policy and Objectives. It is likewise declared government policy to foster, at all
times, a spirit of shared purposes and cooperation among the members and elements of the educational
community, and between the community and other sectors of society, in the realization that only in such
an atmosphere can the true goals and objectives of education be fulfilled.
Moreover, the State shall:
1. Aid and support the natural right and duty of parents in the rearing of the youth through the educational
system.

2. Promote and safeguard the welfare and interests of the students by defining their rights and
obligations, according them privileges, and encouraging the establishment of sound relationships
between them and the other members of the school community.
3. Promote the social and economic status of an school personnel, uphold their rights, define their
obligations, and improve their living and working conditions and career prospects.
4. Extend support to promote the viability of those institutions through which parents, students and
school personnel seek to attain their educational goals.
On the other hand, the policy on the funding of schools in general, are laid down in section 33:
SEC. 33. Declaration of Policy. It is hereby declared to be a policy of the State that the national
government shall contribute to the financial support of educational programs pursuant to the goals of
education as declared in the Constitution. Towards this end, the government shall:
1. Adopt measures to broaden access to education through financial assistance and other forms of
incentives to schools, teachers, pupils and students; and
2. Encourage and stimulate private support to education through, inter alia, fiscal and other assistance
measures.
Given the abovementioned policies and objectives, there are sufficient standards to guide the Minister of
Education in promulgating rules and regulations to implement the provisions of the Education Act of 1982,
As in the Ericta and Tablarin cases, there is sufficient compliance with the requirements of the nondelegation principle.
THIRD SUB-ISSUE
C. Whether or not schools and their employees may enter into a collective bargaining agreement
allocating more than 60% of said incremental proceeds for salary increases and other benefits of said
employees.
1. Arguments raised in the Biscocho and Valmonte cases
Assailed by the petitioners in the Biscocho and the Valmonte cases is the Order of the respondent Minister
of Labor directing the execution of a CBA between the school and the respondent Espiritu Santo Parochial
School Faculty Association which provides for an economic package equivalent to 90% of the proceeds of
tuition fee increases for school year 1985-1986, another 90% for school year 1986-1987 and 85% for
school year 1987-1988. Pursuant to said Order, petitioners in the Biscocho case alleged that the parties
had agreed to incorporate in their CBA a provision which allocates one-half (1/2) of the 90% portion of
the proceeds or 45% to increases in the monthly basic salaries and the other one-half (1/2) or 45% to
increases in monthly living allowance.
The petitioners in the two cases seek the nullification of the MOLE Order for exactly opposite reasons. In
theBiscocho case, the controversy springs from what petitioners perceive to be a diminution of the
benefits to be received by the school employees insofar as the CBA allocates only 45% for salary increases
instead of 60%, which petitioners claim to be the portion set aside by Pres. Dec. No. 451 for that purpose.
Parenthetically, the case questions the allocation of the remaining 45% of the 90% economic package
under the CBA, to allowances. Stripped down to its essentials, the question is whether or not the 90%

portion of the proceeds of tuition fee increases alloted for the economic package may be allocated for
both salary increases and allowances.
On the other hand, petitioners in the Valmonte case believe that the MOLE cannot order the execution of
a CBA which would allocate more than 60% of the proceeds of tuition fee increases for salary increases of
school employees. Furthermore, petitioners question the authority of the then Minister of Labor and
Employment to issue the aforequoted Order insofar as this allocates the tuition fee increases of the
respondent private school. According to them, only the Minister of Education, Culture and Sports has the
authority to promulgate rules and regulations on the use of tuition fees and increases thereto, pursuant
to the provisions of B.P. Blg. 232. They further argue that the assailed Order collides with the provisions
of Pres. Dec. No. 451 insofar as it allocates 90% of the tuition fee increases for salary adjustments of the
members of the bargaining unit which exceeds the 60% of the said increases allocated by the Decree for
the same purpose.
Before delving further into the questions raised, this Court notes that in the Valmonte case, respondent
Minister and respondent Faculty Association raise a procedural objection to the filing of the Petition: the
standing of the petitioners to bring this suit. Both respondents decry the petitioners' lack of the interest
required in Rule 65 of the Rules of Court for the filing of the Petition for certiorari and Prohibition, since
the latter do not appear to be in any way aggrieved by the enforcement of the Order. Petitioners-parents
did not even participate in the proceedings below which led to the issuance of the assailed Order.
This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of Court (Secs. 1 and 2),
only a person aggrieved by the act or proceeding in question may file a petition for certiorari and/or
prohibition. TheValmonte petition fails to indicate how the petitioners would be aggrieved by the assailed
Order. It appears that the petitioners are not parties and never at any time intervened in the conciliation
conferences and arbitration proceedings before the respondent Minister. The parties therein, who stand
to be directly affected by the Order of the respondent Minister, do not contest the validity of said Order.
The petition does not even state that petitioners act as representative of the parents' association in the
School or in behalf of other parents similarly situated.
If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they should have intervened
and moved for a reconsideration of respondent Minister's Order before filing the instant petition.
Petitioners failed to show that the case falls under any one of the recognized exceptions to the rule that
a motion for reconsideration should first be availed of before filing a petition for certiorari and prohibition.
In view of the foregoing, the resolution of the third sub-issue will be based mainly on the arguments raised
in the Biscocho case.
RESOLUTION OF THE THIRD SUB-ISSUE
The Biscocho case involves the issue on the allocation of the incremental proceeds of the tuition fee
increases applied for by the respondent Espiritu Santo Parochial School for school years 1985-1986, 19861987, and 1987-1988. With the repeal of Pres. Dec. No. 451 by B.P. Blg. 232, the allocation of the proceeds
of any authorized tuition fee increase must be governed by specific rules and regulations issued by the
Minister (now Secretary) of Education pursuant to his broadened rule making authority under section 42
of the new law. Thus, insofar as the proceeds of the authorized tuition fee increases for school year 1985-

1986 are concerned, the allocation must conform with the pertinent section of MECS Order No. 25, s.
1985, to wit:
7. Application or Use of Tuition and Other School Fees or Charges.
xxx xxx xxx
7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries or wages,
allowances and fringe benefits of faculty and support staff, including cost of living allowance, imputed
costs of contributed services, thirteenth (13th) month pay, retirement fund contributions, social security,
medicare, unpaid school personnel claims, and payments as may be prescribed by mandated wage orders,
collective bargaining agreements and voluntary employer practices: Provided, That increases in fees
specifically authorized for the purposes fisted in paragraph 4.3.3 hereof shall be used entirely for those
purposes.
xxx xxx xxx
With regard to the proceeds of the tuition fee increases for school year 1986-1987, the applicable rules
are those embodied in MECS Order No. 22, s. 1986 which made reference to MECS Order No. 25, s. 1985,
the pertinent portion of which is quoted above.
Finally, as to the proceeds of the tuition fee increases for school year 1987- 1988, DECS Order No. 37, s.
1987 must apply:
c. Allocation of lncremental Proceeds
(1) In any case of increase at least sixty percent (60%) of the incremental proceeds should be allocated for
increases in or provisions for salaries or wages, allowances and fringe benefits of faculty and other staff,
including accruals to cost of living allowance, 13th month pay, social security, medicare and retirement
contributions and increases as may be provided in mandated wage orders, collective bargaining
agreements or voluntary employer practices.
(2) Provided, that in all cases of increase the allocation of the incremental proceeds shall be without
prejudice to the Supreme Court cases on the interpretation and applicability of existing legislations on
tuition and other fees especially on the allocation and use of any incremental proceeds of tuition and
other fees increases. (Emphasis supplied).
xxx xxx xxx
Based on the aforequoted MECS and DECS rules and regulations which implement BP Blg. 232, the 60%
portion of the proceeds of tuition fee increases may now be allotted for both salaries and allowances and
other benefits. The 60% figure is, however, a minimum which means that schools and their employees
may agree on a larger portion, or in this case, as much as 90% for salaries and allowances and
other benefits. This is not in anyway to allow diminution or loss of the portion allotted for institutional
development of the school concerned. Thus, paragraph 7.5 of MECS Order No. 25, series of 1985
specifically provides that other student fees and charges like registration, library, laboratory or athletic
fees shall be used exclusively for the purposes indicated.
III RESOLUTION OF THE SPECIFIC ISSUES

CEBU INSTITUTE OF TECHNOLOGY CASE

Petitioner assigns three other errors in the petition for certiorari:
1
RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND EMPLOYMENT COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO A DENIAL OF DUE PROCESS OF LAW IN DIRECTLY ISSUING THE ORDER DATED
SEPTEMBER 29,1981 WITHOUT CONDUCTING A FORMAL INVESTIGATION AND ARBITRATION
PROCEEDINGS.
2
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PETITIONER IS EXEMPTED AND/OR NOT OBLIGED
TO PAY SERVICE INCENTIVE LEAVE.
3
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PRIVATE RESPONDENTS' CLAIMS FOR COLA AND
SERVICE INCENTIVE LEAVE ARE FULLY BARRED BY LACHES AND/OR EXTINGUISHED BY PRESCRIPTION.
1. Petitioner assails the Order of the Minister of Labor on the ground that the same was issued without
the benefit of a hearing and was merely based on the report of the labor management committee which
is allegedly without power to pass upon the issues raised. On this premise, petitioner claims that it was
denied its right to due process.
Petitioner's contention is without merit. The Labor Management Committee was empowered to
investigate the complaint against the petitioner for non-payment of the cost of living allowance, 13th
month pay and service incentive leave from 1974-1981 [Annex "F"; Rollo, p. 37]. In the committee,
petitioner was represented by its counsel, registrar and assistant accountant and in the conferences that
were held, the representatives of the petitioner were present. Furthermore, the petitioner's position
paper submitted to the committee reflects that in all the deliberations, it was never denied the right to
present evidence and be heard on all the issues raised, particularly to demonstrate that it had complied
with the various COLA, 13th month pay and service incentive leave decrees. The evidence presented
during the conferences and the position paper of the parties were made the basis of the committee's
report and recommendation which in turn became the basis of the order of the Minister of Labor directing
the petitioner to pay the complainants their COLA and service incentive leave benefits.
It could not therefore be contended that the petitioner was deprived of his right to be heard when it
appears on the record that it was permitted to ventilate its side of the issues. There was sufficient
compliance with the requirements of due process. In the face of the well- settled principle that
administrative agencies are not strictly bound by the technical rules of procedure, this Court dismisses the
petitioner's claim that formal investigative and arbitration proceedings should be conducted. "While a day
in court is a matter of right in judicial proceedings, in administrative proceedings it is otherwise since they
rest upon different principles." [Cornejo v. Gabriel and Provincial Board of Rizal, 41 Phil. 188 (1920);
Tajonera v. Lamaroza, G.R. Nos. L-48907 and L-49035, December 19,1981, 110 SCRA 438].
2. Going now to the matter of service incentive leave benefits, petitioner claims that private respondents
are engaged by the school on a contract basis as shown by the individual teachers contract which defines

the nature, scope and period of their employment; hence, they are not entitled to the said benefit
according to Rule V of the Implementing Rules and Regulations of the Labor Code to wit:
Sec. 1. Coverage. This rule [on Service Incentive Leave] shall apply to all employees, except:
xxx xxx xxx
(d) Field personnel and other employees whose performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed
amount for performing work irrespective of the time consumed in the performance thereof; (MOLE Rules
and Regulations, Rule V, Book III)
The phrase "those who are engaged on task or contract basis" should however, be related with "field
personnel " applying the rule on ejusdem generis that general and unlimited terms are restrained and
limited by the particular terms that they follow, [Vera v. Cuevas, G.R. No. L-33693, May 31, 1979, 90 SCRA
379]. Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "to nonagricultural 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. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private
respondents are not entitled to the service incentive leave benefit cannot therefore be sustained.
3. As a last ditch effort to bar private respondents'claims, petitioner asserts that the same are barred by
laches and/or extinguished by prescription according to Article 291 of the Labor Code which provides:
Art. 291. Money claims. 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.
All money claims accruing prior to the effectivity of this Code shall be filed with the appropriate entities
established under this Code within one (1) year from the date of effectivity, and shall be processed or
determined in accordance with implementing rules and regulations of the Code; otherwise, they shall be
forever barred.
xxx xxx xxx
Considering that the complaint alleging non-payment of benefits was filed only on February 11, 1981,
petitioner argues that prescription has already set in.
From the aforequoted provision, it is not fully accurate to conclude that the entire claims for COLA and
service incentive leave are no longer recoverable. This Court finds no reason to disturb the following
pronouncement of the Minister of Labor:
xxx xxx xxx
Simply stated, claims for COLA under P.D. 525, which took effect on August 1, 1974, for the months of
August, September and October 1974 must be filed within one (1) year from November 1, 1974, otherwise
they shall be considered prescribed; claims under the same decree that accrued on or after November 1,
1974 should be initiated within three (3) years from the date of accrual thereof, otherwise the same shall
be deemed extinguished. Although this particular claim was filed on February 11, 1981, petitioners herein
are entitled to COLA under P.D. 525 from February 1978 up to the present since the COLA that accrued in

February 1978 has not yet prescribed at the time that the claim was filed in February 1981. In the same
vein, petitioners herein should be granted COLA under P.D. 1123 from February 1978 up to 1981 inasmuch
as said decree became effective only on May 11, 1977. Further, petitioners are entitled to the full amount
of COLA provided under P.D.'s 1614, 1634, 1678 and 1713. It must be pointed out that the earliest of the
just cited four (4) decrees, i.e., P.D. 1614, just took effect on April 1, 1979. Thus, the prescriptive period
under Art. 292 of the Labor Code, as amended, does not as yet apply to money claims under the just
mentioned decrees.
DIVINE WORD COLLEGE CASE
In assailing the disputed Order, petitioner contends that the public respondents acted with grave and
patent abuse of discretion amounting to lack of jurisdiction in that:
1. The Regional Director has no jurisdiction over money claims arising from employer-employee
relationship; and
2. The Regional Director and Deputy Minister of Labor adopted the report of the Labor Standards Division
without affording the petitioner the opportunity to be heard.
1. Petitioner school claims that the case at bar is a money claim and should therefore be within the original
and exclusive jurisdiction of the Labor Arbiter pursuant to article 217 of the Labor Code, as amended.
It appears from the record, however, that the original complaint filed by ten (10) faculty members of the
Divine Word College was for non-compliance with Pres. Dec. No. 451 and with Labor Code provisions on
service incentive leave, holiday and rest day pay and which complaint specifically prayed that an
inspection of the College be conducted.
Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly
authorized representatives (which includes Regional Directors) are accorded the power to investigate
complaints for non- compliance with labor laws, particularly those which deal with labor standards such
as payment of wages and other forms of compensation, working hours, industrial safety, etc. This is
provided for in article 128 of the Labor Code, as amended:
Art. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives including labor regulation officers, shall
have access to employers' records and premises at any time of the day or night, whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or which may aid in the enforcement
of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto.
(b) The Secretary of Labor or his duly authorized representatives shall have the power to order and
administer, after due notice and hearing, compliance with the labor standards provisions of this Code
based on the findings of labor regulation officers or industrial safety engineers made in the course of
inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order,
except in cases where the employer contests the findings of the labor regulations officer and raises issues
which cannot be resolved without considering evidentiary matters that are not verifiable in the normal
course of inspection. (Emphasis supplied).

Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction over labor cases
restates inter alia that "(L)abor standards cases arising from violation of labor standards laws discovered
in the course of inspection or complaints where employer-employee relations still exist" are under the
exclusive original jurisdiction of the Regional Director.
Even assuming that respondent Regional Director was without jurisdiction to entertain the case at bar,
petitioner is now barred at this stage to claim lack of jurisdiction having actively participated in the
proceedings below. Petitioner never questioned the jurisdiction of the respondent Regional Director.
2. The petitioner claims that it was never afforded the opportunity to be heard and was therefore denied
due process.
There is no dispute that an inspection of the College was conducted after a complaint by some faculty
members was filed with the Regional Office of the Ministry of Labor and Employment. A report was
submitted on the basis of the findings contained therein. Petitioner was furnished a copy of said report to
which it filed a comment. Finding this to be without merit, the Regional Director issued an order giving
petitioner ten (10) days to manifest its compliance with the findings, otherwise, another would be issued
to enforce payment. Petitioner appealed but instead of resolving the memorandum of appeal, which the
Regional Director treated as a motion for reconsideration, said Director issued another Order dated
August 2, 1983 directing the payment of the employees' share in the sixty (60%) percent incremental
proceeds. Petitioner moved for a reconsideration of the latest order which the Regional Director,
however, denied, thereby elevating the case to the Office of the Minister of Labor and Employment.
The foregoing facts demonstrate that petitioner had the opportunity to refute the report on the
inspection conducted. It submitted a comment thereto, which was in effect its position paper. The
arguments therein and evidence attached thereto were considered by respondent Regional Director in
the order issued subsequently. They, therefore, had ample opportunity to present their side of the
controversy.
What due process contemplates is not merely the existence of an actual hearing. The "right to be heard"
focuses more on the substance rather than the form. In the case at bar, petitioner was actually heard
through the pleadings that it filed with the Regional Office V. As it itself admitted in its petition that it was
afforded the right to be heard on appeal [See Rollo, p. 581, petitioner cannot therefore insist that it was
denied due process.
FAR EASTERN UNIVERSITY CASE
Two other issues are raised in this petition, to wit:
1
WHETHER OR NOT 'TRANSPORTATION ALLOWANCE' SHOULD BE CONSIDERED AS 'EQUIVALENT TO 13THMONTH PAY UNDER PRES. DEC. NO. 851.
2
WHETHER OR NOT LEGAL HOLIDAY PAY BENEFIT COULD BE VALIDLY WITHDRAWN AFTER BEING
PRACTICED CONTINUOUSLY FOR EIGHT (8) MONTHS.

1. The issue on the thirteenth (13th) month pay involves an interpretation of the provisions of Pres. Dec.
No. 851 which requires all employers "to pay all their employees receiving a basic salary of not more than
Pl,000 a month, regardless of the nature of the employment, a 13th- month pay" (Sec. 1). However,
"employer[s] already paying their employees a 13th-month pay or its equivalent are not covered" (Sec.
2). (Emphasis supplied)
The Rules and Regulations Implementing Pres. Dec. No. 851 provide the following:
SEC. 3. Employees. The Decree shall apply to all employers except to: ...
c) Employers already paying their employees 13th-month or more in a calendar year or its equivalent at
the time of this issuance; ...
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) hereof shall include Christmas bonus, mid-year bonus,
profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but
shall not include cash and stock dividends, cost of living allowances and all other allowances regularly
enjoyed by the employer, as well as non-monetary benefits. Where an employer pays less than 1/1 2th of
the employees basic salary, the employer shall pay the difference.
In the case at bar, the 13th month pay is paid in the following manner:
FOR REGULAR EMPLOYEES:
Transportation Allowance (TA)
50% of basic for the first year of service plus additional 5% every year thereafter but not to exceed 100%
of basic salary
Christmas Bonus (CB)
50% of basic salary for the first year of service plus additional 5% every year thereafter but not to exceed
100% of basic salary.
For employees who have served the University for more than 10 years, the University pays them
emoluments equivalent to the 14 months salaries.
13th Month Pay Formula:
Monthly Rate x No. of
months served for the year
Less TA/CB = 13th Mo. pay
12 months
FOR CASUAL EMPLOYEES:
13th Month Pay Formula:

Add salaries from 16 December of previous year to 15th December of present year [and] divide by 12
months = 13th Mo. Pay (Rollo, pp. 60, 72).
The University's answer to the Union's claim of underpayment of the 13th month pay is that the
"transportation allowance" paid to its employees partakes the nature of a mid-year bonus which under
section 2 of Pres. Dec. No. 851 and section 3(c) of the Implementing Rules and Regulations is equivalent
to the 13th month pay,
The Labor Arbiter ordered FEU to pay the 13th month pay differentials of the complainants reasoning
that:
CLEARLY, transportation allowance cannot be considered as equivalent" of 13th month pay as it is neither
a Christmas bonus, mid-year bonus, profit sharing payment, or other cash bonuses, pursuant to
paragraphs (c) and (e), Section 3 of PD 851. The regularity of its payment further cements this proposition.
PERFORCE, complainants are underpaid of their 13th month pay in an amount equivalent to 50% of their
basic salary for the lst year of service, plus additional 5% every year thereafter but not to exceed 100% of
their basic salary which, per respondent's formula, corresponds to their transportation allowance. (Rollo,
p. 61).
On appeal, the Third Division of the National Labor Relations Commission reversed the Labor Arbiter's
ruling by dismissing the complainant's claim for underpayment of the 13th month pay for lack of merit.
The NLRC ruled that:
From the above findings and conclusion, it is clear that insofar as employees with ten (10) years of service
or more are concerned, they receive the equivalent of one (1) month pay for Christmas bonus and another
one (1) month pay as transportation allowance or a total of fourteen (14) months salary in a year.
Obviously, this group of employees are fully paid of their 13th month pay and are not therefore subject
to the instant claim. As it is only those with less than ten (10) years of service are included or encompassed
by the Labor Arbiter's resolution on this particular issue. With this clarification, we shall now proceed to
discuss the crux of the controversy, that is, the determination of whether or not the so designated
"transportation allowance" being paid to the employees should be considered among those deemed
equivalent to 13th month pay. As adverted earlier, the Labor Arbiter opined that it cannot be so
considered as the equivalent of 13th month pay.
xxx xxx xxx
In passing upon the issue, we deemed it best to delve deeper into the nature and intendment of the
transportation allowances as designated by both the complainants and the respondent. Complainants
claim that the transportation allowance they enjoy has always been called and termed allowance and
never as bonus since the time the same was given to them. They assert that it simply was intended as an
allowance and not a bonus. It would appear however that complainants do not dispute respondent's stand
that transportation allowance is being paid only every March of each year as distinguished from other
allowances that are being paid on a monthly basis or on a bimonthly basis; that the amount of
transportation allowance to be paid is dependent on the length of service of the employee concerned (i.e.
50% basic in the first year and additional 5% for each succeeding years, etc.); that the said method of
computing the amount of the transportation allowance to be paid the complainants is Identical to that
used in determining Christmas bonus (respondent's exhibit 8) that the reason behind said transportation

allowance is to financially assist employees in meeting their tax obligations as the same become due on
or about the month of March of each year.
xxx xxx xxx
We are inclined to believe and so hold that by the manner by which said transportation allowance is being
paid (only once a year) as well as the method in determining the amount to be paid (similar to Christmas
bonus) and considering further the reason behind said payment (easing the burden of taxpayeremployee), the said transportation allowance given out by respondent while designating as such, partakes
the nature of a mid-year bonus. It bears to note in passing that in providing for transportation allowance,
respondent was not compelled by law nor by the CBA (Annex "A" of respondent's Appeal) as nowhere in
the CBA nor in the Labor Code can be found any provision on transportation allowance. It was therefore
a benefit that stemmed out purely from the voluntary act and generosity of the respondent FEU.
Moreover, said transportation allowance is only being paid once a year. On the other hand, regular
allowances not considered as 13th month pay equivalent under P.D. 851, to our mind, refer to those paid
on regular intervals and catering for specific employees' needs and requirements that recur on a regular
basis. Verily, if the intendment behind the disputed transportation allowance is to answer for the daily
recurring transportation expenses of the employees, the same should have been paid to employees on
regular periodic intervals. All indications, as we see it, point out to conclusion that the disputed
transportation allowance, while dominated as such apparently for lack of better term, is in fact a form of
bonus doled out by the respondent during the month of March every year.
Hence, we hold that it is one of those that can very well be considered as equivalent to the 13th month
pay (Rollo, pp. 73, 74, 75, 76).
This Court sustains the aforequoted view of public respondent. The benefit herein designated as
"transportation allowance" is a form of bonus equivalent to the 13th month pay. Nevertheless, where this
does not amount to 1/12 of the employees basic salary, the employer shall pay the difference.
The evident intention of the law was to grant an additional income in the form of a 13th month pay to
employees not already receiving the same. This Court ruled in National Federation of Sugar Workers
(NFSW) v. Ovejera[G.R. No. 59743, May 31, 1982, 114 SCRA 354].
Otherwise put, the intention was to grant some relief not to all workers but only to the unfortunate
ones not actually paid a 13th month salary or what amounts to it, by whatever name called: but it was not
envisioned that a double burden would be imposed on the employer already paying his employees a 13th
month pay or its equivalent whether out of pure generosity or on the basis of a binding agreement and,
in the latter case, regardless of the conditional character of the grant (such as making the payment
dependent on profit), so long as there is actual payment. Otherwise, what was conceived to be a 13th
month salary would in effect become a 14th or possibly 15th month pay.
xxx xxx xxx
Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual bonuses
for the purpose of determining liability for the 13th month pay. To require employers (already giving their
employees a 13th month salary or its equivalent) to give a second 13th month pay would be unfair and
productive of undesirable results. To the employer who had acceded and is already bound to give bonuses
to his employees, the additional burden of a 13th month pay would amount to a penalty for his

munificence or liberality. The probable reaction of one so circumstanced would be to withdraw the
bonuses or resist further voluntary grants for fear that if and when a law is passed giving the same
benefits, his prior concessions might not be given due credit; and this negative attitude would have an
adverse impact on the employees (pp.369,370).
The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, October 23, 1982, 117 SCRA 938 (1982)],
citing the ruling in the above case also pointed out that:
To hold otherwise would be to impose an unreasonable and undue burden upon those employers who
had demonstrated their sensitivity and concern for the welfare of their employees. A contrary stance
would indeed create an absurd situation whereby an employer who started giving his employees the 13th
month pay only because of the unmistakable force of the law would be in a far better position than
another who, by his own magnanimity or by mutual agreement, had long been extending his employees
the benefits contemplated under PD No. 851, by whatever nomenclature these benefits have come to be
known. Indeed, PD No. 851, a legislation benevolent in its purpose, never intended to bring about such
oppressive situation. (p. 944)
2. Presidential Decree No. 570-A was issued on November 1, 1974 amending certain articles of
Presidential Decree No. 442 (Labor Code of the Philippines promulgated on May 1, 1974 which took effect
six months thereafter). Section 28 thereof provides that:
Section 28. A new provision is hereby substituted in lieu of the original provision of Article 258 of the same
Code to read as follows:
Art. 258. Right to holiday pay(a) Every worker shall be paid his regular holidays, except in retail and service establishments regularly
employing less than ten (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 thirtieth of December and the day designated by law for holding a general election.
(c) When employer may require work on holidays. The employer may require an employee to work on any
holiday but such employee shall be paid a compensation equivalent twice his regular rate.
Presidential Decree No. 850 issued on December 16, 1975 also amending certain articles of Pres. Dec. No.
442 adopted the aforequoted provision. Two months later, on February 16, 1976, the Rules and
Regulations Implementing the Labor Code, as amended, was released the pertinent portion of which
states that:
Section 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.

(e) Section 3. Holiday Pay. Every employer shall pay his employees their regular daily wage for any
unworked regular holiday.
As used in the Rule, the term 'holiday' shall exclusively refer to: 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 a general election or national
referendum or plebiscite (MOLE Rules and Reg. Book III, Rule IV, sec. 2 (1976).
After one week, on February 23, 1976, the Minister of Labor issued Policy Instruction No. 9, to clarify
further the right to holiday pay, thus:
The Rules Implementing PD 850 have clarified the policy in the implementation of the ten (10) paid legal
holidays. Before PD 850. the number of working days a year in a firm was considered important in
determining entitlement to the benefit. Thus, where an employee was working for at least 313 days, he
was definitely already paid. If he was working for less than 313, there was no certainty whether the ten
(10) paid legal holidays were already paid to him or not.
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 PD 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 P 240, 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 entitled to the ten (10) legal holidays.
These new interpretations must be uniformly and consistently upheld.
This issuance shall take effect immediately.
In the meantime, respondent University paid its employees holiday pay for the following days:
DATE HOLIDAYS PAID
June 9, 1975 for the previous nine legal holidays
August, 1975 for the previous June 12 and July 4
Jan. 14, 1976 or the previous Nov. 30, Dec. 25
and 30 and Jan. 1
After January 14, 1976, however, the University ceased paying the holiday pay allegedly by reason of
Policy Instruction No. 9. Specifically, the University claimed that the monthly salary of its employees was,
as of 1976, more than P 240.00 without deductions from their monthly salary on account of holidays in
months where they occurred and that therefore, by virtue of Policy Instruction No. 9, they were no longer
entitled to the ten paid legal holidays.

Petitioners, upon the other hand, contend that Policy Instruction No. 9 could not have possibly been the
reason that prompted the University to withdraw such benefits from its faculty and employees because
said implementing rule was issued only on April 23, 1976 or four months later.
The Labor Arbiter ruled in favor of the complainant Union for the reason that ". . . the payment of the 10paid legal holiday benefits from June 8, 1975 up to January 14, 1976 is considered an employer practice
that can no longer be withdrawn." [Decision; Rollo, p. 59].
As in the case of the 13th month pay, the NLRC reversed the Labor Arbiter's ruling. The NLRC held that:
Apparently, Arbiter Ruben Aquino concluded that payment by the respondent of the legal holiday pay
preceded the effectivity of the Rules and Regulations Implementing P.D. 850 and which rules took effect
on February 16, 1976. Hence, his conclusion that the payment of the legal holiday pay stemmed out from
company practice and not from law. Tracing back, however, the payments made by respondent of said
holiday pay will show that, if ever, the same was made pursuant to P.D. 570-A which took effect on
November 1, 1974. Noteworthy is the undisputed fact that respondent first paid its employees legal
holiday pay in June 1975 corresponding to nine (9) legal holidays. It bears to note that from the time of
the effectivity of P.D. 570-A which was in November of 1974 up to June of 1975, the time respondent first
paid legal holiday pay for nine (9) legal holidays, there, were indeed more or less nine legal holidays that
transpired to wit: November 30, 1974, December 25, 1974, December 30, 1974, January 1, 1975, February
27, 1975 (Referendum Day), Maundy Thursday of 1975, Good Friday of 1975, April 9, 1975 and finally,
May 1st of 1975. We are therefore inclined to lend credence to respondent's claim that the payment of
legal holiday pay was in fact made pursuant to law, P.D. 570-A in particular, it is not one that arose out of
company practice or policy.
Finding that said payment was made based on an honest although erroneous interpretation of law, which
interpretation was later on corrected by the issuance (sic) of Policy Instruction No. 9 and which issuance
prompted respondent to withdraw the holiday pay benefits extended to the employees who were paid
on a regular monthly basis, and finding further that under Policy Instructions No. 9, said subject employees
are deemed paid their holiday pay as they were paid on a monthly basis at a wage rate presumably above
the statutory minimum, we believe and so hold that the withdrawal of said holiday pay benefit was valid
and justifiable under the circumstances (Rollo, pp. 33-4).
This Court cannot sustain the foregoing decision of public respondent. Said decision relied on Section 2,
Rule IV, Book Ill of the implementing rules and on Policy Instruction No. 9 which were declared by this
Court to be null and void in Insular Bank of Asia and America Employee's Union (IBAAEU) v. Inciong (G.R.
No. 52415, October 23, 1984, 132 SCRA 6631. In disposing of the issue at hand, this Court reiterates the
ruling in that case, to wit:
WE agree with the petitioner's contention that Section 2, Rule IV, Book Ill of the implementing rules and
Policy Instruction No. 9 issued by the then Secretary of Labor are nun and void since in the guise of
clarifying the Labor Code's provision on holiday pay, they in fact amended them by enlarging the scope of
their exclusion.
xxx xxx xxx
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). (pp. 673-4).
BISCOCHO CASE
At issue also in this petition is whether the 60% incremental proceeds may be subjected to attorney's fees,
negotiation fees, agency fees and the like.
The Court notes the fact that there are two classes of employees among the petitioners: (1) those who
are members of the bargaining unit and (2) those who are not members of the bargaining unit. The first
class may be further subdivided into two: those who are members of the collective bargaining agent and
those who are not.
It is clear that the questioned Order of the respondent Minister applies only to members of the bargaining
unit.The CBA prepared pursuant to said Order, however, covered employees who are not members of the
bargaining unit, although said CBA had not yet been signed at the time this petition was filed on November
24, 1986. Assuming it was signed thereafter, the inclusion of employees outside the bargaining unit should
be nullified as this does not conform to said order which directed private respondents to execute a CBA
covering only members of the bargaining unit.
Being outside the coverage of respondent Minister's order, and thus, not entitled to the economic
package involved therein, employees who are non- members of the bargaining unit should not be
assessed negotiation fees, attorney's fees, agency fees and the like, for the simple reason that the
resulting collective bargaining agreement does not apply to them. It should be clear, however, that while
non-members of the bargaining unit are not entitled to the economic package provided by said order,
they are, in lieu thereof, still entitled to their share in the 60% incremental proceeds of increases in tuition
or other school fees or charges.
As far as assessment of fees against employees of the collective bargaining unit who are not members of
the collective bargaining agent is concerned, Article 249 of the Labor Code, as amended by B.P. Blg. 70,
provides the rule:
Art. 249. Unfair labor practices of employers.xxx xxx xxx
(e) ... Employees of an appropriate collective bargaining unit who are not members of the recognized
collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid
by members of the recognized collective bargaining agent, if such non- union members accept the benefits
under the collective agreement . . .

Employees of the collective bargaining unit who are not members of the collective bargaining agent have
to pay the foregoing fees if they accept the benefits under the collective bargaining agreement and if such
fees are not unreasonable. Petitioners who are members of the bargaining unit failed to show that the
equivalent of ten (10%) percent of their backwages sought to be deducted is unreasonable.
WHEREFORE, the Court rules:
CEBU INSTITUTE OF TECHNOLOGY CASE
In G.R. No. 58870, the Order of respondent Minister of Labor and Employment dated September 29, 1981
is SUSTAINED insofar as it ordered petitioner Cebu Institute of Technology to pay its teaching staff the
following:
(1) Cost of living allowance under Pres. Dec.Nos.525 and 1123 from February 1978 up to 1981;
(2) Cost of living allowance under Pres. Dec. Nos. 1614, 1634, 1678 and 1713; and
(3) Service incentive leave due them from 1978.
The Temporary Restraining Order issued by this Court on December 7, 1981 is hereby LIFTED and SET
ASIDE. No costs.
DIVINE WORD COLLEGE CASE
The petition in G.R. No. 68345 is DENIED for lack of merit. The questioned Orders of respondent Deputy
Minister of Labor and Employment, dated December 19, 1983 and July 4, 1984 are SUSTAINED insofar as
said Orders denied the payment of the emergency cost of living allowances of private respondents faculty
teachers of the Divine Word College of Legazpi out of the sixty (60%) incremental proceeds of tuition and
other school fee increases collected during the effectivity of Pres. Dec. No. 451. The Rules and Regulations
implementing Pres. Dec. No. 451 are hereby declared invalid for being ultra vires No costs.
FAR EASTERN UNIVERSITY CASE
The Decision of public respondent National Labor Relations Commission dated September 18, 1984
isREVERSED insofar as it affirmed in toto the dismissal of petitioner Far Eastern University Employee Labor
Union's claim under Pres. Dec. No. 451 and its claim for payment of holiday pay. Private respondent Far
Eastern University is therefore ordered to pay its employees the following:
(1) Their sixty (60) percent share in the increases in tuition and other school fees or charges which shall
be allocated exclusively for increase in salaries or wages if the tuition or other school fee increase was
collected during the effectivity of Pres. Dec. No. 451;
(2) Their claim for holiday pay which was withdrawn since January 14, 1976 up to the present.
The Decision of respondent National Labor Relations Commission, however, is SUSTAINED insofar as it
denied petitioner's claim for thirteenth (1 3th month pay. No costs.
FABROS CASE
In G.R. No. 70832, the Petition for certiorari and Prohibition is DISMISSED. MECS Order No. 25. s. 1985,
particularly paragraphs 7.0 to 7.5 thereof, which provide for the use and application of sixty (60%) percent

of the increases in tuition and other school fees or charges, having been issued pursuant to B.P. Blg. 232
which repealed Pres. Dec. No. 451, is hereby declared VALID. The Temporary Restraining Order issued by
this Court dated May 29, 1985 is LIFTED and SET ASIDE. No costs.
BISCOCHO CASE
The assailed portions of the Order of the Minister of Labor and Employment dated April 14, 1986 are
AFFIRMED. The collective bargaining agreement prepared pursuant thereto should, however, be
MODIFIED to cover only members of the bargaining unit. Only petitioners who are members of the
collective bargaining unit, if they accept the benefits under the resulting collective bargaining agreement,
shall be charged ten (10%) percent of the payable backwages as negotiation fees. The Temporary
Restraining Order dated November 25, 1986 is LIFTED and SET ASIDE. No costs.
VALMONTE CASE
The petition in G.R. No. 76596 is DISMISSED for lack of merit.
Effective September 1, 1982, the application and use of the proceeds from increases in tuition fees and
other schools fees or charges shall be governed by section 42 of B.P. Blg. 232 as implemented by the Rules
and Regulations issued by the then Ministry, now Department of Education, Culture and Sports. SO
ORDERED.
Teehankee, C.J., Yap, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin and Sarmiento, JJ.,
concur.
Fernan, Narvasa, Cruz and Padilla, JJ., took no part.

UST v. NLRZ, G.R. No. 85519, February 15, 1990

G.R. No. 85519 February 15, 1990

UNIVERSITY OF STO. TOMAS, FR. MAXIMO MARINA O.P. AND GILBERTO L. GAMEZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HONORABLE LABOR ARBITER BIENVENIDO S. HERNANDEZ
AND BASILIO E. BORJA, respondents.
Abad, Leao & Associates for petitioners.
Antonio B. Fidelino for private respondent.

GANCAYCO, J.:
The herein private respondent Dr. Basilio E. Borja was first appointed as "affiliate faculty" in the Faculty
of Medicine and Surgery at the University of Sto. Tomas (UST for short) on September 29, 1976. In the
second semester of the school year 1976-77 he was appointed instructor with a load of twelve (12) hours
a week. He was reappointed instructor for the school year 1977-78 with a load of nine (9) hours a week

in the first semester and two (2) hours a week in the second. On June 10, 1978 he was appointed as
Instructor III for the school year 1978-79. His load for the first semester was eight (8) hours a week, and
for the second semester, seven (7) hours a week.
On March 19, 1979 Dean Gilberto Gamez observed that Dr. Borja should not be reappointed based on the
evaluation sheet that shows his sub-standard and inefficient performance. 1 Nevertheless in view of the
critical shortage of staff members in the Department of Neurology and Psychiatry Dr. Gamez
recommended the reappointment of Dr. Borja, after informing the latter of the negative feedbacks
regarding his teaching and his promise to improve his performance. Thus on July 27, 1979 he was
extended a reappointment as Instructor III in the school year 1979-80. He was given a load of six (6) hours
a week. In all these appointments he was a part time instructor.
At the end of the academic year, it appearing that Dr. Borja had not improved his performance in spite of
his assurances of improvement, his reappointment was not recommended.
In July, 1982 he filed a complaint in the National Labor Relations Commission (NLRC for short) for illegal
dismissal against the UST. After the submission of the pleadings and due proceedings the labor arbiter
rendered a decision on July 19, 1984, the dispositive part of which reads as follows:
WHEREFORE this Office finds in favor of the complainant. The respondents (sic) university are hereby
ordered to effect the immediate reinstatement of complainant to his former position with full backwages,
rights and benefits appertaining thereto. Respondent university is likewise ordered to pay the
complainant the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00) as and by way of moral damages
and another 1 0% of the gross amount due him, and as and by way of attorney's fees.
Respondents are hereby ordered to effect this decision immediately. 2
The UST appealed therefrom to the NLRC which in due course rendered a decision on September 30, 1988,
modifying the appealed decision as follows:
WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED with a modification limiting
the backwages to three (3) years without qualification or deduction, computed at P660.00 per month,
ordering respondents to pay complainant P100,000.00 as and for actual or compensatory damages,
ordering respondents to pay complainant P300,000.00 as and for moral damages, and further ordering
them to pay complainant P100,000.00 as and for exemplary damages.
Finally, respondents are ordered to pay to complainant the sum of ten (10%) percent of the total sum due
as and for attorney's fees. 3
Hence the instant petition for certiorari and prohibition with a prayer for the issuance of a writ of
preliminary injunction and restraining order that was filed by the UST and its officers wherein it is alleged
that the public respondent NLRC committed the following errors:
I
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED SERIOUS REVERSIBLE ERRORS
OF SUBSTANCE AMOUNTING TO GRAVE ABUSE OF DISCRETION AND/OR LACK OR EXCESS OF
JURISDICTION IN FINDING THAT BASILIO E. BORJA ACQUIRED TENURE, THE SAID FINDING BEING CLEARLY
CONTRARY TO THE EVIDENCE AT HAND AND DEVOID OF BASIS IN LAW.

II
THE HONORABLE NLRC COMMITTED A SERIOUS AND REVERSIBLE ERROR AND GRAVELY ABUSED ITS
DISCRETION IN HOLDING THAT THE SERVICES OF BASILIO E. BORJA HAD BEEN CONSTRUCTIVELY
TERMINATED, HIS APPOINTMENT HAVING MERELY LAPSED IN ACCORDANCE WITH ITS TERMS AS
ACCEPTED BY THE COMPLAINANT-APPELLEE BORJA.
III
THE HONORABLE NLRC COMMITTED A SERIOUS AND GRAVE ERROR IN AFFIRMING, ALBEIT REDUCING THE
AWARD OF THE HONORABLE LABOR ARBITER A QUO OF CLEARLY EXCESSIVE, UNJUST, UNCONSCIONABLE
AND SHOCKING MORAL DAMAGES OF P300,000.00 AND IN AWARDING MOTU PROPIO EXEMPLARY
DAMAGES IN THE AMOUNT OF P100,000.00 IN GRAVE ABUSE OF ITS DISCRETION AMOUNTING TO EXCESS
OF JURISDICTION. 4
The petition is impressed with merit.
In the questioned decision of the public respondent NLRC it found that private respondent had earned to
his credit eight (8) semesters or four (4) academic years of professional duties with the UST and that he
has met the requirements to become a regular employee under the three (3) years requirement in the
Manual of Regulations for Private Schools.
The appealed decision is correct insofar as it declares that it is the Manual of Regulations for Private
Schools, not the Labor Code, that determines the acquisition of regular or permanent status of faculty
members in an educational institution, but the Court disagrees with the observation that it is only the
completion of three (3) years of service that is required to acquire such status.
According to Policy Instructions No. 11 issued by the Department of Labor and Employment, "the
probationary employment of professors, instructors and teachers shall be subject to standards
established by the Department of Education and Culture." Said standards are embodied in paragraph 75
of the Manual of Regulations for Private Schools, to wit:
75. Full time teachers who have rendered three consecutive years of satisfactory service shall be
considered permanent." (Emphasis supplied)
The legal requisites, therefore, for acquisition by a teacher of permanent employment, or security of
tenure, are as follows:
1) the teacher is a full time teacher;
2) the teacher must have rendered three (3) consecutive years of service; and
3) such service must have been satisfactory.
Now, the Manual of Regulations also states that "a full-time teacher" is "one whose total working day is
devoted to the school, has no other regular remunerative employment and is paid on a regular monthly
basis regardless of the number of teaching hours" (Par. 77); and that in college, "the nominal teaching
load of a full-time instructor shall be eighteen hours a week" (par. 78).
It follows that a part-time member of the faculty cannot acquire permanence in employment under the
Manual of Regulations in relation to the Labor Code.

Hence, the crucial question is whether or not the private respondent was a full-time or part-time member
of the faculty during the three (3) years that he served in the petitioner-university's College of Medicine.
Stated otherwise, the question is (1) whether or not the said respondent's "total working day ..... (was)
devoted to the school" and he had "no other regular remunerative employment" and was "paid on a
regular monthly basis regardless of the number of teaching hours;" and/or (2) whether or not his normal
teaching load was eighteen (18) hours a week.
It cannot be said that respondent's total working day was devoted to the school alone. It is clear from the
record that he was practising his profession as a doctor and maintaining a clinic in the hospital for this
purpose during the time that he was given a teaching load. In other words, he had another regular
remunerative work aside from teaching. His total working day was not, therefore, devoted to the school.
Indeed, his salaries from teaching were computed by the respondent Commission itself at only an average
of P660.00 per month; he, therefore, had to have other sources of income, and this of course was his selfemployment as a practising psychiatrist. That the compensation for teaching had to be averaged also
shows that he was not paid on a regular monthly basis. Moreover, there is absolutely no evidence that he
performed other functions for the school when not teaching. All things considered, it would appear that
teaching was only a secondary occupation or "sideline," his professional practice as a psychiatrist being
his main vocation.
The record also discloses that he never had a normal teaching load of eighteen (18) hours a week during
the time that he was connected with the university. The only evidence on this equally vital issue was
presented by the petitioner through the affidavit of Dr. Gilberts Gamez who was the dean of the medical
school during the time material to the proceedings at bar. His sworn declaration is to the effect that as
"affiliate faculty" member of the Department of Neurology and Psychiatry from September 29,1976,
private respondent had no teaching functions: that in fact, when he was appointed in September, 1976,
classes for the first semester were already nearing their end; that as "affiliate faculty" he was merely an
observer acquainting himself with the functions of an instructor while awaiting issuance of a formal
appointment as such; that in the school year 1977-78 he had a teaching load of nine (9) hours a week in
the first semester and two (2) hours a week in the second semester; that in the school year 1978-1979 he
had a load of eight (8) hours a week in the first semester and seven (7) hours a week in the second
semester; that in the school year 1979-1980 he had a load of six (6) hours a weekin each semester. This
evidence does not appear to have been refuted at all by the private respondent, and has inexplicably been
ignored by public respondent. No discussion of this particular point is found in the decisions of the Labor
Arbiter or the NLRC.
The private respondent, therefore, could not be regarded as a full- time teacher in any aspect. He could
not be regarded as such because his total working day was not devoted to the school and he had other
regular remunerative employment. Moreover, his average teaching load was only 6.33 hours a week.
In view of the explicit provisions of the Manual of Regulations above-quoted, and the fact that private
respondent was not a full- time teacher, he could not have and did not become a permanent employee
even after the completion of three (3) years of service.
Having found that private respondent did not become a permanent employee of petitioner UST, it
correspondingly follows that there was no duty on the part of petitioner UST to reappoint private
respondent as Instructor, the temporary appointment having lapsed. Such appointment is a matter
addressed to the discretion of said petitioner.

The findings, therefore, of the public respondent NLRC that private respondent was constructively
terminated is without lawful basis. By the same token, the order for reinstatement of private respondent
with backwages plus an award of actual or compensatory, moral and exemplary damages must be struck
down.
WHEREFORE, the petition is hereby GRANTED. The questioned orders of public respondent NLRC dated
September 13, 1988 and public respondent labor arbiter Bienvenido S. Hernandez dated July 19,1988 are
hereby SET ASIDE and another judgment is hereby rendered DISMISSING the complaint of private
respondent, without pronouncement as to costs.
SO ORDERED.
Fernan (C.J.), Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Bidin, Cortes, Grio-Aquino,
Medialdea and Regalado, JJ., concur.
Narvasa and Padilla, JJ., took no part.

Separate Opinions

SARMIENTO, J., dissenting:

I vote to deny this petition for lack of merit.
From the records, it appears, that:
Complainant is a Doctor of Medicine with well-rounded experience in the field of Psychiatry. In
consideration of his impressive qualifications, respondents appointed him as a faculty member in the UST
Faculty of Medicine and Surgery, Department of Neurology and Psychiatry. His services in respondent
university are: Affiliate Faculty member for the school year 1976-77; Instructor I in 1976- 1977; Instructor
III on January 5, 1977 and for the school year 1978-1979; professor-in-charge of Psychiatry II for the school
year 1978-1979; and Instructor II for the school year 1979-1980. He was also allowed by respondents to
hold his clinic in the UST Hospital by virtue of a contract which started in 1978, renewable from year to
year. Complainant claims that respondents failed without justifiable reason to give him a teaching load
for the school year 1980-1981, and, therefore, he called the attention of the Head of Academic Affairs and
the Dean of the Faculty who referred the matter to the University Rector. He further wrote a letter to the
respondents on August 12, 1981, but the same was not answered at all, and so he went to the Rector's
Office on March 16 and 18, 1982, but was told that the Rector could not see or talk to him. For these
reasons, the complainant charged respondents of illegal dismissal as he was not given a teaching load for
the school year 1980-1981. He further alleged that the door leading to his clinic was locked twice without
notice. Based on the above allegations, complainant seeks recovery of actual and moral damages allegedly
suffered by him by reason of his dismissal by the respondents. Most importantly, he alleges that he was
also denied practice of his profession in the hospital.

Respondents traversed complainant's charges alleging that complainant had not yet acquired tenure of
employment under the provisions of the UST Faculty Code as he had not completed four (4) academic
years of service; hence, his services in the university were no longer renewed upon its expiration.
Respondents likewise denied complainant's allegation that the door leading to his clinic in the hospital
was locked. (Rollo, 68-70.)
The issues are:
1. Whether or not complainant's services in the university had been constructively terminated by the
respondents when the former was not given a teaching load for the school year 1980-1981; and
2. Whether or not complainant's claims for actual, moral and exemplary damages as well as attorney's
fees are supported by the facts and jurisprudence.
It is Our considered opinion that complainant's services as a member of the faculty in respondent
university were terminated without just cause. (Id., 70.)
As I have indicated, I sustain the NLRC. No grave abuse of discretion, so I find, has been successfully
attributed to it to warrant the extraordinary remedy of certiorari.
There is no question that under the Manual of Regulations for Private Schools, employees on probation
status have three years within which to serve their probation. Within that period they may not be
terminated unless for just cause.
From the records, the private respondent had been with the petitioner-university as instructor since 1976,
when in 1980, he was laid off. He was also informed that there had been "previous negative feedbacks
regarding his teaching." (Id., 6.) That notwithstanding, I submit he had acquired security of tenure after
his three-year probation. The fact that it was extended another year means, in my view, that the school
had been satisfied of his performance. The petitioner-university can not now be heard to say otherwise.
I am agreed that:
The records show that the ground relied upon by the respondents in not renewing complainant's last
appointment when no teaching load for the school year 1980-1981 was assigned to him was due to the
alleged termination of his appointment and there was no obligation on the part of respondents to extend
to him a permanent appointment in accordance with the provisions of the UST Faculty Code or Manual of
Regulations for private Schools. We do not agree with respondents' view. Complainant was first employed
as Affiliate Faculty of respondent University in the first semester of the school year 1976-1977 or on
September 29, 1976 as shown in his appointment signed by the Dean of the Faculty of Medicine and
Surgery of UST. (Annexes 'A" & 'B", Reply to Respondent's Position Paper.) Additional evidences which will
fortify the fact of complainant having rendered forty (40) months of eight (8) semesters could be gleaned
from the Faculty Statement of Earnings and Deductions (Exhibits "D', 'E" and 'H" to 'H-38", for
complainant). Most likely, complainant's early appointment (supra) had been deliberately omitted by the
respondents to confuse the Labor Arbiter a quo in believing that the former had not yet acquired the
tenurial rights under the Faculty Code. This, to our mind, is a scheme resorted to by the respondents to
preclude complainant from becoming a regular professor of the University. We find complainant to have
earned to his credit eight (8) semesters or four (4) academic years of professional duties with the
respondents. Suffice it to say, therefore, complainant met the requirement to become a regular employee

under the 3 years requirement in the Manual of Regulations for Private Schools (par. 75), and, as such,
complainant should not have been deprived of subject load by the respondents for the school year 19801981. (Decision, 4-6.)
The university's contention that under the UST Faculty Code, tenure is acquired after four years in office,
has no merit. First, the code can not prevail over the Manual of Regulations for Private Schools, which has
the character and force of law. Under the Manual:
75). Full-time teachers who have rendered three consecutive years of satisfactory service shall be
considered permanent.
What "full-time" means is stated as follows:
76. ... For this purpose, a full-time teacher should be one whose total working day is devoted to the school.
has no other regular remunerative employment, and is paid on a regular monthly basis regardless of the
number of teaching hours.
It is true that under paragraph 78 of the Manual, "the normal teaching load of a full-time instructor shall
be eighteen hours a week." It is my reading of this provision, however, that a full-time instructor can not
merely be made to teach for longer hours. Hence, the succeeding paragraph states:
79. Any teaching assignment in excess of the foregoing must be taken up with the Bureau, which case
shall be considered only on the basis of educational qualifications, experience, efficiency rating, and
subject preparations of the teachers concerned.
It is my understanding of paragraph 78 that it operates as a restraint upon schools against a grant of
excessive manhours, although school authorities may prescribe a longer period, but provided that it has
the imprimatur of the Bureau of Private Schools. A lesser number of hours, however, does not make an
instructor part-time, if he has otherwise complied with the requisites of paragraph 76. The decision of the
NLRC indicates that the private respondent worked on a full-time basis whatever the number of teaching
hours given to him and we can not disturb its findings. (See Decision, id., 6.)
Second, assuming that the four-year rule is permissible, the private respondent's tenure during that
period was nevertheless secure, which could only be perished by a valid cause. "Negative feedbacks,"
short of actual violations of the faculty code, are no excuse for termination.
The rule is that, unless otherwise provided by contract, a probationary employee can not be dismissed
(during the three-year period), unless dismissal is compelled by a just cause or causes. However, if
thereafter, the school finds the employee's performance unsatisfactory, it is at liberty to rehire or not the
employee, unless a grave abuse of discretion has been committed. Here, the fact that the private
respondent was allowed to stay one year more gave the latter security of tenure.
I must not be understood, however, as holding that schools may or can not enter into contracts for specific
periods (less or more than three years; see also Manual, par. 74) with teaching applicants. Here, however,
there is no "contract" to speak of, other than the implied agreement between the parties. In that case,
the Manual is applicable.
The closure of the doctor's clinic, finally, is a valid basis for the award of moral and exemplary damages,
and attorney's fees.

Hence, I cast this dissenting vote.

Separate Opinions
SARMIENTO, J., dissenting:
I vote to deny this petition for lack of merit.
From the records, it appears, that:
Complainant is a Doctor of Medicine with well-rounded experience in the field of Psychiatry. In
consideration of his impressive qualifications, respondents appointed him as a faculty member in the UST
Faculty of Medicine and Surgery, Department of Neurology and Psychiatry. His services in respondent
university are: Affiliate Faculty member for the school year 1976-77; Instructor I in 1976- 1977; Instructor
III on January 5, 1977 and for the school year 1978-1979; professor-in-charge of Psychiatry II for the school
year 1978-1979; and Instructor II for the school year 1979-1980. He was also allowed by respondents to
hold his clinic in the UST Hospital by virtue of a contract which started in 1978, renewable from year to
year. Complainant claims that respondents failed without justifiable reason to give him a teaching load
for the school year 1980-1981, and, therefore, he called the attention of the Head of Academic Affairs and
the Dean of the Faculty who referred the matter to the University Rector. He further wrote a letter to the
respondents on August 12, 1981, but the same was not answered at all, and so he went to the Rector's
Office on March 16 and 18, 1982, but was told that the Rector could not see or talk to him. For these
reasons, the complainant charged respondents of illegal dismissal as he was not given a teaching load for
the school year 1980-1981. He further alleged that the door leading to his clinic was locked twice without
notice. Based on the above allegations, complainant seeks recovery of actual and moral damages allegedly
suffered by him by reason of his dismissal by the respondents. Most importantly, he alleges that he was
also denied practice of his profession in the hospital.
Respondents traversed complainant's charges alleging that complainant had not yet acquired tenure of
employment under the provisions of the UST Faculty Code as he had not completed four (4) academic
years of service; hence, his services in the university were no longer renewed upon its expiration.
Respondents likewise denied complainant's allegation that the door leading to his clinic in the hospital
was locked. (Rollo, 68-70.)
The issues are:
1. Whether or not complainant's services in the university had been constructively terminated by the
respondents when the former was not given a teaching load for the school year 1980-1981; and
2. Whether or not complainant's claims for actual, moral and exemplary damages as well as attorney's
fees are supported by the facts and jurisprudence.
It is Our considered opinion that complainant's services as a member of the faculty in respondent
university were terminated without just cause. (Id., 70.)

As I have indicated, I sustain the NLRC. No grave abuse of discretion, so I find, has been successfully
attributed to it to warrant the extraordinary remedy of certiorari.
There is no question that under the Manual of Regulations for Private Schools, employees on probation
status have three years within which to serve their probation. Within that period they may not be
terminated unless for just cause.
From the records, the private respondent had been with the petitioner-university as instructor since 1976,
when in 1980, he was laid off. He was also informed that there had been "previous negative feedbacks
regarding his teaching." (Id., 6.) That notwithstanding, I submit he had acquired security of tenure after
his three-year probation. The fact that it was extended another year means, in my view, that the school
had been satisfied of his performance. The petitioner-university can not now be heard to say otherwise.
I am agreed that:
The records show that the ground relied upon by the respondents in not renewing complainant's last
appointment when no teaching load for the school year 1980-1981 was assigned to him was due to the
alleged termination of his appointment and there was no obligation on the part of respondents to extend
to him a permanent appointment in accordance with the provisions of the UST Faculty Code or Manual of
Regulations for private Schools. We do not agree with respondents' view. Complainant was first employed
as Affiliate Faculty of respondent University in the first semester of the school year 1976-1977 or on
September 29, 1976 as shown in his appointment signed by the Dean of the Faculty of Medicine and
Surgery of UST. (Annexes 'A" & 'B", Reply to Respondent's Position Paper.) Additional evidences which will
fortify the fact of complainant having rendered forty (40) months of eight (8) semesters could be gleaned
from the Faculty Statement of Earnings and Deductions (Exhibits "D', 'E" and 'H" to 'H-38", for
complainant). Most likely, complainant's early appointment (supra) had been deliberately omitted by the
respondents to confuse the Labor Arbiter a quo in believing that the former had not yet acquired the
tenurial rights under the Faculty Code. This, to our mind, is a scheme resorted to by the respondents to
preclude complainant from becoming a regular professor of the University. We find complainant to have
earned to his credit eight (8) semesters or four (4) academic years of professional duties with the
respondents. Suffice it to say, therefore, complainant met the requirement to become a regular employee
under the 3 years requirement in the Manual of Regulations for Private Schools (par. 75), and, as such,
complainant should not have been deprived of subject load by the respondents for the school year 19801981. (Decision, 4-6.)
The university's contention that under the UST Faculty Code, tenure is acquired after four years in office,
has no merit. First, the code can not prevail over the Manual of Regulations for Private Schools, which has
the character and force of law. Under the Manual:
75). Full-time teachers who have rendered three consecutive years of satisfactory service shall be
considered permanent.
What "full-time" means is stated as follows:
76. ... For this purpose, a full-time teacher should be one whose total working day is devoted to the school.
has no other regular remunerative employment, and is paid on a regular monthly basis regardless of the
number of teaching hours.

It is true that under paragraph 78 of the Manual, "the normal teaching load of a full-time instructor shall
be eighteen hours a week." It is my reading of this provision, however, that a full-time instructor can not
merely be made to teach for longer hours. Hence, the succeeding paragraph states:
79. Any teaching assignment in excess of the foregoing must be taken up with the Bureau, which case
shall be considered only on the basis of educational qualifications, experience, efficiency rating, and
subject preparations of the teachers concerned.
It is my understanding of paragraph 78 that it operates as a restraint upon schools against a grant of
excessive manhours, although school authorities may prescribe a longer period, but provided that it has
the imprimatur of the Bureau of Private Schools. A lesser number of hours, however, does not make an
instructor part-time, if he has otherwise complied with the requisites of paragraph 76. The decision of the
NLRC indicates that the private respondent worked on a full-time basis whatever the number of teaching
hours given to him and we can not disturb its findings. (See Decision, id., 6.)
Second, assuming that the four-year rule is permissible, the private respondent's tenure during that
period was nevertheless secure, which could only be perished by a valid cause. "Negative feedbacks,"
short of actual violations of the faculty code, are no excuse for termination.
The rule is that, unless otherwise provided by contract, a probationary employee can not be dismissed
(during the three-year period), unless dismissal is compelled by a just cause or causes. However, if
thereafter, the school finds the employee's performance unsatisfactory, it is at liberty to rehire or not the
employee, unless a grave abuse of discretion has been committed. Here, the fact that the private
respondent was allowed to stay one year more gave the latter security of tenure.
I must not be understood, however, as holding that schools may or can not enter into contracts for specific
periods (less or more than three years; see also Manual, par. 74) with teaching applicants. Here, however,
there is no "contract" to speak of, other than the implied agreement between the parties. In that case,
the Manual is applicable.
The closure of the doctor's clinic, finally, is a valid basis for the award of moral and exemplary damages,
and attorney's fees.
Hence, I cast this dissenting vote.

Lacuesta v. ADMU, G.R. No. 152777, December 9, 2005

FIRST DIVISION

LOLITA R. LACUESTA,

G.R. No. 152777

Petitioner,
Present:

Davide, Jr., C.J.,

(Chairman),
- versus -

Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.

ATENEO
DE MANILAUNIVERSITY,
DR. Promulgated:
LEOVINO MA. GARCIA and DR. MARIJO
RUIZ,
December 9, 2005
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
This petition for review on certiorari assails the Decision[1] dated October 12, 2001 of the Court of Appeals
in CA-G.R. SP No. 61173 and its Resolution[2] dated February 21, 2002, denying the motion for
reconsideration. The appellate court affirmed the Decision[3] dated February 24, 2000 of the National
Labor Relations Commission (NLRC), which had reversed the Decision dated March 20, 1998 of the Labor
Arbiter.
The facts are undisputed.
Respondent Ateneo de Manila University (Ateneo) hired, on a contractual basis, petitioner Lolita R.
Lacuesta as a part-time lecturer in its English Department for the second semester of school year 19881989. She was re-hired, still on a contractual basis, for the first and second semesters of school year 19891990.

On July 13, 1990, the petitioner was first appointed as full-time instructor on probation, in the same
department effective June 1, 1990 until March 31, 1991. Thereafter, her contract as faculty on probation
was renewed effective April 1, 1991 until March 31, 1992. She was again hired for a third year effective
April 1, 1992 until March 31, 1993. During these three years she was on probation status.
In a letter dated January 27, 1993, respondent Dr. Leovino Ma. Garcia, Dean of Ateneos Graduate School
and College of Arts and Sciences, notified petitioner that her contract would no longer be renewed
because she did not integrate well with the English Department. Petitioner then appealed to the President
of the Ateneo at the time, Fr. Joaquin Bernas, S.J.
In a letter dated February 11, 1993, Fr. Bernas explained to petitioner that she was not being terminated,
but her contract would simply expire. He also stated that the university president makes a permanent
appointment only upon recommendation of the Dean and confirmation of the Committee on Faculty Rank
and Permanent Appointment. He added that any appointment he might extend would be tantamount to
a midnight appointment.
In another letter dated March 11, 1993, Fr. Bernas offered petitioner the job as book editor in the
University Press under terms comparable to that of a faculty member.
On March 26, 1993, petitioner applied for clearance to collect her final salary as instructor. Petitioner also
signed a Quitclaim, Discharge and Release on April 16, 1993.[4]
Petitioner worked as editor in the University Press from April 1, 1993 to March 31, 1994 including an
extension of two months after her contract expired. Upon expiry of her contract, petitioner applied for
clearance to collect her final salary as editor. Later, she agreed to extend her contract from June 16, 1994
to October 31, 1994. Petitioner decided not to have her contract renewed due to a severe back problem.
She did not report back to work, but she submitted her clearance on February 20, 1995.
On December 23, 1996, petitioner filed a complaint for illegal dismissal with prayer for reinstatement,
back wages, and moral and exemplary damages. Dr. Leovino Ma. Garcia and Dr. Marijo Ruiz were sued in
their official capacities as the previous and present deans of the College of Arts and Sciences, respectively.
Labor Arbiter Manuel P. Asuncion held that petitioner may not be terminated by mere lapse of the
probationary period but only for just cause or failure to meet the employers standards. Moreover, said
the Labor Arbiter, the quitclaim, discharge and release executed by petitioner was not a bar to filing a
complaint for illegal dismissal.[5]Thus, he ordered reinstatement with payment of full back wages.
The NLRC upon appeal of respondents reversed the Labor Arbiters decision and ruled that petitioner was
not illegally dismissed, and that her quitclaim was valid. Petitioner sought reconsideration but it was
denied. She then filed a petition for certiorari before the Court of Appeals assailing the NLRC decision. The
appellate court dismissed the petition saying there was no grave abuse of discretion and affirmed the
NLRC decision. It ruled:
WHEREFORE, the petition is hereby denied and accordingly DISMISSED.[6]
Hence, this instant petition where petitioner assigns the following as errors:

1. The Court of Appeals erred in ruling that it is the Manual of Regulations For Private Schools, not the
Labor Code, that determines the acquisition of regular or permanent status of faculty members in an
educational institution;
2. The Court of Appeals erred in upholding the Quitclaim that was signed by the Petitioner and in taking
that against her claims for illegal dismissal and for moral and exemplary damages against the
respondents.[7]
Simply put, the issue in this case is whether the petitioner was illegally dismissed.
Petitioner contends that Articles 280 and 281 of the Labor Code,[8] not the Manual of Regulations for
Private Schools, is the applicable law to determine whether or not an employee in an educational
institution has acquired regular or permanent status. She argues that (1) under Article 281, probationary
employment shall not exceed six (6) months from date of employment unless a longer period had been
stipulated by an apprenticeship agreement; (2) under Article 280, if the apprenticeship agreement
stipulates a period longer than one year and the employee rendered at least one year of service, whether
continuous or broken, the employee shall be considered as regular employee with respect to the activity
in which he is employed while such activity exists; and (3) it is with more reason that petitioner be made
regular since she had rendered services as part-time and full-time English teacher for four and a half years,
services which are necessary and desirable to the usual business of Ateneo.[9]
Furthermore, the petitioner contends that her clearance was granted and completed only after she signed
the quitclaim on April 16, 1993. She contends also that the respondents failed to show that her quitclaim
was voluntary.
Respondents, for their part, contend that the Manual of Regulations for Private Schools is controlling. In
the Manual, full-time teachers who have rendered three consecutive years of satisfactory service shall be
considered permanent. Respondents also claim that the petitioner was not terminated but her
employment contract expired at the end of the probationary period. Further, institutions of higher
learning, such as respondent Ateneo, enjoy the freedom to choose who may teach according to its
standards. Respondents also argue that the quitclaim, discharge and release by petitioner is binding and
should bar her complaint for illegal dismissal.
After considering the contentions of the parties in the light of the circumstances in this case, we find for
respondents.
The Manual of Regulations for Private Schools, and not the Labor Code, determines whether or not a
faculty member in an educational institution has attained regular or permanent status.[10] In University of
Santo Tomas v. National Labor Relations Commission the Court en banc said that under Policy Instructions
No. 11 issued by the Department of Labor and Employment, the probationary employment of professors,
instructors and teachers shall be subject to the standards established by the Department of Education
and Culture. Said standards are embodied in paragraph 75[11] (now Section 93) of the Manual of
Regulations for Private Schools.[12]
Section 93[13] of the 1992 Manual of Regulations for Private Schools provides that full-time teachers who
have satisfactorily completed their probationary period shall be considered regular or
permanent.[14] Moreover, for those teaching in the tertiary level, the probationary period shall not be
more than six consecutive regular semesters of satisfactory service.[15] The requisites to acquire

permanent employment, or security of tenure, are (1) the teacher is a full-time teacher; (2) the teacher
must have rendered three consecutive years of service; and (3) such service must have been
satisfactory.[16]
As previously held, a part-time teacher cannot acquire permanent status.[17] Only when one has served as
a full-time teacher can he acquire permanent or regular status. The petitioner was a part-time lecturer
before she was appointed as a full-time instructor on probation. As a part-time lecturer, her employment
as such had ended when her contract expired. Thus, the three semesters she served as part-time lecturer
could not be credited to her in computing the number of years she has served to qualify her for permanent
status.
Petitioner posits that after completing the three-year probation with an above-average performance, she
already acquired permanent status. On this point, we are unable to agree with petitioner.
Completing the probation period does not automatically qualify her to become a permanent employee of
the university. Petitioner could only qualify to become a permanent employee upon fulfilling the
reasonable standards for permanent employment as faculty member.[18] Consistent with academic
freedom and constitutional autonomy, an institution of higher learning has the prerogative to provide
standards for its teachers and determine whether these standards have been met.[19] At the end of the
probation period, the decision to re-hire an employee on probation, belongs to the university as the
employer alone.
We reiterate, however, that probationary employees enjoy security of tenure, but only within the period
of probation. Likewise, an employee on probation can only be dismissed for just cause or when he fails to
qualify as a regular employee in accordance with the reasonable standards made known by the employer
at the time of his hiring. Upon expiration of their contract of employment, academic personnel on
probation cannot automatically claim security of tenure and compel their employers to renew their
employment contracts.[20] In the instant case, petitioner, did not attain permanent status and was not
illegally dismissed. As found by the NLRC, her contract merely expired.
Lastly, we find that petitioner had already signed a valid quitclaim, discharge and release which bars the
present action. This Court has held that not all quitclaims are per seinvalid or against public policy, except
(1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2)
where the terms of settlement are unconscionable on their face.[21] In this case, there is no showing that
petitioner was coerced into signing the quitclaim. In her sworn quitclaim, she freely declared that she
received to her full satisfaction all that is due her by reason of her employment and that she was
voluntarily releasing respondent Ateneo from all claims in relation to her employment.[22] Nothing on the
face of her quitclaim has been shown as unconscionable.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated October 12, 2001 of the Court
of Appeals in CA-G.R. SP No. 61173 and its Resolution dated February 21, 2002 are AFFIRMED.
SO ORDERED.

Saint Marys University v. C.A., G.R. No. 157788, March 8, 2005

FIRST DIVISION
[G.R. No. 157788. March 08, 2005]
SAINT MARYS UNIVERSITY, represented by its President REV. JESSIE M. HECHANOVA, CICM, petitioner,
vs. COURT OF APPEALS (Former Special Twelfth Division), NATIONAL LABOR RELATIONS COMMISSION
(Second Division) and MARCELO A. DONELO, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision[1] dated May 21, 2002 and the Resolution[2] dated February 12,
2003 of the Court of Appeals in CA-G.R. SP No. 63240 which dismissed the petition for certiorari of St.
Marys University and its motion for reconsideration, respectively.
Respondent Marcelo Donelo started teaching on a contractual basis at St. Marys University in 1992. In
1995, he was issued an appointment as an Assistant Professor I. Later on, he was promoted to Assistant
Professor III. He taught until the first semester of school year 1999-2000 when the school discontinued
giving him teaching assignments. For this, respondent filed a complaint for illegal dismissal against the
university.
In its defense, petitioner St. Marys University showed that respondent was merely a part-time instructor
and, except for three semesters, carried a load of less than eighteen units. Petitioner argued that
respondent never attained permanent or regular status for he was not a full-time teacher. Further,
petitioner showed that respondent was under investigation by the university for giving grades to students
who did not attend classes. Petitioner alleged that respondent did not respond to inquiries relative to the
investigation. Instead, respondent filed the instant case against the university.
The Labor Arbiter ruled that respondent was lawfully dismissed because he had not attained permanent
or regular status pursuant to the Manual of Regulations for Private Schools. The Labor Arbiter held that
only full-time teachers with regular loads of at least 18 units, who have satisfactorily completed three
consecutive years of service qualify as permanent or regular employees. [3]
On appeal by respondent, the National Labor Relations Commission (NLRC) reversed the Decision of the
Labor Arbiter and ordered the reinstatement of respondent without loss of seniority rights and privileges
with full backwages from the time his salaries were withheld until actual reinstatement.[4] It held that
respondent was a full-time teacher as he did not appear to have other regular remunerative employment
and was paid on a regular monthly basis regardless of the number of teaching hours. As a full-time teacher
and having taught for more than 3 years, respondent qualified as a permanent or regular employee of the
university.
Petitioner sought for reconsideration and pointed out that respondent was also working for the Provincial
Government of Nueva Vizcaya from 1993 to 1996. Nevertheless, the NLRC denied petitioners Motion for
Reconsideration. Aggrieved, petitioner elevated the matter to the Court of Appeals, which affirmed the
Decision of the NLRC.

Hence, this petition with a motion for temporary restraining order, alleging that the Court of Appeals
erred in:
FINDING THAT THE RESPONDENT DONELO ATTAINED A PERMANENT STATUS, THE SAID FINDING BEING
CLEARLY CONTRARY TO THE EVIDENCE AT HAND AND DEVOID OF BASIS IN LAW.
HOLDING THAT THE TWIN-NOTICE REQUIREMENT IMPOSED BY LAW BEFORE TERMINATION OF
EMPLOYMENT CAN BE LEGALLY EFFECTED MUST BE COMPLIED WITH BY THE PETITIONER.
AFFIRMING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION IN ORDERING THE
PETITIONER TO REINSTATE RESPONDENT DONELO TO HIS FORMER POSITION WITHOUT LOSS OF
SENIORITY RIGHTS AND PRIVILEGES WITH FULL BACKWAGES FROM THE TIME OF HIS DISMISSAL UNTIL
ACTUALLY REINSTATED.[5]
Plainly, the ultimate questions before us are:
1. Was respondent a full-time teacher?
2. Had he attained permanent status?
3. Was he illegally dismissed?
Petitioner contends that respondent did not attain permanent status since he did not carry a load of at
least 18 units for three consecutive years; and that only full-time teachers can attain permanent status.
Further, since respondent was not a permanent employee, the twin-notice requirement in the
termination of the latters employment did not apply.
Respondent argues that, as early as 1995, he had a permanent appointment as Assistant Professor, and
he was a permanent employee regardless of the provisions of the Manual of Regulations for Private
Schools. He asserts that he should not be faulted for not carrying a load of at least 18 units since the
university unilaterally controls his load assignment in the same manner that the university has the
prerogative to shorten his probationary period. He points out also that the present Manual allows fulltime teachers to hold other remunerative positions as long as these do not conflict with the regular school
day. Since he is a permanent employee, respondent insists that petitioners failure to give him the required
notices constitutes illegal dismissal.
Section 93 of the 1992 Manual of Regulations for Private Schools, provides that full-time teachers who
have satisfactorily completed their probationary period shall be considered regular or
permanent.[6] Furthermore, the probationary period shall not be more than six consecutive regular
semesters of satisfactory service for those in the tertiary level.[7] Thus, the following requisites must
concur before a private school teacher acquires permanent status: (1) the teacher is a full-time teacher;
(2) the teacher must have rendered three consecutive years of service; and (3) such service must have
been satisfactory.[8]
In the present case, petitioner claims that private respondent lacked the requisite years of service with
the university and also the appropriate quality of his service, i.e., it is less than satisfactory. The basic
question, however, is whether respondent is a full-time teacher.
Section 45 of the 1992 Manual of Regulations for Private Schools provides that full-time academic
personnel are those meeting all the following requirements:

a. Who possess at least the minimum academic qualifications prescribed by the Department under this
Manual for all academic personnel;
b. Who are paid monthly or hourly, based on the regular teaching loads as provided for in the policies,
rules and standards of the Department and the school;
c. Whose total working day of not more than eight hours a day is devoted to the school;
d. Who have no other remunerative occupation elsewhere requiring regular hours of work that will
conflict with the working hours in the school; and
e. Who are not teaching full-time in any other educational institution.
All teaching personnel who do not meet the foregoing qualifications are considered part-time.
A perusal of the various orders of the then Department of Education, Culture and Sports prescribing
teaching loads shows that the regular full-time load of a faculty member is in the range of 15 units to 24
units a semester or term, depending on the courses taught. Part-time instructors carry a load of not more
than 12 units.[9]
The evidence on record reveals that, except for four non-consecutive terms, respondent generally carried
a load of twelve units or less from 1992 to 1999. There is also no evidence that he performed other
functions for the school when not teaching. These give the impression that he was merely a part-time
teacher.[10] Although this is not conclusive since there are full-time teachers who are allowed by the
university to take fewer load, in this case, respondent did not show that he belonged to the latter group,
even after the university presented his teaching record. With a teaching load of twelve units or less, he
could not claim he worked for the number of hours daily as prescribed by Section 45 of the Manual.
Furthermore, the records also indubitably show he was employed elsewhere from 1993 to 1996.
Since there is no showing that respondent worked on a full-time basis for at least three years, he could
not have acquired a permanent status.[11] A part-time employee does not attain permanent status no
matter how long he has served the school.[12] And as a part-timer, his services could be terminated by the
school without being held liable for illegal dismissal. Moreover, the requirement of twin-notice applicable
only to regular or permanent employees could not be invoked by respondent.
Yet, this is not to say that part-time teachers may not have security of tenure. The school could not lawfully
terminate a part-timer before the end of the agreed period without just cause. But once the period,
semester, or term ends, there is no obligation on the part of the school to renew the contract of
employment for the next period, semester, or term.
In this case, the contract of employment of the respondent was not presented. However, judicial notice
may be taken that contracts of employment of part-time teachers are generally on a per semester or term
basis. In the absence of a specific agreement on the period of the contract of employment, it is presumed
to be for a term or semester. After the end of each term or semester, the school does not have any
obligation to give teaching load to each and every part-time teacher. That petitioner did not give any
teaching assignment to the respondent during a given term or semester, even if factually true, did not
amount to an actionable violation of respondents rights. It did not amount to illegal dismissal of the parttime teacher.

The law, while protecting the rights of the employees, authorizes neither the oppression nor destruction
of the employer.[13] And when the law tilts the scale of justice in favor of labor, the scale should never be
so tilted if the result would be an injustice to the employer.[14]
WHEREFORE, the petition is GRANTED. The Decision dated May 21, 2002 and the Resolution dated
February 12, 2003 of the Court of Appeals in CA-G.R. SP No. 63240, which sustained those of the NLRC,
are NULLIFIED and SET ASIDE. The Decision of the Executive Labor Arbiter of the Regional Arbitration
Branch II, Tuguegarao City, Cagayan, is hereby REINSTATED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

See DOLE Handbook on Workers Statutory Monetary Benefits ?????

Contract for Piece of Work

Art. 1713, Civil Code

SECTION 3
Contract for a Piece of Work
Article 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work
for the employer, in consideration of a certain price or compensation. The contractor may either employ
only his labor or skill, or also furnish the material. (1588a)
Article 1714. If the contractor agrees to produce the work from material furnished by him, he shall
deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be
governed by the following articles as well as by the pertinent provisions on warranty of title and against
hidden defects and the payment of price in a contract of sale. (n)
Article 1715. The contract shall execute the work in such a manner that it has the qualities agreed upon
and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should
the work be not of such quality, the employer may require that the contractor remove the defect or
execute another work. If the contract fails or refuses to comply with this obligation, the employer may
have the defect removed or another work executed, at the contractor's cost. (n)
Article 1716. An agreement waiving or limiting the contractor's liability for any defect in the work is void
if the contractor acted fraudulently. (n)
Article 1717. If the contractor bound himself to furnish the material, he shall suffer the loss if the work
should be destroyed before its delivery, save when there has been delay in receiving it. (1589)

Article 1718. The contractor who has undertaken to put only his work or skill, cannot claim any
compensation if the work should be destroyed before its delivery, unless there has been delay in
receiving it, or if the destruction was caused by the poor quality of the material, provided this fact was
communicated in due time to the owner. If the material is lost through a fortuitous event, the contract is
extinguished. (1590a)
Article 1719. Acceptance of the work by the employer relieves the contractor of liability for any defect in
the work, unless:
(1) The defect is hidden and the employer is not, by his special knowledge, expected to recognize the
same; or
(2) The employer expressly reserves his rights against the contractor by reason of the defect. (n)
Article 1720. The price or compensation shall be paid at the time and place of delivery of the work,
unless there is a stipulation to the contrary. If the work is to be delivered partially, the price or
compensation for each part having been fixed, the sum shall be paid at the time and place of delivery, in
the absence if stipulation. (n)
Article 1721. If, in the execution of the work, an act of the employer is required, and he incurs in delay
or fails to perform the act, the contractor is entitled to a reasonable compensation.
The amount of the compensation is computed, on the one hand, by the duration of the delay and the
amount of the compensation stipulated, and on the other hand, by what the contractor has saved in
expenses by reason of the delay or is able to earn by a different employment of his time and industry.
(n)
Article 1722. If the work cannot be completed on account of a defect in the material furnished by the
employer, or because of orders from the employer, without any fault on the part of the contractor, the
latter has a right to an equitable part of the compensation proportionally to the work done, and
reimbursement for proper expenses made. (n)
Article 1723. The engineer or architect who drew up the plans and specifications for a building is liable
for damages if within fifteen years from the completion of the structure, the same should collapse by
reason of a defect in those plans and specifications, or due to the defects in the ground. The contractor
is likewise responsible for the damages if the edifice falls, within the same period, on account of defects
in the construction or the use of materials of inferior quality furnished by him, or due to any violation of
the terms of the contract. If the engineer or architect supervises the construction, he shall be solidarily
liable with the contractor.
Acceptance of the building, after completion, does not imply waiver of any of the cause of action by
reason of any defect mentioned in the preceding paragraph.
The action must be brought within ten years following the collapse of the building. (n)
Article 1724. The contractor who undertakes to build a structure or any other work for a stipulated
price, in conformity with plans and specifications agreed upon with the land-owner, can neither
withdraw from the contract nor demand an increase in the price on account of the higher cost of labor
or materials, save when there has been a change in the plans and specifications, provided:

(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by both parties.
(1593a)
Article 1725. The owner may withdraw at will from the construction of the work, although it may have
been commenced, indemnifying the contractor for all the latter's expenses, work, and the usefulness
which the owner may obtain therefrom, and damages. (1594a)
Article 1726. When a piece of work has been entrusted to a person by reason of his personal
qualifications, the contract is rescinded upon his death.
In this case the proprietor shall pay the heirs of the contractor in proportion to the price agreed upon,
the value of the part of the work done, and of the materials prepared, provided the latter yield him
some benefit.
The same rule shall apply if the contractor cannot finish the work due to circumstances beyond his
control. (1595)
Article 1727. The contractor is responsible for the work done by persons employed by him. (1596)
Article 1728. The contractor is liable for all the claims of laborers and others employed by him, and of
third persons for death or physical injuries during the construction. (n)
Article 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the
contractor have an action against the owner up to the amount owing from the latter to the contractor at
the time the claim is made. However, the following shall not prejudice the laborers, employees and
furnishers of materials:
(1) Payments made by the owner to the contractor before they are due;
(2) Renunciation by the contractor of any amount due him from the owner.
This article is subject to the provisions of special laws. (1597a)
Article 1730. If it is agreed that the work shall be accomplished to the satisfaction of the proprietor, it is
understood that in case of disagreement the question shall be subject to expert judgment.
If the work is subject to the approval of a third person, his decision shall be final, except in case of fraud
or manifest error. (1598a)
Article 1731. He who has executed work upon a movable has a right to retain it by way of pledge until
he is paid. (1600)

Wages

Arts. 97-98, Labor Code

Article 97. Definitions. As used in this Title:

"Person" means an individual, partnership, association, corporation, business trust, legal

representatives, or any organized group of persons.
"Employer" includes any person acting directly or indirectly in the interest of an employer in
relation to an employee and shall include the government and all its branches, subdivisions
and instrumentalities, all government-owned or controlled corporations and institutions, as
well as non-profit private institutions, or organizations.
"Employee" includes any individual employed by an employer.
"Agriculture" includes farming in all its branches and, among other things, includes cultivation
and tillage of soil, dairying, the production, cultivation, growing and harvesting of any
agricultural and horticultural commodities, the raising of livestock or poultry, and any practices
performed by a farmer on a farm as an incident to or in conjunction with such farming
operations, but does not include the manufacturing or processing of sugar, coconuts, abaca,
tobacco, pineapples or other farm products.
"Employ" includes to suffer or permit to work.
"Wage" paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done
or to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor and Employment, of board, lodging, or other
facilities customarily furnished by the employer to the employee. "Fair and reasonable value"
shall not include any profit to the employer, or to any person affiliated with the employer.
Article 98. Application of Title. This Title shall not apply to farm tenancy or leasehold,
domestic service and persons working in their respective homes in needle work or in any
cottage industry duly registered in accordance with law.
Wage v. Salary

Equitable v. Sadac, G.R. No. 164772, June 8, 2006

G.R. No. 164772

June 8, 2006

EQUITABLE BANKING CORPORATION (now known as EQUITABLE-PCI BANK), petitioner,

vs.
RICARDO SADAC, Respondent.
DECISION
CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to the Court En Banc
filed by Equitable Banking Corporation (now known as Equitable-PCI Bank), seeking to reverse the
Decision1 and Resolution2 of the Court of Appeals, dated 6 April 2004 and 28 July 2004, respectively, as
amended by the Supplemental Decision3 dated 26 October 2004 in CA-G.R. SP No. 75013, which
reversed and set aside the Resolutions of the National Labor Relations Commission (NLRC), dated 28
March 2001 and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89.
The Antecedents
As culled from the records, respondent Sadac was appointed Vice President of the Legal Department of
petitioner Bank effective 1 August 1981, and subsequently General Counsel thereof on 8 December
1981. On 26 June 1989, nine lawyers of petitioner Banks Legal Department, in a letter-petition to the
Chairman of the Board of Directors, accused respondent Sadac of abusive conduct, inter alia, and
ultimately, petitioned for a change in leadership of the department. On the ground of lack of confidence
in respondent Sadac, under the rules of client and lawyer relationship, petitioner Bank instructed
respondent Sadac to deliver all materials in his custody in all cases in which the latter was appearing as
its counsel of record. In reaction thereto, respondent Sadac requested for a full hearing and formal
investigation but the same remained unheeded. On 9 November 1989, respondent Sadac filed a
complaint for illegal dismissal with damages against petitioner Bank and individual members of the
Board of Directors thereof. After learning of the filing of the complaint, petitioner Bank terminated the
services of respondent Sadac. Finally, on 10 August 1989, respondent Sadac was removed from his office
and ordered disentitled to any compensation and other benefits.4
In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr., dismissed the complaint for
lack of merit. On appeal, the NLRC in its Resolution6 of 24 September 1991 reversed the Labor Arbiter
and declared respondent Sadacs dismissal as illegal. The decretal portion thereof reads, thus:
WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is
hereby, SET ASIDE, and a new one ENTERED declaring the dismissal of the complainant as illegal, and
consequently ordering the respondents jointly and severally to reinstate him to his former position as
bank Vice-President and General Counsel without loss of seniority rights and other privileges, and to pay
him full backwages and other benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary damages of P50,000.00, and
attorneys fees equivalent to Ten Percent (10%) of the monetary award. Should reinstatement be no
longer possible due to strained relations, the respondents are ordered likewise jointly and severally to
grant separation pay at one (1) month per year of service in the total sum of P293,650.00 with
backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date, subject to
adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00
(exemplary damages) and attorneys fees equal to Ten Percent (10%) of all the monetary award, or a
grand total of P1,649,329.53.7
Petitioner Bank came to us for the first time via a Special Civil Action for Certiorari assailing the NLRC
Resolution of 24 September 1991 in Equitable Banking Corporation v. National Labor Relations
Commission, docketed as G.R. No. 102467.8
In our Decision9 of 13 June 1997, we held respondent Sadacs dismissal illegal. We said that the
existence of the employer-employee relationship between petitioner Bank and respondent Sadac had

been duly established bringing the case within the coverage of the Labor Code, hence, we did not permit
petitioner Bank to rely on Sec. 26, Rule 13810 of the Rules of Court, claiming that the association
between the parties was one of a client-lawyer relationship, and, thus, it could terminate at any time the
services of respondent Sadac. Moreover, we did not find that respondent Sadacs dismissal was
grounded on any of the causes stated in Article 282 of the Labor Code. We similarly found that
petitioner Bank disregarded the procedural requirements in terminating respondent Sadacs
employment as so required by Section 2 and Section 5, Rule XIV, Book V of the Implementing Rules of
the Labor Code. We decreed:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that the
award of moral and exemplary damages are deleted; and that the liability herein pronounced shall be
due from petitioner bank alone, the other petitioners being absolved from solidary liability. No costs.11
On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became final and executory.12
Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for Execution13 thereof.
Likewise, petitioner Bank filed a Manifestation and Motion14 praying that the award in favor of
respondent Sadac be computed and that after payment is made, petitioner Bank be ordered forever
released from liability under said judgment.
Per respondent Sadacs computation, the total amount of the monetary award is P6,030,456.59,
representing his backwages and other benefits, including the general increases which he should have
earned during the period of his illegal termination. Respondent Sadac theorized that he started with a
monthly compensation of P12,500.00 in August 1981, when he was appointed as Vice President of
petitioner Banks Legal Department and later as its General Counsel in December 1981. As of November
1989, when he was dismissed illegally, his monthly compensation amounted to P29,365.00 or more than
twice his original compensation. The difference, he posited, can be attributed to the annual salary
increases which he received equivalent to 15 percent (15%) of his monthly salary.
Respondent Sadac anchored his claim on Article 279 of the Labor Code of the Philippines, and cited as
authority the cases of East Asiatic Company, Ltd. v. Court of Industrial Relations,15 St. Louis College of
Tuguegarao v. National Labor Relations Commission,16 and Sigma Personnel Services v. National Labor
Relations Commission.17 According to respondent Sadac, the catena of cases uniformly holds that it is
the obligation of the employer to pay an illegally dismissed employee the whole amount of the salaries
or wages, plus all other benefits and bonuses and general increases to which he would have been
normally entitled had he not been dismissed; and therefore, salary increases should be deemed a
component in the computation of backwages. Moreover, respondent Sadac contended that his check-up
benefit, clothing allowance, and cash conversion of vacation leaves must be included in the computation
of his backwages.
Petitioner Bank disputed respondent Sadacs computation. Per its computation, the amount of
monetary award due respondent Sadac is P2,981,442.98 only, to the exclusion of the latters general
salary increases and other claimed benefits which, it maintained, were unsubstantiated. The
jurisprudential precedent relied upon by petitioner Bank in assailing respondent Sadacs computation is

Evangelista v. National Labor Relations Commission,18 citing Paramount Vinyl Products Corp. v. National
Labor Relations Commission,19 holding that an unqualified award of backwages means that the
employee is paid at the wage rate at the time of his dismissal. Furthermore, petitioner Bank argued
before the Labor Arbiter that the award of salary differentials is not allowed, the established rule being
that upon reinstatement, illegally dismissed employees are to be paid their backwages without
deduction and qualification as to any wage increases or other benefits that may have been received by
their co-workers who were not dismissed or did not go on strike.
On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order20 adopting respondent
Sadacs computation. In the main, the Labor Arbiter relying on Millares v. National Labor Relations
Commission21concluded that respondent Sadac is entitled to the general increases as a component in
the computation of his backwages. Accordingly, he awarded respondent Sadac the amount of
P6,030,456.59 representing his backwages inclusive of allowances and other claimed benefits, namely
check-up benefit, clothing allowance, and cash conversion of vacation leave plus 12 percent (12%)
interest per annum equivalent to P1,367,590.89 as of 30 June 1999, or a total of P7,398,047.48.
However, considering that respondent Sadac had already received the amount of P1,055,740.48 by
virtue of a Writ of Execution22 earlier issued on 18 January 1999, the Labor Arbiter directed petitioner
Bank to pay respondent Sadac the amount of P6,342,307.00. The Labor Arbiter also granted an award of
attorneys fees equivalent to ten percent (10%) of all monetary awards, and imposed a 12 percent (12%)
interest per annum reckoned from the finality of the judgment until the satisfaction thereof.
The Labor Arbiter decreed, thus:
WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of Execution be issued commanding
the Sheriff, this Branch, to collect from respondent Bank the amount of Ph6,342,307.00 representing the
backwages with 12% interest per annum due complainant.23
Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in a
Resolution,24promulgated on 28 March 2001. It ratiocinated that the doctrine on general increases as
component in computing backwages in Sigma Personnel Services and St. Louis was merely obiter
dictum. The NLRC found East Asiatic Co., Ltd. inapplicable on the ground that the original circumstances
therein are not only peculiar to the said case but also completely strange to the case of respondent
Sadac. Further, the NLRC disallowed respondent Sadacs claim to check-up benefit ratiocinating that
there was no clear and substantial proof that the same was being granted and enjoyed by other
employees of petitioner Bank. The award of attorneys fees was similarly deleted.
The dispositive portion of the Resolution states:
WHEREFORE, the instant appeal is considered meritorious and accordingly, the computation prepared
by respondent Equitable Banking Corporation on the award of backwages in favor of complainant
Ricardo Sadac under the decision promulgated by the Supreme Court on June 13, 1997 in G.R. No.
102476 in the aggregate amount of P2,981,442.98 is hereby ordered.25
Respondent Sadacs Motion for Reconsideration thereon was denied by the NLRC in its
Resolution,26promulgated on 24 September 2002.

Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for Certiorari seeking
nullification of the twin resolutions of the NLRC, dated 28 March 2001 and 24 September 2002, as well
as praying for the reinstatement of the 2 August 1999 Order of the Labor Arbiter.
For the resolution of the Court of Appeals were the following issues, viz.:
(1) Whether periodic general increases in basic salary, check-up benefit, clothing allowance, and cash
conversion of vacation leave are included in the computation of full backwages for illegally dismissed
employees;
(2) Whether respondent is entitled to attorneys fees; and
(3) Whether respondent is entitled to twelve percent (12%) per annum as interest on all accounts
outstanding until full payment thereof.
Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered a Decision on 6 April
2004, the dispositive portion of which is quoted hereunder:
WHEREFORE, premises considered, the March 28, 2001 and the September 24, 2002 Resolutions of the
National Labor Relations Commissions (sic) are REVERSED and SET ASIDE and the August 2, 1999 Order
of the Labor Arbiter is REVIVED to the effect that private respondent is DIRECTED TO PAY petitioner the
sum of PhP6,342,307.00, representing full back wages (sic) which sum includes annual general increases
in basic salary, check-up benefit, clothing allowance, cash conversion of vacation leave and other sundry
benefits plus 12% per annum interest on outstanding balance from July 28, 1997 until full payment.
Costs against private respondent.27
The Court of Appeals, citing East Asiatic held that respondent Sadacs general increases should be added
as part of his backwages. According to the appellate court, respondent Sadacs entitlement to the
annual general increases has been duly proven by substantial evidence that the latter, in fact, enjoyed
an annual increase of more or less 15 percent (15%). Respondent Sadacs check-up benefit, clothing
allowance, and cash conversion of vacation leave were similarly ordered added in the computation of
respondent Sadacs basic wage.
Anent the matter of attorneys fees, the Court of Appeals sustained the NLRC. It ruled that our
Decision28 of 13 June 1997 did not award attorneys fees in respondent Sadacs favor as there was
nothing in the aforesaid Decision, either in the dispositive portion or the body thereof that supported
the grant of attorneys fees. Resolving the final issue, the Court of Appeals imposed a 12 percent (12%)
interest per annum on the total monetary award to be computed from 28 July 1997 or the date our
judgment in G.R. No. 102467 became final and executory until fully paid at which time the quantification
of the amount may be deemed to have been reasonably ascertained.
On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration29 of the 6 April 2004 Court
of Appeals Decision insofar as the appellate court did not award him attorneys fees. Similarly, petitioner
Bank filed a Motion for Partial Reconsideration thereon. Following an exchange of pleadings between
the parties, the Court of Appeals rendered a Resolution,30 dated 28 July 2004, denying petitioner Banks
Motion for Partial Reconsideration for lack of merit.
Assignment of Errors

Hence, the instant Petition for Review by petitioner Bank on the following assignment of errors, to wit:
(a) The Hon. Court of Appeals erred in ruling that general salary increases should be included in the
computation of full backwages.
(b) The Hon. Court of Appeals erred in ruling that the applicable authorities in this case are: (i) East
Asiatic, Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St. Louis College of Tuguegarao v. NLRC, 177 SCRA 151
(1989); (iii) Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993); and (iv) Millares v. NLRC, 305 SCRA
500 (1999) and not (i) Art. 279 of the Labor Code; (ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525
(1990); (iii) Evangelista v. NLRC, 249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 SCRA 430 (1996).
(c) The Hon. Court of Appeals erred in ruling that respondent is entitled to check-up benefit, clothing
allowance and cash conversion of vacation leaves notwithstanding that respondent did not present any
evidence to prove entitlement to these claims.
(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to be paid legal interest even if
the principal amount due him has not yet been correctly and finally determined.31
Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental Decision granting
respondent Sadacs Partial Motion for Reconsideration and amending the dispositive portion of the 6
April 2004 Decision in this wise, viz.:
WHEREFORE, premises considered, the March 24 (sic), 2001 and the September 24, 2002 Resolutions of
the National Labor Relations Commission are hereby REVERSED and SET ASIDE and the August 2, 1999
Order of the Labor Arbiter is hereby REVIVED to the effect that private respondent is hereby DIRECTED
TO PAY petitioner the sum of P6,342,307.00, representing full backwages which sum includes annual
general increases in basic salary, check-up benefit, clothing allowance, cash conversion of vacation leave
and other sundry benefits "and attorneys fees equal to TEN PERCENT (10%) of all the monetary award"
plus 12% per annum interest on all outstanding balance from July 28, 1997 until full payment.
Costs against private respondent.32
On 22 November 2004, petitioner Bank filed a Supplement to Petition for Review33 contending in the
main that the Court of Appeals erred in issuing the Supplemental Decision by directing petitioner Bank
to pay an additional amount to respondent Sadac representing attorneys fees equal to ten percent
(10%) of all the monetary award.
The Courts Ruling
I.
We are called to write finis to a controversy that comes to us for the second time. At the core of the
instant case are the divergent contentions of the parties on the manner of computation of backwages.
Petitioner Bank asseverates that Article 279 of the Labor Code of the Philippines does not contemplate
the inclusion of salary increases in the definition of "full backwages." It controverts the reliance by the
appellate court on the cases of (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares. While
it is in accord with the pronouncement of the Court of Appeals that Republic Act No. 6715, in amending
Article 279, intends to give more benefits to workers, petitioner Bank submits that the Court of Appeals
was in error in relying on East Asiatic to support its finding that salary increases should be included in

the computation of backwages as nowhere in Article 279, as amended, are salary increases spoken of.
The prevailing rule in the milieu of the East Asiatic doctrine was to deduct earnings earned elsewhere
from the amount of backwages payable to an illegally dismissed employee.
Petitioner Bank posits that even granting that East Asiatic allowed general salary increases in the
computation of backwages, it was because the inclusion was purposely to cushion the blow of the
deduction of earnings derived elsewhere; with the amendment of Article 279 and the consequent
elimination of the rule on the deduction of earnings derived elsewhere, the rationale for including salary
increases in the computation of backwages no longer exists. On the references of salary increases in the
aforementioned cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares, petitioner Bank contends
that the same were merely obiter dicta. In fine, petitioner Bank anchors its claim on the cases of (i)
Paramount Vinyl Products Corp. v. National Labor Relations Commission;34 (ii) Evangelista v. National
Labor Relations Commission;35 and (iii) Espejo v. National Labor Relations Commission,36 which ruled
that an unqualified award of backwages is exclusive of general salary increases and the employee is paid
at the wage rate at the time of the dismissal.
For his part, respondent Sadac submits that the Court of Appeals was correct when it ruled that his
backwages should include the general increases on the basis of the following cases, to wit: (i) East
Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares.
Resolving the protracted litigation between the parties necessitates us to revisit our pronouncements on
the interpretation of the term backwages. We said that backwages in general are granted on grounds of
equity for earnings which a worker or employee has lost due to his illegal dismissal.37 It is not private
compensation or damages but is awarded in furtherance and effectuation of the public objective of the
Labor Code. Nor is it a redress of a private right but rather in the nature of a command to the employer
to make public reparation for dismissing an employee either due to the formers unlawful act or bad
faith.38 The Court, in the landmark case of Bustamante v. National Labor Relations Commission,39 had
the occasion to explicate on the meaning of full backwages as contemplated by Article 27940 of the
Labor Code of the Philippines, as amended by Section 34 of Rep. Act No. 6715. The Court in Bustamante
said, thus:
The Court deems it appropriate, however, to reconsider such earlier ruling on the computation of
backwages as enunciated in said Pines City Educational Center case, by now holding that conformably
with the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted, backwages to be
awarded to an illegally dismissed employee, should not, as a general rule, be diminished or reduced by
the earnings derived by him elsewhere during the period of his illegal dismissal. The underlying reason
for this ruling is that the employee, while litigating the legality (illegality) of his dismissal, must still earn
a living to support himself and family, while full backwages have to be paid by the employer as part of
the price or penalty he has to pay for illegally dismissing his employee. The clear legislative intent of the
amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously given them
under the Mercury Drug rule or the "deduction of earnings elsewhere" rule. Thus, a closer adherence to
the legislative policy behind Rep. Act No. 6715 points to "full backwages" as meaning exactly that, i.e.,
without deducting from backwages the earnings derived elsewhere by the concerned employee during
the period of his illegal dismissal. In other words, the provision calling for "full backwages" to illegally
dismissed employees is clear, plain and free from ambiguity and, therefore, must be applied without
attempted or strained interpretation. Index animi sermo est.41

Verily, jurisprudence has shown that the definition of full backwages has forcefully evolved. In Mercury
Drug Co., Inc. v. Court of Industrial Relations,42 the rule was that backwages were granted for a period of
three years without qualification and without deduction, meaning, the award of backwages was not
reduced by earnings actually earned by the dismissed employee during the interim period of the
separation. This came to be known as the Mercury Drug rule.43 Prior to the Mercury Drug ruling in 1974,
the total amount of backwages was reduced by earnings obtained by the employee elsewhere from the
time of the dismissal to his reinstatement. The Mercury Drug rule was subsequently modified in Ferrer v.
National Labor Relations Commission44 and Pines City Educational Center v. National Labor Relations
Commission,45 where we allowed the recovery of backwages for the duration of the illegal dismissal
minus the total amount of earnings which the employee derived elsewhere from the date of dismissal
up to the date of reinstatement, if any. In Ferrer and in Pines, the three-year period was deleted, and
instead, the dismissed employee was paid backwages for the entire period that he was without work
subject to the deductions, as mentioned. Finally came our ruling in Bustamante which superseded Pines
City Educational Center and allowed full recovery of backwages without deduction and without
qualification pursuant to the express provisions of Article 279 of the Labor Code, as amended by Rep.
Act No. 6715, i.e., without any deduction of income the employee may have derived from employment
elsewhere from the date of his dismissal up to his reinstatement, that is, covering the entirety of the
period of the dismissal.
The first issue for our resolution involves another aspect in the computation of full backwages, mainly,
the basis of the computation thereof. Otherwise stated, whether general salary increases should be
included in the base figure to be used in the computation of backwages.
In so concluding that general salary increases should be made a component in the computation of
backwages, the Court of Appeals ratiocinated, thus:
The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971) that
"general increases" should be added as a part of full backwages, to wit:
In other words, the just and equitable rule regarding the point under discussion is this: It is the
obligation of the employer to pay an illegally dismissed employee or worker the whole amount of the
salaries or wages, plus all other benefits and bonuses and general increases, to which he would have
been normally entitled had he not been dismissed and had not stopped working, but it is the right, on
the other hand of the employer to deduct from the total of these, the amount equivalent to the salaries
or wages the employee or worker would have earned in his old employment on the corresponding days
he was actually gainfully employed elsewhere with an equal or higher salary or wage, such that if his
salary or wage in his other employment was less, the employer may deduct only what has been actually
earned.
The doctrine in East Asiatic was subsequently reiterated, in the cases of St. Louis College of Tugueg[a]rao
v. NLRC, 177 SCRA 151 (1989); Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993) and Millares v.
National Labor Relations Commission, 305 SCRA 500 (1999).
Private respondent, in opposing the petitioners contention, alleged in his Memorandum that only the
wage rate at the time of the employees illegal dismissal should be considered private respondent
citing the following decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA 525

(1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC, 255 SCRA 430 (1996) which rendered
obsolete the ruling in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971).
We are not convinced.
The Supreme Court had consistently held that payment of full backwages is the price or penalty that the
employer must pay for having illegally dismissed an employee.
In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v. NLRC and Evergreen Farms,
Inc. 265 SCRA 61 (1996) the Supreme Court held that the clear legislative intent in the amendment in
Republic Act 6715 was to give more benefits to workers than was previously given them under the
Mercury Drug rule or the "deductions of earnings elsewhere" rule.
The Paramount Vinyl, Evangelista, and Espejo cases cited by private respondent are inapplicable to the
case at bar. The doctrines therein came about as a result of the old Mercury Drug rule, which was
repealed with the passage of Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255 SCRA 430
(1993) when the Supreme Court returned to the doctrine in East Asiatic, which was soon supplanted by
the case of Bustamante v. NLRC and Evergreen Farms, Inc., which held that the backwages to be
awarded to an illegally dismissed employee, should not, as a general rule, be diminished or reduced by
the earnings derived from him during the period of his illegal dismissal. Furthermore, the Mercury Drug
rule was never meant to prejudice the workers, but merely to speed the recovery of their backwages.
Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the intent of the Supreme Court
to increase the backwages due an illegally dismissed employee. In the Mercury Drug case, full
backwages was to be recovered even though a three-year limitation on recovery of full backwages was
imposed in the name of equity. Then in Bustamante, full backwages was interpreted to mean absolutely
no deductions regardless of the duration of the illegal dismissal. In Bustamante, the Supreme Court no
longer regarded equity as a basis when dealing with illegal dismissal cases because it is not equity at play
in illegal dismissals but rather, it is employers obligation to pay full back wages (sic). It is an obligation of
the employer because it is "the price or penalty the employer has to pay for illegally dismissing his
employee."
The applicable modern definition of full backwages is now found in Millares v. National Labor Relations
Commission 305 SCRA 500 (1999), where although the issue in Millares concerned separation pay
separation pay and backwages both have employees wage rate at their foundation.
x x x The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally
dismissed employee the whole amount of his salaries plus all other benefits, bonuses and general
increases to which he would have been normally entitled had he not been dismissed and had not
stopped working. The same holds true in case of retrenched employees. x x x
xxxx
x x x Annual general increases are akin to "allowances" or "other benefits." 46 (Italics ours.)
We do not agree.
Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by Section 34
of Rep. Act No. 6715. The law provides as follows:

ART. 279. Security of Tenure. In 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. (Emphasis supplied.)
Article 279 mandates that an employees full backwages shall be inclusive of allowances and other
benefits or their monetary equivalent. Contrary to the ruling of the Court of Appeals, we do not see that
a salary increase can be interpreted as either an allowance or a benefit. Salary increases are not akin to
allowances or benefits, and cannot be confused with either. The term "allowances" is sometimes used
synonymously with "emoluments," as indirect or contingent remuneration, which may or may not be
earned, but which is sometimes in the nature of compensation, and sometimes in the nature of
reimbursement.47 Allowances and benefits are granted to the employee apart or separate from, and in
addition to the wage or salary. In contrast, salary increases are amounts which are added to the
employees salary as an increment thereto for varied reasons deemed appropriate by the employer.
Salary increases are not separate grants by themselves but once granted, they are deemed part of the
employees salary. To extend the coverage of an allowance or a benefit to include salary increases would
be to strain both the imagination of the Court and the language of law. As aptly observed by the NLRC,
"to otherwise give the meaning other than what the law speaks for by itself, will open the floodgates to
various interpretations."48 Indeed, if the intent were to include salary increases as basis in the
computation of backwages, the same should have been explicitly stated in the same manner that the
law used clear and unambiguous terms in expressly providing for the inclusion of allowances and other
benefits.
Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic, therein petitioner East
Asiatic Company, Ltd. was found guilty of unfair labor practices against therein respondent, Soledad A.
Dizon, and the Court ordered her reinstatement with back pay. On the question of the amount of
backwages, the Court granted the dismissed employee the whole amount of the salaries plus all general
increases and bonuses she would have received during the period of her lay-off with the corresponding
right of the employer to deduct from the total amounts, all the earnings earned by the employee during
her lay-off. The emphasis in East Asiatic is the duty of both the employer and the employee to disclose
the material facts and competent evidence within their peculiar knowledge relative to the proper
determination of backwages, especially as the earnings derived by the employee elsewhere are
deductions to which the employer are entitled. However, East Asiatic does not find relevance in the
resolution of the issue before us. First, the material date to consider is 21 March 1989, when the law
amending Article 279 of the Labor Code, Rep. Act No. 6715, otherwise known as the Herrera-Veloso
Law, took effect. It is obvious that the backdrop of East Asiatic, decided by this Court on 31 August 1971
was prior to the current state of the law on the definition of full backwages. Second, it bears stressing
that East Asiatic was decided at a time when even as an illegally dismissed employee is entitled to the
whole amount of the salaries or wages, it was the recognized right of the employer to deduct from the
total of these, the amount equivalent to the salaries or wages the employee or worker would have
earned in his old employment on the corresponding days that he was actually gainfully employed
elsewhere with an equal or higher salary or wage, such that if his salary or wage in his other
employment was less, the employer may deduct only what has been actually earned.49 It is for this

reason the Court centered its discussion on the duty of both parties to be candid and open about facts
within their knowledge to establish the amount of the deductions, and not leave the burden on the
employee alone to establish his claim, as well as on the duty of the court to compel the parties to
cooperate in disclosing such material facts. The inapplicability of East Asiatic to respondent Sadac was
sufficiently elucidated upon by the NLRC, viz.:
A full discernment of the pertinent portion of the judgment sought to be executed in East Asiatic Co.,
Ltd. would reveal as follows:
"x x x to reinstate Soledad A. Dizon immediately to her former position with backwages from September
1, 1958 until actually reinstated with all the rights and privileges acquired and due her, including
seniority and such other terms and conditions of employment AT THE TIME OF HER LAY-OFF"
The basis on which this doctrine was laid out was summed up by the Supreme Court which ratiocinated
in this light. To quote:
"x x x on the other hand, of the employer to deduct from the total of these, the amount equivalent to
these salaries or wages the employee or worker would have earned in his old employment on the
corresponding days that he was actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the employer may deduct only
what has been actually earned x x x" (Ibid, pp. 547-548).
But the Supreme Court, in the instant case, pronounced a clear but different judgment from that of East
Asiatic Co. decretal portion, in this wise:
"WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: that private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; xxx"
Undisputably (sic), it was decreed in plain and unambiguous language that complainant Sadac "shall be
entitled to backwages." No more, no less.
Thus, this decree for Sadac cannot be considered in any way, substantially in essence, with the award of
backwages as pronounced for Ms. Dizon in the case of East Asiatic Co. Ltd.50
In the same vein, we cannot accept the Court of Appeals reliance on the doctrine as espoused in
Millares. It is evident that Millares concerns itself with the computation of the salary base used in
computing the separation pay of petitioners therein. The distinction between backwages and separation
pay is elementary. Separation pay is granted where reinstatement is no longer advisable because of
strained relations between the employee and the employer. Backwages represent compensation that
should have been earned but were not collected because of the unjust dismissal. The bases for
computing the two are different, the first being usually the length of the employees service and the
second the actual period when he was unlawfully prevented from working.51
The issue that confronted the Court in Millares was whether petitioners housing and transportation
allowances therein which they allegedly received on a monthly basis during their employment should
have been included in the computation of their separation pay. It is plain to see that the reference to
general increases in Millares citing East Asiatic was a mere obiter. The crux in Millares was our

pronouncement that the receipt of an allowance on a monthly basis does not ipso facto characterize it
as regular and forming part of salary because the nature of the grant is a factor worth considering.
Whether salary increases are deemed part of the salary base in the computation of backwages was not
the issue in Millares.
Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy. What was mainly
contentious therein was the inclusion of fringe benefits in the computation of the award of backwages,
in particular additional vacation and sick leaves granted to therein concerned employees, it evidently
appearing that the reference to East Asiatic in a footnote was a mere obiter dictum. Salary increases are
not akin to fringe benefits52 and neither is it logical to conceive of both as belonging to the same
taxonomy.
We must also resolve against the applicability of Sigma Personnel Services to the case at bar. The basic
issue before the Court therein was whether the employee, Susan Sumatre, a domestic helper in Abu
Dhabi, United Arab Emirates, had been illegally dismissed, in light of the contention of Sigma Personnel
Services, a duly licensed recruitment agency, that the former was a mere probationary employee who
was, on top of this status, mentally unsound.53 Even a cursory reading of Sigma Personnel Services citing
St. Louis College of Tuguegarao would readily show that inclusion of salary increases in the computation
of backwages was not at issue. The same was not on all fours with the instant petition.
What, then, is the basis of computation of backwages? Are annual general increases in basic salary
deemed component in the computation of full backwages? The weight of authority leans in petitioner
Banks favor and against respondent Sadacs claim for the inclusion of general increases in the
computation of his backwages.
We stressed in Paramount that an unqualified award of backwages means that the employee is paid at
the wage rate at the time of his dismissal, thus:
The determination of the salary base for the computation of backwages requires simply an application
of judicial precedents defining the term "backwages". Unfortunately, the Labor Arbiter erred in this
regard. An unqualified award of backwages means that the employee is paid at the wage rate at the
time of his dismissal [Davao Free Worker Front v. Court of Industrial Relations, G.R. No. L-29356,
October 27, 1975, 67 SCRA 418; Capital Garments Corporation v. Ople, G.R. No. 53627, September 30,
1982, 117 SCRA 473; Durabilt Recapping Plant & Company v. NLRC, G.R. No. 76746, July 27, 1987, 152
SCRA 328]. And the Court has declared that the base figure to be used in the computation of backwages
due to the employee should include not just the basic salary, but also the regular allowances that he had
been receiving, such as the emergency living allowances and the 13th month pay mandated under the
law [See Pan-Philippine Life Insurance Corporation v. NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA
866; Santos v. NLRC, G.R. No. 76721, September 21, 1987, 154 SCRA 166; Soriano v. NLRC, G.R. No.
75510, October 27, 1987, 155 SCRA 124; Insular Life Assurance Co., Ltd. v. NLRC, supra.]54 (Emphasis
supplied.)
There is no ambivalence in Paramount, that the base figure to be used in the computation of backwages
is pegged at the wage rate at the time of the employees dismissal, inclusive of regular allowances that
the employee had been receiving such as the emergency living allowances and the 13th month pay
mandated under the law.

In Evangelista v. National Labor Relations Commission,55 we addressed the sole issue of whether the
computation of the award of backwages should be based on current wage level or the wage levels at the
time of the dismissal. We resolved that an unqualified award of backwages means that the employee is
paid at the wage rate at the time of his dismissal, thus:
As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the determination of the salary base
for the computation of backwages requires simply an application of judicial precedents defining the
term "backwages." An unqualified award of backwages means that the employee is paid at the wage
rate at the time of his dismissal. Furthermore, the award of salary differentials is not allowed, the
established rule being that upon reinstatement, illegally dismissed employees are to be paid their
backwages without deduction and qualification as to any wage increases or other benefits that may
have been received by their co-workers who were not dismissed or did not go on strike.56
The case of Paramount was relied upon by the Court in the latter case of Espejo v. National Labor
Relations Commission,57 where we reiterated that the computation of backwages should be based on
the basic salary at the time of the employees dismissal plus the regular allowances that he had been
receiving. Further, the clarification made by the Court in General Baptist Bible College v. National Labor
Relations Commission,58settles the issue, thus:
We also want to clarify that when there is an award of backwages this actually refers to backwages
without qualifications and deductions. Thus, We held that:
"The term backwages without qualification and deduction means that the workers are to be paid their
backwages fixed as of the time of the dismissal or strike without deduction for their earnings elsewhere
during their layoff and without qualification of their wages as thus fixed; i.e., unqualified by any wage
increases or other benefits that may have been received by their co-workers who are not dismissed or
did not go on strike. Awards including salary differentials are not allowed. The salary base properly used
should, however, include not only the basic salary but also the emergency cost of living allowances and
also transportation allowances if the workers are entitled thereto."59 (Italics supplied.)
Indeed, even a cursory reading of the dispositive portion of the Courts Decision of 13 June 1997 in G.R.
No. 102467, awarding backwages to respondent Sadac, readily shows that the award of backwages
therein is unqualified, ergo, without qualification of the wage as thus fixed at the time of the dismissal
and without deduction.
A demarcation line between salary increases and backwages was drawn by the Court in Paguio v.
Philippine Long Distance Telephone Co., Inc.,60 where therein petitioner Paguio, on account of his illegal
transfer sought backwages, including an amount equal to 16 percent (16%) of his monthly salary
representing his salary increases during the period of his demotion, contending that he had been
consistently granted salary increases because of his above average or outstanding performance. We
said:
In several cases, the Court had the opportunity to elucidate on the reason for the grant of backwages.
Backwages are granted on grounds of equity to workers for earnings lost due to their illegal dismissal
from work. They are a reparation for the illegal dismissal of an employee based on earnings which the
employee would have obtained, either by virtue of a lawful decree or order, as in the case of a wage
increase under a wage order, or by rightful expectation, as in the case of ones salary or wage. The

outstanding feature of backwages is thus the degree of assuredness to an employee that he would have
had them as earnings had he not been illegally terminated from his employment.
Petitioners claim, however, is based simply on expectancy or his assumption that, because in the past
he had been consistently rated for his outstanding performance and his salary correspondingly
increased, it is probable that he would similarly have been given high ratings and salary increases but for
his transfer to another position in the company.
In contrast to a grant of backwages or an award of lucrum cessans in the civil law, this contention is
based merely on speculation. Furthermore, it assumes that in the other position to which he had been
transferred petitioner had not been given any performance evaluation. As held by the Court of Appeals,
however, the mere fact that petitioner had been previously granted salary increases by reason of his
excellent performance does not necessarily guarantee that he would have performed in the same
manner and, therefore, qualify for the said increase later. What is more, his claim is tantamount to
saying that he had a vested right to remain as Head of the Garnet Exchange and given salary increases
simply because he had performed well in such position, and thus he should not be moved to any other
position where management would require his services.61
Applying Paguio to the case at bar, we are not prepared to accept that this degree of assuredness
applies to respondent Sadacs salary increases. There was no lawful decree or order supporting his
claim, such that his salary increases can be made a component in the computation of backwages. What
is evident is that salary increases are a mere expectancy. They are, by its nature volatile and are
dependent on numerous variables, including the companys fiscal situation and even the employees
future performance on the job, or the employees continued stay in a position subject to management
prerogative to transfer him to another position where his services are needed. In short, there is no
vested right to salary increases. That respondent Sadac may have received salary increases in the past
only proves fact of receipt but does not establish a degree of assuredness that is inherent in backwages.
From the foregoing, the plain conclusion is that respondent Sadacs computation of his full backwages
which includes his prospective salary increases cannot be permitted.
Respondent Sadac cannot take exception by arguing that jurisprudence speaks only of wage and not
salary, and therefore, the rule is inapplicable to him. It is respondent Sadacs stance that he was not paid
at the wage rate nor was he engaged in some form of manual or physical labor as he was hired as Vice
President of petitioner Bank. He cites Gaa v. Court of Appeals62 where the Court distinguished between
wage and salary.
The reliance is misplaced. The distinction between salary and wage in Gaa was for the purpose of Article
1708 of the Civil Code which mandates that, "[t]he laborers wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and medical attendance." In labor law,
however, the distinction appears to be merely semantics. Paramount and Evangelista may have involved
wage earners, but the petitioner in Espejo was a General Manager with a monthly salary of P9,000.00
plus privileges. That wage and salary are synonymous has been settled in Songco v. National Labor
Relations Commission.63 We said:
Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another mans business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services

rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary" are in
essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell,
85 N.Y.S.839, 841, 89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word
"salarium," is often used interchangeably with "wage", the etymology of which is the Middle English
word "wagen". Both words generally refer to one and the same meaning, that is, a reward or
recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Blacks Law
Dictionary, 5th Ed). x x x64 (Italics supplied.)
II.
Petitioner Bank ascribes as its second assignment of error the Court of Appeals ruling that respondent
Sadac is entitled to check-up benefit, clothing allowance and cash conversion of vacation leaves
notwithstanding that respondent Sadac did not present any evidence to prove entitlement to these
claims.65
The determination of respondent Sadacs entitlement to check-up benefit, clothing allowance, and cash
conversion of vacation leaves involves a question of fact. The well-entrenched rule is that only errors of
law not of facts are reviewable by this Court in a petition for review.66 The jurisdiction of this Court in a
petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is
limited to reviewing only errors of law, not of fact, unless the factual findings being assailed are not
supported by evidence on record or the impugned judgment is based on a misapprehension of
facts.67 This Court is also not precluded from delving into and resolving issues of facts, particularly if the
findings of the Labor Arbiter are inconsistent with those of the NLRC and the Court of Appeals.68 Such is
the case in the instant petition. The Labor Arbiter and the Court of Appeals are in agreement anent the
entitlement of respondent Sadac to check-up benefit, clothing allowance, and cash conversion of
vacation leaves, but the findings of the NLRC were to the contrary. The Labor Arbiter sustained
respondent Sadacs entitlement to check-up benefit, clothing allowance and cash conversion of vacation
leaves. He gave weight to petitioner Banks acknowledgment in its computation that respondent Sadac
is entitled to certain benefits, namely, rice subsidy, tuition fee allowance, and medicine allowance, thus,
there exists no reason to deprive respondent Sadac of his other benefits. The Labor Arbiter also
reasoned that the petitioner Bank did not adduce evidence to support its claim that the benefits sought
by respondent Sadac are not granted to its employees and officers. Similarly, the Court of Appeals
ratiocinated that if ordinary employees are entitled to receive these benefits, so it is with more reason
for a Vice President, like herein respondent Sadac to receive the same.
We find in the records that, per petitioner Banks computation, the benefits to be received by
respondent are monthly rice subsidy, tuition fee allowance per year, and medicine allowance per
year.69 Contained nowhere is an acknowledgment of herein claimed benefits, namely, check-up benefit,
clothing allowance, and cash conversion of vacation leaves. We cannot sustain the rationalization that
the acknowledgment by petitioner Bank in its computation of certain benefits granted to respondent
Sadac means that the latter is also entitled to the other benefits as claimed by him but not
acknowledged by petitioner Bank. The rule is, he who alleges, not he who denies, must prove. Mere
allegations by respondent Sadac does not suffice in the absence of proof supporting the same.
III.

We come to the third assignment of error raised by petitioner Bank in its Supplement to Petition for
Review, assailing the 26 October 2004 Supplemental Decision of the Court of Appeals which amended
the fallo of its 6 April 2004 Decision to include "attorneys fees equal to TEN PERCENT (10%) of all the
monetary award" granted to respondent Sadac. Petitioner Bank posits that neither the dispositive
portion of our 13 June 1997 Decision in G.R. No. 102467 nor the body thereof awards attorneys fees to
respondent Sadac. It is postulated that the body of the 13 June 1997 Decision does not contain any
findings of facts or conclusions of law relating to attorneys fees, thus, this Court did not intend to grant
to respondent Sadac the same, especially in the light of its finding that the petitioner Bank was not
motivated by malice or bad faith and that it did not act in a wanton, oppressive, or malevolent manner
in terminating the services of respondent Sadac.70
We do not agree.
At the outset it must be emphasized that when a final judgment becomes executory, it thereby becomes
immutable and unalterable. The judgment may no longer be modified in any respect, even if the
modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the Court rendering it or by the
highest Court of the land. The only recognized exceptions are the correction of clerical errors or the
making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of course, where
the judgment is void.71 The Courts 13 June 1997 Decision in G.R. No. 102467 became final and
executory on 28 July 1997. This renders moot whatever argument petitioner Bank raised against the
grant of attorneys fees to respondent Sadac. Of even greater import is the settled rule that it is the
dispositive part of the judgment that actually settles and declares the rights and obligations of the
parties, finally, definitively, and authoritatively, notwithstanding the existence of inconsistent
statements in the body that may tend to confuse.72
Proceeding therefrom, we make a determination of whether the Court in Equitable Banking Corporation
v. National Labor Relations Commission,73 G.R. No. 102467, dated 13 June 1997, awarded attorneys fees
to respondent Sadac. In recapitulation, the dispositive portion of the aforesaid Decision is hereunder
quoted:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that the
award of moral and exemplary damages are deleted; and that the liability herein pronounced shall be
due from petitioner bank alone, the other petitioners being absolved from solidary liability. No costs.74
The dispositive portion of the 24 September 1991 Decision of the NLRC awards respondent Sadac
attorneys fees equivalent to ten percent (10%) of the monetary award, viz:
WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is
hereby, SET ASIDE and a new one ENTERED declaring the dismissal of the complainant as illegal, and
consequently ordering the respondents jointly and severally to reinstate him to his former position as
bank Vice-President and General Counsel without loss of seniority rights and other privileges, and to pay
him full backwages and other benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary damages of P50,000.00, and

attorneys fees equivalent to Ten Percent (10%) of the monetary award. Should reinstatement be no
longer possible due to strained relations, the respondents are ordered likewise jointly and severally to
grant separation pay at one (1) month per year of service in the total sum of P293,650.00 with
backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date, subject to
adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00
(exemplary damages) and attorneys fees equal to Ten Percent (10%) of all the monetary award, or a
grand total of P1,649,329.53.75 (Italics Ours.)
As can be gleaned from the foregoing, the Courts Decision of 13 June 1997 AFFIRMED with
MODIFICATION the NLRC Decision of 24 September 1991, which modification did not touch upon the
award of attorneys fees as granted, hence, the award stands. Juxtaposing the decretal portions of the
NLRC Decision of 24 September 1991 with that of the Courts Decision of 13 June 1997, we find that
what was deleted by the Court was "the award of moral and exemplary damages," but not the award of
"attorneys fees equivalent to Ten Percent (10%) of the monetary award." The issue on the grant of
attorneys fees to respondent Sadac has been adequately and definitively threshed out and settled with
finality when petitioner Bank came to us for the first time on a Petition for Certiorari in Equitable
Banking Corporation v. National Labor Relations Commission, docketed as G.R. No. 102467. The Court
had spoken in its Decision of 13 June 1997 in the said case which attained finality on 28 July 1997. It is
now immutable.
IV.
We proceed with the penultimate issue on the entitlement of respondent Sadac to twelve percent (12%)
interest per annum on the outstanding balance as of 28 July 1997, the date when our Decision in G.R.
No. 102467 became final and executory.
In Eastern Shipping Lines, Inc. v. Court of Appeals,76 the Court, speaking through the Honorable Justice
Jose C. Vitug, laid down the following rules of thumb:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual or compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until
the demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or

extrajudicially (Article 1169, Civil Code) but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2 above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.77
It is obvious that the legal interest of twelve percent (12%) per annum shall be imposed from the time
judgment becomes final and executory, until full satisfaction thereof. Therefore, petitioner Bank is liable
to pay interest from 28 July 1997, the finality of our Decision in G.R. No. 102467.78 The Court of Appeals
was not in error in imposing the same notwithstanding that the parties were at variance in the
computation of respondent Sadacs backwages. What is significant is that the Decision of 13 June 1997
which awarded backwages to respondent Sadac became final and executory on 28 July 1997.
V.
Finally, petitioner Banks Motion to Refer the Petition En Banc must necessarily be denied as established
in our foregoing discussion. We are not herein modifying or reversing a doctrine or principle laid down
by the Court en banc or in a division. The instant case is not one that should be heard by the Court en
banc.791avvphil.net
Fallo
WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the computation of the
backwages, respondent Sadacs claimed prospective salary increases, check-up benefit, clothing
allowance, and cash conversion of vacation leaves are excluded. The petition is PARTIALLY DENIED
insofar as we AFFIRMED the grant of attorneys fees equal to ten percent (10%) of all the monetary
award and the imposition of twelve percent (12%) interest per annum on the outstanding balance as of
28 July 1997. Hence, the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 75013, dated
6 April 2004 and 28 July 2004, respectively, and the Supplemental Decision dated 26 October 2004 are
MODIFIED in the following manner, to wit:
Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:
(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R. No. 102467 with a
clarification that the award of backwages EXCLUDES respondent Sadacs claimed prospective salary
increases, check-up benefit, clothing allowance, and cash conversion of vacation leaves;
(2) ATTORNEYS FEES equal to TEN PERCENT (10%) of the total sum of all monetary award; and
(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the total sum of all monetary
award from 28 July 1997, the date of finality of Our Decision in G.R. No. 102467 until full payment of the
said monetary award.
The Motion to Refer the Petition to the Court En Banc is DENIED.

No costs.
SO ORDERED.

Songco v. NLRC, G.R. Nos. 50999-501000, March 23, 1990

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS, and
F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National Labor Relations
Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres, ComplainantsAppellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN- IV-20855-78-T
entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc., Respondent-Appellee," which
dismissed the appeal of petitioners herein and in effect affirmed the decision of the Labor Arbiter
ordering private respondent to pay petitioners separation pay equivalent to their one month salary
(exclusive of commissions, allowances, etc.) for every year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department of
Labor (Regional Office No. 4) an application seeking clearance to terminate the services of petitioners
Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners) allegedly on
the ground of retrenchment due to financial losses. This application was seasonably opposed by
petitioners alleging that the company is not suffering from any losses. They alleged further that they are
being dismissed because of their membership in the union. At the last hearing of the case, however,
petitioners manifested that they are no longer contesting their dismissal. The parties then agreed that
the sole issue to be resolved is the basis of the separation pay due to petitioners. Petitioners, who were
in the sales force of Zuellig received monthly salaries of at least P40,000. In addition, they received
commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members, contains the following provision (p. 71, Rollo):
ARTICLE XIV Retirement Gratuity

Section l(a)-Any employee, who is separated from employment due to old age, sickness, death or
permanent lay-off not due to the fault of said employee shall receive from the company a retirement
gratuity in an amount equivalent to one (1) month's salary per year of service. One month of salaryas
used in this paragraph shall be deemed equivalent to the salary at date of retirement; years of service
shall be deemed equivalent to total service credits, a fraction of at least six months being considered
one year, including probationary employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:
Art. 284. Reduction of personnel. The termination of employment of any employee due to the
installation of labor saving-devices, redundancy, retrenchment to prevent losses, and other similar
causes, shall entitle the employee affected thereby to separation pay. In case of termination due to the
installation of labor-saving devices or redundancy, the separation pay shall be equivalent to one (1)
month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and other similar causes, the separation pay shall be equivalent to one
(1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is due to retrechment initiated by the employer to
prevent losses or other similar causes, or where the employee suffers from a disease and his continued
employment is prohibited by law or is prejudicial to his health or to the health of his co-employees, the
employee shall be entitled to termination pay equivalent at least to his one month salary, or to one-half
month pay for every year of service, whichever is higher, a fraction of at least six (6) months being
considered as one whole year.
xxx
Sec. 10. Basis of termination pay. The computation of the termination pay of an employee as
provided herein shall be based on his latest salary rate, unless the same was reduced by the employer to
defeat the intention of the Code, in which case the basis of computation shall be the rate before its
deduction. (Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p.
78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay the complainants
separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for
every year of service that they have worked with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of merit.
Hence, the present petition.

On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal of
Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants "to
abide by the decision appealed from" since he had "received, to his full and complete satisfaction, his
separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and allowances should be included in the monthly
salary of petitioners for the purpose of computation of their separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount of separation pay due them,
whether under the Labor Code or the CBA, their basic salary, earned sales commissions and allowances
should be added together. They cited Article 97(f) of the Labor Code which includes commission as part
on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee. 'Fair reasonable value' shall not include any profit to the employer or to any person affiliated
with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules to
include commission in the computation of separation pay, it could have explicitly said so in clear and
unequivocal terms. Furthermore, in the definition of the term "wage", "commission" is used only as one
of the features or designations attached to the word remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in the monthly salary of petitioners
for the purpose of computation of their separation pay is concerned, this has been settled in the case
of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We ruled that "in
the computation of backwages and separation pay, account must be taken not only of the basic salary of
petitioner but also of her transportation and emergency living allowances." This ruling was reiterated
in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and recently, in Planters
Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales commission should be
included in the monthly salary of petitioner for the purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has
been repeatedly declared by the courts that where the law speaks in clear and categorical language,
there is no room for interpretation or construction; there is only room for application (Cebu Portland
Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v.
Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous statute
speaks for itself, and any attempt to make it clearer is vain labor and tends only to obscurity. How ever,
it may be argued that if We correlate Article 97(f) with Article XIV of the Collective Bargaining
Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, there

appears to be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in this manner (pp.
74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated as a
general definition. It is 'wage ' in its generic sense. A careful perusal of the same does not show any
indication that commission is part of salary. We can say that commission by itself may be considered a
wage. This is not something novel for it cannot be gainsaid that certain types of employees like agents,
field personnel and salesmen do not earn any regular daily, weekly or monthly salaries, but rely mainly
on commission earned.
Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules in
conjunction with Articles 273 and 274 (sic) of the Code specifically states that the basis of the
termination pay due to one who is sought to be legally separated from the service is 'his latest salary
rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.
The above terms found in those Articles and the particular Rules were intentionally used to express the
intent of the framers of the law that for purposes of separation pay they mean to be specifically
referring to salary only.
.... Each particular benefit provided in the Code and other Decrees on Labor has its own pecularities and
nuances and should be interpreted in that light. Thus, for a specific provision, a specific meaning is
attached to simplify matters that may arise there from. The general guidelines in (sic) the formation of
specific rules for particular purpose. Thus, that what should be controlling in matters concerning
termination pay should be the specific provisions of both Book VI of the Code and the Rules. At any rate,
settled is the rule that in matters of conflict between the general provision of law and that of a
particular- or specific provision, the latter should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the implementing rules, it could be deduced that wage
is used in its generic sense and obviously refers to the basic wage rate to be ascertained on a time, task,
piece or commission basis or other method of calculating the same. It does not, however, mean that
commission, allowances or analogous income necessarily forms part of the employee's salary because to
do so would lead to anomalies (sic), if not absurd, construction of the word "salary." For what will
prevent the employee from insisting that emergency living allowance, 13th month pay, overtime, and
premium pay, and other fringe benefits should be added to the computation of their separation pay.
This situation, to our mind, is not the real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article XIV
of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, which mention the terms "pay" and "salary", is more apparent than real. Broadly,
the word "salary" means a recompense or consideration made to a person for his pains or industry in
another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of
the Roman soldier, it carries with it the fundamental idea of compensation for services rendered.

Indeed, there is eminent authority for holding that the words "wages" and "salary" are in essence
synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.
839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word
"salarium," is often used interchangeably with "wage", the etymology of which is the Middle English
word "wagen". Both words generally refer to one and the same meaning, that is, a reward or
recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law
Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the same meaning, and
commission is included in the definition of "wage", the logical conclusion, therefore, is, in the
computation of the separation pay of petitioners, their salary base should include also their earned sales
commissions.
The aforequoted provisions are not the only consideration for deciding the petition in favor of the
petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in the
form of incentives or encouragement, so that the petitioners would be inspired to put a little more
industry on the jobs particularly assigned to them, still these commissions are direct remuneration
services rendered which contributed to the increase of income of Zuellig . Commission is the
recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor, broker
or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit
to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749,
750). The nature of the work of a salesman and the reason for such type of remuneration for services
rendered demonstrate clearly that commission are part of petitioners' wage or salary. We take judicial
notice of the fact that some salesmen do not receive any basic salary but depend on commissions and
allowances or commissions alone, are part of petitioners' wage or salary. We take judicial notice of the
fact that some salesman do not received any basic salary but depend on commissions and allowances or
commissions alone, although an employer-employee relationship exists. Bearing in mind the preceeding
dicussions, if we adopt the opposite view that commissions, do not form part of wage or salary, then, in
effect, We will be saying that this kind of salesmen do not receive any salary and therefore, not entitled
to separation pay in the event of discharge from employment. Will this not be absurd? This narrow
interpretation is not in accord with the liberal spirit of our labor laws and considering the purpose of
separation pay which is, to alleviate the difficulties which confront a dismissed employee thrown the the
streets to face the harsh necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be
used in computing the separation pay, We held that:
The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are not
properly includible in such base figure since such commissions must be earned by actual market
transactions attributable to petitioner.
Applying this by analogy, since the commissions in the present case were earned by actual market
transactions attributable to petitioners, these should be included in their separation pay. In the
computation thereof, what should be taken into account is the average commissions earned during their
last year of employment.

The final consideration is, in carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the workingman's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and substance to the liberal and compassionate
spirit of the law as provided for in Article 4 of the Labor Code which states that "all doubts in the
implementation and interpretation of the provisions of the Labor Code including its implementing rules
and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152
SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July 12,1989), and Article 1702 of the
Civil Code which 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.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor
Relations Commission is MODIFIED by including allowances and commissions in the separation pay of
petitioners Jose Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the proper
computation of said separation pay.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ., concur.

Sugue v. Triumph International, G.R. No. 164804, January 30, 2009

FIRST DIVISION
VIRGINIA A. SUGUE and THE HEIRS OF RENATO G.R. No. 164804
S. VALDERRAMA,
Petitioners,

- versus -

TRIUMPH INTERNATIONAL (PHILS.), INC.,

Respondent.

TRIUMPH INTERNATIONAL (PHILS.), INC.,

Petitioner,

G.R. No. 164784

Present:

PUNO, C.J.,*
CARPIO,** Acting Chairperson,
- versus AUSTRIA-MARTINEZ,***
CORONA,
CARPIO MORALES,*** and
VIRGINIA A. SUGUE and THE HEIRS OF RENATO LEONARDO-DE CASTRO, JJ.
S. VALDERRAMA,
Respondents.
Promulgated:

January 30, 2009

x------------------------------------------------------------------------------------------x

DECISION

LEONARDO-DE CASTRO, J.:

Before us are consolidated petitions for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure filed by both contending parties assailing the Decision[1] datedApril 23, 2004 and the
Resolution[2] dated July 21, 2004 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 68591.
In G.R. No. 164804, petitioners Virginia Sugue (Sugue) and the Heirs of Renato Valderrama (Valderrama)
question the CA decision which partly granted their appeal but deleted the attorneys fees and reduced
the moral and exemplary damages awarded to them.
On the other hand, in G.R. No. 164784, petitioner Triumph International (Phils.), Inc. (Triumph hereafter)
assails the CA decision for setting aside an earlier decision[3] of the National Labor Relations Commission
(NLRC) dated June 13, 2001 which ruled in its favor.
The antecedents of the case show that Triumph hired Sugue in May 1990 as its Assistant Manager for
Marketing and was subsequently promoted to Marketing Services Manager with a monthly salary
of P82,500.00. On the other hand, Valderrama was hired in April 1993 as Direct Sales Manager with a
monthly salary of P121,000.00. Their main function/responsibility was to ensure that the companys sales
targets and objectives were met.
Beginning sometime in October 1999, Triumphs top management began to notice a sharp decline in the
sales of the company. Moreover, in the following months, the actual sales figures continued to be

significantly below the sales targets set by Valderrama himself. This persistent below target sales
performance was the subject of correspondence between Valderrama and his superiors from November
1999 to July 2000.[4]
On June 1, 2000, Sugue and Valderrama filed a complaint with the NLRC against Triumph for payment of
money claims arising from allegedly unpaid vacation and sick leave credits, birthday leave and 14th month
pay for the period 1999-2000. Said complaint was docketed as NLRC-NCR-Case No. 00-06-03008-2000.[5]
On June 19, 2000, Sugue and Valderrama personally attended the preliminary conference of the said case.
The following day, a memorandum was issued by Triumphs Managing Director/General Manager, Alfredo
Escueta, reminding all department heads of existing company policy that requires department heads to
notify him (Escueta) before leaving the office during work hours.[6] That same day, Triumphs Personnel
Manager, Ralph Funtila, issued separate memoranda to Sugue and Valderrama requiring them to inform
the office of the General Manager of their whereabouts on June 19, 2000 from 9:06 a.m. to 11:15 a.m.
They replied that they attended the aforementioned preliminary conference.[7]
On June 23, 2000, Valderrama and Sugue were directed to submit a written explanation as to why they
used company time and the company vehicle and driver in attending the preliminary conference at the
NLRC and why they left the office without advising the Managing Director. They explained that they
believed they may use company time and the company vehicle since the hearing they attended was
pursuant to a complaint that they filed as employees of the company.
On June 28, 2000, Triumph charged the one-half day utilized by Sugue and Valderrama in attending the
NLRC hearing on June 19, 2000 to their vacation leave credits.
In the pleadings, Valderrama likewise complained that his request for an executive check-up on June 19,
2000 was disapproved by Triumph. Thereafter, Valderrama did not report for work on July 3 to 5,
2000 due allegedly to persistent cough and vertigo, but his request for sick leave on those dates was
disapproved by Triumph because he failed to submit a medical certificate as required by the companys
rules and policies.
Subsequently, on July 10, 2000, Triumph issued a show cause memo to Valderrama requiring him to
explain, among others, his departments dismal performance since October 1999, within 48 hours from
receipt.[8] On July 11, 2000, Valderrama replied to the show cause memo.[9]
On July 17, 2000, Valderrama wrote the company a letter stating that he considered himself constructively
dismissed due to the unreasonable pressures and harassments he suffered the past months which
prevented him from effectively exercising his tasks as Direct Sales Manager.[10]
Subsequently, on July 28, 2000, Triumph issued a memorandum requiring Valderrama to explain, under
pain of dismissal, his continued absences without official leave. Valderrama failed to respond, thus,
on August 11, 2000, Triumph decided to terminate Valderramas employment for abandonment of
work.[11]
Meanwhile, on July 25, 2000, Sugue also wrote the company stating that she considers herself
constructively dismissed.[12] From the pleadings, Sugues charge of constructive dismissal was based on the
fact that her request for vacation leave from July 14 to 15, 2000 was subject to the condition that she first
submit a report on the companys 2001 Marketing Plan. Also, the approval of her request for executive

check-up was deferred. Then, on July 18, 2000, she received a memorandum instructing her to report to
Mr. Efren Temblique, who was appointed OIC for Marketing as a result of a reorganization prompted by
Valderramas continued absences. Sugue claimed that such act by Triumph was an outright demotion
considering that Mr. Temblique was her former assistant.
On August 11, 2000, Triumph required Sugue to explain why she should not be terminated for continued
absences without official leave.[13] Sugue failed to comply, thus, onSeptember 1, 2000, her employment
was terminated for abandonment of work.[14]
Prior to the actual termination of their employment by Triumph, Sugue and Valderrama filed on July 31,
2000 a complaint for constructive dismissal against Triumph, docketed asNLRC NCR Case No. 00-07-039652000.[15]
The following day, on August 1, 2000, Valderrama commenced his employment as Sales Director of Fila
Phils., Inc., a competitior of Triumph.
On March 15, 2001, Labor Arbiter Salimathar Nambi rendered a decision, declaring that Sugue and
Valderrama were constructively dismissed. The dispositive portion of the Labor Arbiters decision follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Triumph
International (Phils.), Inc. to:
1) Pay, since reinstatement is not feasible, complainants Virginia A. Sugue and Renato Valderrama their
separation pay computed at one month salary for every year of service from their initial engagement on
May 1990 and April 1993, respectively.
2) Pay both complainants full backwages from the time that they were constructively dismissed, i.e.
from 17 July 2000 in the case of Valderrama and from 25 July 2000 in the case of Sugue until finality of
judgment.
3)

Pay P2,000,000.00 as moral damages to each of the complainants

4)

Pay P1,000,000.00 as exemplary damages to each of the complainants.

5)

Reimburse the complainants the 20% of the amounts claimed as attorneys fees.

SO ORDERED.[16]

Aggrieved, Triumph filed an appeal with the NLRC,[17] and in a decision dated June 13, 2001, the First
Division of the NLRC granted the appeal and reversed the ruling of Labor Arbiter Nambi.
Not satisfied with the NLRC decision, Sugue and Valderrama elevated the matter to the CA by way of a
petition for certiorari. While the matter was pending with the CA, Valderrama passed away (on July 3,
2003) and notice of his death was filed by his counsel.[18]
On April 23, 2004, the CA rendered its assailed decision, the dispositive portion of which reads:

WHEREFORE, the petition is partly granted. The Decision dated June 13, 2001 of public respondent NLRC
is hereby set aside, and the Decision dated March 15, 2001 of the labor arbiter is reinstated, subject to
the deletion of the award of attorneys fees and the reduction of the award of moral damages to
P500,000.00 and exemplary damages to 250,000.00, for each of the petitioners.
SO ORDERED.[19]

Triumphs subsequent motion for reconsideration as well as the motion for partial reconsideration filed by
Sugue and the heirs of Valderrama were both denied by the appellate court in its resolution dated July
21, 2004.
Hence, the parties filed the present petitions which were consolidated by this Court in a Resolution
dated September 27, 2004.[20]
In G.R. No. 164804, petitioners therein Sugue and the heirs of Valderrama allege that the Court of Appeals
gravely erred in deleting the labor arbiters award of attorneys fees.[21]
In G.R. No. 164784, petitioner therein Triumph cites the following reasons why the Court should rule in
its favor:
I
The Court of Appeals gravely erred and contravened prevailing jurisprudence in abandoning the NLRCs
findings of fact and making its own findings. The rule is basic that the factual findings of the NLRC are
accorded respect, if not finality, considering that the same were based on evidence on record.
Reassessment of evidence is beyond the province of a writ of certiorari.
II
The Court of Appeals gravely erred and contravened the law and jurisprudence in ruling that Valderama
and Sugue were constructively dismissed, and are entitled to separation pay, backwages and damages.
The facts of the case, as correctly found by the NLRC based on evidence on record, clearly belie their
contention that they were constructively dismissed.[22]

From the allegations of the respective parties in their pleadings, it is clear that the controversies involved
in the two consolidated cases center on the question of whether Valderrama and Sugue were
constructively dismissed by Triumph.
At the outset, it should be stated that the main issue in this case involves a question of fact. It is an
established rule that the jurisdiction of the Supreme Court in cases brought before it from the CA via Rule
45 of the 1997 Rules of Civil Procedure is generally limited to reviewing errors of law.[23] This Court is not
a trier of facts. In the exercise of its power of review, the findings of fact of the CA are conclusive and
binding and consequently, it is not our function to analyze or weigh evidence all over again.[24]
The above rule, however, is not without exceptions. In Sta. Maria v. Court of Appeals,[25] we enumerated
the instances when the factual findings of the CA are not deemed conclusive, to wit: (1) when the
conclusion is a finding grounded entirely on speculations, surmises or conjecture; (2) when the inference
made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when
the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6)

when the CA, in making its findings, went beyond the issues of the case and the same are contrary to the
admission of both the appellant and the appellee; (7) when the findings are contrary to those of the trial
court; (8) when the findings are conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondent; and (10) when the findings of fact are premised on the supposed evidence
and contradicted by the evidence on record.
In the instant case, it appears that there is a divergence between the findings of facts of the NLRC and
that of the CA. Hence, we are constrained to review the factual findings made by the NLRC and the
appellate court.
After a thorough review of the evidence on record, we find sufficient reasons to uphold Triumphs position.
Constructive dismissal is defined as an involuntary resignation resorted to when continued employment
becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay;
or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an
employee.[26]
On a preliminary point, we note that Sugue and Valderrama discuss extensively in their pleadings alleged
denial of leave applications and unpaid cash conversion of unused leaves and other monetary benefits
which moved them to file a complaint for monetary claims on June 1, 2000.[27] We find no need to pass
upon these matters here precisely because they are the subject matters of a separate case and properly
threshed out therein. In any event, it is Sugue and Valderramas theory that Triumphs acts of harassment,
upon which they base their charge of constructive dismissal, were in retaliation for their filing of the
aforementioned complaint for unpaid benefits.[28] The acts which purportedly show discrimination and
bad faith on the part of Triumph are summarized below:
In the case of Valderrama:
1.
The half-day he spent in attending the NLRC hearing on June 19, 2000 was charged to his vacation
leave credit;
2.
His application for sick leave for July 3 to 5, 2000 was disapproved; and
3.
His request for executive check-up was denied.
In the case of Sugue:
1. The half-day she spent in attending the NLRC hearing on June 19, 2000 was charged to her vacation
leave credit;
2. The approval of her application for leave of absence for July 14 and 15, 2000 was made subject to the
condition that she should first submit a report on the 2001 Marketing Plan;
3. The approval of her request for executive check-up was deferred until after the visit of the companys
regional marketing manager; and
4. A memorandum was issued instructing her to report to her former assistant, Mr. Temblique, which was
allegedly tantamount to a demotion.
According to Sugue and Valderrama, this series of discriminatory acts committed by Triumph created an
adverse working environment rendering it impossible for them to continue working for Triumph. Hence,

their severance from the company was not of their own making and therefore amounted to constructive
dismissal which is tantamount to an illegal termination of employment.
With respect to the first alleged discriminatory act, we can conceive of no reason to ascribe bad faith or
malice to Triumph for charging to the leave credits of Sugue and Valderrama the half-day that they spent
in attending the preliminary conference of the case they instituted against Triumph. It is fair and
reasonable for Triumph to do so considering that Sugue and Valderrama did not perform work for onehalf day on June 19, 2000.
Indeed, we find it surprising that Sugue and Valderrama would even have the temerity to contend that
the hours they spent in attending the hearing were compensable time. As the NLRC correctly pointed out,
as early as the case of J.B. Heilbronn Co. v. National Labor Union,[29] this Court held that:
When the case of strikes, and according to the CIR even if the strike is legal, strikers may not collect their
wages during the days they did not go to work, for the same reasons if not more,laborers who voluntarily
absent themselves from work to attend the hearing of a case in which they seek to prove and establish
their demands against the company, the legality and propriety of which demands is not yet known,
should lose their pay during the period of such absence from work. The age-old rule governing the
relation between labor and capital or management and employee is that a "fair day's wage for a fair
day's labor." If there is no work performed by the employee there can be no wage or pay, unless of course,
the laborer was able, willing and ready to work but was illegally locked out, dismissed or suspended. It is
hardly fair or just for an employee or laborer to fight or litigate against his employer on the employer's
time.
In a case where a laborer absents himself from work because of a strike or to attend a conference or
hearing in a case or incident between him and his employer, he might seek reimbursement of his wages
from his union which had declared the strike or filed the case in the industrial court. Or, in the present
case, he might have his absence from his work charged against his vacation leave. xxx (Emphasis ours)
This doctrine in Heilbronn was reiterated in Manila Trading & Supply Co. v. Manila Trading Labor
Association[30] and quoted favorably in later cases.[31] Triumph is, thus, justified in charging Sugue and
Valderramas half-day absence to their vacation leave credits.
Corollarily, we cannot uphold the CAs approval of the Labor Arbiters finding that the memoranda issued
by Triumph in connection with the June 19, 2000 hearing constitute undue harassment.
To begin with, the complained of Memorandum dated June 20, 2000 issued by Mr. Escueta, regarding the
company policy that required department heads to give prior notice to the General Manager if they will
be away from the office during office hours, did not single out Sugue and Valderrama but was addressed
to all department heads. Contrary to Sugue and Valderramas assertion that said policy was being
retroactively applied to them, it is plain on the face of the same memorandum (a copy of which was even
attached to their Position Paper filed with the Labor Arbiter)[32] that the policy of requiring department
heads to give notice to the Office of the Managing Director/General Manager should they leave the office
during regular work hours had been in force since 1997. The memoranda of Mr. Funtila, requiring Sugue
and Valderrama to inform the office of the General Manager of their whereabouts on the morning of June
19, 2000, could not be deemed a form of harassment but rather it was in keeping with due process.
Notwithstanding the fact that the company had received summons for the same hearing, the company
could not simply assume that the hearing was the reason for Valderrama and Sugues absence. When an
employer believes that there has been a possible violation of company rules or policies, the law, in fact,

requires the employer to give the employee ample opportunity to explain. Finally, the memoranda
informing Valderrama and Sugue that they cannot use company time and the company vehicle when
attending hearings for the case they filed against the company and that their absence would be charged
against their vacation leaves were, as discussed above, in accordance with existing jurisprudence and
principles of fair play. Verily, this is not a case of ordinary workers with limited resources who were being
unlawfully pressured or prevented by their employer from pursuing their claims. Sugue and Valderrama
are highly educated managers who were ably represented by counsel and were then being paid handsome
compensation packages by Triumph. Even assuming that Sugue and Valderrama in good faith believed
that they are merely exercising their legal right to prosecute their monetary claims when they chose to
absent themselves from work to attend the June 19, 2000, it would have imposed little burden on them
to have the courtesy to inform their employer beforehand of their intention to personally attend the
hearing and the decency to do so on their own time and at their own expense.
Anent Sugue and Valderramas claim that they were unjustly denied availment of their leaves as part of a
scheme on the part of Triumph to harass them, we find the same patently without merit.
In the case of Valderrama, he applied for sick leave for the period July 3 to 5, 2000 allegedly because of
persistent cough and vertigo, but this was disapproved by Triumph. The record, however, reveals that he
failed to comply with the companys requirement that an application for sick leave for two or more days
must be supported by a medical certificate which must be verified by the company physician. He was even
given twenty-four (24) hours to submit the same but he totally ignored it. That his sick leave application
was denied was mainly due to his own fault and must not be unduly blamed on his employer.
For her part, Sugue condemns Triumph for putting a condition on the approval of her two days vacation
leave for July 14 and 15, 2000, when she was required to first submit a report on the 2001 Marketing Plan.
To be very accurate, Mr. Escuetas memorandum dated July 13, 2000 advised Sugue that her application
for leave will be approved if she will commit to submit her reports in connection with the 2001 Marketing
Plan by July 17, 2000, which was two days after her leave. Again, we find nothing discriminatory in such a
condition considering that she was unable to show that she was the only employee whose leave
application has been subjected to a condition. Discrimination is the failure to treat all persons equally
when no reasonable distinction can be found between those favored and those not favored.[33] Sugue
obviously failed to substantiate her claim of discrimination. To be sure, he who asserts must prove.[34] On
the contrary, the record shows that as early as October 12, 1999, a memorandum was issued by Triumph
addressed to all department heads that leave applications may be approved, disapproved or postponed
depending on the (1) business status due to CBA; (2) companys urgent need for their presence; and (3)
CBA negotiations status.[35] Evidently, this directive applies not just to Sugue but to all department heads.
Although this memorandum was supposedly in force only until December 1999, it establishes a precedent
for the company imposing conditions on the approval of leave applications of department heads.
As for the nature of the condition itself, we do not see how it can be deemed unreasonable or in bad faith
for the employer to require its employee to complete her assignments on time or before taking a vacation
leave. Being the Marketing Services Manager, Sugues reports were indispensable in the preparation of
the 2001 Marketing Plan plus the fact that the company had been experiencing a significant decline in
sales at that time which all the more emphasizes the need for her to submit an updated report relative to
the 2001 Initial Marketing Plan. For sure, she failed to show that the company prevented her from availing
of her vacation leave afterwards or at some other time. Clearly then, there was no discrimination nor
harassment to speak of.

Third, both Sugue and Valderrama question the denial by Triumph of their request for executive checkup. It should be noted that Triumph did not completely turn down their request. Based on Sugue and
Valderramas own evidence, their request was merely deferred because the 2001 Initial Marketing Plan
was due on June 26, 2000 and Triumphs regional product manager was scheduled to visit the country
on June 26 to 29, 2000.[36] As Valderrama was the Direct Sales Manager and Sugue was the Marketing
Services Manager, their presence on those dates was undoubtedly needed. Thus, their contention that
the approval of their request was indefinitely withheld is apocryphal. In fact, there is nothing that
prevented them from scheduling their executive check-up after the visit of the regional marketing
manager.
It is worth stressing that in the grant of vacation and sick leave privileges to an employee, the employer is
given leeway to impose conditions on the entitlement to the same as the grant of vacation and sick leave
is not a standard of law, but a prerogative of management. It is a mere concession or act of grace of the
employer and not a matter of right on the part of the employee.[37] Thus, it is well within the power and
authority of an employer to deny an employees application for leave and the same cannot be perceived
as discriminatory or harassment.
Sugue next asserts that she was demoted when she was directed to report to Mr. Efren Temblique who
was her subordinate and when she was stripped of her usual functions. We are far from convinced.
Demotion involves a situation where an employee is relegated to a subordinate or less important position
constituting a reduction to a lower grade or rank, with a corresponding decrease in salaries, benefits and
privileges.[38]
The evidence on hand belies Sugues assertion, the truth being that prior to the reorganization, Mr.
Temblique occupied the position of Assistant Manager for Direct Sales,[39] and as such was Valderramas
subordinate and not of Sugue. Sugue likewise failed to adequately prove her assertion that she reported
directly to the General Manager, Mr. Escueta, when she was Marketing Services Manager or that she was
not subordinate to Valderrama. To show that she was reporting directly to Mr. Escueta, Sugue adverts to
Annexes U and V of her Position Paper. However, Annexes U and V were merely memoranda addressed
to Mr. Escueta involving Sugues application for leave and did not relate to the discharge of her
functions.[40] On the other hand, there is on record memoranda issued by Sugue concerning work matters
which were addressed to Valderrama, not Mr. Escueta.[41]
The evidence on record suggests that the Marketing Services Department was part of the Direct Sales
Department. As Direct Sales Manager, Valderramas responsibilities not only included sales but also
marketing for which he was tasked to closely coordinate with the regional sales/marketing head office in
Hongkong.[42] The record would also show that Sugue considered herself as belonging to the Direct Sales
Department.[43] It is unsurprising then that when the Direct Sales Department was reorganized due to
Valderramas unexpected departure on July 17, 2000, Sugues Marketing Services Department was
included in the reorganization. It would appear from Mr. Escuetas Memorandum dated July 18, 2000 (Re:
Direct Sales Reorganization) the sales and marketing responsibilities of Mr. Valderrama were taken over
by Mr. Edilberto S. Rivera and Temblique, as OIC for Direct Sales and Marketing, respectively.
In view of Valderramas sudden severance of his employment coupled with the substantially low sales
Triumph had been experiencing for the past nine months, the company saw an imperative need to effect
a reorganization in its sales department, and this included the temporary designation of Temblique as OIC
for Marketing concurrently with his position as Assistant Manager for Direct Sales-SMSD.[44] When Sugue
was directed to report to Temblique, she was not being made to report to Temblique as Assistant Manager

for Direct Sales-SMSD but as the newly designated OIC for Marketing, i.e., the officer chiefly responsible
for all marketing matters. Furthermore, we find no merit in Sugues contention that she was in any way
stripped of her usual functions. A careful perusal of Annexes EE and FF of her Position Position shows that
she continued to be the head of Marketing Services, under the supervision of Temblique as OIC for
Marketing.
As we see it, Triumphs directive for Sugue to report to Temblique was not unreasonable, inconvenient or
prejudicial to her considering that it did not entail a demotion in rank or diminution of salaries, benefits
and other privileges. Even assuming there was a change in the personalities to whom Sugue is required to
report, she continued to assume her position as Marketing Services Manager and to exercise the same
functions. Neither did she assert, much less prove, that there was any diminution in her salary or other
benefits. We ruled in Philippine Wireless, Inc. v. NLRC[45] that there is no demotion where there is no
reduction in position, rank or salary.
In fine, we find that Triumphs reorganization was intended to improve management operations especially
in the light of the poor sales performance of the company during that period. The act of management in
reorganizing the sales department in order to achieve its objectives is a legitimate exercise of its
management prerogatives, barring any showing of bad faith which is absent in the instant case. Indeed,
labor laws discourage interference in employers judgments concerning the conduct of their business. The
law must protect not only the welfare of employees, but also the right of employers.[46]
All told, Triumph did not act with discrimination, insensibility or disdain towards Sugue and Valderrama,
which foreclosed any choice on their part except to forego their continued employment. Purely
conjectural are their assertions that the disapproval of their leave applications, the denial of their request
for executive check-up and the alleged demotion, were carried out by Triumph in retaliation to their filing
of a complaint for unpaid money claims against the company. Sugue and Valderrama offered insufficient
proof to substantiate their allegations. For this reason, their bare and self-serving charges of constructive
dismissal, when unsupported by the evidence on record, cannot be given credence.
Worth noting at this point is that as early as June 21, 2000, Valderrama had accepted employment with
Fila Philippines, Inc. as its Sales Director. Although his appointment was to take effect only on August 1,
2000, it cannot be denied that he had finalized or was finalizing his employment deal with Fila while he
was still employed with Triumph as shown by Filas inter-office memo dated June 21, 2000 announcing to
its employees Valderramas appointment effective August 1, 2000.[47] Unlike the Labor Arbiter and the CA,
we do not view this circumstance as insignificant. It is evident that Valderrama already had a firm
understanding with Fila as of June 21, 2000 so much so that his arrival was highly anticipated and even
formally announced by his new employer on said date. This undeniably demonstrated that Valderrama
intended to leave his employment with Triumph even before the company issued a show cause memo
(on July 10, 2000) for him to explain, among others, his below target sales performance and before he
informed the company that he considered himself constructively dismissed on July 17, 2001. It may be
inferred therefrom that he filed the constructive dismissal case merely as a subterfuge to evade liability
for breach of his employment contract with Triumph which requires 60-day notice prior to
resignation. The circumstance that he did not pray for reinstatement in his complaint bolsters the theory
that the constructive dismissal case was a tool designed to conceal his impending transfer to Fila.
Having failed to substantiate their claim of constructive dismissal, Sugue and Valderrama should be
deemed to have abandoned their work, thus, their dismissal is warranted. Abandonment is the deliberate
and unjustified refusal of an employee to resume his employment, without any intention of returning. It

is a form of neglect of duty, hence, a just cause for termination of employment by the employer. For
abandonment to be a valid ground for dismissal, two elements must then be satisfied: (1) the failure to
report for work or absence without valid or justifiable reason; and (2) a clear intention to sever the
employer-employee relationship. The second element is the more determinative factor and must be
evinced by overt acts.[48]
The abovementioned elements are present in the instant case. First, Sugue and Valderramas failure to
report for work was without justifiable reason. As earlier discussed, their allegation of discrimination and
harassment lacks factual basis, thus, under the circumstances, we find their absences to be unjustified
and without any valid reason. Second, their overt act of writing letters informing Triumph that they
considered themselves constructively dismissed was a clear manifestation of their intention to desist from
their employment. Too, their defiance and disregard of the memorandum sent by Triumph requiring them
to explain their unauthorized absences demonstrated a clear intention on their part to sever their
employer-employee relationship. This is particularly true with Valderrama who, even before unilaterally
terminating his employment with Triumph, had already sought regular employment elsewhere and in fact
was set to join a competitor, Fila Phils., Inc.
Further, they filed a complaint for constructive dismissal without praying for reinstatement. By analogy,
we point to the doctrine that abandonment of work is inconsistent with the filing of a complaint for illegal
dismissal is not applicable where the complainant does not pray for reinstatement and just asks for
separation pay instead.[49] In this case, Sugue and Valderrama opted not to ask for reinstatement and even
for separation pay, which clearly contradicts their stance that they did not abandon their work, for it
appears they have no intention of ever returning to their positions in Triumph. In addition, we cannot
subscribe to the CAs view that Triumphs issuance of show cause memos and notices of termination for
abandonment were mere afterthought since they were preceded by Sugues and Valderramas letters
informing the company that they considered themselves constructively dismissed. Logically, Triumph
could not have issued show cause memos or termination notices for abandonment before Sugue and
Valderrama unilaterally declared themselves constructively dismissed and stopped reporting for work
without justifiable reason.
Indeed, the law imposes many obligations on the employer such as providing just compensation to
workers, and observance of the procedural requirements of notice and hearing in the termination of
employment. On the other hand, the law also recognizes the right of the employer to expect from its
workers not only good performance, adequate work and diligence, but also good conduct and loyalty. The
employer may not be compelled to continue to employ such persons whose continuance in the service
will patently be inimical to his interests.[50] Triumph has adequately shown the existence of a just and valid
cause in terminating the employment of Sugue and Valderrama, and has faithfully complied with the
procedural requirements of due process for valid termination of employment.
Anent Sugue and the heirs of Valderramas petition regarding the CAs deletion of the award of attorneys
fees, a discussion on the propriety of the award of damages and attorneys fees is rendered unnecessary
in view of their failure to prove constructive dismissal.
WHEREFORE, the petition for review filed by Virginia Sugue and the Heirs of Renato Valderrama in G.R.
No. 164804 is DENIED while the petition for review filed by Triumph International (Phils.), Inc. in G.R. No.
164784 is GRANTED. Accordingly, the assailed decision and resolution of the Court of Appeals are
hereby REVERSED andSET ASIDE. The National Labor Relations Commissions Decision dated June 13,
2001 is REINSTATED.

SO ORDERED.

International School v. Quisumbing, G.R. No. 128845, June 1, 2000

FIRST DIVISION
[G.R. No. 128845. June 1, 2000]
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A.
QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B.
TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in
his capacity as the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL,
INC., respondents.
DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School,
mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their colleagues in
other schools is, of course, beside the point. The point is that employees should be given equal pay for
work of equal value. That is a principle long honored in this jurisdiction. That is a principle that rests on
fundamental notions of justice. That is the principle we uphold today.
Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732,
is a domestic educational institution established primarily for dependents of foreign diplomatic personnel
and other temporary residents.[1] To enable the School to continue carrying out its educational program
and improve its standard of instruction, Section 2(c) of the same decree authorizes the School to
employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the protection
of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether
a faculty member should be classified as a foreign-hire or a local hire:
a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which country does one owe economic allegiance?
d.....Was the individual hired abroad specifically to work in the School and was the School responsible for
bringing that individual to the Philippines?[2]

Should the answer to any of these queries point to the Philippines, the faculty member is classified as a
local hire; otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary
rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path-all for the purpose of pursuing his
profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic
realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance
for the education of one's children, adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his
term: that he will eventually and inevitably return to his home country where he will have to confront the
uncertainty of obtaining suitable employment after a long period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international education.[3]
When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members"[4] of the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in
the appropriate bargaining unit, eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary,
Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in favor of the
School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's motion for
reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos
and that the grant of higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with
nationalities other than Filipino, who have been hired locally and classified as local hires.[5]The Acting
Secretary of Labor found that these non-Filipino local-hires received the same benefits as the Filipino
local-hires:
The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth
to tell, there are foreigners who have been hired locally and who are paid equally as Filipino local hires.[6]
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:

The principle "equal pay for equal work" does not find application in the present case. The international
character of the School requires the hiring of foreign personnel to deal with different nationalities and
different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We agree that certain amenities have to be provided to
these people in order to entice them to render their services in the Philippines and in the process remain
competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the
local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would also
require parity in other terms and conditions of employment which include the employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof
provided that the Superintendent of the School has the discretion to recruit and hire expatriate teachers
from abroad, under terms and conditions that are consistent with accepted international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule.
The 25% differential is reflective of the agreed value of system displacement and contracted status of the
OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two
types of employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established
principle of constitutional law that the guarantee of equal protection of the laws is not violated by
legislation or private covenants based on reasonable classification. A classification is reasonable if it is
based on substantial distinctions and apply to all members of the same class. Verily, there is a substantial
distinction between foreign hires and local hires, the former enjoying only a limited tenure, having no
amenities of their own in the Philippines and have to be given a good compensation package in order to
attract them to join the teaching faculty of the School.[7]
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws
reflect the policy against these evils. The Constitution[8] in the Article on Social Justice and Human Rights
exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the
right of all people to human dignity, reduce social, economic, and political inequalities." The very broad
Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the performance of
his duties, [to] act with justice, give everyone his due, and observe honesty and good faith."
International law, which springs from general principles of law,[9] likewise proscribes discrimination.
General principles of law include principles of equity,[10] i.e., the general principles of fairness and justice,
based on the test of what is reasonable.[11] The Universal Declaration of Human Rights,[12] the International

Covenant on Economic, Social, and Cultural Rights,[13] the International Convention on the Elimination of
All Forms of Racial Discrimination,[14] the Convention against Discrimination in Education,[15] the
Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation[16] - all
embody the general principle against discrimination, the very antithesis of fairness and justice. The
Philippines, through its Constitution, has incorporated this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.
The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace - the factory, the office or the field - but include as
well the manner by which employers treat their employees.
The Constitution[18] also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code[19] provides that the State shall "ensure equal work opportunities regardless of
sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in
spite of its primordial obligation to promote and ensure equal employment opportunities, closes its eyes
to unequal and discriminatory terms and conditions of employment.[20]
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes[21] the payment of lesser compensation to a female employee as against
a male employee for work of equal value. Article 248 declares it an unfair labor practice for an employer
to discriminate in regard to wages in order to encourage or discourage membership in any labor
organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof,
provides:
The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and
favourable conditions of work, which ensure, in particular:
a.....Remuneration which provides all workers, as a minimum, with:
i.....Fair wages and equal remuneration for work of equal value without distinction of any kind, in
particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal
pay for equal work;
x x x.
The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of
"equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and
responsibility, under similar conditions, should be paid similar salaries.[22] This rule applies to the School,
its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to that
of foreign-hires.[23] The Court finds this argument a little cavalier. If an employer accords employees the
same position and rank, the presumption is that these employees perform equal work. This presumption
is borne by logic and human experience. If the employer pays one employee less than the rest, it is not
for that employee to explain why he receives less or why the others receive more. That would be adding

insult to injury. The employer has discriminated against that employee; it is for the employer to explain
why the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires
perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions and
responsibilities, which they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed."
Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular
intervals for the rendering of services." In Songco v. National Labor Relations Commission,[24] we said
that:
"salary" means a recompense or consideration made to a person for his pains or industry in another man's
business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman
soldier, it carries with it the fundamental idea of compensation for services rendered. (Emphasis
supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and
they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and
the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The
dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain
benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare," [25] "to
afford labor full protection."[26] The State, therefore, has the right and duty to regulate the relations
between labor and capital.[27] These relations are not merely contractual but are so impressed with public
interest that labor contracts, collective bargaining agreements included, must yield to the common
good.[28] Should such contracts contain stipulations that are contrary to public policy, courts will not
hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of the
School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not
deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the
entire body of employees, consistent with equity to the employer indicate to be the best suited to serve
the reciprocal rights and duties of the parties under the collective bargaining provisions of the law."[29] The
factors in determining the appropriate collective bargaining unit are (1) the will of the employees (Globe
Doctrine); (2) affinity and unity of the employees' interest, such as substantial similarity of work and

duties, or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3) prior
collective bargaining history; and (4) similarity of employment status.[30] The basic test of an asserted
bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure
to all employees the exercise of their collective bargaining rights.[31]
It does not appear that foreign-hires have indicated their intention to be grouped together with localhires for purposes of collective bargaining. The collective bargaining history in the School also shows that
these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy security
of tenure. Although foreign-hires perform similar functions under the same working conditions as the
local-hires, foreign-hires are accorded certain benefits not granted to local-hires. These benefits, such as
housing, transportation, shipping costs, taxes, and home leave travel allowance, are reasonably related
to their status as foreign-hires, and justify the exclusion of the former from the latter. To include foreignhires in a bargaining unit with local-hires would not assure either group the exercise of their respective
collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of
the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby REVERSED
and SET ASIDE insofar as they uphold the practice of respondent School of according foreign-hires higher
salaries than local-hires.
SO ORDERED.
Puno, and Pardo, JJ., concur.
Davide, Jr., C.J., (Chairman), on official leave.
Ynares-Santiago, J., on leave.

Atok-Big Association v. Atok-Big Wedge, G.R. No. L-7349, July 19, 1955

G.R. No. L-7349

July 19, 1955

ATOK-BIG WEDGE MUTUAL BENEFIT ASSOCIATION, petitioner,

vs.
ATOK-BIG WEDGE MINING COMPANY, INCORPORATED, respondents.
Pablo C. Sanidad for petitioner.
Roxas and Sarmiento for respondents.
REYES, J. B. L., J.:
On September 4, 1950, the petitioner labor union, the Atok-Big Wedge Mutual Benefit Association,
submitted to the Atok-Big Wedge Mining Co., Inc. (respondent herein) several demands, among which

was an increase of P0.50 in daily wage. The matter was referred by the mining company to the Court of
Industrial Relations for arbitration and settlement (Case No. 523-V). In the course of conciliatory
measures taken by the Court, some of the demands were granted, and others (including the demand for
increased wages) rejected, and so, hearings proceeded and evidence submitted on the latter. On July 14,
1951, the Court rendered a decision (Record, pp. 25-32) fixing the minimum wage at P2.65 a day with
the rice ration, or P3.20 without rice ration; denying the deduction from such minimum wage, of the
value of housing facilities furnished by the company to the laborers, as well as the efficiency bonus given
to them by the company; and ordered that the award be made effective retroactively from the date of
the demand, September 4, 1950, as agreed by the parties. From this decision, the mining company
appealed to this Court (G.R. No. L-5276).
Subsequently, an urgent petition was presented in Court on October 15, 1952 by the Atok-Big Wedge
Mining Company for authority to stop operations and lay off employees and laborers, for the reason
that due to the heavy losses, increased taxes, high cost of materials, negligible quantity of ore deposits,
and the enforcement of the Minimum Wage Law, the continued operation of the company would lead
to its immediate bankruptcy and collapse (Rec. pp. 100-109). To avert the closure of the company and
the consequent lay-off of hundreds of laborers and employees, the Court, instead of hearing the petition
on the merits, convened the parties for voluntary conciliation and mediation. After lengthy discussions
and exchange of views, the parties on October 29, 1952 reached an agreement effective from August 4,
1952 to December 31, 1954 (Rec. pp. 18-23). The Agreement in part provides:
I
That the petitioner, Atok-Big Wedge Mining Company, Incorporated, agrees to abide by whatever
decision that the Supreme Court may render with respect to Case No. 523-V (G.R. 5276) and Case No.
523-1 (10) (G.R. 5594).
xxx

xxx

xxx

xxx

xxx

III
xxx

That the petitioner, Atok-Big Wedge Mining Company, Incorporated, and the respondent, Atok-Big
Wedge Mutual Benefit Association, agree that the following facilities heretofore given or actually being
given by the petitioner to its workers and laborers, and which constitute as part of their wages, be
valued as follows:
Rice ration

P.55 per
day

Housing facility

40 per day

All other facilities such as recreation

facilities, medical treatment to
dependents of laborers, school
85 per day
facilities, rice ration during off-days,

water, light, fuel, etc., equivalent to

at least
It is understood that the said amount of facilities valued at the abovementioned prices, may be charged
in full or partially by the Atok-Big Wedge Mining Company, Inc., against laborer or employee, as it may
see fit pursuant to the exigencies of its operation.
The agreement was submitted to the Court for approval and on December 26, 1952, was approved by
the Court in an order giving it effect as an award or decision in the case (Rec., p. 24).
Later, Case No. G.R. No. L-5276 was decided by this Court (promulgated March 3, 1953), affirming the
decision of the Court of Industrial Relations fixing the minimum cash wage of the laborers and
employees of the Atok-Big Wedge Mining Co. at P3.20 cash, without rice ration, or P2.65, with rice
ration. On June 13, 1953, the labor union presented to the Court a petition for the enforcement of the
terms of the agreement of October 29, 1952, as allegedly modified by the decision of this Court in G.R.
No. L-5276 and the provisions of the Minimum Wage Law, which has since taken effect, praying for the
payment of the minimum cash wage of P3.45 a day with rice ration, or P4.00 without rice ration, and the
payment of differential pay from August 4, 1952, when the award became effective. The mining
company opposed the petition claiming that the Agreement of October 29, 1952 was entered into by
the parties with the end in view that the company's cost of production be not increased in any way, so
that it was intended to supersede whatever decision the Supreme Court would render in G.R. No. L-5276
and the provisions of the Minimum Wage Law with respect to the minimum cash wage payable to the
laborers and employees. Sustaining the opposition, the Court of Industrial Relations, in an order issued
on September 22, 1953 (Rec. pp. 44-49), denied the petition, upon the ground that when the Agreement
of the parties of October 29, 1952 was entered into by them, they already knew the decision of said
Court (although subject to appeal to the Supreme Court) fixing the minimum cash wage at P3.20 without
rice ration, or P2.65 with rice ration, as well as the provisions of the Minimum Wage Law requiring the
payment of P4 minimum daily wage in the provinces effective August 4, 1952; so that the parties had
intended to be regulated by their Agreement of October 29, 1952. On the same day, the Court issued
another order (Rec. pp. 50-55), denying the claim of the labor union for payment of an additional 50 per
cent based on the basic wage of P4 for work on Sundays and holidays, holding that the payments being
made by the company were within the requirements of the law. Its motion for the reconsideration of
both orders having been denied, the labor union filed this petition for review by certiorari.
The first issue submitted to us arises from an apparent contradiction in the Agreement of October 29,
1952. By paragraph III thereof, the parties by common consent evaluated the facilities furnished by the
Company to its laborers (rice rations, housing, recreation, medical treatment, water, light, fuel, etc.) at
P1.80 per day, and authorized the company to have such value "charge in full or partially against any
laborer or employee as it may see fit"; while in paragraph I, the Company agreed to abide by the
decision of this Court (pending at the time the agreement was had) in G.R. No. L-5594; and as rendered,
the decision was to the effect that the Company could deduct from the minimum wage only the value of
the rice ration.
It is contended by the petitioner union that the two provisions should be harmonized by holding
paragraph III (deduction of all facilities) to be merely provisional, effective only while this Court had not
rendered its decision in G.R. No. L-5594; and that the terms of said paragraph should be deemed

superseded by the decision from the time the latter became final, some four or five months after the
agreement was entered into; in consequence, (it is claimed), the laborers became entitled by virtue of
said decision to the prevailing P4.00 minimum wage with no other deduction than that of the rice ration,
or a net cash wage of P3.45.
This contention, in our opinion, is untenable. The intention of the parties could not have been to make
the arrangement in paragraph III a merely provisional arrangement pending the decision of the Supreme
Court for "this agreement" was expressly made retroactive and effective as of August 4, 1952, and to be
in force up to and including December 31, 1954" (Par. IV). When concluded on October 29, 1952, neither
party could anticipate the date when the decision of the Supreme Court would be rendered; nor is any
reason shown why the parties should desire to limit the effects of the decision to the period 1952-1954
if it was to supersede the agreement of October 29, 1952.
To ascertain the true import of paragraph I of said Agreement providing that the respondent company
agreed to abide by whatever decision the Supreme Court would render in G.R. No. L-5276, it is
important to remember that, as shown by the records, the agreement was prompted by an urgent
petition filed by the respondent mining company to close operations and lay-off laborers because of
heavy losses and the full enforcement of the Minimum Wage Law in the provinces, requiring it to pay its
laborers the minimum wage of P4; to avoid such eventuality, through the mediation of the Court of
Industrial Relations, a compromise was reached whereby it was agreed that the company would pay the
minimum wage fixed by the law, but the facilities then being received by the laborers would be
evaluated and charged as part of the wage, but without in any way reducing the P2.00 cash portion of
their wages which they were receiving prior to the agreement (hearing of Oct. 28, 1952, CIR, t.s.n. 47). In
other words, while it was the objective of the parties to comply with the requirements of the Minimum
Wage Law, it was also deemed important that the mining company should not have to increase the cash
wages it was then paying its laborers, so that its cost of production would not also be increased, in order
to prevent its closure and the lay-off of employees and laborers. And as found by the Court below in the
order appealed from (which finding is conclusive upon us), "it is this eventuality that the parties did not
like to happen, when they have executed the said agreement" (Rec. p. 49). Accordingly, after said
agreement was entered into, the Company started paying its laborers a basic cash or "take-home" wage
of P2.20 (Rec. p. 9), representing the difference between P4 (minimum wage) and P1.80 (value of all
facilities).
With this background, the provision to abide by our decision in G.R. No. L-5276 can only be interpreted
thus: That the company agreed to pay whatever award this Court would make in said case from the date
fixed by the decision (which was that of the original demand, September 4, 1950) up to August 3, 1952
(the day previous to the effectivity of the Compromise Agreement) and from August 4, 1954 to
December 31, 1954, they are to be bound by their agreement of October 29, 1952.
This means that during the first period (September 4, 1950 to August 3, 1952), only rice rations given to
the laborers are to be regarded as forming part of their wage and deductible therefrom. The minimum
wage was then fixed (by the Court of Industrial Relations, and affirmed by this Court) at P3.20 without
rice ration, or P2.65 with rice ration. Since the respondent company had been paying its laborers the
basic cash or "take-home" wage of P2 prior to said decision and up to August 3, 1952, the laborers are
entitled to a differential pay of P0.65 per working day from September 4, 1950 (the date of the
effectivity of the award in G.R. L-5276) up to August 3, 1952.

From August 4, 1952, the date when the Agreement of the parties of October 29, 1952 became effective
(which was also the date when the Minimum Wage Law became fully enforceable in the provinces), the
laborers should be paid a minimum wage of P4 a day. From this amount, the respondent mining
company is given the right to charge each laborer "in full or partially", the facilities enumerated in par. III
of the Agreement; i.e., rice ration at P0.55 per day, housing facility at P0.40 per day, and other facilities
"constitute part of his wages". It appears that the company had actually been paying its laborers the
minimum wage of P2.20 since August 4, 1952; hence they are not entitled to any differential pay from
this date.
Petitioner argues that to allow the deductions stipulated in the Agreement of October 29, 1952 from the
minimum daily wage of P4 would be a waiver of the minimum wage fixed by the law and hence null and
void, since Republic Act No. 602, section 20, provides that "no agreement or contract, oral or written, to
accept a lower wage or less than any other under this Act, shall be valid". An agreement to deduct
certain facilities received by the laborers from their employer is not a waiver of the minimum wage fixed
by the law. Wage, as defined by section 2 of Republic Act No. 602, "includes the fair and reasonable
value as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee." Thus, the law permits the deduction of such facilities from
the laborer's minimum wage of P4, as long as their value is "fair and reasonable". It is not here claimed
that the valuations fixed in the Agreement of October 29, 1952 are not fair and reasonable. On the
contrary, the agreement expressly states that such valuations:
"have been arrived at after careful study and deliberation by both representatives of both parties, with
the assistance of their respective counsels, and in the presence of the Honorable Presiding Judge of the
Court of Industrial Relations" (Rec. p. 2).
Neither is it claimed that the parties, with the aid of the Court of Industrial Relations in a dispute
pending before it, may not fix by agreement the valuation of such facilities, without referring the matter
to the Department of Labor.
Petitioner also argues that to allow the deductions of the facilities appearing in the Agreement referred
to, would be contrary to the mandate of section 19 of the law, that "nothing in this Act . . . justify an
employer . . . in reducing supplements furnished on the date of enactment.
The meaning of the term "supplements" has been fixed by the Code of Rules and Regulations
promulgated by the Wage Administration Office to implement the Minimum Wage Law (Ch. 1, [c]), as:
extra renumeration or benefits received by wage earners from their employees and include but are not
restricted to pay for vacation and holidays not worked; paid sick leave or maternity leave; overtime rate
in excess of what is required by law; sick, pension, retirement, and death benefits; profit-sharing; family
allowances; Christmas, war risk and cost-of-living bonuses; or other bonuses other than those paid as a
reward for extra output or time spent on the job.
"Supplements", therefore, constitute extra renumeration or special privileges or benefits given to or
received by the laborers over and above their ordinary earnings or wages. Facilities, on the other hand,
are items of expense necessary for the laborer's and his family's existence and subsistence, so that by
express provision of the law (sec. 2 [g]) they form part of the wage and when furnished by the employer
are deductible therefrom since if they are not so furnished, the laborer would spend and pay for them

just the same. It is thus clear that the facilities mentioned in the agreement of October 29, 1952 do not
come within the term "supplements" as used in Art. 19 of the Minimum Wage Law.
For the above reasons, we find the appeal from the Order of the Court a quo of September 22, 1953
denying the motion of the petitioner labor union for the payment of the minimum wage of P3.45 per
day plus rice ration, or P4 without rice ration, to be unmeritorious and untenable.
The second question involved herein relates to the additional compensation that should be paid by the
respondent company to its laborers for work rendered on Sundays and holidays. It is admitted that the
respondent company is paying an additional compensation of 50 per cent based on the basic "cash
portion" of the laborer's wage of P2.20 per day; i.e., P1.10 additional compensation for each Sunday or
holiday's work. Petitioner union insists, however, that this 50 per cent additional compensation should
be computed on the minimum wage of P400 and not on the "cash portion" of the laborer's wage of
P2.20, under the provisions of the Agreement of October 29, 1952 and the Minimum Wage Law.
SEC. 4. Commonwealth Act No. 444 (otherwise known as the Eight Hour Labor Law) provides:
No person, firm, or corporations, business establishment or place or center of labor shall compel an
employee or laborer to work during Sundays and holidays, unless he is paid an additional sum of at least
twenty-five per centum of his regular renumeration:
The minimum legal additional compensation for work on Sundays and legal holidays is, therefore, 25 per
cent of the laborer's regular renumeration. Under the Minimum Wage Law, this minimum additional
compensation is P1 a day (25 per cent of P4, the minimum daily wage).
While the respondent company computes the additional compensation given to its laborers for work on
Sundays and holidays on the "cash portion" of their wages of P2.20, it is giving them 50 per cent thereof,
or P1.10 a day. Considering that the minimum additional compensation fixed by the law is P1 (25 per
cent of P4), the compensation being paid by the respondent company to its laborers is even higher than
such minimum legal additional compensation. We, therefore, see no error in the holding of the Court a
quo that the respondent company has not violated the law with respect to the payment of additional
compensation for work rendered by its laborers on Sundays and legal holidays.
Finding no reason to sustain the present petition for review, the same is, therefore, dismissed, with
costs against the petitioner Atok-Big Wedge Mutual Benefit Association.
Bengzon, Acting C.J., Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador, and Concepcion,
JJ.,concur.

Our Haus v. Parian, G.R. No. 204651, August 6, 2014

G.R. No. 204651

August 6, 2014

OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,

vs.
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS, BERNARD TENEDERO and JERRY
SABULAO, Respondents.

DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the May 7, 2012 decision2 and the
November 27, 2012 resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP No.
123273. These assailed CA rulings affirmed the July 20, 2011 decision4 and the December 2, 2011
resolution5 (NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC LAC No. 02000489-11 (NLRC NCR Case No. 06-08544-10). The NLRC rulings in turn reversed and set aside the
December 10, 2010 decision6 of the labor arbiter (LA).
Factual Antecedents
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and Bernardo Tenederowere
all laborers working for petitioner Our Haus Realty Development Corporation (Our Haus), a company
engaged in the construction business.The respondents respective employment records and daily wage
rates from 2007 to 2010 are summarized in the table7 below:
Name

Date Hired

Years of
Service

Year and Place of Assignment

Daily
Rate

Alexander M.
Parian

October
1999

10 years

2007-2010- Quezon City

P353.50

Jay C. Erinco

January
2000

10 years

2008- Quezon City 2009- Antipolo

2010- Quezon City

P342.00

Alexander R.
Canlas

2005

5 years

2007-2010- Quezon City

P312.00

Jerry Q. Sabulao

August
1999

10 years

2008- Quezon City 2009- Antipolo

2010- Quezon City

P342.00

Bernardo N.
Tenedero

1994

16 years

2007-2010- Quezon City

P383.50

Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus
suspended some of its construction projects and asked the affected workers, including the respondents,
to take vacation leaves.8
Eventually, the respondents were asked to report back to work but instead of doing so, they filed with
the LA a complaint for underpayment of their daily wages. They claimed that except for respondent
Bernardo N. Tenedero, their wages were below the minimum rates prescribed in the following wage
orders from 2007 to 2010:
1. Wage Order No. NCR-13, which provides for a daily minimum wage rate of P362.00for the nonagriculture sector (effective from August 28, 2007 until June 13, 2008); and

2. Wage Order No. NCR-14, which provides for a daily minimum wage rate of P382.00for the nonagriculture sector (effective from June 14, 2008 until June 30, 2010).
The respondents also alleged thatOur Haus failed to pay them their holiday, service incentive leave (SIL),
13th month and overtime pays.9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the respondents wages complied with the laws
minimum requirement. Aside from paying the monetary amount of the respondents wages, Our Haus
also subsidized their meals (3 times a day), and gave them free lodging near the construction project
they were assigned to.10In determining the total amount of the respondents daily wages, the value of
these benefits should be considered, in line with Article 97(f)11 of the Labor Code.
Our Haus also rejected the respondents other monetary claims for lack of proof that they were entitled
to it.12
On the other hand, the respondents argued that the value of their meals should not be considered in
determining their wages total amount since the requirements set under Section 413 of
DOLE14 Memorandum Circular No. 215 were not complied with.
The respondents pointed out that Our Haus never presented any proof that they agreed in writing to the
inclusion of their meals value in their wages.16 Also, Our Haus failed to prove that the value of the
facilities it furnished was fair and reasonable.17 Finally, instead of deducting the maximum amount of
70% of the value of the meals, Our Haus actually withheld its full value (which was Php290.00 per week
for each employee).18
The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging would
be taken into account, the respondents daily wages would meet the minimum wage rate.19 As to the
other benefits, the LA found that the respondents were not able to substantiate their claims for it.20
The respondents appealed the LAs decision to the NLRC, which in turn, reversed it. Citing the case of
Mayon Hotel & Restaurant v. Adana,21 the NLRC noted that the respondents did not authorize Our Haus
in writing to charge the values of their board and lodging to their wages. Thus, the samecannot be
credited.
The NLRC also ruled that the respondents are entitled to their respective proportionate 13th month
payments for the year 2010 and SIL payments for at least three years,immediately preceding May 31,
2010, the date when the respondents leftOur Haus. However, the NLRC sustained the LAs ruling that
the respondents were not entitled to overtime pay since the exact dates and times when they rendered
overtime work had not been proven.22
Our Haus moved for the reconsideration23 of the NLRCs decision and submitted new evidence (the five
kasunduans) to show that the respondents authorized Our Haus in writing to charge the values of their
meals and lodging to their wages.
The NLRC denied Our Haus motion, thus it filed a Rule 65 petition24 with the CA. In its petition, Our Haus
propounded a new theory. It made a distinction between deduction and charging. A written
authorization is only necessary if the facilitys value will be deducted and will not be needed if it will

merely be charged or included in the computation of wages.25 Our Haus claimed that it did not actually
deduct the values of the meals and housing benefits. It only considered these in computing the total
amount of wages paid to the respondents for purposes of compliance with the minimum wage law.
Hence, the written authorization requirement should not apply.
Our Haus also asserted that the respondents claim for SIL pay should be denied as this was not included
in their pro formacomplaint. Lastly, it questioned the respondentsentitlement to attorneys fees
because they were not represented by a private lawyer but by the Public Attorneys Office (PAO).
The CAs Ruling
The CA dismissed Our Haus certiorari petition and affirmed the NLRC rulings in toto. It found no real
distinction between deduction and charging,26 and ruled that the legal requirements before any
deduction or charging can be made, apply to both. Our Haus, however, failed to prove that it complied
with any of the requirements laid down in Mabeza v. National Labor Relations
Commission.27 Accordingly, it cannot consider the values of its meal and housing facilities in the
computation of the respondents total wages.
Also, the CA ruled that since the respondents were able to allege non-payment of SIL in their position
paper, and Our Haus, in fact, opposed it in its various pleadings,28 then the NLRC properly considered it
as part of the respondents causes of action. Lastly, the CA affirmed the respondents entitlement to
attorneys fees.29
Our Haus filed a motion for reconsideration but the CA denied its motion, prompting it to file the
present petition for review on certiorari under Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal requirements apply without distinction
whether the facilitys value will be deducted or merely included in the computation of the wages. At
any rate, it complied with the requirements for deductibility of the value of the facilities. First, the five
kasunduans executed by the respondents constitute the written authorization for the inclusion of the
board and lodgings values to their wages. Second, Our Haus only withheld the amount of P290.00 which
represents the foods raw value; the weekly cooking cost (cooks wage, LPG, water) at P239.40 per
person is a separate expense that Our Haus did not withhold from the respondents wages.30 This
disproves the respondentsclaim that it deducted the full amount of the meals value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be granted though not raised in the
complaint; and that the respondents are entitled to an award of attorneys fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They maintained that the CA did not err inruling
that the values of the board and lodging cannot be deducted from their wages for failure to comply with
the requirements set by law.33 And though the claim for SIL pay was not included in their pro forma
complaint, they raised their claims in their position paper and Our Haus had the opportunity to
contradict it in its pleadings.34

Finally, under the PAO law, the availment of the PAOs legal services does not exempt its clients from an
award of attorneys fees.35
The Courts Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition only questions of law
Basic is the rule that only questions of lawmay be raised in a Rule 45 petition.36 However, in this case,
weare confronted with mixed questions of fact and law that are subsumed under the issue of whether
Our Haus complied with the legal requirements on the deductibility of the value of facilities. Strictly,
factual issues cannot be considered under Rule 45 except in the course of resolving if the CA correctly
determined whether or not the NLRC committed grave abuse of discretion in considering and
appreciating the factual issues before it.37
In ruling for legal correctness, we have to view the CA decision in the same context that the petition for
certiorariit ruled upon was presented to it; we have to examine the CA decision from the prism of
whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC decision, on the merits of the case, was correct.
In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on
appeal, of the NLRC decision challenged before it. This is the approach that should bebasic in a Rule 45
review of a CA ruling in a labor case. In question form, the question to ask in the present case is: did the
CA correctly determine that the NLRC did not commit grave abuse of discretion in ruling on the
case?38 We rule that the CA correctly did.
No substantial distinction between deducting and charging a facilitys value from the employees wage;
the legal requirements for creditability apply to both
To justify its non-compliance with the requirements for the deductibility of a facility, Our Haus asks us to
believe that there is a substantial distinction between the deduction and the charging of a facilitys value
to the wages. Our Haus explains that in deduction, the amount of the wage (which may already be
below the minimum) would still be lessened by the facilitys value, thus needing the employees
consent. On the other hand, in charging, there is no reduction of the employees wage since the facilitys
value will just be theoretically added to the wage for purposes of complying with the minimum wage
requirement.39
Our Haus argument is a vain attempt to circumvent the minimum wage law by trying to create a
distinction where none exists.
In reality, deduction and charging both operate to lessen the actual take-home pay of an employee; they
are two sides of the same coin. In both, the employee receives a lessened amount because supposedly,
the facilitys value, which is part of his wage, had already been paid to him in kind. As there is no
substantial distinction between the two, the requirements set by law must apply to both.
As the CA correctly ruled, these requirements, as summarized in Mabeza, are the following:
a. proof must be shown thatsuch facilities are customarily furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily accepted in writingby the employee; and

c. The facilities must be charged at fair and reasonable value.40

We examine Our Haus compliance with each of these requirements in seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to show that a facility is customarily
furnished by the trade is the existence of a company policy or guideline showing that provisions for a
facility were designated as part of the employees salaries.41 To comply with this, Our Haus presented in
its motion for reconsideration with the NLRC the joint sinumpaang salaysayof four of its alleged
employees. These employees averred that they were recipients of free lodging, electricity and water, as
well as subsidized meals from Our Haus.42
We agree with the NLRCs finding that the sinumpaang salaysay statements submitted by Our Haus are
self-serving.1wphi1 For one, Our Haus only produced the documents when the NLRC had already
earlier determined that Our Haus failed to prove that it was traditionally giving the respondents their
board and lodging. This document did not state whether these benefits had been consistently enjoyed
by the rest of Our Haus employees. Moreover, the records reveal that the board and lodging were given
on a per project basis. Our Haus did not show if these benefits were also provided inits other
construction projects, thus negating its claimed customary nature. Even assuming the sinumpaang
salaysay to be true, this document would still work against Our Haus case. If Our Haus really had the
practice of freely giving lodging, electricity and water provisions to its employees, then Our Haus should
not deduct its values from the respondents wages. Otherwise, this will run contrary to the affiants
claim that these benefits were traditionally given free of charge.
Apart from company policy, the employer may also prove compliance with the first requirement by
showing the existence of an industry-wide practice of furnishingthe benefits in question among
enterprises engaged in the same line of business. If it were customary among construction companies to
provide board and lodging to their workers and treat their values as part of their wages, we would have
more reason to conclude that these benefits were really facilities.
However, Our Haus could not really be expected to prove compliance with the first requirement since
the living accommodation of workers in the construction industry is not simply a matter of business
practice. Peculiar to the construction business are the occupational safety and health (OSH) services
which the law itself mandates employers to provide to their workers. This isto ensure the humane
working conditions of construction employees despite their constant exposure to hazardous working
environments. Under Section 16 of DOLE Department Order (DO) No. 13, series of 1998,43 employers
engaged in the construction business are required to providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation ofDOLE
DO No. 13, mandates that the cost of the implementation of the requirements for the construction

safety and health of workers, shall be integrated to the overall project cost.44 The rationale behind this
isto ensure that the living accommodation of the workers is not substandard and is strictly compliant
with the DOLEs OSH criteria.
As part of the project cost that construction companies already charge to their clients, the value of the
housing of their workers cannot be charged again to their employees salaries. Our Haus cannot pass the
burden of the OSH costs of its construction projects to its employees by deducting it as facilities. This is
Our Haus obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose testset by
jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the
employers convenience, it will not be considered as a facility but a supplement.45 Here, careful
consideration is given to the nature of the employers business in relation to the work performed by the
employee. This test is used to address inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances show that it clearly redounds to the
employers greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility, the purpose test
additionally recognizes that the employer and the employee do not stand at the same bargaining
positions on benefits that must or must not formpart of an employees wage. In the ultimate analysis,
the purpose test seeks to prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from the employees wages but not the
value of supplements. Facilities include articles or services for the benefit of the employee or his family
but exclude tools of the trade or articles or services primarily for the benefit of the employer or
necessary to the conduct of the employers business.47
The law also prescribes that the computation of wages shall exclude whatever benefits, supplementsor
allowances given to employees. Supplements are paid to employees on top of their basic pay and are
free of charge.48 Since it does not form part of the wage, a supplements value may not be includedin
the determination of whether an employer complied with the prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus cannot be categorized asfacilities but
as supplements. In SLL International Cables Specialist v. National Labor Relations Commission,49 this
Court was confronted with the issue on the proper characterization of the free board and lodging
provided by the employer. We explained:
The Court, at this point, makes a distinction between "facilities" and "supplements". It is of the view that
the food and lodging, or the electricity and water allegedly consumed by private respondents in this case
were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two
terms were distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or
received by the laborers overand above their ordinary earnings or wages. "Facilities", on the other hand,
are items of expense necessary for the laborer's and his family's existence and subsistence so thatby
express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the employer are

deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just
the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part
of the laborers' basic wages, it is a facility. The distinction lies not so much in the kind of benefit or item
(food, lodging, bonus or sick leave) given, but in the purpose for which it is given.In the case at bench,
the items provided were given freely by SLLfor the purpose of maintaining the efficiency and health of
its workers while they were working attheir respective projects.50
Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given by
the employer. If it is primarily for the employees gain, then the benefit is a facility; if its provision is
mainly for the employers advantage, then it is a supplement. Again, this is to ensure that employees are
protected in circumstances where the employer designates a benefit as deductible from the wages even
though it clearly works to the employers greater convenience or advantage.
Under the purpose test, substantial consideration must be given to the nature of the employers
business inrelation to the character or type of work performed by the employees involved.
Our Haus is engaged in the construction business, a laborintensive enterprise. The success of its projects
is largely a function of the physical strength, vitality and efficiency of its laborers. Its business will be
jeopardized if its workers are weak, sickly, and lack the required energy to perform strenuous physical
activities. Thus, by ensuring that the workers are adequately and well fed, the employer is actually
investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the construction industry relies
heavily and directly on the physical capacity and endurance of its workers. This is not to say that desk
jobs do not require muscle strength; wesimply emphasize that in the construction business, bulk of the
work performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the problem ofmeeting target
deadlines. More often than not, work is performed continuously, day and night, in order to finish the
project on the designated turn-over date. Thus, it will be more convenient to the employer if itsworkers
are housed near the construction site to ensure their ready availability during urgent or emergency
circumstances. Also, productivity issues like tardiness and unexpected absences would be minimized.
This observation strongly bears in the present case since three of the respondents are not residents of
the National Capital Region. The board and lodging provision might have been a substantial
consideration in their acceptance of employment in a place distant from their provincial residences.
Based on these considerations, we conclude that even under the purpose test, the subsidized meals and
free lodging provided by Our Haus are actually supplements. Although they also work to benefit the
respondents, an analysis of the nature of these benefits in relation to Our Haus business shows that
they were given primarily for Our Haus greater convenience and advantage. If weighed on a scale, the
balance tilts more towards Our Haus side. Accordingly, their values cannot be considered in computing
the total amount of the respondents wages. Under the circumstances, the dailywages paid to the
respondents are clearly below the prescribed minimum wage rates in the years 2007-2010.
b. The provision of deductible facilities must be voluntarily accepted in writing by the employee

In Mayon Hotel, we reiterated that a facility may only be deducted from the wage if the employer was
authorized in writingby the concerned employee.51 As it diminishes the take-home pay of an employee,
the deduction must be with his express consent.
Again, in the motion for reconsideration with the NLRC, Our Haus belatedly submitted five kasunduans,
supposedly executed by the respondents, containing their conformity to the inclusion of the values of
the meals and housing to their total wages. Oddly, Our Haus only offered these documents when the
NLRC had already ruled that respondents did not accomplish any written authorization, to allow
deduction from their wages. These five kasunduans were also undated, making us wonder if they had
reallybeen executed when respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus four employees, it was not mentioned that
they also executed a kasunduanfor their board and lodging benefits. Because of these surrounding
circumstances and the suspicious timing when the five kasunduanswere submitted as evidence, we
agree withthe CA that the NLRC committed no grave abuse of discretion in disregarding these
documents for being self serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of P290.00 per week from each of the respondents for
their meals. But it now submits that it did not actually withhold the entire amount as it did not figure in
the computation the money it expended for the salary of the cook, the water, and the LPG used for
cooking, which amounts to P249.40 per week per person. From these, it appears that the total meal
expense per week for each person is P529.40,making Our Haus P290.00 deduction within the 70%
ceiling prescribed by the rules.
However, Our Haus valuation cannotbe plucked out of thin air. The valuation of a facility must
besupported by relevant documents such as receipts and company records for it to be considered as fair
and reasonable. In Mabeza, we noted:
Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were
figures furnished by the private respondent's own accountant, without corroborative evidence.On the
pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he could have, as has been
pointedout in the Solicitor General's manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR".52 [emphasis ours]
In the present case, Our Haus never explained how it came up with the valuesit assigned for the benefits
it provided; it merely listed its supposed expenses without any supporting document. Since Our Haus is
using these additional expenses (cooks salary, water and LPG) to support its claim that it did not
withhold the full amount of the meals value, Our Haus is burdened to present evidence to corroborate
its claim. The records however, are bereft of any evidence to support Our Haus meal expense
computation. Eventhe value it assigned for the respondents living accommodations was not supported
by any documentary evidence. Without any corroborative evidence, it cannot be said that Our Haus
complied withthis third requisite.
A claim not raised in the pro forma complaint may still beraised in the position paper.

Our Haus questions the respondents entitlement to SIL pay by pointing out that this claim was not
included in the pro forma complaint filed with the NLRC. However, we agree with the CA that such
omission does not bar the labor tribunals from touching upon this cause of action since this was raised
and discussed inthe respondents position paper. In Samar-Med Distribution v. National Labor Relations
Commission,53 we held:
Firstly, petitioners contention that the validity of Gutangs dismissal should not be determined because
it had not been included in his complaint before the NLRC is bereft of merit. The complaint of Gutang
was a mere checklist of possible causes of action that he might have against Roleda. Such manner of
preparing the complaint was obviously designed to facilitate the filing of complaints by employees and
laborers who are thereby enabled to expediently set forth their grievances in a general manner. But the
non-inclusion in the complaint of the issue on the dismissal did not necessarily mean that the validity of
the dismissal could not be an issue.The rules of the NLRC require the submission of verified position
papers by the parties should they fail to agree upon an amicable settlement, and bar the inclusion of any
cause of action not mentioned in the complaint or position paper from the time of their submission by
the parties. In view of this, Gutangs cause of action should be ascertained not from a reading of his
complaint alone but also from a consideration and evaluation of both his complaint and position
paper.54
The respondents entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the burden of proving it.Particularly in labor
cases, the burden of proving payment of monetary claims rests on the employeron the reasoning that
the pertinent personnel files, payrolls, records, remittances and other similar documents which will
show that overtime, differentials, service incentive leave and other claims of workers have been paid
are not in the possession of the worker but in the custody and absolute control of the employer.55
Unfortunately, records will disclose the absence of any credible document which will show that
respondents had been paid their 13th month pay, holiday and SIL pays. Our Haus merely presented a
handwritten certification from its administrative officer that its employees automatically become
entitled to five days of service incentive leave as soon as they pass probation. This certification was not
even subscribed under oath. Our Haus could have at least submitted its payroll or copies of the pay slips
of respondents to show payment of these benefits. However, it failed to do so.
Respondents are entitled to attorneys fees.
Finally, we affirm that respondents are entitled to attorneys fees. Our Haus asserts that respondents
availment of free legal services from the PAO disqualifies them from such award. We find this
untenable.
It is settled that in actions for recovery of wages or where an employee was forced to litigate and, thus,
incur expenses to protect his rights and interest, the award of attorney's fees is legally and morally
justifiable.56Moreover, under the PAO Law or Republic Act No. 9406, the costs of the suit, attorney's fees
and contingent fees imposed upon the adversary of the PAO clients after a successful litigation shall be
deposited in the National Treasury as trust fund and shall be disbursed for special allowances of
authorized officials and lawyers of the PAO.57

Thus, the respondents are still entitled to attorney's fees. The attorney's fees awarded to them shall be
paid to the PAO. It serves as a token recompense to the PAO for its provision of free legal services to
litigants who have no means of hiring a private lawyer.
WHEREFORE, in light of these considerations, we conclude that the Court of Appeals correctly found
that the National Labor Relations Commission did not abuse its discretion in its decision of July 20, 2011
and Resolution of December 2, 2011.1wphi1 Consequently we DENY the petition and AFFIRM the Court
of Appeals' decision dated May 7, 2012 and resolution dated November 27, 2012 in CA-G.R. SP No.
123273. No costs.
SO ORDERED.

Reyes v. NLRC, G.R. No. 160233, August 8, 2007

THIRD DIVISION

ROGELIO REYES, G.R. No. 160233

Petitioner,
Present:
- versus - Ynares-Santiago, J. (Chairperson),
Austria-Martinez,
Chico-Nazario, and
Nachura, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, Fifth Division, and Promulgated:
UNIVERSAL ROBINA CORPORATION
GROCERY DIVISION,
Respondents. August 8, 2007
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to reverse the November
14, 2002 Decision[1] of the Court of Appeals in CA-G.R. SP No. 64799, affirming the Decision of the National

Labor Relations Commission (NLRC) which modified the Decision of the Labor Arbiter as regards the
awards of retirement pay and 13thmonth pay, and deleted the award of attorneys fees; as well as the
August 19, 2003 Resolution[2] denying the motion for reconsideration.
Petitioner was employed as a salesman at private respondents Grocery Division in Davao City on August
12, 1977. He was eventually appointed as unit manager of Sales Department-South Mindanao District, a
position he held until his retirement on November 30, 1997.[3] Thereafter, he received a letter regarding
the computation of his separation pay, to wit:
September 10, 1998
MR. ROGELIO J. REYES
#2 San Nicolas Street
Skyline Village, Catalunan Grande
Davao City 8000
Dear Mr. Reyes,
This is in reply to your letter dated August 10, 1998, a copy of which was received by the undersigned only
on September 2, 1998.
We wish to advise you that per our computation, your separation pay amounts to:
Retirement benefit (computed at 50% pay for every year
of service, a fraction of at least 6 months considered as 1
year)
VL Cash Conversion (144 hours)
SL Cash Conversion (120 hours)
Financial Assistance (as approved by LY Gokongwei in
Memo dated November 4, 1997)
Final Accountability/Accounting
Tax Refund 16,699.35
13th Month Pay 10,919.22
Withheld Commission
November 1997 30,000.00
Salary Overpaid ( 834.59)
Lost Pager ( 6,295.00)
TOTAL

Php 109,192.20
7,511.31
3,129.72
30,000.00

50,488.98
Php 200,322.21

This computation is pursuant to Company policy and practice. We are unable to agree with your suggested
basis of computation as they are without legal basis. Also, we regret that we cannot pay you the Sales
Commission and Tax Refund ahead of the other payments.
Kindly get in touch with us at 671-7098 if you have any questions.
Very truly yours,

(SGD) ATTY. MANUEL R. DEL ROSARIO

Group Human Resources Director
cc: Mr. Lance Gokongwei
Atty. Danny Bolos
Mr. Al Bacleon[4]
Insisting that his retirement benefits and 13th month pay must be based on the average monthly salary
of P42,766.19, which consists of P10,919.22 basic salary and P31,846.97 average monthly commission,
petitioner refused to accept the check[5] issued by private respondent in the amount
of P200,322.21.[6] Instead, he filed a complaint before the arbitration branch of the NLRC for retirement
benefits, 13th month pay, tax refund, earned sick and vacation leaves, financial assistance, service
incentive leave pay, damages and attorneys fees.[7]
On March 15, 1999, Labor Arbiter Miriam A. Libron-Barroso rendered a decision holding that sales
commission is part of the basic salary of a unit manager, thus:
WHEREFORE, JUDGMENT IS HEREBY RENDERED ordering respondent Universal Robina CorporationGrocery Division to pay complainant the net amount of PESOS: NINE HUNDRED ELEVEN THOUSAND SIX
HUNDRED NINETY NINE AND 92/100 (P911,699.92) representing his retirement benefits, 13 th month pay
for 1997, 13th month pay differential for 1996 and 1995, VL and SL Cash conversion, withheld commission
for 1997, financial assistance and tax refund plus attorneys fees equivalent to 5% of the total award.
All other claims are dismissed for lack of basis.
SO ORDERED.[8]
On appeal, the NLRC modified the decision of the Labor Arbiter by excluding the overriding commission
in the computation of the retirement benefits and 13th month pay and deleted the award of attorneys
fees, thus:
WHEREFORE, judgment is rendered:
1. Affirming with modification the decision appealed from insofar as the award of retirement pay and
13th month pay to the effect that same be computed based on the P10,919.22 basic salary to the exclusion
of the overriding commissions of complainant.
2. Affirming in toto the award of VL cash conversion, SL cash conversion, tax refund, withheld commission
and financial assistance.
3. Deleting the award of attorneys fees for lack of merit.
SO ORDERED.[9]
Both parties moved for reconsideration of the NLRC decision but were denied by the NLRC for lack of
merit. Only petitioner filed a petition for certiorari before the Court of Appeals but was dismissed for lack
of merit.
Petitioners motion for reconsideration was denied; hence this petition raising the sole issue:

WHETHER OR NOT THE AVERAGE MONTHLY SALES COMMISSION OF THIRTY ONE THOUSAND EIGHT
HUNDRED FORTY SIX AND 97/100 (Php 31,846.97) SHOULD BE INCLUDED IN THE COMPUTATION OF HIS
RETIREMENT BENEFITS AND 13TH MONTH PAY.[10]
Petitioner contends that the commissions form part of the basic salary, citing the case of Philippine
Duplicators, Inc. v. National Labor Relations Commission,[11] wherein the Court held that commissions
earned by salesmen form part of their basic salary.[12]
Private respondent counters that petitioner knew that the overriding commission is not included in the
basic salary because it had not been considered as such for a long time in the computation of the
13th month pay, leave commissions, absences and tardiness. Petitioner himself stated in the complaint
that his basic salary is P10,919.22, thus, he is estopped from claiming otherwise. Moreover, in BoieTakeda Chemicals, Inc. v. De la Serna,[13] the Supreme Court held that the fixed or guaranteed wage is
patently the basic salary for this is what the employee receives for a standard work period, and that
commissions are given for extra efforts exerted in consummating sales or other transactions.Also,
in Soriano v. National Labor Relations Commission,[14] the Court clarified that overriding commission is not
properly includible in the basic salary as it must be earned by actual market transactions attributable to
the claimant. Thus, as a unit manager who supervised the salesmen under his control and did not enter
into actual sale transactions, petitioners overriding commissions must not be considered in the
computation of the retirement benefits and 13th month pay.[15]
The petition lacks merit. Any seeming inconsistencies between Philippine Duplicators and BoieTakeda had been clarified by the Court in the Resolution dated February 15, 1995in the Philippine
Duplicators case.[16]
The Court thus clarified that in Philippine Duplicators, the salesmens commissions, comprising a predetermined percentage of the selling price of the goods sold by each salesman, were properly included in
the term basic salary for purposes of computing the 13th month pay. The salesmens commission are not
overtime payments, nor profit-sharing payments nor any other fringe benefit,[17] but a portion of the
salary structure which represents an automatic increment to the monetary value initially assigned to each
unit of work rendered by a salesman.[18]
Contrarily, in Boie-Takeda, the so-called commissions paid to or received by medical representatives of
Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co., were excluded from
the term basic salary because these were paid to the medical representatives and rank-and-file
employees as productivity bonuses, which are generally tied to the productivity, or capacity for revenue
production, of a corporation and such bonuses closely resemble profit-sharing payments and have no
clear direct or necessary relation to the amount of work actually done by each individual
employee.[19] Further, commissions paid by the Boie-Takeda Company to its medical representatives could
not have been sales commissions in the same sense that Philippine Duplicators paid the salesmen their
sales commissions. Medical representatives are not salesmen; they do not effect any sale of any article at
all.[20]
In fine, whether or not a commission forms part of the basic salary depends upon the circumstances or
conditions for its payment, which indubitably are factual in nature for they will require a re-examination
and calibration of the evidence on record. Thus, our review thereof in the case at bar would violate the
settled rule that findings of facts of quasi-judicial bodies like the NLRC, and affirmed by the Court of

Appeals in due course, are conclusive on this Court, which is not a trier of facts.[21] Nevertheless, should
petitioners commissions be considered in the computation of his retirement benefits and 13th month pay?
We rule in the negative.
Article 287 of the Labor Code, as amended by Republic Act No. 7641, otherwise known as The New
Retirement Law,[22] provides:
Art. 287. Retirement. Any employee may be retired upon reaching the retirement age established in the
collective bargaining agreement or other applicable employment contract.
xxxx
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty five
(65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years
in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one half
(1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one
whole year.
Unless the parties provide for broader inclusions, the term one half (1/2) month salary shall mean fifteen
(15) days plus one twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5)
days of service incentive leaves.
And, Section 5 of Rule II of the Rules Implementing the New Retirement Law, provides:
RULE II
Retirement Benefits
xxxx
Section 5. Retirement Benefits.
5.1
In the absence of an applicable agreement or retirement plan, an employee who retires
pursuant to the Act shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary
for every year of service, a fraction of at least six (6) months being considered as one whole year.
5.2
Components of One-half (1/2) Month Salary. For the purpose of determining the minimum
retirement pay due an employee under this Rule, the term one-half-month salary shall include all the
following:
(a)
Fifteen (15) days salary of the employee based on his latest salary rate. As used herein, the
term salary includes all remunerations paid by an employer to his employees for services rendered during
normal working days and hours, whether such payments are fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, and includes the fair and reasonable value,
as determined by the Secretary of Labor and Employment, of food, lodging, or other facilities customarily
furnished by the employer to his employees. The term does not include cost of living allowance, profit-

sharing payments and other monetary benefits which are not considered as part of or integrated into the
regular salary of the employees.
(b)

The cash equivalent of not more than five (5) days of service incentive leave.

(c)

One-twelfth of the 13 month pay due the employee.

(d)
All other benefits that the employer and employee may agree upon that should be included in
the computation of the employees retirement pay. (Emphasis supplied)
The article provides for two types of retirement: (a) compulsory and (b) optional. The first takes place at
age 65, while the second is primarily determined by the collective bargaining agreement or other
employment contract or employers retirement plan. In the absence of any provision on optional
retirement in a collective bargaining agreement, other employment contract, or employers retirement
plan, an employee may optionally retire upon reaching the age of 60 years or more, but not beyond 65
years, provided he has served at least five years in the establishment concerned.
For the purpose of computing retirement pay, one-half month salary shall include all of the following:
1)
2)
3)
4)

15 days salary based on the latest salary rate;

cash equivalent of 5 days of service incentive leave (or vacation leave);
1/12 of the 13th month pay;
other benefits as may be agreed upon by employer and employee for inclusion.

But, it shall not include the following:

1)
cost of living allowance;
2)
profit-sharing payments; and
3)
other monetary benefits which are not considered as part of or integrated into the regular
salary of the employees
Petitioner filed for optional retirement upon reaching the age of 60. However, the basis in computing his
retirement benefits is his latest salary rate of P10,919.22 as the commissions he received are in the form
of profit-sharing payments specifically excluded by the foregoing rules.
As aptly observed by the Court of Appeals:
In fine, Boie-Takeda and Philippine Duplicator particularize the types of earnings and remuneration that
should or should not properly be included or integrated in the basic salary and which questions are to be
resolved or determined on a case-to-case basis, in the light of the specific and detailed facts of each
case. In other words, when these earnings and remuneration are closely akin to fringe benefits, overtime
pay or profit-sharing statements, they are properly excluded in computing retirement pay. However, sales
commissions which are effectively an integral portion of the basic salary structure of an employee, shall
be included in determining the retirement pay.
At bar, petitioner Rogelio J. Reyes was receiving a monthly sum of P10,919.22 as salary corresponding to
his position as Unit Manager. Thus, as correctly ruled by public respondent NLRC, the overriding
commissions paid to him by Universal Robina Corp. could not have been sales commissions in the same

sense that Philippine Duplicators paid its salesmen sales commissions. Unit Managers are not salesmen;
they do not effect any sale of article at all. Therefore, any commission which they receive is certainly not
the basic salary which measures the standard or amount of work of complainant as Unit
Manager. Accordingly, the additional payments made to petitioner were not in fact sales commissions but
rather partook of the nature of profit-sharing business. Certainly, from the foregoing, the doctrine in BoieTakeda Chemicals and Philippine Fuji Xerox Corporation, which pronounced that commissions are
additional pay that does not form part of the basic salary, applies to the present case.[23]
Aside from the fact that as unit manager petitioner did not enter into actual sale transactions, but merely
supervised the salesmen under his control, the disputed commissions were not regularly received by
him. Only when the salesmen were able to collect from the sale transactions can petitioner receive the
commissions. Conversely, if no collections were made by the salesmen, then petitioner would receive no
commissions at all.[24] In fine, the commissions which petitioner received were not part of his salary
structure but were profit-sharing payments and had no clear, direct or necessary relation to the amount
of work he actually performed. The collection made by the salesmen from the sale transactions was the
profit of private respondent from which petitioner had a share in the form of a commission.
It may be argued that petitioner may have exerted efforts in pushing the salesmen to close more sale
transactions; however, it is not the criterion which would entitle him to a commission, but the actual sale
transactions brought about by the individual efforts of the salesmen.
Insofar as what constitutes basic salary, the foregoing discussions equally apply to the computation of
petitioners 13th month pay. As held in San Miguel Corporation v. Inciong:[25]
Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the
basis in the determination of his 13th-month pay. Any compensations or remunerations which are
deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are
deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instruction No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or integrated as part of the regular
basic salary of the employee at the time of the promulgation of the Decree onDecember 16, 1975.
(Emphasis supplied)
Finally, considering that the computations, as well as the propriety of the awards, are unquestionably
factual issues that have been discussed and ruled upon by NLRC and affirmed by the Court of Appeals, we
cannot depart from such findings. Findings of fact of administrative agencies and quasi-judicial bodies,
which have acquired expertise because their jurisdiction is confined to specific matters, are generally
accorded not only respect, but finality when affirmed by the Court of Appeals. Such findings deserve full
respect and, without justifiable reason, ought not to be altered, modified or reversed.[26]
WHEREFORE, the petition is DENIED. The November 14, 2002 Decision of the Court of Appeals in CA-G.R.
SP No. 64799, affirming the Decision of the National Labor Relations Commission, which modified the
Decision of the Labor Arbiter with respect to the awards of retirement pay and 13th month pay, and
deleted the award of attorneys fees is AFFIRMED in toto.

SO ORDERED.

Book III, Rule VII-A

DOLE D.O. No. 126-13, April 2013

Minimum wage; Minimum wage setting

Art. 99, Labor Code

Chapter II
MINIMUM WAGE RATES
Article 99. Regional minimum wages. The minimum wage rates for agricultural and non-agricultural
employees and workers in each and every region of the country shall be those prescribed by the
Regional Tripartite Wages and Productivity Boards. (As amended by Section 3, Republic Act No. 6727,
June 9, 1989).

R.A. 6727, Wage Rationalization Act

Book III, Rule VII, Sec. 1, Implementing Rules (Labor Code)

SECTION 1. Definition of Terms. As used in this Rules

a) "Act" means Republic Act No. 6727;
b) "Commission" means the National Wages and Productivity Commission;
c) "Board" means the Regional Tripartite Wages and Productivity Board;
d) "Agriculture" refers to all farming activities in all its branches and includes among others, the
cultivation and tillage of the soil, production, cultivation, growing and harvesting of any agricultural or
horticultural commodities, dairying, raising of livestock or poultry, the culture of fish and other aquatic
products in farms or ponds, and any activities performed by a farmer or on a farm as an incident to or in
conjunction with such farming operations, but does not include the manufacturing and/or processing of
sugar, coconut, abaca, tobacco, pineapple, aquatic or other farm products;
e) "Plantation Agricultural Enterprise" is one engaged in agriculture within an area of more than 24
hectares in a locality and/or which employs at least 20 workers. Any other agricultural enterprise shall
be considered as "Non-Plantation Agricultural Enterprises";
f) "Retail Establishment" is one principally engaged in the sale of goods to end-users for personal or
household use;
g) "Service Establishment" is one primarily engaged in the sale of service to individuals for their own or
household use and is generally recognized as such;

h) "Cottage/Handicraft Establishment" is one engaged in an economic endeavor in which the products

are primarily done in the home or such other places for profit which requires manual dexterity and
craftsmanship and whose capitalization does not exceed P500,000, regardless of previous registration
with the defunct NACIDA;
i) "National Capital Region" covers the cities of Kalookan, Manila, Pasay and Quezon and the
municipalities of Las Pias, Makati, Malabon, Mandaluyong, Marikina, Muntinlupa, Navotas, Paraaque,
Pasig, Pateros, San Juan, Taguig and Valenzuela;
j) "Region III" covers the provinces of Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac, and Zambales and
the cities of Angeles, Cabanatuan, Olongapo, Palayan and San Jose;
k) "Region IV" covers the provinces of Aurora, Batangas, Cavite, Laguna, Marinduque, Occidental
Mindoro, Palawan, Quezon, Rizal and Romblon and the cities of Batangas, Cavite, Lipa, Lucena, Puerto
Princesa, San Pablo, Tagaytay and Trece Martires;
l) "Department" refers to the Department of Labor and Employment;
m) "Secretary" means the Secretary of Labor and Employment;
n) "Basic Wage" means all remuneration or earnings paid by an employer to a worker for services
rendered on normal working days and hours but does not include cost-of-living allowances, profit
sharing payments, premium payments, 13th month pay or other monetary benefits which are not
considered as part of or integrated into the regular salary of the workers on the date the Act became
effective."
o) "Statutory Minimum Wage" is the lowest wage fixed by law that an employer can pay his workers;
p) "Wage Distortion" means a situation where an increase in prescribed wage rates results in the
elimination or severe contraction of intentional quantitative differences in wage or salary rates between
and among employee groups in an establishment as to effectively obliterate the distinctions embodied
in such wage structure based on skills, length of service, or other logical bases of differentiation;
q) "Capitalization" means paid-up capital, in the case of a corporation, and total invested capital, in the
case of a partnership or single proprietorship.

NWPC Guidelines No. 1, Series of 2007 (June 19, 2007)

Employees Confederation v. NWPC, G.R. No. 96169, September 24, 1991

G.R. No. 96169 September 24, 1991

EMPLOYERS CONFEDERATION OF THE PHILIPPINES, petitioner,
vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE WAGES AND
PRODUCTIVITY BOARD-NCR, TRADE UNION CONGRESS OF THE PHILIPPINES, respondents.
Sycip Salazar, Hernandez & Gatmaitan for petitioner.

Gilbert P. Lorenzo for private respondent.

SARMIENTO, J.:p
The petition is given due course and the various pleadings submitted being sufficient to aid the Court in
the proper resolution of the basic issues raised in this case, we decide it without further ado.
The Employers Confederation of the Philippines (ECOP) is questioning the validity of Wage Order No.
NCR-01-A dated October 23, 1990 of the Regional Tripartite Wages and Productivity Board, National
Capital Region, promulgated pursuant to the authority of Republic Act No. 6727, "AN ACT TO
RATIONALIZE WAGE POLICY DETERMINATION BY ESTABLISHING THE MECHANISM AND PROPER
STANDARDS THEREFORE, AMENDING FOR THE PURPOSE ARTICLE 99 OF, AND INCORPORATING ARTICLES
120, 121, 122, 123, 124, 126, AND 127 INTO, PRESIDENTIAL DECREE NO. 442 AS AMENDED, OTHERWISE
KNOWN AS THE LABOR CODE OF THE PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING WAGE
INCENTIVES FOR INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER PURPOSES," was
approved by the President on June 9, 1989. Aside from providing new wage rates, 1 the "Wage
Rationalization Act" also provides, among other things, for various Regional Tripartite Wages and
Productivity Boards in charge of prescribing minimum wage rates for all workers in the various
regions 2 and for a National Wages and Productivity Commission to review, among other functions, wage
levels determined by the boards. 3
On October 15, 1990, the Regional Board of the National Capital Region issued Wage Order No. NCR-01,
increasing the minimum wage by P17.00 daily in the National Capital Region. 4 The Trade Union Congress
of the Philippines (TUCP) moved for reconsideration; so did the Personnel Management Association of
the Philippines (PMAP). 5 ECOP opposed.
On October 23, 1990, the Board issued Wage Order No. NCR-01-A amending Wage Order No. NCR-01, as
follows:
Section 1. Upon the effectivity of this Wage Order, all workers and employees in the private sector in the
National Capital Region already receiving wages above the statutory minimum wage rates up to one
hundred and twenty-five pesos (P125.00) per day shall also receive an increase of seventeen pesos
(P17.00) per day.
ECOP appealed to the National Wages and Productivity Commission. On November 6, 1990, the
Commission promulgated an Order, dismissing the appeal for lack of merit. On November 14, 1990, the
Commission denied reconsideration.
The Orders of the Commission (as well as Wage Order No. NCR-01-A) are the subject of this petition, in
which. ECOP assails the board's grant of an "across-the-board" wage increase to workers already being
paid more than existing minimum wage rates (up to P125. 00 a day) as an alleged excess of authority,
and alleges that under the Republic Act No. 6727, the boards may only prescribe "minimum wages," not
determine "salary ceilings." ECOP likewise claims that Republic Act No. 6727 is meant to promote
collective bargaining as the primary mode of settling wages, and in its opinion, the boards can not
preempt collective bargaining agreements by establishing ceilings. ECOP prays for the nullification of
Wage Order No. NCR 01-A and for the "reinstatement" of Wage Order No. NCR-01.

The Court directed the Solicitor General to comment on behalf of the Government, and in the Solicitor
General's opinion, the Board, in prescribing an across-the-board hike did not, in reality, "grant additional
or other benefits to workers and employees, such as the extension of wage increases to employees and
workers already receiving more than minimum wages ..." 6 but rather, fixed minimum wages according
to the "salary-ceiling method."
ECOP insists, in its reply, that wage is a legislative function, and Republic Act No. 6727 delegated to the
regional boards no more "than the power to grant minimum wage adjustments" 7 and "in the absence of
clear statutory authority," 8 the boards may no more than adjust "floor wages." 9
The Solicitor General, in his rejoinder, argues that Republic Act No. 6727 is intended to correct "wage
distortions" and the salary-ceiling method (of determining wages) is meant, precisely, to rectify wage
distortions. 10
The Court is inclined to agree with the Government. In the National Wages and Productivity
Commission's Order of November 6, 1990, the Commission noted that the determination of wages has
generally involved two methods, the "floor-wage" method and the "salary-ceiling" method. We quote:
Historically, legislation involving the adjustment of the minimum wage made use of two methods. The
first method involves the fixing of determinate amount that would be added to the prevailing statutory
minimum wage. The other involves "the salary-ceiling method" whereby the wage adjustment is applied
to employees receiving a certain denominated salary ceiling. The first method was adopted in the earlier
wage orders, while the latter method was used in R.A. Nos. 6640 and 6727. Prior to this, the salaryceiling method was also used in no less than eleven issuances mandating the grant of cost-of-living
allowances (P.D. Nos. 525, 1123, 1614, 1634, 1678, 1713 and Wage Order Nos. 1, 2, 3, 5 and 6). The shift
from the first method to the second method was brought about by labor disputes arising from wage
distortions, a consequence of the implementation of the said wage orders. Apparently, the wage order
provisions that wage distortions shall be resolved through the grievance procedure was perceived by
legislators as ineffective in checking industrial unrest resulting from wage order implementations. With
the establishment of the second method as a practice in minimum wage fixing, wage distortion disputes
were minimized. 11
As the Commission noted, the increasing trend is toward the second mode, the salary-cap method,
which has reduced disputes arising from wage distortions (brought about, apparently, by the floor-wage
method). Of course, disputes are appropriate subjects of collective bargaining and grievance
procedures, but as the Commission observed and as we are ourselves agreed, bargaining has helped
very little in correcting wage distortions. Precisely, Republic Act No. 6727 was intended to rationalize
wages, first, by providing for full-time boards to police wages round-the-clock, and second, by giving the
boards enough powers to achieve this objective. The Court is of the opinion that Congress meant the
boards to be creative in resolving the annual question of wages without labor and management
knocking on the legislature's door at every turn. The Court's opinion is that if Republic No. 6727
intended the boards alone to set floor wages, the Act would have no need for a board but an accountant
to keep track of the latest consumer price index, or better, would have Congress done it as the need
arises, as the legislature, prior to the Act, has done so for years. The fact of the matter is that the Act
sought a "thinking" group of men and women bound by statutory standards. We quote:

ART. 124. Standards / Criteria for Minimum Wage Fixing. The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to maintain the
minimum standards of living necessary for the health, efficiency and general well-being of the
employees within the framework of the national economic and social development program. In the
determination of such regional minimum wages, the Regional Board shall, among other relevant factors,
consider the following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of emphasis employers;
(i) Effects of employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of economic and social
development. 12
The Court is not convinced that the Regional Board of the National Capital Region, in decreeing an
across-the-board hike, performed an unlawful act of legislation. It is true that wage-fixing, like rate
constitutes an act Congress; 13 it is also true, however, that Congress may delegate the power to fix
rates 14 provided that, as in all delegations cases, Congress leaves sufficient standards. As this Court has
indicated, it is impressed that the above-quoted standards are sufficient, and in the light of the floorwage method's failure, the Court believes that the Commission correctly upheld the Regional Board of
the National Capital Region.
Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meant to "get the
Government out of the industry" and leave labor and management alone in deciding wages. The Court
does not think that the law intended to deregulate the relation between labor and capital for several
reasons: (1) The Constitution calls upon the State to protect the rights of workers and promote their
welfare; 15 (2) the Constitution also makes it a duty of the State "to intervene when the common goal so
demands" in regulating property and property relations; 16 (3) the Charter urges Congress to give priority
to the enactment of measures, among other things, to diffuse the wealth of the nation and to regulate
the use of property; 17 (4) the Charter recognizes the "just share of labor in the fruits of
production;" 18 (5) under the Labor Code, the State shall regulate the relations between labor and
management; 19 (6) under Republic Act No. 6727 itself, the State is interested in seeing that workers
receive fair and equitable wages; 20and (7) the Constitution is primarily a document of social justice, and
although it has recognized the importance of the private sector, 21 it has not embraced fully the concept
of laissez faire 22 or otherwise, relied on pure market forces to govern the economy; We can not give to
the Act a meaning or intent that will conflict with these basic principles.

It is the Court's thinking, reached after the Court's own study of the Act, that the Act is meant to
rationalize wages, that is, by having permanent boards to decide wages rather than leaving wage
determination to Congress year after year and law after law. The Court is not of course saying that the
Act is an effort of Congress to pass the buck, or worse, to abdicate its duty, but simply, to leave the
question of wages to the expertise of experts. As Justice Cruz observed, "[w]ith the proliferation of
specialized activities and their attendant peculiar problems, the national legislature has found it more
necessary to entrust to administrative agencies the power of subordinate legislation' as it is caned." 23
The Labor Code defines "wage" as follows:
"Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or
to be rendered and includes the fair and reasonably value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the employee. "Fair and
reasonable value" shall not include any profit to the employer or to any person affiliated with the
employer. 24
The concept of "minimum wage" is, however, a different thing, and certainly, it means more than setting
a floor wage to upgrade existing wages, as ECOP takes it to mean. "Minimum wages" underlies the effort
of the State, as Republic Act No. 6727 expresses it, "to promote productivity-improvement and gainsharing measures to ensure a decent standard of living for the workers and their families; to guarantee
the rights of labor to its just share in the fruits of production; to enhance employment generation in the
countryside through industry dispersal; and to allow business and industry reasonable returns on
investment, expansion and growth," 25 and as the Constitution expresses it, to affirm "labor as a primary
social economic force." 26 As the Court indicated, the statute would have no need for a board if the
question were simply "how much". The State is concerned, in addition, that wages are not distributed
unevenly, and more important, that social justice is subserved.
It is another question, to be sure, had Congress created "roving" boards, and were that the case, a
problem of undue delegation would have ensued; but as we said, we do not see a Board (National
Capital Region) "running riot" here, and Wage Order No. NCR-01-A as an excess of authority.
It is also another question whether the salary-cap method utilized by the Board may serve the purposes
of Republic Act No. 6727 in future cases and whether that method is after all, a lasting policy of the
Board; however, it is a question on which we may only speculate at the moment. At the moment, we
find it to be reasonable policy (apparently, it has since been Government policy); and if in the future it
would be perceptibly unfair to management, we will take it up then.
WHEREFORE, premises considered, the petition is DENIED. No pronouncement as to costs.
IT IS SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur.
Paras, J., took no part.

Nasipit Integrated v. Nasipit Employees, G.R. No. 162411, June 27, 2008

Republic of the Philippines

SUPREME COURT
Baguio City

SECOND DIVISION

NASIPIT
INTEGRATED
ARRASTRE
AND
STEVEDORING SERVICES, INC. (NIASSI),
represented by RAMON M. CALO,
Petitioner,
- versus -

NASIPIT EMPLOYEES LABOR UNION (NELU)ALU-TUCP, represented by DONELL P. DAGANI,

Respondent.

G.R. No. 162411

Present:

CARPIO MORALES, J.,

Acting Chairperson,
TINGA,
CHICO-NAZARIO,*
VELASCO, JR., and
BRION, JJ.

Promulgated:
June 27, 2008

x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
This petition for review[1] under Rule 45 seeks to nullify and set aside the Decision[2] dated September 30,
2003 and Resolution[3] dated January 9, 2004, both issued by the Court of Appeals (CA) in CA-G.R. SP No.
70435 which dismissed petitioner Nasipit Integrated Arrastre & Stevedoring Services, Inc.s (NIASSIs)
petition for review of the Decision[4] dated February 22, 2002 rendered by Voluntary Arbitrator Jesus G.
Chavez in VA Case No. 0925-XIII-08-003-01A.
The records yield the following facts:
NIASSI is a domestic corporation with office at Talisay, Nasipit, Agusan del Norte. Respondent Nasipit
Employees Labor Union (Union) wasand may still bethe collective bargaining agent of the rank-and-file
employees of NIASSI and is a local chapter of the Associated Labor Union.

The dispute started when, in October 1999, the Regional Tripartite Wages and Productivity Board (Wage
Board) of Caraga Region in Northeastern Mindanao issued Wage Order No. (WO) RXIII-02 which granted
an additional PhP 12 per day cost of living allowance to the minimum wage earners in that region. Owing
allegedly to NIASSIs failure to implement the wage order, the Union filed a complaint before the
Department of Labor and Employment (DOLE) Caraga Regional Office for the inspection of NIASSIs records
and the enforcement of WO RXIII-02. A DOLE inspection team was accordingly dispatched to NIASSI. In its
reports dated May 30, 2000 and November 28, 2000, the inspection team stated that WO RXIII-02 was
not applicable to NIASSIs employees since they were already receiving a wage rate higher than the
prescribed minimum wage.
Upon motion by the Union, the DOLE Regional Director indorsed the case to the National Labor Relations
Commission (NLRC) Regional Arbitration Branch for further hearing. On May 18, 2001, Executive Labor
Arbiter Rogelio P. Legaspi, in turn, referred the case to the National Conciliation and Mediation Board
(NCMB) for voluntary arbitration.
The case was, accordingly, referred to the NCMB which docketed the same as VA Case No. 0925-XIII-08003-01A.
On February 22, 2002, Voluntary Arbitrator Jesus G. Chavez rendered a decision granting the Unions
prayer for the implementation of WO RXIII-02 on the rationale that WO RXIII-02 did not specifically
prohibit the grant of wage increase to employees earning above the minimum wage. On the contrary,
Chavez said, the wage order specifically enumerated those who are outside its coverage, but did not
include in the enumeration those earning above the minimum wage. He also held that the Collective
Bargaining Agreement (CBA) between NIASSI and the Union provides that wage increases granted by the
company within one year from CBA signing shall not be creditable to future legally mandated wage
increases. The voluntary arbitrator further held that NIASSI would not incur any damage from the
implementation of WO RXIII-02 since NIASSIs petition to increase the tariff rates for all cargoesto counter
the financial burden of implementing WO RXIII-02had been granted and had been in effect since February
16, 2000.
Following the denial of its motion for reconsideration, NIASSI filed with the CA a petition for review under
Rule 43 of the Rules of Court to nullify the February 22, 2002 Decision of Chavez. The petition was
docketed as CA-G.R. SP. No. 70435.
By a decision dated September 30, 2003, the CA found the decision of the voluntary arbitrator and the
premises holding it together to be in order and, accordingly, dismissed NIASSIs petition for review.
NIASSI is now before the Court via this Petition for Review on Certiorari, ascribing to the CA the
commission of several errors all which resolve themselves into the question of whether or not WO RXIII02 applies or covers NIASSIs employees.
The Courts Ruling
In gist, NIASSI argues that its employees enjoy a daily wage level higher than the minimum wage mandated
by the subject wage order; thus, the wage order is not applicable. Corollary to this argument, NIASSI
contends that the Wage Board did not envision a wage order with an across-the-board wage increase
effect; thus, it could be made to apply only to minimum wage earners. As a final point, NIASSI states that,

since WO RXIII-02 is not applicable, the issue respecting the interpretation of the NIASSI-Union CBA
provision on wage crediting finds no application either.
As a counterpoint, the Union maintains that Section 2, Article XIX of the CBA clearly mandates the
implementation of WO RXIII-02 to cover all NIASSIs employees. While admitting that the new wage rates
specifically finds application only to minimum wage earners, the Union would nonetheless argue that WO
RXIII-02, as couched, does not specifically prohibit the grant of wage increase to employees already
receiving wages over the prescribed minimum wage.
The petition is impressed with merit.
The main issue in this case is whether WO RXIII-02 may be made to apply and cover Nasipits employees
who, at the time of the issuance and effectivity of the wage order, were already receiving a wage rate
higher than the prevailing minimum wage.
The pertinent portion of WO RXIII-02 provides, as follows:
Section 1. COVERAGE. The rates prescribed under this Wage Order shall apply to minimum wage
earners in the private sector regardless of their position designation or status and irrespective of the
method by which their wages are paid.
Not covered by the provisions of this Order are household or domestic helpers and persons employed in
the personal service of another, including family drivers. (Emphasis supplied.)

The provision of the wage orders Implementing Rules and Regulations (IRR)[5] pertinent to the instant
issue reads, as follows:
RULE II
NEW MINIMUM WAGE RATES
Section 1. COVERAGE
a.
The minimum wage rates prescribed under the Order shall apply to the minimum wage earners in
the private sector regardless of their position, designation or status and irrespective of the method by
which their wages are paid.
b. Not covered by the provision of the Order are household or domestic helpers or persons employed
in the personal service of another including family drivers.
c.
Workers and employees who, prior to the effectivity of the Order were receiving a basic wage rate
per day or its monthly equivalent of more than those prescribed under the Order, may receive wage
increases through the correction of wage distortions in accordance with Section 1, Rule IV of this Rules.
(Emphasis supplied.)
It is abundantly clear from the above quoted provisions of WO RXIII-02 and its IRR that only minimum
wage earners are entitled to the prescribed wage increase. Expressio unius est exclusio alterius.[6] The
express mention of one person, thing, act, or consequence excludes all others. The beneficent, operative

provision of WO RXIII-02 is specific enough to cover only minimum wage earners. Necessarily excluded
are those receiving rates above the prescribed minimum wage. The only situation when employees
receiving a wage rate higher than that prescribed by the WO RXIII-02 may still benefit from the order is,
as indicated in Sec. 1 (c) of the IRRs, through the correction of wage distortions.
In any case, it would be highly irregular for the Wage Board to issue an across-the-board wage increase,
its mandate being limited to determining and fixing the minimum wage rates within its area of concern,
in this case the Caraga Region, and to issue the corresponding wage orders and implementing rules.
In Metropolitan Bank and Trust Company, Inc., v. National Wages and Productivity Commission, the Court
elucidated on the authority of the Regional Tripartite Wages and Productivity Board, thus:
R.A. No. 6727 declared it a policy of the State to rationalize the fixing of minimum wages and to promote
productivity improvement and gain-sharing measures to ensure a decent standard of living for the
workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to
enhance employment generation in the countryside through industrial dispersal; and to allow business
and industry reasonable returns on investment, expansion and growth.
In line with its declared policy, R.A. No. 6727 created the NWPC, vested with the power to prescribe rules
and guidelines for the determination of appropriate minimum wage and productivity measures at the
regional, provincial or industry levels; and authorized the RTWPB to determine and fix the minimum wage
rates applicable in their respective regions, provinces, or industries therein and issue the corresponding
wage orders, subject to the guidelines issued by the NWPC. Pursuant to its wage fixing authority, the
RTWPB may issue wage orders which set the daily minimum wage rates, based on the standards or criteria
set by Article 124 of the Labor Code.[7]
In the same case, the Court held that a RTWPB commits ultra vires and unreasonable act when, instead
of setting a minimum wage rate, it prescribes a wage increase cutting across all levels of employment and
wage brackets:
In the present case, the RTWPB did not determine or fix the minimum wage rate by the floor-wage method
or the salary-ceiling method in issuing the Wage Order. The RTWPB did not set a wage level nor a range
to which a wage adjustment or increase shall be added. Instead, it granted an across-the-board wage
increase of P15.00 to all employees and workers of Region 2. In doing so, the RTWPB exceeded its
authority by extending the coverage of the Wage Orders to wage earners receiving more than the
prevailing minimum wage rate, without a denominated salary ceiling. As correctly pointed out by the OSG,
the Wage Order granted additional benefits not contemplated by R.A. No. 6727.[8]

Clearly then, only employees receiving salaries below the prescribed minimum wage are entitled to the
wage increase set forth under WO RXIII-02, without prejudice, of course, to the grant of increase to correct
wage distortions consequent to the implementation of such wage order. Considering that NIASSIs
employees are undisputedly already receiving a wage rate higher than that prescribed by the wage order,
NIASSI is not legally obliged to grant them wage increase.[9]

The Union, in a bid to bolster its case for wage increase for its members under NIASSIs employ, invokes
its CBA with the company and invites attention to Chavezs favorable ruling. The pertinent CBA provision
reads:
Article XIX, Section 2.

All general wage increases granted by the company after one (1) year from the signing of this CBA shall
not be creditable to any future wage increases mandated by any wage legislation and/or issuance of the
Regional Wage Board.
Chavezs decision, on the other hand, pertinently states:
It is likewise undisputed that complainant members are receiving more than the minimum wage.
Although, as mentioned earlier, the Notice of Inspection Report was not attached to respondents Position
Paper, complainant did not rebut respondents contention that the complainant members receive more
than the minimum wage. However, there is no evidence that the overage results from wage increases
granted by the company within one (1) year from the signing of the CBA. Doubt is resolved in favor of
labor. Therefore, the overage could not be credited to the P12.00 COLA mandated by Wage Order No. 2
pursuant to the aforequoted CBA provision.
xxxx
Moreover, Wage Order No. 2 does not expressly prohibit the granting of P12.00 COLA to those receiving
more than the minimum wage. It only says under Section 2 thereof that all minimum wage earners in the
private sector in Caraga Region shall receive a Cost of Living Allowance (COLA) in the amount of TWELVE
PESOS (P12.00) per day upon the effectivity of this Wage Order. On the other hand, Section 1 of the same
Wage Order positively enumerates those not covered: household or domestic helpers and persons
employed in the personal service of another, including family drivers. If Wage Order No. 2, therefore,
meant to exclude those receiving more than the minimum wage, then it would have specifically provided
so.[10]

Petitioners reliance on the above quoted CBA provision and on the flawed arbitrators case disposition is
really misplaced. Consider that in his decision, Chavez, after admitting that NIASSIs employees were
receiving a wage rate higher than the prescribed minimum wage, proceeded to fault NIASSI for not
presenting evidence to show that the overage or excess resulted from general wage increases granted by
the company itself within one year from the effectivity of the CBA in 1997. By simplistically utilizing the
adage doubt is resolved in labor, instead of relying on the case records and the evidence adduced, the
voluntary arbitrator extended the coverage of WO RXIII-02 to include those who, by the terms of the
order, are not supposed to receive the benefit. If only the voluntary arbitrator was circumspect enough
to consider the facts on hand, he would have seen that the CBA provision on non-creditability finds no
application in the present case, because creditability is not the real issue in this case. And neither is the
interpretation of the CBA provision. The real issue in this case, as discussed above, is the coverage and
application of WO RXIII-02.
While it behooves the Court to accord protection to the working class, tilting the balance of justice in its
favor whenever appropriate, it is not possible to resolve every dispute to further the cause of labor. In
every case, justice is to be granted to the deserving and dispensed in the light of established facts and the
applicable law and doctrine,[11]as here.
WHEREFORE, premises considered, the Decision of the CA dated September 30, 2003 and its Resolution
of January 9, 2004 in CA-G.R. SP No. 70435, affirming the Decision dated February 22, 2002 of Voluntary
Arbitrator Jesus G. Chavez in VA Case No. 0925-XIII-08-003-01A, are hereby REVERSED and SET ASIDE.

The Unions complaint for the enforcement of Wage Order No. RXIII-02 is, accordingly, DISMISSED for lack
of merit.
SO ORDERED.

Minimum wage of workers paid by results

Workers paid by results

Art. 124, Labor Code

Article 124. Standards/Criteria for minimum wage fixing. The regional minimum wages to be established
by the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum
standards of living necessary for the health, efficiency and general well-being of the employees within
the framework of the national economic and social development program. In the determination of such
regional minimum wages, the Regional Board shall, among other relevant factors, consider the
following:
The demand for living wages;
Wage adjustment vis--vis the consumer price index;
The cost of living and changes or increases therein;
The needs of workers and their families;
The need to induce industries to invest in the countryside;
Improvements in standards of living;
The prevailing wage levels;
Fair return of the capital invested and capacity to pay of employers;
Effects on employment generation and family income; and
The equitable distribution of income and wealth along the imperatives of economic and social
development.
The wages prescribed in accordance with the provisions of this Title shall be the standard prevailing
minimum wages in every region. These wages shall include wages varying with industries, provinces or
localities if in the judgment of the Regional Board, conditions make such local differentiation proper and
necessary to effectuate the purpose of this Title.
Any person, company, corporation, partnership or any other entity engaged in business shall file and
register annually with the appropriate Regional Board, Commission and the National Statistics Office, an
itemized listing of their labor component, specifying the names of their workers and employees below

the managerial level, including learners, apprentices and disabled/handicapped workers who were hired
under the terms prescribed in the employment contracts, and their corresponding salaries and wages.
Where the application of any prescribed wage increase by virtue of a law or wage order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and
the union shall negotiate to correct the distortions. Any dispute arising from wage distortions shall be
resolved through the grievance procedure under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in writing, such
dispute shall be decided by the voluntary arbitrators within ten (10) calendar days from the time said
dispute was referred to voluntary arbitration.
In cases where there are no collective agreements or recognized labor unions, the employers and
workers shall endeavor to correct such distortions. Any dispute arising therefrom shall be settled
through the National Conciliation and Mediation Board and, if it remains unresolved after ten (10)
calendar days of conciliation, shall be referred to the appropriate branch of the National Labor Relations
Commission (NLRC). It shall be mandatory for the NLRC to conduct continuous hearings and decide the
dispute within twenty (20) calendar days from the time said dispute is submitted for compulsory
arbitration.
The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of
any increase in prescribed wage rates pursuant to the provisions of law or wage order.
As used herein, a wage distortion shall mean a situation where an increase in prescribed wage rates
results in the elimination or severe contraction of intentional quantitative differences in wage or salary
rates between and among employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation.
All workers paid by result, including those who are paid on piecework, takay, pakyaw or task basis, shall
receive not less than the prescribed wage rates per eight (8) hours of work a day, or a proportion
thereof for working less than eight (8) hours.
All recognized learnership and apprenticeship agreements shall be considered automatically modified
insofar as their wage clauses are concerned to reflect the prescribed wage rates. (As amended by
Republic Act No. 6727, June 9, 1989)

Art. 101, Labor Code

Article 101. Payment by results.

The Secretary of Labor and Employment shall regulate the payment of wages by results, including
pakyao, piecework, and other non-time work, in order to ensure the payment of fair and reasonable
wage rates, preferably through time and motion studies or in consultation with representatives of
workers and employers organizations.

Book III, Rule VII-A, Implementing Rules (Labor Code)

Tan v. Lagman, G.R. No. 151228, August 15, 2002

SECOND DIVISION
[G.R. No. 151228. August 15, 2002]
ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA and THE HONORABLE COURT OF
APPEALS, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision,[1] dated May 31, 2001, and the resolution,[2] dated
November 27, 2001, of the Court of Appeals in C.A.-G.R. SP. No. 63160, annulling the resolutions of the
National Labor Relations Commission (NLRC) and reinstating the ruling of the Labor Arbiter which found
petitioner Rolando Tan guilty of illegally dismissing private respondent Leovigildo Lagrama and ordering
him to pay the latter the amount of P136,849.99 by way of separation pay, backwages, and damages.
The following are the facts.
Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general manager of
Crown and Empire Theaters in Butuan City. Private respondent Leovigildo Lagrama is a painter, making ad
billboards and murals for the motion pictures shown at the Empress, Supreme, and Crown Theaters for
more than 10 years, from September 1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided: Nangihi na
naman ka sulod sa imong drawinganan. (You again urinated inside your work area.) When Lagrama asked
what Tan was saying, Tan told him, Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan
karon, wala nay drawing. Gawas. (Dont say anything further. I dont want you to draw anymore. From
now on, no more drawing. Get out.)
Lagrama denied the charge against him. He claimed that he was not the only one who entered the drawing
area and that, even if the charge was true, it was a minor infraction to warrant his dismissal. However,
everytime he spoke, Tan shouted Gawas (Get out), leaving him with no other choice but to leave the
premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the National Labor Relations
Commission (NLRC) in Butuan City. He alleged that he had been illegally dismissed and sought
reinvestigation and payment of 13th month pay, service incentive leave pay, salary differential, and
damages.
Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was an independent
contractor who did his work according to his methods, while he (petitioner) was only interested in the
result thereof. He cited the admission of Lagrama during the conferences before the Labor Arbiter that
he was paid on a fixed piece-work basis, i.e., that he was paid for every painting turned out as ad billboard
or mural for the pictures shown in the three theaters, on the basis of a no mural/billboard drawn, no pay
policy. He submitted the affidavits of other cinema owners, an amusement park owner, and those
supervising the construction of a church to prove that the services of Lagrama were contracted by

them. He denied having dismissed Lagrama and alleged that it was the latter who refused to paint for him
after he was scolded for his habits.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the parties to file
their position papers. On June 17, 1999, he rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered judgment is hereby ordered:
1. Declaring complainants [Lagramas] dismissal illegal and
2. Ordering respondents [Tan] to pay complainant the following:
A. Separation Pay - P 59,000.00
B. Backwages - 47,200.00
(from 17 October 1998 to 17 June 1999)
C. 13th month pay (3 years) - 17,700.00
D. Service Incentive Leave
Pay (3 years) - 2, 949.99
E. Damages - 10,000.00
TOTAL [P136,849.99]
Complainants other claims are dismissed for lack of merit.[3]
Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City, which, on June 30, 2000,
rendered a decision[4] finding Lagrama to be an independent contractor, and for this reason reversing the
decision of the Labor Arbiter.
Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of merit by the NLRC in
a resolution of September 29, 2000. He then filed a petition for certiorari under Rule 65 before the Court
of Appeals.
The Court of Appeals found that petitioner exercised control over Lagramas work by dictating the time
when Lagrama should submit his billboards and murals and setting rules on the use of the work area and
rest room. Although it found that Lagrama did work for other cinema owners, the appeals court held it to
be a mere sideline insufficient to prove that he was not an employee of Tan. The appeals court also found
no evidence of any intention on the part of Lagrama to leave his job or sever his employment relationship
with Tan. Accordingly, on May 31, 2001, the Court of Appeals rendered a decision, the dispositive portion
of which reads:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The Resolutions of the Public
Respondent issued on June 30, 2000 and September 29, 2000 are ANNULLED. The Decision of the
Honorable Labor Arbiter Rogelio P. Legaspi on June 17, 1999 is hereby REINSTATED.

Petitioner moved for a reconsideration, but the Court of Appeals found no reason to reverse its decision
and so denied his motion for lack of merit.[5] Hence, this petition for review on certiorari based on the
following assignments of errors:
I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP NO. 63160 is bereft of
any finding that Public Respondent NLRC, 5th Division, had no jurisdiction or exceeded it or otherwise
gravely abused its discretion in its Resolution of 30 June 2000 in NLRC CA-NO. M-004950-99.
II. With all due respect, respondent Court of Appeals, absent any positive finding on its part that the
Resolution of 30 June 2000 of the NLRC is not supported by substantial evidence, is without authority to
substitute its conclusion for that of said NLRC.
III. With all due respect, respondent Court of Appeals discourse on freelance artists and painters in the
decision in question is misplaced or has no factual or legal basis in the record.
IV. With all due respect, respondent Court of Appeals opening statement in its decision as to employment,
monthly salary of P1,475.00 and work schedule from Monday to Saturday, from 8:00 oclock in the morning
up to 5:00 oclock in the afternoon as facts is not supported by the evidence on record.
V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420 [G.R. No. 111042 October
26, 1999] relied upon by respondent Court of Appeals is not applicable to the peculiar circumstances of
this case.[6]
The issues raised boil down to whether or not an employer-employee relationship existed between
petitioner and private respondent, and whether petitioner is guilty of illegally dismissing private
respondent. We find the answers to these issues to be in the affirmative.
I.
In determining whether there is an employer-employee relationship, we have applied a four-fold test, to
wit: (1) whether the alleged employer has the power of selection and engagement of employees; (2)
whether he has control of the employee with respect to the means and methods by which work is to be
accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid
wages.[7] These elements of the employer-employee relationship are present in this case.
First. The existence in this case of the first element is undisputed. It was petitioner who engaged the
services of Lagrama without the intervention of a third party. It is the existence of the second element,
the power of control, that requires discussion here.
Of the four elements of the employer-employee relationship, the control test is the most important.
Compared to an employee, an independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on its own account and under its own
responsibility according to its own manner and method, free from the control and direction of the
principal in all matters connected with the performance of the work except as to the results
thereof.[8] Hence, while an independent contractor enjoys independence and freedom from the control
and supervision of his principal, an employee is subject to the employers power to control the means and
methods by which the employees work is to be performed and accomplished.

In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was an independent
contractor and never his employee, the evidence shows that the latter performed his work as painter
under the supervision and control of petitioner. Lagrama worked in a designated work area inside the
Crown Theater of petitioner, for the use of which petitioner prescribed rules. The rules included the
observance of cleanliness and hygiene and a prohibition against urinating in the work area and any place
other than the toilet or the rest rooms.[9] Petitioners control over Lagramas work extended not only to the
use of the work area, but also to the result of Lagramas work, and the manner and means by which the
work was to be accomplished.
Moreover, it would appear that petitioner not only provided the workplace, but supplied as well the
materials used for the paintings, because he admitted that he paid Lagrama only for the latters services.[10]
Private respondent Lagrama claimed that he worked daily, from 8 oclock in the morning to 5 oclock in the
afternoon. Petitioner disputed this allegation and maintained that he paid Lagrama P1,475.00 per week
for the murals for the three theaters which the latter usually finished in 3 to 4 days in one week.[11] Even
assuming this to be true, the fact that Lagrama worked for at least 3 to 4 days a week proves regularity in
his employment by petitioner.
Second. That petitioner had the right to hire and fire was admitted by him in his position paper submitted
to the NLRC, the pertinent portions of which stated:
Complainant did not know how to use the available comfort rooms or toilets in and about his work
premises. He was urinating right at the place where he was working when it was so easy for him, as
everybody else did and had he only wanted to, to go to the comfort rooms. But no, the complainant had
to make a virtual urinal out of his work place! The place then stunk to high heavens, naturally, to the
consternation of respondents and everyone who could smell the malodor.
...
Given such circumstances, the respondents had every right, nay all the compelling reason, to fire him from
his painting job upon discovery and his admission of such acts. Nonetheless, though thoroughly scolded,
he was not fired. It was he who stopped to paint for respondents.[12]
By stating that he had the right to fire Lagrama, petitioner in effect acknowledged Lagrama to be his
employee. For the right to hire and fire is another important element of the employer-employee
relationship.[13] Indeed, the fact that, as petitioner himself said, he waited for Lagrama to report for work
but the latter simply stopped reporting for work reinforces the conviction that Lagrama was indeed an
employee of petitioner. For only an employee can nurture such an expectancy, the frustration of which,
unless satisfactorily explained, can bring about some disciplinary action on the part of the employer.
Third. Payment of wages is one of the four factors to be considered in determining the existence of
employer-employee relation. Wages are defined as remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered.[14] That Lagrama worked for Tan on a fixed piece-work basis is of no
moment. Payment by result is a method of compensation and does not define the essence of the
relation.[15] It is a method of computing compensation, not a basis for determining the existence or

absence of employer-employee relationship. One may be paid on the basis of results or time expended
on the work, and may or may not acquire an employment status, depending on whether the elements of
an employer-employee relationship are present or not.[16]
The Rules Implementing the Labor Code require every employer to pay his employees by means of
payroll.[17] The payroll should show among other things, the employees rate of pay, deductions made, and
the amount actually paid to the employee. In the case at bar, petitioner did not present the payroll to
support his claim that Lagrama was not his employee, raising speculations whether his failure to do so
proves that its presentation would be adverse to his case.[18]
The primary standard for determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the
employer.[19] In this case, there is such a connection between the job of Lagrama painting billboards and
murals and the business of petitioner. To let the people know what movie was to be shown in a movie
theater requires billboards. Petitioner in fact admits that the billboards are important to his business.[20]
The fact that Lagrama was not reported as an employee to the SSS is not conclusive on the question of
whether he was an employee of petitioner.[21] Otherwise, an employer would be rewarded for his failure
or even neglect to perform his obligation.[22]
Neither does the fact that Lagrama painted for other persons affect or alter his employment relationship
with petitioner. That he did so only during weekends has not been denied by petitioner. On the other
hand, Samuel Villalba, for whom Lagrama had rendered service, admitted in a sworn statement that he
was told by Lagrama that the latter worked for petitioner.[23]
Lagrama had been employed by petitioner since 1988. Under the law, therefore, he is deemed a regular
employee and is thus entitled to security of tenure, as provided in Art. 279 of Labor Code:
ART. 279. Security of Tenure. In 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.
This Court has held that if the employee has been performing the job for at least one year, even if not
continuously but intermittently, the repeated and continuing need for its performance is sufficient
evidence of the necessity, if not indispensability, of that activity to the business of his employer. Hence,
the employment is also considered regular, although with respect only to such activity, and while such
activity exists.[24]
It is claimed that Lagrama abandoned his work. There is no evidence to show this. Abandonment requires
two elements: (1) the failure to report for work or absence without valid or justifiable reason, and (2) a
clear intention to sever the employer-employee relationship, with the second element as the more
determinative factor and being manifested by some overt acts.[25] Mere absence is not sufficient. What is
more, the burden is on the employer to show a deliberate and unjustified refusal on the part of the
employee to resume his employment without any intention of returning.[26] In the case at bar, the Court
of Appeals correctly ruled:

Neither do we agree that Petitioner abandoned his job. In order for abandonment to be a just and valid
ground for dismissal, the employer must show, by clear proof, the intention of the employee to abandon
his job. . . .
In the present recourse, the Private Respondent has not established clear proof of the intention of the
Petitioner to abandon his job or to sever the employment relationship between him and the Private
Respondent. On the contrary, it was Private Respondent who told Petitioner that he did not want the
latter to draw for him and thereafter refused to give him work to do or any mural or billboard to paint or
draw on.
More, after the repeated refusal of the Private Respondent to give Petitioner murals or billboards to work
on, the Petitioner filed, with the Sub-Regional Arbitration Branch No. X of the National Labor Relations
Commission, a Complaint for Illegal Dismissal and Money Claims. Such act has, as the Supreme Court
declared, negate any intention to sever employment relationship. . . .[27]
II.
The second issue is whether private respondent Lagrama was illegally dismissed. To begin, the employer
has the burden of proving the lawfulness of his employees dismissal.[28] The validity of the charge must be
clearly established in a manner consistent with due process. The Implementing Rules of the Labor
Code[29] provide that no worker shall be dismissed except for a just or authorized cause provided by law
and after due process. This provision has two aspects: (1) the legality of the act of dismissal, that is,
dismissal under the grounds provided for under Article 282 of the Labor Code and (2) the legality in the
manner of dismissal. The illegality of the act of dismissal constitutes discharge without just cause, while
illegality in the manner of dismissal is dismissal without due process.[30]
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his sight as the
latter tried to explain his side, petitioner made it plain that Lagrama was dismissed. Urinating in a work
place other than the one designated for the purpose by the employer constitutes violation of reasonable
regulations intended to promote a healthy environment under Art. 282(1) of the Labor Code for purposes
of terminating employment, but the same must be shown by evidence. Here there is no evidence that
Lagrama did urinate in a place other than a rest room in the premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor Arbiter found
that the relationship between the employer and the employee has been so strained that the latters
reinstatement would no longer serve any purpose. The parties do not dispute this finding. Hence, the
grant of separation pay in lieu of reinstatement is appropriate. This is of course in addition to the payment
of backwages which, in accordance with the ruling in Bustamante v. NLRC,[31] should be computed from
the time of Lagramas dismissal up to the time of the finality of this decision, without any deduction or
qualification.
The Bureau of Working Conditions[32] classifies workers paid by results into two groups, namely; (1) those
whose time and performance is supervised by the employer, and (2) those whose time and performance
is unsupervised by the employer. The first involves an element of control and supervision over the manner
the work is to be performed, while the second does not. If a piece worker is supervised, there is an
employer-employee relationship, as in this case. However, such an employee is not entitled to service
incentive leave pay since, as pointed out in Makati Haberdashery v. NLRC[33] and Mark Roche International

v. NLRC,[34] he is paid a fixed amount for work done, regardless of the time he spent in accomplishing such
work.
WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing that the Court of Appeals
committed any reversible error. The decision of the Court of Appeals, reversing the decision of the
National Labor Relations Commission and reinstating the decision of the Labor Arbiter, is AFFIRMED with
the MODIFICATION that the backwages and other benefits awarded to private respondent Leovigildo
Lagrama should be computed from the time of his dismissal up to the time of the finality of this decision,
without any deduction and qualification. However, the service incentive leave pay awarded to him is
DELETED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, and Corona, JJ., concur.

Apprentices
Learners

Arts. 57-60, Labor Code

Title II
TRAINING AND EMPLOYMENT OF SPECIAL WORKERS
Chapter I
APPRENTICES
Article 57. Statement of objectives. This Title aims:
To help meet the demand of the economy for trained manpower;
To establish a national apprenticeship program through the participation of employers, workers and
government and non-government agencies; and
To establish apprenticeship standards for the protection of apprentices.
Article 58. Definition of Terms. As used in this Title:
"Apprenticeship" means practical training on the job supplemented by related theoretical instruction.
An "apprentice" is a worker who is covered by a written apprenticeship agreement with an individual
employer or any of the entities recognized under this Chapter.
An "apprenticeable occupation" means any trade, form of employment or occupation which requires
more than three (3) months of practical training on the job supplemented by related theoretical
instruction.
"Apprenticeship agreement" is an employment contract wherein the employer binds himself to train the
apprentice and the apprentice in turn accepts the terms of training.

Article 59. Qualifications of apprentice. To qualify as an apprentice, a person shall:

Be at least fourteen (14) years of age;
Possess vocational aptitude and capacity for appropriate tests; and
Possess the ability to comprehend and follow oral and written instructions.
Trade and industry associations may recommend to the Secretary of Labor appropriate educational
requirements for different occupations.
Article 60. Employment of apprentices. Only employers in the highly technical industries may employ
apprentices and only in apprenticeable occupations approved by the Secretary of Labor and
Employment. (As amended by Section 1, Executive Order No. 111, December 24, 1986)

Arts. 73-77, Labor Code

Chapter II
LEARNERS
Article 73. Learners defined. Learners are persons hired as trainees in semi-skilled and other industrial
occupations which are non-apprenticeable and which may be learned through practical training on the
job in a relatively short period of time which shall not exceed three (3) months.
Article 74. When learners may be hired. Learners may be employed when no experienced workers are
available, the employment of learners is necessary to prevent curtailment of employment opportunities,
and the employment does not create unfair competition in terms of labor costs or impair or lower
working standards.
Article 75. Learnership agreement. Any employer desiring to employ learners shall enter into a
learnership agreement with them, which agreement shall include:
The names and addresses of the learners;
The duration of the learnership period, which shall not exceed three (3) months;
The wages or salary rates of the learners which shall begin at not less than seventy-five percent (75%) of
the applicable minimum wage; and
A commitment to employ the learners if they so desire, as regular employees upon completion of the
learnership. All learners who have been allowed or suffered to work during the first two (2) months shall
be deemed regular employees if training is terminated by the employer before the end of the stipulated
period through no fault of the learners.
The learnership agreement shall be subject to inspection by the Secretary of Labor and Employment or
his duly authorized representative.
Article 76. Learners in piecework. Learners employed in piece or incentive-rate jobs during the training
period shall be paid in full for the work done.

Article 77. Penalty clause. Any violation of this Chapter or its implementing rules and regulations shall
be subject to the general penalty clause provided for in this Code.

Book II, Rule VI, Sec. 29, Implementing Rules (Labor Code)

SECTION 29. Wages. The wage rate of the apprentice shall start at seventy five (75%) per cent of the
statutory minimum wage for the first six (6) months; thereafter, he shall be paid the full minimum wage,
including the full cost of living allowance.cralaw

Persons with disability

Arts. 78-81, Labor Code

Chapter III
HANDICAPPED WORKERS
Article 78. Definition. Handicapped workers are those whose earning capacity is impaired by age or
physical or mental deficiency or injury.
Article 79. When employable. Handicapped workers may be employed when their employment is
necessary to prevent curtailment of employment opportunities and when it does not create unfair
competition in labor costs or impair or lower working standards.
Article 80. Employment agreement. Any employer who employs handicapped workers shall enter into
an employment agreement with them, which agreement shall include:
The names and addresses of the handicapped workers to be employed;
The rate to be paid the handicapped workers which shall not be less than seventy five (75%) percent of
the applicable legal minimum wage;
The duration of employment period; and
The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by the Secretary of Labor or his duly
authorized representative.
Article 81. Eligibility for apprenticeship. Subject to the appropriate provisions of this Code, handicapped
workers may be hired as apprentices or learners if their handicap is not such as to effectively impede the
performance of job operations in the particular occupations for which they are hired.

R.A. 7277, Magna Carta for Disabled Persons

Commissions

See Songco v. NLRC, G.R. Nos. 50999-501000, March 23, 1990

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,

vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO
AGUAS, and F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National Labor Relations
Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RNIV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed the
decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay
equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of
service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department
of Labor (Regional Office No. 4) an application seeking clearance to terminate the services of
petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners)
allegedly on the ground of retrenchment due to financial losses. This application was seasonably
opposed by petitioners alleging that the company is not suffering from any losses. They alleged
further that they are being dismissed because of their membership in the union. At the last hearing of
the case, however, petitioners manifested that they are no longer contesting their dismissal. The
parties then agreed that the sole issue to be resolved is the basis of the separation pay due to
petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries of at least
P40,000. In addition, they received commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members, contains the following provision (p. 71, Rollo):
ARTICLE XIV Retirement Gratuity
Section l(a)-Any employee, who is separated from employment due to old age,
sickness, death or permanent lay-off not due to the fault of said employee shall
receive from the company a retirement gratuity in an amount equivalent to one (1)
month's salary per year of service. One month of salaryas used in this paragraph
shall be deemed equivalent to the salary at date of retirement; years of service shall
be deemed equivalent to total service credits, a fraction of at least six months being
considered one year, including probationary employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:

Art. 284. Reduction of personnel. The termination of employment of any employee

due to the installation of labor saving-devices, redundancy, retrenchment to prevent
losses, and other similar causes, shall entitle the employee affected thereby to
separation pay. In case of termination due to the installation of labor-saving devices
or redundancy, the separation pay shall be equivalent to one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and other similar causes, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered
one (1) whole year. (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code
provide:
xxx
Sec. 9(b). Where the termination of employment is due to retrechment initiated by the
employer to prevent losses or other similar causes, or where the employee suffers
from a disease and his continued employment is prohibited by law or is prejudicial to
his health or to the health of his co-employees, the employee shall be entitled to
termination pay equivalent at least to his one month salary, or to one-half
month pay for every year of service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year.
xxx
Sec. 10. Basis of termination pay. The computation of the termination pay of an
employee as provided herein shall be based on his latest salary rate, unless the
same was reduced by the employer to defeat the intention of the Code, in which case
the basis of computation shall be the rate before its deduction. (Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p.
78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered
to pay the complainants separation pay equivalent to their one month salary
(exclusive of commissions, allowances, etc.) for every year of service that they have
worked with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of
merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and
Withdrawal of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that
he wants "to abide by the decision appealed from" since he had "received, to his full and complete
satisfaction, his separation pay," resolved to dismiss the petition as to him.

The issue is whether or not earned sales commissions and allowances should be included in the
monthly salary of petitioners for the purpose of computation of their separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount of separation pay due them,
whether under the Labor Code or the CBA, their basic salary, earned sales commissions and
allowances should be added together. They cited Article 97(f) of the Labor Code which includes
commission as part on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee. 'Fair reasonable value' shall not include
any profit to the employer or to any person affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules
to include commission in the computation of separation pay, it could have explicitly said so in clear
and unequivocal terms. Furthermore, in the definition of the term "wage", "commission" is used only
as one of the features or designations attached to the word remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay is concerned, this has been settled
in the case of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where
We ruled that "in the computation of backwages and separation pay, account must be taken not only
of the basic salary of petitioner but also of her transportation and emergency living allowances." This
ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124
and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales commission should
be included in the monthly salary of petitioner for the purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has
been repeatedly declared by the courts that where the law speaks in clear and categorical language,
there is no room for interpretation or construction; there is only room for application (Cebu Portland
Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga
v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous
statute speaks for itself, and any attempt to make it clearer is vain labor and tends only to obscurity.
How ever, it may be argued that if We correlate Article 97(f) with Article XIV of the Collective
Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing
Rules, there appears to be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in
this manner (pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be
(sic) stated as a general definition. It is 'wage ' in its generic sense. A careful perusal
of the same does not show any indication that commission is part of salary. We can
say that commission by itself may be considered a wage. This is not something novel
for it cannot be gainsaid that certain types of employees like agents, field personnel

and salesmen do not earn any regular daily, weekly or monthly salaries, but rely
mainly on commission earned.
Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the
implementing rules in conjunction with Articles 273 and 274 (sic) of the Code
specifically states that the basis of the termination pay due to one who is sought to
be legally separated from the service is 'his latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.
The above terms found in those Articles and the particular Rules were intentionally
used to express the intent of the framers of the law that for purposes of separation
pay they mean to be specifically referring to salary only.
.... Each particular benefit provided in the Code and other Decrees on Labor has its
own pecularities and nuances and should be interpreted in that light. Thus, for a
specific provision, a specific meaning is attached to simplify matters that may arise
there from. The general guidelines in (sic) the formation of specific rules for particular
purpose. Thus, that what should be controlling in matters concerning termination pay
should be the specific provisions of both Book VI of the Code and the Rules. At any
rate, settled is the rule that in matters of conflict between the general provision of law
and that of a particular- or specific provision, the latter should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the implementing rules, it could be
deduced that wage is used in its generic sense and obviously refers to the basic
wage rate to be ascertained on a time, task, piece or commission basis or other
method of calculating the same. It does not, however, mean that commission,
allowances or analogous income necessarily forms part of the employee's salary
because to do so would lead to anomalies (sic), if not absurd, construction of the
word "salary." For what will prevent the employee from insisting that emergency
living allowance, 13th month pay, overtime, and premium pay, and other fringe
benefits should be added to the computation of their separation pay. This situation, to
our mind, is not the real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article
XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10
of the Implementing Rules, which mention the terms "pay" and "salary", is more apparent than real.
Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for
services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary"
are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins
vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of
which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of
which is the Middle English word "wagen". Both words generally refer to one and the same meaning,
that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages"
and "salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary"
have the same meaning, and commission is included in the definition of "wage", the logical

conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base
should include also their earned sales commissions.
The aforequoted provisions are not the only consideration for deciding the petition in favor of the
petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in
the form of incentives or encouragement, so that the petitioners would be inspired to put a little more
industry on the jobs particularly assigned to them, still these commissions are direct remuneration
services rendered which contributed to the increase of income of Zuellig . Commission is the
recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor,
broker or bailee, when the same is calculated as a percentage on the amount of his transactions or
on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123,
141 A.2d 749, 750). The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commission are part of petitioners'
wage or salary. We take judicial notice of the fact that some salesmen do not receive any basic
salary but depend on commissions and allowances or commissions alone, are part of petitioners'
wage or salary. We take judicial notice of the fact that some salesman do not received any basic
salary but depend on commissions and allowances or commissions alone, although an employeremployee relationship exists. Bearing in mind the preceeding dicussions, if we adopt the opposite
view that commissions, do not form part of wage or salary, then, in effect, We will be saying that this
kind of salesmen do not receive any salary and therefore, not entitled to separation pay in the event
of discharge from employment. Will this not be absurd? This narrow interpretation is not in accord
with the liberal spirit of our labor laws and considering the purpose of separation pay which is, to
alleviate the difficulties which confront a dismissed employee thrown the the streets to face the harsh
necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should
be used in computing the separation pay, We held that:
The commissions also claimed by petitioner ('override commission' plus 'net deposit
incentive') are not properly includible in such base figure since such commissions
must be earned by actual market transactions attributable to petitioner.
Applying this by analogy, since the commissions in the present case were earned by actual market
transactions attributable to petitioners, these should be included in their separation pay. In the
computation thereof, what should be taken into account is the average commissions earned during
their last year of employment.
The final consideration is, in carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the workingman's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor Code which states that "all
doubts in the implementation and interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No.
71812, July 30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July
12,1989), and Article 1702 of the Civil Code which 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.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor
Relations Commission is MODIFIED by including allowances and commissions in the separation pay

of petitioners Jose Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the
proper computation of said separation pay.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ., concur.

Soriano v. NLRC, G.R. No. L-75510, October 27, 1987

G.R. No. 75510 October 27, 1987

RUFINA SORIANO, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and KINGLY COMMODITIES TRADERS
AND MULTI-RESOURCES, INC., respondents.
RESOLUTION

FELICIANO, J.:
Petitioner started working with respondent commodities trading Corporation in November 1977 as
Investment Counselor and eventually became Vice-President, Marketing. On 18 September 1984,
petitioner was charged with allowing or failing to supervise and monitor certain activities of
investment counselors in her department, which included the signing of a contract opening an
account for a client by an investment counselor without authority from the client, transfers of funds
from one account to another without the knowledge and authority of the clients involved,
unauthorized transactions in foreign currency with clients of the respondent Corporation,
unauthorized approval of leave for members of her department, and resulting in loss of confidence in
petitioner. Petitioner was preventively suspended and required to explain her acts or failure to act.
Two (2) days later, petitioner submitted her detailed answer or explanation. On 27 September, 1984,
the Executive Vice-President and General Manager of respondent Corporation found petitioner's
written explanation unsatisfactory and notified petitioner that the Corporation had lost confidence on
her ability to discharge the functions of her office and accordingly terminated her services.
Petitioner filed a complaint for illegal suspension and dismissal against respondent Corporation and
Mr. Guil Rivera, Senior Vice-President, and Mr. Richard Tan, Executive Vice-President and General
Manager. She asked for reinstatement with backwages, as well as moral and exemplary damages,
medical expenses, attorney's fees and other litigation expenses.
On 8 July 1985, Labor Arbiter A.L Sevilla rendered a Decision requiring the respondent Corporation
to pay petitioner: (1) separation pay in the amount of P10,500.00; (2) six (6) months backwages in
the amount of P120,000.00; (3) moral damages in the amount of P500,000.00; (4) exemplary
damages in the amount of P100,000.00; and (5) attorney's fees equivalent to 10% of the award.

On appeal by the private respondents, public respondent NLRC, in a Decision dated 10 March 1986,
modified the Labor Arbiter's award by deleting the award of moral and exemplary damages and
requiring respondent Corporation to pay: (1) separation pay amounting to P21,000.00; (2) three (3)
months backwages without qualification and deduction amounting to P9,000.00; and (3) 10% of the
award as attorney's fees.
Both the Labor Arbiter and respondent NLRC found that because of the strained relations between
petitioner and respondent Corporation, reinstatement of petitioner was not feasible. Respondent
Corporation had alleged that petitioner had immediately found employment with Onapal Philippines
Commodities, which had not been denied or refuted by petitioner. Because respondent Corporation
had failed to specify the definite date of her employment, respondent NLRC granted petitioner three
(3) months backwages without qualification and deduction.
In the present Petition for Certiorari, petitioner seeks the annulment of the Decision of respondent
NLRC dated 10 March 1986 and the revival or reinstatement of the Decision of Iabor Arbiter Sevilla
dated 8 July 1985.
Petitioner claims that respondent Corporation acted in bad faith in suspending and terminating her
services. Petitioner asserts that:
1. respondent Corporation had violated her right to due process by suspending her
immediately without the benefit of hearing. She argues that the notice of preventive
suspension served her on 18 September 1986 was "living proof" that the corporation
had already concluded she was guilty of the charges levelled against her even before
she could submit her written explanation.
2. the "true reason" for her "illegal dismissal" was the "personal grudge which Rivera
harbored against her.
3. respondent Corporation's bad faith was also demonstrated in discrimination
against her in relation to other employees of the Corporation who had been in the
past similarly charged with alleged infractions of the corporation's rules. More
specifically, petitioner asserts discrimination against herself consisting of the failure
of the respondent Corporation to dismiss the two (2) immediate supervisors of the
investment counselor who had carried out the unauthorized manipulations of clients'
accounts in petitioner's department.
4. petitioner also charges respondent Corporation with having misrepresented the
extent of her participation in or the scope of her duties in respect of unauthorized
acts and transactions of her subordinates in the marketing department of respondent
company.
The Court considers that petitioner has failed to show a grave abuse of discretion, or an act
performed without or in excess of jurisdiction, on the part of the respondent NLRC.
In respect of Item 1, preventive suspension does not in itself prove that the company had prejudged
that petitioner was guilty of the charges she was asked to answer and explain. Preventive
suspension may be necessary for the protection of the company, its operations and assets, pending
investigation of the alleged malfeasance or misfeasance on the part of officers or employees of the
company and pending a decision on the part of the company (See Sec. 3 of Rule XIV, Book V, of the
Omnibus Rules Implementing the Labor Code). Considering the very senior and sensitive character
of petitioner's position as head of a Department, a fine position as distinguished from a staff or

planning position, and considering the unauthorized transactions then just discovered by the
respondent Corporation, we do not believe that the preventive suspension was an arbitrary and
capricious act amounting to bad faith on the part of the respondent Corporation.
In respect of Item 2, the alleged personal motive behind petitioner's dismissal-personal envy or
feelings of personal insecurity on the part of Guil Rivera, Senior Vice-President, respondent NLRC
found that petitioner had not sufficiently established her assertion. Petitioner's assertion on this point
appears no more than a conjecture or supposition and does not afford an adequate basis for
overturning respondent NLRC's finding on this point. Further, if petitioner had clearly proven such
personal ill-will on the part of Mr. Rivera, a serious question would arise as to whether the
respondent Corporation (as distinguished from Mr. Rivera) could be held liable at all for Mr. Rivera's
acts in the absence of clear authorization for, or approval or adoption of, such act by the respondent
Corporation with knowledge of the personal malice on the part of Mr. Rivera.
In respect of Item 3, respondent NLRC's decision was silent. The Court believes, however, that
respondent Corporation must be accorded reasonable latitude in determining who among erring
officers or employees should be punished by the company and to what extent. In the instant case,
respondent Corporation presumably found it was not necessary to terminate the services also of the
two (2) section heads in petitioner's department, who clearly are much lower in the corporate
hierarchy than petitioner.
With respect to the last and most important of the above listed items, the scope of petitioner's
responsibility for the operations of her department and the extent of her supervisory authority over
her subordinates in the marketing department, respondent NLRC set forth the following discussion
and evaluation:
Appellants stressed the point that complainant, as vice president, marketing, is
actually a department head of one of the company's sales department (sic). As such,
her basic function is the supervision and monitoring the daily activities of her
department and the employees she supervises (sic). By the nature of the company's
business, complainant as a department head should see to it that the clients' trust
and confidence in the company is upheld through above-board transactions,
untainted relations, satisfactory servicing and unquestioned integrity of its officers
and staff, aside from the promotion of cordial employee relations among her
personnel through unbiased and uniform implementation of company policies
affecting employee benefits and welfare.
According to the appellants, the finding of the Labor Arbiter that 'complainant is not
expected to keep an eye or be aware of all day-to-day transactions of her workers
particularly Investment Consultants in her department' does not conform to the facts
prevailing in this case.
In the Panemanglor case, which is the crucial point at issue, Panemanglor opened
an account with the respondent corporation on June 28, 1984 by depositing the
amount of P50,000.00 through Sofia Nazareno, investment counselor. Instead of the
client signing the Customers Agreement, it was Nazareno who signed the agreement
and the signature card in the name of the client, which is highly irregular. Had she
exercised prudence in the supervision of her investment consultants, the irregularity
could hate been earlier detected. As a result, the sum of P25,000.00 from
Panemanglor's account was transferred by Nazareno to the account of Ramon
Lopez, without the knowledge of Panemanglor on July 9, 1984. On July 13, 1984 the
said client withdrew the sum of P25,000.00 through a Payment Instruction Form that

was approved by the complainant. On August 6, 1964, the amount of P4,052.59 was
transferred by Nazareno to the account of Panemanglor from the account of Ramon
Lopez. This transaction was with the approval of the complainant. On September 3,
1984, Panemanglor demanded the payment of the balance of P25,000.00 from the
respondent company to close his account and the letter of Panemanglor was referred
to complainant by respondent Guil Rivera for necessary action. In her memorandum
to senior vice president Guil Rivera complainant confirmed the irregularity in the
handling of the account of Panemanglor, but she failed to take appropriate action
against the erring employee which was within her power to discipline employees
under her supervision ater on February 4, 1985, a complaint was filed before the
Securities and Exchange Commission by Panemanglor for the recovery of the
P25,000.00 plus damages against the respondent corporation, contrary to her claim
that the client will not file a recovery suit against the corporation since the obligation
was purely personal to Nazareno.
Respondents contend that complainant could have immediately discovered the
unauthorized signature of Sofia Nazareno that led to the illegal transfers of fund, had
she followed the company procedure and practice for her to be personally
acquainted with new clients and her admission that she was not aware of the
complained acts has brought to light that she was remiss in her supervisory and
monitoring function. On top of this, she failed to institute disciplinary action
xxx xxx xxx
As head of one of the company's sales department (sic) and a managerial employee
at that, complainant is expected to monitor the daily activities of the investment
counselors and the transactions of clients in her department. As a matter of practice
and procedure, complainant, as vice-president marketing, is always informed of new
clients for her to be personally acquainted with the client. We agree with the
appellants that had the complainant adhered to this procedure, she could have
immediately noticed the unauthorized signature by Sofia Nazareno that enabled her
to transfer funds from one account to another. Likewise, since the complainant
approved the payment instruction for P25,000.00 on July 13, 1984, the transfer of
P4,052.59 on August 6, 1984 from the account of Ramon Lopez to Panemanglor's
account, and the withdrawal of the transferred amount on August 7, 1984, she could
have easily suspected that something was irregular with the transaction Yet, it took
several months before she knew of the anomaly and it took her superior, respondent
Guil Rivera, to bring the matter to her attention. Under the circumstances, it cannot
be truthfully said that complainant has not been without any fault whatsoever. For
this reason, the basis for the award of the moral and exemplary damages has not
been suffiiciently or satisfactorily against the erring employee. gently or satisfactorily
established by the complainant. And besides the dismissal of the complainant by the
respondent was done in good faith. ... (Emphasis supplied)
Petitioner's argument that, because she was head of the entire marketing (sales) department, she
could not be expected to monitor the detailed or day-to-day acts and behaviour of the staff members
of her department, does not address what appears to be the thrust of the respondent NLRC's
decision, And that is, that as head of the department, it was her responsibility to adopt ways and
means of keeping herself sufficiently informed of the activities of her staff members so as to prevent
or at least discover at an early stage, e.g., unauthorized or illegal transactions and manipulation of
clients' accounts. On the one hand, the above position taken by the respondent NLRC cannot be
regarded as so obviously unreasonable and despotic as to constitute a grave abuse of discretion,
given the character of the business of a commodities trading company and the fact that very

substantial sums of money are handled daily by petitioner's department. Upon the other hand,
petitioner's logic would lead to the conclusion that the more senior the management position, the
slighter the responsibility for malfeasance or nonfeasance that can be laid upon the position holder;
the chief executive officer of a corporation would effectively have, under this logic, little or no
responsibility at all.
Turning to the specific award made by respondent NLRC, the salary base properly used in
computing the separation pay and the backwages due to petitioner should include not just the basic
salary but also the regular allowances that petitioner had been receiving (See Santos v. National
Labor Relations CommissionG.R. No. 76721, 21 September 1987). In petitioner's case, the base
figure properly includes her: (a) basic salary of P3,000.00 a month; and (b) living allowance of
P2,400 a month (petitioner's Affidavit, dated 12 April 1985, Exhibit "G", Rollo, p. 105).
The commissions also claimed by petitioner ("override commission" plus "net deposit incentive") are
not properly includible in such base figure since such commissions must be earned by actual market
transactions attributable to petitioner. Neither should "travels equivalent" [an unusual and
unexplained term; P10,000.00 a month] and "commission in trading personal clients" P3,000.00 a
month] be included in such base figure. Considering that the charge of bad faith on the part of
private respondents was not proven, the respondent NLRC having, on the contrary, made a finding
that petitioner's dismissal was made in good faith there appears no real basis for the award of
attorney's fees (Art. 2208 5 Civil Code). This award should not exceed a nominal amount which we
set at P1,500.00.
Thus, the appropriate computation would be:
A. Separationpay-P5,400.00/month 7 = P37,800.00 (in view of petitioner's seven (7)
years of service)
B. Backwages-P5,400.00/month x 3 mos. = P16,200.00
Sub-Total P54,000.00
plus nominal attorney's fees 1,500.00
TOTAL P55,500.00
ACCORDINGLY, the Court Resolved to DISMISS the Petition for certiorari for lack of merit. The
Decision of the respondent NLRC dated 10 March 1986 is modified so as to award petitioner the
following items: a) separation pay in the amount of P37,800.00; b) backwages for three (3) months in
the amount of P16,200.00; and c) attorney's fees of P1,500.00, making a total of P55,500.00.
SO ORDERED.
Fernan (Chairman), Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Iran v. NLRC, G.R. No. 121927, April 22, 1998

Deductions from wages

Arts. 113-118, Labor Code

Article 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
For union dues, in cases where the right of the worker or his union to check-off has been recognized by
the employer or authorized in writing by the individual worker concerned; and
In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and
Employment.
Article 114. Deposits for loss or damage. No employer shall require his worker to make deposits from
which deductions shall be made for the reimbursement of loss of or damage to tools, materials, or
equipment supplied by the employer, except when the employer is engaged in such trades, occupations
or business where the practice of making deductions or requiring deposits is a recognized one, or is
necessary or desirable as determined by the Secretary of Labor and Employment in appropriate rules
and regulations.
Article 115. Limitations. No deduction from the deposits of an employee for the actual amount of the
loss or damage shall be made unless the employee has been heard thereon, and his responsibility has
been clearly shown.
Article 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly
or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of
his wages by force, stealth, intimidation, threat or by any other means whatsoever without the workers
consent.
Article 117. Deduction to ensure employment. It shall be unlawful to make any deduction from the
wages of any employee for the benefit of the employer or his representative or intermediary as
consideration of a promise of employment or retention in employment.
Article 118. Retaliatory measures. It shall be unlawful for an employer to refuse to pay or reduce the
wages and benefits, discharge or in any manner discriminate against any employee who has filed any
complaint or instituted any proceeding under this Title or has testified or is about to testify in such
proceedings.

Book III, Rule VIII, Secs. 10-11, Implementing Rules (Labor Code)

SECTION 13. Wages deduction. Deductions from the wages of the employees may be made by the employer in
any of the following cases: (a) When the deductions are authorized by law, including deductions for the insurance
premiums advanced by the employer in behalf of the employee as well as union dues where the right to check-off
has been recognized by the employer or authorized in writing by the individual employee himself. (b) When the
deductions are with the written authorization of the employees for payment to the third person and the employer

agrees to do so; Provided, That the latter does not receive any pecuniary benefit, directly or indirectly, from the
transaction.
SECTION 14. Deduction for loss or damage. Where the employer is engaged in a trade, occupation or business
where the practice of making deductions or requiring deposits is recognized to answer for the reimbursement of
loss or damage to tools, materials, or equipment supplied by the employer to the employee, the employer may
make wage deductions or require the employees to make deposits from which deductions shall be made, subject
to the following conditions: (a) That the employee concerned is clearly shown to be responsible for the loss or
damage; (b) That the employee is given reasonable opportunity to show cause why deduction should not be made;
(c) That the amount of such deduction is fair and reasonable and shall not exceed the actual loss or damage; and
(d) That the deduction from the wages of the employee does not exceed 20 percent of the employee's wages in a
week.

Arts. 1706, 1708, Civil Code

Article 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.
Article 1708. The laborer's wages shall not be subject to execution or attachment, except for debts
incurred for food, shelter, clothing and medical attendance.

Art. 59, R.A. 6938, Cooperative Code of the Phils.

Section 59. Instrument for Salary or Wage Deduction. - (1) A member of a cooperative may,
notwithstanding the provisions of existing laws to the contrary, execute an instrument in favor of the
cooperative authorizing his employer to deduct from the salary or wages payable to him by the
employer and pay to the cooperative such amount as may be specified in satisfaction of any debt or
other demand due from the member to the cooperative.
(2) Upon the execution of such instrument and as may be required by the cooperative contained in a
written request, the employer shall make the deduction in accordance with the agreement and remit
forthwith the amount so deducted to the cooperative. The employer shall make the deduction for as
long as such debt or other demand or any part of it remains unpaid by the employee.
(3) The term "employer" as used in this article shall include all private firms and the national and local
governments and government-owned or controlled corporations who have under their employ a
member of a cooperative and have agreed to carry out the terms of the instrument mentioned in
paragraphs (1) and (2) of this article.
(4) The provision of this section shall also apply to all such agreements of the nature referred to in
paragraph (1) as were in force on the date of the approval of this Code.

Bluer Than Blue v. Esteban, G.R. No. 192582, April 7, 2014

G.R. No. 192582

April 7, 2014

BLUER THAN BLUE JOINT VENTURES COMPANY/MARY ANN DELA VEGA, Petitioners,
vs.
GLYZA ESTEBAN, Respondent.
DECISION
REYES, J.:
"It is not the job title but the actual work that the employee performs that determines whether he or
she occupies a position of trust and confidence."1 In this case, while respondent's position was
denominated as Sales Clerk, the nature of her work included inventory and cashiering, a function
that clearly falls within the sphere of rank-and-file positions imbued with trust and confidence.
Facts of the Case
Respondent Glyza Esteban (Esteban) was employed in January 2004 as Sales Clerk, and assigned
at Bluer Than Blue Joint Ventures Company's (petitioner) EGG boutique in SM City Marilao,
Bulacan, beginning the year 2006. Part of her primary tasks were attending to all customer needs,
ensuring efficient inventory, coordinating orders from clients, cashiering and reporting to the
accounting department.
In November 2006, the petitioner received a report that several employees have access to its pointof-sale (POS) system through a universal password given by Elmer Flores (Flores). Upon
investigation, it was discovered that it was Esteban who gave Flores the password. The petitioner
sent a letter memorandum to Esteban on November 8, 2006, asking her to explain in writing why she
should not be disciplinary dealt with for tampering with the companys POS system through the use
of an unauthorized password. Esteban was also placed under preventive suspension for ten days.
In her explanation, Esteban admitted that she used the universal password three times on the same
day in December 2005, after she learned of it from two other employees who she saw browsing
through the petitioners sales inquiry. She inquired how the employees were able to open the system
and she was told that they used the "123456" password.
On November 13, 2006, Estebans preventive suspension was lifted, but at the same time, a notice
of termination was sent to her, finding her explanation unsatisfactory and terminating her
employment immediately on the ground of loss of trust and confidence. Esteban was given her final
pay, including benefits and bonuses, less inventory variances incurred by the store amounting
to P8,304.93. Esteban signed a quitclaim and release in favor of the petitioner.
On December 6, 2006, Esteban filed a complaint for illegal dismissal, illegal suspension, holiday
pay, rest day and separation pay.
In a Decision2 dated September 28, 2007, the Labor Arbiter (LA) ruled in favor of Esteban and found
that she was illegally dismissed. The LA also awarded separation pay, backwages, unpaid salary
during her preventive suspension and attorneys fees. The dispositive portion of the LA decision
provides:
WHEREFORE, a Decision is hereby rendered declaring [Esteban] to have been illegally dismissed.
Corollarily, she is entitled for the payment of separation pay as prayed for at one month salary for
every year of service, plus backwages from November 13, 2006 when she was dismissed up to the
rendition of this Decision.

Further, as [Esteban] was illegally suspended she is entitled to salaries during her suspension from
November 9-13, 2006.
In addition, an attorneys fees equivalent to ten (10%) percent of the total award is hereby granted,
computed as follows:
a) Backwages
11/13/06 - 9/28/07

10.50 mos.

[P]350 x 26 x 10.50

= [P]95,550.00

13th Month Pay

1/12 of [P]95,550.00
SILP

= 7,962.50

[P]350 x 5/12 x 10.50

= 1,531.25

[P]105,043.75

b) Separation Pay
11/25/03 - 12/6/06

= 3 yrs.

[P]350 x 26 x 3 27,300.00
c) Unpaid Salaries
11/9 - 13/06

= 5 days

[P]350 x 5

1,750.00
[P]134,093.75

Ten (10%) Percent Attorneys Fees

TOTAL

13,409.37
[P]147,503.12

SO ORDERED.3
The petitioner filed an appeal with the National Labor Relations Commission (NLRC), and in its
Decision4 dated September 23, 2008, the NLRC reversed the decision of the LA and dismissed the
case for illegal dismissal. The dispositive portion of the NLRC decision reads:
WHEREFORE, the decision appealed from is hereby reversed and set aside and in its stead a new
one is rendered dismissing this case for lack of merit.
[Petitioners] however are ordered to refund to [Esteban] the amount of [P]8,304.93 which was
illegally deducted from her salary.
SO ORDERED.5
Thus, Esteban went to the Court of Appeals (CA) on certiorari. In the assailed Decision6 dated
November 25, 2009, the CA granted Estebans petition and reinstated the LA decision, to wit:

WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed Decision dated
September 23, 2008 and Resolution dated November 27, 2008 of public respondent National Labor
Relations Commission are ANNULLED and SET ASIDE[.]
Accordingly, the Decision of the Labor Arbiter dated September 28, 2007 is REINSTATED with
MODIFICATION, that the award of separation pay is computed from January 2, 2004, and not from
November 25, 2003.
SO ORDERED.7
Hence, this petition with the following assignment of errors:
I. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN
IT HELD THAT RANK-AND-FILE EMPLOYEES CANNOT BE DISMISSED ON GROUND
OF LOSS OF TRUST AND CONFIDENCE.
II. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
APPLYING THE PRINCIPLE OF REASONABLE PROPORTIONALITY ON THE
WRONGFUL ACTS OF RESPONDENT ESTEBAN.
II. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
HOLDING THAT THE PREVENTIVE SUSPENSION OF RESPONDENT ESTEBAN WAS
UNWARRANTED.
IV. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
HOLDING THAT THE WAGE DEDUCTION FOR THE NEGATIVE VARIANCE AMOUNTING
TO [P]8,304.93 IS UNFOUNDED.8
The petitioner argues that it had just cause to terminate the employment of Esteban, that is, loss of
trust and confidence. Esteban, the petitioner believes, is a rank-and-file employee whose nature of
work is reposed with trust and confidence. Her unauthorized access to the POS system of the
company and her dissemination of the unauthorized password, which Esteban admitted, is a breach
of trust and confidence, and justifies her dismissal.9
The petitioner also contends that the CA failed to appreciate the significance of Estebans infraction
when it ruled that suspension would have sufficed to discipline her. Estebans length of service
should also not have been considered to mitigate the penalty imposed, as her acts show a lack of
concern for her employer. As regards her preventive suspension, the petitioner maintains that it was
justified in imposing the same despite that the acts were committed almost a year before the
investigation since it did not have any prior knowledge of the infraction.10
Finally, the petitioner contends that the deduction on Estebans wages of the negative variances in
the sales is allowed by the Labor Code, and such practice has been widely recognized in the retail
industry.11
Esteban, on the other hand, avers that the competency clause she signed with the petitioner merely
states the following functions: (1) attend to and assist the customer in all their needs; (2) conduct
physical inventory; (3) clean and tidy up the merchandise and store; and (4) coordinate with the
stockroom for orders. As regards the cashiering function, it merely states "to follow."12 As such, her
main task is that of a sales clerk.

Esteban also avers, albeit belatedly, that the notice to explain given to her did not identify the acts or
omissions allegedly committed by her. She also contends that it was the companys fault in not
creating a strong password, and that she was forced into signing the quitclaim and waiver, among
others.13
Ruling of the Court
The LA and the CA were one in ruling that Esteban was illegally dismissed by the petitioner. It was
their finding that the position occupied by Esteban was that of a rank-and-file employee and she is
neither a supervisor, manager nor a cashier; thus, she does not hold a position of trust and
confidence.14 The CA also affirmed the ruling of the LA that Estebans preventive suspension was not
warranted.15 The CA also upheld the finding of the NLRC that the deduction of P8,304.93,
representing the stores negative variance, from Estebans salary violates Article 113 of the Labor
Code, which prohibits wage deduction.16
The NLRC, on the other hand, found that Esteban was dismissed for cause. According to the NLRC,
Esteban admitted that she violated the petitioner when she made an unauthorized access to the
POS system, and even shared the password to another employee. The NLRC also rejected
Estebans assertion that her job as sales clerk does not occupy a position of trust, and that her
preventive suspension was not warranted. With regard to her waiver and quitclaim, the NLRC upheld
its validity as Esteban signed the same with full awareness that she committed a wrong.17
Loss of trust and confidence as a
valid ground for dismissal from
employment
The antecedent facts that gave rise to Estebans dismissal from employment are not disputed in this
case. The issue is whether Estebans acts constitute just cause to terminate her employment with
the company on the ground of loss of trust and confidence.
Loss of trust and confidence is premised on the fact that the employee concerned holds a position of
responsibility, trust and confidence. The employee must be invested with confidence on delicate
matters, such as the custody, handling, care and protection of the employers property and
funds.18 "[W]ith respect to rank-and-file personnel, loss of trust and confidence as ground for valid
dismissal requires proof of involvement in the alleged events in question, and that mere
uncorroborated assertions and accusations by the employer will not be sufficient."19
Esteban is, no doubt, a rank-and-file employee. The question now is whether she occupies a
position of trust and confidence.
Among the fiduciary rank-and-file employees are cashiers, auditors, property custodians, or those
who, in the normal exercise of their functions, regularly handle significant amounts of money or
property.20 These employees, though rank-and-file, are routinely charged with the care and custody
of the employers money or property, and are thus classified as occupying positions of trust and
confidence.21
In this case, Esteban was a sales clerk. Her duties, however, were more than that of a sales clerk.
Aside from attending to customers and tending to the shop, Esteban also assumed cashiering
duties. This, she does not deny; instead, she insists that the competency clause provided that her
tasks were that of a sales clerk and the cashiering function was labelled "to follow."22 A perusal of the
competency clause, however, shows that it is merely an attestation on her part that she is competent
to "meet the basic requirements needed for the position [she] is applying for x x x". It does not define

her actual duties. As consistently ruled by the Court, it is not the job title but the actual work that the
employee performs that determines whether he or she occupies a position of trust and
confidence.23 In Philippine Plaza Holdings, Inc. v. Episcope,24 the Court ruled that a service attendant,
who was tasked to attend to dining guests, handle their bills and receive payments for transmittal to
the cashier and was therefore involved in the handling of company funds, is considered an employee
occupying a position of trust and confidence. Similarly in Estebans case, given that she had in her
care and custody the stores property and funds, she is considered as a rank-and-file employee
occupying a position of trust and confidence.
Proceeding from the above conclusion, the pivotal question that must be answered is whether
Estebans acts constitute just cause to terminate her employment.
Loss of trust and confidence to be a valid cause for dismissal must be work related such as would
show the employee concerned to be unfit to continue working for the employer and it must be based
on a wilful breach of trust and founded on clearly established facts.25 Such breach is wilful if it is done
intentionally, knowingly, and purposely, without justifiable excuse as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently.26 The loss of trust and confidence must spring
from the voluntary or wilful act of the employee, or by reason of some blameworthy act or omission
on the part of the employee.27
In this case, the Court finds that the acts committed by Esteban do not amount to a wilful breach of
trust. She admitted that she accessed the POS system28 with the use of the unauthorized "123456"
password. She did so, however, out of curiosity and without any obvious intention of defrauding the
petitioner. As professed by Esteban, "she was acting in good faith in verifying what her co-staff told
her about the opening of the computer by the use of the "123456" password, x x x. She even told her
co-staff not to open again said computer, and that was the first and last time she opened said
computer."29 Moreover, the petitioner even admitted that Esteban has her own password to the POS
system. If it was her intention to manipulate the stores inventory and funds, she could have done so
long before she had knowledge of the unauthorized password. But the facts on hand show that she
did not. The petitioner also failed to establish a substantial connection between Estebans use of the
"123456" password and any loss suffered by the petitioner. Indeed, it may be true that, as posited by
the petitioner, it is the fact that she used the password that gives cause to the loss of trust and
confidence on Esteban. However, as ruled above, such breach must have been done intentionally,
knowingly, and purposely, and without any justifiable excuse, and not simply something done
carelessly, thoughtlessly, heedlessly or inadvertently. To the Courts mind, Estebans lapse is, at
best, a careless act that does not merit the imposition of the penalty of dismissal.
The Court is not saying that Esteban is innocent of any breach of company policy. That she relayed
the password to another employee is likewise demonstrative of her mindless appreciation of her
duties as a sales clerk in the petitioners employ. But absent any showing that her acts were done
with "moral perverseness" that would justify the claimed loss of trust and confidence attendant to her
job,30 the Court must sustain the conclusion that Esteban was illegally dismissed. As stated by the
CA, "[s]uspension would have sufficed as punishment, considering that the petitioner had already
been with the company for more than 2 years, and the petitioner apologized and readily admitted her
mistake in her written explanation, and considering that no clear and convincing evidence of loss or
prejudice, which was suffered by the [petitioner] from [Estebans] supposed infraction."31
1wphi1

Preventive suspension during

investigation
Preventive suspension is a measure allowed by law and afforded to the employer if an employees
continued employment poses a serious and imminent threat to the employers life or property or of

his co-workers.32 It may be legally imposed against an employee whose alleged violation is the
subject of an investigation.33
In this case, the petitioner was acting well within its rights when it imposed a 10-day preventive
suspension on Esteban. While it may be that the acts complained of were committed by Esteban
almost a year before the investigation was conducted, still, it should be pointed out that Esteban was
performing functions that involve handling of the petitioners property and funds, and the petitioner
had every right to protect its assets and operations pending Estebans investigation.34
Sales negative variances as wage
deductions
The petitioner deducted the amount of P8,304.93 from Estebans last salary. According to the
petitioner, this represents the stores negative variance for the year 2005 to 2006. The petitioner
justifies the deduction on the basis of alleged trade practice and that it is allowed by the Labor Code.
Article 113 of the Labor Code provides that no employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except in cases where the
employer is authorized by law or regulations issued by the Secretary of Labor and Employment,
among others. The Omnibus Rules Implementing the Labor Code, meanwhile, provides:
SECTION 14. Deduction for loss or damage. Where the employer is engaged in a trade,
occupation or business where the practice of making deductions or requiring deposits is recognized
to answer for the reimbursement of loss or damage to tools, materials, or equipment supplied by the
employer to the employee, the employer may make wage deductions or require the employees to
make deposits from which deductions shall be made, subject to the following conditions:
(a) That the employee concerned is clearly shown to be responsible for the loss or damage;
(b) That the employee is given reasonable opportunity to show cause why deduction should
not be made;
(c) That the amount of such deduction is fair and reasonable and shall not exceed the actual
loss or damage; and
(d) That the deduction from the wages of the employee does not exceed 20 percent of the
employees wages in a week.
In this case, the petitioner failed to sufficiently establish that Esteban was responsible for the
negative variance it had in its sales for the year 2005 to 2006 and that Esteban was given the
opportunity to show cause the deduction from her last salary should not be made. The Court cannot
accept the petitioners statement that it is the practice in the retail industry to deduct variances from
an employees salary, without more. In Nia Jewelry Manufacturing of Metal Arts, Inc. v.
Montecillo,35 the Court ruled that:
[T]he petitioners should first establish that the making of deductions from the salaries is authorized
by law, or regulations issued by the Secretary of Labor. Further, the posting of cash bonds should be
proven as a recognized practice in the jewelry manufacturing business, or alternatively, the
petitioners should seek for the determination by the Secretary of Labor through the issuance of
appropriate rules and regulations that the policy the former seeks to implement is necessary or
desirable in the conduct of business. The petitioners failed in this respect. It bears stressing that

without proofs that requiring deposits and effecting deductions are recognized practices, or without
securing the Secretary of Labor's determination of the necessity or desirability of the same, the
imposition of new policies relative to deductions and deposits can be made subject to abuse by the
employers. This is not what the law intends.36
1w phi1

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated November 25, 2009 and
Resolution dated June 10, 2010 of the Court of Appeals in CA-G.R. SP No. 107573 insofar as it
reinstated with modification the Decision of the Labor Arbiter dated September 28, 2007 are
AFFIRMED. Insofar as it affirmed respondent Glyza Esteban's preventive suspension, the same are
hereby REVERSED.
The Labor Arbiter is hereby ORDERED to re-compute the monetary award in favor of Glyza Esteban
and to exclude the award of backwages during such period of preventive suspension, if any.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice

Nina Jewelry v. Trinidad, G.R. No. 188169, November 28, 2011

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION
NIA JEWELRY MANUFACTURING
OF METAL ARTS, INC. (otherwise
known as NIA MANUFACTURING
AND METAL ARTS, INC.) and
ELISEA B. ABELLA,
Petitioners,

- versus MADELINE C. MONTECILLO and

LIZA M. TRINIDAD,
Respondents.

G.R. No. 188169

Present:
CARPIO, J.,
Chairperson,
BRION,
PEREZ,
ARANAL-SERENO, and
REYES, JJ.
Promulgated:
November 28, 2011

x----------------------------------------------------------------------------------------x
DECISION
REYES, J.:
The Case
Before us is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assailing the January
9, 2009 Decision[2] and the May 26, 2009 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No.
01755. The dispositive portion of the assailed Decision reads:
WHEREFORE, the Decision dated August 31, 2005 and Resolution dated October 28, 2005 of the National
Labor Relations Commission (NLRC), Fourth Division, Cebu City, in NLRC Case No. V-000363-2005
are REVERSED and SET ASIDE, and a new one rendered ordering Nia Jewelry Manufacturing:
(1)
to reinstate petitioners to their respective positions as goldsmiths without loss of seniority
rights and other privileges; and
(2)
to pay petitioners their full backwages inclusive of allowances and other benefits or their
monetary equivalent computed from the time their compensation was withheld up to their actual
reinstatement.
The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary award due
to petitioners in accord with this decision. The Labor Arbiter is ORDERED to submit his compliance within
thirty (30) days from notice of this decision, with copies furnished to the parties.[4] (citations omitted)

The assailed Resolution denied the petitioners' Motion for Reconsideration.[5]

The Factual Antecedents
Madeline Montecillo (Madeline) and Liza Trinidad (Liza), hereinafter referred to collectively as the
respondents, were first employed as goldsmiths by the petitioner NiaJewelry Manufacturing of Metal Arts,
Inc. (Nia Jewelry) in 1996 and 1994, respectively. Madeline's weekly rate was P1,500.00 while Liza's
was P2,500.00. Petitioner Elisea Abella (Elisea) is Nia Jewelry's president and general manager.
There were incidents of theft involving goldsmiths in Nia Jewelry's employ.
On August 13, 2004, Nia Jewelry imposed a policy for goldsmiths requiring them to post cash bonds or
deposits in varying amounts but in no case exceeding 15% of the latter's salaries per week. The deposits
were intended to answer for any loss or damage which Nia Jewelry may sustain by reason of the
goldsmiths' fault or negligence in handling the gold entrusted to them. The deposits shall be returned
upon completion of the goldsmiths' work and after an accounting of the gold received.
Nia Jewelry alleged that the goldsmiths were given the option not to post deposits, but to sign
authorizations allowing the former to deduct from the latter's salaries amounts not exceeding 15% of
their take home pay should it be found that they lost the gold entrusted to them. The respondents claimed

otherwise insisting that Nia Jewelry left the goldsmiths with no option but to post the deposits. The
respondents alleged that they were constructively dismissed by Nia Jewelry as their continued
employments were made dependent on their readiness to post the required deposits.
Nia Jewelry averred that on August 14, 2004, the respondents no longer reported for work and signified
their defiance against the new policy which at that point had not even been implemented yet.
On September 7, 2004, the respondents filed against Nia Jewelry complaints[6] for illegal dismissal and for
the award of separation pay.
On September 20, 2004, the respondents filed their amended complaints[7] which excluded their earlier
prayer for separation pay but sought reinstatement and payment of backwages, attorney's fees and
13th month pay.
Labor Arbiter Jose Gutierrez (LA Gutierrez) dismissed the respondents' complaints for lack of merit but
ordered Nia Jewelry to pay Madeline the sum of P3,750.00, and Liza, P6,250.00, representing
their proportionate entitlements to 13th month pay for the year 2004. LA Gutierrez ratiocinated that:
Their [respondents] claim is self-serving. As evidence to (sic) their claims that they were made to sign
blank trust receipts, complainants presented Annexes 'A'[,] 'B' and 'C'. Our examination, however, shows
that they are not blank trust receipts but rather they are filled up trust receipts.
The undisputed facts show that complainants were piece workers of the respondent who are engaged in
the processing of gold into various jewelry pieces. Because of the nature of its business, respondent was
plagued with too many incidents of theft from its piece workers. x x x This deposit [not exceeding 15% of
the salary for the week of the piece worker] is released back upon completion of work and after
accounting of the gold received by him or her. There is an alternative, however, the piece worker may opt
not to give a deposit, instead sign an authorization to allow the respondent to deduct from the salary an
amount not to exceed 15% of his take home pay, should it be found out that he lost the gold [entrusted]
to him or her due to his or her fault or negligence. The complainants did not like to post a deposit, or sign
an authorization. They instead told their fellow goldsmiths that they will bring the matter to the Labor
Commission. Complainants did not anymore report for work and did not anymore perform their tasks.
The fact of complainants not being dismissed from employment was duly attested to by his co-workers
who executed their Joint Affidavit under oath, Annex '4'.
As further evidence to prove that they were dismissed, complainants presented the minutes of [the] Sept.
7, 2004 conference.
We examined the statements therein, we find that there is no admission on the part of the respondents
that they terminate[d] the complainants from employment. Respondents only inform[ed] the
complainants to put up the appropriate cash bond before they could be allowed to return back to work
which they previously refused to perform, as a sign of their protest to the requirement to post cash bond
or to sign an authorization.
xxxx
x x x It is clearly shown that complainants were paid with their 13th month pay for the year 2001, 2002
and 2003. However, for the year 2004, considering that complainants have worked until the month of

August, we rule to grant them the proportionate 13th month pay as there is no showing that they were
already paid. The other money claims are denied for lack of merit. x x x.[8]

The respondents filed an appeal before the NLRC which affirmed LA Gutierrez's dismissal of the amended
complaints but deleted the award of 13th month pay based on findings that the former had contracted
unpaid individual loans from Nia Jewelry. The NLRC found that:
x x x [I]t was complainants who refused to work with the respondents when they were required to post
cash bond or sign an authorization for deduction for the gold material they received and to be
manufactured into various jewelries. x x x We find it logically sound for the latter [Nia Jewelry] to innovate
certain policy or rule to protect its own business. To deprive them of such prerogative [management
prerogative] will be likened to 'killing the goose that lays the golden eggs.'
x x x [C]omplainants failed to prove their affirmative allegations in the respective complaints that they
were indeed dismissed. On the contrary, respondents have convincingly shown that if (sic) were
complainants who voluntarily abandoned from (sic) their work by refusing to abide with the newly
adopted company policy of putting up a cash bond or signing an authorization for deduction for the gold
materials entrusted to them in case of loss or pilferage.
x x x [B]oth complainants are still indebted with (sic) the respondents in the amounts of P5,118.63 in the
case of Madeline Montecillo and P7,963.11 in the case of Liza Montecillo. Such being the case[,] Madeline
Montecillo has still on account payable of P1,368.63 while Liza Montecillo is still indebted of P1,713.71.
This principle of offsetting of credit should be allowed to preclude unjust enrichment at the expense of
the respondents.[9]

The respondents filed a Petition for Certiorari[10] before the CA ascribing patent errors in the appreciation
of facts and application of jurisprudence on the part of the NLRC when it ruled that what occurred was
not a case of illegal dismissal but of abandonment of work.
On January 9, 2009, the CA rendered the now assailed Decision[11] reversing the findings of the LA and the
NLRC. The CA ruled:
According to [the] private respondents, they required a deposit or cash bond from [the] petitioners in
order to secure their interest against gold thefts committed by some of their employees. If the employee
fails to make the required deposit, he will not be given gold to work on. Further, [the] private respondents
admitted during the conciliation proceedings before Executive Labor Arbiter Violeta Ortiz-Bantug that
[the] petitioners would only be allowed back to work after they had posted the proportionate cash bond.
The Labor Code of the Philippines provides:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;

(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized
by the employer or authorized in writing by the individual worker concerned; and
(c)

In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.

Article 114. Deposits for loss or damage. No employer shall require his worker to make deposits from
which deductions shall be made for the reimbursement of loss of or damage to tools, materials, or
equipment supplied by the employer, except when the employer is engaged in such trades, occupations
or business where the practice of making deposits is a recognized one, or is necessary or desirable as
determined by the Secretary of Labor in appropriate rules and regulations.
Applying these provisions to the case at bar, before [the] petitioners may be required to deposit cash or
agree to a salary deduction proportionate to the value of gold delivered to them, the employer must
comply with the relevant conditions imposed by law. Hence, the latter must prove that there is an existing
law or regulation authorizing it to impose such burden on its employees. And, in case of deposit, that it is
engaged in a trade, occupation or business where such requirement is a recognized practice. Nia Jewelry
obviously
failed
in
this
respect.
Surely,
mere invocation of management prerogative cannot exempt it from compliance with the strict
requirements of law. Accordingly, [w]e hold that Nia Jewelry's unilateral imposition of cash deposit or
salary deduction on [the] petitioners is illegal. For that matter, when Ni[]a Jewelry refused to give
assignment to [the] petitioners or to admit them back to work because they failed to give cash deposit or
agree to a salary deduction, it was deemed to have constructively dismissed [the] petitioners. Obviously,
such deposit or salary deduction was imposed as a condition for [the] petitioners' continuing employment.
Non-compliance indubitably meant termination of [the] petitioners' employment. Suldao vs. Cimech
System Construction, Inc.[12] enunciated:
Constructive dismissal or a constructive discharge has been defined as quitting because continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank
and a diminution in pay. There is constructive dismissal when the continued employment is rendered
impossible so as to foreclose any choice on the employee's part except to resign from such employment.
The fact that [the] petitioners lost no time in filing the complaint for illegal dismissal lucidly negates [the]
private respondents' claim that the former had abandoned their work. A contrary notion would not only
be illogical but also absurd.[13] Indeed, prompt filing of a case for illegal dismissal, on one hand, is
anathema to the concept of abandonment, on the other.
Finally, under Article 279 of the Labor Code, an illegally dismissed employee is entitled to reinstatement
without loss of seniority rights and other privileges; full backwages, inclusive of allowances; and other
benefits or their monetary equivalent computed from the time his compensation was withheld from him
up to the time of his actual reinstatement.[14] x x x.
As for damages, it is a rule that moral damages may be recovered where the dismissal of the employee
was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy. x x x [w]e find that private respondents did not act with
oppression, bad faith or fraud. They imposed a cash bond or deposit on herein petitioners in the honest
belief that it was the best way to protect their interest against gold theft in the company. x x x. [15] (some
citations omitted)

The Issues
The following are to be resolved in the instant Petition for Review:[16]
I.
WHETHER OR NOT THE COURT OF APPEALS GROSSLY ERRED IN GIVING DUE COURSE TO THE PETITION
[under Rule 65 of the Rules of Court], IN EFFECT, FINDING GRAVE ABUSE OF DISCRETION, AMOUNTING
TO LACK OR EXCESS OF JURISDICTION ON THE PART OF THE NLRC, DESPITE THE FACT THAT THE SUBJECT
DECISION AND RESOLUTION THEREIN ARE IN PERFECT ACCORD WITH THE EVIDENCE ON RECORD AND
APPLICABLE LAWS.
II.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THERE WAS CONSTRUCTIVE
DISMISSAL IN THE PRESENT CASE AND ORDERING RESPONDENTS' REINSTATEMENT AS WELL AS THE
PAYMENT OF THEIR BACKWAGES AND OTHER MONETARY BENEFITS WITHOUT FACTUAL OR LEGAL
BASES.[17]

The petitioners now argue that the CA should have outrightly dismissed the petition filed before it as the
respondents had resorted to an erroneous mode of appeal. The arguments raised in the petition were the
same ones already passed upon by the LA and the NLRC. What the respondents sought was the CA's reevaluation of the facts and evidence. The petition was thus based on purported errors of judgment which
are beyond the province of a petition for certiorari.
The petitioners likewise insist that the respondents abandoned their work without due notice and to the
prejudice of the former. The respondents' co-workers attested to the foregoing circumstance.[18] The
respondents are goldsmiths whose skills are indispensable to a jewelry manufacturing business, thus, it is
not in accord with both logic and experience for the petitioners to just fire them only to train new workers.
Moreover, in the complaints and amended complaints, the respondents did not claim for reinstatement,
hence, implying their admission that they were not terminated.
Further, under Articles 114 and 115[19] of the Labor Code, an employer may require a worker to post a
deposit even before a loss or damage has occurred, provided that deductions from the deposit can be
made only upon proof that the worker is liable for the loss or damage. In case no loss or damage is
incurred, the deposit shall be returned to the worker after the conduct of an accounting which was what
happened in the case at bar. This is a valid exercise of management prerogative the scope of which
includes the setting of policies relative to working methods, procedures to be followed and working
regulations.[20]
The petitioners stress that they did not transgress the respondents' rights. The respondents, who
expressed to their co-workers their lack of fear to have their employment severed, are motivated by their
greed to extract money from the petitioners.
The petitioners conclude that the CA should have accorded respect to the findings of the LA and the NLRC
especially since they were not arrived at arbitrarily or in disregard of the evidence on record.

In the respondents' Comment,[21] they reiterate the arguments they had presented in the proceedings
below. The respondents emphasize that when they pleaded for reinstatement during the conference with
the petitioners on September 7, 2004, the latter openly admitted without reservation that the former will
only be allowed to return to work if they will post the required cash bond.
Further, the respondents claim that there was no plausible reason for them to abandon their employment
considering the length of their service and the fact that they were being paid rates above the minimum
wage. Citing Hantex Trading Co. Inc. v. Court of Appeals,[22] the respondents argue that no employee in his
right mind would recklessly abandon his job to join the ranks of the unemployed and choose to unduly
expose his family to hunger and untold hardship.
Besides, in Anflo Management & Investment Corp. v. Rodolfo Bolanio,[23] this Court had the occasion to
state that the filing of a complaint for illegal dismissal is inconsistent with a charge of abandonment, for
an employee who takes steps to protest his lay off cannot by any logic be said to have abandoned his
work.
The respondents also claim that the petitioners misrepresented to this Court that the former did not pray
for reinstatement as the dorsal portions of the amended complaints indicate otherwise.
Moreover, the petitioners failed to prove their authority granted by either the law, or regulations issued
by the Secretary of Labor, allowing them to require their workers to post deposits. The petitioners also
failed to establish that Nia Jewelry is engaged in a trade, occupation or business
where the practice of making deposits is a recognized one or is considered as necessary or desirable by
the Secretary of Labor.
Citing Sections 12,[24] 13[25] and 14,[26] Book III, Rule VIII of the Omnibus Rules Implementing the Labor
Code (Omnibus Rules), the respondents posit that salary deductions made prior to the occurrence of loss
or damage are illegal and constitute as undue interferences in the workers' disposal of their
wages. Further, the workers must first be given the opportunity to show cause why deductions should not
be made. If to be made, deductions should be fair, reasonable and should not exceed the actual loss or
damage. In the case at bar, the respondents were required to post cash bonds even when there is no
proof yet of their fault or negligence.
In the petitioners' Reply,[27] they averred that the day after Nia Jewelry required from its employees the
posting of deposits and even before the policy was actually implemented, the respondents promptly
stopped reporting for work despite Elisea's attempt to get in touch with them. The petitioners convened
the
employees
to
discuss
the
propriety
of
imposing
the
new policy and to afford them ample opportunity to air their concerns. The respondents' acts contravene
Article 19 of the New Civil Code (NCC) which requires every person to act with justice, give everyone his
due and observe honesty and good faith.
Further, it is clear in the Minutes of the Conciliation Proceedings[28] before the LA that the respondents
were not willing to be reinstated and preferred instead the payment of separation pay. Hence, no prayer
for reinstatement was indicated in the original complaints filed by them. As an afterthought, however,
they amended their complaints to reflect that they were likewise seeking for reinstatement.

The petitioners also point out that the doctrines in Hantex[29] and Anflo Management[30] cited by the
respondents find no application in the case at bar. In Hantex, the employer presented mere cash vouchers
to prove abandonment by the employee. In the case before us, sufficient evidence show that the
respondents abandoned their work. InAnflo Management, the employer expressly uttered words
terminating the employee who in turn filed a complaint the day right after the incident. In the case now
under our consideration, the respondents merely made a bare claim of illegal dismissal. Rightly so in Abad
v. Roselle Cinema,[31] it was ruled that an employer's claim of not having terminated an employee, when
supported by substantial evidence, should not be outrightly overcome by the argument that an employee
would not have filed a complaint for illegal dismissal if he were not really dismissed. The circumstances
surrounding the separation from employment should be taken into account.
Under Article 114 of the Labor Code, the Secretary of Labor is conferred the authority to promulgate rules
determining the circumstances when the making of deposits is deemed recognized, necessary or
desirable. However, Section 14,[32] Book III, Rule VIII of the Omnibus Rules does not define those
circumstances. What is defined is the circumstances when deductions can be made. It can thus be inferred
that the intention is for the courts to determine on a case to case basis what should be considered
asrecognized, necessary or desirable especially in the light of the existence of myriads of businesses which
are practically impossible to enumerate in modern society. The petitioners hence argue that the validity
of requiring cash deposits should be scrutinized with due consideration of its reasonableness and
necessity. Further, Article 1306 of the NCC allows contracting parties to establish stipulations, clauses,
terms and conditions which they may deem convenient provided they do not contravene the law, morals,
good customs, public order or public policy. In the case at bar, the policy adopted by the petitioners was
neither unreasonable nor oppressive. It was intended to benefit all the contracting parties.
Lastly, while the respondents raise the issue of the illegality of deductions, the petitioners stress that it is
academic because no deduction was actually made yet.

The Court's Ruling

The instant petition is partially meritorious.
The petitioners raise the procedural issue of whether or not the CA validly gave due course to the petition
for certiorari filed before it under Rule 65 of the Rules of Court. As the substantive issue of whether or not
the
petitioners constructively dismissed the respondents is closely-intertwined with the procedural question
raised, they will be resolved jointly.
Yolanda Mercado, et al. v. AMA Computer College-Paraaque City, Inc.[33] is instructive as to the nature of
a petition for review on certiorari under Rule 45, and a petition for certiorari under Rule 65, viz:
x x x [R]ule 45 limits us to the review of questions of law raised against the assailed CA decision. In ruling
for legal correctness, we have to view the CA decision in the same context that the petition for certiorari it
ruled upon was presented to it; we have to examine the CA decision from the prism of whether it
correctly determined the presence or absence of grave abuse of discretion in the NLRC decision before
it, not on the basis of whether the NLRC decision on the merits of the case was correct. In other words,
we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC

decision challenged before it. This is the approach that should be basic in a Rule 45 review of a CA ruling
in a labor case. In question form, the question to ask is: Did the CA correctly determine whether the
NLRC committed grave abuse of discretion in ruling on the case?[34]

It is thus settled that this Court is bound by the CA's factual findings. The rule, however, admits of
exceptions, among which is when the CA's findings are contrary to those of the trial court or administrative
body exercising quasi-judicial functions from which the action originated.[35] The case before us falls under
the aforementioned exception.
The petitioners argue that the respondents resorted to an erroneous mode of appeal as the issues raised
in the petition lodged before the CA essentially sought a re-evaluation of facts and evidence, hence, based
on purported errors of judgment which are outside the ambit of actions which can be aptly filed under
Rule 65.
We agree.
Again in Mercado,[36] we ruled that:
x x x [I]n certiorari proceedings under Rule 65 of the Rules of Court, the appellate court does not assess
and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC based their conclusion.
The query in this proceeding is limited to the determination of whether or not the NLRC acted without or
in excess of its jurisdiction or with grave abuse of discretion in rendering its decision. However, as an
exception, the appellate court may examine and measure the factual findings of the NLRC if the same
are not supported by substantial evidence.x x x.[37]

In the case at bench, in the petition for certiorari under Rule 65 filed by the respondents before the CA,
the following issues were presented for resolution:
I.
WHETHER OR NOT PUBLIC RESPONDENT [NLRC] committed patent errors in the appreciation of facts and
application of pertinent jurisprudence amounting to grave abuse of discretion or lack or in excess of
jurisdiction WHEN IT HELD THAT PRIVATE RESPONDENTS [herein petitioners] ARE NOT GUILTY OF ILLEGAL
DISMISSAL BECAUSE IT WAS THE PETITIONERS [herein private respondents] WHO ABANDONED THEIR JOB
AND REFUSED TO WORK WITH RESPONDENTS WHEN THEY WERE REQUIRED TO PUT UP CASH BOND OR
SIGN AN AUTHORIZATION FOR DEDUCTION.
II.
WHETHER OR NOT PUBLIC RESPONDENT committed patent errors in the appreciation of facts and
application
of
pertinent
jurisprudence
amounting to grave abuse of discretion or lack or in excess of jurisdiction WHEN IT DID NOT ORDER THE
REINSTATEMENT OF HEREIN PETITIONERS AND DELETED THE AWARD OF 13th MONTH PAY AND DENIED
THE CLAIMS OF ATTORNEY'S FEES, DAMAGES AND FULL BACKWAGES.[38]

Essentially, the issues raised by the respondents for resolution by the CA were anchored on an alleged
misappreciation of facts and evidence by the NLRC and the LA when they both ruled that abandonment
of work and not constructive dismissal occurred.
We agree with the petitioners that what the respondents sought was a re-evaluation of evidence, which
as a general rule cannot be properly done in a petition for certiorariunder Rule 65, save in cases where
substantial evidence to support the NLRC's findings are wanting.
In Honorable Ombudsman Simeon Marcelo v. Leopoldo Bungubung,[39] the Court defined substantial
evidence and laid down guidelines relative to the conduct of judicial review of decisions rendered by
administrative agencies in the exercise of their quasi-judicial power, viz:
x x x Substantial evidence is more than a mere scintilla of evidence. It means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if other minds equally
reasonable might conceivably opine otherwise. Second, in reviewing administrative decisions of the
executive branch of the government, the findings of facts made therein are to be respected so long as
they are supported by substantial evidence. Hence, it is not for the reviewing court to weigh the
conflicting evidence, determine the credibility of witnesses, or otherwise substitute its judgment for that
of the administrative agency with respect to the sufficiency of evidence. Third, administrative decisions in
matters within the executive jurisdiction can only be set aside on proof of gross abuse of discretion, fraud,
or
error
of
law.
These
principles
negate
the
power of the reviewing court to re-examine the sufficiency of the evidence in an administrative case as if
originally instituted therein, and do not authorize the court to receive additional evidence that was not
submitted to the administrative agency concerned.[40] (citations omitted)

We find the factual findings of the LA and the NLRC that the respondents were not dismissed are
supported by substantial evidence.
In the Joint Affidavit[41] executed by Generoso Fortunaba, Erdie Pilares and Crisanto Ignacio, all goldsmiths
under Nia Jewelry's employ, they expressly stated that they have personal knowledge of the fact that the
respondents were not terminated from employment. Crisanto Ignacio likewise expressed that after Elisea
returned from the United Statesin the first week of September of 2004, the latter even called to inquire
from him why the respondents were not reporting for work. We observe that the respondents had neither
ascribed any ill-motive on the part of their fellow goldsmiths nor offered any explanation as to why the
latter made declarations adverse to their cause. Hence, the statements of the respondents' fellow
goldsmiths deserve credence. This is especially true in the light of the respondents' failure to present any
notice of termination issued by the petitioners. It is settled that there can be dismissal even in the absence
of a termination notice.[42] However, in the case at bench, we find that the acts of the petitioners towards
the respondents do not at all amount to constructive dismissal.
Constructive dismissal occurs when there is cessation of work because continued employment is rendered
impossible, unreasonable or unlikely; when there is a demotion in rank or diminution in pay or both; or
when a clear discrimination, insensibility, or disdain by an employer becomes
unbearable to the employee.[43]
In the case now under our consideration, the petitioners did not whimsically or arbitrarily impose the
policy to post cash bonds or make deductions from the workers' salaries. As attested to by the

respondents' fellow goldsmiths in their Joint Affidavit, the workers were convened and informed of the
reason behind the implementation of the new policy. Instead of airing their concerns, the respondents
just promptly stopped reporting for work.
Although the propriety of requiring cash bonds seems doubtful for reasons to be discussed hereunder,
we find no grounds to hold that the respondents were dismissed expressly or even constructively by the
petitioners. It was the respondents who merely stopped reporting for work. While it is conceded that the
new policy will impose an additional burden on the part of the respondents, it was not intended to result
in their demotion. Neither is a diminution in pay intended because as long as the workers observe due
diligence in the performance of their tasks, no loss or damage shall result from their handling of the gold
entrusted to them, hence, all the amounts due to the goldsmiths shall still be paid in full. Further, the
imposition of the new policy cannot be viewed as an act tantamount to discrimination, insensibility or
disdain against the respondents. For one, the policy was intended to be implemented upon all the
goldsmiths in Nia Jewelry's employ and not solely upon the respondents. Besides, as stressed by the
petitioners, the new policy was intended to merely curb the incidences of gold theft in the work place.
The new policy can hardly be said to be disdainful or insensible to the workers as to render their continued
employment unreasonable, unlikely or impossible.
On September 7, 2004, or more or less three weeks after the imposition of the new policy, the
respondents filed their complaints for illegal dismissal which include their prayer for the payment of
separation pay. On September 20, 2004, they filed amended complaints seeking for reinstatement
instead.
The CA favored the respondents' argument that the latter could not have abandoned their work as it can
be presumed that they would not have filed complaints for illegal dismissal had they not been really
terminated and had they not intended themselves to be reinstated. We find that the presumption relied
upon by the CA pales in comparison to the substantial evidence offered by the petitioners that it was the
respondents who stopped reporting for work and were not dismissed at all.
In sum, we agree with the petitioners that substantial evidence support the LA's and the NLRC's findings
that no dismissal occurred. Hence, the CA should not have given due course to and granted the petition
for certiorari under Rule 65 filed by the respondents before it.
In view of our disquisition above that the findings of the LA and the NLRC that no constructive dismissal
occurred are supported by substantial evidence, the CA thus erred in giving due course to and granting
the petition filed before it. Hence, it is not even necessary anymore to resolve the issue of whether or not
the policy of posting cash bonds or making deductions from the goldsmiths' salaries is proper. However,
considering that there are other goldsmiths in Nia Jewelry's employ upon whom the policy challenged by
the respondents remain to be enforced, in the interest of justice and to put things to rest, we shall resolve
the issue.
Article 113 of the Labor Code is clear that there are only three exceptions to the general rule that no
deductions
from
the
employees'
salaries can be made. The exception which finds application in the instant petition is in cases where the
employer is authorized by law or regulations issued by the Secretary of Labor to effect the deductions. On
the other hand, Article 114 states that generally, deposits for loss or damages are not allowed except in
cases where the employer is engaged in such trades, occupations or business where the practice of making

deposits is a recognized one, or is necessary or desirable as determined by the Secretary of Labor in

appropriate rules or regulations.
While employers should generally be given leeways in their exercise of management prerogatives, we
agree with the respondents and the CA that in the case at bar, the petitioners had failed to prove that
their imposition of the new policy upon the goldsmiths under Nia Jewelry's employ falls under the
exceptions specified in Articles 113 and 114 of the Labor Code.
The petitioners point out that Section 14, Book III, Rule VIII of the Omnibus Rules does not define the
circumstances when the making of deposits is deemed recognized, necessary or desirable. The petitioners
then argue that the intention of the law is for the courts to determine on a case to case basis what should
be regarded as recognized, necessary or desirable and to test an employer's policy of requiring deposits
on the bases of its reasonableness and necessity.
We are not persuaded.
Articles 113 and 114 of the Labor Code are clear as to what are the exceptions to the general prohibition
against requiring deposits and effecting deductions from the employees' salaries. Hence, a statutory
construction of the aforecited provisions is not called for. Even if we were however called upon to
interpret the provisions, our inclination would still be to strictly construe the same against the employer
because
evidently,
the
posting
of
cash bonds and the making of deductions from the wages would inarguably impose an additional burden
upon the employees.
While the petitioners are not absolutely precluded from imposing the new policy, they can only do so
upon compliance with the requirements of the law.[44] In other words, the petitioners should first establish
that the making of deductions from the salaries is authorized by law, or regulations issued by the Secretary
of Labor. Further, the posting of cash bonds should be proven as a recognized practice in the jewelry
manufacturing business, or alternatively, the petitioners should seek for the determination by the
Secretary of Labor through the issuance of appropriate rules and regulations that the policy the former
seeks to implement is necessary or desirable in the conduct of business. The petitioners failed in this
respect. It bears stressing that without proofs that requiring deposits and effecting deductions are
recognized practices, or without securing the Secretary of Labor's determination of the necessity or
desirability of the same, the imposition of new policies relative to deductions and deposits can be made
subject to abuse by the employers. This is not what the law intends.
In view of the foregoing, we hold that no dismissal, constructive or otherwise, occurred. The findings of
the NLRC and the LA that it was the respondents who stopped reporting for work are supported by
substantial evidence. Hence, the CA erred when it re-evaluated the parties' respective evidence and
granted the petition filed before it. However, we agree with the CA that it is baseless for Nia Jewelry to
impose its new policy upon the goldsmiths under its employ without first complying with the strict
requirements of the law.
WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision and Resolution of the CA
dated January 9, 2009 and May 26, 2009, respectively, are REVERSED only in so far as they declared that
the respondents were constructively dismissed and entitled to reinstatement and payment of backwages,
allowances and benefits. However, the CA's ruling that the petitioners' imposition of its new policy upon
the respondents lacks legal basis, stands.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

SHS Perforated v. Diaz, G.R. No. 185814, October 13, 2010

SECOND DIVISION
SHS PERFORATED MATERIALS, INC., WINFRIED HARTMANNSHENN,
and HINRICH JOHANN SCHUMACHER,
Petitioners,
- versus -

MANUEL F. DIAZ, Respondent.

G.R. No. 185814

Present:
VELASCO, JR.,*J.,
NACHURA,**
Acting Chairperson,
LEONARDO-DE
CASTRO, ***
BRION, **** and
MENDOZA, JJ.

Promulgated:October
13, 2010

x ----------------------------------------------------------------------------------------x
DECISION
MENDOZA, J.:

Petitioners, by way of this petition for review on certiorari under Rule 45, seek to annul and set aside the
December 23, 2008 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 100015, which reversed and
set aside the December 29, 2006 Resolution[2] of the National Labor Relations Commission (NLRC). The
NLRC Resolution, in turn, reversed and set aside the June 15, 2006 Decision[3] of the Labor Arbiter (LA).[4]
THE FACTS
Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation organized and existing under the
laws of the Republic of the Philippines and registered with the Philippine Economic Zone Authority.
Petitioner Winfried Hartmannshenn (Hartmannshenn), a German national, is its president, in which
capacity he determines the administration and direction of the day-to-day business affairs of SHS.
Petitioner Hinrich Johann Schumacher (Schumacher), also a German national, is the treasurer and one of
the board directors. As such, he is authorized to pay all bills, payrolls, and other just debts of SHS of
whatever nature upon maturity. Schumacher is also the Executive Vice-President of the European
Chamber of Commerce of the Philippines (ECCP) which is a separate entity from SHS. Both entities have
an arrangement where ECCP handles the payroll requirements of SHS to simplify business operations and
minimize operational expenses. Thus, the wages of SHS employees are paid out by ECCP, through its
Accounting Services Department headed by Juliet Taguiang (Taguiang).
Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business Development on
probationary status from July 18, 2005 to January 18, 2006, with a monthly salary of P100,000.00.
Respondents duties, responsibilities, and work hours were described in the Contract of Probationary
Employment,[5] as reproduced below:

NAME : Jose Manuel F. Diaz

TITLE/STATUS : Manager for Business Development
LOCATION : Lot C3-2A, Phase I, Camelray
Industrial Park II, Calamba, Laguna
REPORTS TO : Direct to Mr. Winfried
Hartmannshenn
Normal Working Hours : 8:00 a.m. to 5:00 p.m.
subject to requirements of the job
OVERTIME : ________________________
JOB DESCRIPTION AND RESPONSIBILITIES:
DAILY/GENERAL DUTIES:
(a)
(b)
(c)
(d)

Represent the company in any event organized by PEZA;

Perform sales/marketing functions;
Monitor/follow-up customers inquiry on EMPLOYERs services;
Monitor on-going job orders/projects;

(e)
Submit requirements as needed in application/renewal of necessary permits;
(f)
Liaise closely with the other commercial and technical staff of the company;
(g)
Accomplish PEZA documents/requirements for every sales made; with legal assistance where
necessary at EMPLOYERs expense; and
(h)
Perform other related duties and responsibilities.
OTHER RESPONSIBILITIES:
(a)
abide by and perform to the best of his abilities all functions, duties and responsibilities to be
assigned by the EMPLOYER in due course;
(b)
comply with the orders and instructions given from time to time by the EMPLOYER, INC.
through its authorized representatives;
(c)
will not disclose any confidential information in respect of the affairs of the EMPLOYER to any
unauthorized person;
(d)
perform any other administrative or non-administrative duties, as assigned by any of the
EMPLOYERs representative from time to time either through direct written order or by verbal assignment.
The EMPLOYER may take into account EMPLOYEEs training and expertise when assigning additional tasks.
AGREED:
(sgd. Manuel Diaz).

In addition to the above-mentioned responsibilities, respondent was also instructed by Hartmannshenn

to report to the SHS office and plant at least two (2) days every work week to observe technical processes
involved in the manufacturing of perforated materials, and to learn about the products of the company,
which respondent was hired to market and sell.
During respondents employment, Hartmannshenn was often abroad and, because of business exigencies,
his instructions to respondent were either sent by electronic mail or relayed through telephone or mobile
phone. When he would be in the Philippines, he and the respondent held meetings. As to respondents
work, there was no close supervision by him.
During meetings with the respondent, Hartmannshenn expressed his dissatisfaction over respondents
poor performance. Respondent allegedly failed to make any concrete business proposal or implement any
specific measure to improve the productivity of the SHS office and plant or deliver sales except for a
meagre P2,500.00 for a sample product. In numerous electronic mail messages, respondent
acknowledged his poor performance and offered to resign from the company.
Respondent, however, denied sending such messages but admitted that he had reported to the SHS office
and plant only eight (8) times from July 18, 2005 to November 30, 2005.
On November 16, 2005, in preparation for his trip to the Philippines, Hartmannshenn tried to call
respondent on his mobile phone, but the latter failed to answer. OnNovember 18, 2005, Hartmannshenn
arrived in the Philippines from Germany, and on November 22 and 24, 2005, notified respondent of his

arrival through electronic mail messages and advised him to get in touch with him. Respondent claimed
that he never received the messages.
On November 29, 2005, Hartmannshenn instructed Taguiang not to release respondents salary. Later that
afternoon, respondent called and inquired about his salary. Taguiang informed him that it was being
withheld and that he had to immediately communicate with Hartmannshenn. Again, respondent denied
having received such directive.
The next day, on November 30, 2005, respondent served on SHS a demand letter and a resignation
letter. The resignation letter reads:
This is to tender my irrevocable resignation from SHS Perforated Materials, Inc, Philippines, effective
immediately upon receipt of my due and demandable salary for the period covering November 16 to 30,
2005, which has yet been unpaid and is still currently being withheld albeit illegally. This covers and
amounts to the sum of Php50,000.00 pesos net of all taxes. As my employment contract clearly shows I
receive a monthly salary of Php100,000.00 net of all taxes.
It is precisely because of illegal and unfair labor practices such as these that I offer my resignation with
neither regret nor remorse.[6]
In the evening of the same day, November 30, 2005, respondent met with Hartmannshenn in Alabang.
The latter told him that he was extremely disappointed for the following reasons: his poor work
performance; his unauthorized leave and malingering from November 16 to November 30, 2005; and
failure to immediately meet Hartmannshenn upon his arrival from Germany.
Petitioners averred that respondent was unable to give a proper explanation for his behavior.
Hartmannshenn then accepted respondents resignation and informed him that his salary would be
released upon explanation of his failure to report to work, and proof that he did, in fact, work for the
period in question. He demanded that respondent surrender all company property and information in his
possession. Respondent agreed to these exit conditions through electronic mail. Instead of complying with
the said conditions, however, respondent sent another electronic mail message to Hartmannshenn and
Schumacher on December 1, 2005, appealing for the release of his salary.
Respondent, on the other hand, claimed that the meeting with Hartmannshenn took place in the evening
of December 1, 2005, at which meeting the latter insulted him and rudely demanded that he
accept P25,000.00 instead of his accrued wage and stop working for SHS, which demands he refused.
Later that same night, he sent Hartmannshenn and Schumacher an electronic mail message appealing for
the release of his salary. Another demand letter for respondents accrued salary for November 16
to November 30, 2005, 13th month pay, moral and exemplary damages, and attorneys fees was sent
on December 2, 2005.
To settle the issue amicably, petitioners counsel advised respondents counsel by telephone that a check
had been prepared in the amount of P50,000.00, and was ready for pick-up on December 5, 2005. On the
same date, a copy of the formal reply letter relating to the prepared payment was sent to the respondents
counsel by facsimile transmission. Despite being informed of this, respondent never picked up the check.
Respondent countered that his counsel received petitioners formal reply letter only on December 20,
2005, stating that his salary would be released subsequent to the turn-over of all materials owned by the

company in his possession. Respondent claimed that the only thing in his possession was a sample panels
folder which he had already returned and which was duly received by Taguiang on November 30, 2005.
On December 9, 2005, respondent filed a Complaint[7] against the petitioners for illegal dismissal; nonpayment of salaries/wages and 13th month pay with prayer for reinstatement and full backwages;
exemplary damages, and attorneys fees, costs of suit, and legal interest.
THE RULING OF THE LABOR ARBITER
On June 15, 2006, the LA rendered his decision, the dispositive portion of which states:
WHEREFORE, premises considered, judgment is hereby rendered declaring complainant as having been
illegally dismissed and further ordering his immediate reinstatement without loss of seniority rights and
benefits. It is also ordered that complainant be deemed as a regular employee. Accordingly, respondents
are hereby ordered to jointly and severally pay complainant the following
1.
2.
3.
4.
5.

P704,166.67 (P100,000.00 x 6.5 + (P100,000.00 x 6.5/12) as backwages;

P50,000.00 as unpaid wages;
P37,083.33 as unpaid 13th month pay
P200,000.00 as moral and exemplary damages;
P99,125.00 as attorneys fees.

SO ORDERED.[8]
The LA found that respondent was constructively dismissed because the withholding of his salary was
contrary to Article 116 of the Labor Code as it was not one of the exceptions for allowable wage deduction
by the employer under Article 113 of the Labor Code. He had no other alternative but to resign because
he could not be expected to continue working for an employer who withheld wages without valid cause.
The LA also held that respondents probationary employment was deemed regularized because petitioners
failed to conduct a prior evaluation of his performance and to give notice two days prior to his termination
as required by the Probationary Contract of Employment and Article 281 of the Labor Code. Petitioners
contention that they lost trust and confidence in respondent as a managerial employee was not given
credence for lack of notice to explain the supposed loss of trust and confidence and absence of an
evaluation of respondents performance.
The LA believed that the respondent complied with the obligations in his contract as evidenced by his
electronic mail messages to petitioners. He ruled that petitioners are jointly and severally liable to
respondent for backwages including 13th month pay as there was no showing in the salary vouchers
presented that such was integrated in the salary; for moral and exemplary damages for having in bad faith
harassed respondent into resigning; and for attorneys fees.
THE RULING OF THE NLRC
On appeal, the NLRC reversed the decision of the LA in its December 29, 2006 Resolution, the dispositive
portion of which reads:
WHEREFORE, premises considered, the appeal is hereby GRANTED.
The Decision dated June 15, 2006 is hereby REVERSED and SET ASIDE and a new one is hereby entered:

(1) dismissing the complaint for illegal dismissal for want of merit;
(2) dismissing the claims for 13th month pay, moral and exemplary damages and attorneys fees for lack
of factual and legal basis; and
(3) ordering respondents to pay the complainants unpaid salary for the period covering November 16-30,
2005 in the amount of FIFTY THOUSAND PESOS (Php 50,000.00).
SO ORDERED.[9]
The NLRC explained that the withholding of respondents salary was a valid exercise of management
prerogative. The act was deemed justified as it was reasonable to demand an explanation for failure to
report to work and to account for his work accomplishments. The NLRC held that the respondent
voluntarily resigned as evidenced by the language used in his resignation letter and demand letters. Given
his professional and educational background, the letters showed respondents resolve to sever the
employer-employee relationship, and his understanding of the import of his words and their
consequences. Consequently, respondent could not have been regularized having voluntarily resigned
prior to the completion of the probationary period. The NLRC further noted that respondents 13th month
pay was already integrated in his salary in accordance with his Probationary Contract of Employment and,
therefore, no additional amount should be due him.
On January 25, 2007, respondent filed a motion for reconsideration but the NLRC subsequently denied it
for lack of merit in its May 23, 2007 Resolution.
THE RULING OF THE COURT OF APPEALS
The CA reversed the NLRC resolutions in its December 23, 2008 Decision, the dispositive portion of said
decision reads:
WHEREFORE, premises considered, the herein petition is GRANTED and the 29 December 2006 Resolution
of the NLRC in NLRC CN RAB-IV-12-21758-05-L, and the 23 May 2007 Resolution denying petitioners
Motion for Reconsideration, are REVERSED and SET ASIDE. Accordingly, a new judgment is hereby entered
in that petitioner is hereby awarded separation pay equivalent to at least one month pay, and his full
backwages, other privileges and benefits, or their monetary equivalent during the period of his dismissal
up to his supposed actual reinstatement by the Labor Arbiter on 15 June 2006.
SO ORDERED.[10]
Contrary to the NLRC ruling, the CA held that withholding respondents salary was not a valid exercise of
management prerogative as there is no such thing as a management prerogative to withhold wages
temporarily. Petitioners averments of respondents failure to report to work were found to be
unsubstantiated allegations not corroborated by any other evidence, insufficient to justify said
withholding and lacking in probative value. The malicious withholding of respondents salary made it
impossible or unacceptable for respondent to continue working, thus, compelling him to resign. The
respondents immediate filing of a complaint for illegal dismissal could only mean that his resignation was
not voluntary. As a probationary employee entitled to security of tenure, respondent was illegally
dismissed. The CA ruled out actual reinstatement, however, reasoning out that antagonism had caused a

severe strain in their relationship. It was of the view that separation pay equivalent to at least one month
pay would be a more equitable disposition.
THE ISSUES
Aggrieved, the petitioners come to this Court praying for the reversal and setting aside of the subject CA
decision presenting the following
ISSUES
I
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN NOT AFFIRMING THE
DECISION OF THE NLRC, WHICH WAS BASED ON SUBSTANTIAL EVIDENCE.
II
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN NOT AFFIRMING THE NLRCS
HOLDING THAT PETITIONERS WITHHOLDING OF RESPONDENTS SALARY FOR THE PAYROLL PERIOD
NOVEMBER 16-30, 2005 IN VIEW OF RESPONDENTS FAILURE TO RENDER ACTUAL WORK FOR SAID
PAYROLL PERIOD WAS A VALID EXERCISE OF MANAGEMENT PREROGATIVE.
III
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN AFFIRMING THE LABOR
ARBITERS FINDING THAT RESPONDENT HAD BEEN CONSTRUCTIVELY DISMISSED.

IV
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN AWARDING RESPONDENT
SEPARATION PAY EQUIVALENT TO AT LEAST ONE MONTH PAY IN LIEU OF REINSTATEMENT, FULL
BACKWAGES, AND OTHER PRIVILEGES AND BENEFITS, OR THEIR MONETARY EQUIVALENT IN VIEW OF
THE FACT THAT RESPONDENT VOLUNTARILY RESIGNED FROM PETITIONER SHS AND WAS NOT
ILLEGALLY DISMISSED.
V
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN NOT HOLDING THAT
INDIVIDUAL PETITIONERS HARTMANNSHENN AND SCHUMACHER MAY NOT BE HELD SOLIDARILY AND
PERSONALLY LIABLE WITH PETITIONER SHS FOR THE PAYMENT OF THE MONETARY AWARD TO
RESPONDENT.

The resolution of these issues is dependent on whether or not respondent was constructively dismissed
by petitioners, which determination is, in turn, hinged on finding out (i) whether or not the temporary
withholding of respondents salary/wages by petitioners was a valid exercise of management prerogative;
and (ii) whether or not respondent voluntarily resigned.

THE COURTS RULING

As a rule, the factual findings of the courts below are conclusive in a petition for review on certiorari where
only errors of law should be reviewed. The case, however, is an exception because the factual findings of
the CA and the LA are contradictory to that of the NLRC. Thus, a review of the records is necessary to
resolve the factual issues involved and render substantial justice to the parties.[11]
Petitioners contend that withholding respondents salary from November 16 to November 30, 2005, was
justified because respondent was absent and did not show up for work during that period. He also failed
to account for his whereabouts and work accomplishments during said period. When there is an issue as
to whether an employee has, in fact, worked and is entitled to his salary, it is within management
prerogative to temporarily withhold an employees salary/wages pending determination of whether or not
such employee did indeed work.
We disagree with petitioners.
Management prerogative refers to the right of an employer to regulate all aspects of employment, such
as the freedom to prescribe work assignments, working methods, processes to be followed, regulation
regarding transfer of employees, supervision of their work, lay-off and discipline, and dismissal and recall
of work.[12] Although management prerogative refers to the right to regulate all aspects of employment,
it cannot be understood to include the right to temporarily withhold salary/wages without the consent of
the employee. To sanction such an interpretation would be contrary to Article 116 of the Labor Code,
which provides:
ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or
indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his
wages by force, stealth, intimidation, threat or by any other means whatsoever without the workers
consent.

Any withholding of an employees wages by an employer may only be allowed in the form of wage
deductions under the circumstances provided in Article 113 of the Labor Code, as set forth below:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized
by the employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.
As correctly pointed out by the LA, absent a showing that the withholding of complainants wages falls
under the exceptions provided in Article 113, the withholding thereof is thus unlawful.[13]

Petitioners argue that Article 116 of the Labor Code only applies if it is established that an employee is
entitled to his salary/wages and, hence, does not apply in cases where there is an issue or uncertainty as
to whether an employee has worked and is entitled to his salary/wages, in consonance with the principle
of a fair days wage for a fair days work. Petitioners contend that in this case there was precisely an issue
as to whether respondent was entitled to his salary because he failed to report to work and to account
for his whereabouts and work accomplishments during the period in question.
To substantiate their claim, petitioners presented hard copies of the electronic mail messages[14] sent to
respondent on November 22 and 24, 2005, directing the latter to contact Hartmannshenn; the
Affidavit[15] of Taguiang stating that she advised respondent on or about November 29, 2005 to
immediately communicate with Mr. Hartmannshenn at the SHS office; Hartmannshenns CounterAffidavit[16] stating that he exerted earnest efforts to contact respondent through mobile phone;
Schumachers Counter-Affidavit[17]stating that respondent had not filed any request for official leave; and
respondents admission in his Position Paper[18] that he found it absurd to report to the SHS plant when
only security guards and machinists were present.
Respondent, on the other hand, presented reports[19] prepared by him and submitted to Hartmannshenn
on November 18 and 25, 2005; a receipt[20] issued to him by Taguiang for a clients payment during the
subject period; and eight notarized letters[21] of prospective clients vouching for meetings they had with
the respondent during the subject period.
The Court finds petitioners evidence insufficient to prove that respondent did not work from November
16 to November 30, 2005. As can be gleaned from respondents Contract of Probationary Employment and
the exchanges of electronic mail messages[22] between Hartmannshenn and respondent, the latters duties
as manager for business development entailed cultivating business ties, connections, and clients in order
to make sales. Such duties called for meetings with prospective clients outside the office rather than
reporting for work on a regular schedule. In other words, the nature of respondents job did not allow
close supervision and monitoring by petitioners. Neither was there any prescribed daily monitoring
procedure established by petitioners to ensure that respondent was doing his job. Therefore, granting
that respondent failed to answer Hartmannshenns mobile calls and to reply to two electronic mail
messages and given the fact that he admittedly failed to report to work at the SHS plant twice each week
during the subject period, such cannot be taken to signify that he did not work from November 16 to
November 30, 2005.
Furthermore, the electronic mail reports sent to Hartmannshenn and the receipt presented by respondent
as evidence of his having worked during the subject period were not controverted by petitioners. The
eight notarized letters of prospective clients vouching for meetings they had with respondent during the
subject period may also be given credence. Although respondent only presented such letters in support
of his Motion for Reconsideration filed with the NLRC, they may be considered by this Court in light of
Section 10, Rule VII, of the 2005 New Rules of Procedure of the NLRC, which provides in part that the rules
of procedure and evidence prevailing in courts of law and equity shall not be controlling and the
Commission shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law or procedure, all in the interest of due process. While
administrative tribunals exercising quasi-judicial functions are free from the rigidity of certain procedural
requirements, they are bound by law and practice to observe the fundamental and essential requirements
of due process in justiciable cases presented before them.[23] In this case, due process was afforded
petitioners as respondent filed with the NLRC a Motion to Set Case for Reception of Additional Evidence
as regards the said letters, which petitioners had the opportunity to, and did, oppose.

Although it cannot be determined with certainty whether respondent worked for the entire period from
November 16 to November 30, 2005, the consistent rule is that if doubt exists between the evidence
presented by the employer and that by the employee, the scales of justice must be tilted in favor of the
latter[24] in line with the policy mandated by Articles 2 and 3 of the Labor Code to afford protection to
labor and construe doubts in favor of labor. For petitioners failure to satisfy their burden of proof,
respondent is presumed to have worked during the period in question and is, accordingly, entitled to his
salary. Therefore, the withholding of respondents salary by petitioners is contrary to Article 116 of the
Labor Code and, thus, unlawful.
Petitioners contend that respondent could not have been constructively dismissed because he voluntarily
resigned as evidenced by his resignation letter. They assert that respondent was not forced to draft the
letter and his intention to resign is clear from the contents and terms used, and that given respondents
professional and educational background, he was fully aware of the import and consequences of the said
letter. They maintain that respondent resigned to save face and avoid disciplinary measures due to his
allegedly dismal work performance and failure to report to work.
The Court, however, agrees with the LA and the CA that respondent was forced to resign and was, thus,
constructively dismissed. In Duldulao v. Court of Appeals, it was written:
There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer
becomes so unbearable on the part of the employee that it would foreclose any choice by him except to
forego his continued employment. It exists where there is cessation of work because continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank
and a diminution in pay. [25]

What made it impossible, unreasonable or unlikely for respondent to continue working for SHS was the
unlawful withholding of his salary. For said reason, he was forced to resign. It is of no moment that he
served his resignation letter on November 30, 2005, the last day of the payroll period and a non-working
holiday, since his salary was already due him on November 29, 2005, being the last working day of said
period. In fact, he was then informed that the wages of all the other SHS employees were already released,
and only his was being withheld. What is significant is that the respondent prepared and served his
resignation letter right after he was informed that his salary was being withheld. It would be absurd to
require respondent to tolerate the unlawful withholding of his salary for a longer period before his
employment can be considered as so impossible, unreasonable or unlikely as to constitute constructive
dismissal. Even granting that the withholding of respondents salary on November 30, 2005, would not
constitute an unlawful act, the continued refusal to release his salary after the payroll period was clearly
unlawful. The petitioners claim that they prepared the check ready for pick-up cannot undo the unlawful
withholding.
It is worthy to note that in his resignation letter, respondent cited petitioners illegal and unfair labor
practice[26] as his cause for resignation. As correctly noted by the CA, respondent lost no time in submitting
his resignation letter and eventually filing a complaint for illegal dismissal just a few days after his salary
was withheld. These circumstances are inconsistent with voluntary resignation and bolster the finding of
constructive dismissal.

Petitioners cite the case of Solas v. Power & Telephone Supply Phils., Inc.[27] to support their contention
that the mere withholding of an employees salary does not by itself constitute constructive
dismissal. Petitioners are mistaken in anchoring their argument on said case, where the withholding of
the salary was deemed lawful. In the above-cited case, the employees salary was withheld for a valid
reason - it was applied as partial payment of a debt due to the employer, for withholding taxes on his
income and for his absence without leave. The partial payment of a debt due to the employer and the
withholding of taxes on income were valid deductions under Article 113 paragraph (c) of the Labor
Code. The deduction from an employees salary for a due and demandable debt to an employer was
likewise sanctioned under Article 1706 of the Civil Code. As to the withholding for income tax purposes,
it was prescribed by the National Internal Revenue Code. Moreover, the employee therein was indeed
absent without leave.
In this case, the withholding of respondents salary does not fall under any of the circumstances provided
under Article 113. Neither was it established with certainty that respondent did not work from November
16 to November 30, 2005. Hence, the Court agrees with the LA and the CA that the unlawful withholding
of respondents salary amounts to constructive dismissal.
Respondent was constructively dismissed and, therefore, illegally dismissed. Although respondent was a
probationary employee, he was still entitled to security of tenure.Section 3 (2) Article 13 of the
Constitution guarantees the right of all workers to security of tenure. In using the expression all workers,
the Constitution puts no distinction between a probationary and a permanent or regular employee. This
means that probationary employees cannot be dismissed except for cause or for failure to qualify as
regular employees.[28]
This Court has held that probationary employees who are unjustly dismissed during the probationary
period are entitled to reinstatement and payment of full backwages and other benefits and privileges
from the time they were dismissed up to their actual reinstatement.[29] Respondent is, thus, entitled to
reinstatement without loss of seniority rights and other privileges as well as to full backwages, inclusive
of allowances, and other benefits or their monetary equivalent computed from the time his compensation
was withheld up to the time of actual reinstatement. Respondent, however, is not entitled to the
additional amount for 13th month pay, as it is clearly provided in respondents Probationary Contract of
Employment that such is deemed included in his salary. Thus:
EMPLOYEE will be paid a net salary of One Hundred Thousand (Php100,000.00) Pesos per month payable
every 15th day and end of the month.
The compensation package defined in this paragraph shall represent all that is due and demandable under
this Contract and includes all benefits required by law such as the 13th month pay. No other benefits, bonus
or allowance shall be due the employee. [30]
(emphasis supplied)
Respondents reinstatement, however, is no longer feasible as antagonism has caused a severe strain in
their working relationship. Under the doctrine of strained relations, the payment of separation pay is
considered an acceptable alternative to reinstatement when the latter option is no longer desirable or
viable. Payment liberates the employee from what could be a highly oppressive work environment, and
at the same time releases the employer from the obligation of keeping in its employ a worker it no longer
trusts.Therefore, a more equitable disposition would be an award of separation pay equivalent to at least
one month pay, in addition to his full backwages, allowances and other benefits.[31]

With respect to the personal liability of Hartmannshenn and Schumacher, this Court has held that
corporate directors and officers are only solidarily liable with the corporation for termination of
employment of corporate employees if effected with malice or in bad faith.[32] Bad faith does not connote
bad judgment or negligence; it imports dishonest purpose or some moral obliquity and conscious doing
of wrong; it means breach of unknown duty through some motive or interest or ill will; it partakes of the
nature of fraud.[33] To sustain such a finding, there should be evidence on record that an officer or director
acted maliciously or in bad faith in terminating the employee.[34]
Petitioners withheld respondents salary in the sincere belief that respondent did not work for the period
in question and was, therefore, not entitled to it. There was no dishonest purpose or ill will involved as
they believed there was a justifiable reason to withhold his salary. Thus, although they unlawfully
withheld respondents salary, it cannot be concluded that such was made in bad faith. Accordingly,
corporate officers, Hartmannshenn and Schumacher, cannot be held personally liable for the corporate
obligations of SHS.
WHEREFORE, the assailed December 23, 2008 Decision of the Court of Appeals in CA-G.R. SP No. 100015
is hereby AFFIRMED with MODIFICATION. The additional amount for 13th month pay is deleted.
Petitioners Winfried Hartmannshenn and Hinrich Johann Schumacher are not solidarily liable with
petitioner SHS Perforated Materials, Inc.
SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

Non-diminution of benefits

Art. 100, Labor Code

Article 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed
at the time of promulgation of this Code.

Wesleyan University v. Faculty, G.R. No. 181806, March 12, 2014

G.R. No. 181806

March 12, 2014

WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner,

vs.
WESLEYAN UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION, Respondent.

DECISION
DEL CASTILLO, J.:
A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate
labor organization concerning the terms and conditions of employment.1 Like any other contract, it
has the force of law between the parties and, thus, should be complied with in good faith.2 Unilateral
changes or suspensions in the implementation of the provisions of the CBA, therefore, cannot be
allowed without the consent of both parties.
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25,
2007 Decision4 and the February 5, 2008 Resolution5 of the Court of Appeals (CA) in CA-G.R. SP
No. 97053.
Factual Antecedents
Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly
organized and existing under the laws of the Philippines.6 Respondent Wesleyan UniversityPhilippines Faculty and Staff Association, on the other hand, is a duly registered labor
organization7 acting as the sole and exclusive bargaining agent of all rank-and-file faculty and staff
employees of petitioner.8
In December 2003, the parties signed a 5-year CBA9 effective June 1, 2003 until May 31, 2008.10
On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya),
issued a Memorandum11 providing guidelines on the implementation of vacation and sick leave
credits as well as vacation leave commutation. The pertinent portions of the Memorandum read:
1. VACATION AND SICK LEAVE CREDITS
Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a
qualified employee earns an equivalent of 1.25 days credit each for VL and SL. Vacation
Leave and Sick Leave credits of 15 days become complete at the cut off date of May 31 of
each year. (Example, only a total of 5 days credit will be given to an employee for each of
sick leave [or] vacation leave, as of month end September, that is, 4 months from June to
September multiplied by 1.25 days). An employee, therefore, who takes VL or SL beyond his
leave credits as of date will have to file leave without pay for leaves beyond his credit.
2. VACATION LEAVE COMMUTATION
Only vacation leave is commuted or monetized to cash. Vacation leave commutation is
effected after the second year of continuous service of an employee. Hence, an employee
who started working June 1, 2005 will get his commutation on May 31, 2007 or thereabout.12
On August 25, 2005, respondents President, Cynthia L. De Lara (De Lara) wrote a letter13 to Atty.
Maglaya informing him that respondent is not amenable to the unilateral changes made by
petitioner.14 De Lara questioned the guidelines for being violative of existing practices and the
CBA,15 specifically Sections 1 and 2, Article XII of the CBA, to wit:
ARTICLE XII
VACATION LEAVE AND SICK LEAVE

SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are
entitled to receive shall enjoy fifteen (15) days vacation leave with pay annually.
1.1 All unused vacation leave after the second year of service shall be converted into cash and be
paid to the entitled employee at the end of each school year to be given not later than August 30 of
each year.
SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy
fifteen (15) days sick leave with pay annually.16
On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which
petitioner advised respondent to file a grievance complaint on the implementation of the vacation
and sick leave policy.17 In the same meeting, petitioner announced its plan of implementing a oneretirement policy,18 which was unacceptable to respondent.
Ruling of the Voluntary Arbitrator
Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary
Arbitrator. During the hearing, respondent submitted affidavits to prove that there is an established
practice of giving two retirement benefits, one from the Private Education Retirement Annuity
Association (PERAA) Plan and another from the CBA Retirement Plan. Sections 1, 2, 3 and 4 of
Article XVI of the CBA provide:
ARTICLE XVI
SEPARATION, DISABILITY AND RETIREMENT PAY
SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all
full-time, regular staff and tenured faculty of the University, except the University President.
Membership in the Plan shall commence on the first day of the month coincident with or next
following his statement of Regular/Tenured Employment Status.
SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each
Member shall be as follows:
a. Faculty The last day of the School Year, coincident with his attainment of age sixty (60)
with at least five (years) of unbroken, credited service.
b. Staff Upon reaching the age of sixty (60) with at least five (5) years of unbroken, credited
service.
SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior
to his compulsory retirement. His number of years of service in the University shall be the basis of
computing x x x his retirement benefits regardless of his chronological age.
SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of
the members final monthly salary for compulsory retirement.
For optional retirement, the vesting schedule shall be:
x x x x19

On November 2, 2006, the Voluntary Arbitrator rendered a Decision20 declaring the one-retirement
policy and the Memorandum dated August 16, 2005 contrary to law. The dispositive portion of the
Decision reads:
WHEREFORE, the following award is hereby made:
1. The assailed University guidelines on the availment of vacation and sick leave credits and
vacation leave commutation are contrary to law. The University is consequently ordered to
reinstate the earlier scheme, practice or policy in effect before the issuance of the said
guidelines on August 16, 2005;
2. The "one retirement" policy is contrary to law and is hereby revoked and rescinded. The
University is ordered x x x to resume and proceed with the established practice of extending
to qualified employees retirement benefits under both the CBA and the PERAA Plan.
3. The other money claims are denied.21
Ruling of the Court of Appeals
Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the
Rules of Court.
On September 25, 2007, the CA rendered a Decision22 finding the rulings of the Voluntary Arbitrator
supported by substantial evidence. It also affirmed the nullification of the one-retirement policy and
the Memorandum dated August 16, 2005 on the ground that these unilaterally amended the CBA
without the consent of respondent.23 Thus:
WHEREFORE, the instant appeal is DISMISSED for lack of merit.
SO ORDERED.24
Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008
Resolution.25
Issues
Hence, this recourse by petitioner raising the following issues:
a.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators
ruling that the Affidavits submitted by Respondent WU-PFSA are substantial evidence as defined by
the rules and jurisprudence that would substantiate that Petitioner WU-P has long been in the
practice of granting its employees two (2) sets of Retirement Benefits.
b.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators
ruling that a university practice of granting its employees two (2) sets of Retirement Benefits had
already been established as defined by the law and jurisprudence especially in light of the illegality
and lack of authority of such alleged grant.

c.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators
ruling that it is incumbent upon Petitioner WU-P to show proof that no Board Resolution was issued
granting two (2) sets of Retirement Benefits.
d.
Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005
Memorandum of Petitioner WU-P for being contrary to extant policy.26
Petitioners Arguments
Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA
Plan are one and the same.27 It maintains that there is no established company practice or policy of
giving two retirement benefits to its employees.28 Assuming, without admitting, that two retirement
benefits were released,29 petitioner insists that these were done by mere oversight or mistake as
there is no Board Resolution authorizing their release.30 And since these benefits are unauthorized
and irregular, these cannot ripen into a company practice or policy.31 As to the affidavits submitted by
respondent, petitioner claims that these are self-serving declarations,32 and thus, should not be given
weight and credence.33
In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the
guidelines on the implementation of vacation and sick leave credits as well as vacation leave
commutation, is valid because it is in full accord with existing policy.34
Respondents Arguments
Respondent belies the claims of petitioner and asserts that there are two retirement plans as the
PERAA Retirement Plan, which has been implemented for more than 30 years, is different from the
CBA Retirement Plan.35 Respondent further avers that it has always been a practice of petitioner to
give two retirement benefits36 and that this practice was established by substantial evidence as found
by both the Voluntary Arbitrator and the CA.37
As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary to
the CBA and existing practices as it added qualifications or limitations which were not agreed upon
by the parties.38
Our Ruling
The Petition is bereft of merit.
The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees. This rule, however, applies only if
the benefit is based on an express policy, a written contract, or has ripened into a practice.40 To be
considered a practice, it must be consistently and deliberately made by the employer over a long
period of time.41
An exception to the rule is when "the practice is due to error in the construction or application of a
doubtful or difficult question of law."42 The error, however, must be corrected immediately after its
discovery;43 otherwise, the rule on Non-Diminution of Benefits would still apply.

The practice of giving two retirement

benefits to petitioners employees is
supported by substantial evidence.
In this case, respondent was able to present substantial evidence in the form of affidavits to support
its claim that there are two retirement plans. Based on the affidavits, petitioner has been giving two
retirement benefits as early as 1997.44 Petitioner, on the other hand, failed to present any evidence to
refute the veracity of these affidavits. Petitioners contention that these affidavits are self-serving
holds no water. The retired employees of petitioner have nothing to lose or gain in this case as they
have already received their retirement benefits. Thus, they have no reason to perjure themselves.
Obviously, the only reason they executed those affidavits is to bring out the truth. As we see it then,
their affidavits, corroborated by the affidavits of incumbent employees, are more than sufficient to
show that the granting of two retirement benefits to retiring employees had already ripened into a
consistent and deliberate practice.
Moreover, petitioners assertion that there is only one retirement plan as the CBA Retirement Plan
and the PERAA Plan are one and the same is not supported by any evidence. There is nothing in
Article XVI of the CBA to indicate or even suggest that the "Plan" referred to in the CBA is the
PERAA Plan. Besides, any doubt in the interpretation of the provisions of the CBA should be
resolved in favor of respondent. In fact, petitioners assertion is negated by the announcement it
made during the LMC Meeting on February 8, 2006 regarding its plan of implementing a "oneretirement plan." For if it were true that petitioner was already implementing a one-retirement policy,
there would have been no need for such announcement. Equally damaging is the lettermemorandum45 dated May 11, 2006, entitled "Suggestions on the defenses we can introduce to
justify the abolition of double retirement policy," prepared by the petitioners legal counsel.
These circumstances, taken together, bolster the finding that the two-retirement policy is a
practice. Thus, petitioner cannot, without the consent of respondent, eliminate the two-retirement
policy and implement a one-retirement policy as this would violate the rule on non-diminution of
benefits.
1w phi 1

As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is
illegal or unauthorized and that the benefits were erroneously given by the previous administration.
No evidence, however, was presented by petitioner to substantiate its allegations.
Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as
affirmed by the CA, that there is substantial evidence to prove that there is an existing practice of
giving two retirement benefits, one under the PERAA Plan and another under the CBA Retirement
Plan.
The Memorandum dated August 16,
2005 is contrary to the existing CBA.
Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August
16, 2005 is contrary to the existing CBA.
Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days
sick leave and 15 days vacation leave with pay every year and that after the second year of service,
all unused vacation leave shall be converted to cash and paid to the employee at the end of each
school year, not later than August 30 of each year.

The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are
not automatic as leave credits would be earned on a month-to-month basis. This, in effect, limits the
available leave credits of an employee at the start of the school year. For example, for the first four
months of the school year or from June to September, an employee is only entitled to five days
vacation leave and five days sick leave.46 Considering that the Memorandum dated August 16, 2005
imposes a limitation not agreed upon by the parties nor stated in the CBA, we agree with the CA that
it must be struck down.
In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no
doubt on the intention of the parties, the literal meaning of the stipulation shall govem.47
However, if there is doubt in its interpretation, it should be resolved in favor of labor,48 as this is
mandated by no less than the Constitution.49
WHEREFORE, the Petition is hereby DENIED. The assailed September 25, 2007 Decision and the
February 5, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97053 are hereby
AFFIRMED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice

Vergara v. Coca-Cola, G.R. No. 176985, April 1, 2013

G.R. No. 176985

April 1, 2013

RICARDO E. VERGARA, JR., Petitioner,

vs.
COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent.
DECISION
PERALTA, J.:
Before Us is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure assailing
the January 9, 2007 Decision1 and March 6, 2007 Resolution2 of the Court of Appeals (CA) in CA ..
G.R. SP No. 94622, which affirmed the January 31, 2006 Decision3 and March 8, 2006
Resolution4 of the National Labor Relations Commission (NLRC) modifying the September 30, 2003
Decision5 of the Labor Arbiter (LA) by deleting the sales management incentives in the computation
of petitioner's retirement benefits.
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola Bottlers Philippines,
Inc. from May 1968 until he retired on January 31, 2002 as a District Sales Supervisor (DSS) for Las
Pias City, Metro Manila. As stipulated in respondents existing Retirement Plan Rules and
Regulations at the time, the Annual Performance Incentive Pay of RSMs, DSSs, and SSSs shall be
considered in the computation of retirement benefits, as follows: Basic Monthly Salary + Monthly

Average Performance Incentive (which is the total performance incentive earned during the year
immediately preceding 12 months) No. of Years in Service.6
Claiming his entitlement to an additional PhP474,600.00 as Sales Management Incentives
(SMI)7 and to the amount of PhP496,016.67 which respondent allegedly deducted illegally,
representing the unpaid accounts of two dealers within his jurisdiction, petitioner filed a complaint
before the NLRC on June 11, 2002 for the payment of his "Full Retirement Benefits, Merit Increase,
Commission/Incentives, Length of Service, Actual, Moral and Exemplary Damages, and Attorneys
Fees."8
After a series of mandatory conference, both parties partially settled with regard the issue of merit
increase and length of service.9 Subsequently, they filed their respective Position Paper and Reply
thereto dealing on the two remaining issues of SMI entitlement and illegal deduction.
On September 30, 2003, the LA rendered a Decision10 in favor of petitioner, directing respondent to
reimburse the amount illegally deducted from petitioners retirement package and to integrate therein
his SMI privilege. Upon appeal of respondent, however, the NLRC modified the award and deleted
the payment of SMI.
Petitioner then moved to partially execute the reimbursement of illegal deduction, which the LA
granted despite respondents opposition.11 Later, without prejudice to the pendency of petitioners
petition for certiorari before the CA, the parties executed a Compromise Agreement12 on October 4,
2006, whereby petitioner acknowledged full payment by respondent of the amount of
PhP496,016.67 covering the amount illegally deducted.
The CA dismissed petitioners case on January 9, 2007 and denied his motion for reconsideration
two months thereafter. Hence, this present petition to resolve the singular issue of whether the SMI
should be included in the computation of petitioners retirement benefits on the ground of consistent
company practice. Petitioner insistently avers that many DSSs who retired without achieving the
sales and collection targets were given the average SMI in their retirement package.
We deny.
This case does not fall within any of the recognized exceptions to the rule that only questions of law
are proper in a petition for review on certiorari under Rule 45 of the Rules of Court. Settled is the rule
that factual findings of labor officials, who are deemed to have acquired expertise in matters within
their respective jurisdiction, are generally accorded not only respect but even finality, and bind us
when supported by substantial evidence.13Certainly, it is not Our function to assess and evaluate the
evidence all over again, particularly where the findings of both the CA and the NLRC coincide.
In any event, even if this Court would evaluate petitioner's arguments on its supposed merits, We
still find no reason to disturb the CA ruling that affirmed the NLRC. The findings and conclusions of
the CA show that the evidence and the arguments of the parties had all been carefully considered
and passed upon. There are no relevant and compelling facts to justify a different resolution which
the CA failed to consider as well as no factual conflict between the CA and the NLRC decisions.
Generally, employees have a vested right over existing benefits voluntarily granted to them by their
employer.14 Thus, any benefit and supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer.15 The principle of non-diminution of benefits
is actually founded on the Constitutional mandate to protect the rights of workers, to promote their
welfare, and to afford them full protection.16 In turn, said mandate is the basis of Article 4 of the

Labor Code which states that "all doubts in the implementation and interpretation of this Code,
including its implementing rules and regulations, shall be rendered in favor of labor."17
There is diminution of benefits when the following requisites are present: (1) the grant or benefit is
founded on a policy or has ripened into a practice over a long period of time; (2) the practice is
consistent and deliberate; (3) the practice is not due to error in the construction or application of a
doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by
the employer.18
To be considered as a regular company practice, the employee must prove by substantial evidence
that the giving of the benefit is done over a long period of time, and that it has been made
consistently and deliberately.19 Jurisprudence has not laid down any hard-and-fast rule as to the
length of time that company practice should have been exercised in order to constitute voluntary
employer practice.20 The common denominator in previously decided cases appears to be the
regularity and deliberateness of the grant of benefits over a significant period of time.21 It requires an
indubitable showing that the employer agreed to continue giving the benefit knowing fully well that
the employees are not covered by any provision of the law or agreement requiring payment
thereof.22 In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of
the employer to grant the benefit over a considerable period of time.23
Upon review of the entire case records, We find no substantial evidence to prove that the grant of
SMI to all retired DSSs regardless of whether or not they qualify to the same had ripened into
company practice. Despite more than sufficient opportunity given him while his case was pending
before the NLRC, the CA, and even to this Court, petitioner utterly failed to adduce proof to establish
his allegation that SMI has been consistently, deliberately and voluntarily granted to all retired DSSs
without any qualification or conditions whatsoever. The only two pieces of evidence that he
stubbornly presented throughout the entirety of this case are the sworn statements of Renato C.
Hidalgo (Hidalgo) and Ramon V. Velazquez (Velasquez), former DSSs of respondent who retired in
2000 and 1998, respectively. They claimed that the SMI was included in their retirement package
even if they did not meet the sales and collection qualifiers.24 However, juxtaposing these with the
evidence presented by respondent would reveal the frailty of their statements.
The declarations of Hidalgo and Velazquez were sufficiently countered by respondent through the
affidavits executed by Norman R. Biola (Biola), Moises D. Escasura (Escasura), and Ma. Vanessa
R. Balles (Balles).25Biola pointed out the various stop-gap measures undertaken by respondent
beginning 1999 in order to arrest the deterioration of its accounts receivables balance, two of which
relate to the policies on the grant of SMI and to the change in the management structure of
respondent upon its re-acquisition by San Miguel Corporation. Escasura represented that he has
personal knowledge of the circumstances behind the retirement of Hidalgo and Velazquez. He
attested that contrary to petitioners claim, Hidalgo was in fact qualified for the SMI. As for
Velazquez, Escasura asserted that even if he (Velazquez) did not qualify for the SMI, respondents
General Manager in its Calamba plant still granted his (Velazquez) request, along with other
numerous concessions, to achieve industrial peace in the plant which was then experiencing labor
relations problems. Lastly, Balles confirmed that petitioner failed to meet the trade receivable
qualifiers of the SMI. She also cited the cases of Ed Valencia (Valencia) and Emmanuel Gutierrez
(Gutierrez), both DSSs of respondent who retired on January 31, 2002 and December 30, 2002,
respectively. She noted that, unlike Valencia, Gutierrez also did not receive the SMI as part of his
retirement pay, since he failed to qualify under the policy guidelines. The verity of all these
statements and representations stands and holds true to Us, considering that petitioner did not
present any iota of proof to debunk the same.
1w phi 1

Therefore, respondent's isolated act of including the SMI in the retirement package of Velazquez
could hardly be classified as a company practice that may be considered an enforceable obligation.
To repeat, the principle against diminution of benefits is applicable only if the grant or benefit is
founded on an express policy or has ripened into a practice over a long period of time which is
consistent and deliberate; it presupposes that a company practice, policy and tradition favorable to
the employees has been clearly established; and that the payments made by the company pursuant
to it have ripened into benefits enjoyed by them.26 Certainly, a practice or custom is, as a general
rule, not a source of a legally demandable or enforceable right.27 Company practice, just like any
other fact, habits, customs, usage or patterns of conduct, must be proven by the offering party who
must allege and establish specific, repetitive conduct that might constitute evidence of habit or
company practice.28
To close, We rule that petitioner could have salvaged his case had he step up to disprove
respondents contention that he miserably failed to meet the collection qualifiers of the SMI.
Respondent argues that
An examination of the Companys aged trial balance reveals that petitioner did not meet the trade
receivable qualifier. On the contrary, the said trial balance reveals that petitioner had a large amount
of uncollected overdue accounts. For the year 2001, his percentage collection efficiency for current
issuance was at an average of 13.5% a month as against the required 70%. For the same,
petitioners collection efficiency was at an average of 60.25% per month for receivables aged 1-30
days, which is again, way below the required 90%. For receivables aged 31-60 days during said
year, petitioners collection efficiency was at an average of 56.17% per month, which is
approximately half of the required 100%. Worse, for receivables over 60 days old, petitioners
average collection efficiency per month was a reprehensively low 14.10% as against the required
100%.29
The above data was repeatedly raised by respondent in its Rejoinder (To Complainants Reply)
before the LA,30Memorandum of Appeal31 and Opposition (To Complainant-Appellees Motion for
Reconsideration)32 before the NLRC, and Comment (On the Petition),33 Memorandum (For the
Private Respondent),34 and Comment (On the Motion for Reconsideration)35 before the CA. Instead
of frontally rebutting the data, petitioner treated them with deafening silence; thus, reasonably and
logically implying lack of evidence to support the contrary.
WHEREFORE, the petition is DENIED. The January 9, 2007 Decision and March 6, 2007 Resolution
of the Court of Appeals in CA-G.R. SP No. 94622, which affirmed the January 31, 2006 Decision
and March 8, 2006 Resolution of the NLRC deleting the LA's inclusion of sales management
incentives in the computation of petitioner's retirement benefits, is hereby AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

Netlink v. Delmo, G.R. No. 160827, June 18, 2014

G.R. No. 160827

June 18, 2014

NETLINK COMPUTER INCORPORATED, Petitioner,

vs.
ERIC DELMO, Respondent.
DECISION
BERSAMIN, J.:
In the absence of a written agreement between the employer and the employee that sales
commissions shall be paid in a foreign currency, the latter has the right to be paid in such foreign
currency once the same has become an established practice of the former. The rate of exchange at
the time of payment, not the rate of exchange at the time of the sales, controls.
Antecedents
On November 3, 1991, Netlink Computer, Inc. Products and Services (Netlink) hired Eric S. Delmo
(Delmo) as account manager tasked to canvass and source clients and convince them to purchase
the products and services of Netlink. Delmo worked in the field most of the time. He and his fellow
account managers were not required to accomplish time cards to record their personal presence in
the office of Netlink.1 He was able to generate sales worth P35,000,000.00, more or less, from which
he earned commissions amounting toP993,558.89 and US$7,588.30. He then requested payment of
his commissions, but Netlink refused and only gave him partial cash advances chargeable to his
commissions. Later on, Netlink began to nitpick and fault find, like stressing his supposed absences
and tardiness. In order to force him to resign, Netlink issued several memoranda detailing his
supposed infractions of the companys attendance policy. Despite the memoranda, Delmo continued
to generate huge sales for Netlink.2
On November 28, 1996, Delmo was shocked when he was refused entry into the company premises
by the security guard pursuant to a memorandum to that effect. His personal belongings were still
inside the company premises and he sought their return to him. This incident prompted Delmo to file
a complaint for illegal dismissal.3
In its answer to Delmos complaint,Netlink countered that there were guidelines regarding company
working time and its utilization and how the employees time would be recorded. Allegedly, all
personnel were required to use the bundy clock to punch in and out in the morning, and in and out in
the afternoon. Excepted from the rules were the company officers, and the authorized personnel in
the field project assignments. Netlink claimed that it would be losing on the business transactions
closed by Delmo due to the high costs of equipment, and in fact his biggest client had not yet paid.
Netlink pointed out that Delmo had becomevery lax in his obligations, with the other account
managers eventually having outperformed him. Netlink asserted that warning, reprimand, and
suspension memoranda were given to employees who violated company rules and regulations, but
such actions were considered as a necessary management tool to instill discipline.4
Ruling of the Labor Arbiter
On September 23, 1998, the Labor Arbiter ruled against Netlink and in favor of Delmo, to wit:
WHEREFORE, judgment is hereby rendered declaring complainant as illegally and unjustly
dismissed and respondents are ordered to reinstate complainant to his former position without loss
of seniority rights with full backwages and other benefits and respondents are hereby ordered to pay
complainant as follows:

P161,000.00 - Backwages, basic pay and allowances from Nov. 1996 to Sept. 1998
15,000.00 - 13th month pay for 1996 to 1998
993,558.89 - unpaid commissions
P1,169,558.89 - Total
plus US$7,588.30 - unpaid commissions
plus 10% attorneys fees
The reinstatement aspect is immediately executory even pending appeal. In case reinstatement is
no longer feasible, complainant shall be paid separation pay of one-month pay for every year of
service. All other claims are hereby dismissed.
SO ORDERED.5
Decision of the NLRC
On appeal, the National Labor Relations Commission (NLRC) modified the decision of the Labor
Arbiter by setting aside the backwages and reinstatement decreed by the Labor Arbiter due to the
existence of valid and just causes for the termination of Delmos employment, to wit: WHEREFORE,
premises considered, the decision of the Labor Arbiter a quo is hereby SET ASIDEand a new one
ENTERED, ordering the respondents-appellantsto pay the following:
1. TWO THOUSAND PESOS (P2,000.00) as indemnity for failure to observe procedural due
process;
2. Unpaid commission in the amount of P993,558.89;
3. US$7,588.30 as unpaid commission;
4. P15,000.00 representing the 13th month pay for 1996, 1997, and 1998;
5. 10% attorneys fees of the total amount awarded.
SO ORDERED.6
The NLRC denied the motion for reconsideration, after which Netlink filed a petition for certiorariin
the CA.
Judgment of the CA
On May 9, 2003, the CA promulgated its assailed decision upholding the NLRCs ruling subject to
modifications,7 viz:
In the present case, since the payment of the commission is made to depend on the future and
uncertain event which is the payment of the accounts by the persons who have transacted

business with the petitioner, without payment by the former to the latter, the obligation to pay the
commission has not yet arisen.
The evidence on record shows that the ALCATEL, private respondents biggest client has not paid
fully the amount it owes to the petitioner as of March 10, 1998. (Rollo, pp. 101, 397, 398) The
obligation therefore, on the part of the petitioner to pay the private respondent for his commission for
the said unpaid account has not yet arisen. Thus it is a grave abuse of discretion on the part of the
public respondent to make petitioner liable to the private respondent for the payment of the said
commission, when it is clear on the record, as We have discussed above, that the obligation therefor
has not yet arisen.
Perusal of the records, likewise, show that petitioner failed to refute by evidence that the private
respondent is not entitled to the P993, 558.89 commission. Petitioner however claimed that since the
amounts out of which the commission will be taken has not yet been paid fully, petitioner must,
likewise, not be made liable for the said commission. However, public respondent committed grave
abuse of discretion when it disregard the evidence on record which is not disputed by the private
respondent that out of the total commissions of the private respondent, petitioner has paid the
petitioner in the amount of P216,799.45 in the form of advance payment. (Rollo, p. 12)
In view of the foregoing discussions, therefore, the advance payment made by the petitioner in
favorof the private respondent in the amount of P216, 799.45 must be deducted to the P993, 558.89
unpaid commission of the private respondent. The difference amounting to P776, 779.44 must
likewise be deducted to the amount ofP4, 066.19 which represents the amount which the petitioner
had admitted as the net commission payable to private respondent. The difference thereof
amounting to P772, 713.25 shall represent the unpaid commission which shall be payable to the
private respondent by the petitioner upon payment of the accounts out of which such commission
shall be taken.
We, likewise, agree with the petitioner that the private respondent is not entitled to 13th month pay in
the years 1997 and 1998. The order of the public respondent making the petitioner liable to the
private respondent for the 13th month pay of the latter in the years 1997 and 1998 is contrary to its
findings that there are valid and just cause for the termination of the private respondent from
employment, although private respondent was not given his right to due process. (Rollo, pp. 32-33)
The rule applicable in the present case is the decision of the Supreme Court in the case of
Sebuguero vs National Labor Relations Commission [248 SCRA 532, 547 (1995)] where it was ruled
that "where the dismissal of an employee is in fact for a just and valid cause and is so proven to be
but he is not accorded his right to due process,i.e., he was not furnished the twin requirements of
notice and the opportunityto be heard, the dismissal shall be upheld but the employer must be
sanctioned for non-compliance with the requirements of or for failureto observe due process."
Hence, petitioner should not be made to pay the 13th month pay to private respondent whose
employment was terminated for cause but without due process in 1996.
xxxx
Thus, private respondent is entitled only to a 13th month pay computed pro-rata from January 1996
to November 1996 which as properly computed by the petitioner amounts to P4, 584.00. (Rollo, p.
11)
With respect to the other arguments of the petitioner, this Court is not persuaded. Petitioner failed to
refute by evidence that private respondent is not entitled to the commissions payable in US dollars.
Neither is there any reason for us to agree with the petitioner that the computation of these
commissions must be based on the value of [the] Peso in relation to a Dollar at the time of sale. As

properly observed by the Labor Arbiter a quo, viz: "Likewise the devaluation of the peso cannot be
used as a shield against the complainant because that should have been the lookout of the
respondent company in providing for such a clause that in case of devaluation, the price agreed
upon should be at the exchange rate when the contract of sale had been consummated. For the lack
of foresight and inefficiency of the respondent company and as regards its contracts or agreements
with its clientele, the complainant should not be made to suffer." (Labor Arbiter Ricardo Olairez
Decision, September 23, 1998, pp. 11-12, Rollo,pp. 328-329) In this regardtherefore, We uphold the
well settled rule that "the findings of facts of the NLRC, particularly where the NLRC and the Labor
Arbiter are in agreement, are deemed binding and conclusive upon the Court." (Permex, Inc. vs
National Labor Relations Commission, 323 SCRA 121, 126).
xxxx
WHEREFORE, premises considered, the assailed Resolutions are hereby AFFIRMED with
MODIFICATION, ordering the petitioner to pay the private respondent the following:
1. TWO-THOUSAND PESOS (P2,000.00) as indemnity for failure to observe procedural due
process;
2. P4,066.19 representing the unpaid commissions that have accrued in favor of the private
respondent;
3. P776,779.44 payable to the private respondent upon payment of the accounts out of
which the said amount will be taken;
4. P4,584.00 representing the unpaid 13th month pay of the private respondent;
5. US$7,588.30 as unpaid commission;
6. 10% attorneys fees of the total amount awarded excluding the amount contained in the
No.3 of this Order.
SO ORDERED.
Issues
Hence, this appeal.
Netlink submits that the CA committed a palpable and reversible error of law in not holding that the
applicable exchange rate for computing the US dollar commissions of Delmo should be the rates
prevailing at the time when the sales were actually generated, not the rates prevailing at the time of
the payment; and in awarding attorneys fees.
In his comment,8 Delmo counters that because he had earned in US dollars it was only fair that his
commissions be paid in US dollars; that Netlink should not be allowed to flip-flop after it had paid
commissions in US dollar on the sales generated by its sales agents on US-dollar denominated
transactions; and that attorneys fees were warranted because of the unanimous finding that there
was violation of procedural due process.
In its reply,9 Netlink maintains that the commissions of Delmo should be based on sales generated,
actually paid by and collected from the customers; that commissions must be paid on the basis of

the conversion of the US dollar to the Philippine peso at the time of sale; and that no cogent and
justifiable reason existed for the award of attorneys fees.
To be considered for resolution are,therefore, the following, namely: (1) whether or not the payment
of the commissions should be in US dollars; and (2) whether or not the award ofattorneys fees was
warranted.
Ruling of the Court
The appeal lacks merit.
As a general rule, all obligations shall be paid in Philippine currency. However, the contracting
parties may stipulate that foreign currencies may be used for settling obligations. This is pursuant to
Republic Act No. 8183,10 which provides as follows:
Section 1. All monetary obligations shall be settled in the Philippine currency which is legal tender in
the Philippines. However, the parties may agree that the obligation ortransaction shall be settled in
any other currency at the time of payment.
We remarked in C.F. Sharp & Co. v. Northwest Airlines, Inc.11 that the repeal of Republic Act No. 529
had the effect of removing the prohibition on the stipulation of currency other than Philippine
currency, such that obligations or transactions could already be paid in the currency agreed upon by
the parties. However, both Republic Act No. 529 and Republic Act No. 8183 did not stipulate the
applicable rate of exchange for the conversion of foreign currency-incurred obligations to their peso
equivalent. It follows, therefore, that the jurisprudence established under Republic Act No. 529 with
regard to the rate of conversion remains applicable. In C.F. Sharp, the Court cited Asia World
Recruitment,Inc. v. NLRC,12 to the effect that the real value of the foreign exchange-incurred
obligation up to the date of itspayment should be preserved.
There was no written contract between Netlink and Delmo stipulating that the latters commissions
would be paid in US dollars. The absence of the contractual stipulation notwithstanding, Netlink was
still liable to pay Delmo in US dollars because the practice of paying its sales agents in US dollars
for their US dollar-denominatedsales had become a company policy. This was impliedly admitted by
Netlink when it did not refute the allegation that the commissions earned by Delmo and its other
sales agents had been paid in US dollars. Instead of denying the allegation, Netlink only sought a
declaration that the US dollar commissions be paid using the exchange rate at the time of sale. The
principle of non-diminution of benefits, which has been incorporated in Article 10013 of the Labor
Code, forbade Netlink from unilaterally reducing, diminishing, discontinuing or eliminating the
practice. Verily, the phrase "supplements, or other employee benefits" in Article 100 is construed to
mean the compensation and privileges received by an employee aside from regular salaries or
wages.
1w phi1

With regard to the length of timethe company practice should have been observed to constitute a
voluntary employer practice that cannot be unilaterally reduced, diminished, discontinued or
eliminated by the employer, we find that jurisprudence has not laid down any rule requiring a specific
mmimum number of years. In Davao Fruits Corporation v. Associated Labor Unions,14 the company
practice lasted for six years. In Davao Integrated Port Stevedoring Services v. Abarquez,15 the
employer, for three years and nine months, approved the commutation to cash of the unenjoyed
portion of the sick leave with pay benefits of its intermittent workers. In Tiangco v. Leogardo, Jr.,16 the
employer carried on the practice of giving a fixed monthly emergency allowance from November
1976 to February 1980, or three years and four months. In Sevilla Trading Company v.

Semana,17 the employer kept the practice of including non-basic benefits such as paid leaves for
unused sick leave and vacation in the computation of their 13th-month pay for at least two years.
With the payment of US dollar commissions having ripened into a company practice, there is no way
that the commissions due to Delmo were to be paid in US dollars or their equivalent in Philippine
currency determined at the time of the sales. To rule otherwise would be to cause an unjust
diminution of the commissions due and owing to Delmo.
Finally, we affirm the following justification of the CA in granting attorney's fees to Delmo, viz: The
award of attorney's fees must, likewise, be upheld in line of (sic) the decision of the Supreme Court
in the case of Consolidated Rural Bank (Cagayan Valley), Inc. vs. National Labor Relations
Commission, 301 SCRA 223, 235, where it was held that "in actions for recovery of wages or where
an employee was forced to litigate and thus incur expenses to protect her rights and interests, even
if not so claimed, an award of attorney's fees equivalent to ten percent (10%) of the total award is
legally and morally justifiable. There is no doubt that in the present case, the private respondent has
incurred expenses for the protection and enforcement of his right to his commissions.18
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision
promulgated on May 9, 2003; and ORDERS the petitioner to pay the costs of suit.
SO ORDERED
LUCAS P. BERSAMIN
Associate Justice

Facilities v. Supplements

Art. 97 (f), Labor Code

"Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or
to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor and
Employment, of board, lodging, or other facilities customarily furnished by the employer to the
employee. "Fair and reasonable value" shall not include any profit to the employer, or to any person
affiliated with the employer.

SLL International v. NLRC, G.R. No. 172161, March 2, 2011

G.R. No. 172161

March 2, 2011

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON, Petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN LOPEZ, EDGARDO

ZUIGA and DANILO CAETE, Respondents.
DECISION
MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006 Decision1 and the March 31,
2006 Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with
modification the March 31, 2004 Decision3 and December 15, 2004 Resolution4 of the National Labor
Relations Commission (NLRC).The NLRC Decision found the petitioners, SLL International Cables
Specialist (SLL) and its manager, Sonny L. Lagon (petitioners), not liable for the illegal dismissal of
Roldan Lopez, Danilo Caete and Edgardo Zuiga(private respondents) but held them jointly and
severally liable for payment of certain monetary claims to said respondents.
A chronicle of the factual antecedents has been succinctly summarized by the CA as follows:
Sometime in 1996, and January 1997, private respondents Roldan Lopez (Lopez for brevity) and
Danilo Caete (Caete for brevity), and Edgardo Zuiga (Zuiga for brevity) respectively, were hired
by petitioner Lagon as apprentice or trainee cable/lineman. The three were paid the full minimum
wage and other benefits but since they were only trainees, they did not report for work regularly but
came in as substitutes to the regular workers or in undertakings that needed extra workers to
expedite completion of work. After their training, Zuiga, Caete and Lopez were engaged as project
employees by the petitioners in their Islacom project in Bohol. Private respondents started on March
15, 1997 until December 1997. Upon the completion of their project, their employment was also
terminated. Private respondents received the amount of P145.00, the minimum prescribed daily
wage for Region VII. In July 1997, the amount of P145 was increased to P150.00 by the Regional
Wage Board (RWB) and in October of the same year, the latter was increased to P155.00.
Sometime in March 1998, Zuiga and Caete were engaged again by Lagon as project employees
for its PLDT Antipolo, Rizal project, which ended sometime in (sic) the late September 1998. As a
consequence, Zuiga and Caetes employment was terminated. For this project, Zuiga and
Caete received only the wage of P145.00 daily. The minimum prescribed wage for Rizal at that
time was P160.00.
Sometime in late November 1998, private respondents re-applied in the Racitelcom project of Lagon
in Bulacan. Zuiga and Caete were re-employed. Lopez was also hired for the said specific project.
For this, private respondents received the wage of P145.00. Again, after the completion of their
project in March 1999, private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked with Lagons project in Camarin,
Caloocan City with Furukawa Corporation as the general contractor. Their contract would expire on
February 28, 2000, the period of completion of the project. From May 21, 1997-December 1999,
private respondents received the wage of P145.00. At this time, the minimum prescribed rate for
Manila was P198.00. In January to February 28, the three received the wage of P165.00. The
existing rate at that time was P213.00.
For reasons of delay on the delivery of imported materials from Furukawa Corporation, the Camarin
project was not completed on the scheduled date of completion. Face[d] with economic problem[s],
Lagon was constrained to cut down the overtime work of its worker[s][,] including private
respondents. Thus, when requested by private respondents on February 28, 2000 to work overtime,
Lagon refused and told private respondents that if they insist, they would have to go home at their
own expense and that they would not be given anymore time nor allowed to stay in the quarters.

This prompted private respondents to leave their work and went home to Cebu. On March 3, 2000,
private respondents filed a complaint for illegal dismissal, non-payment of wages, holiday pay, 13th
month pay for 1997 and 1998 and service incentive leave pay as well as damages and attorneys
fees.
In their answers, petitioners admit employment of private respondents but claimed that the latter
were only project employees[,] for their services were merely engaged for a specific project or
undertaking and the same were covered by contracts duly signed by private respondents. Petitioners
further alleged that the food allowance of P63.00 per day as well as private respondents allowance
for lodging house, transportation, electricity, water and snacks allowance should be added to their
basic pay. With these, petitioners claimed that private respondents received higher wage rate than
that prescribed in Rizal and Manila.
Lastly, petitioners alleged that since the workplaces of private respondents were all in Manila, the
complaint should be filed there. Thus, petitioners prayed for the dismissal of the complaint for lack of
jurisdiction and utter lack of merit. (Citations omitted.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his decision5 declaring that
his office had jurisdiction to hear and decide the complaint filed by private respondents. Referring to
Rule IV, Sec. 1 (a) of the NLRC Rules of Procedure prevailing at that time,6 the LA ruled that it had
jurisdiction because the "workplace," as defined in the said rule, included the place where the
employee was supposed to report back after a temporary detail, assignment or travel, which in this
case was Cebu.
As to the status of their employment, the LA opined that private respondents were regular
employees because they were repeatedly hired by petitioners and they performed activities which
were usual, necessary and desirable in the business or trade of the employer.
With regard to the underpayment of wages, the LA found that private respondents were underpaid. It
ruled that the free board and lodging, electricity, water, and food enjoyed by them could not be
included in the computation of their wages because these were given without their written consent.
The LA, however, found that petitioners were not liable for illegal dismissal. The LA viewed private
respondents act of going home as an act of indifference when petitioners decided to prohibit
overtime work.7
In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In addition, the NLRC
noted that not a single report of project completion was filed with the nearest Public Employment
Office as required
by the Department of Labor and Employment (DOLE) Department Order No. 19, Series of
1993.8 The NLRC later denied9 the motion for reconsideration10 subsequently filed by petitioners.
When the matter was elevated to the CA on a petition for certiorari, it affirmed the findings that the
private respondents were regular employees. It considered the fact that they performed functions
which were the regular and usual business of petitioners. According to the CA, they were clearly
members of a work pool from which petitioners drew their project employees.
The CA also stated that the failure of petitioners to comply with the simple but compulsory
requirement to submit a report of termination to the nearest Public Employment Office every time
private respondents employment was terminated was proof that the latter were not project
employees but regular employees.

The CA likewise found that the private respondents were underpaid. It ruled that the board and
lodging, electricity, water, and food enjoyed by the private respondents could not be included in the
computation of their wages because these were given without their written consent. The CA added
that the private respondents were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal dismissal. The CA opined that it was the
petitioners prerogative to grant or deny any request for overtime work and that the private
respondents act of leaving the workplace after their request was denied was an act of
abandonment.
In modifying the decision of the labor tribunal, however, the CA noted that respondent Roldan Lopez
did not work in the Antipolo project and, thus, was not entitled to wage differentials. Also, in
computing the differentials for the period January and February 2000, the CA disagreed in the award
of differentials based on the minimum daily wage of P223.00, as the prevailing minimum daily wage
then was only P213.00. Petitioners sought reconsideration but the CA denied it in its March 31, 2006
Resolution.11
In this petition for review on certiorari,12 petitioners seek the reversal and setting aside of the CA
decision anchored on this lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW IN AWARDING
WAGE DIFFERENTIALS TO THE PRIVATE COMPLAINANTS ON THE BASES OF MERE
TECHNICALITIES, THAT IS, FOR LACK OF WRITTEN CONFORMITY x x x AND LACK OF
NOTICE TO THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)[,] AND THUS, THE
COURT OF APPEALS GRAVELY ERRED IN AFFIRMING WITH MODIFICATION THE NLRC
DECISION IN THE LIGHT OF THE RULING IN THE CASE OF JENNY M. AGABON and VIRGILIO
AGABON vs, NLRC, ET AL., GR NO. 158963, NOVEMBER 17, 2004, 442 SCRA 573, [AND
SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME PHILIPPINES, INC.
VS. NAGAKAKAISANG EMPLEYADO NG WELLCOME-DFA (NEW DFA), ET AL., GR NO.
149349, 11 MARCH 2005], WHICH FINDS APPLICATION IN THE INSTANT CASE BY
ANALOGY.13
Petitioners reiterated their position that the value of the facilities that the private respondents enjoyed
should be included in the computation of the "wages" received by them. They argued that the rulings
in Agabon v. NLRC14and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng
Wellcome-DFA15 should be applied by analogy, in the sense that the lack of written acceptance of
the employees of the facilities enjoyed by them should not mean that the value of the facilities could
not be included in the computation of the private respondents "wages."
On November 29, 2006, the Court resolved to issue a Temporary Restraining Order (TRO) enjoining
the public respondent from enforcing the NLRC and CA decisions until further orders from the Court.
After a thorough review of the records, however, the Court finds no merit in the petition.
This petition generally involves factual issues, such as, whether or not there is evidence on record to
support the findings of the LA, the NLRC and the CA that private respondents were project or regular
employees and that their salary differentials had been paid. This calls for a re-examination of the
evidence, which the Court cannot entertain. Settled is the rule that factual findings of labor officials,
who are deemed to have acquired expertise in matters within their respective jurisdiction, are

generally accorded not only respect but even finality, and bind the Court when supported by
substantial evidence. It is not the Courts function to assess and evaluate the evidence
all over again, particularly where the findings of both the Labor tribunals and the CA concur. 16
As a general rule, on payment of wages, a party who alleges payment as a defense has the burden
of proving it.17 Specifically with respect to labor cases, the burden of proving payment of monetary
claims rests on the employer, the rationale being that the pertinent personnel files, payrolls, records,
remittances and other similar documents which will show that overtime, differentials, service
incentive leave and other claims of workers have been paid are not in the possession of the
worker but in the custody and absolute control of the employer.18
In this case, petitioners, aside from bare allegations that private respondents received wages higher
than the prescribed minimum, failed to present any evidence, such as payroll or payslips, to support
their defense of payment. Thus, petitioners utterly failed to discharge the onus probandi.
Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are
regular or non-regular employees.
Section 3, Rule VII of the Rules to Implement the Labor Code19 specifically enumerates those who
are not covered by the payment of minimum wage. Project employees are not among them.
On whether the value of the facilities should be included in the computation of the "wages" received
by private respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that an employer
may provide subsidized meals and snacks to his employees provided that the subsidy shall not be
less that 30% of the fair and reasonable value of such facilities. In such cases, the employer may
deduct from the wages of the employees not more than 70% of the value of the meals and snacks
enjoyed by the latter, provided that such deduction is with the written authorization of the employees
concerned.
Moreover, before the value of facilities can be deducted from the employees wages, the following
requisites must all be attendant: first, proof must be shown that such facilities are customarily
furnished by the trade; second, the provision of deductible facilities must be voluntarily accepted in
writing by the employee; andfinally, facilities must be charged at reasonable value.20 Mere availment
is not sufficient to allow deductions from employees wages.21
These requirements, however, have not been met in this case. SLL failed to present any company
policy or guideline showing that provisions for meals and lodging were part of the employees
salaries. It also failed to provide proof of the employees written authorization, much less show how
they arrived at their valuations. At any rate, it is not even clear whether private respondents actually
enjoyed said facilities.
The Court, at this point, makes a distinction between "facilities" and "supplements." It is of the view
that the food and lodging, or the electricity and water allegedly consumed by private respondents in
this case were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co.,22 the two terms were distinguished from one another in this wise:
"Supplements," therefore, constitute extra remuneration or special privileges or benefits given to or
received by the laborers over and above their ordinary earnings or wages. "Facilities," on the other
hand, are items of expense necessary for the laborer's and his family's existence and subsistence so
that by express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the

employer are deductible therefrom, since if they are not so furnished, the laborer would spend and
pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration
above and over his basic or ordinary earning or wage is supplement; and when said benefit or
privilege is part of the laborers' basic wages, it is a facility. The distinction lies not so much in the
kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for which it is
given.23 In the case at bench, the items provided were given freely by SLL for the purpose of
maintaining the efficiency and health of its workers while they were working at their respective
projects.
1avv phi1

For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any rate, these
were cases of dismissal with just and authorized causes. The present case involves the matter of the
failure of the petitioners to comply with the payment of the prescribed minimum wage.
The Court sustains the deletion of the award of differentials with respect to respondent Roldan
Lopez. As correctly pointed out by the CA, he did not work for the project in Antipolo.
WHEREFORE, the petition is DENIED. The temporary restraining order issued by the Court on
November 29, 2006 is deemed, as it is hereby ordered, DISSOLVED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice

Mabeza v. NLRC, G.R. No. 118506, April 18, 1997

FIRST DIVISION
[G.R. No. 118506. April 18, 1997]
NORMA MABEZA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL
SUPREME, respondents.
DECISION
KAPUNAN, J.:
This petition seeking the nullification of a resolution of public respondent National Labor Relations
Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the preservation
of the constitutionally enshrined rights of the working class. Without the protection accorded by our laws
and the tempering of courts, the natural and historical inclination of capital to ride roughshod over the
rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent, are
illustrative.

Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees
at the Hotel Supreme in Baguio City were asked by the hotel's management to sign an instrument attesting
to the latter's compliance with minimum wage and other labor standard provisions of law.[1] The
instrument provides:[2]
JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA NONOG,
NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and residents of
Baguio City, under oath, depose and say:
1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay Ave.,
Baguio City;
2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;
3. That we are all (8) employees in the hotel and assigned in each respective shifts;
4. That we have no complaints against the management of the Hotel Supreme as we are paid accordingly
and that we are treated well.
5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose of
informing the authorities concerned and to dispute the alleged report of the Labor Inspector of the
Department of Labor and Employment conducted on the said establishment on February 2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City,
Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY
(Sgd) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA
(Sgd) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.
Asst. City Prosecutor
Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity
and contents of the affidavit as instructed by management. The affidavit was nevertheless submitted on
the same day to the Regional Office of the Department of Labor and Employment in Baguio City.
As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting
findings of the Labor Inspector of DOLE (in an inspection of respondent's establishment on February 2,
1991) apparently adverse to the private respondent.[3]

After she refused to proceed to the City Prosecutor's Office - on the same day the affidavit was submitted
to the Cordillera Regional Office of DOLE - petitioner avers that she was ordered by the hotel management
to turn over the keys to her living quarters and to remove her belongings from the hotel
premises.[4] According to her, respondent strongly chided her for refusing to proceed to the City
Prosecutor's Office to attest to the affidavit.[5] She thereafter reluctantly filed a leave of absence from her
job which was denied by management. When she attempted to return to work on May 10, 1991, the
hotel's cashier, Margarita Choy, informed her that she should not report to work and, instead, continue
with her unofficial leave of absence.Consequently, on May 13, 1991, three days after her attempt to
return to work, petitioner filed a complaint for illegal dismissal before the Arbitration Branch of the
National Labor Relations Commission - CAR Baguio City. In addition to her complaint for illegal dismissal,
she alleged underpayment of wages, non-payment of holiday pay, service incentive leave pay, 13th month
pay, night differential and other benefits. The complaint was docketed as NLRC Case No. RAB-CAR-050198-91 and assigned to Labor Arbiter Felipe P. Pati.
Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job)
without notice to the management"[6] and that she actually abandoned her work. He maintained that
there was no basis for the money claims for underpayment and other benefits as these were paid in the
form of facilities to petitioner and the hotel's other employees.[7] Pointing to the Affidavit of May 7, 1991,
the private respondent asserted that his employees actually have no problems with management. In a
supplemental answer submitted eleven (11) months after the original complaint for illegal dismissal was
filed, private respondent raised a new ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's office of the City of Baguio against petitioner
on July 4, 1991.[8]
On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the ground
of loss of confidence. His disquisitions in support of his conclusion read as follows:
It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1 piece
bedsheet, 1 piece thermos, 2 pieces towel (Exhibits '9', '9-A,' '9-B,' '9-C' and '10' pages 12-14 TSN,
December 1, 1992).
In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant for
qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant committed
the crime of qualified theft issued a resolution for its filing in court but dismissing the charge of perjury
(Exhibit '4' for respondent and Exhibit 'B-7' for complainant). As a consequence, complainant was charged
in court for the said crime (Exhibit '5' for respondent and Exhibit 'B-6' for the complainant).
With these pieces of evidence, complainant committed serious misconduct against her employer which is
one of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor Code
as amended).[9]
On April 28, 1994, respondent NLRC promulgated its assailed Resolution[10] affirming the Labor Arbiter's
decision. The resolution substantially incorporated the findings of the Labor Arbiter.[11] Unsatisfied,
petitioner instituted the instant special civil action for certiorari under Rule 65 of the Rules of Court on
the following grounds:[12]

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS FAILURE TO
CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN AFTERTHOUGHT ON THE
PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF THE
COMPLAINANT FROM HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ADOPTING THE RULING
OF THE LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES AND BENEFITS ON THE BASIS
OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY RESPONDENT'S
EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN EVIDENCE TO PROVE PAYMENT OF
WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN FAILING TO CONSIDER
THE EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING UNFAIR LABOR PRACTICE
COMMITTED BY THE RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private
respondent's principal claims and defenses and urges this Court to set aside the public respondent's
assailed resolution.[13]
We agree.
It is settled that in termination cases the employer bears the burden of proof to show that the dismissal
is for just cause, the failure of which would mean that the dismissal is not justified and the employee is
entitled to reinstatement.[14]
In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she
failed to return to work on May 8, 1991. Additionally, in order to strengthen his contention that there
existed sufficient cause for the termination of petitioner, he belatedly included a complaint for loss of
confidence, supporting this with charges that petitioner had stolen a blanket, a bedsheet and two towels
from the hotel.[15] Appended to his last complaint was a suit for qualified theft filed with the Baguio City
prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances upon which private respondent
anchored his claim that petitioner "abandoned" her job were not enough to constitute just cause to
sanction the termination of her services under Article 283 of the Labor Code. For abandonment to arise,
there must be concurrence of two things: 1) lack of intention to work;[16] and 2) the presence of overt acts
signifying the employee's intention not to work.[17]
In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence
when she learned that the hotel management was displeased with her refusal to attest to the
affidavit. The fact that she made this attempt clearly indicates not an intention to abandon but an
intention to return to work after the period of her leave of absence, had it been granted, shall have
expired.

Furthermore, while absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a claim. The overt act
(absence) ought to unerringly point to the fact that the employee has no intention to return to
work,[18] which is patently not the case here. In fact, several days after she had been advised to take an
informal leave, petitioner tried to resume working with the hotel, to no avail. It was only after she had
been repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate against the private
respondent's claim that petitioner abandoned her job. As the Solicitor General in his manifestation
observed:
Petitioner's absence on that day should not be construed as abandonment of her job. She did not report
because the cashier told her not to report anymore, and that private respondent Ng did not want to see
her in the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify
her employment status, she again reported for work. However, she was prevented from working by
private respondents.[19]
We now come to the second cause raised by private respondent to support his contention that petitioner
was validly dismissed from her job.
Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank
check for terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if
unqualifiedly given the seal of approval by this Court, could readily reduce to barren form the words of
the constitutional guarantee of security of tenure. Having this in mind, loss of confidence should ideally
apply only to cases involving employees occupying positions of trust and confidence or to those situations
where the employee is routinely charged with the care and custody of the employer's money or
property. To the first class belong managerial employees, i.e., those vested with the powers or
prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees or effectively recommend such managerial actions; and to the second class
belong cashiers, auditors, property custodians, etc., or those who, in the normal and routine exercise of
their functions, regularly handle significant amounts of money or property. Evidently, an ordinary
chambermaid who has to sign out for linen and other hotel property from the property custodian each
day and who has to account for each and every towel or bedsheet utilized by the hotel's guests at the end
of her shift would not fall under any of these two classes of employees for which loss of confidence, if ably
supported by evidence, would normally apply.Illustrating this distinction, this Court, in Marina Port
Services, Inc. vs. NLRC,[20] has stated that:
To be sure, every employee must enjoy some degree of trust and confidence from the employer as that
is one reason why he was employed in the first place. One certainly does not employ a person he
distrusts. Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only
because he is the one who opens the office in the morning and closes it at night and in this sense is
entrusted with the care or protection of the employer's property. The keys he holds are the symbol of
that trust and confidence.
By the same token, the security guard must also be considered as enjoying the trust and confidence of his
employer, whose property he is safeguarding. Like the janitor, he has access to this property.He too, is
charged with its care and protection.

Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that
property. The employer's trust and confidence in him is limited to that ministerial function. He is not
entrusted, in the Labor Arbiter's words, 'with the duties of safekeeping and safeguarding company
policies, management instructions, and company secrets such as operation devices.' He is not privy to
these confidential matters, which are shared only in the higher echelons of management. It is the persons
on such levels who, because they discharge these sensitive duties, may be considered holding positions
of trust and confidence. The security guard does not belong in such category.[21]
More importantly, we have repeatedly held that loss of confidence should not be simulated in order to
justify what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be used
as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere
afterthought to justify an earlier action taken in bad faith."[22]
In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against
petitioner long after the latter exposed the hotel's scheme (to avoid its obligations as employer under the
Labor Code) by her act of filing illegal dismissal charges against the private respondent would hardly
warrant serious consideration of loss of confidence as a valid ground for dismissal. Notably, the Solicitor
General has himself taken a position opposite the public respondent and has observed that:
If petitioner had really committed the acts charged against her by private respondents (stealing supplies
of respondent hotel), private respondents should have confronted her before dismissing her on that
ground. Private respondents did not do so. In fact, private respondent Ng did not raise the matter when
petitioner went to see him on May 9, 1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal complaint against
petitioner, in an obvious attempt to build a case against her.
The manipulations of private respondents should not be countenanced.[23]
Clearly, the efforts to justify petitioner's dismissal - on top of the private respondent's scheme of inducing
his employees to sign an affidavit absolving him from possible violations of the Labor Code - taints with
evident bad faith and deliberate malice petitioner's summary termination from employment.
Having said this, we turn to the important question of whether or not the dismissal by the private
respondent of petitioner constitutes an unfair labor practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part of the employer is alleged is
whether or not the employer has exerted pressure, in the form of restraint, interference or coercion,
against his employee's right to institute concerted action for better terms and conditions of
employment. Without doubt, the act of compelling employees to sign an instrument indicating that the
employer observed labor standards provisions of law when he might have not, together with the act of
terminating or coercing those who refuse to cooperate with the employer's scheme constitutes unfair
labor practice. The first act clearly preempts the right of the hotel's workers to seek better terms and
conditions of employment through concerted action.
We agree with the Solicitor General's observation in his manifestation that "[t]his actuation... is analogous
to the situation envisaged in paragraph (f) of Article 248 of the Labor Code"[24]which distinctly makes it an

unfair labor practice "to dismiss, discharge or otherwise prejudice or discriminate against an employee
for having given or being about to give testimony"[25]under the Labor Code. For in not giving positive
testimony in favor of her employer, petitioner had reserved not only her right to dispute the claim and
proffer evidence in support thereof but also to work for better terms and conditions of employment.
For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as an
example to all of the hotel's employees, that they could only cause trouble to management at great
personal inconvenience. Implicit in the act of petitioner's termination and the subsequent filing of charges
against her was the warning that they would not only be deprived of their means of livelihood, but also
possibly, their personal liberty.
This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the same
are ably supported by the evidence on record. However, where such conclusions are based on a
misperception of facts or where they patently fly in the face of reason and logic, we will not hesitate to
set aside those conclusions. Going into the issue of petitioner's money claims, we find one more salient
reason in this case to set things right: the labor arbiter's evaluation of the money claims in this case
incredibly ignores existing law and jurisprudence on the matter. Its blatant one-sidedness simply raises
the suspicion that something more than the facts, the law and jurisprudence may have influenced the
decision at the level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the
monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage was
because petitioner did not factor in the meals, lodging, electric consumption and water she received
during the period in her computations.[26] Granting that meals and lodging were provided and indeed
constituted facilities, such facilities could not be deducted without the employer complying first with
certain legal requirements. Without satisfying these requirements, the employer simply cannot deduct
the value from the employee's wages. First, proof must be shown that such facilities are customarily
furnished by the trade. Second, the provision of deductible facilities must be voluntarily accepted in
writing by the employee. Finally, facilities must be charged at fair and reasonable value.[27]
These requirements were not met in the instant case. Private respondent "failed to present any company
policy or guideline to show that the meal and lodging . . . (are) part of the salary;"[28] he failed to provide
proof of the employee's written authorization; and, he failed to show how he arrived at the valuations.[29]
Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were
figures furnished by the private respondent's own accountant, without corroborative evidence. On the
pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he could have, as has been
pointed out in the Solicitor General's manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR."[30]
More significantly, the food and lodging, or the electricity and water consumed by the petitioner were
not facilities but supplements. A benefit or privilege granted to an employee for the convenience of the
employer is not a facility. The criterion in making a distinction between the two not so much lies in the
kind (food, lodging) but the purpose.[31] Considering, therefore, that hotel workers are required to work
different shifts and are expected to be available at various odd hours, their ready availability is a necessary
matter in the operations of a small hotel, such as the private respondent's hotel.

It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages equivalent
to the full wage applicable from May 13, 1988 up to the date of her illegal dismissal.
Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living
allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the
private respondent has never been able to adduce proof that petitioner was paid the aforestated benefits.
However, the claims covering the period of October 1987 up to the time of filing the case on May 13, 1988
are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money claims
arising out of employer-employee relationship to three (3) years from the time the cause of action
accrues.[32]
We depart from the settled rule that an employee who is unjustly dismissed from work normally should
be reinstated without loss of seniority rights and other privileges. Owing to the strained relations between
petitioner and private respondent, allowing the former to return to her job would only subject her to
possible harassment and future embarrassment. In the instant case, separation pay equivalent to one
month's salary for every year of continuous service with the private respondent would be proper, starting
with her job at the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik
Bustamante, et al. vs. National Labor Relations Commission,[33] petitioner is entitled to full backwages
from the time of her illegal dismissal up to the date of promulgation of this decision without qualification
or deduction.
Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be
terminated from employment with two written notices before the same may be legally effected. The first
is a written notice containing a statement of the cause(s) for dismissal; the second is a notice informing
the employee of the employer's decision to terminate him stating the basis of the dismissal. During the
process leading to the second notice, the employer must give the employee ample opportunity to be
heard and defend himself, with the assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy
that the private respondent never even bothered to inform petitioner of the charges against her. Neither
was petitioner given the opportunity to explain the loss of the articles. It was only almost two months
after petitioner had filed a complaint for illegal dismissal, as an afterthought, that the loss was reported
to the police and added as a supplemental answer to petitioner's complaint. Clearly, the dismissal of
petitioner without the benefit of notice and hearing prior to her termination violated her constitutional
right to due process. Under the circumstances, an award of One Thousand Pesos (P1,000.00) on top of
payment of the deficiency in wages and benefits for the period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated
April 24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the petitioner
are hereby summarized as follows:
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's illegal
dismissal;
2) Service incentive leave pay; night differential pay and 13th month pay for the same period;

3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the
private respondent starting with her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up to
the date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC.[34]
5) P1.000.00.
SO ORDERED.
Padilla, Bellosillo and Vitug, JJ., concur.
Hermosisima, Jr., J., on leave.

See Our Haus v. Parian, G.R. No. 204651, August 6, 2014

G.R. No. 204651

August 6, 2014

OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,

vs.
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS, BERNARD TENEDERO and
JERRY SABULAO, Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the May 7, 2012 decision2 and the
November 27, 2012 resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP No.
123273. These assailed CA rulings affirmed the July 20, 2011 decision4 and the December 2, 2011
resolution5 (NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC LAC No.
02-000489-11 (NLRC NCR Case No. 06-08544-10). The NLRC rulings in turn reversed and set
aside the December 10, 2010 decision6 of the labor arbiter (LA).
Factual Antecedents
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and Bernardo
Tenederowere all laborers working for petitioner Our Haus Realty Development Corporation (Our
Haus), a company engaged in the construction business.The respondents respective employment
records and daily wage rates from 2007 to 2010 are summarized in the table7 below:
Name

Date Hired

Years of
Service

Year and Place of Assignment

Daily
Rate

Alexander M.
Parian

October
1999

10 years

2007-2010- Quezon City

P353.50

Jay C. Erinco

January
2000

10 years

2008- Quezon City 2009- Antipolo

2010- Quezon City

P342.00

Alexander R.
Canlas

2005

5 years

2007-2010- Quezon City

P312.00

Jerry Q. Sabulao

August
1999

10 years

2008- Quezon City 2009- Antipolo

2010- Quezon City

P342.00

Bernardo N.
Tenedero

1994

16 years

2007-2010- Quezon City

P383.50

Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus
suspended some of its construction projects and asked the affected workers, including the
respondents, to take vacation leaves.8
Eventually, the respondents were asked to report back to work but instead of doing so, they filed
with the LA a complaint for underpayment of their daily wages. They claimed that except for
respondent Bernardo N. Tenedero, their wages were below the minimum rates prescribed in the
following wage orders from 2007 to 2010:
1. Wage Order No. NCR-13, which provides for a daily minimum wage rate of P362.00for the
non-agriculture sector (effective from August 28, 2007 until June 13, 2008); and
2. Wage Order No. NCR-14, which provides for a daily minimum wage rate of P382.00for the
non-agriculture sector (effective from June 14, 2008 until June 30, 2010).
The respondents also alleged thatOur Haus failed to pay them their holiday, service incentive leave
(SIL), 13th month and overtime pays.9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the respondents wages complied with the laws
minimum requirement. Aside from paying the monetary amount of the respondents wages, Our
Haus also subsidized their meals (3 times a day), and gave them free lodging near the construction
project they were assigned to.10In determining the total amount of the respondents daily wages, the
value of these benefits should be considered, in line with Article 97(f)11 of the Labor Code.
Our Haus also rejected the respondents other monetary claims for lack of proof that they were
entitled to it.12
On the other hand, the respondents argued that the value of their meals should not be considered in
determining their wages total amount since the requirements set under Section 413 of
DOLE14 Memorandum Circular No. 215 were not complied with.
The respondents pointed out that Our Haus never presented any proof that they agreed in writing to
the inclusion of their meals value in their wages.16 Also, Our Haus failed to prove that the value of
the facilities it furnished was fair and reasonable.17 Finally, instead of deducting the maximum

amount of 70% of the value of the meals, Our Haus actually withheld its full value (which was
Php290.00 per week for each employee).18
The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging
would be taken into account, the respondents daily wages would meet the minimum wage rate.19 As
to the other benefits, the LA found that the respondents were not able to substantiate their claims for
it.20
The respondents appealed the LAs decision to the NLRC, which in turn, reversed it. Citing the case
of Mayon Hotel & Restaurant v. Adana,21 the NLRC noted that the respondents did not authorize Our
Haus in writing to charge the values of their board and lodging to their wages. Thus, the samecannot
be credited.
The NLRC also ruled that the respondents are entitled to their respective proportionate 13th month
payments for the year 2010 and SIL payments for at least three years,immediately preceding May
31, 2010, the date when the respondents leftOur Haus. However, the NLRC sustained the LAs
ruling that the respondents were not entitled to overtime pay since the exact dates and times when
they rendered overtime work had not been proven.22
Our Haus moved for the reconsideration23 of the NLRCs decision and submitted new evidence (the
five kasunduans) to show that the respondents authorized Our Haus in writing to charge the values
of their meals and lodging to their wages.
The NLRC denied Our Haus motion, thus it filed a Rule 65 petition24 with the CA. In its petition, Our
Haus propounded a new theory. It made a distinction between deduction and charging. A written
authorization is only necessary if the facilitys value will be deducted and will not be needed if it will
merely be charged or included in the computation of wages.25 Our Haus claimed that it did not
actually deduct the values of the meals and housing benefits. It only considered these in computing
the total amount of wages paid to the respondents for purposes of compliance with the minimum
wage law. Hence, the written authorization requirement should not apply.
Our Haus also asserted that the respondents claim for SIL pay should be denied as this was not
included in their pro formacomplaint. Lastly, it questioned the respondentsentitlement to attorneys
fees because they were not represented by a private lawyer but by the Public Attorneys Office
(PAO).
The CAs Ruling
The CA dismissed Our Haus certiorari petition and affirmed the NLRC rulings in toto. It found no real
distinction between deduction and charging,26 and ruled that the legal requirements before any
deduction or charging can be made, apply to both. Our Haus, however, failed to prove that it
complied with any of the requirements laid down in Mabeza v. National Labor Relations
Commission.27 Accordingly, it cannot consider the values of its meal and housing facilities in the
computation of the respondents total wages.
Also, the CA ruled that since the respondents were able to allege non-payment of SIL in their
position paper, and Our Haus, in fact, opposed it in its various pleadings,28 then the NLRC properly
considered it as part of the respondents causes of action. Lastly, the CA affirmed the respondents
entitlement to attorneys fees.29
Our Haus filed a motion for reconsideration but the CA denied its motion, prompting it to file the
present petition for review on certiorari under Rule 45.

The Petition
Our Haus submits that the CA erred in ruling that the legal requirements apply without distinction
whether the facilitys value will be deducted or merely included in the computation of the wages. At
any rate, it complied with the requirements for deductibility of the value of the facilities. First, the five
kasunduans executed by the respondents constitute the written authorization for the inclusion of the
board and lodgings values to their wages. Second, Our Haus only withheld the amount of P290.00
which represents the foods raw value; the weekly cooking cost (cooks wage, LPG, water)
at P239.40 per person is a separate expense that Our Haus did not withhold from the respondents
wages.30 This disproves the respondentsclaim that it deducted the full amount of the meals value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be granted though not raised in the
complaint; and that the respondents are entitled to an award of attorneys fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They maintained that the CA did not err
inruling that the values of the board and lodging cannot be deducted from their wages for failure to
comply with the requirements set by law.33 And though the claim for SIL pay was not included in their
pro forma complaint, they raised their claims in their position paper and Our Haus had the
opportunity to contradict it in its pleadings.34
Finally, under the PAO law, the availment of the PAOs legal services does not exempt its clients
from an award of attorneys fees.35
The Courts Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition only questions of law
Basic is the rule that only questions of lawmay be raised in a Rule 45 petition.36 However, in this
case, weare confronted with mixed questions of fact and law that are subsumed under the issue of
whether Our Haus complied with the legal requirements on the deductibility of the value of facilities.
Strictly, factual issues cannot be considered under Rule 45 except in the course of resolving if the
CA correctly determined whether or not the NLRC committed grave abuse of discretion in
considering and appreciating the factual issues before it.37
In ruling for legal correctness, we have to view the CA decision in the same context that the petition
for certiorariit ruled upon was presented to it; we have to examine the CA decision from the prism of
whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC decision, on the merits of the case, was
correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. This is the approach that should
bebasic in a Rule 45 review of a CA ruling in a labor case. In question form, the question to ask in
the present case is: did the CA correctly determine that the NLRC did not commit grave abuse of
discretion in ruling on the case?38 We rule that the CA correctly did.
No substantial distinction between deducting and charging a facilitys value from the employees
wage; the legal requirements for creditability apply to both

To justify its non-compliance with the requirements for the deductibility of a facility, Our Haus asks
us to believe that there is a substantial distinction between the deduction and the charging of a
facilitys value to the wages. Our Haus explains that in deduction, the amount of the wage (which
may already be below the minimum) would still be lessened by the facilitys value, thus needing the
employees consent. On the other hand, in charging, there is no reduction of the employees wage
since the facilitys value will just be theoretically added to the wage for purposes of complying with
the minimum wage requirement.39
Our Haus argument is a vain attempt to circumvent the minimum wage law by trying to create a
distinction where none exists.
In reality, deduction and charging both operate to lessen the actual take-home pay of an employee;
they are two sides of the same coin. In both, the employee receives a lessened amount because
supposedly, the facilitys value, which is part of his wage, had already been paid to him in kind. As
there is no substantial distinction between the two, the requirements set by law must apply to both.
As the CA correctly ruled, these requirements, as summarized in Mabeza, are the following:
a. proof must be shown thatsuch facilities are customarily furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily accepted in writingby the employee;
and
c. The facilities must be charged at fair and reasonable value.40
We examine Our Haus compliance with each of these requirements in seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to show that a facility is customarily
furnished by the trade is the existence of a company policy or guideline showing that provisions for a
facility were designated as part of the employees salaries.41 To comply with this, Our Haus
presented in its motion for reconsideration with the NLRC the joint sinumpaang salaysayof four of its
alleged employees. These employees averred that they were recipients of free lodging, electricity
and water, as well as subsidized meals from Our Haus.42
We agree with the NLRCs finding that the sinumpaang salaysay statements submitted by Our Haus
are self-serving. For one, Our Haus only produced the documents when the NLRC had already
earlier determined that Our Haus failed to prove that it was traditionally giving the respondents their
board and lodging. This document did not state whether these benefits had been consistently
enjoyed by the rest of Our Haus employees. Moreover, the records reveal that the board and
lodging were given on a per project basis. Our Haus did not show if these benefits were also
provided inits other construction projects, thus negating its claimed customary nature. Even
assuming the sinumpaang salaysay to be true, this document would still work against Our Haus
case. If Our Haus really had the practice of freely giving lodging, electricity and water provisions to
its employees, then Our Haus should not deduct its values from the respondents wages. Otherwise,
this will run contrary to the affiants claim that these benefits were traditionally given free of charge.
1wphi 1

Apart from company policy, the employer may also prove compliance with the first requirement by
showing the existence of an industry-wide practice of furnishingthe benefits in question among
enterprises engaged in the same line of business. If it were customary among construction

companies to provide board and lodging to their workers and treat their values as part of their
wages, we would have more reason to conclude that these benefits were really facilities.
However, Our Haus could not really be expected to prove compliance with the first requirement
since the living accommodation of workers in the construction industry is not simply a matter of
business practice. Peculiar to the construction business are the occupational safety and health
(OSH) services which the law itself mandates employers to provide to their workers. This isto ensure
the humane working conditions of construction employees despite their constant exposure to
hazardous working environments. Under Section 16 of DOLE Department Order (DO) No. 13, series
of 1998,43 employers engaged in the construction business are required to providethe following
welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men and women workers.
[emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation
ofDOLE DO No. 13, mandates that the cost of the implementation of the requirements for the
construction safety and health of workers, shall be integrated to the overall project cost.44 The
rationale behind this isto ensure that the living accommodation of the workers is not substandard
and is strictly compliant with the DOLEs OSH criteria.
As part of the project cost that construction companies already charge to their clients, the value of
the housing of their workers cannot be charged again to their employees salaries. Our Haus cannot
pass the burden of the OSH costs of its construction projects to its employees by deducting it as
facilities. This is Our Haus obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose testset by
jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the
employers convenience, it will not be considered as a facility but a supplement.45 Here, careful
consideration is given to the nature of the employers business in relation to the work performed by
the employee. This test is used to address inequitable situations wherein employers consider a
benefit deductible from the wages even if the factual circumstances show that it clearly redounds to
the employers greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility, the purpose test
additionally recognizes that the employer and the employee do not stand at the same bargaining
positions on benefits that must or must not formpart of an employees wage. In the ultimate analysis,
the purpose test seeks to prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from the employees wages but not
the value of supplements. Facilities include articles or services for the benefit of the employee or his
family but exclude tools of the trade or articles or services primarily for the benefit of the employer or
necessary to the conduct of the employers business.47

The law also prescribes that the computation of wages shall exclude whatever benefits,
supplementsor allowances given to employees. Supplements are paid to employees on top of their
basic pay and are free of charge.48 Since it does not form part of the wage, a supplements value
may not be includedin the determination of whether an employer complied with the prescribed
minimum wage rates.
In the present case, the board and lodging provided by Our Haus cannot be categorized asfacilities
but as supplements. In SLL International Cables Specialist v. National Labor Relations
Commission,49 this Court was confronted with the issue on the proper characterization of the free
board and lodging provided by the employer. We explained:
The Court, at this point, makes a distinction between "facilities" and "supplements". It is of the view
that the food and lodging, or the electricity and water allegedly consumed by private respondents in
this case were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co., the two terms were distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or
received by the laborers overand above their ordinary earnings or wages. "Facilities", on the other
hand, are items of expense necessary for the laborer's and his family's existence and subsistence so
thatby express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the
employer are deductible therefrom, since if they are not so furnished, the laborer would spend and
pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration
above and over his basic or ordinary earning or wage is supplement; and when said benefit or
privilege is part of the laborers' basic wages, it is a facility. The distinction lies not so much in the
kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for which it is
given.In the case at bench, the items provided were given freely by SLLfor the purpose of
maintaining the efficiency and health of its workers while they were working attheir respective
projects.50
Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given
by the employer. If it is primarily for the employees gain, then the benefit is a facility; if its provision
is mainly for the employers advantage, then it is a supplement. Again, this is to ensure that
employees are protected in circumstances where the employer designates a benefit as deductible
from the wages even though it clearly works to the employers greater convenience or advantage.
Under the purpose test, substantial consideration must be given to the nature of the employers
business inrelation to the character or type of work performed by the employees involved.
Our Haus is engaged in the construction business, a laborintensive enterprise. The success of its
projects is largely a function of the physical strength, vitality and efficiency of its laborers. Its
business will be jeopardized if its workers are weak, sickly, and lack the required energy to perform
strenuous physical activities. Thus, by ensuring that the workers are adequately and well fed, the
employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the construction industry relies
heavily and directly on the physical capacity and endurance of its workers. This is not to say that
desk jobs do not require muscle strength; wesimply emphasize that in the construction business,
bulk of the work performed are strenuous physical activities.

Moreover, in the construction business, contractors are usually faced with the problem ofmeeting
target deadlines. More often than not, work is performed continuously, day and night, in order to
finish the project on the designated turn-over date. Thus, it will be more convenient to the employer if
itsworkers are housed near the construction site to ensure their ready availability during urgent or
emergency circumstances. Also, productivity issues like tardiness and unexpected absences would
be minimized. This observation strongly bears in the present case since three of the respondents are
not residents of the National Capital Region. The board and lodging provision might have been a
substantial consideration in their acceptance of employment in a place distant from their provincial
residences.
Based on these considerations, we conclude that even under the purpose test, the subsidized meals
and free lodging provided by Our Haus are actually supplements. Although they also work to benefit
the respondents, an analysis of the nature of these benefits in relation to Our Haus business shows
that they were given primarily for Our Haus greater convenience and advantage. If weighed on a
scale, the balance tilts more towards Our Haus side. Accordingly, their values cannot be considered
in computing the total amount of the respondents wages. Under the circumstances, the dailywages
paid to the respondents are clearly below the prescribed minimum wage rates in the years 20072010.
b. The provision of deductible facilities must be voluntarily accepted in writing by the employee
In Mayon Hotel, we reiterated that a facility may only be deducted from the wage if the employer was
authorized in writingby the concerned employee.51 As it diminishes the take-home pay of an
employee, the deduction must be with his express consent.
Again, in the motion for reconsideration with the NLRC, Our Haus belatedly submitted five
kasunduans, supposedly executed by the respondents, containing their conformity to the inclusion of
the values of the meals and housing to their total wages. Oddly, Our Haus only offered these
documents when the NLRC had already ruled that respondents did not accomplish any written
authorization, to allow deduction from their wages. These five kasunduans were also undated,
making us wonder if they had reallybeen executed when respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus four employees, it was not mentioned
that they also executed a kasunduanfor their board and lodging benefits. Because of these
surrounding circumstances and the suspicious timing when the five kasunduanswere submitted as
evidence, we agree withthe CA that the NLRC committed no grave abuse of discretion in
disregarding these documents for being self serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of P290.00 per week from each of the respondents
for their meals. But it now submits that it did not actually withhold the entire amount as it did not
figure in the computation the money it expended for the salary of the cook, the water, and the LPG
used for cooking, which amounts to P249.40 per week per person. From these, it appears that the
total meal expense per week for each person is P529.40,making Our Haus P290.00 deduction
within the 70% ceiling prescribed by the rules.
However, Our Haus valuation cannotbe plucked out of thin air. The valuation of a facility must
besupported by relevant documents such as receipts and company records for it to be considered as
fair and reasonable. In Mabeza, we noted:

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision
were figures furnished by the private respondent's own accountant, without corroborative
evidence.On the pretext that records prior to the July 16, 1990 earthquake were lost or destroyed,
respondent failed to produce payroll records, receipts and other relevant documents, where he could
have, as has been pointedout in the Solicitor General's manifestation, "secured certified copies
thereof from the nearest regional office of the Department of Labor, the SSS or the BIR".52 [emphasis
ours]
In the present case, Our Haus never explained how it came up with the valuesit assigned for the
benefits it provided; it merely listed its supposed expenses without any supporting document. Since
Our Haus is using these additional expenses (cooks salary, water and LPG) to support its claim that
it did not withhold the full amount of the meals value, Our Haus is burdened to present evidence to
corroborate its claim. The records however, are bereft of any evidence to support Our Haus meal
expense computation. Eventhe value it assigned for the respondents living accommodations was
not supported by any documentary evidence. Without any corroborative evidence, it cannot be said
that Our Haus complied withthis third requisite.
A claim not raised in the pro forma complaint may still beraised in the position paper.
Our Haus questions the respondents entitlement to SIL pay by pointing out that this claim was not
included in the pro forma complaint filed with the NLRC. However, we agree with the CA that such
omission does not bar the labor tribunals from touching upon this cause of action since this was
raised and discussed inthe respondents position paper. In Samar-Med Distribution v. National Labor
Relations Commission,53 we held:
Firstly, petitioners contention that the validity of Gutangs dismissal should not be determined
because it had not been included in his complaint before the NLRC is bereft of merit. The complaint
of Gutang was a mere checklist of possible causes of action that he might have against Roleda.
Such manner of preparing the complaint was obviously designed to facilitate the filing of complaints
by employees and laborers who are thereby enabled to expediently set forth their grievances in a
general manner. But the non-inclusion in the complaint of the issue on the dismissal did not
necessarily mean that the validity of the dismissal could not be an issue.The rules of the NLRC
require the submission of verified position papers by the parties should they fail to agree upon an
amicable settlement, and bar the inclusion of any cause of action not mentioned in the complaint or
position paper from the time of their submission by the parties. In view of this, Gutangs cause of
action should be ascertained not from a reading of his complaint alone but also from a consideration
and evaluation of both his complaint and position paper.54
The respondents entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the burden of proving it.Particularly in labor
cases, the burden of proving payment of monetary claims rests on the employeron the reasoning
that the pertinent personnel files, payrolls, records, remittances and other similar documents
which will show that overtime, differentials, service incentive leave and other claims of workers have
been paid are not in the possession of the worker but in the custody and absolute control of the
employer.55
Unfortunately, records will disclose the absence of any credible document which will show that
respondents had been paid their 13th month pay, holiday and SIL pays. Our Haus merely presented
a handwritten certification from its administrative officer that its employees automatically become
entitled to five days of service incentive leave as soon as they pass probation. This certification was

not even subscribed under oath. Our Haus could have at least submitted its payroll or copies of the
pay slips of respondents to show payment of these benefits. However, it failed to do so.
Respondents are entitled to attorneys fees.
Finally, we affirm that respondents are entitled to attorneys fees. Our Haus asserts that
respondents availment of free legal services from the PAO disqualifies them from such award. We
find this untenable.
It is settled that in actions for recovery of wages or where an employee was forced to litigate and,
thus, incur expenses to protect his rights and interest, the award of attorney's fees is legally and
morally justifiable.56Moreover, under the PAO Law or Republic Act No. 9406, the costs of the suit,
attorney's fees and contingent fees imposed upon the adversary of the PAO clients after a
successful litigation shall be deposited in the National Treasury as trust fund and shall be disbursed
for special allowances of authorized officials and lawyers of the PAO.57
Thus, the respondents are still entitled to attorney's fees. The attorney's fees awarded to them shall
be paid to the PAO. It serves as a token recompense to the PAO for its provision of free legal
services to litigants who have no means of hiring a private lawyer.
WHEREFORE, in light of these considerations, we conclude that the Court of Appeals correctly
found that the National Labor Relations Commission did not abuse its discretion in its decision of
July 20, 2011 and Resolution of December 2, 2011. Consequently we DENY the petition and
AFFIRM the Court of Appeals' decision dated May 7, 2012 and resolution dated November 27, 2012
in CA-G.R. SP No. 123273. No costs.
1w phi 1

SO ORDERED.
ARTURO D. BRION
Associate Justice

Wage distortion/rectification

Art. 124, Labor Code

Article 124. Standards/Criteria for minimum wage fixing. The regional minimum wages to be established
by the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum
standards of living necessary for the health, efficiency and general well-being of the employees within
the framework of the national economic and social development program. In the determination of such
regional minimum wages, the Regional Board shall, among other relevant factors, consider the
following:
The demand for living wages;
Wage adjustment vis--vis the consumer price index;
The cost of living and changes or increases therein;

The needs of workers and their families;

The need to induce industries to invest in the countryside;
Improvements in standards of living;
The prevailing wage levels;
Fair return of the capital invested and capacity to pay of employers;
Effects on employment generation and family income; and
The equitable distribution of income and wealth along the imperatives of economic and social
development.
The wages prescribed in accordance with the provisions of this Title shall be the standard prevailing
minimum wages in every region. These wages shall include wages varying with industries, provinces or
localities if in the judgment of the Regional Board, conditions make such local differentiation proper and
necessary to effectuate the purpose of this Title.
Any person, company, corporation, partnership or any other entity engaged in business shall file and
register annually with the appropriate Regional Board, Commission and the National Statistics Office, an
itemized listing of their labor component, specifying the names of their workers and employees below
the managerial level, including learners, apprentices and disabled/handicapped workers who were hired
under the terms prescribed in the employment contracts, and their corresponding salaries and wages.
Where the application of any prescribed wage increase by virtue of a law or wage order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and
the union shall negotiate to correct the distortions. Any dispute arising from wage distortions shall be
resolved through the grievance procedure under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in writing, such
dispute shall be decided by the voluntary arbitrators within ten (10) calendar days from the time said
dispute was referred to voluntary arbitration.
In cases where there are no collective agreements or recognized labor unions, the employers and
workers shall endeavor to correct such distortions. Any dispute arising therefrom shall be settled
through the National Conciliation and Mediation Board and, if it remains unresolved after ten (10)
calendar days of conciliation, shall be referred to the appropriate branch of the National Labor Relations
Commission (NLRC). It shall be mandatory for the NLRC to conduct continuous hearings and decide the
dispute within twenty (20) calendar days from the time said dispute is submitted for compulsory
arbitration.
The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of
any increase in prescribed wage rates pursuant to the provisions of law or wage order.
As used herein, a wage distortion shall mean a situation where an increase in prescribed wage rates
results in the elimination or severe contraction of intentional quantitative differences in wage or salary
rates between and among employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation.

All workers paid by result, including those who are paid on piecework, takay, pakyaw or task basis, shall
receive not less than the prescribed wage rates per eight (8) hours of work a day, or a proportion
thereof for working less than eight (8) hours.
All recognized learnership and apprenticeship agreements shall be considered automatically modified
insofar as their wage clauses are concerned to reflect the prescribed wage rates. (As amended by
Republic Act No. 6727, June 9, 1989)

Metrobank v. NLRC, G.R. No. 102636, September 10, 1993

G.R. No. 102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO
V. BALINANG,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and
TRUST COMPANY, respondents.
Gilbert P. Lorenzo for petitioners.
Marcial G. dela Fuente for private respondents.

VITUG, J.:
In this petition for certiorari, the Metropolitan Bank & Trust Company Employees Union-ALU-TUCP
(MBTCEU) and its president, Antonio V. Balinang, raise the issue of whether or not the
implementation by the Metropolitan Bank and Trust Company of Republic Act No. 6727, mandating
an increase in pay of P25 per day for certain employees in the private sector, created a distortion
that would require an adjustment under said law in the wages of the latter's other various groups of
employees.
On 25 May 1989, the bank entered into a collective bargaining agreement with the MBTCEU,
granting a monthly P900 wage increase effective 01 January 1989, P600 wage increase 01 January
1990, and P200 wage increase effective 01 January 1991. The MBTCEU had also bargained for the
inclusion of probationary employees in the list of employees who would benefit from the first P900
increase but the bank had adamantly refused to accede thereto. Consequently, only regular
employees as of 01 January 1989 were given the increase to the exclusion of probationary
employees.
Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to rationalize wage policy
determination be establishing the mechanism and proper standards thereof, . . . fixing new wage
rates, providing wage incentives for industrial dispersal to the countryside, and for other purposes,"
took effect. Its provisions, pertinent to this case, state:

Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all
workers and employees in the private sector, whether agricultural or non-agricultural,
shall be increased by twenty-five pesos (P25) per day, . . .: Provided, That those
already receiving above the minimum wage rates up to one hundred pesos(P100.00)
shall also receive an increase of twenty-five pesos (P25.00) per day, . . .
xxx xxx xxx
(d) If expressly provided for and agreed upon in the collective bargaining
agreements, all increase in the daily basic wage rates granted by the employers
three (3) months before the effectivity of this Act shall be credited as compliance with
the increases in the wage rates prescribed herein,provided that, where such
increases are less than the prescribed increases in the wage rates under this Act, the
employer shall pay the difference. Such increase shall not include anniversary wage
increases, merit wage increase and those resulting from the regularization or
promotion of employees.
Where the application of the increases in the wage rates under this Section results in
distortions as defined under existing laws in the wage structure within an
establishment and gives rise to a dispute therein, such dispute shall first be settled
voluntarily between the parties and in the event of a deadlock, the same shall be
finally resolved through compulsory arbitration by the regional branches of the
National Labor Relations Commission (NLRC) having jurisdiction over the workplace.
It shall be mandatory for the NLRC to conduct continous hearings and decide any
dispute arising under this Section within twenty (20) calendar days from the time said
dispute is formally submitted to it for arbitration. The pendency of a dispute arising
from a wage distortion shall not in any way delay the applicability of the increase in
the wage rates prescribed under this Section.
Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to its
probationary employees and to those who had been promoted to regular or permanent status before
01 July 1989 but whose daily rate was P100 and below. The bank refused to give the same increase
to its regular employees who were receiving more than P100 per day and recipients of the P900
CBA increase.
Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of the
employees into (a) the probationary employees as of 30 June 1989 and regular employees receiving
P100 or less a day who had been promoted to permanent or regular status before 01 July 1989, and
(b) the regular employees as of 01 July 1989, whose pay was over P100 a day, and that, between
the two groups, there emerged a substantially reduced salary gap, the MBTCEU sought from the
bank the correction of the alleged distortion in pay. In order to avert an impeding strike, the bank
petitioned the Secretary of Labor to assume jurisdiction over the case or to certify the same to the
National Labor Relations Commission (NLRC) under Article 263 (g) of the Labor Code. 1 The parties
ultimately agreed to refer the issue for compulsory arbitration to the NLRC.

The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05 February 1991, the
labor arbiter disregard with the bank's contention that the increase in its implementation of Republic
Act 6727 did not constitute a distortion because "only 143 employees or 6.8% of the bank's
population of a total of 2,108 regular employees" benefited. He stressed that "it is not necessary that
a big number of wage earners within a company be benefited by the mandatory increase before a
wage distortion may be considered to have taken place," it being enough, he said, that such

increase "result(s) in the severe contraction of an intentional quantitative difference in wage between
employee groups."
The labor arbiter concluded that since the "intentional quantitative difference" in wage or salary rates
between and among groups of employees is not based purely on skills or length of service but also
on "other logical bases of differentiation, a P900.00 wage gap intentionally provided in a collective
bargaining agreement as a quantitative difference in wage between those who WERE regular
employees as of January 1, 1989 and those who WERE NOT as of that date, is definitely a logical
basis of differentiation (that) deserves protection from any distorting statutory wage increase."
Otherwise, he added, "a minimum wage statute that seek to uplift the economic condition of labor
would itself destroy the mechanism of collective bargaining which, with perceived stability, has been
labor's constitutional and regular source of wage increase for so long a time now." Thus, since the
"subjective quantitative difference" between wage rates had been reduced from P900.00 to barely
P150.00, correction of the wage distortion pursuant to Section 4(c) of the Rules Implementing
Republic Act 6727 should be made.
The labor arbiter disposed of the case, thus:
WHEREFORE, premises considered, the respondent is hereby directed to restore to
complainants and their members the Nine Hundred (P900.00) Pesos CBA wage gap
they used to enjoy over non-regular employees as of January 1, 1989 by granting
them a Seven Hundred Fifty (P750.00) Pesos monthly increase effective July 1,
1989.
SO ORDERED. 2
The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division, by a vote of 2 to 1,
reversed the decision of the Labor Arbiter. Speaking, through Commissioners Rustico L. Diokno and
Domingo H. Zapanta, the NLRC said:
. . . a wage distortion can arise only in a situation where the salary structure is
characterized by intentional quantitative differences among employee groups
determined or fixed on the basis of skills, length of service, or other logical basis of
differentiation and such differences or distinction are obliterated (In Re: Labor
Dispute at the Bank of the Philippine Islands, NCMB-RB-7-11-096-89, Secretary of
Labor and Employment, February 18, 1991).
As applied in this case, We noted that in the new wage salary structure, the wage
gaps between Level 6 and 7 levels 5 and 6, and levels 6 and 7 (sic) were maintained.
While there is a noticeable decrease in the wage gap between levels 2 and 3, Levels
3 and 4, and Levels 4 and 5, the reduction in the wage gaps between said levels is
not significant as to obliterate or result in severe contraction of the intentional
quantitative differences in salary rates between the employees groups. For this
reason, the basis requirement for a wage in this case. Moreover, there is nothing in
the law which would justify an across-the-board adjustment of P750.00 as ordered by
the labor Arbiter.
WHEREFORE, premises considered, the appealed decision is hereby set aside and
a new judgment is hereby entered, dismissing the complaint for lack of merit.
SO ORDERED. 3

In her dissent, Presiding Commissioner Edna Bonto-Perez opined:

There may not be an obliteration nor elimination of said quantitative
distinction/difference aforecited but clearly there is a contraction. Would such
contraction be severe as to warrant the necessary correction sanctioned by the law
in point, RA 6727? It is may considered view that the quantitative intended distinction
in pay between the two groups of workers in respondent company was contracted by
more than fifty (50%) per cent or in particular by more or less eighty-three (83%) per
cent hence, there is no doubt that there is an evident severe contraction resulting in
the complained of wage distortion.
Nonetheless, the award of P750.00 per month to all of herein individual complainants
as ordered by the Labor Arbiter below, to my mind is not the most equitable remedy
at bar, for the same would be an across the board increase which is not the intention
of RA 6727. For that matter, herein complainants cannot by right claim for the whole
amount of P750.00 a month or P25.00 per day granted to the workers covered by the
said law in the sense that they are not covered by the said increase mandated by RA
6727. They are only entitled to the relief granted by said law by way of correction of
the pay scale in case of distortion in wages by reason thereof.
Hence, the formula offered and incorporated in Wage Order No. IV-02 issued on 21
May 1991 by the Regional Tripartite Wages and Productivity Commission for
correction of pay scale structures in case of wage distortion as in the case at bar
which is:
Minimum Wage = % x Prescribed = Distortion
Increased Adjustment
Actual Salary
would be the most equitable and fair under the circumstances obtaining in this case.
For this very reason, I register my dissent from the majority opinion and opt for the
modification of the Labor Arbiter's decision as afore-discussed. 4
The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having been denied,
the MBTCEU and its president filed the instant petition for certiorari, charging the NLRC with gave
abuse of discretion by its refusal (a) "to acknowledge the existence of a wage distortion in the wage
or salary rates between and among the employee groups of the respondent bank as a result of the
bank's partial implementation" of Republic Act 6727 and (b) to give due course to its claim for an
across-the-board P25 increase under Republic Act No. 6727.5
We agree with the Solicitor General that the petition is impressed with merit. 6
The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:
(p) Wage Distortion means a situation where an increase in prescribed wage rates
results in the elimination or severe contradiction of intentional quantitative differences
in wage or salary rates between and among employee groups in an establishment as
to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation.

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage
increase to certain employees, we agree, is, by and large, a question of fact the determination of
which is the statutory function of the NLRC. 7 Judicial review of labor cases, we may add, does not go
beyond the evaluation of the sufficiency of the evidence upon which the labor official's findings rest. 8 As
such, factual findings of the NLRC are generally accorded not only respect but also finality provided that
its decision are supported by substantial evidence and devoid of any taint of unfairness of
arbitrariness. 9 When, however, the members of the same labor tribunal are not in accord on those
aspects of a case, as in this case, this Court is well cautioned not to be as so conscious in passing upon
the sufficiency of the evidence, let alone the conclusions derived therefrom.

In this case, the majority of the members of the NLRC, as well as its dissenting member, agree that
there is a wage distortion arising from the bank's implementation of the P25 wage increase; they do
differ, however, on the extent of the distortion that can warrant the adoption of corrective measures
required by law.
The definition of "wage distortion," 10 aforequoted, shows that such distortion can so exist when, as a
result of an increase in the prescribed wage rate, an "elimination or severe contraction of intentional
quantitative differences in wage or salary rates" would occur "between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation." In mandating an adjustment, the law did not
require that there be an elimination or total abrogation of quantitative wage or salary differences; a severe
contraction thereof is enough. As has been aptly observed by Presiding Commissioner Edna Bonto-Perez
in her dissenting opinion, the contraction between personnel groupings comes close to eighty-three
(83%), which cannot, by any stretch of imagination, be considered less than severe.

The "intentional quantitative differences" in wage among employees of the bank has been set by the
CBA to about P900 per month as of 01 January 1989. It is intentional as it has been arrived at
through the collective bargaining process to which the parties are thereby concluded. 11 The Solicitor
General, in recommending the grant of due course to the petition, has correctly emphasized that the
intention of the parties, whether the benefits under a collective bargaining agreement should be equated
with those granted by law or not, unless there are compelling reasons otherwise, must prevail and be
given effect. 12

In keeping then with the intendment of the law and the agreement of the parties themselves, along
with the often repeated rule that all doubts in the interpretation and implementation of labor laws
should be resolved in favor of labor, 13 we must approximate an acceptable quantitative difference
between and among the CBA agreed work levels. We, however, do not subscribe to the labor arbiter's
exacting prescription in correcting the wage distortion. Like the majority of the members of the NLRC, we
are also of the view that giving the employees an across-the-board increase of P750 may not be
conducive to the policy of encouraging "employers to grant wage and allowance increases to their
employees higher than the minimum rates of increases prescribed by statute or administrative regulation,"
particularly in this case where both Republic Act 6727 and the CBA allow a credit for voluntary
compliance. As the Court, through Associate Justice Florentino Feliciano, also pointed out in Apex Mining
Company, Inc. v. NLRC: 14

. . . . (T)o compel employers simply to add on legislated increases in salaries or

allowances without regard to what is already being paid, would be to penalize
employers who grant their workers more than the statutorily prescribed minimum
rates of increases. Clearly, this would be counter-productive so far as securing the
interests of labor is concerned. . . .
We find the formula suggested then by Commissioner Bonto-Perez, which has also been the
standard considered by the regional Tripartite Wages and Productivity Commission for the correction

of pay scale structures in cases of wage distortion, 15 to well be the appropriate measure to balance the
respective contentions of the parties in this instance. We also view it as being just and equitable.

WHEREFORE, finding merit in the instant petition for certiorari, the same is GRANTED DUE
PROCESS, the questioned NLRC decision is hereby SET ASIDE and the decision of the labor
arbiter is REINSTATED subject to the MODIFICATION that the wage distortion in question be
corrected in accordance with the formula expressed in the dissenting opinion of Presiding
Commissioner Edna Bonto-Perez. This decision is immediately executory.
SO ORDERED.
Bidin, Romero and Melo, JJ., concur.
Feliciano, J., is on leave.

Prubankers Assoc. v. Prudential Bank, G.R. No. 131247, January 25, 1999

SYLLABI/SYNOPSIS
THIRD DIVISION
[G.R. No. 131247. January 25, 1999]
PRUBANKERS ASSOCIATION, petitioner, vs. PRUDENTIAL BANK & TRUST COMPANY, respondent.
DECISION
PANGANIBAN, J.:
Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy
without a corresponding raise for higher-tiered employees in the same region of the country, resulting
in the elimination or the severe diminution of the distinction between the two groups. Such distortion
does not arise when a wage order gives employees in one branch of a bank higher compensation than
that given to their counterparts in other regions occupying the same pay scale, who are not covered by
said wage order. In short, the implementation of wage orders in one region but not in others does not in
itself necessarily result in wage distortion.
The Case

Before us is a Petition for Review on Certiorari, challenging the November 6, 1997 Decision[1] of the
Court of Appeals in CA-GR SP No. 42525. The dispositive portion of the challenged Decision reads:
WHEREFORE, the petition is GRANTED. The assailed decision of the Voluntary Arbitration Committee
dated June 18, 1996 is hereby REVERSED and SET ASIDE for having been issued with grave abuse of
discretion tantamount to lack of or excess of jurisdiction, and a new judgment is rendered finding that
no wage distortion resulted from the petitioners separate and regional implementation of Wage Order
No. VII-03 at its Cebu, Mabolo and P. del Rosario branches.

The June 18, 1996 Decision of the Voluntary Arbitration Committee,[2] which the Court of Appeals
reversed and set aside, disposed as follows:
WHEREFORE, it is hereby ruled that the Banks separate and regional implementation of Wage Order No.
VII-03 at its Cebu, Mabolo and P. del Rosario branches created a wage distortion in the Bank nationwide
which should be resolved in accordance with Art. 124 of the Labor Code.[3]
The Facts

The facts of the case are summarized by the Court of Appeals thus:
On November 18, 1993, the Regional Tripartite Wages and Productivity Board of Region V issued Wage
Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to workers in the private
sector who ha[d] rendered service for at least three (3) months before its effectivity, and for the same
period [t]hereafter, in the following categories: SEVENTEEN PESOS AND FIFTY CENTAVOS (P17.50) in the
cities of Naga and Legaspi; FIFTEEN PESOS AND FIFTY CENTAVOS (P15.50) in the municipalities of
Tabaco, Daraga, Pili and the city of Iriga; and TEN PESOS (P10.00) for all other areas in the Bicol Region.
Subsequently on November 23, 1993, the Regional Tripartite Wages and Productivity Board of Region VII
issued Wage Order No. RB VII-03, which directed the integration of the COLA mandated pursuant to
Wage Order No. RO VII-02-A into the basic pay of all workers. It also established an increase in the
minimum wage rates for all workers and employees in the private sector as follows: by Ten Pesos
(P10.00) in the cities of Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in the municipalities of
Compostela, Liloan, Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo,
Dumaguete, Bais, Canlaon, and Tagbilaran.
The petitioner then granted a COLA of P17.50 to its employees at its Naga Branch, the only branch
covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into the basic pay of
its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches, the branches covered by
Wage Order No. RB VII-03.
On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting that the Labor
Management Committee be immediately convened to discuss and resolve the alleged wage distortion
created in the salary structure upon the implementation of the said wage orders. Respondent
Association then demanded in the Labor Management Committee meetings that the petitioner extend
the application of the wage orders to its employees outside Regions V and VII, claiming that the regional
implementation of the said orders created a wage distortion in the wage rates of petitioners employees
nationwide. As the grievance could not be settled in the said meetings, the parties agreed to submit the
matter to voluntary arbitration. The Arbitration Committee formed for that purpose was composed of
the following: public respondent Froilan M. Bacungan as Chairman, with Attys. Domingo T. Anonuevo
and Emerico O. de Guzman as members. The issue presented before the Committee was whether or not
the banks separate and regional implementation of Wage Order No. 5-03 at its Naga Branch and Wage
Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches, created a wage distortion in the bank
nationwide.
The Arbitration Committee on June 18, 1996 rendered the questioned decision.[4]
Ruling of the Court of Appeals

In ruling that there was no wage distortion, the Court of Appeals held that the variance in the salary
rates of employees in different regions of the country was justified by RA 6727. It noted that the
underlying considerations in issuing the wage orders are diverse, based on the distinctive situations and
needs existing in each region. Hence, there is no basis to apply the salary increases imposed by Wage
Order No. VII-03 to employees outside of Region VII. Furthermore, the Court of Appeals ruled that the
distinctions between each employee group in the region are maintained, as all employees were granted
an increase in minimum wage rate.[5]
The Issues

In its Memorandum, petitioner raises the following issues:[6]

I
Whether or not the Court of Appeals departed from the usual course of judicial procedure when it
disregarded the factual findings of the Voluntary Arbitration Committee as to the existence of wage
distortion.
II
Whether or not the Court of Appeals committed grave error in law when it ruled that wage distortion
exists only within a region and not nationwide.
III
Whether or not the Court of Appeals erred in implying that the term establishment as used in Article
125 of the Labor Code refers to the regional branches of the bank and not to the bank as a whole.
The main issue is whether or not a wage distortion resulted from respondents implementation of the
aforecited Wage Orders. As a preliminary matter, we shall also take up the question of forum-shopping.
The Courts Ruling

The petition is devoid of merit.[7]

Preliminary Issue: Forum-Shopping

Respondent asks for the dismissal of the petition because petitioner allegedly engaged in forumshopping. It maintains that petitioner failed to comply with Section 2 of Rule 42 of the Rules of Court,
which requires that parties must certify under oath that they have not commenced any other action
involving the same issues in the Supreme Court, the Court of Appeals, or different divisions thereof, or
any other tribunal or agency; if there is such other action or proceeding, they must state the status of
the same; and if they should thereafter learn that a similar action or proceeding has been filed or is
pending before the said courts, they should promptly inform the aforesaid courts or any other tribunal
or agency within five days therefrom. Specifically, petitioner accuses respondent of failing to inform this
Court of the pendency of NCMB-NCR-RVA-04-012-97 entitled In Re: Voluntary Arbitration between
Prudential Bank and Prubankers Association (hereafter referred to as voluntary arbitration case), an
action involving issues allegedly similar to those raised in the present controversy.

In its Reply, petitioner effectively admits that the voluntary arbitration case was already pending when it
filed the present petition. However, it claims no violation of the rule against forum-shopping, because
there is no identity of causes of action and issues between the two cases.
We sustain the respondent. The rule on forum-shopping was first included in Section 17 of the Interim
Rules and Guidelines issued by this Court on January 11, 1983, which imposed a sanction in this wise: A
violation of the rule shall constitute contempt of court and shall be a cause for the summary dismissal of
both petitions, without prejudice to the taking of appropriate action against the counsel or party
concerned. Thereafter, the Court restated the rule in Revised Circular No. 28-91 and Administrative
Circular No. 04-94. Ultimately, the rule was embodied in the 1997 amendments to the Rules of Court.
As explained by this Court in First Philippine International Bank v. Court of Appeals,[8] forumshopping exists where the elements of litis pendentia are present, and where a final judgment in one
case will amount to res judicata in the other. Thus, there is forum-shopping when, between an action
pending before this Court and another one, there exist: a) identity of parties, or at least such parties as
represent the same interests in both actions, b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts, and c) the identity of the two preceding particulars is such that
any judgement rendered in the other action, will, regardless of which party is successful amount to res
judicata in the action under consideration; said requisites also constitutive of the requisites for auter
action pendant orlis pendens.[9] Another case elucidates the consequence of forum-shopping: [W]here a
litigant sues the same party against whom another action or actions for the alleged violation of the same
right and the enforcement of the same relief is/are still pending, the defense of litis pendentia in one
case is a bar to the others; and, a final judgment in one would constitute res judicata and thus would
cause the dismissal of the rest.[10]
The voluntary arbitration case involved the issue of whether the adoption by the Bank of regionalized
hiring rates was valid and binding.
On the other hand, the issue now on hand revolves around the existence of a wage distortion arising
from the Banks separate and regional implementation of the two Wage Orders in the affected
branches. A closer look would show that, indeed, the requisites of forum-shopping are present.
First, there is identity of parties. Both cases are between the Bank and the Association, acting on behalf
of all its members. Second, although the respective issues and reliefs prayed for in the two cases are
stated differently, both actions boil down to one single issue: the validity of the Banks regionalization of
its wage structure based on RA 6727. Even if the voluntary arbitration case calls for striking down the
Banks regionalized hiring scheme while the instant petition calls for the correction of the alleged wage
distortion caused by the regional implementation of Wage Order No. VII-03, the ultimate relief prayed
for in both cases is the maintenance of the Banks national wage structure. Hence, the final disposition of
one would constitute res judicata in the other. Thus, forum-shopping is deemed to exist and, on this
basis, the summary dismissal of both actions is indeed warranted.
Nonetheless, we deem it appropriate to pass upon the main issue on its merit in view of its importance.
Main Issue: Wage Distortion

The statutory definition of wage distortion is found in Article 124 of the Labor Code, as amended by
Republic Act No. 6727, which reads:

Article 124. Standards/Criteria for Minimum Wage Fixing - xxx

As used herein, a wage distortion shall mean a situation where an increase in prescribed wage results in
the elimination or severe contraction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation.
Elaborating on this statutory definition, this Court ruled: Wage distortion presupposes a classification of
positions and ranking of these positions at various levels. One visualizes a hierarchy of positions with
corresponding ranks basically in terms of wages and other emoluments. Where a significant change
occurs at the lowest level of positions in terms of basic wage without a corresponding change in the
other level in the hierarchy of positions, negating as a result thereof the distinction between one level of
position from the next higher level, and resulting in a parity between the lowest level and the next
higher level or rank, between new entrants and old hires, there exists a wage distortion. xxx. The
concept of wage distortion assumes an existing grouping or classification of employees which
establishes distinctions among such employees on some relevant or legitimate basis. This classification is
reflected in a differing wage rate for each of the existing classes of employees[11]
Wage distortion involves four elements:
1. An existing hierarchy of positions with corresponding salary rates
2. A significant change in the salary rate of a lower pay class without a concomitant increase in the salary
rate of a higher one
3. The elimination of the distinction between the two levels
4. The existence of the distortion in the same region of the country.
In the present case, it is clear that no wage distortion resulted when respondent implemented the
subject Wage Orders in the covered branches. In the said branches, there was an increase in the salary
rates of all pay classes. Furthermore, the hierarchy of positions based on skills, length of service and
other logical bases of differentiation was preserved. In other words, the quantitative difference in
compensation between different pay classes remained the same in all branches in the affected
region. Put differently, the distinction between Pay Class 1 and Pay Class 2, for example, was not
eliminated as a result of the implementation of the two Wage Orders in the said region. Hence, it cannot
be said that there was a wage distortion.
Petitioner argues that a wage distortion exists because the implementation of the two Wage Orders has
resulted in the discrepancy in the compensation of employees of similar pay classification
indifferent regions. Hence, petitioner maintains that, as a result of the two Wage Orders, the employees
in the affected regions have higher compensation than their counterparts of the same level in other
regions.Several tables are presented by petitioner to illustrate that the employees in the regions
covered by the Wage Orders are receiving more than their counterparts in the same pay scale in other
regions.
The Court is not persuaded. A wage parity between employees in different rungs is not at issue here, but
a wage disparity between employees in the same rung but located in different regions of the country.

Contrary to petitioners postulation, a disparity in wages between employees holding similar positions
but in different regions does not constitute wage distortion as contemplated by law. As previously
enunciated, it is the hierarchy of positions and the disparity of their corresponding wages and other
emoluments that are sought to be preserved by the concept of wage distortion. Put differently, a wage
distortion arises when a wage order engenders wage parity between employees in different rungs of the
organizational ladder of the same establishment. It bears emphasis that wage distortion involves a
parity in the salary rates of different pay classes which, as a result, eliminates the distinction between
the different ranks in the same region.
Different Regional Wages Mandated by RA 6727

Petitioners claim of wage distortion must also be denied for one other reason. The difference in wages
between employees in the same pay scale in different regions is not the mischief sought to be banished
by the law. In fact, Republic Act No. 6727 (the Wage Rationalization Act), recognizes existing regional
disparities in the cost of living. Section 2 of said law provides:
SEC 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages and to
promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for
the workers and their families; to guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the countryside through industry dispersal; and to
allow business and industry reasonable returns on investment, expansion and growth.
The State shall promote collective bargaining as the primary mode of settling wages and other terms
and conditions of employment; and whenever necessary, the minimum wage rates shall be adjusted in a
fair and equitable manner, considering existing regional disparities in the cost of living and other socioeconomic factors and the national economic and social development plans.
RA 6727 also amended Article 124 of the Labor Code, thus:
Art. 124. Standards/Criteria for Minimum Wage Fixing. - The regional minimum wages to be established
by the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum
standards of living necessary for the health, efficiency and general well-being of the employees within
the frame work of the national economic and social development program. In the determination of such
regional minimum wages, the Regional Board shall, among other relevant factors, consider the
following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of employers;

(I) Effects on employment generation and family income; and

(j) The equitable distribution of income and wealth along the imperatives of social and economic
development.
From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity in wages
between employees with similar positions in different regions is necessarily expected. In insisting that
the employees of the same pay class in different regions should receive the same compensation,
petitioner has apparently misunderstood both the meaning of wage distortion and the intent of the law
to regionalize wage rates.
It must be understood that varying in each region of the country are controlling factors such as the cost
of living; supply and demand of basic goods, services and necessities; and the purchasing power of the
peso. Other considerations underscore the necessity of the law. Wages in some areas may be increased
in order to prevent migration to the National Capital Region and, hence, to decongest the
metropolis.Therefore, what the petitioner herein bewails is precisely what the law provides in order to
achieve its purpose.
Petitioner claims that it does not insist that the Regional Wage Boards created pursuant to RA 6727 do
not have the authority to issue wage orders based on the distinctive situations and needs existing in
each region. So also, xxx it does not insist that the [B]ank should not implement regional wage
orders. Neither does it seek to penalize the Bank for following Wage Order VII-03. xxx What it simply
argues is that it is wrong for the Bank to peremptorily abandon a national wage structure and replace
the same with a regionalized structure in violation of the principle of equal pay for equal work. And, it is
wrong to say that its act of abandoning its national wage structure is mandated by law.
As already discussed above, we cannot sustain this argument. Petitioner contradicts itself in not
objecting, on the one hand, to the right of the regional wage boards to impose a regionalized wage
scheme; while insisting, on the other hand, on a national wage structure for the whole Bank. To
reiterate, a uniform national wage structure is antithetical to the purpose of RA 6727.
The objective of the law also explains the wage disparity in the example cited by petitioner: Armae
Librero, though only in Pay Class 4 in Mabolo, was, as a result of the Wage Order, receiving more than
Bella Cristobal, who was already in Pay Class 5 in Subic.[12] RA 6727 recognizes that there are different
needs for the different situations in different regions of the country. The fact that a person is receiving
more in one region does not necessarily mean that he or she is better off than a person receiving less in
another region. We must consider, among others, such factors as cost of living, fulfillment of national
economic goals, and standard of living. In any event, this Court, in its decisions, merely enforces the
law. It has no power to pass upon its wisdom or propriety.
Equal Pay for Equal Work

Petitioner also avers that the implementation of the Wage Order in only one region violates the equalpay-for-equal-work principle. This is not correct. At the risk of being repetitive, we stress that RA 6727
mandates that wages in every region must be set by the particular wage board of that region, based on
the prevailing situation therein. Necessarily, the wages in different regions will not be uniform.Thus,
under RA 6727, the minimum wage in Region 1 may be different from that in Region 13, because the
socioeconomic conditions in the two regions are different.

Meaning of Establishment

Petitioner further contends that the Court of Appeals erred in interpreting the meaning of establishment
in relation to wage distortion. It quotes the RA 6727 Implementing Rules, specifically Section 13 thereof
which speaks of workers working in branches or agencies of establishments in or outside the National
Capital Region. Petitioner infers from this that the regional offices of the Bank do not themselves
constitute, but are simply branches of, the establishment which is the whole bank. In effect, petitioner
argues that wage distortion covers the pay scales even of employees in different regions, and not
onlythose of employees in the same region or branch. We disagree.
Section 13 provides that the minimum wage rates of workers working in branches or agencies of
establishments in or outside the National Capital Region shall be those applicable in the place where
they are sanctioned. The last part of the sentence was omitted by petitioner in its argument. Given the
entire phrase, it is clear that the statutory provision does not support petitioners view that
establishment includes all branches and offices in different regions.
Further negating petitioners theory is NWPC Guideline No. 1 (S. 1992) entitled Revised Guidelines on
Exemption From Compliance With the Prescribed Wage/Cost of Living Allowance Increases Granted by
the Regional Tripartite Wages and Productivity Board, which states that establishment refers to an
economic unit which engages in one or predominantly one kind of economic activity with a single fixed
location.
Management Practice

Petitioner also insists that the Bank has adopted a uniform wage policy, which has attained the status of
an established management practice; thus, it is estopped from implementing a wage order for a specific
region only. We are not persuaded. Said nationwide uniform wage policy of the Bank had been adopted
prior to the enactment of RA 6727. After the passage of said law, the Bank was mandated to regionalize
its wage structure. Although the Bank implemented Wage Order Nos. NCR-01 and NCR-02 nationwide
instead of regionally even after the effectivity of RA 6727, the Bank at the time was still uncertain about
how to follow the new law. In any event, that single instance cannot be constitutive of management
practice.
WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against petitioner.
SO ORDERED.
Romero, Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

Bankard Employees v. NLRC, G.R. No. 140689, February 17, 2004

THIRD DIVISION

[G.R. No. 140689. February 17, 2004]

BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and BANKARD, INC., respondents.
DECISION
CARPIO MORALES, J.:
The present Petition for Review on Certiorari under Rule 45 of the Rules of Court raises the issue of
whether the unilateral adoption by an employer of an upgraded salary scale that increased the hiring rates
of new employees without increasing the salary rates of old employees resulted in wage distortion within
the contemplation of Article 124 of the Labor Code.
Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level II, Level III, Level IV, and
Level V. On May 28, 1993, its Board of Directors approved a New Salary Scale, made retroactive to April
1, 1993, for the purpose of making its hiring rate competitive in the industrys labor market. The New
Salary Scale increased the hiring rates of new employees, to wit: Levels I and V by one thousand pesos
(P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00). Accordingly, the salaries of
employees who fell below the new minimum rates were also adjusted to reach such rates under their
levels.
Bankards move drew the Bankard Employees Union-WATU (petitioner), the duly certified exclusive
bargaining agent of the regular rank and file employees of Bankard, to press for the increase in the salary
of its old, regular employees.
Bankard took the position, however, that there was no obligation on the part of the management to grant
to all its employees the same increase in an across-the-board manner.
As the continued request of petitioner for increase in the wages and salaries of Bankards regular
employees remained unheeded, it filed a Notice of Strike on August 26, 1993 on the ground of
discrimination and other acts of Unfair Labor Practice (ULP).
A director of the National Conciliation and Mediation Board treated the Notice of Strike as a Preventive
Mediation Case based on a finding that the issues therein were not strikeable.
Petitioner filed another Notice of Strike on October 8, 1993 on the grounds of refusal to bargain,
discrimination, and other acts of ULP - union busting. The strike was averted, however, when the dispute
was certified by the Secretary of Labor and Employment for compulsory arbitration.
The Second Division of the NLRC, by Order of May 31, 1995, finding no wage distortion, dismissed the case
for lack of merit.
Petitioners motion for reconsideration of the dismissal of the case was, by Resolution of July 28, 1995,
denied.
Petitioner thereupon filed a petition for certiorari before this Court, docketed as G.R. 121970. In
accordance with its ruling in St. Martin Funeral Homes v. NLRC,[1] the petition was referred to the Court of
Appeals which, by October 28, 1999, denied the same for lack of merit.
Hence, the present petition which faults the appellate court as follows:

(1) It misapprehended the basic issues when it concluded that under Bankards new wage structure, the
old salary gaps between the different classification or level of employees were still reflected by the
adjusted salary rates[2]; and
(2) It erred in concluding that wage distortion does not appear to exist, which conclusion is manifestly
contrary to law and jurisprudence.[3]
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others, Article
124 of the Labor Code) on June 9, 1989, the term wage distortion was explicitly defined as:
... a situation where an increase in prescribed wage rates results in the elimination or severe contraction
of intentional quantitative differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation.[4]
Prubankers Association v. Prudential Bank and Trust Company[5] laid down the four elements of wage
distortion, to wit: (1.) An existing hierarchy of positions with corresponding salary rates; (2) A significant
change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher
one; (3) The elimination of the distinction between the two levels; and (4) The existence of the distortion
in the same region of the country.
Normally, a company has a wage structure or method of determining the wages of its employees. In a
problem dealing with wage distortion, the basic assumption is that there exists a grouping or classification
of employees that establishes distinctions among them on some relevant or legitimate bases.[6]
Involved in the classification of employees are various factors such as the degrees of responsibility, the
skills and knowledge required, the complexity of the job, or other logical basis of differentiation. The
differing wage rate for each of the existing classes of employees reflects this classification.
Petitioner maintains that for purposes of wage distortion, the classification is not one based on levels or
ranks but on two groups of employees, the newly hired and the old, in each and every level, and not
between and among the different levels or ranks in the salary structure.
Public respondent National Labor Relations Commission (NLRC) refutes petitioners position, however. It,
through the Office of the Solicitor General, essays in its Comment of April 12, 2000 as follows:
To determine the existence of wage distortion, the historical classification of the employees prior to the
wage increase must be established. Likewise, it must be shown that as between the different classification
of employees, there exists a historical gap or difference.
xxx
The classification preferred by petitioner is belied by the wage structure of private respondent as shown
in the new salary scale it adopted on May 28, 1993, retroactive to April 1, 1993, which provides, thus:
Hiring

Minimum

Maximum

Level

From

To

From

To

From

To

3,100

4,100

3,200

4,200

7,200

9,250

II

3,200

4,100

3,300

4,200

7,500

9,500

III

3,300

4,200

3,400

4,300

8,000

10,000

IV

3,500

4,400

3,600

4,500

8,500

10,500

3,700

4,700

3,800

4,800

9,000

11,000

Thus the employees of private respondent have been historically classified into levels, i.e. I to V, and not
on the basis of their length of service. Put differently, the entry of new employees to the companyipso
facto place[s] them under any of the levels mentioned in the new salary scale which private respondent
adopted retroactive [to] April 1, 1993. Petitioner cannot make a contrary classification of private
respondents employees without encroaching upon recognized management prerogative of formulating
a wage structure, in this case, one based on level.[7] (Emphasis and underscoring supplied)
The issue of whether wage distortion exists being a question of fact that is within the jurisdiction of quasijudicial tribunals,[8] and it being a basic rule that findings of facts of quasi-judicial agencies, like the NLRC,
are generally accorded not only respect but at times even finality if they are supported by substantial
evidence, as are the findings in the case at bar, they must be respected. For these agencies have acquired
expertise, their jurisdiction being confined to specific matters.[9]
It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of
Bankard, hence, the first element of wage distortion provided in Prubankers is wanting.
While seniority may be a factor in determining the wages of employees, it cannot be made the sole basis
in cases where the nature of their work differs.
Moreover, for purposes of determining the existence of wage distortion, employees cannot create their
own independent classification and use it as a basis to demand an across-the-board increase in salary.
As National Federation of Labor v. NLRC, et al.[10] teaches, the formulation of a wage structure through
the classification of employees is a matter of management judgment and discretion.
[W]hether or not a new additional scheme of classification of employees for compensation purposes
should be established by the Company (and the legitimacy or viability of the bases of distinction there
embodied) is properly a matter of management judgment and discretion, and ultimately, perhaps, a
subject matter for bargaining negotiations between employer and employees. It is assuredly something
that falls outside the concept of wage distortion.[11] (Emphasis and underscoring supplied)
As did the Court of Appeals, this Court finds that the third element provided in Prubankers is also wanting.
For, as the appellate court explained:
In trying to prove wage distortion, petitioner union presented a list of five (5) employees allegedly affected
by the said increase:
Pay of Old/
Regular Employees
A. Prior to April 1, 1993

Pay of Newly

Difference
Hired Employees

Level I

P4,518.75

P3,100

P1,418.75

P3,200

P3,042.00

P3,300

P1,550.00

P3,500

P1,839.00

P3,700

P3,390.69

P4,100

P418.75

P4,100

P2,142.00

P4,200

P650.00

P4,400

P939.00

P4,700

P2,390.69

(Sammy Guce)
Level II

P6,242.00
(Nazario Abello)

Level III

P4,850.00
(Arthur Chavez)

Level IV

P5,339.00
Melissa Cordero)

Level V

P7,090.69
(Ma. Lourdes Dee)

B. Effective April 1, 1993

Level I

P4,518.75
Sammy Guce)

Level II

P6,242.00
(Nazario Abello)

Level III

P4,850.00
(Arthur Chavez)

Level IV

P5,330.00
(Melissa Cordero)

Level V

P7,090.69
(Ma. Lourdes Dee)

Even assuming that there is a decrease in the wage gap between the pay of the old employees and the
newly hired employees, to Our mind said gap is not significant as to obliterate or result in severe
contraction of the intentional quantitative differences in the salary rates between the employee group.
As already stated, the classification under the wage structure is based on the rank of an employee, not on
seniority. For this reason, ,wage distortion does not appear to exist.[12] (Emphasis and underscoring
supplied)
Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements of wage
distortion are absent, petitioner cannot legally obligate Bankard to correct the alleged wage distortion as
the increase in the wages and salaries of the newly-hired was not due to a prescribed law or wage order.

The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds of wage
adjustments, then the language of the law should have been broad, not restrictive as it is currently
phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing.
xxx
Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and the
union shall negotiate to correct the distortions. Any dispute arising from the wage distortions shall be
resolved through the grievance procedure under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration.
x x x (Italics and emphasis supplied)
Article 124 is entitled Standards/Criteria for Minimum Wage Fixing. It is found in CHAPTER V on WAGE
STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION which principally deals with the fixing of
minimum wage. Article 124 should thus be construed and correlated in relation to minimum wage fixing,
the intention of the law being that in the event of an increase in minimum wage, the distinctions
embodied in the wage structure based on skills, length of service, or other logical bases of differentiation
will be preserved.
If the compulsory mandate under Article 124 to correct wage distortion is applied to voluntary and
unilateral increases by the employer in fixing hiring rates which is inherently a business judgment
prerogative, then the hands of the employer would be completely tied even in cases where an increase in
wages of a particular group is justified due to a re-evaluation of the high productivity of a particular group,
or as in the present case, the need to increase the competitiveness of Bankards hiring rate. An employer
would be discouraged from adjusting the salary rates of a particular group of employees for fear that it
would result to a demand by all employees for a similar increase, especially if the financial conditions of
the business cannot address an across-the-board increase.
Petitioner cites Metro Transit Organization, Inc. v. NLRC[13] to support its claim that the obligation to
rectify wage distortion is not confined to wage distortion resulting from government decreed law or wage
order.
Reliance on Metro Transit is however misplaced, as the obligation therein to rectify the wage distortion
was not by virtue of Article 124 of the Labor Code, but on account of a then existing company practice
that whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory
employees were, as a matter of practice, also paid the same amount plus an added premium. Thus this
Court held in said case:
We conclude that the supervisory employees, who then (i.e., on April 17, 1989) had, unlike the rank-andfile employees, no CBA governing the terms and conditions of their employment, had the right to rely on
the company practice of unilaterally correcting the wage distortion effects of a salary increase given to
the rank-and-file employees, by giving the supervisory employees a corresponding salary increase plus a
premium. . . .[14] (Emphasis supplied)

Wage distortion is a factual and economic condition that may be brought about by different causes.
In Metro Transit, the reduction or elimination of the normal differential between the wage rates of rankand-file and those of supervisory employees was due to the granting to the former of wage increase which
was, however, denied to the latter group of employees.
The mere factual existence of wage distortion does not, however, ipso facto result to an obligation to
rectify it, absent a law or other source of obligation which requires its rectification.
Unlike in Metro Transit then where there existed a company practice, no such management practice is
herein alleged to obligate Bankard to provide an across-the-board increase to all its regular employees.
Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust the
rates of employees affected thereby is embodied under Section 2, Article V (Salary and Cost of Living
Allowance) of the parties Collective Bargaining Agreement (CBA), to wit:
Section 2. Any salary increase granted under this Article shall be without prejudice to the right of the
Company to establish such minimum salaries as it may hereafter find appropriate for specific jobs, and to
adjust the rates of the employees thereby affected to such minimum salaries thus established.[15] (Italics
and underscoring supplied)
This CBA provision, which is based on legitimate business-judgment prerogatives of the employer, is a
valid and legally enforceable source of rights between the parties.
In fine, absent any indication that the voluntary increase of salary rates by an employer was done
arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any legitimate purpose
other than to discriminate against the regular employees, this Court will not step in to interfere with this
management prerogative. Employees are of course not precluded from negotiating with its employer and
lobby for wage increases through appropriate channels, such as through a CBA.
This Court, time and again, has shown concern and compassion to the plight of workers in adherence to
the Constitutional provisions on social justice and has always upheld the right of workers to press for
better terms and conditions of employment. It does not mean, however, that every dispute should be
decided in favor of labor, for employers correspondingly have rights under the law which need to be
respected.
WHEREFORE, the present petition is hereby DENIED.
SO ORDERED.
Vitug, (Chairman), Sandoval-Gutierrez, and Corona, JJ., concur.

Divisor to determine daily rate

Lim v. HMR Phils, G.R. No. 201483, August 4, 2014

G.R. No. 201483

August 4, 2014

CONRADO A. LIM, Petitioner,

vs.
HMR PHILIPPINES, INC., TERESA SANTOS-CASTRO, HENRY BUNAG and NELSON
CAMILLER,Respondents.
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the March 30, 20121 Decision of the Court of Appeals (CA) in CA G.R. SP No. 112708, a case
involving the computation of the back wages of an illegally dismissed employee. The Facts
On February 8, 200 I, petitioner Conrado A. Lim (Lim) filed a case for illegal dismissal and money
claims against respondents, HMR Philippines, Inc. (HMR)and its officers, Teresa G. Santos-Castro,
Henry G. Bunag and Nelson S. Camiller. The Labor Arbiter (LA) dismissedthe complaint for lack of
merit. On April 11, 2003, the National Labor Relations Commission (NLRC)in NLRC NCR No. 0200926-01, reversedthe LA and declared Lim to have been illegally dismissed. The dispositive portion
of the NLRC decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring the appealed Decision
REVERSED and SET ASIDE; that the dismissal of herein complainant-appellant was illegal and the
respondent-appellee Company is hereby ordered to reinstate immediately the said employee to his
former position without loss of seniority rights and other privileges. Furthermore, the respondentappellee Company is hereby ordered to pay the complainant-appellant his full backwages, reckoned
from his dismissal on February 3, 2001 up to the promulgation of this Decision.
All other claims are hereby DISMISSED for lack of merit.
The Computation and Research Unit (CRU) of this Commission is hereby directed to compute the
backwages and the 10% annual increase from 1998 to 2000.
SO ORDERED.2
[Emphases supplied]
Both Lim and HMR filed their respective petitions for certiorari before the CA, docketed as CA-G.R.
SP No. 80379 and CA-G.R. SP No. 80630, respectively, which were consolidated. Pending
resolution of the petitions, the CA issued the Temporary Restraining Order (TRO)enjoining the
execution of the NLRC decision.
On November 15, 2005, the CA affirmed the NLRC decision with modification as follows:
WHEREFORE, the Decision of the National Labor Relations Commission is AFFIRMED, with
MODIFICATION by awarding moral damages and exemplary damages to Conrado A. Lim in the

amount of P50,000.00 and P20,000.00, respectively, as well as attorneys fees equivalent to 10% of
the total amount due him.
SO ORDERED.3
On February 7, 2007, this Court, in G.R. No. 175950-51, dismissed the petition for certiorari4 filed by
HMR assailing the November 15, 2005 CA decision. Entry of judgment was ordered on July 27,
2007.5
On September 24, 2007, Lim moved for execution.6 On November 28, 2007, the Computation and
Research Unit (CRU) of the NLRC computed the total award to amount to P2,020,053.46,7 which
computed the backwages from February 3, 2001, the date of the illegal dismissal, up to October 31,
2007, the date ofactual reinstatement.
HMR opposed the computation arguing that the backwages should be computed until April 11, 2003
only, the date of promulgation of the NLRC decision, as stated in the dispositive portion of the NLRC
decision, which provided that backwages shall be "reckoned from his dismissal on February 3, 2001
up to the promulgation of this Decision." It also noted that the 10% annual increase was computed
from 1998 to 2007, instead of only from 1998 to 2000 as decreed.8
In his Comment, Lim argued that the body of the NLRC decision explictly stated that he was entitled
tofull backwages from the time he was illegally dismissed until his actual reinstatement, which was
also in accord with Article 279 of the Labor Codeand all prevailing jurisprudence.9 Ruling of the LA
On April 21, 2009, the LA issued the order10 granting the motion for execution filed by Lim. Holding
thatthe backwages should be reckoned until April 11, 2003 only in accordance with the NLRC
decision, the LA disposed:
Accordingly, in computing complainants backwages, the following conditions must apply: 1) that the
backwages cover the period February 3, 2001 up to April 11, 2003; 2) that the base rate applicable
is his salary as of February 3, 2001 inclusive of the ten percent adjustment due at the time,
or P12,500.00 plus ten percent (10%) or P13,750.00; 3) that the computation should include his 13th
month pay; and 4) 15 days vacation pay in accordance with the personnel policy handbook, in lieu of
5 days service incentive leave pay.
While complainant claims that he is entitled to 15 days sick leave pay, a perusal of the personnel
policy handbook on the grant of said benefit shows that sick leave pay is availed of only upon
notification of illness and conversion thereof to cash is subject to the discretion of management.
Accordingly, complainants monetary award, which is the proper subject of enforcement through a
writ of execution, in accordance with the Decision of the Commission as modified by the Court of
Appeals, is computed as follows:
A. Backwages:
2/3/01 to 4/11/03 = 26.26
P13,750.00 x 26.26

= P361,075.00

13th month pay (P366,575.00/12)

Vacation Leave (P687.50 x 15 x 26.26/12) =

B. Moral Damages

30,089.58
22,859.37 P414,023.95
50,000.00

C. Exemplary Damages

20,000.00
P484,023.95

D. Attorneys Fees

48,402.39
P532,426.34

WHEREFORE, complainants Motion for Issuance of Writ of Execution is GRANTED. A Writ of

Execution is hereby issued for the satisfaction of the judgment award rendered in this case.
SO ORDERED.11
Ruling of the NLRC
Lim filed his "Motion Ad Cautelamfor Reconsideration or Recomputation and Partial Execution of
Monetary Award," insisting that his backwages should be computed up to his actual
reinstatement.12 On August 28, 2009, the NLRC treated the motion as an appeal and sustained the
computation of the LA, explaining that the dispositive portion was clear, and that it could not alter or
amend the amount based on the final decision of the NLRC which was affirmed by both the CA and
this Court.13 Aggrieved, petitioner filed a petition for certioraribefore the CA.
Ruling of the CA
In its assailed March 30, 2012 Decision,14 the CA dismissed the petition. It emphasized that the April
11, 2003 NLRC decision had long become final and executory after it was affirmed by the Court and,
as such, it may no longer be amended or corrected. While noting that the body of the NLRC decision
stated that petitioner was entitled to backwages until his actual reinstatement, the CA ruled that
when there was a conflict between the dispositive portion and the body of the decision, the former
must prevail as the dispositive portion was the final order, and that it was the dispositive portion
which was the subject of execution. It wrote that the fallowas clear and unequivocal and could,
therefore, be given effect without going to the body of the decision or further interpretation or
construction.
The CA found that although the NLRC had recognized that petitioner was entitled to backwages until
actual reinstatement, nonetheless, it expressly limited the computation of backwages to the
promulgation date of its decision. It wrote that the issue ofwhether such limitation was lawful or
improper could no longer be ventilated due to the finality of the judgment.
Hence, the present petition.
ISSUES AND ARGUMENTS
I
Whether or not the Court of Appeals erred in peremptorily applying the doctrine laid down in
PH Credit Corporation v. Court of Appealsand contrary to law as well as the established
jurisprudence mandating the payment of backwages until the illegally dismissed employee is
actually reinstated.
II

Whether or not the Court of Appeals erred in not affirming the applicability of Eastern
Shipping Lines v. Court of Appealsin the computation of interest since the Decision on the
illegal termination case had become final and executory on June 6, 2007 inconsistent with
existing jurisprudence by its failure to include interest payments.15
Petitioner Lim argues that Article279 of the Labor Code and the prevailing jurisprudence provide that
illegally dismissed workers are entitled to an award of backwages from the timeof the illegal
dismissal until they are actually reinstated. He states that the body of the NLRC decision was explicit
in its intent to award backwages until actual reinstatement, especially when read with its fallo,which
ordered his immediate reinstatement. He further avers that it has been held that the dispositive part
of a decision must find support from the decisions ratio decidendi, because, while the opinion of the
court is not partof the judgment, it may, in case of uncertainty or ambiguity, be referred tofor the
purpose of construing the judgment, where the court may clarify by amendment even after judgment
has become final.
Lim also points out that the LA completely failed to include in the computation the unpaid 10%
annual increase in his salary from 1998 to 2000, as awarded in the falloof the NLRC decision. He
posits that the LA also failed to include the payment of other benefits, such as a 10% increase in
salary per annum, 15 days vacation leave and 15 days sick leave per annum, all as part of employee
benefitsfound in HMRs Personnel Policy.
Petitioner Lim also argues that in accordance with the rules laid down in Eastern Shipping Lines v.
Court of Appeals,16 the monetary awards should be subject to interest. He prays that the respondents
be made to pay, jointly and severally, additional moral and exemplary damages on account of their
bad faith in delaying the payment and reinstatement of the petitioner, which prompted him to file the
present petition.
Respondents Comment
In their Comment,17 the respondents argue that the August 28, 2009 NLRC Resolution had already
becomefinal and executory and could no longer be modified as the petitioner belatedly filed his
motion for reconsideration. In the same vein, they argue that the April 21, 2009 LA Order had also
become final and executory considering that the petitioners motion ad cautelam/appeal was not
seasonably filed.
The respondents insist that the "decretal portion of the NLRC decision, dated April 11, 2003 limited
the amount of petitioners backwages from February 3, 2001 and up to promulgation of such
Decision on April 11, 2003 only.18 Granting that the body of such decision controls, they aver that the
recoverable backwages cannot go beyond December 26, 2007, the date HMR offered to reinstate
Lim, who refused to be reinstated and abandoned his job. They add that it was also clearfrom the
dispositive portion that the 10% annual salary increase awarded was only for the years 1998 to
2000.
They also point out that the P12,500.00 base pay of Lim was already inclusive of holiday pay, and
that the conversion of sick leave to cash was subject to management discretion in accordance with
company policy.
They further argue that the claimsfor legal interest and additional moral and exemplary damages are
without merit because these were not awarded in the decision and they simply acted in good faith in
pursuing the legal remedies available to them.
Petitioners Reply

In his Reply,19 Lim counters that his pleadings before the NLRC and the LA were timely filed as the
notices of their respective orders had not been received by an authorized representative. As to
HMRs offer of reinstatement, the petitioner explainsthat the respondent company never responded
to his reply-letter asking for a meeting to discuss the matter of his compensation upon reinstatement.
Lim also argued that holiday pay was not shown by HMR to be included in his salary, and that it is
unjust to leave the sick leave conversion to management discretion. Specifically, the Court has to
address the following
ISSUES:
1. Whether the petitioners motion for reconsideration and motion ad cautelam/appeal were
belatedly filed?
2. Whether the computation of backwages should be reckoned until the promulgation of the
NLRC Decision on April 11, 2003 or until actual reinstatement?
3. Whether the petitioner is entitled to the unpaid 10% annual salary increase from 19982000?
4. Whether the petitioner is entitled to the 10% annual salary increase after the year 2000?
5. Whether the petitioner is entitled to holiday pay?
6. Whether the petitioner is entitled to sick leave pay?
7. Whether the respondents should beheld jointly and severally liable for additional moral
and exemplary damages?
8. Whether the interest in accordance with Eastern Shipping should be awarded?
Ruling of The Court
The petition is partly meritorious.
Preliminarily, the Court shall first dispose of the lone procedural issue. The respondents argue
thatthe August 28, 2009 NLRC Resolution was already final and executory and could no longer be
modified as the petitioner belatedly filed his motion for reconsideration thereto. In the same vein,
they aver that the April 21,2009 LA Order was also final and executory considering that petitioners
motion ad cautelam/appeal was not seasonably filed. The petitioner counters that his pleadings were
timely filed because the aforementioned NLRC Resolution and LA Order were not duly received by
an authorized representative.
It appears that the respondents raised this issue before the NLRC and the CA. The lower courts,
nonetheless, ruled on the merits of the assailed pleadings of the petitioner. The lower courts, thus,
gave credence to the petitioners argument that the notices were not received by an authorized
representative. The Court sees no reason to deviate from their findings. In any case, this issue is a
question of fact which is beyond the Courts ambit of review under Rule 45 of the Rules of Court,
considering that a resolution of the issue would require a review of the evidence presented in
connection therewith.
The Court now moves on to the substantive issues.

Backwages
It is beyond question that Lim was illegally dismissed by HMR. All that remains to be settled is the
exact amount owing to petitioner as an illegally dismissed employee.
Article 279 of the Labor Code is clear in providing that an illegally dismissed employee is entitled to
his full backwages computed from the time his compensation was withheld up to the time of his
actual reinstatement, to wit:
Art. 279. Security of tenure.In 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. [Emphases and underscoring supplied]
In accordance with this provision, the body of the April 11, 2003 NLRC decision expressly
recognizes that Lim is entitled to his full backwages until his actual reinstatement, as follows:
In fine, the act of complainant-appellant herein, do not constitute a serious misconduct as tojustify
his dismissal. As such, he is, thus, entitled to reinstatement to his former position as Assistant
Technical Manager, unless such position no longer exists, in which case, he shall be given a
substantially equivalent position without loss of seniority rights. He is, likewise, entitled to his full
backwages from the time he was illegally dismissed until his actual reinstatement.20 [Emphasis and
underscoring supplied]
Nowhere in the body of the NLRC decision was there a discussion restricting the award of
backwages. Nonetheless, the falloof the said decision limited the computation of the backwages up
to its promulgation on April 11, 2003, in this wise:
WHEREFORE, premises considered, judgment is hereby rendered declaring the appealed Decision
REVERSED and SET ASIDE; that the dismissal of herein complainant-appellant was illegal and the
respondent-appellee Company is hereby ordered to reinstate immediately the said employee to his
former position without loss of seniority rights and other privileges. Furthermore, the respondentappellee Company is hereby ordered to pay the complainant-appellant his full backwages, reckoned
from his dismissal on February 3, 2001 up to the promulgation of this Decision.
All other claims are hereby DISMISSED for lack of merit.
The Computation and Research Unit (CRU) of this Commission is hereby directed tocompute the
backwages and the 10% annual increase from 1998 to 2000.
SO ORDERED.21
[Emphasis and underscoring supplied]
Considering that the judgmentdecreeing the computation of backwages up to the promulgation of the
NLRC decision has long become final and executory, the key question is whether a recomputation of
backwages up to the date of the actual reinstatement of Lim would violate the principle of
immutability of judgments.

The rule is that it is the dispositive portion that categorically states the rights and obligations of the
parties tothe dispute as against each other. Thus, it is the dispositive portion that must be enforced
to ensure the validity of the execution. That a judgment should be implemented according to the
terms of its dispositive portion is a long and well-established rule. A companion to this rule is the
principle of immutability of final judgments. Save for recognized exceptions, a final judgment may no
longer be altered, amended or modified, even if the alteration, amendment or modification is meant
to correct what is perceived to be an erroneous conclusion of fact or law and regardless of what
court renders it. Any attempt to insert, change or add matters not clearly contemplated inthe
dispositive portion violates the rule on immutability of judgments.22
The cases of Session Delights Ice Cream and Fast Foods v. Court of Appeals (Session
Delights)23 and Nacar v. Gallery Frames (Nacar)24 shed much light on the apparent discrepancy inthe
case at hand. As in the present case, both involve labor cases findingthat the employees therein
were illegally dismissed. At the LA level,in awarding backwages, a precise computation was
provided from the time of illegal dismissal up to the promulgation of the LA decision.25 Additionally,
the dispositive portion of the LA decision in Nacaralso made a declaration that separation pay in lieu
of reinstatement be "computed only up to promulgation of this decision."26 The LA decisions in these
cases were affirmed by the NLRC and the CA and subsequently became final and executory. At the
execution stage, the computation of backwages came into issue.
Session Delights made clear that a case for illegal dismissal is one that relates to status, where the
decision or ruling is essentially declaratory of the status and of the rights, obligations and monetary
consequences that flow from the declared status, such as, the payment of separation pay and
backwages. In execution, what is primarily implemented is the declaratory finding on the status and
the rights and obligations of the parties therein; the arising monetary consequences from the
declaration only follow as component of the parties rights and obligations.27 The precise amount of
backwages should ideally be stated in the final decision; otherwise, the matter is for handling and
computation by the LA of origin as the labor official charged with the implementation of decisions
before the NLRC.28
The Courts disquisition in Session Delights, also referenced with approval in Nacar, is enlightening:
A source of misunderstanding in implementing the final decision in this case proceeds from the way
the original labor arbiter framed his decision. The decision consists essentially of two parts. The first
is that part of the decision that cannot now be disputed because it has been confirmed with finality.
This is the finding of the illegality of the dismissal and the awards of separation pay in lieu of
reinstatement, backwages, attorneys fees, and legal interests.
The secondpart is the computation of the awards made. On its face, the computation the labor
arbiter made shows that it was time-bound as can be seen from the figures used in the computation.
This part, being merely a computation of what the first part of the decision established and declared,
can, by its nature, be recomputed. This is the part, too, that the petitioner now posits should no
longer be re-computed because the computation is already in the labor arbiters decision that the CA
had affirmed. The public and private respondents, onthe other hand, posit that a recomputation is
necessary because the relief in an illegal dismissal decision goes all the way up to reinstatement if
reinstatement is to be made, or up to the finality of the decision, if separation pay is to be given in
lieu of reinstatement.
xxx
Clearly implied from this original computation is its currency up to the finality of the labor arbiters
decision. As we noted above, this implication is apparent from the terms of the computation itself,

and no question would have arisen had the parties terminated the case and implemented the
decision at that point.
However, the petitioner disagreed with the labor arbiters findings on all counts i.e., on the finding
of illegality as well as on all the consequent awards made. Hence, the petitioner appealed the case
to the NLRC which, in turn, affirmed the labor arbiters decision. By law, the NLRC decision is final,
reviewable only by the CA on jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a
timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC exceeded its authority
in affirming the payment of 13th month pay and indemnity, lapsed to finalityand was subsequently
returned to the labor arbiter of origin for execution.
It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the
original labor arbiters decision, the implementing labor arbiter ordered the award recomputed; he
apparently read the figures originally ordered to be paid to be the computation due had the case
been terminated and implemented at the labor arbiters level. Thus, the labor arbiter recomputed the
award to include the separation pay and the backwages due up to the finality of the CA decision that
fully terminated the case on the merits. Unfortunately, the labor arbiters approved computation went
beyond the finality of the CA decision (July 29, 2003) and included as well the payment for awards
the final CA decision had deleted specifically, the proportionate 13th month pay and the indemnity
awards. Hence, the CA issued the decision now questioned in the present petition.
We see no error in the CA decision confirming that a recomputation is necessary as it essentially
considered the labor arbiters original decision in accordance with its basic component parts as we
discussed above. To reiterate, the first part contains the finding of illegality and its monetary
consequences; the second part is the computation of the awards or monetary consequences of the
illegal dismissal, computed as of the time of the labor arbiters original decision.
To illustrate these points, had the case involved a pure money claim for a specific sum (e.g. salary
for a specific period) or a specific benefit (e.g. 13th month pay for a specific year) made by a former
employee, the labor arbiters computation would admittedly have continuing currency because the
sum is specific and any variation may only be on the interests that may run from the finality of the
decision ordering the payment of the specific sum.
In contrast with a ruling on a specific pure money claim, is a claim that relates to status (as in this
case, where the claim is the legality of the termination of the employment relationship). In this type of
cases, the decision or ruling is essentially declaratory of the status and of the rights, obligations and
monetary consequences that flow from the declared status (in this case, the payment of separation
pay and backwages and attorneys fees when illegal dismissal is found). When this type of decision
is executed, what is primarily implemented is the declaratory finding on the status and the rights and
obligations of the parties therein; the arising monetary consequences from the declaration only
follow as component of the parties rights and obligations.
In the present case, the CA confirmed that indeed an illegal dismissal had taken place, so that
separation pay in lieu of reinstatement and backwages should be paid. How much that separation
pay would be, would ideally be stated in the final CA decision; if not, the matter is for handling and
computation by the labor arbiter of origin as the labor official charged with the implementation of
decisions before the NLRC.
xxx

Consistent with what we discussed above, we hold that under the terms of the decision under
execution, no essential change is made by a re-computation as this step is a necessary
consequence that flows from the nature of the illegality of dismissal declared in that decision. A recomputation (or an original computation, if no previous computation has been made) is a partof the
law specifically, Article 279 of the Labor Code and the established jurisprudence on this provision
that is read into the decision. By the nature of an illegal dismissal case, the reliefs continue toadd
on until full satisfaction, as expressed under Article 279 of the Labor Code. The re-computation of
the consequences of illegal dismissal upon execution of the decision does not constitute an
alteration or amendment of the final decision being implemented. The illegal dismissal ruling stands;
only the computation of monetary consequences of this dismissal is affected and this is not a
violation of the principle of immutability of final judgments.
xxx
That the amount the petitioner shall now pay has greatly increased is a consequence that it cannot
avoid as itis the risk that it ran when it continued to seek recourses against the labor arbiters
decision.Article 279 provides for the consequences of illegal dismissal in no uncertain terms,
qualified only by jurisprudence in its interpretation of when separationpay in lieu of reinstatement is
allowed. When that happens, the finality of the illegal dismissal decision becomes the reckoning
point instead of the reinstatement that the law decrees. In allowing separation pay, the final decision
effectively declares that the employment relationship ended so that separation pay and backwages
are to be computed up to that point. x x x29
[Emphases and underscoring supplied]
Although the NLRC decision in the present case did not provide a precise computation, the
principles enunciated in Session Delightsstill equally apply. In Session Delights, the computation of
the LA was found to be time-bound, which implied the currency of the computation up to the finality
of the LA decision. In the present case, the NLRC declared backwages to be reckoned "up to the
promulgation" of its decision, which was an express declaration of the currency of the computation
up to the finality of the NLRC decision, especially considering that HMR was "ordered to reinstate
immediately" petitioner Lim. The decisions in both cases are premised on their immediate execution,
in that no question would have arisen had the parties terminated the case and the decision
implemented at that point.30
As discussed above, no essential change is being made by a recomputation because such is a
necessary consequence which flows from the nature of the illegality of the dismissal. To reiterate, a
recomputation, or an original computation, if no previous computation was made, as in the present
case, is a part of the law that is read into the decision, namely, Article 279 of the Labor Code and
established jurisprudence.31 Article 279 provides for the consequences of illegal dismissal, one of
which is the payment of full backwages until actual reinstatement, qualified only by jurisprudence
whenseparation pay in lieu of reinstatement is allowed, where the finality of the illegal dismissal
decision instead becomes the reckoning point.32
The nature of an illegal dismissal case requires that backwages continue to add on until full
satisfaction.The computation required to reflect full satisfaction does not constitute an alteration or
amendment of the final decision being implemented as the illegal dismissal ruling stands. Thus, in
the present case, a computation of backwages until actual reinstatement is not a violation of the
principle of immutability of final judgments.33
The respondents aver that the recoverable backwages cannot go beyond December 26, 2007, the
date HMR offered to reinstate Lim, who allegedly refused to be reinstated and abandoned his job.

HMR sent the petitioner a letter,34 dated December 22, 2007, directing him to report for work on
December 26,2007, with an offer of separation pay in the amount of P150,000.00 in lieu of
reinstatement which he could avail of not later than December26, 2007. Lim replied in a
letter,35 dated December 24, 2007, requesting for a meeting in January 2008, considering that his
counsel was out of the country; that the NLRC was still in the process of computing the amount of
the award which was necessary to consider the offer of separation pay; and that a writ of execution
had not yet been issued. HMR never responded to the petitioners request, and up to the present,
the latter has yet to be reinstated.
From the above, it is apparent that the petitioner cannot be deemed to have refused reinstatement or
to have abandoned his job. HMRs offer of reinstatement appeared superficial and insincere
considering that it never replied to the petitioners letter. It did not make any further attempt to
reinstate the petitioner either. The recoverable backwages, thus, continue to run, and must be
reckoned up until the petitioners actual reinstatement.
10% annual salary increase
Petitioner Lim argues that the LA completely failed to include in its computation the unpaid 10%
annual increase in his salary from 1998 to 2000, as stated in the falloof the NLRC decision, and the
10% salary increase per annumin backwages until actual reinstatement.
The pertinent portion of the falloof the NLRC decision reads:
The Computation and Research Unit (CRU) of this Commission is hereby directed tocompute the
backwages and the 10% annual increase from 1998 to 2000.36
In awarding the 10% annual salary increase from 1998 to 2000, the body of the NLRC decision
explained:
We see no reason, therefore, why complainant-appellant herein, being a regular employee, should
be deprived of what he is entitled to under Company policy. As such, he should be paid his unpaid
10% annual increase for the years 1998, 1999 and 2000.37
[Emphasis and underscoring supplied]
Lim is, thus, entitled to be paid his unpaid 10% annual salary increase for the years 1998-2000. A
reading of the assailed order of the LA would reveal that it made the following adjustment in
connection to the 10% annual salary increase:
2) that the base rate applicable is his salary as of February 3, 2003 inclusive of the ten percent
adjustment due at the time, or P12,500.00 plus ten percent (10%) or P13,750.00;38
This is incorrect on two counts. First, the LA failed to include the actual unpaid 10% annual increase
from 1998-2000. The first computation of the LA,39 as well as the suggested computation of
respondent HMR itself,40 gave the correct computation ofthe unpaid salary increase from 1998-2000,
as follows:
Year

Rate (P)

Increase

Monthly
Increase (P)

Annual
Increase (P)

1998

12,500.00

10%

1,250.00

15,000.00

1999

13,750.00

10%

1,375.00

16,500.00

2000

15,125.00

10%

1,512.50

18,150.00

Total

49,650.00

Second, based on the above, the applicable base rate for the computation of the petitioners
backwages from the time he was illegally dismissed on February 3, 2001 should be P15,125.00. Lim
cannot, however, insist that the 10% annual salary increase be applied to his backwages past the
year 2000 up to his actual reinstatement. In Equitable Banking Corporation v. Sadac,41 the Court held
that although Article 279 of the Labor Code mandates that an employees full backwages be
inclusive of allowances and other benefits, salary increases cannot be interpreted as either an
allowance or a benefit, as allowances and benefits are separate from salary, while a salary increase
is added to salary as an increment thereto.42 It was further held therein that the base figure to be
used in the computation of backwages was pegged at the wage rate at the time of the employees
dismissal, inclusive of regular allowances that the employee had been receiving such as the
emergency living allowances and the 13th month pay mandated by law. The award of salary
differentials was not allowed, the rule being that upon reinstatement, illegally dismissed employees
were to be paid their backwages without deduction and qualification as to any wage increases
orother benefits that might have been received by their co-workerswho were not dismissed.43
It must be noted that the NLRC did not err in awarding the unpaid salary increase for the years
1998-2000 as such did not constitute backwages as a consequence of the petitioners illegal
dismissal, but was earned and owing to the petitioner before he was illegally terminated.
Holiday pay
The respondents insist that the base pay of Lim is already inclusive of holiday pay. The records,
however, are insufficient to determine whether holiday pay is indeed included in the petitioners base
pay.
Under Article 94 of the Labor Code, every worker shall be paid his regular daily wage during regular
holidays. Thus, anemployee must receive his daily wage even if he does not work on a regular
holiday. The purpose of holiday pay is to prevent diminution ofthe monthly income of workers on
account of work interruptions declared by the State.44
Whether or not holiday pay is included in the monthly salary of an employee, may be gleaned from
the divisors used by the company in the computation of overtime pay and employees absences. To
illustrate, if all nonworking days are paid, the divisor ofthe monthly salary to obtain daily rate should
be 365. If nonworking days are not paid, the divisor is 251, which is a result of subtracting all
Saturdays, Sundays, and the ten legal holidays.45 Hence, if the petitioners base pay does not yet
include holiday pay, it must be added tohis monetary award.
This matter is clearly for the LA to determine being the labor official charged with the implementation
of decision46 and concomitant computations.
Sick leave pay
The LA found that that the petitioner was not entitled to have his sick leaves converted to cash
because such was subject to the discretion of management in accordance with company policy. The
pertinent provision on sick leave conversion in the Personnel Policy handbook of HMR reads:

d) Accumulated days of unused sick leave may be converted into cash, time-off or vacation
allowance at the end of the calendar year, any of these upon the discretion of the General
Manager.47
It is clear from the above that the provision does not give HMR the absolute discretion to decide
whether ornot to grant sick leave conversion. The discretion of the general manager only pertains to
what form the sick leave conversion may take, and not to whether or not sick leave conversion will
be granted at all. An HMR employee is, therefore, entitled to conversion of unused sick leave,
subject only to the general managersdiscretion as to the form it will take, namely cash,time-off, or
vacation allowance. Considering that the conversion optionsof time-off and vacation allowance are
no longer feasible because the petitioner was illegally dismissed, he is now entitled to have his
unused sick leaves converted to cash.
Additional moral and exemplary damages
Petitioner Lim prays that the respondents be made to pay, jointly and severally, additional moral and
exemplary damages on account of their bad faith in delaying the payment and his reinstatement.
There appears, however, no basis to award additional damages considering that the respondents
simply availed of the remedies available to them under the law in good faith.
Legal interest
The petitioner argues that legal interest in accordance with the case of Eastern Shippingmust also
be awarded, as follows:
1. the unpaid 10% annual increasefrom 1998 to 2000 shall earn a 6% interest annually
starting 1998 until October 23, 2003 (Entry of Judgment of the April 11, 2003 NLRC
decision); and 12% legal interest per annumthereafter until the same is fully paid; and
2. the backwages, 13th month pay as well asunpaid vacation and sick leaves shall earn a
6% per annuminterest starting at the time of petitioners illegal dismissal on February 3, 2001
until October 23, 2003; and 12% legal interest per annumthereafter until the same is fully
paid.48
The respondents counter that interest may no longer be added considering that such was not
included in the any of the courts decisions before the judgment became final and executory.
In both Session Delightsand Nacar, no interest was expressly awarded before the judgments
became final and executory, yet in both cases, the Court, nonetheless, awarded legal interest.
Session Delightsexplained that the decision had become a judgment for money from which another
consequence flowed, namely, the payment of interest in case of delay in accordance with Eastern
Shipping Lines v. Court of Appeals. It was held therein that when the judgment of the court awarding
a sum of money became final and executory, the rateof legal interest, should be 12% per
annumfrom finality until satisfaction.49
The rules on legal interest in Eastern Shippinghave, however, been recently modified by Nacar in
accordance with Bangko Sentral ng Pilipinas Monetary Board (BSP-MB) Circular No. 799, which
became effective on July 1, 2013. Pertinently, it amended the rate of legal interest in judgments from
12% to 6% per annum, with the qualification that the new rate be applied prospectively. Thus, the

12% per annumlegal interest in judgments under Eastern Shippingshall apply only until June 30,
2013, and the new rate of 6% per annumshall be applied from July 1, 2013 onwards.50
Petitioner also prays that he be awarded interest at a rate of 6% per annumon the amounts awarded
from the time they became legally due him until entry of judgment, presumably under the second
paragraph in Eastern Shipping (which was not modified by Nacar), which states:
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the courtat the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.51
[Emphasis supplied]
It is plain from the above that the interest of 6% per annumfor obligations not constituting a loan or
forbearance of money is one that may be imposed at the discretion of the court. This form of interest
is not mandatory but discretionary in nature and therefore, not necessarily owing to the petitioner in
the present case.
WHEREFORE, the petition is PARTLY GRANTED, the March 30, 2012 Decision of the Court of
Appeals, in CA-G.R. SP No. 112708 is REVERSED and SET ASIDE. Respondent HMR
Philippines, Inc. is ORDERED to PAY petitioner Conrado A. Lim:
1aw p++i1

(1) back wages computed from the time the petitioner was illegally dismissed on February 3,
2001 up to his actual reinstatement, with a monthly base pay in the amount of P15,125.00;
(2) the unpaid 10% annual salary increase from 1998-2000 in the amount of P49,650.00;
(3) 13th monthpay;
(4) vacation pay in accordance with the personnel policy handbook;
(5) the cash value of his unused sick leaves;
(6) holiday pay, provided that the Labor Arbiter finds that such is not yet included in the base
pay;
(7) moral damages in the amount of P50,000.00;
(8) exemplary damages in the amount of P20,000.00;
(9) attorney's fees equivalent to 10% of the total amount due to the petitioner; and
(10) legal interest of 12% per annum of the total monetary awards computed from July 27,
2007 to June 30, 2013, and 6% per annum from July 1, 2013 until their full satisfaction.

The Labor Arbiter is ORDERED to compute the total monetary benefits awarded and due the
petitioner in accordance with this decision.
1w phi 1

SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice

Arellano University Employees v. CA, G.R. No. 139940, September 19, 2006

THIRD DIVISION
ARELLANO UNIVERSITY EMPLOYEES AND
WORKERS UNION, CARLOS C. A. RIVAS, JR.,
SIMEON B. INOCENCIO, ROMULO D. JACOB,
NYMIA M. PINEDA, BENEDICTO I. NIETO, JR.,
LUIS JACINTO, MILBERT MORA, MONICO
CALMA,
CONSTANCIO
BAYHONAN,
BERNARDO SABLE, NESTOR BRINOSA, NANJI
MACARAMPAT, EDUARDO FLORAGUE and
DIONY S. LUMANTA,
Petitioners,

G.R. No. 139940

Present:
QUISUMBING, Chairperson,CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

-versus-

COURT OF APPEALS, NATIONAL LABOR Promulgated:

RELATIONS COMMISSION, and ARELLANO
UNIVERSITY, INC.,
Respondents.
September 19, 2006

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - x
DECISION
CARPIO MORALES, J.:
Subject of the present petition for certiorari are the Court of Appeals Resolution of April 13, 1999[1] and
Resolution of September 3, 1999[2] which dismissed petitioners petition for certiorari for having been filed
six days beyond the reglementary period under Section 4, Rule 65 of the 1997 Rules of Civil Procedure, as
amended by Supreme Court En Banc Resolution dated July 21, 1998 reading:

If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said
judgment, order or resolution, the period herein fixed shall be interrupted. If the motion is denied, the
aggrieved party may file the petition within the remaining period, but which shall not be less than five (5)
days in any event, reckoned from notice of such denial. No extension of time to file the petition shall be
granted except for the most compelling reason and in no case to exceed fifteen (15) days. (Emphasis and
underscoring supplied)

Petitioners, in the main, plead for the application of substantial justice over procedural lapses,
conformably to this Courts pronouncements in several cases, and a liberal construction of the Rules in
order to promote its objective of securing a just disposition of every action or proceeding.[3]
The record shows that the September 3, 1999 Resolution of the Court of Appeals denying petitioners
motion for reconsideration was received by them on September 13, 1999. OnSeptember 27, 1999,
petitioners filed a motion for 30-day extension of time to file petition which this Court
granted.[4] On October 28, 1999, petitioners filed the present petition for certiorari.[5] Doubtless,
petitioners could not have availed of such petition as a mere substitute for lost appeal,[6] hence, this Court
treats it as one for review under Rule 45.
Indeed, Section 4 of Rule 65 of the 1997 Rules of Civil Procedure was amended by the July 21, 1998
Resolution of this Court En Banc by adding to it as second paragraph the above-quoted amendment.
The same Section was, however, subsequently amended by this Courts En Banc Resolution in A.M. No.
00-2-03-SC which took effect on September 1, 2000 providing for a 60-day period to file petition under
Rule 65 from denial of a motion for reconsideration or new trial. As thus further amended, Section 4 of
Rule 65 now reads:
SEC. 4. When and where petition filed. The petition shall be filed not later than sixty (60) days from notice
of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed,
whether such motion is required or not, the sixty (60) day period shall be counted from notice of the
denial of said motion. (Emphasis and underscoring supplied)

The rule is settled that remedial statutes or modes of procedure, which do not create new rights or take
away vested rights but only operate in furtherance of the remedy or confirmation of rights already
existing, do not come within the purview of the general rule against the retroactive operation of
statutes. They are construed to be applicable to actions pending and undetermined at the time of their
passage, and are deemed retroactive in that sense and to that extent. Hence, in a long line of cases,[7] the
new period under Section 4 of Rule 65 was given retroactive application. Of course at the time the assailed
Resolutions of the appellate court were issued in 1999, Section 4 of Rule 65 had not yet been amended
by this Courts Resolution in A.M. No. 00-2-03-SC.
There being no reason why Section 4 of Rule 65, as amended in 2000 by this Court, may not be given
retroactive application to petitioners petition, it now gives said application.While, normally, a remand of
the case to the appellate court for further proceedings is done,[8] this Court now opts to decide the petition
on the merits to forestall further delay in its disposition.

On December 12, 1997, the Arellano University Employees and Workers Union (the Union), the exclusive
bargaining representative of about 380 rank-and-file employees of Arellano University, Inc. (the
University), filed with the National Conciliation and Mediation Board (NCMB) a Notice of Strike charging
the University with Unfair Labor Practice (ULP) as follows:
1.

Interfering in union activities;

2.

Union Busting violation of CBAs Article IV, Section 2;[9]

3. Union Busting disregarding the unions request to deduct penalties from its members who were
absent and without justifiable reasons during union meetings; and
4. Contracting Workout the management is contracting out services and functions being performed by
Union members.[10]

The Notice of Strike was docketed as NCMB-NCR-NS-12-520-97.

Subsequently or on December 17, 1997, a majority of the members of the Union filed a December 15,
1997 petition for audit[11] of union funds before the Office of the National Capital Region Director of the
Department of Labor and Employment (DOLE) against the officers of the Union.
On March 11, 1998, the Regional Director of DOLE-NCR directed the Union officers to call a general
membership meeting to, among other things, render an accounting of union funds amounting
to P481,117.28 which were remitted per the check-off statement.[12]
Also on March 11, 1998, then DOLE Secretary Cresenciano B. Trajano certified the Notice of Strike for
compulsory arbitration to the National Labor Relations Commission (NLRC) which the latter assigned to
Labor Arbiter Cristeta D. Tamayo. The Labor Arbiter set the dispute for hearing/conference on July 3,
1998, July 17, 1998, and August 11, 1998. No settlement was reached by the parties, however.[13]
On July 28, 1998, the University moved for the consolidation with the ULP charge (NCMB-NCR-NS-12-52097) the Interpleader[14] it filed against the Union and some of its members, docketed as NLRC NCR Case
No. 00-02-02036-98 and pending before Labor Arbiter Felipe T. Garduque II, and the Complaint the Union
filed for underpayment of wages arising from the change in the manner of computation of salary of
employees and non-payment of Sunday pay, docketed as NLRC NCR Case No. 00-02-01422-98 and
pending before Labor Arbiter Ramon Valentin T. Reyes, both of which involve the same parties.[15]
Before the NLRC could act on the Universitys motion for consolidation, DOLE
Secretary Bienvenido E. Laguesma, by Order[16] of August 5, 1998, certified for compulsory arbitration to
the NLRC a second Notice of Strike filed by the Union on July 16, 1998, docketed as NCMB-NCR-NS-07277-98, charging the University with the following:
a. Violation of Collective Bargaining Agreement (CBA), Art. V withholding of union and death benefits;
b. Violation of CBA, Art. VI non-granting of ten (10%) percent salary increase to some union members;
c. Illegal/unauthorized deductions in the payroll;

d. Union interference circulating letters against the union; and

e. Non-implementation of the retirement plan as approved by the BIR.[17]

A strike was in fact staged on August 5, 1998.

By the same Order of August 5, 1998, the DOLE Secretary directed the strikers to return to work within
twenty-four (24) hours. The order was served upon the Union on August 6, 1998, and the following
day, August 7, 1998, at about 3:00 p.m., the Union lifted its strike.[18]
The strike staged by the Union on August 5-7, 1998 prompted the University to file on August 24, 1998 a
petition to declare the same illegal, docketed as NLRC-NCR Case No. 00-08-06897-98, which was also
consolidated with the other cases.
Resolving the consolidated cases, the NLRC, by Decision[19] of October 12, 1998, disposed as follows:
WHEREFORE, judgment is hereby rendered declaring:
1. That the Unions two notices of strike docketed as NCMB-NCR-NS-12-520-97 and NCMB-NCR-NS-07277-98 were, to the extent as they concern the issues herein resolved, withoutmerit;
2. That as a consequence, the University is absolved from the charges of Unfair Labor
Practice contained in said notices of strike;
3. The loss of employment status of all the individual respondents in NLRC-NCR-Case No. 00-08-0689798; and
4. That there is no diminution of workers benefits in NLRC-NCR Case No. 00-02-01422-98, because
apart from the Unions failure to prove it, the University, based on existing laws, is correct in using 314
days as divisor in computing the daily wage of its daily paid employees.
SO ORDERED.[20] (Emphasis and underscoring supplied)
The NLRC found that what triggered the strike was the Unions suspicion that the petition for audit of union
funds was initiated by the University. The NLRC, citing an Order ofMarch 11, 1998 issued by the DOLE
Regional Director, found the therein petitioners to have initiated, out of their own volition, the filing of
the petition. It thus concluded that there was no factual basis to hold the University guilty of interference
in union activities.[21]
On the allegation of union busting, the NLRC ruled that the refusal of the University to deduct penalties
from the salaries of members of the Union who failed to attend meetings was based on Article IV, Section
2[22] of the CBA vis--vis Section 1[23] of the same Article which requires as condition for a
valid checkoff prior submission to the management of individual checkoff authorizations, a requirement
which was not met by the Union.[24] Besides, the NLRC held, the law mandates that the Union should not
be arbitrary, excessive or oppressive in imposing a fine.[25]

On the claim that the University had been contracting out work, the NLRC held that the same was never
raised during the conciliation meetings at the NCMB level.[26]
Respecting the second Notice of Strike, the NLRC found that only the charges of violation of the CBA for
withholding union dues and death benefits, and the non-implementation of the retirement plan, as
approved by the BIR, were left for resolution as the Union dropped the other issues raised therein after
the NCMB hearings on July 21, 1998 and July 28, 1998.[27]
Crediting the explanation of the University that its withholding of union dues and death aid benefits was
upon the written request of several union members themselves, the NLRC held that no ULP was
committed.
On the charge of non-implementation of the retirement plan by the University, the NLRC found that the
same was baseless and it was in fact not ventilated before the NCMB.[28]
In NLRC NCR Case No. 00-02-02036-98, the NLRC ruled that the University may not be held guilty of ULP
for refusal to heed the demand of the Union that salaries of its members be deducted for their failure to
attend union meetings: firstly, because the Union itself failed to meet the requirements provided for in
Sections 1 and 2, Article IV of the CBA; and secondly, an interpleader had been filed by the University for
the parties to litigate their claims before the NLRC.[29] The NLRC also ruled that the resolution calling for
such deduction was not valid as it was not even signed by the majority of Union officers and circulated to
the members.[30]
In NLRC NCR Case No. 00-08-06897-98 (the Universitys petition to declare the strike staged by the Union
on August 5-7, 1998 illegal), the NLRC granted the petition and declared the loss of employment status
of all the strikers for knowingly defying the Return-to-Work Order of the DOLE Secretary dated August 5,
1998, said Order having been served upon the union on August 6, 1998 but it was only on August 7, 1998,
at about 3:00 p.m., that the strike was lifted.[31]
In NLRC NCR Case No. 00-02-01422-98, the NLRC ruled that the University was correct in using 314 days
as divisor, instead of 365 days, in computing the equivalent daily rate[32] of pay of a worker.
The Union et al. (hereafter petitioners) filed a motion for reconsideration of the NLRC decision which was
denied by Resolution[33] of January 20, 1999. Hence, they elevated the decision to the Court of Appeals
via petition for certiorari which was, as stated early on, dismissed.
In the present petition, petitioners insist that the University violated the CBA by withholding union dues
and death benefits. The University counters that on the request of Union members in light of their gripes
against the Union and its officers, it did withhold said dues and benefits which they deposited with the
DOLE where the parties could settle the issues among themselves.
The then prevailing Rules Implementing the Labor Code, Book V[34], Rule XVIII provided that
Section 1. Right of union to collect dues. The right of the incumbent bargaining representative to check off
and to collect dues resulting therefrom shall not be affected by the pendency of a representation case or
an intra-union dispute.[35] (Emphasis supplied)

To constitute ULP, however, violations of the CBA must be gross. Gross violation of the CBA, under Article
261 of the Labor Code, means flagrant and/or malicious refusal to comply with the economic provisions
thereof. Evidently, the University can not be faulted for ULP as it in good faith merely heeded the abovesaid request of Union members.
On the NLRCs declaration of loss of employment status of the strikers, the pertinent provision of Article
264 of the Labor Code provides:
Article 264.
xxxx
Any union officer who knowingly participates in an illegal strike and any worker or union officer who
knowingly participates in the commission of illegal acts during a strike may be declared to have lost his
employment status (Emphasis and underscoring supplied)

Under the immediately quoted provision, an ordinary striking worker may not be declared to have lost his
employment status by mere participation in an illegal strike. There must be proof that he knowingly
participated in the commission of illegal acts during the strike. While the University adduced
photographs[36] showing strikers picketing outside the university premises, it failed to identify who they
were. It thus failed to meet the substantiality of evidence test[37] applicable in dismissal cases.
Petitioner-union members must thus be reinstated to their former position, without backwages. If
reinstatement is no longer possible, they should receive separation pay of One (1) Month for every year
of service in accordance with existing jurisprudence.[38]
With respect to the union officers, as already discussed, their mere participation in the illegal strike
warrants their dismissal.
As for petitioners claim of substantial diminution of their salary on account of the divisor used by the
University in its computation 314 days, instead of 365 days, this Court finds nothing wrong
therewith. Sundays being un-worked and considered unpaid rest days, while regular holidays as well as
special holidays considered as paid days,[39] the factorused by the University merely complies with the
basic rule in this jurisdiction of no work, no pay. The right to be paid for un-worked days is generally limited
to the ten legal holidays in a year.[40]
WHEREFORE, the Court of Appeals Resolution of April 13, 1999 and Resolution of September 3,
1999 are SET ASIDE.
The NLRC Decision of October 12, 1998 and Resolution of January 20, 1999 are AFFIRMED, with the
MODIFICATION that the dismissal of petitioner-union members MONICO CALMA, CONSTANCIO
BAYHONAN, BERNARDO SABLE, NESTOR BRINOSA, NANJI MACARAMPAT, EDUARDO FLORAGUE and
DIONY S. LUMANTA is SET ASIDE, and they are thus ordered REINSTATED WITHOUT BACKWAGES. If their
reinstatement is no longer possible, however, they should be given SEPARATION PAY at the rate of One
(1) Month pay for every year of service.
SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

Leyeco IV v. Employees, G.R. No. 157775, October 19, 2007

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

LEYTE IV ELECTRIC

G.R. No. 157775

COOPERATIVE, INC.,
Petitioner,

Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus -

AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

LEYECO IV Employees UnionALU,

Promulgated:

Respondent.*

October 19, 2007

x------------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Resolution[1] dated September 4, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 72336 which
dismissed outright petitioner's Petition for Certiorari for adopting a wrong mode of appeal and the CA
Resolution[2] dated February 28, 2003 which denied petitioner's Motion for Reconsideration.

The facts:
On April 6, 1998, Leyte IV Electric Cooperative, Inc. (petitioner) and Leyeco IV Employees Union-ALU
(respondent) entered into a Collective Bargaining Agreement (CBA)[3] covering petitioner rank-and-file
employees, for a period of five (5) years effective January 1, 1998.

On June 7, 2000, respondent, through its Regional Vice-President, Vicente P. Casilan, sent a letter to
petitioner demanding holiday pay for all employees, as provided for in the CBA.[4]

On June 20, 2000, petitioner, through its legal counsel, sent a letter-reply to Casilan, explaining that after
perusing all available pay slips, it found that it had paid all employees all the holiday pays enumerated in
the CBA.[5]

After exhausting the procedures of the grievance machinery, the parties agreed to submit the issues of
the interpretation and implementation of Section 2, Article VIII of the CBA on the payment of holiday pay,
for arbitration of the National Conciliation and Mediation Board (NCMB), Regional Office No. VIII
in Tacloban City.[6] The parties were required to submit their respective position papers, after which the
dispute was submitted for decision.

While admitting in its Position Paper[7] that the employees were paid all of the days of the month even if
there was no work, respondent alleged that it is not prevented from making separate demands for the
payment of regular holidays concomitant with the provisions of the CBA, with its supporting documents

consisting of a letter demanding payment of holiday pay, petitioner's reply thereto and respondent's
rejoinder, a computation in the amount of P1,054,393.07 for the unpaid legal holidays, and several pay
slips.

Petitioner, on the other hand, in its Position Paper,[8] insisted payment of the holiday pay in compliance
with the CBA provisions, stating that payment was presumed since the formula used in determining the
daily rate of pay of the covered employees is Basic Monthly Salary divided by 30 days or Basic Monthly
Salary multiplied by 12 divided by 360 days, thus with said formula, the employees are already paid their
regular and special days, the days when no work is done, the 51 un-worked Sundays and the 51 un-worked
Saturdays.

On March 1, 2001, Voluntary Arbitrator Antonio C. Lopez, Jr. rendered a Decision[9] in favor of respondent,
holding petitioner liable for payment of unpaid holidays from 1998 to 2000 in the sum
of P1,054,393.07. He reasoned that petitioner miserably failed to show that it complied with the CBA
mandate that holiday pay be reflected during any payroll period of occurrence since the payroll slips did
not reflect any payment of the paid holidays. He found unacceptable not only petitioner's presumption of
payment of holiday pay based on a formula used in determining and computing the daily rate of each
covered employee, but also petitioner's further submission that the rate of its employees is not less than
the statutory minimum wage multiplied by 365 days and divided by twelve.

On April 11, 2001, petitioner filed a Motion for Reconsideration[10] but it was denied by the Voluntary
Arbitrator in a Resolution[11] dated June 17, 2002. Petitioner received said Resolution on June 27, 2002.[12]

Thirty days later, or on July 27, 2002,[13] petitioner filed a Petition for Certiorari[14] in the CA, ascribing grave
abuse of discretion amounting to lack of jurisdiction to the Voluntary Arbitrator: (a) for ignoring that in
said company the divisor for computing the applicable daily rate of rank-and-file employees is 360 days
which already includes payment of 13 un-worked regular holidays under Section 2, Article VIII of the
CBA;[15] and (b) for holding the petitioner liable for the unpaid holidays just because the payroll slips
submitted as evidence did not show any payment for the regular holidays.[16]

In a Resolution[17] dated September 4, 2002, the CA dismissed outright petitioner's Petition

for Certiorari for adopting a wrong mode of appeal. It reasoned:

Considering that what is assailed in the present recourse is a Decision of a Voluntary Arbitrator, the proper
remedy is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure; hence, the present
petition for certiorari under Rule 65 filed on August 15, 2002, should be rejected, as such a petition cannot
be a substitute for a lost appeal. And in this case, the period for appeal via a petition for review has already

lapsed since the petitioner received a copy of the Resolution denying its motion for reconsideration
on June 27, 2002, so that its last day to appeal lapsed on July 12, 2002.

x x x x[18]

Petitioner filed a Motion for Reconsideration[19] but

Resolution[20] dated February 28, 2003.

it

was

denied by

the

CA

in

Hence, the present petition anchored on the following grounds:

(1) The Honorable Court of Appeals erred in rejecting the petition for certiorari under Rule 65 of the Rules
of Court filed by herein petitioner to assail the Decision of the Voluntary Arbitrator.[21]

(2) Even if decisions of voluntary arbitrator or panel of voluntary arbitrators are appealable to the
Honorable Court of Appeals under Rule 43, a petition for certiorari under Rule 65 is still available if it is
grounded on grave abuse of discretion. Hence, the Honorable Court of Appeals erred in rejecting the
petition for certiorari under Rule 65 of the Rules of Court filed by herein petitioner.[22]

(3) The Honorable Court of Appeals erred in refusing to rule on the legal issue presented by herein
petitioner in the petition for certiorari that it had filed and in putting emphasis instead on a technicality
of procedure. The legal issues needs a clear-cut ruling by this Honorable Court for the guidance of herein
petitioner and private respondent.[23]

Petitioner contends that Rule 65 of the Rules of Court is the applicable mode of appeal to the CA from
judgments issued by a voluntary arbitrator since Rule 43 only allows appeal from judgments of particular
quasi-judicial agencies and voluntary arbitrators authorized by law and not those judgments and orders
issued under the Labor Code; that the petition before the CA did not raise issues of fact but was founded
on jurisdictional issues and, therefore, reviewable through a special civil action for certiorari under Rule
65; that technicalities of law and procedure should not be utilized to subvert the ends of substantial
justice.

In its Comment,[24] respondent avers that Luzon Development Bank v. Association of Luzon Development
Bank Employees[25] laid down the prevailing rule that judgments of the Voluntary Arbitrator
are appealable to the CA under Section 1, Rule 43 of the Rules of Court; that having failed to file the

appropriate remedy due to the lapse of the appeal period, petitioner cannot simply invoke Rule 65 for its
own convenience, as an alternative remedy.

In its Reply,[26] petitioner submits that the ruling in Luzon Development Bank does not expressly exclude
the filing of a petition for certiorari under Rule 65 of the Rules of Court to assail a decision of a voluntary
arbitrator. It reiterates that technicalities of law and procedure should not be utilized to subvert the ends
of substantial justice.

It has long been settled in the landmark case Luzon Development Bank that a voluntary arbitrator,
whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency; hence, his decisions
and awards are appealable to the CA. This is so because the awards of voluntary arbitrators become final
and executory upon the lapse of the period to appeal;[27] and since their awards determine the rights of
parties, their decisions have the same effect as judgments of a court. Therefore, the proper remedy from
an award of a voluntary arbitrator is a petition for review to the CA, following Revised Administrative
Circular No. 1-95, which provided for a uniform procedure for appellate review of all adjudications of
quasi-judicial entities, which is now embodied in Section 1, Rule 43 of the 1997 Rules of Civil Procedure,
which reads:

SECTION 1. Scope. This Rule shall apply to appeals from judgments or final orders of the Court of Tax
Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial
agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service
Commission, Central Board of Assessment Appeals, Securities and Exchange Commission, Office of the
President, Land Registration Authority, Social Security Commission, Civil Aeronautics Board, Bureau of
Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory
Board, National Telecommunications Commission, Department of Agrarian Reform under Republic Act
No. 6657, Government Service Insurance System, Employees Compensation Commission, Agricultural
Inventions Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments,
Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law.[28] (Emphasis
supplied)
Section 2, Rule 43 of the 1997 Rules of Civil Procedure which provides that:

SEC. 2. Cases not covered. - This Rule shall not apply to judgments or final orders issued under the Labor
Code of the Philippines.

did not alter the Court's ruling in Luzon Development Bank. Section 2, Rule 42 of the 1997 Rules of Civil
Procedure, is nothing more than a reiteration of the exception to the exclusive appellate jurisdiction of
the CA,[29] as provided for in Section 9, Batas Pambansa Blg. 129,[30] as amended by Republic Act No.
7902:[31]

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the
Securities and Exchange Commission, the Employees Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance
with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4)
of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

The Court took into account this exception in Luzon Development Bank but, nevertheless, held that the
decisions of voluntary arbitrators issued pursuant to the Labor Code do not come within its ambit, thus:

x x x. The fact that [the voluntary arbitrators] functions and powers are provided for in the Labor Code
does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as
contemplated therein. It will be noted that, although the Employees Compensation Commission is also
provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised
Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisions to the Court
of Appeals under the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in
amending Sec. 9 of B.P. 129.

A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise
be appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative
Circular No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated
therein.

This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide
a uniform procedure for the appellate review of adjudications of all quasi-judicial entities not
expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute.
Nor will it run counter to the legislative intendment that decisions of the NLRC be reviewable directly by
the Supreme Court since, precisely, the cases within the adjudicative competence of the voluntary
arbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter.[32]

This ruling has been repeatedly reiterated in subsequent cases[33] and continues to be the controlling
doctrine. Thus, the general rule is that the proper remedy from decisions of voluntary arbitrators is a
petition for review under Rule 43 of the Rules of Court.

Nonetheless, a special civil action for certiorari under Rule 65 of the Rules of Court is the proper remedy
for one who complains that the tribunal, board or officer exercising judicial or quasi-judicial
functions acted in total disregard of evidence material to or decisive of the controversy.[34] As this Court
elucidated in Garcia v. NationalLabor Relations Commission[35] -

[I]n Ong v. People, we ruled that certiorari can be properly resorted to where the factual findings
complained of are not supported by the evidence on record. Earlier, in Gutib v. Court of Appeals, we
emphasized thus:

[I]t has been said that a wide breadth of discretion is granted a court of justice
in certiorari proceedings. The cases in which certiorari will issue cannot be defined, because to do so
would be to destroy its comprehensiveness and usefulness. So wide is the discretion of the court that
authority is not wanting to show that certiorari is more discretionary than either prohibition or
mandamus. In the exercise of our superintending control over inferior courts, we are to be guided by all
the circumstances of each particular case as the ends of justice may require. So it is that the writ will be
granted where necessary to prevent a substantial wrong or to do substantial justice. [36]

In addition, while the settled rule is that an independent action for certiorari may be availed of only when
there is no appeal or any plain, speedy and adequate remedy in the ordinary course of
law[37] and certiorari is not a substitute for the lapsed remedy of appeal,[38] there are a few significant
exceptions when the extraordinary remedy ofcertiorari may be resorted to despite the availability of an
appeal, namely: (a) when public welfare and the advancement of public policy dictate; (b) when the
broader interests of justice so require; (c) when the writs issued are null; and (d) when the questioned
order amounts to an oppressive exercise of judicial authority.[39]

In this case, while the petition was filed on July 27, 2002,[40] 15 days after July 12, 2002, the expiration of
the 15-day reglementary period for filing an appeal under Rule 43, the broader interests of justice warrant
relaxation of the rules on procedure. Besides, petitioner alleges that the Voluntary Arbitrators conclusions
have no basis in fact and in law; hence, the petition should not be dismissed on procedural grounds.

The Voluntary Arbitrator gravely abused its discretion in giving a strict or literal interpretation of the CBA
provisions that the holiday pay be reflected in the payroll slips. Such literal interpretation ignores the
admission of respondent in its Position Paper[41] that the employees were paid all the days of the month
even if not worked. In light of such admission, petitioner's submission of its 360 divisor in the computation
of employees salaries gains significance.

In Union of Filipro Employees v. Vivar, Jr.[42] the Court held that [t]he divisor assumes an important role in
determining whether or not holiday pay is already included in the monthly paid employees salary and in

the computation of his daily rate. This ruling was applied in Wellington Investment and Manufacturing
Corporation v. Trajano,[43]Producers Bank of the Philippines v. National Labor Relations
Commission[44] and Odango v. National Labor Relations Commission,[45] among others.[46]

In Wellington,[47] the monthly salary was fixed by Wellington to provide for compensation for every
working day of the year including the holidays specified by law and excluding only Sundays. In fixing the
salary, Wellington used what it called the 314 factor; that is, it simply deducted 51 Sundays from the 365
days normally comprising a year and used the difference, 314, as basis for determining the monthly
salary. The monthly salary thus fixed actually covered payment for 314 days of the year, including regular
and special holidays, as well as days when no work was done by reason of fortuitous cause, such as
transportation strike, riot, or typhoon or other natural calamity, or cause not attributable to the
employees.

In Producers Bank,[48] the employer used the divisor 314 in arriving at the daily wage rate of monthly
salaried employees. The divisor 314 was arrived at by subtracting all Sundays from the total number of
calendar days in a year, since Saturdays are considered paid rest days. The Court held that the use of 314
as a divisor leads to the inevitable conclusion that the ten legal holidays are already included therein.

In Odango v. National Labor Relations Commission,[49] the Court ruled that the use of a divisor that was
less than 365 days cannot make the employer automatically liable for underpayment of holiday pay. In
said case, the employees were required to work only from Monday to Friday and half of Saturday. Thus,
the minimum allowable divisor is 287, which is the result of 365 days, less 52 Sundays and less 26
Saturdays (or 52 half Saturdays). Any divisor below 287 days meant that the employees were deprived of
their holiday pay for some or all of the ten legal holidays. The 304-day divisor used by the employer was
clearly above the minimum of 287 days.

In this case, the employees are required to work only from Monday to Friday. Thus, the minimum
allowable divisor is 263, which is arrived at by deducting 51 un-worked Sundays and 51 un-worked
Saturdays from 365 days. Considering that petitioner used the 360-day divisor, which is clearly above the
minimum, indubitably, petitioner's employees are being given their holiday pay.

Thus, the Voluntary Arbitrator should not have simply brushed aside petitioner's divisor formula. In
granting respondent's claim of non-payment of holiday pay, a double burden was imposed upon
petitioner because it was being made to pay twice for its employees' holiday pay when payment thereof
had already been included in the computation of their monthly salaries. Moreover, it is absurd to grant
respondent's claim of non-payment when they in fact admitted that they were being paid all of the days
of the month even if not worked. By granting respondent's claim, the Voluntary Arbitrator
sanctioned unjust enrichment in favor of the respondent and caused unjust financial burden to the
petitioner. Obviously, the Court cannot allow this.

While the Constitution is committed to the policy of social justice[50] and the protection of the working
class,[51] it should not be supposed that every labor dispute would automatically be decided in favor of
labor. Management also has it own rights which, as such, are entitled to respect and enforcement in the
interest of simple fair play. Out of concern for those with less privileges in life, this Court has inclined more
often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism,
however, has not blinded us to the rule that justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and doctrine.[52]

WHEREFORE, the petition for review is GRANTED. The Resolutions dated September 4,
2002 and February 28, 2003 of the Court of Appeals in CA-G.R. SP No. 72336 areREVERSED and SET
ASIDE. The Decision dated March 1, 2001 and Resolution dated June 17, 2002 of the Voluntary Arbitrator
are declared NULL and VOID.

SO ORDERED.

Rest Periods
Weekly rest day

Art. 91, Labor Code

Article 91. Right to weekly rest day.
It shall be the duty of every employer, whether operating for profit or not, to provide each of his
employees a rest period of not less than twenty-four (24) consecutive hours after every six (6)
consecutive normal work days.
The employer shall determine and schedule the weekly rest day of his employees subject to collective
bargaining agreement and to such rules and regulations as the Secretary of Labor and Employment may
provide. However, the employer shall respect the preference of employees as to their weekly rest day
when such preference is based on religious grounds.

Book III, Rule III, Implementing Rules (Labor Code)

RULE III
Weekly Rest Periods
SECTION 1. General statement on coverage. This Rule shall apply to all employers whether operating
for profit or not, including public utilities operated by private persons.

SECTION 2. Business on Sundays/Holidays. All establishments and enterprises may operate or open
for business on Sundays and holidays provided that the employees are given the weekly rest day and the
benefits as provided in this Rule.
SECTION 3. Weekly rest day. Every employer shall give his employees a rest period of not less than twenty-four
(24) consecutive hours after every six consecutive normal work days.

SECTION 4. Preference of employee. The preference of the employee as to his weekly day of rest shall
be respected by the employer if the same is based on religious grounds. The employee shall make
known his preference to the employer in writing at least seven (7) days before the desired effectivity of
the initial rest day so preferred. Where, however, the choice of the employee as to his rest day based on
religious grounds will inevitably result in serious prejudice or obstruction to the operations of the
undertaking and the employer cannot normally be expected to resort to other remedial measures, the
employer may so schedule the weekly rest day of his choice for at least two (2) days in a month.
SECTION 5. Schedule of rest day. (a) Where the weekly rest is given to all employees simultaneously,
the employer shall make known such rest period by means of a written notice posted conspicuously in
the work place at least one week before it becomes effective. (b) Where the rest period is not granted
to all employees simultaneously and collectively, the employer shall make known to the employees their
respective schedules of weekly rest through written notices posted conspicuously in the work place at
least one week before they become effective.
SECTION 6. When work on rest day authorized. An employer may require any of his employees to
work on his scheduled rest day for the duration of the following emergencies and exceptional
conditions:
(a) In case of actual or impending emergencies caused by serious accident, fire, flood, typhoon,
earthquake, epidemic or other disaster or calamity, to prevent loss of life or property, or in cases of
force majeure or imminent danger to public safety;
(b) In case of urgent work to be performed on machineries, equipment or installations to avoid serious
loss which the employer would otherwise suffer;
(c) In the event of abnormal pressure of work due to special circumstances, where the employer cannot
ordinarily be expected to resort to other measures;
(d) To prevent serious loss of perishable goods;
(e) Where the nature of the work is such that the employees have to work continuously for seven (7)
days in a week or more, as in the case of the crew members of a vessel to complete a voyage and in
other similar cases; and
(f) When the work is necessary to avail of favorable weather or environmental conditions where
performance or quality of work is dependent thereon. No employee shall be required against his will to
work on his scheduled rest day except under circumstances provided in this Section: Provided, However,
that where an employee volunteers to work on his rest day under other circumstances, he shall express
such desire in writing, subject to the provisions of Section 7 hereof regarding additional compensation.

SECTION 7. Compensation on rest day/Sunday/holiday.

(a) Except those employees referred to under Section 2, Rule I, Book Three, an employee who is made or
permitted to work on his scheduled rest day shall be paid with an additional compensation of at least
30% of his regular wage. An employee shall be entitled to such additional compensation for work
performed on a Sunday only when it is his established rest day.
(b) Where the nature of the work of the employee is such that he has no regular work days and no
regular rest days can be scheduled, he shall be paid an additional compensation of at least 30% of his
regular wage for work performed on Sundays and holidays.
(c) Work performed on any special holiday shall be paid with an additional compensation of at least 30%
of the regular wage of the employees. Where such holiday work falls on the employee's scheduled rest
day, he shall be entitled to additional compensation of at least 50% of his regular wage.
(d) The payment of additional compensation for work performed on regular holiday shall be governed
by Rule IV, Book Three, of these regulations. (e) Where the collective bargaining agreement or other
applicable employment contract stipulates the payment of a higher premium pay than that prescribed
under this Section, the employer shall pay such higher rate.
SECTION 8. Paid-off days. Nothing in this Rule shall justify an employer in reducing the compensation
of his employees for the unworked Sundays, holidays, or other rest days which are considered paid-off
days or holidays by agreement or practice subsisting upon the effectivity of the Code.
SECTION 9. Relation to agreements. Nothing herein shall prevent the employer and his employees or
their representatives in entering into any agreement with terms more favorable to the employees than
those provided herein, or be used to diminish any benefit granted to the employees under existing laws,
agreements, and voluntary employer practices.

Emergency rest day

Art. 92, Labor Code

Article 92. When employer may require work on a rest day. The employer may require his employees to
work on any day:
In case of actual or impending emergencies caused by serious accident, fire, flood, typhoon, earthquake,
epidemic or other disaster or calamity to prevent loss of life and property, or imminent danger to public
safety;
In cases of urgent work to be performed on the machinery, equipment, or installation, to avoid serious
loss which the employer would otherwise suffer;
In the event of abnormal pressure of work due to special circumstances, where the employer cannot
ordinarily be expected to resort to other measures;
To prevent loss or damage to perishable goods;
Where the nature of the work requires continuous operations and the stoppage of work may result in
irreparable injury or loss to the employer; and

Under other circumstances analogous or similar to the foregoing as determined by the Secretary of
Labor and Employment.

Book III, Rule III, Implementing Rules (Labor Code)

SECTION 6. When work on rest day authorized. An employer may require any of his employees to
work on his scheduled rest day for the duration of the following emergencies and exceptional
conditions:
(a) In case of actual or impending emergencies caused by serious accident, fire, flood, typhoon,
earthquake, epidemic or other disaster or calamity, to prevent loss of life or property, or in cases of
force majeure or imminent danger to public safety;
(b) In case of urgent work to be performed on machineries, equipment or installations to avoid serious
loss which the employer would otherwise suffer;
(c) In the event of abnormal pressure of work due to special circumstances, where the employer cannot
ordinarily be expected to resort to other measures;
(d) To prevent serious loss of perishable goods;
(e) Where the nature of the work is such that the employees have to work continuously for seven (7)
days in a week or more, as in the case of the crew members of a vessel to complete a voyage and in
other similar cases; and
(f) When the work is necessary to avail of favorable weather or environmental conditions where
performance or quality of work is dependent thereon. No employee shall be required against his will to
work on his scheduled rest day except under circumstances provided in this Section: Provided, However,
that where an employee volunteers to work on his rest day under other circumstances, he shall express
such desire in writing, subject to the provisions of Section 7 hereof regarding additional compensation.

Art. 93, Labor Code

Article 93. Compensation for rest day, Sunday or holiday work.
Where an employee is made or permitted to work on his scheduled rest day, he shall be paid
an additional compensation of at least thirty percent (30%) of his regular wage. An employee
shall be entitled to such additional compensation for work performed on Sunday only when it
is his established rest day.
When the nature of the work of the employee is such that he has no regular workdays and no
regular rest days can be scheduled, he shall be paid an additional compensation of at least thirty
percent (30%) of his regular wage for work performed on Sundays and holidays.

Work performed on any special holiday shall be paid an additional compensation of at least
thirty percent (30%) of the regular wage of the employee. Where such holiday work falls on
the employees scheduled rest day, he shall be entitled to an additional compensation of at
least fifty per cent (50%) of his regular wage.
Where the collective bargaining agreement or other applicable employment contract stipulates
the payment of a higher premium pay than that prescribed under this Article, the employer
shall pay such higher rate.

Holiday pay/Premium pay

Coverage; exclusions
Art. 94, Labor Code
Article 94. Right to holiday pay.
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 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
As used in this Article, "holiday" includes: New Years 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.

Book III, Rule IV, Implementing Rules (Labor Code)

SECTION 1. Coverage. This rule shall apply to all employees except:
(a) Those of the government and any of the political subdivision, including government-owned and
controlled corporation;
(b) Those of retail and service establishments regularly employing less than ten (10) workers;
(c) Domestic helpers and persons in the personal service of another;
(d) Managerial employees as defined in Book Three of the Code;
(e) Field personnel and other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who are
paid a fixed amount for performing work irrespective of the time consumed in the performance thereof.
SECTION 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 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.

SECTION 3. Holiday Pay. Every employer shall pay his employees their regular daily wage for any
worked regular holidays.
As used in the rule, the term 'regular holiday' shall exclusively refer to: New Year's Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the last Sunday of August,
the thirtieth of November, the twenty-fifth and thirtieth of December. Nationwide special days shall
include the first of November and the last day of December. As used in this Rule legal or regular holiday
and special holiday shall now be referred to as 'regular holiday' and 'special day', respectively. SECTION
4. Compensation for holiday work. Any employee who is permitted or suffered to work on any regular
holiday, not exceeding eight (8) hours, shall be paid at least two hundred percent (200%) of his regular
daily wage. If the holiday work falls on the scheduled rest day of the employee, he shall be entitled to an
additional premium pay of at least 30% of his regular holiday rate of 200% based on his regular wage
rate. SECTION 5. Overtime pay for holiday work. For work performed in excess of eight hours on a
regular holiday, an employee shall be paid an additional compensation for the overtime work equivalent
to his rate for the first eight hours on such holiday work plus at least 30% thereof. Where the regular
holiday work exceeding eight hours falls on the scheduled rest day of the employee, he shall be paid an
additional compensation for the overtime work equivalent to his regular holiday-rest day for the first 8
hours plus 30% thereof. The regular holiday rest day rate of an employee shall consist of 200% of his
regular daily wage rate plus 30% thereof. SECTION 6. Absences. (a) All covered employees shall be
entitled to the benefit provided herein when they are on leave of absence with pay. Employees who are
on leave of absence without pay on the day immediately preceding a regular holiday may not be paid
the required holiday pay if he has not worked on such regular holiday. (b) Employees shall grant the
same percentage of the holiday pay as the benefit granted by competent authority in the form of
employee's compensation or social security payment, whichever is higher, if they are not reporting for
work while on such benefits. (c) Where the day immediately preceding the holiday is a non-working day
in the establishment or the scheduled rest day of the employee, he shall not be deemed to be on leave
of absence on that day, in which case he shall be entitled to the holiday pay if he worked on the day
immediately preceding the non-working day or rest day. SECTION 7. Temporary or periodic shutdown
and temporary cessation of work. (a) In cases of temporary or periodic shutdown and temporary
cessation of work of an establishment, as when a yearly inventory or when the repair or cleaning of
machineries and equipment is undertaken, the regular holidays falling within the period shall be
compensated in accordance with this Rule. (b) The regular holiday during the cessation of operation of
an enterprise due to business reverses as authorized by the Secretary of Labor and Employment may not
be paid by the employer. SECTION 8. Holiday pay of certain employees. (a) Private school teachers,
including faculty members of colleges and universities, may not be paid for the regular holidays during
semestral vacations. They shall, however, be paid for the regular holidays during Christmas vacation;
(b) Where a covered employee, is paid by results or output, such as payment on piece work, his holiday
pay shall not be less than his average daily earnings for the last seven (7) actual working days preceding
the regular holiday; Provided, However, that in no case shall the holiday pay be less than the applicable
statutory minimum wage rate.

Jose Rizal College v. NLRC, G.R. No. 65482, December 1, 1987

G.R. No. L-65482 December 1, 1987

JOSE RIZAL COLLEGE, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND NATIONAL ALLIANCE OF TEACHERS/OFFICE
WORKERS, respondents.

PARAS, J.:
This is a petition for certiorari with prayer for the issuance of a writ of preliminary injunction, seeking
the annulment of the decision of the National Labor Relations Commission * in NLRC Case No. RB-IV
23037-78 (Case No. R4-1-1081-71) entitled "National Alliance of Teachers and Office Workers and Juan
E. Estacio, Jaime Medina, et al. vs. Jose Rizal College" modifying the decision of the Labor Arbiter as
follows:
WHEREFORE, in view of the foregoing considerations, the decision appealed from is MODIFIED, in the
sense that teaching personnel paid by the hour are hereby declared to be entitled to holiday pay.
SO ORDERED.
The factual background of this case which is undisputed is as follows:
Petitioner is a non-stock, non-profit educational institution duly organized and existing under the laws of
the Philippines. It has three groups of employees categorized as follows: (a) personnel on monthly basis,
who receive their monthly salary uniformly throughout the year, irrespective of the actual number of
working days in a month without deduction for holidays; (b) personnel on daily basis who are paid on
actual days worked and they receive unworked holiday pay and (c) collegiate faculty who are paid on
the basis of student contract hour. Before the start of the semester they sign contracts with the college
undertaking to meet their classes as per schedule.
Unable to receive their corresponding holiday pay, as claimed, from 1975 to 1977, private respondent
National Alliance of Teachers and Office Workers (NATOW) in behalf of the faculty and personnel of Jose
Rizal College filed with the Ministry of Labor a complaint against the college for said alleged nonpayment of holiday pay, docketed as Case No. R04-10-81-72. Due to the failure of the parties to settle
their differences on conciliation, the case was certified for compulsory arbitration where it was
docketed as RB-IV-23037-78 (Rollo, pp. 155-156).
After the parties had submitted their respective position papers, the Labor Arbiter ** rendered a
decision on February 5, 1979, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
1. The faculty and personnel of the respondent Jose Rizal College who are paid their salary by the month
uniformly in a school year, irrespective of the number of working days in a month, without deduction for
holidays, are presumed to be already paid the 10 paid legal holidays and are no longer entitled to
separate payment for the said regular holidays;
2. The personnel of the respondent Jose Rizal College who are paid their wages daily are entitled to be
paid the 10 unworked regular holidays according to the pertinent provisions of the Rules and
Regulations Implementing the Labor Code;

3. Collegiate faculty of the respondent Jose Rizal College who by contract are paid compensation per
student contract hour are not entitled to unworked regular holiday pay considering that these regular
holidays have been excluded in the programming of the student contact hours. (Rollo. pp. 26-27)
On appeal, respondent National Labor Relations Commission in a decision promulgated on June 2, 1982,
modified the decision appealed from, in the sense that teaching personnel paid by the hour are declared
to be entitled to holiday pay (Rollo. p. 33).
Hence, this petition.
The sole issue in this case is whether or not the school faculty who according to their contracts are paid
per lecture hour are entitled to unworked holiday pay.
Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed by petitioner who are paid
their salaries monthly, are uniformly paid throughout the school year regardless of working days, hence
their holiday pay are included therein while the daily paid employees are renumerated for work
performed during holidays per affidavit of petitioner's treasurer (Rollo, pp. 72-73).
There appears to be no problem therefore as to the first two classes or categories of petitioner's
workers.
The problem, however, lies with its faculty members, who are paid on an hourly basis, for while the
Labor Arbiter sustains the view that said instructors and professors are not entitled to holiday pay, his
decision was modified by the National Labor Relations Commission holding the contrary. Otherwise
stated, on appeal the NLRC ruled that teaching personnel paid by the hour are declared to be entitled to
holiday pay.
Petitioner maintains the position among others, that it is not covered by Book V of the Labor Code on
Labor Relations considering that it is a non- profit institution and that its hourly paid faculty members
are paid on a "contract" basis because they are required to hold classes for a particular number of
hours. In the programming of these student contract hours, legal holidays are excluded and labelled in
the schedule as "no class day. " On the other hand, if a regular week day is declared a holiday, the school
calendar is extended to compensate for that day. Thus petitioner argues that the advent of any of the
legal holidays within the semester will not affect the faculty's salary because this day is not included in
their schedule while the calendar is extended to compensate for special holidays. Thus the programmed
number of lecture hours is not diminished (Rollo, pp. 157- 158).
The Solicitor General on the other hand, argues that under Article 94 of the Labor Code (P.D. No. 442 as
amended), holiday pay applies to all employees except those in retail and service establishments. To
deprive therefore employees paid at an hourly rate of unworked holiday pay is contrary to the policy
considerations underlying such presidential enactment, and its precursor, the Blue Sunday Law
(Republic Act No. 946) apart from the constitutional mandate to grant greater rights to labor
(Constitution, Article II, Section 9). (Reno, pp. 76-77).
In addition, respondent National Labor Relations Commission in its decision promulgated on June 2,
1982, ruled that the purpose of a holiday pay is obvious; that is to prevent diminution of the monthly
income of the workers on account of work interruptions. In other words, although the worker is forced
to take a rest, he earns what he should earn. That is his holiday pay. It is no excuse therefore that the

school calendar is extended whenever holidays occur, because such happens only in cases of special
holidays (Rollo, p. 32).
Subject holiday pay is provided for in the Labor Code (Presidential Decree No. 442, as amended), 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 in the Implementing Rules and Regulations, Rule IV, Book III, which reads:
SEC. 8. Holiday pay of certain employees. (a) Private school teachers, including faculty members of
colleges and universities, may not be paid for the regular holidays during semestral vacations. They shall,
however, be paid for the regular holidays during Christmas vacations. ...
Under the foregoing provisions, apparently, the petitioner, although a non-profit institution is under
obligation to give pay even on unworked regular holidays to hourly paid faculty members subject to the
terms and conditions provided for therein.
We believe that the aforementioned implementing rule is not justified by the provisions of the law
which after all is silent with respect to faculty members paid by the hour who because of their teaching
contracts are obliged to work and consent to be paid only for work actually done (except when an
emergency or a fortuitous event or a national need calls for the declaration of special
holidays). Regular holidays specified as such by law are known to both school and faculty members as
no class days;" certainly the latter do not expect payment for said unworked days, and this was clearly in
their minds when they entered into the teaching contracts.
On the other hand, both the law and the Implementing Rules governing holiday pay are silent as to
payment on Special Public Holidays.
It is readily apparent that the declared purpose of the holiday pay which is the prevention of diminution
of the monthly income of the employees on account of work interruptions is defeated when a regular
class day is cancelled on account of a special public holiday and class hours are held on another working
day to make up for time lost in the school calendar. Otherwise stated, the faculty member, although
forced to take a rest, does not earn what he should earn on that day. Be it noted that when a special
public holiday is declared, the faculty member paid by the hour is deprived of expected income, and it
does not matter that the school calendar is extended in view of the days or hours lost, for their income
that could be earned from other sources is lost during the extended days. Similarly, when classes are
called off or shortened on account of typhoons, floods, rallies, and the like, these faculty members must
likewise be paid, whether or not extensions are ordered.
Petitioner alleges that it was deprived of due process as it was not notified of the appeal made to the
NLRC against the decision of the labor arbiter.
The Court has already set forth what is now known as the "cardinal primary" requirements of due
process in administrative proceedings, to wit: "(1) the right to a hearing which includes the right to

present one's case and submit evidence in support thereof; (2) the tribunal must consider the evidence
presented; (3) the decision must have something to support itself; (4) the evidence must be substantial,
and substantial evidence means such evidence as a reasonable mind might accept as adequate to
support a conclusion; (5) the decision must be based on the evidence presented at the hearing, or at
least contained in the record and disclosed to the parties affected; (6) the tribunal or body of any of its
judges must act on its or his own independent consideration of the law and facts of the controversy, and
not simply accept the views of a subordinate; (7) the board or body should in all controversial questions,
render its decisions in such manner that the parties to the proceeding can know the various issues
involved, and the reason for the decision rendered. " (Doruelo vs. Commission on Elections, 133 SCRA
382 [1984]).
The records show petitioner JRC was amply heard and represented in the instant proceedings. It
submitted its position paper before the Labor Arbiter and the NLRC and even filed a motion for
reconsideration of the decision of the latter, as well as an "Urgent Motion for Hearing En Banc" (Rollo, p.
175). Thus, petitioner's claim of lack of due process is unfounded.
PREMISES CONSIDERED, the decision of respondent National Labor Relations Commission is hereby set
aside, and a new one is hereby RENDERED:
(a) exempting petitioner from paying hourly paid faculty members their pay for regular holidays,
whether the same be during the regular semesters of the school year or during semestral, Christmas, or
Holy Week vacations;
(b) but ordering petitioner to pay said faculty members their regular hourly rate on days declared as
special holidays or for some reason classes are called off or shortened for the hours they are supposed
to have taught, whether extensions of class days be ordered or not; in case of extensions said faculty
members shall likewise be paid their hourly rates should they teach during said extensions.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

Insular Bank v. Inciong, G.R. No. L-52415, October 23, 1984

G.R. No. L-52415 October 23, 1984
INSULAR BANK OF ASIA AND AMERICA EMPLOYEES' UNION (IBAAEU), petitioner,
vs.
HON. AMADO G. INCIONG, Deputy Minister, Ministry of Labor and INSULAR BANK OF ASIA
AND AMERICA,respondents.
Sisenando R. Villaluz, Jr. for petitioner.
Abdulmaid Kiram Muin colloborating counsel for petitioner.

The Solicitor General Caparas, Tabios, Ilagan Alcantara & Gatmaytan Law Office and Sycip,
Salazar, Feliciano & Hernandez Law Office for respondents.

MAKASIAR, J.:

+.wp h!1

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:
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.
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:
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:
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.
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).
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

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;
(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 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

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:

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.).
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. "
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.)
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.
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 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."
"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).
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.
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".
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

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).
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 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

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. ...
xxx xxx xxx
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:

t.hqw

xxx xxx xxx

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.
COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF ASIA AND AMERICA
SO ORDERED.

1w ph1.t

Guerrero, Escolin and Cuevas, JJ., concur.

Aquino and Abad Santos, JJ., concur in the result.

Concepcion Jr., J., took no part.

No. 3, DOLE Handbook on Workers Statutory Monetary Benefits

Teachers, piece workers, takay, seasonal workers, seafarers

David v. Macasio, G.R. No. 195466, July 2, 2014

G.R. No. 195466

July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010
decision2 and the January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
116003. The CA decision annulled and set aside the May 26, 2010 decision4 of the National Labor
Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 Decision6 of the Labor
Arbiter (LA). The LA's decision dismissed respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing
business under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay
and 13th month pay. He also claimed payment for moral and exemplary damages and attorneys
fees. Macasio also claimed payment for service incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for David since January 6,
1995. Macasio claimed that David exercised effective control and supervision over his work, pointing
out that David: (1) set the work day, reporting time and hogs to be chopped, as well as the manner
by which he was to perform his work; (2) daily paid his salary of P700.00, which was increased
from P600.00 in 2007, P500.00 in 2006 andP400.00 in 2005; and (3) approved and disapproved his
leaves. Macasio added that David owned the hogs delivered for chopping, as well as the work tools
and implements; the latter also rented the workplace. Macasio further claimed that David employs
about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has
ten employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis
who is, therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant to the
provisions of the Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out
that Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or
earlier, depending on the volume of the delivered hogs; (2) received the fixed amount of P700.00 per
engagement, regardless of the actual number of hours that he spent chopping the delivered hogs;
and (3) was not engaged to report for work and, accordingly, did not receive any fee when no hogs
were delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his business only in
2005. He pointed to the Certificate of Employment12 that David issued in his favor which placed the
date of his employment, albeit erroneously, in January 2000. Second, he reported for work every day
which the payroll or time record could have easily proved had David submitted them in evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as he hired the
latter on "pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon
Macasios request, only for overseas employment purposes. He pointed to the "Pinagsamang
Sinumpaang Salaysay,"14 executed by Presbitero Solano and Christopher (Antonio Macasios cobutchers), to corroborate his claims.

In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit. The LA gave
credence to Davids claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the
following facts to support this finding: (1) Macasio received the fixed amount of P700.00 for every
work done, regardless of the number of hours that he spent in completing the task and of the volume
or number of hogs that he had to chop per engagement; (2) Macasio usually worked for only four
hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and (3) the P700.00 fixed
wage far exceeds the then prevailing daily minimum wage of P382.00. The LA added that the nature
of Davids business as hog dealer supports this "pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to
overtime, holiday, SIL and 13th month pay.
The NLRCs Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did
not require Macasio to observe an eight hour work schedule to earn the fixed P700.00 wage; and
that Macasio had been performing a non-time work, pointing out that Macasio was paid a fixed
amount for the completion of the assigned task, irrespective of the time consumed in its
performance. Since Macasio was paid by result and not in terms of the time that he spent in the
workplace, Macasio is not covered by the Labor Standards laws on overtime, SIL and holiday pay,
and 13th month pay under the Rules and Regulations Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010
resolution,20prompting Macasio to elevate his case to the CA via a petition for certiorari.21
The CAs Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition and reversed
the NLRCs ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it
nevertheless found Macasio entitled to his monetary claims following the doctrine laid down in
Serrano v. Severino Santos Transit.23 The CA explained that as a task basis employee, Macasio is
excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a "field
personnel." As defined by the Labor Code, a "field personnel" is one who performs the work away
from the office or place of work and whose regular work hours cannot be determined with
reasonable certainty. In Macasios case, the elements that characterize a "field personnel" are
evidently lacking as he had been working as a butcher at Davids "Yiels Hog Dealer" business in Sta.
Mesa, Manila under Davids supervision and control, and for a fixed working schedule that starts at
10:00 p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three years,
with 10% attorneys fees on the total monetary award. The CA, however, denied Macasios claim for
moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration24 in the CAs
January 31, 2011 resolution.25
The Petition

In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task basis.
Hence, the latter is excluded from the coverage of holiday, SIL and 13th month pay. David reiterates
his submissions before the lower tribunals27 and adds that he never had any control over the manner
by which Macasio performed his work and he simply looked on to the "end-result." He also contends
that he never compelled Macasio to report for work and that under their arrangement, Macasio was
at liberty to choose whether to report for work or not as other butchers could carry out his tasks. He
points out that Solano and Antonio had, in fact, attested to their (David and Macasios) established
"pakyawan" arrangement that rendered a written contract unnecessary. In as much as Macasio is a
task basis employee who is paid the fixed amount of P700.00 per engagement regardless of the
time consumed in the performance David argues that Macasio is not entitled to the benefits he
claims. Also, he posits that because he engaged Macasio on "pakyaw" or task basis then no
employer-employee relationship exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality
especially when, as in this case, they are supported by substantial evidence. Hence, David posits
that the CA erred in reversing the labor tribunals findings and granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David would have
this Court believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to
Davids position, theP700.00 fee that he was paid for each day that he reported for work does not
indicate a "pakyaw" or task basis employment as this amount was paid daily, regardless of the
number or pieces of hogs that he had to chop. Rather, it indicates a daily-wage method of payment
and affirms his regular employment status. He points out that David did not allege or present any
evidence as regards the quota or number of hogs that he had to chop as basis for the "pakyaw" or
task basis payment; neither did David present the time record or payroll to prove that he worked for
less than eight hours each day. Moreover, David did not present any contract to prove that his
employment was on task basis. As David failed to prove the alleged task basis or "pakyawan"
agreement, Macasio concludes that he was Davids employee. Procedurally, Macasio points out that
Davids submissions in the present petition raise purely factual issues that are not proper for a
petition for review on certiorari. These issues whether he (Macasio) was paid by result or on
"pakyaw" basis; whether he was a "field personnel"; whether an employer-employee relationship
existed between him and David; and whether David exercised control and supervision over his work
are all factual in nature and are, therefore, proscribed in a Rule 45 petition. He argues that the
CAs factual findings bind this Court, absent a showing that such findings are not supported by the
evidence or the CAs judgment was based on a misapprehension of facts. He adds that the issue of
whether an employer-employee relationship existed between him and David had already been
settled by the LA29 and the NLRC30 (as well as by the CA per Macasios manifestation before this
Court dated November 15, 2012),31 in his favor, in the separate illegal case that he filed against
David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on
holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or task basis. In the context of
the Rule 65 petition before the CA, the issue is whether the CA correctly found the NLRC in grave
abuse of discretion in ruling that Macasio is entitled to these labor standards benefits.
The Courts Ruling
We partially grant the petition.

Preliminary considerations: the Montoya ruling and the factual-issue-bar rule

In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule 65
proceeding, this Courts power of review is limited to resolving matters pertaining to any perceived
legal errors that the CA may have committed in issuing the assailed decision. This is in contrast with
the review for jurisdictional errors, which we undertake in an original certiorari action. In reviewing
the legal correctness of the CA decision, we examine the CA decision based on how it determined
the presence or absence of grave abuse of discretion in the NLRC decision before it and not on the
basis of whether the NLRC decision on the merits of the case was correct.32 In other words, we have
to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it.33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law raised
against the assailed CA decision.34
In this petition, David essentially asks the question whether Macasio is entitled to holiday, SIL and
13th month pay. This one is a question of law. The determination of this question of law however is
intertwined with the largely factual issue of whether Macasio falls within the rule on entitlement to
these claims or within the exception. In either case, the resolution of this factual issue presupposes
another factual matter, that is, the presence of an employer-employee relationship between David
and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged the
latter on "pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task
basis with the lack of employment relationship. Impliedly, David asserts that their "pakyawan" or task
basis arrangement negates the existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does
not characterize the relationship that may exist between the parties, i.e., whether one of employment
or independent contractorship. Article 97(6) of the Labor Code defines wages as "xxx the
remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be
rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of workers paid by
results or those whose pay is calculated in terms of the quantity or quality of their work output which
includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis
negates employer-employee relationship, David would want the Court to engage on a factual
appellate review of the entire case to determine the presence or existence of that relationship. This
approach however is not authorized under a Rule 45 petition for review of the CA decision rendered
under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an employeremployee but because of its finding that since Macasio is paid on pakyaw or task basis, then he is
not entitled to SIL, holiday and 13th month pay. Second, we consider it crucial, that in the separate
illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the
existence of an employer-employee relationship.37
In other words, aside from being factual in nature, the existence of an employer-employee
relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review

of a labor decision rendered by the CA under 65, the narrow scope of inquiry is whether the CA
correctly determined the presence or absence of grave abuse of discretion on the part of the NLRC.
In concrete question form, "did the NLRC gravely abuse its discretion in denying Macasios claims
simply because he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee
relationship exists baseless. Employing the control test,38 we find that such a relationship exist in the
present case.
Even a factual review shows that Macasio is Davids employee
To determine the existence of an employer-employee relationship, four elements generally need to
be considered, namely: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employees conduct. These
elements or indicators comprise the so-called "four-fold" test of employment relationship. Macasios
relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and
engagement of the employee." David categorically confirmed this fact when, in his "Sinumpaang
Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano
and Antonio stated in their "Pinagsamang Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho
sa Yiels xxx na pag-aari ni Ariel David bilang butcher" and "kilalanamin si xxx Macasio na isa ring
butcher xxx ni xxx David at kasama namin siya sa aming trabaho."
Second, David paid Macasios wages.Both David and Macasio categorically stated in their
respective pleadings before the lower tribunals and even before this Court that the former had been
paying the latterP700.00 each day after the latter had finished the days task. Solano and Antonio
also confirmed this fact of wage payment in their "Pinagsamang Sinumpaang Salaysay."41 This
satisfies the element of "payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This power to
determine the work schedule obviously implies power of control. By having the power to control
Macasios work schedule, David could regulate Macasios work and could even refuse to give him
any assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasios work as to the means
and methods of performing it. In addition to setting the day and time when Macasio should report for
work, the established facts show that David rents the place where Macasio had been performing his
tasks. Moreover, Macasio would leave the workplace only after he had finished chopping all of the
hog meats given to him for the days task. Also, David would still engage Macasios services and
have him report for work even during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be expected
to observe certain rules and requirements and David would necessarily exercise some degree of
control as the chopping of the hog meats would be subject to his specifications. Also, since Macasio
performed his tasks at Davids workplace, David could easily exercise control and supervision over
the former. Accordingly, whether or not David actually exercised this right or power to control is
beside the point as the law simply requires the existence of this power to control 4243 or, as in this
case, the existence of the right and opportunity to control and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to an
employer-employee relationship existing between David and Macasio.

Macasio is engaged on "pakyaw" or task basis

At this point, we note that all three tribunals the LA, the NLRC and the CA found that Macasio
was engaged or paid on "pakyaw" or task basis. This factual finding binds the Court under the rule
that factual findings of labor tribunals when supported by the established facts and in accord with the
laws, especially when affirmed by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour
wage payment, is the non-consideration of the time spent in working. In a task-basis work, the
emphasis is on the task itself, in the sense that payment is reckoned in terms of completion of the
work, not in terms of the number of time spent in the completion of work.45 Once the work or task is
completed, the worker receives a fixed amount as wage, without regard to the standard
measurements of time generally used in pay computation.
In Macasios case, the established facts show that he would usually start his work at 10:00 p.m.
Thereafter, regardless of the total hours that he spent at the workplace or of the total number of the
hogs assigned to him for chopping, Macasio would receive the fixed amount of P700.00 once he had
completed his task. Clearly, these circumstances show a "pakyaw" or task basis engagement that all
three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by applying the
"four-fold" test; engagement on "pakyaw" or task basis does not determine the parties relationship
as it is simply a method of pay computation. Accordingly, Macasio is Davids employee, albeit
engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether
Macasio is entitled to holiday, 13th month, and SIL pay.
On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to Section 1,
Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential
Decree (PD) No. 851. The NLRC, on the other hand, relied on Article 82 of the Labor Code and the
Rules and Regulations Implementing PD No. 851. Uniformly, these provisions exempt workers paid
on "pakyaw" or task basis from the coverage of holiday, SIL and 13th month pay.
In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well as on
Section 1, Rule V of the IRR of the Labor Code and the Courts ruling in Serrano v. Severino Santos
Transit.46 These labor law provisions, when read together with the Serrano ruling, exempt those
engaged on "pakyaw" or task basis only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to conclude that
the worker is exempted or covered depends on the facts and in this sense, is a question of fact: first,
whether Macasio is a "field personnel"; and second, whether those engaged on "pakyaw" or task
basis, but who are not "field personnel," are exempted from the coverage of holiday, SIL and 13th
month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision
rendered under Rule 65 and framed in question form, the legal question is whether the CA correctly
ruled that it was grave abuse of discretion on the part of the NLRC to deny Macasios monetary

claims simply because he is paid on a non-time basis without determining whether he is a field
personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the
Labor Code - provisions governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] 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.
xxxx
"Field personnel" shall refer to non-agricultural 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. [emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code)
and SIL pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand
and "workers who are paid by results" on the other hand, are not covered by the Title I provisions.
The wordings of Article82 of the Labor Code additionally categorize workers "paid by results" and
"field personnel" as separate and distinct types of employees who are exempted from the Title I
provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the
IRR47 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 (10) workers[.]
[emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission basis, or
those who are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR48 pertinently provides:

Art. 95. Right to service incentive. (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.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided,
those enjoying vacation leave with pay of at least five days and those employed in establishments
regularly employing less than ten employees or in establishments exempted from granting this
benefit by the Secretary of Labor and Employment after considering the viability or financial
condition of such establishment. [emphases ours]
xxxx
Section 1. Coverage. This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who
are paid a fixed amount for performing work irrespective of the time consumed in the performance
thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees.
To be excluded from their coverage, an employee must be one of those that these provisions
expressly exempt, strictly in accordance with the exemption. Under the IRR, exemption from the
coverage of holiday and SIL pay refer to "field personnel and other employees whose time and
performance is unsupervised by the employer including those who are engaged on task or contract
basis[.]" Note that unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay do not
exclude employees "engaged on task basis" as a separate and distinct category from employees
classified as "field personnel." Rather, these employees are altogether merged into one classification
of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that
those who are engaged on task basis, per se, are excluded from the SIL and holiday payment since
this is what the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable
interpretation of this rule may be conceded to be within the discretion granted to the LA and NLRC
as the quasi-judicial bodies with expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase "those
who are engaged on task or contract basis" in the rule has already been interpreted to mean as
follows:
[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis
that general and unlimited terms are restrained and limited by the particular terms that they follow
xxx Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "to nonagricultural 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. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that
private respondents are not entitled to the service incentive leave benefit cannot therefore be
sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one
from the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including
the holiday and SIL pay) only if they qualify as "field personnel." The IRR therefore validly qualifies

and limits the general exclusion of "workers paid by results" found in Article 82 from the coverage of
holiday and SIL pay. This is the only reasonable interpretation since the determination of excluded
workers who are paid by results from the coverage of Title I is "determined by the Secretary of Labor
in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v.
Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to
apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the
Implementing Rules, Service Incentive Leave shall not apply to employees classified as "field
personnel." The phrase "other employees whose performance is unsupervised by the employer"
must not be understood as a separate classification of employees to which service incentive leave
shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis,
purely commission basis." Said phrase should be related with "field personnel," applying the rule on
ejusdem generis that general and unlimited terms are restrained and limited by the particular terms
that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support
of granting Macasios petition.
In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees engaged on
task or contract basis xxx are not automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel."51 The Court explained that the phrase
"including those who are engaged on task or contract basis, purely commission basis" found in
Section 1(d), Rule V of Book III of the IRR should not be understood as a separate classification of
employees to which SIL shall not be granted. Rather, as with its preceding phrase - "other
employees whose performance is unsupervised by the employer" - the phrase "including those who
are engaged on task or contract basis" serves to amplify the interpretation of the Labor Code
definition of "field personnel" as those "whose actual hours of work in the field cannot be determined
with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the
Labor Code provisions and the IRR as exempting an employee from the coverage of Title I of the
Labor Code based simply and solely on the mode of payment of an employee. The NLRCs utter
disregard of this consistent jurisprudential ruling is a clear act of grave abuse of discretion.52 In other
words, by dismissing Macasios complaint without considering whether Macasio was a "field
personnel" or not, the NLRC proceeded based on a significantly incomplete consideration of the
case. This action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only
taken counsel from Serrano and earlier cases, they would have correctly reached a similar
conclusion regarding the payment of holiday pay since the rule exempting "field personnel" from the
grant of holiday pay is identically worded with the rule exempting "field personnel" from the grant of

SIL pay. To be clear, the phrase "employees engaged on task or contract basis "found in the IRR on
both SIL pay and holiday pay should be read together with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday
and SIL pay, the presence (or absence) of employer supervision as regards the workers time and
performance is the key: if the worker is simply engaged on pakyaw or task basis, then the general
rule is that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions
specifically provided under Article 94 (holiday pay) and Article95 (SIL pay) of the Labor Code.
However, if the worker engaged on pakyaw or task basis also falls within the meaning of "field
personnel" under the law, then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does
not fall under the definition of "field personnel." The CAs finding in this regard is supported by the
established facts of this case: first, Macasio regularly performed his duties at Davids principal place
of business; second, his actual hours of work could be determined with reasonable certainty; and,
third, David supervised his time and performance of duties. Since Macasio cannot be considered a
"field personnel," then he is not exempted from the grant of holiday, SIL pay even as he was
engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRCs ruling
dismissing Macasios complaint for holiday and SIL pay for having been rendered with grave abuse
of discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in finding
that the NLRC gravely abused its discretion in denying this benefit to Macasio.
1wphi1

The governing law on 13th month pay is PD No. 851.53

As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee
must be one of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations
Implementing P.D. No. 85154 enumerates the exemptions from the coverage of 13th month pay
benefits. Under Section 3(e), "employers of those who are paid on xxx task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the
performance thereof"55 are exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees "paid on task basis" without any
reference to "field personnel." This could only mean that insofar as payment of the 13th month pay is
concerned, the law did not intend to qualify the exemption from its coverage with the requirement
that the task worker be a "field personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar
as the payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the
decision dated November 22, 2010 and the resolution dated January 31, 2011 of the Court of
Appeals in CA-G.R. SP No. 116003.
SO ORDERED.

ARTURO D. BRION
Associate Justice

Tan v. Lagman, G.R. No. 151228, August 15, 2002

SECOND DIVISION
[G.R. No. 151228. August 15, 2002]
ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA and THE HONORABLE COURT OF
APPEALS, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision,[1] dated May 31, 2001, and the resolution,[2] dated
November 27, 2001, of the Court of Appeals in C.A.-G.R. SP. No. 63160, annulling the resolutions of the
National Labor Relations Commission (NLRC) and reinstating the ruling of the Labor Arbiter which found
petitioner Rolando Tan guilty of illegally dismissing private respondent Leovigildo Lagrama and ordering
him to pay the latter the amount of P136,849.99 by way of separation pay, backwages, and damages.
The following are the facts.
Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general manager of
Crown and Empire Theaters in Butuan City. Private respondent Leovigildo Lagrama is a painter, making ad
billboards and murals for the motion pictures shown at the Empress, Supreme, and Crown Theaters for
more than 10 years, from September 1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided: Nangihi na
naman ka sulod sa imong drawinganan. (You again urinated inside your work area.) When Lagrama asked
what Tan was saying, Tan told him, Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan
karon, wala nay drawing. Gawas. (Dont say anything further. I dont want you to draw anymore. From
now on, no more drawing. Get out.)
Lagrama denied the charge against him. He claimed that he was not the only one who entered the drawing
area and that, even if the charge was true, it was a minor infraction to warrant his dismissal. However,
everytime he spoke, Tan shouted Gawas (Get out), leaving him with no other choice but to leave the
premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the National Labor Relations
Commission (NLRC) in Butuan City. He alleged that he had been illegally dismissed and sought
reinvestigation and payment of 13th month pay, service incentive leave pay, salary differential, and
damages.
Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was an independent
contractor who did his work according to his methods, while he (petitioner) was only interested in the

result thereof. He cited the admission of Lagrama during the conferences before the Labor Arbiter that
he was paid on a fixed piece-work basis, i.e., that he was paid for every painting turned out as ad billboard
or mural for the pictures shown in the three theaters, on the basis of a no mural/billboard drawn, no pay
policy. He submitted the affidavits of other cinema owners, an amusement park owner, and those
supervising the construction of a church to prove that the services of Lagrama were contracted by
them. He denied having dismissed Lagrama and alleged that it was the latter who refused to paint for him
after he was scolded for his habits.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the parties to file
their position papers. On June 17, 1999, he rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered judgment is hereby ordered:
1. Declaring complainants [Lagramas] dismissal illegal and
2. Ordering respondents [Tan] to pay complainant the following:
A. Separation Pay - P 59,000.00
B. Backwages - 47,200.00
(from 17 October 1998 to 17 June 1999)
C. 13th month pay (3 years) - 17,700.00
D. Service Incentive Leave
Pay (3 years) - 2, 949.99
E. Damages - 10,000.00
TOTAL [P136,849.99]
Complainants other claims are dismissed for lack of merit.[3]
Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City, which, on June 30, 2000,
rendered a decision[4] finding Lagrama to be an independent contractor, and for this reason reversing the
decision of the Labor Arbiter.
Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of merit by the NLRC in
a resolution of September 29, 2000. He then filed a petition for certiorari under Rule 65 before the Court
of Appeals.
The Court of Appeals found that petitioner exercised control over Lagramas work by dictating the time
when Lagrama should submit his billboards and murals and setting rules on the use of the work area and
rest room. Although it found that Lagrama did work for other cinema owners, the appeals court held it to
be a mere sideline insufficient to prove that he was not an employee of Tan. The appeals court also found
no evidence of any intention on the part of Lagrama to leave his job or sever his employment relationship
with Tan. Accordingly, on May 31, 2001, the Court of Appeals rendered a decision, the dispositive portion
of which reads:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The Resolutions of the Public
Respondent issued on June 30, 2000 and September 29, 2000 are ANNULLED. The Decision of the
Honorable Labor Arbiter Rogelio P. Legaspi on June 17, 1999 is hereby REINSTATED.
Petitioner moved for a reconsideration, but the Court of Appeals found no reason to reverse its decision
and so denied his motion for lack of merit.[5] Hence, this petition for review on certiorari based on the
following assignments of errors:
I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP NO. 63160 is bereft of
any finding that Public Respondent NLRC, 5th Division, had no jurisdiction or exceeded it or otherwise
gravely abused its discretion in its Resolution of 30 June 2000 in NLRC CA-NO. M-004950-99.
II. With all due respect, respondent Court of Appeals, absent any positive finding on its part that the
Resolution of 30 June 2000 of the NLRC is not supported by substantial evidence, is without authority to
substitute its conclusion for that of said NLRC.
III. With all due respect, respondent Court of Appeals discourse on freelance artists and painters in the
decision in question is misplaced or has no factual or legal basis in the record.
IV. With all due respect, respondent Court of Appeals opening statement in its decision as to employment,
monthly salary of P1,475.00 and work schedule from Monday to Saturday, from 8:00 oclock in the morning
up to 5:00 oclock in the afternoon as facts is not supported by the evidence on record.
V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420 [G.R. No. 111042 October
26, 1999] relied upon by respondent Court of Appeals is not applicable to the peculiar circumstances of
this case.[6]
The issues raised boil down to whether or not an employer-employee relationship existed between
petitioner and private respondent, and whether petitioner is guilty of illegally dismissing private
respondent. We find the answers to these issues to be in the affirmative.
I.
In determining whether there is an employer-employee relationship, we have applied a four-fold test, to
wit: (1) whether the alleged employer has the power of selection and engagement of employees; (2)
whether he has control of the employee with respect to the means and methods by which work is to be
accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid
wages.[7] These elements of the employer-employee relationship are present in this case.
First. The existence in this case of the first element is undisputed. It was petitioner who engaged the
services of Lagrama without the intervention of a third party. It is the existence of the second element,
the power of control, that requires discussion here.
Of the four elements of the employer-employee relationship, the control test is the most important.
Compared to an employee, an independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on its own account and under its own
responsibility according to its own manner and method, free from the control and direction of the
principal in all matters connected with the performance of the work except as to the results
thereof.[8] Hence, while an independent contractor enjoys independence and freedom from the control

and supervision of his principal, an employee is subject to the employers power to control the means and
methods by which the employees work is to be performed and accomplished.
In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was an independent
contractor and never his employee, the evidence shows that the latter performed his work as painter
under the supervision and control of petitioner. Lagrama worked in a designated work area inside the
Crown Theater of petitioner, for the use of which petitioner prescribed rules. The rules included the
observance of cleanliness and hygiene and a prohibition against urinating in the work area and any place
other than the toilet or the rest rooms.[9] Petitioners control over Lagramas work extended not only to the
use of the work area, but also to the result of Lagramas work, and the manner and means by which the
work was to be accomplished.
Moreover, it would appear that petitioner not only provided the workplace, but supplied as well the
materials used for the paintings, because he admitted that he paid Lagrama only for the latters services.[10]
Private respondent Lagrama claimed that he worked daily, from 8 oclock in the morning to 5 oclock in the
afternoon. Petitioner disputed this allegation and maintained that he paid Lagrama P1,475.00 per week
for the murals for the three theaters which the latter usually finished in 3 to 4 days in one week. [11] Even
assuming this to be true, the fact that Lagrama worked for at least 3 to 4 days a week proves regularity in
his employment by petitioner.
Second. That petitioner had the right to hire and fire was admitted by him in his position paper submitted
to the NLRC, the pertinent portions of which stated:
Complainant did not know how to use the available comfort rooms or toilets in and about his work
premises. He was urinating right at the place where he was working when it was so easy for him, as
everybody else did and had he only wanted to, to go to the comfort rooms. But no, the complainant had
to make a virtual urinal out of his work place! The place then stunk to high heavens, naturally, to the
consternation of respondents and everyone who could smell the malodor.
...
Given such circumstances, the respondents had every right, nay all the compelling reason, to fire him from
his painting job upon discovery and his admission of such acts. Nonetheless, though thoroughly scolded,
he was not fired. It was he who stopped to paint for respondents.[12]
By stating that he had the right to fire Lagrama, petitioner in effect acknowledged Lagrama to be his
employee. For the right to hire and fire is another important element of the employer-employee
relationship.[13] Indeed, the fact that, as petitioner himself said, he waited for Lagrama to report for work
but the latter simply stopped reporting for work reinforces the conviction that Lagrama was indeed an
employee of petitioner. For only an employee can nurture such an expectancy, the frustration of which,
unless satisfactorily explained, can bring about some disciplinary action on the part of the employer.
Third. Payment of wages is one of the four factors to be considered in determining the existence of
employer-employee relation. Wages are defined as remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for

services rendered or to be rendered.[14] That Lagrama worked for Tan on a fixed piece-work basis is of no
moment. Payment by result is a method of compensation and does not define the essence of the
relation.[15] It is a method of computing compensation, not a basis for determining the existence or
absence of employer-employee relationship. One may be paid on the basis of results or time expended
on the work, and may or may not acquire an employment status, depending on whether the elements of
an employer-employee relationship are present or not.[16]
The Rules Implementing the Labor Code require every employer to pay his employees by means of
payroll.[17] The payroll should show among other things, the employees rate of pay, deductions made, and
the amount actually paid to the employee. In the case at bar, petitioner did not present the payroll to
support his claim that Lagrama was not his employee, raising speculations whether his failure to do so
proves that its presentation would be adverse to his case.[18]
The primary standard for determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the
employer.[19] In this case, there is such a connection between the job of Lagrama painting billboards and
murals and the business of petitioner. To let the people know what movie was to be shown in a movie
theater requires billboards. Petitioner in fact admits that the billboards are important to his business.[20]
The fact that Lagrama was not reported as an employee to the SSS is not conclusive on the question of
whether he was an employee of petitioner.[21] Otherwise, an employer would be rewarded for his failure
or even neglect to perform his obligation.[22]
Neither does the fact that Lagrama painted for other persons affect or alter his employment relationship
with petitioner. That he did so only during weekends has not been denied by petitioner. On the other
hand, Samuel Villalba, for whom Lagrama had rendered service, admitted in a sworn statement that he
was told by Lagrama that the latter worked for petitioner.[23]
Lagrama had been employed by petitioner since 1988. Under the law, therefore, he is deemed a regular
employee and is thus entitled to security of tenure, as provided in Art. 279 of Labor Code:
ART. 279. Security of Tenure. In 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.
This Court has held that if the employee has been performing the job for at least one year, even if not
continuously but intermittently, the repeated and continuing need for its performance is sufficient
evidence of the necessity, if not indispensability, of that activity to the business of his employer. Hence,
the employment is also considered regular, although with respect only to such activity, and while such
activity exists.[24]
It is claimed that Lagrama abandoned his work. There is no evidence to show this. Abandonment requires
two elements: (1) the failure to report for work or absence without valid or justifiable reason, and (2) a
clear intention to sever the employer-employee relationship, with the second element as the more
determinative factor and being manifested by some overt acts.[25] Mere absence is not sufficient. What is

more, the burden is on the employer to show a deliberate and unjustified refusal on the part of the
employee to resume his employment without any intention of returning.[26] In the case at bar, the Court
of Appeals correctly ruled:
Neither do we agree that Petitioner abandoned his job. In order for abandonment to be a just and valid
ground for dismissal, the employer must show, by clear proof, the intention of the employee to abandon
his job. . . .
In the present recourse, the Private Respondent has not established clear proof of the intention of the
Petitioner to abandon his job or to sever the employment relationship between him and the Private
Respondent. On the contrary, it was Private Respondent who told Petitioner that he did not want the
latter to draw for him and thereafter refused to give him work to do or any mural or billboard to paint or
draw on.
More, after the repeated refusal of the Private Respondent to give Petitioner murals or billboards to work
on, the Petitioner filed, with the Sub-Regional Arbitration Branch No. X of the National Labor Relations
Commission, a Complaint for Illegal Dismissal and Money Claims. Such act has, as the Supreme Court
declared, negate any intention to sever employment relationship. . . .[27]
II.
The second issue is whether private respondent Lagrama was illegally dismissed. To begin, the employer
has the burden of proving the lawfulness of his employees dismissal.[28] The validity of the charge must be
clearly established in a manner consistent with due process. The Implementing Rules of the Labor
Code[29] provide that no worker shall be dismissed except for a just or authorized cause provided by law
and after due process. This provision has two aspects: (1) the legality of the act of dismissal, that is,
dismissal under the grounds provided for under Article 282 of the Labor Code and (2) the legality in the
manner of dismissal. The illegality of the act of dismissal constitutes discharge without just cause, while
illegality in the manner of dismissal is dismissal without due process.[30]
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his sight as the
latter tried to explain his side, petitioner made it plain that Lagrama was dismissed. Urinating in a work
place other than the one designated for the purpose by the employer constitutes violation of reasonable
regulations intended to promote a healthy environment under Art. 282(1) of the Labor Code for purposes
of terminating employment, but the same must be shown by evidence. Here there is no evidence that
Lagrama did urinate in a place other than a rest room in the premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor Arbiter found
that the relationship between the employer and the employee has been so strained that the latters
reinstatement would no longer serve any purpose. The parties do not dispute this finding. Hence, the
grant of separation pay in lieu of reinstatement is appropriate. This is of course in addition to the payment
of backwages which, in accordance with the ruling in Bustamante v. NLRC,[31] should be computed from
the time of Lagramas dismissal up to the time of the finality of this decision, without any deduction or
qualification.
The Bureau of Working Conditions[32] classifies workers paid by results into two groups, namely; (1) those
whose time and performance is supervised by the employer, and (2) those whose time and performance
is unsupervised by the employer. The first involves an element of control and supervision over the manner

the work is to be performed, while the second does not. If a piece worker is supervised, there is an
employer-employee relationship, as in this case. However, such an employee is not entitled to service
incentive leave pay since, as pointed out in Makati Haberdashery v. NLRC[33] and Mark Roche International
v. NLRC,[34] he is paid a fixed amount for work done, regardless of the time he spent in accomplishing such
work.
WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing that the Court of Appeals
committed any reversible error. The decision of the Court of Appeals, reversing the decision of the
National Labor Relations Commission and reinstating the decision of the Labor Arbiter, is AFFIRMED with
the MODIFICATION that the backwages and other benefits awarded to private respondent Leovigildo
Lagrama should be computed from the time of his dismissal up to the time of the finality of this decision,
without any deduction and qualification. However, the service incentive leave pay awarded to him is
DELETED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, and Corona, JJ., concur.

Leaves
Service Incentive Leaves

Art. 95, Labor Code

Article 95. Right to service incentive leave.
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.
This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted from granting this benefit by the
Secretary of Labor and Employment after considering the viability or financial condition of such
establishment.
The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any
court or administrative action.

Book III, Rule V, Implementing Rules (Labor Code)

See David v. Macasio, G.R. No. 195466, July 2, 2014

See CIT v. Ople, G.R. No. L-58870, December 18, 1987

CORTES, J.:

Six cases involving various private schools, their teachers and non-teaching school personnel, and even
parents with children studying in said schools, as well as the then Minister of Labor and Employment, his
Deputy, the National Labor Relations Commission, and the then Minister of Education, Culture and
Sports, have been consolidated in this single Decision in order to dispose of uniformly the common legal
issue raised therein, namely, the allocation of the incremental proceeds of authorized tuition fee
increases of private schools provided for in section 3 (a) of Presidential Decree No. 451, and thereafter,
under the Education Act of 1982 (Batas Pambansa Blg. 232).
Specifically, the common problem presented by these cases requires an interpretation of section 3(a) of
Pres. Decree No. 451 which states:
SEC. 3. Limitations. The increase in tuition or other school fees or other charges as well as the new
fees or charges authorized under the next preceding section shall be subject to the following conditions;
(a) That no increase in tuition or other school fees or charges shall be approved unless sixty (60%)per
centum of the proceeds is allocated for increase in salaries or wages of the members of the faculty and
all other employees of the school concerned, and the balance for institutional development, student
assistance and extension services, and return to investments: ProvidedThat in no case shall the return to
investments exceed twelve (12%) per centum of the incremental proceeds;
xxx xxx xxx
In addition, there is also a need for a pronouncement on the effect of the subsequent enactment of B.P.
Blg. 232 which provides for the allocation of tuition fee increases in section 42 thereof.
In a nutshell, the present controversy was precipitated by the claims of some school personnel for
allowances and other benefits and the refusal of the private schools concerned to pay said allowances
and benefits on the ground that said items should be deemed included in the salary increases they had
paid out of the 60% portion of the proceeds from tuition fee increases provided for in section 3 (a) of
Pres. Decree No. 451. The interpretation and construction of laws being a matter of judicial power and
duty [Marbury v. Madison, 1 Cranch 137 (1803); Endencia v. David, 93 Phil. 696 (1953)], this Court has
been called upon to resolve the controversy.
In the process of reading and at times, having to decipher, the numerous pleadings filed in the six cases,
the Court found that the main issue has been approached by the parties from almost diametrical points,
thereby bringing into focus three sub-issues: first, whether or not allowances and other fringe benefits
of faculty members and other school employees may be charged against the 60% portion of the tuition
fee increases provided for in section 3(a) of Pres. Dec. No. 451: second, whether or not the same items
may be charged against said portion under the provisions of B.P. Blg. 232: and, third, whether or not
schools and their employees may enter into a collective bargaining agreement allocating more than 60%
of said incremental proceeds for salary increases and other benefits of said employees. After these subissues have been resolved, the Court will tackle the other incidents attending the individual
cases, seriatim.
The factual antecedents that brought these cases before this Tribunal are as follows:
I.. FACTUAL BACKGROUND OF EACH CASE
A.

CEBU INSTITUTE OF TECHNOLOGY CASE

This case originated from a Complaint filed with the Regional Office No. VII of the Ministry of Labor on
February 11, 1981 against petitioner Cebu Institute of Technology (CIT) by private respondents, Panfilo
Canete, et al., teachers of CIT, for non-payment of: a) cost of living allowances (COLA) under Pres. Dec.
Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th) month pay differentials and c) service
incentive leave. By virtue of an Order issued by the then Deputy Minister of Labor Carmelo C. Noriel, a
labor-management committee composed of one representative each from the Ministry of Labor and
Employment (MOLE), the Minister of Education, Culture and Sports (MECS), and two representatives
each from CIT and from the teachers was created. Said committee was to ascertain compliance with the
legal requirements for the payment of COLA, thirteenth (13th) month pay and service incentive leave
[Rollo, p. 84].
The position taken by CIT during the conference held by the labor management committee was that it
had paid the allowances mandated by various decrees but the same had been integrated in the
teacher's hourly rate. It alleged that the payment of COLA by way of salary increases is in line with Pres.
Dec. No. 451. It also claimed in its position paper that it had paid thirteenth month pay to its employees
and that it was exempt from the payment of service incentive leave to its teachers who were employed
on contract basis [Rollo, pp. 85-86].
After the report and recommendation of the committee, herein public respondent, then Minister of
Labor and Employment issued the assailed Order dated September 29, 1981 and held that the basic
hourly rate designated in the Teachers' Program is regarded as the basic hourly rate of
teachers exclusive of the COLA, and that COLA should not be taken from the 60% incremental proceeds
of the approved increase in tuition fee. The dispositive portion of the Order reads:
PREMISES CONSIDERED, CIT is hereby ordered to pay its teaching staff the following:
1) COLA under P.D.'s 525 and 1123 from February 1978 up to 1981;
2) COLA under P.D.'s l6l4,1634,1678 and l7l3;and
3) Service incentive leave from l978 upto l981.
CIT is further directed to integrate into the basic salaries of its teachers and (sic) COLA under P.D.'s 525
and 1123 starting on January 1981, pursuant to P.D. 1751. For purposes of integration, the hourly rate
shown in its Teachers' Program for school year 198182 shall be considered as the basic hourly rate.
SO ORDERED.
Petitioner assails the aforesaid Order in this Special Civil Action of certiorari with Preliminary Injunction
and/or Restraining Order. The Court issued a Temporary Restraining Order on December 7, 1981 against
the enforcement of the questioned Order of the Minister of Labor and Employment.
B.
DIVINE WORD COLLEGE OF LEGAZPI CASE
Upon a complaint filed by ten faculty members for alleged non-compliance by herein petitioner Divine
Word College of Legazpi with, among others, Pres. Dec. No. 451, i.e., allowances were charged to the

60% incremental proceeds of tuition fee increase, the Labor Regulation Section of Regional Office No. V
(Legazpi City) of the Ministry of Labor and Employment conducted an inspection of the employment
records of said school. On the basis of the report on the special inspection that the school did not
comply with Pres. Dec. No. 451, herein respondent Regional Director issued an Order dated May 30,
1983, requiring compliance by the Divine Word College. The latter filed a Memorandum of Appeal from
said Order which the Regional Director treated as a Motion for Reconsideration. Upon failure of the
school to comply with the aforesaid Order, another Order (August 2, 1983) was issued by herein
respondent Regional Director requiring herein petitioner to pay the faculty members- complainants
(herein private respondents) the amounts indicated therein or the total sum of Six Hundred Seventeen
Thousand Nine Hundred Sixty Seven Pesos and Seventy Seven Centavos (P 617,967.77). Petitioner's
Motion for Reconsideration of the Order was denied.
On appeal, the respondent Deputy Minister of Labor and Employment affirmed the Order of the
Regional Director, viz:
xxx xxx xxx
Coming now to the substantial merit of the case, we share the view that the emergency allowances due
the complainants under the several presidential decrees (PD's 525, 1123, etc.) cannot be charged by the
respondent against the 60% of the incremental proceeds from increase in tuition fees authorized under
PD 451, not only because as per decision of the Supreme Court (UE vs. UE Faculty Association, et. al.,
G.R. No. 57387, September 30, 1982) said allowances whether mandated by law or secured by collective
bargaining should be taken only from the return to investment referred to in the decree if the school has
no other resources to grant the allowances but not from the 60% incremental proceeds, but also
because to hold otherwise would, to our mind, inevitably result in the loss of one benefit due the
complainants-that is the salary or wage increase granted them by PD 451.
In other words, we believe that by paying the complainants' allowances out of the 60% incremental
proceeds intended for their salary increase they are practically being deprived of one benefit-their share
in the 60% incremental proceeds in terms of salary or wage increase.
WHEREFORE, for the reasons abovestated, the Order appealed from is hereby AFFIRMED, and the
appeal DISMISSED, for lack of merit.
SO ORDERED.
(Annex "K " to Petition; Rollo, p. 108, 110).
This special civil action of certiorari and Prohibition with Preliminary Injunction questions the
interpretation of, and application by the respondent Deputy Minister, of the provisions of Pres. Dec. No.
45 1, as set forth in the assailed Order.
On March 25, 1985, after considering the allegations, issues and arguments adduced in the Petition as
well as the Comment thereon of the public respondent and dispensing with the private respondents'
Comment, the Court resolved to dismiss the Petition for lack of merit (Rollo, p. 198). On April 26, 1985,
petitioner filed a Motion for Reconsideration with Motion to Consider the Case En Banc. On June 26,
1985 the First Division of the Court referred the case to the Court En Banc for consolidation with G.R.
No. 70832, entitled "Gregorio T. Fabros, et al vs. Hon. Jaime C. Laya, etc. " since it involves the same

issue on the application of 60% incremental proceeds of authorized tuition fee increases [Rollo, p. 235].
The Court EN BANC resolved to accept the case. (Resolution of July 16, 1985). These cases were further
consolidated with other cases involving the same issues.
C.
FAR EASTERN UNIVERSITY CASE
On December 17, 1978, petitioner Union filed with the Ministry of Labor and Employment a complaint
against respondent University for non-payment of legal holiday pay and under-payment of the
thirteenth (13th) month pay. On July 7, 1979, while the case was pending, the Union President, in his
personal capacity, filed another complaint for violation of Pres. Dec. No. 451 against the same
respondent.
The two cases were forthwith consolidated and jointly heard and tried. On March 10, 1980, Labor
Arbiter Ruben A. Aquino promulgated a decision the dispositive portion of which is quoted hereunder:
RESPONSIVE TO THE FOREGOING, respondent is hereby directed, within ten (10) days from receipt
hereof, to:
1. To (sic) pay the paid legal holidays that it withdrew since January 14, 1976 up to the present; and
2. Pay the 13th month pay differential of complainant's for the covered period December 16, 1975 to
December 17, 1978, date of filing of complaint for non-payment of legal holiday pay and under payment
of the 13th month pay, and thereafter. Barred forever are money claims beyond three (3) years from
the time the course (sic) of action occurred. Respondent's formula on transportation allowance which
was deducted from the 13th month pay is thus subject to this prescriptive period, for purposes of
computation of differentials for the 13th month pay.
The claim under PD 451 is hereby dismissed for lack of merit.
SO ORDERED.
(Annex " E " to Petition; Rollo, p. 55, 65-66).
Both parties appealed the decision of the Labor Arbiter. On September 18, 1984, the respondent
Commission disposed of the appeal in the following manner:
RESPONSIVE TO THE FOREGOING, the Decision of Labor Arbiter Ruben A. Aquino in the instant case
dated March 10, 1980 is hereby Modified in the sense that complainant's claims for legal holiday pay
and 13th month pay are likewise dismissed for lack of merit and the dismissal of the claim under P.D.
451 is hereby Affirmed en (sic) toto.
(Annex "A" to Petition: Rollo, p. 24, 35).
Petitioner's Motion for Reconsideration dated September 29, 1984 was denied for lack of merit on
November 8, 1984. Before this Court is the petition on certiorari filed by the Union assailing the
abovementioned decision of the Commissioner.
D.

FABROS CASE
This petition is in the nature of a class suit brought by petitioners in behalf of the faculty members and
other employees of more than 4000 private schools nationwide. Petitioners seek to enjoin the
implementation of paragraphs 7 to 7.5 of MECS Order No. 5, series of 1985 on the ground that the said
order is null and void for being contrary to Pres. Dec. No. 451 and the rulings of the Supreme Court in
the cases of University of the East v. UE Faculty Association [G.R. No. L-57387, September 20, 1982, 117
SCRA 5541, University of Pangasinan Faculty Union v. University of Pangasinan and NLRC [G.R. No.
63122, February 20, 1984, 127 SCRA 691 ], St. Louis University Faculty Club v. NLRC and St. Louis
University [G.R. No. 65585, September 28, 1984, 132 SCRA 380].
On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was signed into law. On the
matter of tuition and other school fees of private schools, section 42 of said law provides as follows:
Sec. 42. Tuition and other School Fees. Each private School shall determine its rate of tuition and
other school fees or charges. The rates and charges adopted by schools pursuant to this provision shall
be collectible, and their application or use authorized subject to rules and regulations promulgated by
the Ministry of Education, Culture and Sports. (Emphasis supplied).
Invoking section 42 of B.P. Blg. 232, among others, as its legal basis, the then Minister of Education
Jaime C. Laya promulgated on April 1, 1985 the disputed MECS Order No. 25, s. 1985 entitled Rules and
Regulations To Implement the Provisions of B.P. Blg. 232. The Education Act of 1982, Relative to Student
Fees for School Year 1985-1986. The relevant portions of said Order are quoted hereunder:
7. Application or Use of Tuition and
Other School Fees or Charges.
7.1. The proceeds from tuition fees and other school charges as well as other income of each school
shall be treated as an institutional fund which shall be administered and managed for the support of
school purposes strictly: Provided, That for the purpose of generating additional financial resources or
income for the operational support and maintenance of each school two or more schools may pool their
institutional funds, in whole or in part, subject to the prior approval of their respective governing
boards.
7.2. Tuition fees shag be used to cover the general expenses of operating the school in order to allow it
to meet the minimum standards required by the Ministry or any other higher standard, to which the
school aspires. They may be used to meet the costs of operation for maintaining or improving the
quality of instruction/training/research through improved facilities and through the payment of
adequate and competitive compensation for its faculty and support personnel, including compliance
with mandated increases in personnel compensation and/or allowance.
7.3. Tuition fees shag be used to cover minimum and necessary costs including the following: (a)
compensation of school personnel such as teaching or academic staff, school administrators, academic
non-teaching personnel, and non-academic personnel, (b) maintenance and operating expenses,
including power and utilities, rentals, depreciation, office supplies; and (c) interest expenses and
installment payments on school debts.

7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries or
wages, allowances and fringe benefits of faculty and support staff, including cost of living allowance,
imputed costs of contributed services, thirteenth (13th) month pay, retirement fund contributions,
social security, medicare, unpaid school personnel claims and payments as may be prescribed by
mandated wage orders. collective bargaining agreements and voluntary employer practices, Provided
That increases in fees specifically authorized for the purposes listed in paragraph 4.3.3 hereof shall be
used entirely for those purposes. (Italics supplied).
7.5. Other student fees and charges as may be approved, including registration, library, laboratory,
athletic, application, testing fees and charges shall be used exclusively for the indicated purposes,
including (a) the acquisition and maintenance of equipment, furniture and fixtures, and buildings, (b) the
payment of debt amortization and interest charges on debt incurred for school laboratory, athletic, or
other purposes, and (c) personal services and maintenance and operating expenses incurred to operate
the facilities or services for which fees and charges are collected.
The Petition prayed for the issuance of a temporary restraining order which was granted by this Court
after hearing. The dispositive portion of the resolution dated May 28, 1985 reads as follows:
After due consideration of the allegations of the petition dated May 22, 1985 and the arguments of the
parties, the Court Resolved to ISSUE, effective immediately and continuing until further orders from this
Court, a TEMPORARY RESTRAINING ORDER enjoining the respondent from enforcing or implementing
paragraphs 7.4 to 7.5 of MECS Order No. 25, s. 1985, which provide for the use and application of sixty
per centum (60%) of the increases in tuition and other school fees or charges authorized by public
respondent for the school year 1985-1986 in a manner inconsistent with section 3(a), P.D. No. 451,
(which allocates such 60% of the increases exclusively "for increases in salaries or wages of the members
of the faculty and other employees of the school concerned.") and directing accordingly that such 60%
of the authorized increases shall be held in escrow by the respective colleges and universities, i.e., shall
be kept intact and not disbursed for any purpose pending the Court's resolution of the issue of the
validity of the aforementioned MECS Order in question.
(Rollo, p. 21).
In the same resolution, the Philippine Association of Colleges and Universities (PACU) was impleaded as
respondent.
Subsequent to the issuance of this resolution, four (4) schools, represented in this petition, moved for
the lifting of the temporary restraining order as to them. In separate resolutions, this Court granted
their prayers.
Ateneo de Manila University, De La Sale University (Taft Avenue) and De La Salle University-South,
through their respective counsels, manifested that for the school year 1985-1986, tuition fee increase
was approved by the MECS and that on the basis of Pres. Dec. No. 451, 60% of the tuition fee increases
shall answer for salary increase. However, a budgeted salary increase, exclusive of living allowances and
other benefits, was approved for the same school year which when computed amounts to more than
the 60%.

This Court granted the motions in separate resolutions lifting the temporary restraining order with
respect to these schools in order that they may proceed with the implementation of the general salary
increase for their employees.
In the case of St. Louis University, its Faculty Club, Administrative Personnel Association and the
University itself joined in a petition seeking for leave that 49% of the increase in tuition and other fees
for school year 1985-1986 be released. Petitioners manifested that the remaining balance shall continue
to be held in escrow by the University.
In a resolution dated January 28, 1986, the Court resolved as follows:
Accordingly, the Temporary Restraining Order issued by this Court on May 28, 1985 is hereby ordered
LIFTED with respect to Saint Louis University of Baguio City in order that it may proceed immediately
with the implementation of salary increases for its employees.
D.
BISCOCHO CASE
The Espiritu Santo Parochial School and the Espiritu Santo Parochial School Faculty Association were
parties to a labor dispute which arose from a deadlock in collective bargaining. The parties entered into
conciliation proceedings. The union went on strike after efforts at the conciliation failed. Subsequently,
a return to work agreement was forged between the parties and both agreed to submit their labor
dispute to the jurisdiction of the Minister of Labor.
In the exercise of his power to assume jurisdiction, the Ministry of Labor and Employment issued an
Order dated April 14, 1986 which provides for the following:
IN CONSIDERATION OF ALL THE FOREGOING, the Ministry hereby declares the strike staged by the Union
to be legal and orders the following:
a) the School to submit the pertinent record of employment of Romualdo Noriego to the Research and
Information Division of the NLRC for computation of his underpayment of wages and for the parties to
abide by the said computation;
b) the School to submit all pertinent record of collections of tuition fee increases for school year (sic)
1982-1983, 1983-1984 and 1984-1985 to the Research and Information Division of the NLRC for proper
computation and for equal distribution of the amount to all employees and teachers during the
abovementioned school year (sic) as their salary adjustment under P.D. 461;
c) the parties to wait for the final resolution of the illegal dismissal (case) docketed as NLRC NCR Case
No. 5-1450-85 and to abide by the said resolution;
d) to furnish the MECS a copy of this order for them to issue the guidelines in the implementation of
PRODED Program;
e) the parties to execute a collective bargaining agreement with an economic package equivalent to 90%
of the proceeds from tuition fee increases for school year 1985-1986 and another 90% for school year
1986-1987 and 85% for school year 1987-1988. The amount aforementioned shall be divided equally to
all members of the bargaining unit as their respective salary adjustments. Such other benefits being

enjoyed by the members of the bargaining unit prior to the negotiation of the CBA shall remain the same
and shall not be reduced.
f) the School to deduct the amount equivalent to ten (10%) per cent of the backwages payable to all
members of the bargaining unit as negotiation fee and to deliver the same to the Union Treasurer for
proper disposition (Emphasis supplied).
SO ORDERED.
(Rollo, pp. 16-17)
Pursuant to the said order, private respondent Union agreed to incorporate in their proposed collective
bargaining agreement (CBA) with the School the following:
2) The Union and School Administration will incorporate the following in their CBA 1) The computation of the tuition fee increase shall be gross to gross from which the corresponding
percentage of 90% will be taken. The resulting amount will be divided among 141.5 employees for 198586 and 132.5 employees for 1986-87.
1/2 of the resulting increase will be added to basic and divided by 13.3 to arrive at monthly increase in
basic. The other 1/2 will be divided by 12.3 to arrive at monthly increase in living allowance.
xxx xxx xxx
4) xxx
Upon request/demand of the Union, School win deduct from backwages of managerial employees and
others outside the bargaining unit what Union win charge its own members in the form of attorney's
fees, special assessment and union dues/agency fee.
5) The signing of the CBA and payment of backwages and others shall be on November 26, 1986 at the
Espiritu Santo Parochial School Library.
(Rollo, pp. 3-4).
The herein petitioners, Jasmin Biscocho and 26 others, all employees and faculty members of the
respondent School, filed the present petition for prohibition to restrain the implementation of the April
14, 1986 Order of respondent Labor Minister as well as the agreements arrived at pursuant thereto.
They contend that said Order and agreements affect their rights to the 60% incremental proceeds under
Pres. Dec. No. 451 which provide for the exclusive application of the 60% incremental proceeds to basic
salary.
Acting on the petitioners' prayer, this Court immediately issued a temporary restraining order on
November 25, 1986 ". . . enjoining the respondents from enforcing, implementing and proceeding with
the questioned order of April 14, 1986 and collective bargaining agreement executed between
respondents Union and the School Administration in pursuance thereof." [Rollo, p. 20].
F.
VALMONTE CASE

This Petition was filed by parents with children studying at respondent school, Espiritu Santo Parochial
School to nullify the Order dated April 14, 1986 issued by public respondent, then Minister of Labor and
Employment, specifically paragraphs (e) and (f) thereof, quoted in the Biscocho case.
The award contained in the said Order is the result of the assumption of jurisdiction by the public
respondent over a labor dispute involving the private respondents school and faculty association. The
latter had earlier filed a notice of strike because of a bargaining deadlock on the demands of its
members for additional economic benefits. After numerous conciliation conferences held while the
union was on strike, the parties voluntarily agreed that the public respondent shall assume jurisdiction
over all the disputes between them. As to the subject matter of the instant case, the public respondent
found that the latest proposals of the respondent school was to give 85% of the proceeds from tuition
fee increases for the school years to be divided among the teachers and employees as salary
adjustments. What the respondent faculty association offered to accept was a package of 95% for
school year 1985-1986, 90% for school year 1986- 1987. The respondent school offered to strike the
middle of the two positions, hence the Order complained of by the petitioners [See Annex "A", Petition;
Rollo, pp. 9, 14-15; Comment of the Respondent Faculty Association: Rollo, p. 26].
II. RESOLUTION OF THE COMMON LEGAL ISSUE
This long-drawn controversy has sadly placed on the balance diverse interests, opposed yet intertwined,
and all deserving, and demanding, the protection of the State. On one arm of the balance hang the
economic survival of private schools and the private school system, undeniably performing a
complementary role in the State's efforts to maintain an adequate educational system in the country.
Perched precariously on the other arm of the same balance is the much-needed financial uplift of
schoolteachers, extolled for all times as the molders of the minds of youth, hence of every nation's
future. Ranged with them with needs and claims as insistent are other school personnel. And then,
anxiously waiting at the sidelines, is the interest of the public at large, and of the State, in the continued
availability to all who desire it, high-standard education consistent with national goals, at a reasonable
and affordable price.
Amidst these opposing forces the task at hand becomes saddled with the resultant implications that the
interpretation of the law would bear upon such varied interests. But this Court can not go beyond what
the legislature has laid down. Its duty is to say what the law is as enacted by the lawmaking body. That is
not the same as saying what the law should be or what is the correct rule in a given set of
circumstances. It is not the province of the judiciary to look into the wisdom of the law nor to question
the policies adopted by the legislative branch. Nor is it the business of this Tribunal to remedy every
unjust situation that may arise from the application of a particular law. It is for the legislature to enact
remedial legislation if that be necessary in the premises. But as always, with apt judicial caution and cold
neutrality, the Court must carry out the delicate function of interpreting the law, guided by the
Constitution and existing legislation and mindful of settled jurisprudence. The Court's function is
therefore limited, and accordingly, must confine itself to the judicial task of saying what the law is, as
enacted by the lawmaking body.
FIRST SUB-ISSUE
A. Whether or not allowances and other fringe benefits of employees may be charged against the 60%
portion of the incremental proceeds provided for in sec. 3(a) of Pres. Dec. No. 451.

1. Arguments raised in the Cebu Institute of Technology case

In maintaining its position that the salary increases it had paid to its employees should be considered to
have included the COLA, Cebu Institute of Technology (CIT) makes reference to Pres. Dec. No. 451 and
its Implementing Rules. The line of reasoning of the petitioner appears to be based on the major
premise that under said decree and rules, 60% of the incremental proceeds from tuition fee increases
may be applied to salaries, allowances and other benefits of teachers and other school personnel. In
support of this major premise, petitioner cites various implementing rules and regulations of the then
Minister of Education, Culture and Sports, to the effect that 60% of the incremental proceeds may be
applied to salaries, allowances and other benefits for members of the faculty and other school
personnel [Petition citing Implementing Rules and Regulations of Pres. Dec. No. 451 of various dates;
Rollo, pp. 318-320]. Petitioner concludes that the salary increases it had granted the CIT teachers out of
the 60% portion of the incremental proceeds of its tuition fee increases from 1974-1980 pursuant to
Pres. Dec. No. 451 and the MECS implementing rules and regulations must be deemed to have included
the COLA payable to said employees for those years [Rollo, pp. 911].
With leave of Court, the Philippine Association of Colleges and Universities, filed its Memorandum as
Intervenor in support of the proposition that schools may pay the COLA to faculty members and other
employees out of the 60% of the increase in tuition fees. In addition to the arguments already set forth
in the memorandum of the petitioner CIT, intervenor PACU attacks the Decision of this Court
in University of the East v. University of the East Faculty Association et. all G.R. No. 57387 as "not
doctrinal" and inapplicable to the CIT case. The Court held in the UE case, which was promulgated on
September 30, 1982, during the pendency of these cases, that:
... allowances and benefits should be chargeable to the return to investment referred to in Sec. 3(a), if
the schools should happen to have no other resources than incremental proceeds of authorized tuition
fee increases ... (See Dispositive Portion of the Decision)
Intervenor PACU alleges that the aforecited U.E. decision does not categorically rule that COLA and
other fringe benefits should not be charged against the 60% incremental proceeds of the authorized
tuition fee increase.
The Solicitor General, on the other hand, argues in support of the Order of the public respondent that
Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee increases exclusively for salary increases of
teachers and non- teaching supportive personnel of the school concerned, and that the Decree does not
provide that said salary increases would take the place of the COLA [Rollo, p. 244-245]. He cites as
authority for this stance, two (2) memoranda of the then President dated June 6, 1978 and March 30,
1979 both of which provide that the 60% incremental proceeds of tuition fee increases "shall be
allocated for the increase in the salaries of teachers and supportive personnel. " Anent the U.E. case, the
Solicitor General states that the Supreme Court in deciding said case took note of the stand of the Office
of the President that the 60% incremental proceeds shall be solely applied to salaries of faculty
members and employees.
On August 7, 1986, considering the supervening events, including the change of administration, that
have transpired during the pendency of these cases, the Court required the Solicitor General to state
whether or not he maintains the action and position taken by his predecessor-in-office. In his
Compliance with said Resolution, the Solicitor General Manifested the position that:

a. If the tuition fee increase was collected during the effectivity oil Presidential Decree No. 451, 60%
thereof shall answer exclusively for salary increase of school personnel. Other employment benefits
shall be covered by the 12% allocated for return of investment, this is in accordance with the ruling of
this Honorable Court in University of the East vs. U.E. Faculty Association, et. al (117 SCRA 554), ... and
reiterated in University of Pangasinan Faculty Union v. University of Pangasinan, et. al. (127 SCRA 691)
and St. Louis Faculty Club u. NLRC (132 SCRA 380).
b. If the salary increase was collected during the effectivity of Batas Pambansa Blg. (sic) 232, 60%
thereof shall answer not only for salary increase of school personnel but also for other employment
benefits.
(Rollo, at pp. 513-514)
2. Arguments raised in the Divine Word College Case
Petitioner Divine Word College of Legazpi (DWC) advances the theory that the COLA, 13th month pay
and other personnel benefits decreed by law, must be deemed chargeable against the 60% portion
allocated for increase of salaries or wages of faculty and all other school employees. In support of this
stance, petitioner points out that said personnel benefits are not included in the enumeration of the
items for which the balance (less 60%) or 40% portion of the incremental proceeds may be alloted under
section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30. Petitioner likewise cites the interpretation of the
respondent Minister of Education, Culture and Sports embodied in the Implementing Rules and
Regulations of P.D. 451, DEC Issuance, May 13, 1987; Rollo, p. 30], that the 60% incremental proceeds of
authorized tuition fee increases may be applied to increases in emoluments and/or benefits for
members of faculty, including staff and administrative employees of the school as the valid
interpretation of the law, as against that made by the respondent Deputy Minister of Labor in the
assailed Order. If the latter interpretation is upheld, petitioner would go as far as questioning the
constitutionality of Pres. Dec. No. 451 upon the ground that the same discriminates against the
petitioner and other private schools as a class of employers. According to the petitioner, the
discrimination takes the form of requiring said class of employers to give 60% of their profits to their
employees in addition to the COLA mandated by law, while other employers have to contend only with
salary increases and COLA [Petition; Rollo, p. 46].
With regard to the Decision of this Court in the U.E. case, petitioner claims exemption therefrom upon
the ground that the Court's interpretation of a law cannot be applied retroactively to parties who have
relied upon the previous administrative interpretation which has not been declared invalid or
unconstitutional [Petition; Rollo, pp. 50-51 1. Petitioner further argues on this point that if the court had
intended to invalidate the MECS interpretation of the Decree, it should have positively stated so in the
Decision [Petition; Rollo, p. 50].
The Comment of the public respondents cite as settled jurisprudence applicable to the case at bar, the
ruling of this Court in the U.E. case, supra, which was reiterated in the subsequent cases of University of
Pangasinan Faculty Union v. University of Pangasinan et all and St. Louis Faculty Club v. NLRC, et al.
Public respondents Deputy Minister of Labor and Employment and Regional Director of the MOLE
(Region V) likewise attack the validity of the Revised Implementing Rules and Regulations of Pres. Dec.
No. 451 cited by the petitioner insofar as said rules direct the allotment of the 60% of incremental

proceeds from tuition fee hikes for retirement plan, faculty development and allowances. They argue
that said rules and regulations were invalid for having been promulgated in excess of the rule-making
authority of the then Minister of Education under Pres. Dec. No. 451 which mandates that the 60% of
incremental proceeds from tuition fee hikes should be allotted solely for salary increases [Comment;
Rollo, pp. 184-185]. Finally, with respect to the issue on the allege unconstitutionality of Pres. Dec. No.
451, the public respondents posit that a legislation (such as Pres. Dec. No. 451) which affects a particular
class does not infringe the constitutional guarantee of equal protection of the law as long as it applies
uniformly and without discrimination to everyone of that class [Comment; Rollo, p. 14].
3. Arguments raised in the Far Eastern University case
It is the petitioner's contention that in respect of Pres. Dec. No. 451, the decision of the NLRC is a
defiance of the rulings of this Court in the cases of University of the East v. U.E. Faculty, Association et al.
and of University of Pangasinan Faculty Union v. University of Pangasinan and NLRC (supra). The Union
submits that monetary benefits, other than increases in basic salary, are not chargeable to the 60%
incremental proceeds.
The respondent University in its Comment dated June 13, 1982 refers to Article 97(f) of the Labor Code
which provides a definition of the term "wages" to support its position that "salaries or wages" as used
in Pres. Dec. No. 451 should be interpreted to include other benefits in terms of money.
As mentioned in the Cebu Institute of Technology case, the Solicitor General filed its Compliance with
this Court's resolution dated August 7, 1986 requiring him to manifest whether public respondents
maintain the position they have taken in these consolidated cases. The resolution of September 25,
1986 required petitioners to Comment on said Compliance.
The Comment dated December 6, 1986 was received by this Court after petitioner Union was required
to show cause why no disciplinary action should be taken against them for failure to comply earlier. The
Union agreed with the position taken by the Solicitor General that under Pres. Dec. No. 451, 60% of the
tuition fee increases, shall answer exclusively for salary increase. However, it expressed disagreement
with the opinion that during the effectivity of B.P. Blg. 232, the 60% ncremental proceeds shall answer
not only for salary increases but also for other employment benefits. The Union argues that
whereas "Pres. Dec. No. 451 is a law on a particular subject, viz., increase of tuition fee by educational
institutions and how such increase shall be allocated B.P. Blg. 232 is not a law on a particular subject of
increase of tuition fee . . . ; at most it is a general legislation on tuition fee as it touches on such subject in
general, " [Comment on Compliance; Rollo, p. 376], Suppletory to its argument that B.P. Blg. 232 did not
impliedly repeal Pres. Dec. No. 451, the Union also invokes the principle that a special or particular law
cannot be repealed by a general law.
RESOLUTION OF THE FIRST SUB-ISSUE
This Court has consistently held, beginning with the University of the East case, that if the schools have
no resources other than those derived from tuition fee increases, allowances and benefits should be
charged against the proceeds of tuition fee increases which the law allows for return on investments
under section 3(a) of Pres. Dec. No. 451, therefore, not against the 60% portion allocated for increases
in salaries and wages (See 117 SCRA at 571). This ruling was reiterated in the University of
Pangasinan case and in the Saint Louis University case.

There is no cogent reason to reverse the Court's ruling in the aforecited cases. Section 3(a) of Pres. Dec.
No. 451 imposes among the conditions for the approval of tuition fee increases, the allocation of 60%
per cent of the incremental proceeds thereof for increases in salaries or wages of school personnel and
not for any other item such as allowances or other fringe benefits. As aptly put by the Court in University
of Pangasinan Faculty Union v. University of Pangasinan, supra:
... The sixty (60%) percent incremental proceeds from the tuition increase are to be devoted entirely to
wage or salary increases which means increases in basic salary. The law cannot be construed to include
allowances which are benefits over and above the basic salaries of the employees. To charge such
benefits to the 60% incremental proceeds would be to reduce the increase in basic salary provided by
law, an increase intended also to help the teachers and other workers tide themselves and their families
over these difficult economic times. [Italics supplied] (127 SCRA 691, 702).
This interpretation of the law is consistent with the legislative intent expressed in the Decree itself, i.e.,
to alleviate the sad plight of private schools and that of their personnel wrought by slump in enrollment
and increasing operational costs on the part of the schools, and the increasing costs of living on the part
of the personnel (Preamble, Pres. Dec. No. 451). While coming to the aid of the private school system by
simplifying the procedure for increasing tuition fees, the Decree imposes as a condition for the approval
of any such increase in fees, the allocation of 60% of the incremental proceeds thereof, to increases in
salaries or wages of school personnel. This condition makes for a quid pro quo of the approval of any
tuition fee hike by a school, thereby assuring the school personnel concerned, of a share in its proceeds.
The condition having been imposed to attain one of the main objectives of the Decree, which is to help
the school personnel cope with the increasing costs of living, the same cannot be interpreted in a sense
that would diminish the benefit granted said personnel.
In the light of existing laws which exclude allowances from the basic salary or wage in the computation
of the amount of retirement and other benefits payable to an employee, this Court will not adopt a
different meaning of the terms "salaries or wages" to mean the opposite, i.e. to include allowances in
the concept of salaries or wages.
As to the alleged implementing rules and regulations promulgated by the then MECS to the effect that
allowances and other benefits may be charged against the 60% portion of the proceeds of tuition fee
increases provided for in Section 3(a) of Pres. Dec. No. 45 1, suffice it to say that these were issued ultra
vires, and therefore not binding upon this Court.
The rule-making authority granted by Pres. Dec. No. 451 is confined to the implementation of the
Decree and to the imposition of limitations upon the approval of tuition fee increases, to wit:
SEC. 4. Rules and Regulations. The Secretary of Education and Culture is hereby authorized,
empowered and directed to issue the requisite rules and regulations for the effective implementation of
this Decree. He may, in addition to the requirements and limitations provided for under Sections 2 and 3
hereof, impose other requirements and limitations as he may deem proper and reasonable.
The power does not allow the inclusion of other items in addition to those for which 60% of the
proceeds of tuition fee increases are allocated under Section 3(a) of the Decree.
Rules and regulations promulgated in accordance with the power conferred by law would have the force
and effect of law [Victorias Milling Company, Inc. v. Social Security Commission, 114 Phil. 555 (1962)] if

the same are germane to the subjects of the legislation and if they conform with the standards
prescribed by the same law [People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450].
Since the implementing rules and regulations cited by the private schools adds allowances and other
benefits to the items included in the allocation of 60% of the proceeds of tuition fee increases expressly
provided for by law, the same were issued in excess of the rule-making authority of said agency, and
therefore without binding effect upon the courts. At best the same may be treated as administrative
interpretations of the law and as such, they may be set aside by this Court in the final determination of
what the law means.
SECOND SUB-ISSUE
B. Whether or not allowances and other fringe benefits may be charged against the 60% portion of the
incremental proceeds of tuition fee increases upon the effectivity of the Education Act of 1982 (B.P. Blg.
232).
1. Arguments raised in the Fabros case
In assailing MECS Order No. 25, s. 1985, petitioners argue that the matter of allocating the proceeds
from tuition fee increases is still governed by Pres. Dec. No. 451. It is their opinion that section 42 of B.P.
Blg. 232 did not repeal Pres. Dec. No. 451 for the following reasons: first, there is no conflict between
section 42 of B.P. Blg. 232 and section 3(a) of Pres. Dec. No. 451 or any semblance of inconsistency to
deduce a case of a repeal by implication: second, Pres. Dec. No. 451 is a specific law upon a particular
subject-the purposes and distribution of the incremental proceeds of tuition fee increases, while B.P.
Blg. 232 is a general law on the educational system; as such, a specific law is not repealed by a
subsequent general law in the absence of a clear intention; and third, Pres. Dec. No. 451 is still the only
law on the subject of tuition fee increases there being no prescription or provision in section 42 of B.P.
Blg. 232 or elsewhere in the law. They furthermore aver that the disputed MECS Order which imposed
additional burdens against the 60% incremental proceeds of tuition fee increases are not provided in
either Pres. Dec. No. 451 or B.P. Blg. 232. The logical result as intimated by petitioners is that the
inclusion of paragraph 7.4 and related paragraphs 7 to 7.3 and 7.5 in the questioned MECS order
contravenes the statutory authority granted to the public respondent, and the same are therefore, void.
Respondent PACU takes the contrary view contending that MECS Order No. 25, s. 1985, complies with
the mandate of section 42 of B.P. Blg. 232 which law had already repealed Pres. Dec. No. 451. PACU
notes that the University of the East case invoked by petitioners is not applicable because the issue in
that case does not involve the effect of B.P. Blg. 232 on Pres. Dec. No. 451.
The Solicitor General, representing the public respondent, after giving a summary of the matters raised
by petitioner and respondent PACU, points out that the decisive issue in this case is whether B.P. Big.
232 has repealed Pres. Dec. No. 451 because on the answer to this question depends the validity of
MECS Order No. 25, s. 1985. Public respondent holds the view consistent with that of PACU on the
matter of B.P. Blg. 232 having repealed Pres. Dec. No. 451. To support this contention, the Solicitor
General compared the respective provisions of the two laws to show the inconsistency and
incompatibility which would result in a repeal by implication.
RESOLUTION OF THE SECOND SUB-ISSUE
On the matter of tuition fee increases section 42 of B.P. Blg. 232 provides:

SEC. 42. Tuition and Other School Fees. Each private school shall determine its rate of tuition and
other school fees or charges. The rates and charges adopted by schools pursuant to this provision shall
be collectible and their application or use authorized, subject to rules and regulations promulgated by
the Ministry of Education, Culture and Sports. (Emphasis supplied).
The enactment of B.P. Blg. 232 and the subsequent issuance of MECS Order No. 25, s. 1985 revived the
old controversy on the application and use of the incremental proceeds from tuition fee increases. As
can be gleaned from the pleadings and arguments of the parties in these cases, one side, composed of
the teachers and other employees of the private schools, insist on the applicability of section 3(a) of
Pres. Dec. No. 451 as interpreted arid applied in the University of the East, University of Pangasinan and
St Louis University cases, while the private schools uphold the view that the matter of allocating the
incremental proceeds from tuition fee increases is governed by section 42 of B.P. Blg. 232 as
implemented by the MECS Rules and Regulations. As stated, the latter's argument is premised on the
allegation that B.P. Blg. 232 impliedly repealed Pres. Dec. No. 451.
On the second sub-issue, therefore, this Court upholds the view taken by the Solicitor General in
the Fabroscase, that the decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec. No. 451.
In recognition of the vital role of private schools in the country's educational system, the government
has provided measures to regulate their activities. As early as March 10, 1917, the power to inspect
private schools, to regulate their activities, to give them official permits to operate under certain
conditions and to revoke such permits for cause was granted to the then Secretary of Public Instruction
by Act No. 2706 as amended by Act No. 3075 and Commonwealth Act No. 180. Republic Act No. 6139,
enacted on August 31, 1970, provided for the regulation of tuition and other fees charged by private
schools in order to discourage the collection of exorbitant and unreasonable fees. In an effort to simplify
the "cumbersome and time consuming" procedure prescribed under Rep. Act No. 6139 and "to alleviate
the sad plight of private schools," Pres. Dec. No. 451 was enacted on May 11, 1974. While this later
statute was being implemented, the legislative body envisioned a comprehensive legislation which
would introduce changes and chart directions in the educational system, hence, the enactment of B.P.
Blg. 232. What then was the effect of B.P. Blg. 232 on Pres. Dec. No. 451?
The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly section 3(a)
thereof, finds evident irreconcilable differences.
Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other school fees or
charges by private schools is lodged with the Secretary of Education and Culture (Sec. 1), where section
42 of B.P. Blg. 232 liberalized the procedure by empowering each private school to determine its rate of
tuition and other school fees or charges.
Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee increases shall be
applied or used to augment the salaries and wages of members of the faculty and other employees of
the school, while B.P. Blg. 232 provides that the increment shall be applied or used in accordance with
the regulations promulgated by the MECS.
A closer look at these differences leads the Court to resolve the question in favor of repeal. As pointed
out by the Solicitor General, three aspects of the disputed provisions of law support the above
conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to apportion the

incremental proceeds of the tuition fee increases; such power is delegated to the Ministry of Education
and Culture under B.P. Blg. 232.Second, Pres. Dec. No. 451 limits the application or use of the increment
to salary or wage increase, institutional development, student assistance and extension services and
return on investment, whereas B.P. Blg. 232 gives the MECS discretion to determine the application or
use of the increments. Third, the extent of the application or use of the increment under Pres. Dec. No.
451 is fixed at the pre-determined percentage allocations; 60% for wage and salary increases, 12% for
return in investment and the balance of 28% to institutional development, student assistance and
extension services, while under B.P. Blg. 232, the extent of the allocation or use of the increment is
likewise left to the discretion of the MECS.
The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451 is apparent in the
second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42 of B.P. Blg. 232 which
cover the same subject matter, are so clearly inconsistent and incompatible with each other that there is
no other conclusion but that the latter repeals the former in accordance with section 72 of B.P. Blg. 232
to wit:
Sec. 72. Repealing clause. All laws or parts thereof inconsistent with any provision of this Act shall be
deemed repealed or modified, as the case may be.
Opinion No. 16 of the Ministry of Justice dated January 29, 1985, quoted below, supports the above
conclusion:
Both P.D. No. 451 and B.P. Blg. 232 deal with the imposition of tuition and other school fees or charges
and their use and application, although the latter is broader in scope as it covers other aspects of the
education system. We note substantial differences or inconsistencies between the provisions of the two
laws. P.D. No. 451 prescribes certain limitations in the increase of tuition and other school fees and their
application, whereas the latter law, B.P. Blg. 232 s silent on the matter. Under P.D. 451, rates of
tuition/school fees need prior approval of the Secretary of Education, Culture (now Minister of
Education, Culture and Sports), who also determines the reasonable rates for new school fees, whereas
under B.P. Blg. 232, each private school determines its rate of tuition and other school fees or charges.
P.D. No. 451 authorizes the Secretary of Education and Culture to issue requisite rules and regulations to
implement the said Decree and for that purpose, he is empowered to impose other requirements and
limitations as he may deem proper and reasonable in addition to the limitations prescribed by the
Decree for increases in tuition fees and school charges, particularly, the limitations imposed in the
allocation of increases in fees and charges, whereas under B.P. Blg. 232, the collection and application or
use of rates and charges adopted by the school are subject to rules and regulations promulgated by the
Ministry of Education, Culture and Sports without any mention of the statutory limitations on the
application or use of the fees or charges. The authority granted to private schools to determine its rates
of tuition and unconditional authority vested in the Ministry of Education, Culture and Sports to
determine by rules and regulations the collection and application or use of tuition or fees rates and
charges under B.P. Big. 232 constitute substantial and irreconcilable incompatibility with the provisions
of P.D. No. 451, which should be for that reason deemed to have been abrogated by the subsequent
legislation.
Moreover, B.P. Blg. 232 is a comprehensive legislation dealing with the establishment and maintenance
of an integrated system of education and as such, covers the entire subject matter of the earlier law,
P.D. No. 451. The omission of the limitations or conditions imposed in P.D. No. 451 for increases in

tuition fees and school charges is an indication of a legislative intent to do away with the said limitations
or conditions. (Crawford, supra, p. 674). It has also been said that
an act which purports to set out in full all that it intends to contain, operates as a repeal of anything
omitted which was contained in the old act and not included in the amendatory act." (People vs.
Almuete 69 SCRA 410; People vs. Adillo 68 SCRA 90) (Ministry of Justice, Op. No. 16, s. 1985).
Having concluded that under B.P. Big. 232 the collection and application or use of tuition and other
school fees are subject only to the limitations under the rules and regulations issued by the Ministry, the
crucial point now shifts to the said implementing rules.
The guidelines and regulations on tuition and other school fees issued after the enactment of B.P. Blg.
232 consistently permit the charging of allowances and other benefits against the 60% incremental
proceeds. Such was the tenor in the MECS Order No. 23, s. 1983; MECS Order No. 15, s. 1984; MECS
Order No. 25, s. 1985; MECS Order No. 22, s. 1986; and DECS Order No. 37, s. 1987. The pertinent
portion of the latest order reads thus:
In any case of increase at least sixty percent (60%) of the incremental proceeds should be allocated for
increases in or provisions for salaries or wages, allowances and fringe benefits of faculty and other staff,
including accruals to cost of living allowance, 13th month pay, social security, medicare and retirement
contribution and increases as may be provided in mandated wage orders, collective bargaining
agreements or voluntary employer practices.
The validity of these orders, particularly MECS Order No. 25, s. 1985, is attacked on the ground that the
additional burdens charged against ". . . the 60% of the proceeds of the increases in tuition fees
constitute both as [sic] an excess of statutory authority and as (sic) a substantial impairment of the
accrued, existing and protected rights and benefits of the members of faculty and non-academic
personnel of private schools." Memorandum for Petitioners, Rollo, p. 1911. Petitioners alleged that
these additional burdens under the MECS Order are not provided in the law itself, either in section 42 of
B.P. Blg. 232 or section 3(a) of Pres. Dec. No. 451, except increases in salaries in the latter provision.
Section 42 of B.P. Blg. 232 grants to the Minister of Education (now Secretary of Education) rule-making
authority to fill in the details on the application or use of tuition fees and other school charges. In the
same vein is section 70 of the same law which states:
SEC. 70. Rule-making Authority. The Minister of Education, Culture and Sports charged with the
administration and enforcement of this Act, shall promulgate the necessary implementing rules and
regulations.
Contrary to the petitioners' insistence that the questioned rules and regulations contravene the
statutory authority granted to the Minister of Education, this Court finds that there was a valid exercise
of rule-making authority.
The statutory grant of rule-making power to administrative agencies like the Secretary of Education is a
valid exception to the rule on non-delegation of legislative power provided two conditions concur,
namely: 1) the statute is complete in itself, setting forth the policy to be executed by the agency, and 2)
said statute fixes a standard to which the latter must conform [Vigan Electric Light Co., Inc. v. Public

Service Commission, G.R. No. L-19850, January 30, 1964, and Pelaez v. Auditor General, G. R. No. L23825, December 24, 1965].
The Education Act of 1982 is "an act providing for the establishment and maintenance of an integrated
system for education " with the following basic policy:
It is the policy of the State to establish and maintain a complete, adequate and integrated system of
education relevant to the goals of national development. Toward this end, the government shall ensure,
within the context of a free and democratic system, maximum contribution of the educational system to
the attainment of the following national development goals:
1. To achieve and maintain an accelerating rate of economic development and social progress;
2. To assure the maximum participation of all the people in the attainment and enjoyment of the
benefits of such growth; and
3. To achieve and strengthen national unity and consciousness and preserve, develop and promote
desirable cultural, moral and spiritual values in a changing world.
The State shall promote the right of every individual to relevant quality education, regardless of sex, age,
creed, socioeconomic status, physical and mental conditions, racial or ethnic origin, political or other
affiliation. The State shall therefore promote and maintain equality of access to education as well as the
enjoyment of the benefits of education by all its citizens.
The State shall promote the right of the nation's cultural communities in the exercise of their right to
develop themselves within the context of their cultures, customs, traditions, interests and belief, and
recognizes education as an instrument for their maximum participation in national development and in
ensuring their involvement in achieving national unity. (Section 3, Declaration of Basic Policy).
With the foregoing basic policy as well as, specific policies clearly set forth in its various provisions, the
Act is complete in itself and does not leave any part of the policy-making, a strictly legislative function,
to any administrative agency.
Coming now to the presence or absence of standards to guide the Minister of Education in the exercise
of rule-making power, the pronouncement in Edu v. Ericta [G.R. No. L-32096, October 24, 1970, 35 SCRA
481, 497] is relevant:
The standard may be either expressed or implied. If the former, the non-delegation objection is easily
met. The standard though does not have to be spelled out specifically. It could be impliedfrom the policy
and purpose of the act considered as a whole. In the Reflector Law, clearly the legislative objective is
public safety. What is sought to be attained as in Calalang v. Williams is "safe transit upon the roads."
(Italics supplied).
Thus, in the recent case of Tablarin et al. v. Hon. Gutierrez, et al. (G.R. No. 78164, July 31, 1987], the
Court held that the necessary standards are set forth in Section 1 of the 1959 Medical Act, i.e., "the
standardization and regulation of medical education" as well as in other provisions of the Act. Similarly,
the standards to be complied with by Minister of Education in this case may be found in the various
policies set forth in the Education Act of 1982.

MECS Order No. 25, s. 1985 touches upon the economic relationship between some members and
elements of the educational community, i.e., the private schools and their faculty and support staff. In
prescribing the minimum percentage of tuition fee increments to be applied to the salaries, allowances
and fringe benefits of the faculty and support staff, the Act affects the economic status and the living
and working conditions of school personnel, as well as the funding of the private schools.
The policies and objectives on the welfare and interests of the various members of the educational
community are found in section 5 of B.P. Blg. 232. which states:
SEC. 5. Declaration of Policy and Objectives. It is likewise declared government policy to foster, at all
times, a spirit of shared purposes and cooperation among the members and elements of the educational
community, and between the community and other sectors of society, in the realization that only in
such an atmosphere can the true goals and objectives of education be fulfilled.
Moreover, the State shall:
1. Aid and support the natural right and duty of parents in the rearing of the youth through the
educational system.
2. Promote and safeguard the welfare and interests of the students by defining their rights and
obligations, according them privileges, and encouraging the establishment of sound relationships
between them and the other members of the school community.
3. Promote the social and economic status of an school personnel, uphold their rights, define their
obligations, and improve their living and working conditions and career prospects.
4. Extend support to promote the viability of those institutions through which parents, students and
school personnel seek to attain their educational goals.
On the other hand, the policy on the funding of schools in general, are laid down in section 33:
SEC. 33. Declaration of Policy. It is hereby declared to be a policy of the State that the national
government shall contribute to the financial support of educational programs pursuant to the goals of
education as declared in the Constitution. Towards this end, the government shall:
1. Adopt measures to broaden access to education through financial assistance and other forms of
incentives to schools, teachers, pupils and students; and
2. Encourage and stimulate private support to education through, inter alia, fiscal and other assistance
measures.
Given the abovementioned policies and objectives, there are sufficient standards to guide the Minister
of Education in promulgating rules and regulations to implement the provisions of the Education Act of
1982, As in the Ericta and Tablarin cases, there is sufficient compliance with the requirements of the
non-delegation principle.
THIRD SUB-ISSUE
C. Whether or not schools and their employees may enter into a collective bargaining agreement
allocating more than 60% of said incremental proceeds for salary increases and other benefits of said
employees.

1. Arguments raised in the Biscocho and Valmonte cases

Assailed by the petitioners in the Biscocho and the Valmonte cases is the Order of the respondent
Minister of Labor directing the execution of a CBA between the school and the respondent Espiritu
Santo Parochial School Faculty Association which provides for an economic package equivalent to 90%
of the proceeds of tuition fee increases for school year 1985-1986, another 90% for school year 19861987 and 85% for school year 1987-1988. Pursuant to said Order, petitioners in the Biscocho case
alleged that the parties had agreed to incorporate in their CBA a provision which allocates one-half (1/2)
of the 90% portion of the proceeds or 45% to increases in the monthly basic salaries and the other onehalf (1/2) or 45% to increases in monthly living allowance.
The petitioners in the two cases seek the nullification of the MOLE Order for exactly opposite reasons. In
theBiscocho case, the controversy springs from what petitioners perceive to be a diminution of the
benefits to be received by the school employees insofar as the CBA allocates only 45% for salary
increases instead of 60%, which petitioners claim to be the portion set aside by Pres. Dec. No. 451 for
that purpose. Parenthetically, the case questions the allocation of the remaining 45% of the 90%
economic package under the CBA, to allowances. Stripped down to its essentials, the question is
whether or not the 90% portion of the proceeds of tuition fee increases alloted for the economic
package may be allocated for both salary increases and allowances.
On the other hand, petitioners in the Valmonte case believe that the MOLE cannot order the execution
of a CBA which would allocate more than 60% of the proceeds of tuition fee increases for salary
increases of school employees. Furthermore, petitioners question the authority of the then Minister of
Labor and Employment to issue the aforequoted Order insofar as this allocates the tuition fee increases
of the respondent private school. According to them, only the Minister of Education, Culture and Sports
has the authority to promulgate rules and regulations on the use of tuition fees and increases thereto,
pursuant to the provisions of B.P. Blg. 232. They further argue that the assailed Order collides with the
provisions of Pres. Dec. No. 451 insofar as it allocates 90% of the tuition fee increases for salary
adjustments of the members of the bargaining unit which exceeds the 60% of the said increases
allocated by the Decree for the same purpose.
Before delving further into the questions raised, this Court notes that in the Valmonte case, respondent
Minister and respondent Faculty Association raise a procedural objection to the filing of the Petition: the
standing of the petitioners to bring this suit. Both respondents decry the petitioners' lack of the interest
required in Rule 65 of the Rules of Court for the filing of the Petition for certiorari and Prohibition, since
the latter do not appear to be in any way aggrieved by the enforcement of the Order. Petitionersparents did not even participate in the proceedings below which led to the issuance of the assailed
Order.
This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of Court (Secs. 1 and 2),
only a person aggrieved by the act or proceeding in question may file a petition for certiorari and/or
prohibition. TheValmonte petition fails to indicate how the petitioners would be aggrieved by the
assailed Order. It appears that the petitioners are not parties and never at any time intervened in the
conciliation conferences and arbitration proceedings before the respondent Minister. The parties
therein, who stand to be directly affected by the Order of the respondent Minister, do not contest the
validity of said Order. The petition does not even state that petitioners act as representative of the
parents' association in the School or in behalf of other parents similarly situated.

If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they should have
intervened and moved for a reconsideration of respondent Minister's Order before filing the instant
petition. Petitioners failed to show that the case falls under any one of the recognized exceptions to the
rule that a motion for reconsideration should first be availed of before filing a petition for certiorari and
prohibition.
In view of the foregoing, the resolution of the third sub-issue will be based mainly on the arguments
raised in the Biscocho case.
RESOLUTION OF THE THIRD SUB-ISSUE
The Biscocho case involves the issue on the allocation of the incremental proceeds of the tuition fee
increases applied for by the respondent Espiritu Santo Parochial School for school years 1985-1986,
1986-1987, and 1987-1988. With the repeal of Pres. Dec. No. 451 by B.P. Blg. 232, the allocation of the
proceeds of any authorized tuition fee increase must be governed by specific rules and regulations
issued by the Minister (now Secretary) of Education pursuant to his broadened rule making authority
under section 42 of the new law. Thus, insofar as the proceeds of the authorized tuition fee increases for
school year 1985-1986 are concerned, the allocation must conform with the pertinent section of MECS
Order No. 25, s. 1985, to wit:
7. Application or Use of Tuition and Other School Fees or Charges.
xxx xxx xxx
7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries or
wages, allowances and fringe benefits of faculty and support staff, including cost of living allowance,
imputed costs of contributed services, thirteenth (13th) month pay, retirement fund contributions,
social security, medicare, unpaid school personnel claims, and payments as may be prescribed by
mandated wage orders, collective bargaining agreements and voluntary employer practices: Provided,
That increases in fees specifically authorized for the purposes fisted in paragraph 4.3.3 hereof shall be
used entirely for those purposes.
xxx xxx xxx
With regard to the proceeds of the tuition fee increases for school year 1986-1987, the applicable rules
are those embodied in MECS Order No. 22, s. 1986 which made reference to MECS Order No. 25, s.
1985, the pertinent portion of which is quoted above.
Finally, as to the proceeds of the tuition fee increases for school year 1987- 1988, DECS Order No. 37, s.
1987 must apply:
c. Allocation of lncremental Proceeds
(1) In any case of increase at least sixty percent (60%) of the incremental proceeds should be allocated
for increases in or provisions for salaries or wages, allowances and fringe benefits of faculty and other
staff, including accruals to cost of living allowance, 13th month pay, social security, medicare and
retirement contributions and increases as may be provided in mandated wage orders, collective
bargaining agreements or voluntary employer practices.

(2) Provided, that in all cases of increase the allocation of the incremental proceeds shall be without
prejudice to the Supreme Court cases on the interpretation and applicability of existing legislations on
tuition and other fees especially on the allocation and use of any incremental proceeds of tuition and
other fees increases. (Emphasis supplied).
xxx xxx xxx
Based on the aforequoted MECS and DECS rules and regulations which implement BP Blg. 232, the 60%
portion of the proceeds of tuition fee increases may now be allotted for both salaries and allowances
and other benefits. The 60% figure is, however, a minimum which means that schools and their
employees may agree on a larger portion, or in this case, as much as 90% for salaries and allowances
and other benefits. This is not in anyway to allow diminution or loss of the portion allotted for
institutional development of the school concerned. Thus, paragraph 7.5 of MECS Order No. 25, series of
1985 specifically provides that other student fees and charges like registration, library, laboratory or
athletic fees shall be used exclusively for the purposes indicated.
III RESOLUTION OF THE SPECIFIC ISSUES
CEBU INSTITUTE OF TECHNOLOGY CASE
Petitioner assigns three other errors in the petition for certiorari:
1
RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND EMPLOYMENT COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO A DENIAL OF DUE PROCESS OF LAW IN DIRECTLY ISSUING THE ORDER
DATED SEPTEMBER 29,1981 WITHOUT CONDUCTING A FORMAL INVESTIGATION AND ARBITRATION
PROCEEDINGS.
2
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PETITIONER IS EXEMPTED AND/OR NOT OBLIGED
TO PAY SERVICE INCENTIVE LEAVE.
3
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PRIVATE RESPONDENTS' CLAIMS FOR COLA AND
SERVICE INCENTIVE LEAVE ARE FULLY BARRED BY LACHES AND/OR EXTINGUISHED BY PRESCRIPTION.
1. Petitioner assails the Order of the Minister of Labor on the ground that the same was issued without
the benefit of a hearing and was merely based on the report of the labor management committee which
is allegedly without power to pass upon the issues raised. On this premise, petitioner claims that it was
denied its right to due process.
Petitioner's contention is without merit. The Labor Management Committee was empowered to
investigate the complaint against the petitioner for non-payment of the cost of living allowance, 13th
month pay and service incentive leave from 1974-1981 [Annex "F"; Rollo, p. 37]. In the committee,
petitioner was represented by its counsel, registrar and assistant accountant and in the conferences that
were held, the representatives of the petitioner were present. Furthermore, the petitioner's position
paper submitted to the committee reflects that in all the deliberations, it was never denied the right to

present evidence and be heard on all the issues raised, particularly to demonstrate that it had complied
with the various COLA, 13th month pay and service incentive leave decrees. The evidence presented
during the conferences and the position paper of the parties were made the basis of the committee's
report and recommendation which in turn became the basis of the order of the Minister of Labor
directing the petitioner to pay the complainants their COLA and service incentive leave benefits.
It could not therefore be contended that the petitioner was deprived of his right to be heard when it
appears on the record that it was permitted to ventilate its side of the issues. There was sufficient
compliance with the requirements of due process. In the face of the well- settled principle that
administrative agencies are not strictly bound by the technical rules of procedure, this Court dismisses
the petitioner's claim that formal investigative and arbitration proceedings should be conducted. "While
a day in court is a matter of right in judicial proceedings, in administrative proceedings it is otherwise
since they rest upon different principles." [Cornejo v. Gabriel and Provincial Board of Rizal, 41 Phil. 188
(1920); Tajonera v. Lamaroza, G.R. Nos. L-48907 and L-49035, December 19,1981, 110 SCRA 438].
2. Going now to the matter of service incentive leave benefits, petitioner claims that private
respondents are engaged by the school on a contract basis as shown by the individual teachers contract
which defines the nature, scope and period of their employment; hence, they are not entitled to the
said benefit according to Rule V of the Implementing Rules and Regulations of the Labor Code to wit:
Sec. 1. Coverage. This rule [on Service Incentive Leave] shall apply to all employees, except:
xxx xxx xxx
(d) Field personnel and other employees whose performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid in a
fixed amount for performing work irrespective of the time consumed in the performance thereof;
(MOLE Rules and Regulations, Rule V, Book III)
The phrase "those who are engaged on task or contract basis" should however, be related with "field
personnel " applying the rule on ejusdem generis that general and unlimited terms are restrained and
limited by the particular terms that they follow, [Vera v. Cuevas, G.R. No. L-33693, May 31, 1979, 90
SCRA 379]. Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "to
non-agricultural 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. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private
respondents are not entitled to the service incentive leave benefit cannot therefore be sustained.
3. As a last ditch effort to bar private respondents'claims, petitioner asserts that the same are barred by
laches and/or extinguished by prescription according to Article 291 of the Labor Code which provides:
Art. 291. Money claims. 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.
All money claims accruing prior to the effectivity of this Code shall be filed with the appropriate entities
established under this Code within one (1) year from the date of effectivity, and shall be processed or

determined in accordance with implementing rules and regulations of the Code; otherwise, they shall be
forever barred.
xxx xxx xxx
Considering that the complaint alleging non-payment of benefits was filed only on February 11, 1981,
petitioner argues that prescription has already set in.
From the aforequoted provision, it is not fully accurate to conclude that the entire claims for COLA and
service incentive leave are no longer recoverable. This Court finds no reason to disturb the following
pronouncement of the Minister of Labor:
xxx xxx xxx
Simply stated, claims for COLA under P.D. 525, which took effect on August 1, 1974, for the months of
August, September and October 1974 must be filed within one (1) year from November 1, 1974,
otherwise they shall be considered prescribed; claims under the same decree that accrued on or after
November 1, 1974 should be initiated within three (3) years from the date of accrual thereof, otherwise
the same shall be deemed extinguished. Although this particular claim was filed on February 11, 1981,
petitioners herein are entitled to COLA under P.D. 525 from February 1978 up to the present since the
COLA that accrued in February 1978 has not yet prescribed at the time that the claim was filed in
February 1981. In the same vein, petitioners herein should be granted COLA under P.D. 1123 from
February 1978 up to 1981 inasmuch as said decree became effective only on May 11, 1977. Further,
petitioners are entitled to the full amount of COLA provided under P.D.'s 1614, 1634, 1678 and 1713. It
must be pointed out that the earliest of the just cited four (4) decrees, i.e., P.D. 1614, just took effect on
April 1, 1979. Thus, the prescriptive period under Art. 292 of the Labor Code, as amended, does not as
yet apply to money claims under the just mentioned decrees.
DIVINE WORD COLLEGE CASE
In assailing the disputed Order, petitioner contends that the public respondents acted with grave and
patent abuse of discretion amounting to lack of jurisdiction in that:
1. The Regional Director has no jurisdiction over money claims arising from employer-employee
relationship; and
2. The Regional Director and Deputy Minister of Labor adopted the report of the Labor Standards
Division without affording the petitioner the opportunity to be heard.
1. Petitioner school claims that the case at bar is a money claim and should therefore be within the
original and exclusive jurisdiction of the Labor Arbiter pursuant to article 217 of the Labor Code, as
amended.
It appears from the record, however, that the original complaint filed by ten (10) faculty members of the
Divine Word College was for non-compliance with Pres. Dec. No. 451 and with Labor Code provisions on
service incentive leave, holiday and rest day pay and which complaint specifically prayed that an
inspection of the College be conducted.
Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly
authorized representatives (which includes Regional Directors) are accorded the power to investigate

complaints for non- compliance with labor laws, particularly those which deal with labor standards such
as payment of wages and other forms of compensation, working hours, industrial safety, etc. This is
provided for in article 128 of the Labor Code, as amended:
Art. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives including labor regulation officers, shall
have access to employers' records and premises at any time of the day or night, whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or which may aid in the
enforcement of this Code and of any labor law, wage order or rules and regulations issued pursuant
thereto.
(b) The Secretary of Labor or his duly authorized representatives shall have the power to order and
administer, after due notice and hearing, compliance with the labor standards provisions of this Code
based on the findings of labor regulation officers or industrial safety engineers made in the course of
inspection, and to issue writs of execution to the appropriate authority for the enforcement of their
order, except in cases where the employer contests the findings of the labor regulations officer and
raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in
the normal course of inspection. (Emphasis supplied).
Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction over labor cases
restates inter alia that "(L)abor standards cases arising from violation of labor standards laws discovered
in the course of inspection or complaints where employer-employee relations still exist" are under the
exclusive original jurisdiction of the Regional Director.
Even assuming that respondent Regional Director was without jurisdiction to entertain the case at bar,
petitioner is now barred at this stage to claim lack of jurisdiction having actively participated in the
proceedings below. Petitioner never questioned the jurisdiction of the respondent Regional Director.
2. The petitioner claims that it was never afforded the opportunity to be heard and was therefore
denied due process.
There is no dispute that an inspection of the College was conducted after a complaint by some faculty
members was filed with the Regional Office of the Ministry of Labor and Employment. A report was
submitted on the basis of the findings contained therein. Petitioner was furnished a copy of said report
to which it filed a comment. Finding this to be without merit, the Regional Director issued an order
giving petitioner ten (10) days to manifest its compliance with the findings, otherwise, another would be
issued to enforce payment. Petitioner appealed but instead of resolving the memorandum of appeal,
which the Regional Director treated as a motion for reconsideration, said Director issued another Order
dated August 2, 1983 directing the payment of the employees' share in the sixty (60%) percent
incremental proceeds. Petitioner moved for a reconsideration of the latest order which the Regional
Director, however, denied, thereby elevating the case to the Office of the Minister of Labor and
Employment.
The foregoing facts demonstrate that petitioner had the opportunity to refute the report on the
inspection conducted. It submitted a comment thereto, which was in effect its position paper. The
arguments therein and evidence attached thereto were considered by respondent Regional Director in

the order issued subsequently. They, therefore, had ample opportunity to present their side of the
controversy.
What due process contemplates is not merely the existence of an actual hearing. The "right to be heard"
focuses more on the substance rather than the form. In the case at bar, petitioner was actually heard
through the pleadings that it filed with the Regional Office V. As it itself admitted in its petition that it
was afforded the right to be heard on appeal [See Rollo, p. 581, petitioner cannot therefore insist that it
was denied due process.
FAR EASTERN UNIVERSITY CASE
Two other issues are raised in this petition, to wit:
1
WHETHER OR NOT 'TRANSPORTATION ALLOWANCE' SHOULD BE CONSIDERED AS 'EQUIVALENT TO
13TH-MONTH PAY UNDER PRES. DEC. NO. 851.
2
WHETHER OR NOT LEGAL HOLIDAY PAY BENEFIT COULD BE VALIDLY WITHDRAWN AFTER BEING
PRACTICED CONTINUOUSLY FOR EIGHT (8) MONTHS.
1. The issue on the thirteenth (13th) month pay involves an interpretation of the provisions of Pres. Dec.
No. 851 which requires all employers "to pay all their employees receiving a basic salary of not more
than Pl,000 a month, regardless of the nature of the employment, a 13th- month pay" (Sec. 1). However,
"employer[s] already paying their employees a 13th-month pay or its equivalent are not covered" (Sec.
2). (Emphasis supplied)
The Rules and Regulations Implementing Pres. Dec. No. 851 provide the following:
SEC. 3. Employees. The Decree shall apply to all employers except to: ...
c) Employers already paying their employees 13th-month or more in a calendar year or its equivalent at
the time of this issuance; ...
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) hereof shall include Christmas bonus, mid-year bonus,
profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary
but shall not include cash and stock dividends, cost of living allowances and all other allowances
regularly enjoyed by the employer, as well as non-monetary benefits. Where an employer pays less than
1/1 2th of the employees basic salary, the employer shall pay the difference.
In the case at bar, the 13th month pay is paid in the following manner:
FOR REGULAR EMPLOYEES:
Transportation Allowance (TA)
50% of basic for the first year of service plus additional 5% every year thereafter but not to exceed 100%
of basic salary

Christmas Bonus (CB)

50% of basic salary for the first year of service plus additional 5% every year thereafter but not to
exceed 100% of basic salary.
For employees who have served the University for more than 10 years, the University pays them
emoluments equivalent to the 14 months salaries.
13th Month Pay Formula:
Monthly Rate x No. of
months served for the year
Less TA/CB = 13th Mo. pay
12 months
FOR CASUAL EMPLOYEES:
13th Month Pay Formula:
Add salaries from 16 December of previous year to 15th December of present year [and] divide by 12
months = 13th Mo. Pay (Rollo, pp. 60, 72).
The University's answer to the Union's claim of underpayment of the 13th month pay is that the
"transportation allowance" paid to its employees partakes the nature of a mid-year bonus which under
section 2 of Pres. Dec. No. 851 and section 3(c) of the Implementing Rules and Regulations is equivalent
to the 13th month pay,
The Labor Arbiter ordered FEU to pay the 13th month pay differentials of the complainants reasoning
that:
CLEARLY, transportation allowance cannot be considered as equivalent" of 13th month pay as it is
neither a Christmas bonus, mid-year bonus, profit sharing payment, or other cash bonuses, pursuant to
paragraphs (c) and (e), Section 3 of PD 851. The regularity of its payment further cements this
proposition.
PERFORCE, complainants are underpaid of their 13th month pay in an amount equivalent to 50% of their
basic salary for the lst year of service, plus additional 5% every year thereafter but not to exceed 100%
of their basic salary which, per respondent's formula, corresponds to their transportation allowance.
(Rollo, p. 61).
On appeal, the Third Division of the National Labor Relations Commission reversed the Labor Arbiter's
ruling by dismissing the complainant's claim for underpayment of the 13th month pay for lack of merit.
The NLRC ruled that:
From the above findings and conclusion, it is clear that insofar as employees with ten (10) years of
service or more are concerned, they receive the equivalent of one (1) month pay for Christmas bonus
and another one (1) month pay as transportation allowance or a total of fourteen (14) months salary in
a year. Obviously, this group of employees are fully paid of their 13th month pay and are not therefore

subject to the instant claim. As it is only those with less than ten (10) years of service are included or
encompassed by the Labor Arbiter's resolution on this particular issue. With this clarification, we shall
now proceed to discuss the crux of the controversy, that is, the determination of whether or not the so
designated "transportation allowance" being paid to the employees should be considered among those
deemed equivalent to 13th month pay. As adverted earlier, the Labor Arbiter opined that it cannot be so
considered as the equivalent of 13th month pay.
xxx xxx xxx
In passing upon the issue, we deemed it best to delve deeper into the nature and intendment of the
transportation allowances as designated by both the complainants and the respondent. Complainants
claim that the transportation allowance they enjoy has always been called and termed allowance and
never as bonus since the time the same was given to them. They assert that it simply was intended as an
allowance and not a bonus. It would appear however that complainants do not dispute respondent's
stand that transportation allowance is being paid only every March of each year as distinguished from
other allowances that are being paid on a monthly basis or on a bimonthly basis; that the amount of
transportation allowance to be paid is dependent on the length of service of the employee concerned
(i.e. 50% basic in the first year and additional 5% for each succeeding years, etc.); that the said method
of computing the amount of the transportation allowance to be paid the complainants is Identical to
that used in determining Christmas bonus (respondent's exhibit 8) that the reason behind said
transportation allowance is to financially assist employees in meeting their tax obligations as the same
become due on or about the month of March of each year.
xxx xxx xxx
We are inclined to believe and so hold that by the manner by which said transportation allowance is
being paid (only once a year) as well as the method in determining the amount to be paid (similar to
Christmas bonus) and considering further the reason behind said payment (easing the burden of
taxpayer-employee), the said transportation allowance given out by respondent while designating as
such, partakes the nature of a mid-year bonus. It bears to note in passing that in providing for
transportation allowance, respondent was not compelled by law nor by the CBA (Annex "A" of
respondent's Appeal) as nowhere in the CBA nor in the Labor Code can be found any provision on
transportation allowance. It was therefore a benefit that stemmed out purely from the voluntary act
and generosity of the respondent FEU. Moreover, said transportation allowance is only being paid once
a year. On the other hand, regular allowances not considered as 13th month pay equivalent under P.D.
851, to our mind, refer to those paid on regular intervals and catering for specific employees' needs and
requirements that recur on a regular basis. Verily, if the intendment behind the disputed transportation
allowance is to answer for the daily recurring transportation expenses of the employees, the same
should have been paid to employees on regular periodic intervals. All indications, as we see it, point out
to conclusion that the disputed transportation allowance, while dominated as such apparently for lack
of better term, is in fact a form of bonus doled out by the respondent during the month of March every
year.
Hence, we hold that it is one of those that can very well be considered as equivalent to the 13th month
pay (Rollo, pp. 73, 74, 75, 76).

This Court sustains the aforequoted view of public respondent. The benefit herein designated as
"transportation allowance" is a form of bonus equivalent to the 13th month pay. Nevertheless, where
this does not amount to 1/12 of the employees basic salary, the employer shall pay the difference.
The evident intention of the law was to grant an additional income in the form of a 13th month pay to
employees not already receiving the same. This Court ruled in National Federation of Sugar Workers
(NFSW) v. Ovejera[G.R. No. 59743, May 31, 1982, 114 SCRA 354].
Otherwise put, the intention was to grant some relief not to all workers but only to the
unfortunate ones not actually paid a 13th month salary or what amounts to it, by whatever name called:
but it was not envisioned that a double burden would be imposed on the employer already paying his
employees a 13th month pay or its equivalent whether out of pure generosity or on the basis of a
binding agreement and, in the latter case, regardless of the conditional character of the grant (such as
making the payment dependent on profit), so long as there is actual payment. Otherwise, what was
conceived to be a 13th month salary would in effect become a 14th or possibly 15th month pay.
xxx xxx xxx
Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual bonuses
for the purpose of determining liability for the 13th month pay. To require employers (already giving
their employees a 13th month salary or its equivalent) to give a second 13th month pay would be unfair
and productive of undesirable results. To the employer who had acceded and is already bound to give
bonuses to his employees, the additional burden of a 13th month pay would amount to a penalty for his
munificence or liberality. The probable reaction of one so circumstanced would be to withdraw the
bonuses or resist further voluntary grants for fear that if and when a law is passed giving the same
benefits, his prior concessions might not be given due credit; and this negative attitude would have an
adverse impact on the employees (pp.369,370).
The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, October 23, 1982, 117 SCRA 938 (1982)],
citing the ruling in the above case also pointed out that:
To hold otherwise would be to impose an unreasonable and undue burden upon those employers who
had demonstrated their sensitivity and concern for the welfare of their employees. A contrary stance
would indeed create an absurd situation whereby an employer who started giving his employees the
13th month pay only because of the unmistakable force of the law would be in a far better position than
another who, by his own magnanimity or by mutual agreement, had long been extending his employees
the benefits contemplated under PD No. 851, by whatever nomenclature these benefits have come to
be known. Indeed, PD No. 851, a legislation benevolent in its purpose, never intended to bring about
such oppressive situation. (p. 944)
2. Presidential Decree No. 570-A was issued on November 1, 1974 amending certain articles of
Presidential Decree No. 442 (Labor Code of the Philippines promulgated on May 1, 1974 which took
effect six months thereafter). Section 28 thereof provides that:
Section 28. A new provision is hereby substituted in lieu of the original provision of Article 258 of the
same Code to read as follows:
Art. 258. Right to holiday pay-

(a) Every worker shall be paid his regular holidays, except in retail and service establishments regularly
employing less than ten (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 thirtieth of December and the day designated by law for holding a
general election.
(c) When employer may require work on holidays. The employer may require an employee to work on
any holiday but such employee shall be paid a compensation equivalent twice his regular rate.
Presidential Decree No. 850 issued on December 16, 1975 also amending certain articles of Pres. Dec.
No. 442 adopted the aforequoted provision. Two months later, on February 16, 1976, the Rules and
Regulations Implementing the Labor Code, as amended, was released the pertinent portion of which
states that:
Section 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.
(e) Section 3. Holiday Pay. Every employer shall pay his employees their regular daily wage for any
unworked regular holiday.
As used in the Rule, the term 'holiday' shall exclusively refer to: 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 a general
election or national referendum or plebiscite (MOLE Rules and Reg. Book III, Rule IV, sec. 2 (1976).
After one week, on February 23, 1976, the Minister of Labor issued Policy Instruction No. 9, to clarify
further the right to holiday pay, thus:
The Rules Implementing PD 850 have clarified the policy in the implementation of the ten (10) paid legal
holidays. Before PD 850. the number of working days a year in a firm was considered important in
determining entitlement to the benefit. Thus, where an employee was working for at least 313 days, he
was definitely already paid. If he was working for less than 313, there was no certainty whether the ten
(10) paid legal holidays were already paid to him or not.
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 PD 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 P 240, 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 entitled to the ten (10) legal holidays.
These new interpretations must be uniformly and consistently upheld.
This issuance shall take effect immediately.
In the meantime, respondent University paid its employees holiday pay for the following days:
DATE HOLIDAYS PAID
June 9, 1975 for the previous nine legal holidays
August, 1975 for the previous June 12 and July 4
Jan. 14, 1976 or the previous Nov. 30, Dec. 25
and 30 and Jan. 1
After January 14, 1976, however, the University ceased paying the holiday pay allegedly by reason of
Policy Instruction No. 9. Specifically, the University claimed that the monthly salary of its employees
was, as of 1976, more than P 240.00 without deductions from their monthly salary on account of
holidays in months where they occurred and that therefore, by virtue of Policy Instruction No. 9, they
were no longer entitled to the ten paid legal holidays.
Petitioners, upon the other hand, contend that Policy Instruction No. 9 could not have possibly been the
reason that prompted the University to withdraw such benefits from its faculty and employees because
said implementing rule was issued only on April 23, 1976 or four months later.
The Labor Arbiter ruled in favor of the complainant Union for the reason that ". . . the payment of the
10-paid legal holiday benefits from June 8, 1975 up to January 14, 1976 is considered an employer
practice that can no longer be withdrawn." [Decision; Rollo, p. 59].
As in the case of the 13th month pay, the NLRC reversed the Labor Arbiter's ruling. The NLRC held that:
Apparently, Arbiter Ruben Aquino concluded that payment by the respondent of the legal holiday pay
preceded the effectivity of the Rules and Regulations Implementing P.D. 850 and which rules took effect
on February 16, 1976. Hence, his conclusion that the payment of the legal holiday pay stemmed out
from company practice and not from law. Tracing back, however, the payments made by respondent of
said holiday pay will show that, if ever, the same was made pursuant to P.D. 570-A which took effect on
November 1, 1974. Noteworthy is the undisputed fact that respondent first paid its employees legal
holiday pay in June 1975 corresponding to nine (9) legal holidays. It bears to note that from the time of
the effectivity of P.D. 570-A which was in November of 1974 up to June of 1975, the time respondent
first paid legal holiday pay for nine (9) legal holidays, there, were indeed more or less nine legal holidays
that transpired to wit: November 30, 1974, December 25, 1974, December 30, 1974, January 1, 1975,
February 27, 1975 (Referendum Day), Maundy Thursday of 1975, Good Friday of 1975, April 9, 1975 and
finally, May 1st of 1975. We are therefore inclined to lend credence to respondent's claim that the
payment of legal holiday pay was in fact made pursuant to law, P.D. 570-A in particular, it is not one that
arose out of company practice or policy.

Finding that said payment was made based on an honest although erroneous interpretation of law,
which interpretation was later on corrected by the issuance (sic) of Policy Instruction No. 9 and which
issuance prompted respondent to withdraw the holiday pay benefits extended to the employees who
were paid on a regular monthly basis, and finding further that under Policy Instructions No. 9, said
subject employees are deemed paid their holiday pay as they were paid on a monthly basis at a wage
rate presumably above the statutory minimum, we believe and so hold that the withdrawal of said
holiday pay benefit was valid and justifiable under the circumstances (Rollo, pp. 33-4).
This Court cannot sustain the foregoing decision of public respondent. Said decision relied on Section 2,
Rule IV, Book Ill of the implementing rules and on Policy Instruction No. 9 which were declared by this
Court to be null and void in Insular Bank of Asia and America Employee's Union (IBAAEU) v. Inciong (G.R.
No. 52415, October 23, 1984, 132 SCRA 6631. In disposing of the issue at hand, this Court reiterates the
ruling in that case, to wit:
WE agree with the petitioner's contention that Section 2, Rule IV, Book Ill of the implementing rules and
Policy Instruction No. 9 issued by the then Secretary of Labor are nun and void since in the guise of
clarifying the Labor Code's provision on holiday pay, they in fact amended them by enlarging the scope
of their exclusion.
xxx xxx xxx
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). (pp. 673-4).
BISCOCHO CASE
At issue also in this petition is whether the 60% incremental proceeds may be subjected to attorney's
fees, negotiation fees, agency fees and the like.
The Court notes the fact that there are two classes of employees among the petitioners: (1) those who
are members of the bargaining unit and (2) those who are not members of the bargaining unit. The first
class may be further subdivided into two: those who are members of the collective bargaining agent and
those who are not.
It is clear that the questioned Order of the respondent Minister applies only to members of the
bargaining unit.The CBA prepared pursuant to said Order, however, covered employees who are not
members of the bargaining unit, although said CBA had not yet been signed at the time this petition was
filed on November 24, 1986. Assuming it was signed thereafter, the inclusion of employees outside the

bargaining unit should be nullified as this does not conform to said order which directed private
respondents to execute a CBA covering only members of the bargaining unit.
Being outside the coverage of respondent Minister's order, and thus, not entitled to the economic
package involved therein, employees who are non- members of the bargaining unit should not be
assessed negotiation fees, attorney's fees, agency fees and the like, for the simple reason that the
resulting collective bargaining agreement does not apply to them. It should be clear, however, that
while non-members of the bargaining unit are not entitled to the economic package provided by said
order, they are, in lieu thereof, still entitled to their share in the 60% incremental proceeds of increases
in tuition or other school fees or charges.
As far as assessment of fees against employees of the collective bargaining unit who are not members of
the collective bargaining agent is concerned, Article 249 of the Labor Code, as amended by B.P. Blg. 70,
provides the rule:
Art. 249. Unfair labor practices of employers.xxx xxx xxx
(e) ... Employees of an appropriate collective bargaining unit who are not members of the recognized
collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid
by members of the recognized collective bargaining agent, if such non- union members accept the
benefits under the collective agreement . . .
Employees of the collective bargaining unit who are not members of the collective bargaining agent
have to pay the foregoing fees if they accept the benefits under the collective bargaining agreement and
if such fees are not unreasonable. Petitioners who are members of the bargaining unit failed to show
that the equivalent of ten (10%) percent of their backwages sought to be deducted is unreasonable.
WHEREFORE, the Court rules:
CEBU INSTITUTE OF TECHNOLOGY CASE
In G.R. No. 58870, the Order of respondent Minister of Labor and Employment dated September 29,
1981 is SUSTAINED insofar as it ordered petitioner Cebu Institute of Technology to pay its teaching staff
the following:
(1) Cost of living allowance under Pres. Dec.Nos.525 and 1123 from February 1978 up to 1981;
(2) Cost of living allowance under Pres. Dec. Nos. 1614, 1634, 1678 and 1713; and
(3) Service incentive leave due them from 1978.
The Temporary Restraining Order issued by this Court on December 7, 1981 is hereby LIFTED and SET
ASIDE. No costs.
DIVINE WORD COLLEGE CASE
The petition in G.R. No. 68345 is DENIED for lack of merit. The questioned Orders of respondent Deputy
Minister of Labor and Employment, dated December 19, 1983 and July 4, 1984 are SUSTAINED insofar as
said Orders denied the payment of the emergency cost of living allowances of private respondents

faculty teachers of the Divine Word College of Legazpi out of the sixty (60%) incremental proceeds of
tuition and other school fee increases collected during the effectivity of Pres. Dec. No. 451. The Rules
and Regulations implementing Pres. Dec. No. 451 are hereby declared invalid for being ultra vires No
costs.
FAR EASTERN UNIVERSITY CASE
The Decision of public respondent National Labor Relations Commission dated September 18, 1984
isREVERSED insofar as it affirmed in toto the dismissal of petitioner Far Eastern University Employee
Labor Union's claim under Pres. Dec. No. 451 and its claim for payment of holiday pay. Private
respondent Far Eastern University is therefore ordered to pay its employees the following:
(1) Their sixty (60) percent share in the increases in tuition and other school fees or charges which shall
be allocated exclusively for increase in salaries or wages if the tuition or other school fee increase was
collected during the effectivity of Pres. Dec. No. 451;
(2) Their claim for holiday pay which was withdrawn since January 14, 1976 up to the present.
The Decision of respondent National Labor Relations Commission, however, is SUSTAINED insofar as it
denied petitioner's claim for thirteenth (1 3th month pay. No costs.
FABROS CASE
In G.R. No. 70832, the Petition for certiorari and Prohibition is DISMISSED. MECS Order No. 25. s. 1985,
particularly paragraphs 7.0 to 7.5 thereof, which provide for the use and application of sixty (60%)
percent of the increases in tuition and other school fees or charges, having been issued pursuant to B.P.
Blg. 232 which repealed Pres. Dec. No. 451, is hereby declared VALID. The Temporary Restraining Order
issued by this Court dated May 29, 1985 is LIFTED and SET ASIDE. No costs.
BISCOCHO CASE
The assailed portions of the Order of the Minister of Labor and Employment dated April 14, 1986 are
AFFIRMED. The collective bargaining agreement prepared pursuant thereto should, however, be
MODIFIED to cover only members of the bargaining unit. Only petitioners who are members of the
collective bargaining unit, if they accept the benefits under the resulting collective bargaining
agreement, shall be charged ten (10%) percent of the payable backwages as negotiation fees. The
Temporary Restraining Order dated November 25, 1986 is LIFTED and SET ASIDE. No costs.
VALMONTE CASE
The petition in G.R. No. 76596 is DISMISSED for lack of merit.
Effective September 1, 1982, the application and use of the proceeds from increases in tuition fees and
other schools fees or charges shall be governed by section 42 of B.P. Blg. 232 as implemented by the
Rules and Regulations issued by the then Ministry, now Department of Education, Culture and Sports.
SO ORDERED.
Teehankee, C.J., Yap, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin and Sarmiento,
JJ., concur.
Fernan, Narvasa, Cruz and Padilla, JJ., took no part.

Maternity Leave

Art. 133, Labor Code

Article 133. Maternity leave benefits.
Every employer shall grant to any pregnant woman employee who has rendered an aggregate service of
at least six (6) months for the last twelve (12) months, maternity leave of at least two (2) weeks prior to
the expected date of delivery and another four (4) weeks after normal delivery or abortion with full pay
based on her regular or average weekly wages. The employer may require from any woman employee
applying for maternity leave the production of a medical certificate stating that delivery will probably
take place within two weeks.
The maternity leave shall be extended without pay on account of illness medically certified to arise out
of the pregnancy, delivery, abortion or miscarriage, which renders the woman unfit for work, unless she
has earned unused leave credits from which such extended leave may be charged.
The maternity leave provided in this Article shall be paid by the employer only for the first four (4)
deliveries by a woman employee after the effectivity of this Code.

Sec. 14-A, Social Security Law (as amended)

No. 11, DOLE Handbook on Workers Statutory Monetary Benefits

R.A. 10151, Sec. 4

Chapter V
Employment of Night Workers
Art. 154. Coverage. This chapter shall apply to all persons, who shall be employed or permitted or
suffered to work at night, except those employed in agriculture, stock raising, fishing, maritime
transport and inland navigation, during a period of not less than seven (7) consecutive hours, including

the interval from midnight to five oclock in the morning, to be determined by the Secretary of Labor
and Employment, after consulting the workers representatives/labor organizations and employers.
Night worker means any employed person whose work requires performance of a substantial number
of hours of night work which exceeds a specified limit. This limit shall be fixed by the Secretary of Labor
after consulting the workers representatives/labor organizations and employers.
Art. 155. Health Assessment, At their request, workers shall have the right to undergo a health
assessment without charge and to receive advice on how to reduce or avoid health problems associated
with their work:
(a) Before taking up an assignment as a night worker;
(b) At regular intervals during such an assignment; and
(c) If they experience health problems during such an assignment which are not caused by factors other
than the performance of night work.
With the exception of a finding of unfitness for night work, the findings of such assessments shall not
be transmitted to others without the workers consent and shall not be used to their detriment.
Art. 156. Mandatory Facilities. Suitable first-aid facilities shall be made available for workers
performing night work, including arrangements where such workers, where necessary, can be taken
immediately to a place for appropriate treatment. The employers are likewise required to provide safe
and healthful working conditions and adequate or reasonable facilities such as sleeping or resting
quarters in the establishment and transportation from the work premises to the nearest point of their
residence subject to exceptions and guidelines to be provided by the DOLE.
Art. 157. Transfer. Night workers who are certified as unfit for night work, due to health reasons,
shall be transferred, whenever practicable, to a similar job for which they are fit to work.
If such transfer to a similar job is not practicable, these workers shall be granted the same benefits as
other workers who are unable to work, or to secure employment during such period.
A night worker certified as temporarily unfit for night work shall be given the same protection against
dismissal or notice of dismissal as other workers who are prevented from working for reasons of
health.
Art. 158. Women Night Workers. Measures shall be taken to ensure that an alternative to night work
is available to women workers who would otherwise be called upon to perform such work:
(a) Before and after childbirth, for a period of at least sixteen (16) weeks, which shall be divided
between the time before and after childbirth;
(b) For additional periods, in respect of which a medical certificate is produced stating that said
additional periods are necessary for the health of the mother or child:
(1) During pregnancy;

(2) During a specified time beyond the period, after childbirth is fixed pursuant to subparagraph (a)
above, the length of which shall be determined by the DOLE after consulting the labor organizations and
employers.
During the periods referred to in this article:
(i) A woman worker shall not be dismissed or given notice of dismissal, except for just or authorised
causes provided for in this Code that are not connected with pregnancy, childbirth and childcare
responsibilities.
(ii) A woman worker shall not lose the benefits regarding her status, seniority, and access to promotion
which may attach to her regular night work position.
Pregnant women and nursing mothers may he allowed to work at night only if a competent physician,
other than the company physician, shall certify their fitness to render night work, and specify, in the
ease of pregnant employees, the period of the pregnancy that they can safely work.
The measures referred to in this article may include transfer to day work where this is possible, the
provision of social security benefits or an extension of maternity leave.
The provisions of this article shall not have the effect of reducing the protection and benefits
connected with maternity leave under existing laws.
Art. 159. Compensation. The compensation for night workers in the form of working time, pay or
similar benefits shall recognize the exceptional nature of night work.
Art. 160. Social Services.Appropriate social services shall be provided for night workers and, where
necessary, for workers performing night work.
Art. 161. Night Work Schedules. Before introducing work schedules requiring the services of night
workers, the employer shall consult the workers representatives/labor
organizations concerned on the details of such schedules and the forms of organization of night work
that are best adapted to the establishment and its personnel, as well as on the occupational health
measures and social services which are required. In establishments employing night workers,
consultation shall take place regularly.

Paternity Leave

R.A. 8187, Paternity Leave Act

REPUBLIC ACT NO. 8187
AN ACT GRANTING PATERNITY LEAVE OF SEVEN (7) DAYS WITH FULL PAY TO
ALL MARRIED MALE EMPLOYEES IN THE PRIVATE AND PUBLIC SECTORS FOR
THE FIRST FOUR (4) DELIVERIES OF THE LEGITIMATE SPOUSE WITH WHOM HE
IS COHABITING AND FOR OTHER PURPOSES.
SECTION 1. Short Title. - This Act shall be known as the "Paternity Leave Act of 1996".

SECTION 2. Notwithstanding any law, rules and regulations to the contrary, every married male
employee in the private and public sectors shall be entitled to a paternity leave of seven (7)
days with full pay for the first four (4) deliveries of the legitimate spouse with whom he is
cohabiting. The male employee applying for paternity leave shall notify his employer of the
pregnancy of his legitimate spouse and the expected date of such delivery.
For purposes, of this Act, delivery shall include childbirth or any miscarriage.
SECTION 3. Definition of Term. - For purposes of this Act, Paternity Leave refers to the
benefits granted to a married male employee allowing him not to report for work for seven (7)
days but continues to earn the compensation therefor, on the condition that his spouse has
delivered a child or suffered a miscarriage for purposes of enabling him to effectively lend
support to his wife in her period of recovery and/or in the nursing of the newly-born child.
SECTION 4. The Secretary of Labor and Employment, the Chairman of the Civil Service
Commission and the Secretary of Health shall, within thirty (30) days from the effectivity of
this Act, issue such rules and regulations necessary for the proper implementation of the
provisions hereof.
SECTION 5. Any person, corporation, trust, firm, partnership, association or entity found
violating this Act or the rules and regulations promulgated thereunder shall be punished by a
fine not exceeding Twenty-five thousand pesos (P25,000) or imprisonment of not less than
thirty (30)days nor more than six (6) months.
If the violation is committed by a corporation, trust or firm, partnership, association or any
other entity, the penalty of imprisonment shall be imposed on the entity's responsible officers,
including, but not limited to, the president, vice-president, chief executive officer, general
manager, managing director or partner directly responsible therefor.
SECTION 6. Nondiminution Clause. - Nothing in this Act shall be construed to reduce any
existing benefits of any form granted under existing laws, decrees, executive orders, or any
contract agreement or policy between employer and employee.
SECTION 7. Repealing Clause. - All laws, ordinances, rules, regulations, issuances, or parts
thereof which are inconsistent with this Act are hereby repealed or modified accordingly.
SECTION 8. Effectivity. - This Act shall take effect (15) days from its publication in the Official
Gazette or in at least two (2) newspapers of national circulation.
Approved: June 11, 1996

Revised Implementing Rules of R.A. 8187 (March 13, 1997)

Pursuant to Republic Act No. 8187 entitled, An Act Granting

Paternity Leave of Seven (7) Days With Full Pay to All Married Male
Employees in the Private and Public Sectors For the First Four (4)
Deliveries of the Legitimate Spouse With Whom He is Cohabiting
And For Other Purposes, the following Revised Rules and
Regulations are hereby issued:

SECTION 1. Definition of Terms. As used in these Rules, the

following terms shall have the meaning as indicated hereunder:
a. Paternity leave refers to the leave benefits granted to a married
male employee allowing him not to report for work for seven (7) days
but continues to earn the compensation therefor, on the condition
that his spouse has delivered a child or suffered a miscarriage for the
purpose of lending support to his wife during her period of recovery
and/or in nursing of the newly born child.
b. Employee refers to any person who performs services for another
and receives compensation therefor, provided an employer-employee
relationship exists between them.
c. Delivery refers to childbirth or miscarriage.
d. Spouse refers to the lawful wife. For this purpose, lawful wife
refers to a woman who is legally married to the male employee
concerned.
e. Cohabiting refers to the obligation of the husband and wife to
live together.
SECTION 2. Coverage. Every married male employee in the private
sector shall be entitled to paternity leave benefits of seven (7) days
with full pay for the first four deliveries by his lawful spouse under
such terms and conditions as hereinafter provided.
The rules on paternity leave of employees in the public sector shall be
promulgated by the Civil Service Commission.
SECTION 3. Conditions to entitlement of paternity leave benefits.
A married male employee shall be entitled to paternity benefits
provided that:
a. he is an employee at the time of delivery of his child;
b. he is cohabiting with his spouse at the time she gives birth or
suffers a miscarriage. prcd
c. he has applied for paternity leave in accordance with Section 4
hereof; and
d. his wife has given birth or suffered a miscarriage.
SECTION 4. Application for leave. The married male employees
shall apply for paternity leave with his employer within a reasonable
period of time from the expected date of delivery by the pregnant
spouse, or within such period as may be provided by company rules
and regulations or by collective bargaining agreement, provided that

prior application for leave shall not be required in case of miscarriage.

SECTION 5. Availment. Paternity leave benefits shall be granted to
the qualified employee after the delivery by his wife, without
prejudice to an employer allowing an employee to avail of the benefit
before or during the delivery; provided, that the total number of days
shall not exceed seven (7) days for each delivery.
SECTION 6. Benefits. The employee is entitled to his full pay,
consisting of basic salary, for the seven (7) days during which he is
allowed not to report for work, provided, that his pay shall not be less
than the mandated minimum wage.
SECTION 7. Non-commutation of benefits. In the event that
paternity leave benefit is not availed of, said leave shall not be
convertible to cash.
SECTION 8. Non-diminution clause. Nothing in these Rules shall
be construed to reduce or replace any existing benefits of any kind
granted under existing laws, decrees, executive orders, or any
contract, agreement or policy between employer and employee.
SECTION 9. Crediting of existing benefits. Where a male employee
is already enjoying the paternity leave benefits by reason of contract,
company policy or collective bargaining agreement, the following
rules shall apply:
a. If the existing paternity leave benefit is greater than the benefit
herein provided, the greater benefit shall prevail;
b. If the existing paternity leave is less than that provided herein,
such existing benefit shall be adjusted to the extent of the difference.
However, where a contract, company policy or collective bargaining
agreement provides for an emergency or contingency leave without
specific provisions on paternity leave, the paternity leave as herein
provided shall apply in full.
SECTION 10. Penalty. Any person, corporation, trust, firm,
partnership, association or entity found violating any provision of
these Rules shall be penalized by a fine not exceeding twenty five
thousand pesos (P25,000) or imprisonment of not less than thirty
(30) days nor more than six (6) months.

If the violation is committed by a corporation, trust or firm,

partnership, association or any other entity, the penalty of
imprisonment shall be imposed on the entitys responsible officers,
including but not limited to, the president, vice president, chief
executive officer, general manager, managing director or partner
directly responsible therefor.
SECTION 11. Transitory Provision. All qualified employees whose
spouse delivered a child or suffered a miscarriage on or after July 5,
1996 are entitled to paternity leave, subject to the conditions
prescribed in Section 3, paragraphs (a) and (b).
SECTION 12. Repealing Clause. All laws, ordinances, rules,
regulations, issuances, or parts thereof which are inconsistent with
these Rules are deemed repealed or modified accordingly.
SECTION 13. Separability Clause. If any provision or portion of
these Rules is declared void or unconstitutional, the remaining
portions or provisions hereof shall continue to be valid and effective.
SECTION 14. Effectivity. These Revised Rules shall take effect on 05 July
1996.
Parental Leave (R.A. 8972)

R.A. 8972, Solo Parents Welfare Act

REPUBLIC ACT NO. 8972
AN ACT PROVIDING FOR BENEFITS AND PRIVILEGES TO SOLO PARENTS AND THEIR CHILDREN,
APPROPRIATING FUNDS THEREFOR AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines Congress assembled:
Section 1. Title. - This Act shall be known as the "Solo Parents' Welfare Act of 2000."
Section 2. Declaration of Policy. - It is the policy of the State to promote the family as the foundation of
the nation, strengthen its solidarity and ensure its total development. Towards this end, it shall develop
a comprehensive program of services for solo parents and their children to be carried out by the
Department of Social Welfare and Development (DSWD), the Department of Health (DOH), the
Department of Education, Culture and Sports (DECS), the Department of the Interior and Local
Government (DILG), the Commission on Higher Education (CHED), the Technical Education and Skills
Development Authority (TESDA), the National Housing Authority (NHA), the Department of Labor and
Employment (DOLE) and other related government and nongovernment agencies.
Section 3. Definition of Terms. - Whenever used in this Act, the following terms shall mean as follows:

(a) "Solo parent" - any individual who falls under any of the following categories:
(1) A woman who gives birth as a result of rape and other crimes against chastity even without a final
conviction of the offender: Provided, That the mother keeps and raises the child;
(2) Parent left solo or alone with the responsibility of parenthood due to death of spouse;
(3) Parent left solo or alone with the responsibility of parenthood while the spouse is detained or is
serving sentence for a criminal conviction for at least one (1) year;
(4) Parent left solo or alone with the responsibility of parenthood due to physical and/or mental
incapacity of spouse as certified by a public medical practitioner;
(5) Parent left solo or alone with the responsibility of parenthood due to legal separation or de
factoseparation from spouse for at least one (1) year, as long as he/she is entrusted with the custody of
the children;
(6) Parent left solo or alone with the responsibility of parenthood due to declaration of nullity or
annulment of marriage as decreed by a court or by a church as long as he/she is entrusted with the
custody of the children;
(7) Parent left solo or alone with the responsibility of parenthood due to abandonment of spouse for at
least one (1) year;
(8) Unmarried mother/father who has preferred to keep and rear her/his child/children instead of
having others care for them or give them up to a welfare institution;
(9) Any other person who solely provides parental care and support to a child or children;
(10) Any family member who assumes the responsibility of head of family as a result of the death,
abandonment, disappearance or prolonged absence of the parents or solo parent.
A change in the status or circumstance of the parent claiming benefits under this Act, such that he/she is
no longer left alone with the responsibility of parenthood, shall terminate his/her eligibility for these
benefits.
(b) "Children" - refer to those living with and dependent upon the solo parent for support who are
unmarried, unemployed and not more than eighteen (18) years of age, or even over eighteen (18) years
but are incapable of self-support because of mental and/or physical defect/disability.
(c) "Parental responsibility" - with respect to their minor children shall refer to the rights and duties of
the parents as defined in Article 220 of Executive Order No. 209, as amended, otherwise known as the
"Family Code of the Philippines."
(d) "Parental leave" - shall mean leave benefits granted to a solo parent to enable him/her to perform
parental duties and responsibilities where physical presence is required.
(e) "Flexible work schedule" - is the right granted to a solo parent employee to vary his/her arrival and
departure time without affecting the core work hours as defined by the employer.

Section 4. Criteria for Support. - Any solo parent whose income in the place of domicile falls below the
poverty threshold as set by the National Economic and Development Authority (NEDA) and subject to
the assessment of the DSWD worker in the area shall be eligible for assistance: Provided, however, That
any solo parent whose income is above the poverty threshold shall enjoy the benefits mentioned in
Sections 6, 7 and 8 of this Act.
Section 5. Comprehensive Package of Social Development and Welfare Services. - A comprehensive
package of social development and welfare services for solo parents and their families will be developed
by the DSWD, DOH, DECS, CHED, TESDA, DOLE, NHA and DILG, in coordination with local government
units and a nongovernmental organization with proven track record in providing services for solo
parents.
The DSWD shall coordinate with concerned agencies the implementation of the comprehensive package
of social development and welfare services for solo parents and their families. The package will initially
include:
(a) Livelihood development services which include trainings on livelihood skills, basic business
management, value orientation and the provision of seed capital or job placement.
(b) Counseling services which include individual, peer group or family counseling. This will focus on the
resolution of personal relationship and role conflicts.
(c) Parent effectiveness services which include the provision and expansion of knowledge and skills of
the solo parent on early childhood development, behavior management, health care, rights and duties
of parents and children.
(d) Critical incidence stress debriefing which includes preventive stress management strategy designed
to assist solo parents in coping with crisis situations and cases of abuse.
(e) Special projects for individuals in need of protection which include temporary shelter, counseling,
legal assistance, medical care, self-concept or ego-building, crisis management and spiritual enrichment.
Section 6. Flexible Work Schedule. - The employer shall provide for a flexible working schedule for solo
parents: Provided, That the same shall not affect individual and company productivity: Provided,
further, That any employer may request exemption from the above requirements from the DOLE on
certain meritorious grounds.
Section 7. Work Discrimination. - No employer shall discriminate against any solo parent employee with
respect to terms and conditions of employment on account of his/her status.
Section 8. Parental Leave. - In addition to leave privileges under existing laws, parental leave of not
more than seven (7) working days every year shall be granted to any solo parent employee who has
rendered service of at least one (1) year.
Section 9. Educational Benefits. - The DECS, CHED and TESDA shall provide the following benefits and
privileges:
(1) Scholarship programs for qualified solo parents and their children in institutions of basic, tertiary and
technical/skills education; and

(2) Nonformal education programs appropriate for solo parents and their children.
The DECS, CHED and TESDA shall promulgate rules and regulations for the proper implementation of this
program.
Section 10. Housing Benefits. - Solo parents shall be given allocation in housing projects and shall be
provided with liberal terms of payment on said government low-cost housing projects in accordance
with housing law provisions prioritizing applicants below the poverty line as declared by the NEDA.
Section 11. Medical Assistance. - The DOH shall develop a comprehensive health care program for solo
parents and their children. The program shall be implemented by the DOH through their retained
hospitals and medical centers and the local government units (LGUs) through their
provincial/district/city/municipal hospitals and rural health units (RHUs).
Section 12. Additional Powers and Functions of the DSWD. The DSWD shall perform the following
additional powers and functions relative to the welfare of solo parents and their families:
(a) Conduct research necessary to: (1) develop a new body of knowledge on solo parents; (2) define
executive and legislative measures needed to promote and protect the interest of solo parents and their
children; and (3) assess the effectiveness of programs designed for disadvantaged solo parents and their
children;
(b) Coordinate the activities of various governmental and nongovernmental organizations engaged in
promoting and protecting the interests of solo parents and their children; and
(c) Monitor the implementation of the provisions of this Act and suggest mechanisms by which such
provisions are effectively implemented.
Section 13. Implementing Rules and Regulations. - An interagency committee headed by the DSWD, in
coordination with the DOH, DECS, CHED, TESDA, DOLE, NHA, and DILG is hereby established which shall
formulate, within ninety (90) days upon the effectivity of this Act, the implementing rules and
regulations in consultation with the local government units, nongovernment organizations and people's
organizations.
Section 14. Appropriations. - The amount necessary to carry out the provisions of this Act shall be
included in the budget of concerned government agencies in the General Appropriations Act of the year
following its enactment into law and thereafter.1awphil.net
Section 15. Repealing Clause. - All laws, decrees, executive orders, administrative orders or parts thereof
inconsistent with the provisions of this Act are hereby repealed, amended or modified accordingly.
Section 16. Separability Clause. - If any provision of this Act is held invalid or unconstitutional, other
provisions not affected thereby shall continue to be in full force and effect.
Section 17. Effectivity Clause. - This Act shall take effect fifteen (15) days following its complete
publication in the Official Gazette or in at least two (2) newspaper of general circulation.
Approved.
(Sgd.)

JOSEPH EJERCITO ESTRADA

President of the Philippines

Implementing Rules, R.A. 8972

Dela Cueva v. Omaga, A.M. No. P-08-2590, July 5, 2010

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION

JULIE ANN C. DELA CUEVA,

Complainant,

A.M. NO. P-08-2590*

Present:

- versus -

SELIMA B. OMAGA,
Court Stenographer I,
MTC-Calauan, Laguna,
Respondent.

CARPIO, J., Chairperson,

NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

Promulgated:
July 5, 2010

x --------------------------------------------------------------------------------------- x
DECISION

MENDOZA, J.:

This administrative case stemmed from a sworn Affidavit-Complaint[1] dated June 15, 2007 filed by Julie
Ann dela Cueva charging respondent Selima B. Omaga, Court Stenographer, Municipal Trial Court,
Calauan, Laguna, with Immorality.

Complainant Julie Ann C. dela Cueva is the legal wife of P/Supt. Nestor dela Cueva.[2] They were married
on July 29, 1984, and the union bore three children. Due to the philandering ways of her husband, the

couple separated on November 30, 1994.[3] Thereafter, the complainant cohabited with two different
men in succession (1) William Castillo with whom she had three children: Jessica, born on February 24,
1998; William Paolo, born on March 6, 2000; and Frenz William, born on August 8, 2002; and (2) Justiniano
Montillano with whom she had one child, Justin Jan, born on March 31, 2006.[4]
On May 31, 2007, P/Supt. Nestor dela Cueva filed a Petition for Declaration of Nullity of Marriage alleging
as ground his own psychological incapacity.[5] This angered and prompted his wife, the complainant, to
file a criminal complaint against him for bigamy and concubinage. Her complaint alleged that he and
respondent, Selima B. Omaga, got married and were living together as husband and wife despite the
subsistence of his marriage with her (the complainant).[6] The criminal charges were dismissed by the
provincial prosecutor in a resolution dated August 24, 2007.[7]
Complainant dela Cueva also filed an administrative complaint against both her husband and the
respondent.[8] In her defense, respondent averred that she first met P/Supt. dela Cueva in 1995 when he
was assigned by the Philippine National Police as Chief of Police in Calauan, Laguna. Their relationship
started on March 8, 1995 and continued until she received notice of the bigamy and concubinage case
filed against him.[9] It was only then that she discovered that he was married.[10] She bore P/Supt. dela
Cueva three children: John Emmanuel, born on December 27, 1996; Patrick Josef, born on May 1, 1998;
and Patricia May, born on May 18, 2000.[11] Respondent further asserted that despite having had three
children with P/Supt. dela Cueva, they did not live together in one house but rather, he would just visit
her in her house from time to time.[12]
On October 23, 2008, the Office of the Court Administrator recommended that the complaint be redocketed as a regular administrative matter and that respondent be in the meantime suspended for a
period six (6) months and one (1) day, without pay with a stern warning that a repetition of the same act
would be dealt with more severely.[13]
As recommended, the Court re-docketed the complaint as a regular administrative matter in a Resolution
dated December 15, 2008.[14] In another Resolution dated June 10, 2009, the Office of the Court
Administrator was directed to assign a Regional Trial Court judge in Laguna for investigation, report and
recommendation.[15] On September 17, 2009, Judge Agripino G. Morga of the Regional Trial Court, Branch
32, San Pablo City, Laguna, was designated to be the investigating judge.
During the hearing of the case before the investigating judge on October 8, 2009, the complainant
manifested that she was withdrawing her complaint after learning that respondent and her husband never
lived together as husband and wife.[16] Complainant confessed that she was prompted to file the
complaint simply because her husband had filed a petition for declaration of nullity of their marriage.[17]
In his Report and Recommendation dated December 10, 2009, Judge Morga recommended that the
respondent be absolved from any administrative liability taking into consideration the following
circumstances: (1) respondent and P/Supt. dela Cueva began their relationship after he was already
separated in fact from complainant; (2) complainant is no longer interested in pursuing the case as she
realized that filing it was a mistake since respondent and her husband never lived together as husband
and wife; (3) there is no evidence to contradict respondents claim that during their relationship she did
not know dela Cueva was married and that they did not cohabit in one house; (4) respondents
performance as court stenographer was not adversely affected by her situation; and (5) respondent has
properly reared her children and conducted herself in public appropriately.[18] He further stated that:

All told, the totality of the above circumstances necessitates a review on the findings of the Honorable
Court and the Court Administrator to impose a six-month suspension. While it cannot be disputed that
respondent entered into an illicit relationship, the same to the mind of this Investigator was not so corrupt
and false as to constitute a criminal act or so unprincipled as to be reprehensible to a high degree.[19]

The sole issue before this Court is whether or not respondent is guilty of immoral conduct.
At the outset, it should be stressed that complainants change of heart in deciding not to pursue the case
against respondent is of no moment as it has no controlling significance in this administrative case. The
long standing policy is:
Administrative actions cannot depend on the will or pleasure of the complainant who may, for reasons of
his own, condone what may be detestable. Neither can the Court be bound by the unilateral act of the
complainant in a matter relating to its disciplinary power x x x Desistance cannot divest the Court of its
jurisdiction to investigate and decide the complaint against the respondent. To be sure, public interest is
at stake in the conduct and actuations of officials and employees of the judiciary. And the program and
efforts of this Court in improving the delivery of justice to the people should not be frustrated and put to
naught by private arrangements between the parties.[20]
This is so because the issue in administrative cases is not whether the complainant has a cause of action
against the respondent but, rather, whether the employee against whom the complaint is filed has
breached the norms and standards of service in the judiciary.[21] As such, this Court, having disciplinary
authority over employees of the lower courts, has the power and duty to pursue this administrative
matter regardless of complainants desistance.
The Court now determines whether or not respondent is indeed guilty of immoral conduct.
Well-established is the principle that public office is a public trust.[22] No less than the Constitution
requires that: Public officers and employees must at all times be accountable to the people, serve them
with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead
modest lives.[23] In relation thereto, this Court has held that:
x x x. This constitutional mandate should always be in the minds of all public servants to guide them in
their actions during their entire tenure in the government service. The good of the service and the degree
of morality which every official and employee in the public service must observe, if respect and confidence
are to be maintained by the Government in the enforcement of the law, demand that no untoward
conduct on his part, affecting morality, integrity and efficiency while holding office should be left without
proper and commensurate sanction, all attendant circumstances taken into account.[24]
Employees of the judiciary, however, are subject to a higher standard than most other civil servants. It
has been written that a place in the judiciary demands upright men and women who must carry on with
dignity and be ever conscious of the impression that they could create by the way they conduct
themselves.[25] In the case of Acebedo v. Arquero,[26] this Court ruled that:
Although every office in the government service is a public trust, no position exacts a greater demand for
moral righteousness and uprightness from an individual than in the judiciary. That is why this Court has
firmly laid down exacting standards of morality and decency expected of those in the service of the

judiciary. Their conduct, not to mention their behavior, is circumscribed with the heavy burden of
responsibility, characterized by, among other things, propriety and decorum so as to earn and keep the
publics respect and confidence in the judicial service. It must be free from any whiff of impropriety, not
only with respect to their duties in the judicial branch but also to their behavior outside the court as
private individuals. There is no dichotomy of morality; court employees are also judged by their private
morals.[27]

These exacting standards of morality and decency are required of employees of the judiciary in order to
preserve the faith of the people in the courts as dispensers of justice.[28] Our reminder, through the words
of Justice Muoz-Palma, must be taken to heart:
x x x. The image of the court of justice is necessarily mirrored in the conduct, official or otherwise, of the
men and women who work thereat, from the judge to the least and lowest of its personnel - hence, it
becomes the imperative sacred duty of each and everyone in the court to maintain its good name and
standing as a true temple of justice.[29]
This was further emphasized by the Court in Ratti v. Mendoza-de Castro:[30]

It must be stressed that every employee of the judiciary should be an example of integrity, uprightness
and honesty. Like any public servant, she must exhibit the highest sense of honesty and integrity not only
in the performance of her official duties but in her personal and private dealings with other people. In
order to preserve the good name and integrity of the courts of justice, court personnel are enjoined to
adhere to the exacting standards of morality and decency in their professional and private conduct.

Under the Revised Uniform Rules on Administrative Cases in the Civil Service, disgraceful and immoral
conduct is punishable by suspension of six months and one day to one year for the first offense.[31]
Immorality has been defined to include not only sexual matters but also conduct inconsistent with
rectitude, or indicative of corruption, indecency, depravity, and dissoluteness; or is willful, flagrant or
shameless conduct showing moral indifference to opinions of respectable members of the community,
and an inconsiderate attitude toward good order and public welfare.[32]
There is no doubt that engaging in sexual relations with a married man is not only a violation of the moral
standards expected of employees of the judiciary but is also a desecration of the sanctity of the institution
of marriage which this Court abhors and is, thus, punishable.
Respondent claims, however, that she had no knowledge that P/Supt. dela Cueva was married and that
she ended their relationship as soon as she was made aware of his true civil status. If her contention were
true, this would serve to exculpate her from the accusation of immorality.

The Court finds respondents assertion to be plausible. It should be noted that the complainant did not
refute her defense that she did not learn of P/Supt. dela Cuevas marital status until complainant filed a

complaint against them. Indeed, there is no concrete evidence on record to show that respondent knew
of his married state at the time their relationship started.
The idea, however, that the respondent never had the slightest notion that P/Supt. dela Cueva was
married and that she did not cohabit with him despite having three children may be quite a stretch of the
imagination. It is fairly inconceivable for a woman to have had a relationship with a married man for more
than a decade without even a tinge of suspicion that he might have been lying about his true civil
status. But then again, there is nothing on record which can refute respondents allegation. In view of the
lack of proof showing that respondent willingly entered into an immoral sexual liaison with a married man,
she cannot be held liable for immoral and disgraceful conduct.
It is a well-settled rule that administrative penalties must be supported by substantial evidence for the
imposition thereof.[33] This is in keeping with the constitutional imperative that a person is entitled to due
process of law. The Court will exercise its disciplinary authority over respondent only if the case against
her is established by clear, convincing and satisfactory evidence.[34] In this case, the Court finds the
evidence against respondent insufficient to warrant the imposition of an administrative penalty.
We are, thus, guided by the disquisition of the Court in the case of Concerned Employee v. Mayor.[35] In
said case, a court stenographer had sexual relations with a married man. She alleged that she did not
know that her lover was married when they commenced their relationship. The Court acknowledged the
validity of such a defense:
The legal effect of such ignorance deserves due consideration, if only for intellectual clarity. The act of
having sexual relations with a married person, or of married persons having sexual relations outside their
marriage is considered disgraceful and immoral conduct because such manifests deliberate disregard by
the actor of the marital vows protected by the Constitution and our laws. The perversion is especially
egregious if committed by judicial personnel, those persons specifically tasked with the administration of
justice and the laws of the land. However, the malevolent intent that normally characterizes the act is
not present when the employee is unaware that his/her sexual partner is actually married. This lack of
awareness may extenuate the cause for the penalty, as it did in the aforementioned Ui case.[36] (emphasis
supplied)
In the cited case of Ui v. Bonifacio,[37] the respondent was a female lawyer who had a relationship with,
and actually married, a man whose earlier marriage was still subsisting. She asserted, however, that as
soon as she learned that he was married, she left him and ended their association. The Court found that
she did not deserve administrative punishment:

All these taken together leads to the inescapable conclusion that respondent was imprudent in managing
her personal affairs. However, the fact remains that her relationship with Carlos Ui, clothed as it was with
what respondent believed was a valid marriage, cannot be considered immoral. For immorality connotes
conduct that shows indifference to the moral norms of society and the opinion of good and respectable
members of the community. Moreover, for such conduct to warrant disciplinary action, the same must
be grossly immoral, that is, it must be so corrupt and false as to constitute a criminal act or so
unprincipled as to be reprehensible to a high degree.

We have held that a member of the Bar and officer of the court is not only required to refrain from
adulterous relationships . . . but must also so behave himself as to avoid scandalizing the public by creating

the belief that he is flouting those moral standards. Respondent's act of immediately distancing herself
from Carlos Ui upon discovering his true civil status belies just that alleged moral indifference and
proves that she had no intention of flaunting the law and the high moral standard of the legal
profession.Complainant's bare assertions to the contrary deserve no credit. After all, the burden of proof
rests upon the complainant, and the Court will exercise its disciplinary powers only if she establishes her
case by clear, convincing and satisfactory evidence. This, herein complainant miserably failed to
do.[38] (emphases supplied)

On a final note, the Court would like to point out that, in the absence of clear and convincing evidence, it
would be insensitive to condemn the respondent for simply being an unmarried mother of three. There
has been no showing that she has lived her life in a scandalous and disgraceful manner which, by any
means, has affected her standing in the community.[39] To speculate that she did so would be tantamount
to committing a discrimination against a solo parent,[40] which is prohibited under Section 7 of Republic
Act No. 8972, the Solo Parents Welfare Act of 2000, to wit:
Section 7. Work Discrimination No employer shall discriminate against any solo parent employee with
respect to terms and conditions of employment on account of his/her status.

WHEREFORE, the complaint for disgraceful and immoral conduct against respondent Selima B. Omaga is
hereby DISMISSED.
SO ORDERED.

Leave for VAWC victims (R.A. 9262)

Sec. 43, R.A. 9262, Anti-VAWC Act

SECTION 43. Entitled to Leave. Victims under this Act shall be entitled to take a paid leave of absence
up to ten (10) days in addition to other paid leaves under the Labor Code and Civil Service Rules and
Regulations, extendible when the necessity arises as specified in the protection order.
Any employer who shall prejudice the right of the person under this section shall be penalized in
accordance with the provisions of the Labor Code and Civil Service Rules and Regulations. Likewise, an
employer who shall prejudice any person for assisting a co-employee who is a victim under this Act shall
likewise be liable for discrimination.

Sec. 42, Implementing Rules, R.A. 9262

Section 42. Ten-day paid leave in addition to other leave benefits. - At any time during the application of
any protection order, investigation, prosecution and/or trial of the criminal case, a victim of VAWC who
is employed shall be entitled to a paid leave of up to ten (10) days in addition to other paid leaves under

the Labor Code and Civil Service Rules and Regulations and other existing laws and company policies,
extendible when the necessity arises as specified in the protection order. The Punong
Barangay/kagawad or prosecutor or the Clerk of Court, as the case may be, shall issue a certification at
no cost to the woman that such an action is pending, and this is all that is required for the employer to
comply with the 10-day paid leave. For government employees, in addition to the aforementioned
certification, the employee concerned must file an application for leave citing as basis R.A. 9262. The
administrative enforcement of this leave entitlement shall be considered within the jurisdiction of the
Regional Director of the DOLE under Article 129 of the Labor Code of the Philippines, as amended, for
employees in the private sector, and the Civil Service Commission, for government employees.
The availment of the ten day-leave shall be at the option of the woman employee, which shall cover the
days that she has to attend to medical and legal concerns. Leaves not availed of are noncumulative and
not convertible to cash.
The employer/agency head who denies the application for leave, and who shall prejudice the victimsurvivor or any person for assisting a co-employee who is a victim-survivor under the Act shall be held
liable for discrimination and violation of R.A 9262.
The provision of the Labor Code and the Civil Service Rules and Regulations shall govern the penalty to
be imposed on the said employer/agency head.

Special Leave benefit for women

Sec. 18, R.A. 9710, Magna Carta of Women

Section 18. Special Leave Benefits for Women. - A woman employee having rendered continuous
aggregate employment service of at least six (6) months for the last twelve (12) months shall be entitled
to a special leave benefit of two (2) months with full pay based on her gross monthly compensation
following surgery caused by gynecological disorders.

Sec. 21, Rule IV, Implementing Rules, R.A. 9710

SECTION 21. Special Leave Benefits for Women

A. Any female employee in the public and private sector
regardless of age and civil status shall be entitled to a special leave
of two (2) months with full pay based on her gross monthly
compensation subject to existing laws, rules and regulations due to
surgery caused by gynecological disorders under such terms and
conditions:
1. She has rendered at least six (6) months continuous
aggregate employment service for the last twelve (12) months
prior to surgery;
2. In the event that an extended leave is necessary, the
female employee may use her earned leave credits; and
3. This special leave shall be non-cumulative and nonconvertible
to cash.

Sec. 7 (m), Rule II, Implementing Rules, R.A. 9710

M. Gynecological disorders refers to disorders that

would require surgical procedures such as, but not limited to, dilatation
and curettage and those involving female reproductive organs such as
the vagina, cervix, uterus, fallopian tubes, ovaries, breast, adnexa and
pelvic floor, as certified by a competent physician. For purposes of
the Act and these Rules and Regulations, gynecological surgeries
shall also include hysterectomy, ovariectomy, and mastectomy;

Service Charge

Art. 96, Labor Code

Article 96. Service charges. All service charges collected by hotels, restaurants and similar
establishments shall be distributed at the rate of eighty-five percent (85%) for all covered employees
and fifteen percent (15%) for management. The share of the employees shall be equally distributed
among them. In case the service charge is abolished, the share of the covered employees shall be
considered integrated in their wages.

Book III, Rule V, Implementing Rules (Labor Code)

No. 7 (a), (c), DOLE Handbook on Workers Statutory Monetary Benefits

Mayon Hotel v. Adana, G.R. No. 157634, May 16, 2005

SECOND DIVISION
[G.R. No. 157634. May 16, 2005]
MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners, vs. ROLANDO
ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO
TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS GUADES,
AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE ATRACTIVO, MIGUEL
TORREFRANCA, and SANTOS BROOLA, respondents.

DECISION
PUNO, J.:
This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals
(CA)[1] in CA-G.R. SP No. 68642, entitled Rolando Adana, Wenefredo Loveres, et. al. vs. National Labor
Relations Commission (NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al., and the
Resolution[2] denying petitioners motion for reconsideration. The assailed CA decision reversed the NLRC
Decision which had dismissed all of respondents complaints,[3] and reinstated the Joint Decision of the
Labor Arbiter[4] which ruled that respondents were illegally dismissed and entitled to their money claims.
The facts, culled from the records, are as follows:[5]
Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of petitioner
Pacita O. Po,[6] whose mother, petitioner Josefa Po Lam, manages the establishment.[7] The hotel and
restaurant employed about sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the following
people, all respondents in this case, with the following jobs:[8]
1. Wenefredo Loveres

Accountant and Officer-in-charge

2. Paterno Llarena

Front Desk Clerk

3. Gregorio Nicerio

Supervisory Waiter

4. Amado Macandog

Roomboy

5. Luis Guades

Utility/Maintenance Worker

6. Santos Broola

Roomboy

7. Teodoro Laurenaria

Waiter

8. Eduardo Alamares

Roomboy/Waiter

9. Lourdes Camigla

Cashier

10. Chona Bumalay

Cashier

11. Jose Atractivo

Technician

12. Amado Alamares

Dishwasher and Kitchen Helper

13. Roger Burce

Cook

14. Rolando Adana

Waiter

15. Miguel Torrefranca

Cook

16. Edgardo Torrefranca

Cook

Due to the expiration and non-renewal of the lease contract for the rented space occupied by the said
hotel and restaurant at Rizal Street, the hotel operations of the business were suspended on March 31,
1997.[9] The operation of the restaurant was continued in its new location at Elizondo
Street, Legazpi City, while waiting for the construction of a new Mayon Hotel & Restaurant at Pearanda
Street, Legazpi City.[10] Only nine (9) of the sixteen (16) employees continued working in the Mayon
Restaurant at its new site.[11]
On various dates of April and May 1997, the 16 employees filed complaints for underpayment of wages
and other money claims against petitioners, as follows:[12]
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal,
underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave pay (SILP) and
claims for separation pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages;
nonpayment of cost of living allowance (COLA) and overtime pay; premium pay for holiday and rest day;
SILP; nightshift differential pay and separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages; nonpayment of
holiday and rest day pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of COLA,
overtime, holiday, rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and night shift
differential pay;
Santos Broola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday pay,
SILP, and damages;[13] and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay; premium pay
for holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of the
employees. The Labor Arbiter awarded substantially all of respondents money claims, and held that
respondents Loveres, Macandog and Llarena were entitled to separation pay, while respondents
Guades, Nicerio and Alamares were entitled to their retirement pay. The Labor Arbiter also held that
based on the evidence presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant
and the proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were
dismissed.
Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed a
petition for certiorari with the CA which rendered the now assailed decision.
After their motion for reconsideration was denied, petitioners now come to this Court, seeking the
reversal of the CA decision on the following grounds:

I. THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION (SECOND DIVISION) BY HOLDING THAT THE FINDINGS OF FACT OF THE NLRC
WERE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE DESPITE AMPLE AND SUFFICIENT EVIDENCE
SHOWING THAT THE NLRC DECISION IS INDEED SUPPORTED BY SUBSTANTIAL EVIDENCE;
II. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE JOINT DECISION OF THE LABOR
ARBITER WHICH RULED THAT PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED FROM THEIR
EMPLOYMENT, DESPITE THE FACT THAT THE REASON WHY PRIVATE RESPONDENTS WERE OUT OF
WORK WAS NOT DUE TO THE FAULT OF PETITIONERS BUT TO CAUSES BEYOND THE CONTROL OF
PETITIONERS.
III. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE AWARD OF MONETARY BENEFITS
BY THE LABOR ARBITER IN HIS JOINT DECISION IN FAVOR OF THE PRIVATE RESPONDENTS, INCLUDING
THE AWARD OF DAMAGES TO SIX (6) OF THE PRIVATE RESPONDENTS, DESPITE THE FACT THAT THE
PRIVATE RESPONDENTS HAVE NOT PROVEN BY SUBSTANTIAL EVIDENCE THEIR ENTITLEMENT THERETO
AND ESPECIALLY THE FACT THAT THEY WERE NOT ILLEGALLY DISMISSED BY THE PETITIONERS.
IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PACITA ONG PO IS THE OWNER OF
THE BUSINESS ESTABLISHMENT, PETITIONER MAYON HOTEL AND RESTAURANT, THUS DISREGARDING
THE CERTIFICATE OF REGISTRATION OF THE BUSINESS ESTABLISHMENT ISSUED BY THE LOCAL
GOVERNMENT, WHICH IS A PUBLIC DOCUMENT, AND THE UNQUALIFIED ADMISSIONS OF
COMPLAINANTS-PRIVATE RESPONDENTS.[14]
In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner Mayon Hotel
& Restaurant, and the proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to underpayment of wages, and nonpayment of
holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift differential pay?
It is petitioners contention that the above issues have already been threshed out sufficiently and
definitively by the NLRC. They therefore assail the CAs reversal of the NLRC decision, claiming that based
on the ruling in Castillo v. NLRC,[15] it is non sequitur that the CA should re-examine the factual findings
of both the NLRC and the Labor Arbiter, especially as in this case the NLRCs findings are allegedly
supported by substantial evidence.
We do not agree.
There is no denying that it is within the NLRCs competence, as an appellate agency reviewing decisions
of Labor Arbiters, to disagree with and set aside the latters findings.[16] But it stands to reason that the
NLRC should state an acceptable cause therefore, otherwise it would be a whimsical, capricious,
oppressive, illogical, unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the
extraordinary writ of certiorari.[17] And when the factual findings of the Labor Arbiter and the NLRC are
diametrically opposed and this disparity of findings is called into question, there is, necessarily, a reexamination of the factual findings to ascertain which opinion should be sustained.[18] As ruled
in Asuncion v. NLRC,[19]

Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and
respect, we are constrained to take a second look at the facts before us because of the diversity in the
opinions of the Labor Arbiter and the NLRC. A disharmony between the factual findings of the Labor
Arbiter and those of the NLRC opens the door to a review thereof by this Court.[20]
The CA, therefore, did not err in reviewing the records to determine which opinion was supported by
substantial evidence.
Moreover, it is explicit in Castillo v. NLRC[21] that factual findings of administrative bodies like the NLRC
are affirmed only if they are supported by substantial evidence that is manifest in the decision and on
the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a Labor
Arbiter. Mere variance in evidentiary assessment between the NLRC and the Labor Arbiter does not
automatically call for a full review of the facts by this Court. The NLRCs decision, so long as it is not
bereft of substantial support from the records, deserves respect from this Court. As a rule, the original
and exclusive jurisdiction to review a decision or resolution of respondent NLRC in a petition
for certiorari under Rule 65 of the Rules of Court does not include a correction of its evaluation of the
evidence but is confined to issues of jurisdiction or grave abuse of discretion. Thus, the NLRCs factual
findings, if supported by substantial evidence, are entitled to great respect and even finality, unless
petitioner is able to show that it simply and arbitrarily disregarded the evidence before it or had
misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had
been properly appreciated. (citations omitted)[22]
After careful review, we find that the reversal of the NLRCs decision was in order precisely because it
was not supported by substantial evidence.
1.

Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in fact,
the owner of Mayon Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on review,
agreed with the Labor Arbiter that notwithstanding the certificate of registration in the name of Pacita
Po, it is Josefa Po Lam who is the owner/proprietor of Mayon Hotel & Restaurant, and the proper
respondent in the complaints filed by the employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault the
labor arbiter in ruling that Josefa Po Lam is the owner of the subject hotel and restaurant. There were
conflicting documents submitted by Josefa herself. She was ordered to submit additional documents to
clearly establish ownership of the hotel and restaurant, considering the testimonies given by the
[respondents] and the non-appearance and failure to submit her own position paper by Pacita Po. But
Josefa did not comply with the directive of the Labor Arbiter. The ruling of the Supreme Court in
Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po Lam which is stated in
this wise:
When the evidence tends to prove a material fact which imposes a liability on a party, and he has it in
his power to produce evidence which from its very nature must overthrow the case made against him if
it is not founded on fact, and he refuses to produce such evidence, the presumption arises that the
evidence[,] if produced, would operate to his prejudice, and support the case of his adversary.

Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor arbiter
relied also on the testimonies of the witnesses, during the hearing of the instant case. When the
conclusions of the labor arbiter are sufficiently corroborated by evidence on record, the same should be
respected by appellate tribunals, since he is in a better position to assess and evaluate the credibility of
the contending parties.[23] (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner Josefa
Po Lam is the owner of Mayon Hotel & Restaurant. They allege that the documents they submitted to
the Labor Arbiter sufficiently and clearly establish the fact of ownership by petitioner Pacita Po, and not
her mother, petitioner Josefa Po Lam. They contend that petitioner Josefa Po Lams participation was
limited to merely (a) being the overseer; (b) receiving the month-to-month and/or year-to-year financial
reports prepared and submitted by respondent Loveres; and (c) visitation of the premises.[24] They also
put emphasis on the admission of the respondents in their position paper submitted to the Labor
Arbiter, identifying petitioner Josefa Po Lam as the manager, and Pacita Po as the owner.[25] This, they
claim, is a judicial admission and is binding on respondents. They protest the reliance the Labor Arbiter
and the CA placed on their failure to submit additional documents to clearly establish ownership of the
hotel and restaurant, claiming that there was no need for petitioner Josefa Po Lam to submit additional
documents considering that the Certificate of Registration is the best and primary evidence of
ownership.
We disagree with petitioners. We have scrutinized the records and find the claim that petitioner Josefa
Po Lam is merely the overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings with the Labor
Arbiter. Despite receipt of the Labor Arbiters notice and summons, other notices and Orders, petitioner
Pacita Po failed to appear in any of the proceedings with the Labor Arbiter in these cases, nor file her
position paper.[26] It was only on appeal with the NLRC that Pacita Po signed the pleadings.[27] The apathy
shown by petitioner Pacita Po is contrary to human experience as one would think that the owner of an
establishment would naturally be concerned when ALLher employees file complaints against her.
Second. The records of the case belie petitioner Josefa Po Lams claim that she is merely an overseer.
The findings of the Labor Arbiter on this question were based on credible, competent and substantial
evidence. We again quote the Joint Decision on this matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa Po Lam
claims that it is her daughter, Pacita Po, who owns the hotel and restaurant when the latter purchased
the same from one Palanos in 1981, Josefa failed to submit the document of sale from said Palanos to
Pacita as allegedly the sale was only verbal although the license to operate said hotel and restaurant is
in the name of Pacita which, despite our Order to Josefa to present the same, she failed to comply (p.
38, tsn. August 13, 1998). While several documentary evidences were submitted by Josefa wherein
Pacita was named therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there
were documentary evidences also that were submitted by Josefa showing her ownership of said
enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained her participation and interest in the
business as merely to help and assist her daughter as the hotel and restaurant was near the formers
store, the testimonies of [respondents] and Josefa as well as her demeanor during the trial in these
cases proves (sic) that Josefa Po Lam owns Mayon Hotel and Restaurant. [Respondents] testified that it
was Josefa who exercises all the acts and manifestation of ownership of the hotel and restaurant like

transferring employees from the Greatwall Palace Restaurant which she and her husband Roy Po Lam
previously owned; it is Josefa to whom the employees submits (sic) reports, draws money for payment
of payables and for marketing, attending (sic) to Labor Inspectors during ocular inspections. Except for
documents whereby Pacita Po appears as the owner of Mayon Hotel and Restaurant, nothing in the
record shows any circumstance or manifestation that Pacita Po is the owner of Mayon Hotel and
Restaurant. The least that can be said is that it is absurd for a person to purchase a hotel and restaurant
in the very heart of the City of Legazpi verbally. Assuming this to be true, when [petitioners],
particularly Josefa, was directed to submit evidence as to the ownership of Pacita of the hotel and
restaurant, considering the testimonies of [respondents], the former should [have] submitted the lease
contract between the owner of the building where Mayon Hotel and Restaurant was located at Rizal St.,
Legazpi City and Pacita Po to clearly establish ownership by the latter of said enterprise. Josefa
failed. We are not surprised why some employers employ schemes to mislead Us in order to evade
liabilities. We therefore consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel and
Restaurant and the proper respondent in these cases.[28]
Petitioners reliance on the rules of evidence, i.e., the certificate of registration being the best proof of
ownership, is misplaced. Notwithstanding the certificate of registration, doubts were cast as to the true
nature of petitioner Josefa Po Lams involvement in the enterprise, and the Labor Arbiter had the
authority to resolve this issue. It was therefore within his jurisdiction to require the additional
documents to ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and the application of technical
rules of procedure may be relaxed in labor cases to serve the demand of substantial justice.[29] The rule
of evidence prevailing in court of law or equity shall not be controlling in labor cases and it is the spirit
and intention of the Labor Code that the Labor Arbiter shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process.[30] Labor laws mandate the speedy administration of justice,
with least attention to technicalities but without sacrificing the fundamental requisites of due
process.[31]
Similarly, the fact that the respondents complaints contained no allegation that petitioner Josefa Po Lam
is the owner is of no moment. To apply the concept of judicial admissions to respondents who are but
lowly employees - would be to exact compliance with technicalities of law that is contrary to the
demands of substantial justice. Moreover, the issue of ownership was an issue that arose only during
the course of the proceedings with the Labor Arbiter, as an incident of determining respondents claims,
and was well within his jurisdiction.[32]
Petitioners were also not denied due process, as they were given sufficient opportunity to be heard on
the issue of ownership.[33] The essence of due process in administrative proceedings is simply an
opportunity to explain ones side or an opportunity to seek reconsideration of the action or ruling
complained of.[34] And there is nothing in the records which would suggest that petitioners had absolute
lack of opportunity to be heard.[35] Obviously, the choice not to present evidence was made by
petitioners themselves.[36]
But more significantly, we sustain the Labor Arbiter and the CA because even when the case was on
appeal with the NLRC, nothing was submitted to negate the Labor Arbiters finding that Pacita Po is not
the real owner of the subject hotel and restaurant. Indeed, no such evidence was submitted in the

proceedings with the CA nor with this Court. Considering that petitioners vehemently deny ownership
by petitioner Josefa Po Lam, it is most telling that they continue to withhold evidence which would shed
more light on this issue. We therefore agree with the CA that the failure to submit could only mean that
if produced, it would have been adverse to petitioners case.[37]
Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is the owner of
petitioner Mayon Hotel & Restaurant.
2.

Illegal Dismissal: claim for separation pay

Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres,
Llarena, Nicerio, Macandog, Guades, Atractivo and Broola.[38]
The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents
Loveres, Macandog and Llarena. As respondents Guades, Nicerio and Alamares were already 79, 66 and
65 years old respectively at the time of the dismissal, the Labor Arbiter granted retirement benefits
pursuant to Article 287 of the Labor Code as amended.[39] The Labor Arbiter ruled that respondent
Atractivo was not entitled to separation pay because he had been transferred to work in the restaurant
operations in Elizondo Street, but awarded him damages. Respondents Loveres, Llarena, Nicerio,
Macandog and Guades were also awarded damages.[40]
The NLRC reversed the Labor Arbiter, finding that no clear act of termination is attendant in the case at
bar and that respondents did not submit any evidence to that effect, but the finding and conclusion of
the Labor Arbiter [are] merely based on his own surmises and conjectures.[41] In turn, the NLRC was
reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC finding that none of the abovenamed respondents were illegally dismissed, or entitled to separation or retirement pay. According to
petitioners, even the Labor Arbiter and the CA admit that when the illegal dismissal case was filed by
respondents on April 1997, they had as yet no cause of action. Petitioners therefore conclude that the
filing by respondents of the illegal dismissal case was premature and should have been dismissed
outright by the Labor Arbiter.[42] Petitioners also claim that since the validity of respondents dismissal is
a factual question, it is not for the reviewing court to weigh the conflicting evidence.[43]
We do not agree. Whether respondents are still working for petitioners IS a factual question. And the
records are unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant suspended its
hotel operations and transferred its restaurant operations in Elizondo Street, respondents Loveres,
Macandog, Llarena, Guades and Nicerio have not been permitted to work for petitioners. Respondent
Alamares, on the other hand, was also laid-off when the Elizondo Street operations closed, as were all
the other respondents. Since then, respondents have not been permitted to work nor recalled, even
after the construction of the new premises at Pearanda Street and the reopening of the hotel operations
with the restaurant in this new site. As stated by the Joint Decision of the Labor Arbiter on July 2000, or
more than three (3) years after the complaint was filed:[44]
[F]rom the records, more than six months had lapsed without [petitioner] having resumed operation of
the hotel. After more than one year from the temporary closure of Mayon Hotel and the temporary
transfer to another site of Mayon Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere
the hotel and restaurant will be transferred has been finally constructed and the same is operated as a

hotel with bar and restaurant nevertheless, none of [respondents] herein who were employed at Mayon
Hotel and Restaurant which was also closed on April 30, 1998 was/were recalled by [petitioner] to
continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had not
filed an amended complaint to question the cessation of their employment after the closure of Mayon
Hotel & Restaurant on March 31, 1997.[45]
The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with the
NLRC. It confounds us, therefore, how the NLRC could have so cavalierly treated this uncontroverted
factual finding by ruling that respondents have not introduced any evidence to show that they were
illegally dismissed, and that the Labor Arbiters finding was based on conjecture.[46] It was a serious error
that the NLRC did not inquire as to the legality of the cessation of employment. Article 286 of the Labor
Code is clear there is termination of employment when an otherwise bona fide suspension of work
exceeds six (6) months.[47] The cessation of employment for more than six months was patent and the
employer has the burden of proving that the termination was for a just or authorized cause.[48]
Moreover, we are not impressed by any of petitioners attempts to exculpate themselves from the
charges. First, in the proceedings with the Labor Arbiter, they claimed that it could not be illegal
dismissal because the lay-off was merely temporary (and due to the expiration of the lease contract over
the old premises of the hotel). They specifically invoked Article 286 of the Labor Code to argue that the
claim for separation pay was premature and without legal and factual basis.[49] Then, because the Labor
Arbiter had ruled that there was already illegal dismissal when the lay-off had exceeded the six-month
period provided for in Article 286, petitioners raise this novel argument, to wit:
It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code is
misplaced, considering that the reason why private respondents were out of work was not due to the
fault of petitioners. The failure of petitioners to reinstate the private respondents to their former
positions should not likewise be attributable to said petitioners as the private respondents did not
submit any evidence to prove their alleged illegal dismissal. The petitioners cannot discern why they
should be made liable to the private respondents for their failure to be reinstated considering that the
fact that they were out of work was not due to the fault of petitioners but due to circumstances beyond
the control of petitioners, which are the termination and non-renewal of the lease contract over the
subject premises. Private respondents, however, argue in their Comment that petitioners themselves
sought the application of Article 286 of the Labor Code in their case in their Position Paper filed before
the Labor Arbiter. In refutation, petitioners humbly submit that even if they invoke Article 286 of the
Labor Code, still the fact remains, and this bears stress and emphasis, that the temporary suspension of
the operations of the establishment arising from the non-renewal of the lease contract did not result in
the termination of employment of private respondents and, therefore, the petitioners cannot be faulted
if said private respondents were out of work, and consequently, they are not entitled to their money
claims against the petitioners.[50]
It is confounding how petitioners have fashioned their arguments. After having admitted, in effect, that
respondents have been laid-off since April 1997, they would have this Court excuse their refusal to
reinstate respondents or grant them separation pay because these same respondents purportedly have
not proven the illegality of their dismissal.

Petitioners arguments reflect their lack of candor and the blatant attempt to use technicalities to
muddle the issues and defeat the lawful claims of their employees. First, petitioners admit that since
April 1997, when hotel operations were suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio and Guadeshave not been permitted to
work. Second, even after six months of what should have been just a temporary lay-off, the same
respondents were still not recalled to work. As a matter of fact, the Labor Arbiter even found that as of
the time when he rendered his Joint Decision on July 2000 or more than three (3) years after the
supposed temporary lay-off, the employment of all of the respondents with petitioners had ceased,
notwithstanding that the new premises had been completed and the same operated as a hotel with bar
and restaurant. This is clearly dismissal or the permanent severance or complete separation of the
worker from the service on the initiative of the employer regardless of the reasons therefor.[51]
On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing of the
complaint, respondents had no cause of action to file the case for illegal dismissal. According to the CA
and the Labor Arbiter, the lay-off of the respondents was merely temporary, pending construction of the
new building at Pearanda Street.[52]
While the closure of the hotel operations in April of 1997 may have been temporary, we hold that the
evidence on record belie any claim of petitioners that the lay-off of respondents on that same date was
merely temporary. On the contrary, we find substantial evidence that petitioners intended the
termination to be permanent. First, respondents Loveres, Macandog, Llarena, Guades, Nicerio and
Alamares filed the complaint for illegal dismissal immediately after the closure of the hotel operations
in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel operations, and
petitioners allegations that the employees assigned to the hotel operations knew about this
beforehand. Second, in their position paper submitted to the Labor Arbiter, petitioners invoked Article
286 of the Labor Code to assert that the employer-employee relationship was merely suspended, and
therefore the claim for separation pay was premature and without legal or factual basis.[53] But they
made no mention of any intent to recall these respondents to work upon completion of the new
premises. Third, the various pleadings on record show that petitioners held respondents, particularly
Loveres, as responsible for mismanagement of the establishment and for abuse of trust and
confidence. Petitioner Josefa Po Lams affidavit on July 21, 1998, for example, squarely blamed
respondents, specifically Loveres, Bumalay and Camigla, for abusing her leniency and causing petitioner
Mayon Hotel & Restaurant to sustain continuous losses until it is closed. She then asserts that
respondents are not entitled to separation pay for they were not terminated and if ever the business
ceased to operate it was because of losses.[54] Again, petitioners make the same allegation in their
memorandum on appeal with the NLRC, where they alleged that three (3) years prior to the expiration
of the lease in 1997, the operation of the Hotel had been sustaining consistent losses, and these were
solely attributed to respondents, but most especially due to Loveress mismanagement and abuse of
petitioners trust and confidence.[55] Even the petition filed in this court made reference to the
separation of the respondents due to severe financial losses and reverses, again imputing it to
respondents mismanagement.[56] The vehemence of petitioners accusation of mismanagement against
respondents, especially against Loveres, is inconsistent with the desire to recall them to work. Fourth,
petitioners memorandum on appeal also averred that the case was filed not because of the business
being operated by them or that they were supposedly not receiving benefits from the Labor Code which
is true, but because of the fact that the source of their livelihood, whether legal or immoral, was

stopped on March 31, 1997, when the owner of the building terminated the Lease Contract.[57] Fifth,
petitioners had inconsistencies in their pleadings (with the NLRC, CA and with this Court) in referring to
the closure,[58] i.e., in the petition filed with this court, they assert that there is no illegal dismissal
because there was only a temporary cessation or suspension of operations of the hotel and restaurant
due to circumstances beyond the control of petitioners, and that is, the non-renewal of the lease
contract...[59] And yet, in the same petition, they also assert that: (a) the separation of respondents was
due to severe financial losses and reverses leading to the closure of the business; and
(b) petitionerPacita Po had to close shop and was bankrupt and has no liquidity to put up her own
building to house Mayon Hotel & Restaurant.[60] Sixth, and finally, the uncontroverted finding of the
Labor Arbiter that petitioners terminated all the other respondents, by not employing them when the
Hotel and Restaurant transferred to its new site on Pearanda Street.[61] Indeed, in this same
memorandum, petitioners referred to all respondents as former employees of Mayon Hotel &
Restaurant.[62]
These factors may be inconclusive individually, but when taken together, they lead us to conclude that
petitioners really intended to dismiss all respondents and merely used the termination of the lease
(on Rizal Street premises) as a means by which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely
temporary, it became dismissal by operation of law when petitioners failed to reinstate respondents
after the lapse of six (6) months, pursuant to Article 286 of the Labor Code.
We are not impressed by petitioners claim that severe business losses justified their failure to reinstate
respondents. The evidence to prove this fact is inconclusive. But more important, serious business
losses do not excuse the employer from complying with the clearance or report required under Article
283 of the Labor Code and its implementing rules before terminating the employment of its
workers.[63] In the absence of justifying circumstances, the failure of petitioners to observe the
procedural requirements set out under Article 284, taints their actuations with bad faith, especially since
they claimed that they have been experiencing losses in the three years before 1997. To say the least, if
it were true that the lay-off was temporary but then serious business losses prevented the
reinstatement of respondents, then petitioners should have complied with the requirements of written
notice. The requirement of law mandating the giving of notices was intended not only to enable the
employees to look for another employment and therefore ease the impact of the loss of their jobs and
the corresponding income, but more importantly, to give the Department of Labor and Employment
(DOLE) the opportunity to ascertain the verity of the alleged authorized cause of termination.[64]
And even assuming that the closure was due to a reason beyond the control of the employer, it still has
to accord its employees some relief in the form of severance pay.[65]
While we recognize the right of the employer to terminate the services of an employee for a just or
authorized cause, the dismissal of employees must be made within the parameters of law and pursuant
to the tenets of fair play.[66] And in termination disputes, the burden of proof is always on the employer
to prove that the dismissal was for a just or authorized cause.[67]Where there is no showing of a clear,
valid and legal cause for termination of employment, the law considers the case a matter of illegal
dismissal.[68]

Under these circumstances, the award of damages was proper. As a rule, moral damages are
recoverable where the dismissal of the employee was attended by bad faith or fraud or constituted an
act oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy.[69] We believe that the dismissal of the respondents was attended with bad faith and meant to
evade the lawful obligations imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents being terminated from employment in
1997 as a matter of fact, but without legal redress. This runs counter to notions of fair play, substantial
justice and the constitutional mandate that labor rights should be respected. If doubts exist between
the evidence presented by the employer and the employee, the scales of justice must be tilted in favor
of the latter the employer must affirmatively show rationally adequate evidence that the dismissal was
for a justifiable cause.[70] It is a time-honored rule that in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing
should be resolved in the formers favor.[71]The policy is to extend the doctrine to a greater number of
employees who can avail of the benefits under the law, which is in consonance with the avowed policy
of the State to give maximum aid and protection of labor.[72]
We therefore reinstate the Labor Arbiters decision with the following modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena; (Santos
Broola cannot be granted separation pay as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of dismissal were
entitled to their retirement benefits pursuant to Article 287 of the Labor Code as amended;[73]and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola.
3.

Money claims

The CA held that contrary to the NLRCs ruling, petitioners had not discharged the burden of proving that
the monetary claims of the respondents have been paid.[74] The CA thus reinstated the Labor Arbiters
grant of respondents monetary claims, including damages.
Petitioners assail this ruling by repeating their long and convoluted argument that as there was no illegal
dismissal, then respondents are not entitled to their monetary claims or separation pay and damages.
Petitioners arguments are not only tiring, repetitive and unconvincing, but confusing and confused
entitlement to labor standard benefits is a separate and distinct concept from payment of separation
pay arising from illegal dismissal, and are governed by different provisions of the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their
complaint, position paper, affidavits and other documents the labor standard benefits they are entitled
to, and which they alleged that petitioners have failed to pay them. It was therefore petitioners burden
to prove that they have paid these money claims. One who pleads payment has the burden of proving
it, and even where the employees must allege nonpayment, the general rule is that the burden rests on
the defendant to prove nonpayment, rather than on the plaintiff to prove non payment.[75] This
petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e.,
affidavits executed by some of respondents during an ocular inspection conducted by an inspector of

the DOLE; notices of inspection result and Facility Evaluation Orders issued by DOLE, are not sufficient to
prove payment.[76] Despite repeated orders from the Labor Arbiter,[77]petitioners failed to submit the
pertinent employee files, payrolls, records, remittances and other similar documents which would
show that respondents rendered work entitling them to payment for overtime work, night shift
differential, premium pay for work on holidays and rest day, and payment of these as well as the COLA
and the SILP documents which are not in respondents possession but in the custody and absolute
control of petitioners.[78] By choosing not to fully and completely disclose information and present the
necessary documents to prove payment of labor standard benefits due to respondents, petitioners
failed to discharge the burden of proof.[79] Indeed, petitioners failure to submit the necessary
documents which as employers are in their possession, inspite of orders to do so, gives rise to the
presumption that their presentation is prejudicial to its cause.[80] As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has it in
his power to produce evidence which from its very nature must overthrow the case made against him if
it is not founded on fact, and he refuses to produce such evidence, the presumption arises that the
evidence, if produced, would operate to his prejudice, and support the case of his adversary.[81]
Petitioners next claim that the cost of the food and snacks provided to respondents as facilities should
have been included in reckoning the payment of respondents wages. They state that although on the
surface respondents appeared to receive minimal wages, petitioners had granted respondents other
benefits which are considered part and parcel of their wages and are allowed under existing
laws.[82] They claim that these benefits make up for whatever inadequacies there may be in
compensation.[83] Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the deduction of
facilities provided by the employer through an appropriate Facility Evaluation Order issued by the
Regional Director of the DOLE.[84] Petitioners also aver that they give five (5) percent of the gross income
each month as incentives. As proof of compliance of payment of minimum wages, petitioners submitted
the Notice of Inspection Results issued in 1995 and 1997 by the DOLE Regional Office.[85]
The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of
respondents minimum wage. As stated in the Labor Arbiters decision:[86]
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the DOLE
Regional Office whereby the cost of meals given by [petitioners] to [respondents] were specified for
purposes of considering the same as part of their wages, We cannot consider the cost of meals in the
Orders as applicable to [respondents]. [Respondents] were not interviewed by the DOLE as to the
quality and quantity of food appearing in the applications of [petitioners] for facility evaluation prior to
its approval to determine whether or not [respondents] were indeed given such kind and quantity of
food. Also, there was no evidence that the quality and quantity of food in the Orders were voluntarily
accepted by [respondents]. On the contrary; while some [of the respondents] admitted that they were
given meals and merienda, the quality of food serve[d] to them were not what were provided for in the
Orders and that it was only when they filed these cases that they came to know about said Facility
Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa herself,
who applied for evaluation of the facility (food) given to [respondents], testified that she did not inform
[respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed constituted facilities, such facilities could
not be deducted without compliance with certain legal requirements. As stated in Mabeza v.

NLRC,[87] the employer simply cannot deduct the value from the employee's wages without satisfying
the following: (a) proof that such facilities are customarily furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities are charged
at fair and reasonable value. The records are clear that petitioners failed to comply with these
requirements. There was no proof of respondents written authorization. Indeed, the Labor Arbiter
found that while the respondents admitted that they were given meals and merienda, the quality of
food served to them was not what was provided for in the Facility Evaluation Orders and it was only
when they filed the cases that they came to know of this supposed Facility Evaluation
Orders.[88] Petitioner Josefa Po Lam herself admitted that she did not inform the respondents of the
facilities she had applied for.[89]
Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter
therefore erred when he ruled that the cost of the meals actually provided to respondents should be
deducted as part of their salaries, on the ground that respondents have availed themselves of the food
given by petitioners.[90] The law is clear that mere availment is not sufficient to allow deductions from
employees wages.
More important, we note the uncontroverted testimony of respondents on record that they were
required to eat in the hotel and restaurant so that they will not go home and there is no interruption in
the services of Mayon Hotel & Restaurant. As ruled in Mabeza, food or snacks or other convenience
provided by the employers are deemed as supplements if they are granted for the convenience of the
employer. The criterion in making a distinction between a supplement and a facility does not so much lie
in the kind (food, lodging) but the purpose.[91]Considering, therefore, that hotel workers are required to
work different shifts and are expected to be available at various odd hours, their ready availability is a
necessary matter in the operations of a small hotel, such as petitioners business.[92] The deduction of the
cost of meals from respondents wages, therefore, should be removed.
We also do not agree with petitioners that the five (5) percent of the gross income of the establishment
can be considered as part of the respondents wages. We quote with approval the Labor Arbiter on this
matter, to wit:
While complainants, who were employed in the hotel, receive[d] various amounts as profit share, the
same cannot be considered as part of their wages in determining their claims for violation of labor
standard benefits. Although called profit share[,] such is in the nature of share from service charges
charged by the hotel. This is more explained by [respondents] when they testified that what they
received are not fixed amounts and the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104;
vol. II, rollo). Also, [petitioners] failed to submit evidence that the amounts received by [respondents] as
profit share are to be considered part of their wages and had been agreed by them prior to their
employment. Further, how can the amounts receive[d] by [respondents] be considered as profit share
when the same [are] based on the gross receipt of the hotel[?] No profit can as yet be determined out of
the gross receipt of an enterprise. Profits are realized after expenses are deducted from the gross
income.
On the issue of the proper minimum wage applicable to respondents, we sustain the Labor Arbiter. We
note that petitioners themselves have admitted that the establishment employs more or less sixteen
(16) employees,[93] therefore they are estopped from claiming that the applicable minimum wage should
be for service establishments employing 15 employees or less.

As for petitioners repeated invocation of serious business losses, suffice to say that this is not a defense
to payment of labor standard benefits. The employer cannot exempt himself from liability to pay
minimum wages because of poor financial condition of the company. The payment of minimum wages
is not dependent on the employers ability to pay.[94]
Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.
4.

Conclusion

There is no denying that the actuations of petitioners in this case have been reprehensible. They have
terminated the respondents employment in an underhanded manner, and have used and abused the
quasi-judicial and judicial processes to resist payment of their employees rightful claims, thereby
protracting this case and causing the unnecessary clogging of dockets of the Court. They have also
forced respondents to unnecessary hardship and financial expense. Indeed, the circumstances of this
case would have called for exemplary damages, as the dismissal was effected in a wanton, oppressive or
malevolent manner,[95] and public policy requires that these acts must be suppressed and
discouraged.[96]
Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00
each to all respondents. While it is true that other forms of damages under the Civil Code may be
awarded to illegally dismissed employees,[97] any award of moral damages by the Labor Arbiter cannot
be based on the Labor Code but should be grounded on the Civil Code.[98] And the law is clear that
exemplary damages can only be awarded if plaintiff shows proof that he is entitled to moral, temperate
or compensatory damages.[99]
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broola specifically
claimed damages from petitioners, then only they are entitled to exemplary damages.[sjgs1]
Finally, we rule that attorneys fees in the amount to P10,000.00 should be granted to each
respondent. It is settled that in actions for recovery of wages or where an employee was forced to
litigate and incur expenses to protect his rights and interest, he is entitled to an award of attorney's
fees.[100] This case undoubtedly falls within this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003 of the Court of
Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision of July 14, 2000of the Labor Arbiter in RAB
V Case Nos. 04-00079-97 and 04-00080-97 is AFFIRMED, with the following MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of service to respondents Loveres,
Macandog and Llarena;
(2)

Granting retirement pay for respondents Guades, Nicerio, and Alamares;

(3)

Removing the deductions for food facility from the amounts due to all respondents;

(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog, Llarena,
Guades, Nicerio, Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except Loveres,
Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola; and

(6)

Granting attorneys fees of P10,000.00 each to all respondents.

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary benefits
awarded and due to the employees concerned in accordance with the decision. The Labor Arbiter is
ORDERED to submit his compliance thereon within thirty (30) days from notice of this decision, with
copies furnished to the parties.
SO ORDERED.
Austria-Martinez, Callejo Sr., Tinga, and Chico-Nazario, JJ., concur.

Philippine Hoteliers v. National Union, G.R. No. 181972, August 25, 2009

THIRD DIVISION

PHILIPPINE HOTELIERS, INC., DUSIT HOTEL

NIKKO-MANILA,
Petitioner,

- versus -

NATIONAL UNION OF WORKERS IN HOTEL,

RESTAURANT, AND ALLIED INDUSTRIES
(NUWHRAIN-APL-IUF)DUSIT
HOTELNIKKO CHAPTER,
Respondents.

G.R. No. 181972

Present:
CARPIO MORALES,* J.,
CHICO-NAZARIO,**
Acting Chairperson,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

Promulgated:

August 25, 2009

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the
Decision[1] dated 10 September 2007 of the Court of Appeals in CA-G.R. SP No. 92798 granting the P30.00per-day Emergency Cost of Living Allowance (ECOLA), under Wage Order (WO) No. NCR-09 (WO No. 9), to
144 employees of petitioner Dusit Hotel Nikko (Dusit Hotel)[2] and imposing upon the latter the penalty of
double indemnity under Republic Act No. 6727, as amended by Republic Act No. 8188.Likewise assailed
herein is the Resolution[3] dated 4 March 2008 of the appellate court in the same case denying the Motion
for Reconsideration of Dusit Hotel.
The antecedent facts of the case are as follows:
WO No. 9, approved by the Regional Tripartite Wages and Productivity Board (RTWPB) of the National
Capital Region (NCR), took effect on 5 November 2001. It grantsP30.00 ECOLA to particular employees
and workers of all private sectors, identified as follows in Section 1 thereof:
Section 1. Upon the effectivity of this Wage Order, all private sector workers and employees in the
National Capital Region receiving daily wage rates of TWO HUNDRED FIFTY PESOS (P250.00) up to TWO
HUNDRED NINETY PESOS (P290.00) shall receive an emergency cost of living allowance in the amount of
THIRTY PESOS (P30.00) per day payable in two tranches as follows:
Amount of ECOLA Effectivity
P15.00 5 November 2001
P15.00 1 February 2002

On 20 March 2002, respondent National Union of Workers in Hotel, Restaurant and Allied Industries-Dusit
Hotel Nikko Chapter (Union), through its President, Reynaldo C. Rasing (Rasing), sent a letter[4] to Director
Alex Maraan (Dir. Maraan) of the Department of Labor and Employment-National Capital Region (DOLENCR), reporting the non-compliance of Dusit Hotel with WO No. 9, while there was an on-going
compulsory arbitration before the National Labor Relations Commission (NLRC) due to a bargaining
deadlock between the Union and Dusit Hotel; and requesting immediate assistance on this matter. On 24
May 2002, Rasing sent Dir. Maraan another letter following-up his previous request for assistance.
Acting on Rasings letters, the DOLE-NCR sent Labor Standards Officer Estrellita Natividad (LSO Natividad)
to conduct an inspection of Dusit Hotel premises on 24 April 2002. LSO Natividads Inspection Results
Report[5] dated 2 May 2002 stated:
Based on interviews/affidavits of employees, they are receiving more than P290.00 average daily rate
which is exempted in the compliance of Wage Order NCR-09;
Remarks: There is an ongoing negotiation under Case # NCMB-NCR-NS-12-369-01 & NCMB-NCR-NS-01019-02 now forwarded to the NLRC office for the compulsory arbitration.
NOTE: Payrolls to follow later upon request including position paper of [Dusit Hotel].

By virtue of Rasings request[6] for another inspection, LSO Natividad conducted a second inspection of
Dusit Hotel premises on 29 May 2002. In her Inspection Results Report[7] dated 29 May 2002, LSO
Natividad noted:
*Non-presentation of records/payrolls
*Based on submitted payrolls & list of union members by NUWHRAIN-DUSIT HOTEL NIKKO Chapter, there
are one hundred forty-four (144) affected in the implementation of Wage Order No. NCR-09-> ECOLA
covering the periods from Nov.5/01 to present.

Accordingly, the DOLE-NCR issued a Notice of Inspection Result directing Dusit Hotel to effect restitution
and/or correction of the noted violations within five days from receipt of the Notice, and to submit any
question on the findings of the labor inspector within the same period, otherwise, an order of compliance
would be issued. The Notice of Inspection Result was duly received by Dusit Hotel Assistant Personnel
Manager Rogelio Santos.[8]
In the meantime, the NLRC rendered a Decision[9] dated 9 October 2002 in NLRC-NCR-CC No. 000215-02
the compulsory arbitration involving the Collective Bargaining Agreement (CBA) deadlock between Dusit
Hotel and the Union granting the hotel employees the following wage increases, in accord with the CBA:
Effective January 1, 2001- P500.00/month
Effective January 1, 2002- P550.00/month
Effective January 1, 2003- P600.00/month

On 22 October 2002, based on the results of the second inspection of Dusit Hotel premises, DOLE-NCR,
through Dir. Maraan, issued the Order[10] directing Dusit Hotel to pay 144 of its employees the total
amount of P1,218,240.00, corresponding to their unpaid ECOLA under WO No. 9; plus, the penalty of
double indemnity, pursuant to Section 12 of Republic Act No. 6727,[11] as amended by Republic Act No.
8188,[12] which provides:
Sec. 12. Any person, corporation, trust, firm, partnership, association or entity which refuses or fails to
pay any of the prescribed increases or adjustments in wage rates made in accordance with this Act shall
be punished by a fine not less than Twenty-five thousand pesos (P25,000) nor more than One hundred
thousand pesos (P100,000) or imprisonment of not less than two (2) years nor more than four (4) years
or both such find and imprisonment at the discretion of the court: Provided, That any person convicted
under this Act shall not be entitled to the benefits provided for under the Probation Law.
The employer concerned shall be ordered to pay an amount equivalent to double the unpaid benefits
owing to the employees: Provided, That payment of indemnity shall not absolve the employer from the
criminal liability under this Act.
If the violation is committed by a corporation, trust or firm, partnership, association or any other entity,
the penalty of imprisonment shall be imposed upon the entitys responsible officers including but not

limited to the president, vice president, chief executive officer, general manager, managing director or
partner. (Emphasis ours.)

Dusit Hotel filed a Motion for Reconsideration[13] of the DOLE-NCR Order dated 22 October 2002, arguing
that the NLRC Decision dated 9 October 2002, resolving the bargaining deadlock between Dusit Hotel and
the Union, and awarding salary increases under the CBA to hotel employees retroactive to 1 January 2001,
already rendered the DOLE-NCR Order moot and academic. With the increase in the salaries of the hotel
employees ordered by the NLRC Decision of 9 October 2002, along with the hotel employees share in the
service charges, the 144 hotel employees, covered by the DOLE-NCR Order of 22 October 2002, would
already be receiving salaries beyond the coverage of WO No.9.
Acting on the Motion for Reconsideration of Dusit Hotel, DOLE-NCR issued a Resolution[14] on 27
December 2002, setting aside its earlier Order dated 22 October 2002 for being moot and academic, in
consideration of the NLRC Decision dated 9 October 2002; and dismissing the complaint of the Union
against Dusit Hotel, for non-compliance with WO No. 9, for lack of merit.
The Union appealed[15] the 27 December 2002 Resolution before the DOLE Secretary maintaining that the
wage increases granted by the NLRC Decision of 9 October 2002 should not be deemed as compliance by
Dusit Hotel with WO No. 9.
The DOLE, through Acting Secretary Manuel G. Imson, issued an Order[16] dated 22 July 2004 granting the
appeal of the Union. The DOLE Secretary reasoned that the NLRC Decision dated 9 October
2002 categorically declared that the wage increase under the CBA finalized between Dusit Hotel and
the Union shall not be credited as compliance with WOs No. 8 and No. 9. Furthermore, Section 1 of Rule
IV of the Rules Implementing WO No. 9, which provides that wage increases granted by an employer in
an organized establishment within three months prior to the effectivity of said Wage Order shall be
credited as compliance with the ECOLA prescribed therein, applies only when an agreement to this effect
has been forged between the parties or a provision in the CBA allowing such crediting exists. Hence, the
DOLE Secretary held:
WHEREFORE, premises considered, the appeal is hereby GRANTED. The Resolution dated December 27,
2002 issued by the Regional Director is SET ASIDE and his Order datedOctober 22, 2002 is hereby
REINSTATED. Dusit Hotel Nikko Manila is hereby ordered to pay its One Hundred Forty Four (144)
employees the aggregate amount of One Million Two Hundred Eighteen Thousand Two Hundred Forty
Pesos (Php1,218,240.00) representing their Emergency Cost Of Living Allowance (ECOLA) under Wage
Order No. NCR-09 and the penalty of double indemnity under Republic Act. No. 8188, as amended.[17]

Expectedly, Dusit Hotel sought reconsideration[18] of the 22 July 2004 Order of the DOLE Secretary. In an
Order[19] dated 16 December 2004, the DOLE Secretary granted the Motion for Reconsideration of Dusit
Hotel and reversed his Order dated 22 July 2004. The DOLE Secretary, in reversing his earlier Order,
admitted that he had disregarded therein that the wage increase granted by the NLRC in the latters
Decision dated 9 October 2002 retroacted to 1 January 2001. The said wage increase, taken together with
the hotel employees share in the service charges of Dusit Hotel, already constituted compliance with the
WO No. 9. According to the DOLE Secretary:

To stress, the overriding consideration of Wage Order NCR-09 is quite simple, to provide workers with
immediate relief through the grant of Emergency Cost of Living Allowance to enable them to cope with
the increases in the cost of living. Conformably with the evident intent of the subject Wage Order as
expressed in its preamble, this Office finds that the substantial share in the service charge being received
by the employees of appellee (Dusit Hotel) more than compensates for the Emergency Cost of Living
Allowance of P30.00 given under Wage Order NCR-09.[20]

It was then the turn of the Union to file a Motion for Reconsideration,[21] but it was denied by the DOLE
Secretary in an Order[22] dated 13 October 2005. The DOLE Secretary found that it would be unjust on the
part of Dusit Hotel if the hotel employees were to enjoy salary increases retroactive to 1 January 2001,
pursuant to the NLRC Decision dated 9 October 2002, and yet said salary increases would be disregarded
in determining compliance by the hotel with WO No. 9.
The Union appealed the Orders dated 16 December 2004 and 13 October 2005 of the DOLE Secretary
with the Court of Appeals via a Petition for Review[23] under Rule 43 of the Rules of Court. On 10
September 2007, the Court of Appeals promulgated its Decision[24] ruling in favor of the Union. Referring
to Section 13 of WO No. 9, the Court of Appeals declared that wage increases/allowances granted by the
employer shall not be credited as compliance with the prescribed increase in the same Wage Order, unless
so provided in the law or the CBA itself; and there was no such provision in the case at bar. The appellate
court also found that Dusit Hotel failed to substantiate its position that receipt by its employees of shares
in the service charges collected by the hotel was to be deemed substantial compliance by said hotel with
the payment of ECOLA required by WO No. 9. The Court of Appeals adjudged that Dusit Hotel should be
liable for double indemnity for its failure to comply with WO No. 9 within five days from receipt of notice.
The appellate court stressed that ECOLA is among the laborers financial gratifications under the law, and
is distinct and separate from benefits derived from negotiation or agreement with their employer. In the
end, the Court of Appeals disposed:
WHEREFORE, finding the existence of grave abuse of discretion in the issuance of the assailed Orders
dated December 16, 2004 and October 13, 2005, the same are hereby REVERSED AND SET ASIDE and the
Order dated July 22, 2004 of the respondent DOLE Acting Secretary in OS-LS-0630-2003-0105 is
REINSTATED.[25]

The Motion for Reconsideration[26] of Dusit Hotel was denied for lack of merit by the Court of Appeals in
its Resolution[27] dated 4 March 2008.
Hence, Dusit Hotel sought recourse from this Court by filing the instant Petition,[28] at the crux of which is
the sole issue of whether the 144 hotel employees were still entitled to ECOLA granted by WO No. 9
despite the increases in their salaries, retroactive to 1 January 2001, ordered by NLRC in the latters
Decision dated 9 October 2002.
Section 1 of WO No. 9 very plainly stated that only private sector workers and employees in the NCR
receiving daily wage rates of P250.00 to P290.00 shall be entitled to ECOLA. Necessarily, private sector
workers and employees receiving daily wages of more than P290.00 were no longer entitled to
ECOLA. The ECOLA was to be implemented in two tranches: P15.00/day beginning 5 November 2001; and
the full amount of P30.00/day beginning 1 February 2002.

WO No. 9 took effect on 5 November 2001. The Decision rendered by the NLRC on 9 October
2002 ordered Dusit Hotel to grant its employees salary increases retroactive to 1 January 2001 and 1
January 2002. In determining which of its employees were entitled to ECOLA, Dusit Hotel used as bases
the daily salaries of its employees, inclusive of the retroactive salary increases. The Union protested and
insisted that the bases for the determination of entitlement to ECOLA should be the hotel employees daily
salaries,exclusive of the retroactive salary increases. According to the Union, Dusit Hotel cannot credit
the salary increases as compliance with WO No. 9.
Much of the confusion in this case arises from the insistence of the Union to apply Section 13 of WO No.
9, which states:
Section 13. Wage increases/allowances granted by an employer in an organized establishment with three
(3) months prior to the effectivity of this Order shall be credited as compliance with the prescribed
increase set forth herein, provided the corresponding bargaining agreement provision allowing
creditability exists. In the absence of such an agreement or provision in the CBA, any increase granted by
the employer shall not be credited as compliance with the increase prescribed in this Order.
In unorganized establishments, wage increases/allowances granted by the employer within three (3)
months prior to the effectivity of this Order shall be credited as compliance therewith.
In case the increases given are less than the prescribed adjustment, the employer shall pay the difference.
Such increases shall not include anniversary increases, merit wage increases and those resulting from the
regularization or promotion of employees. (Emphasis ours.)

The Union harps on the fact that its CBA with Dusit Hotel does not contain any provision on creditability,
thus, Dusit Hotel cannot credit the salary increases as compliance with the ECOLA required to be paid
under WO No. 9.
The reliance of the Union on Section 13 of WO No. 9 in this case is misplaced. Dusit Hotel is not contending
creditability of the hotel employees salary increases as compliance with the ECOLA mandated by WO No.
9. Creditability means that Dusit Hotel would have been allowed to pay its employees the salary
increases in place of the ECOLA required by WO No. 9. This, however, is not what Dusit Hotel is after. The
position of Dusit Hotel is merely that the salary increases should be taken into account in determining the
employees entitlement to ECOLA. The retroactive increases could raise the hotel employees daily salary
rates above P290.00, consequently, placing said employees beyond the coverage of WO No. 9. Evidently,
Section 13 of WO No. 9 on creditability is irrelevant and inapplicable herein.
The Court agrees with Dusit Hotel that the increased salaries of the employees should be used as bases
for determining whether they were entitled to ECOLA under WO No. 9.The very fact that the NLRC decreed
that the salary increases of the Dusit Hotel employees shall be retroactive to 1 January 2001 and 1 January
2002, means that said employees were already supposed to receive the said salary increases beginning
on these dates. The increased salaries were the rightful salaries of the hotel employees by 1 January 2001,
then again by 1 January 2002. Although belatedly paid, the hotel employees still received their salary
increases.
It is only fair and just, therefore, that in determining entitlement of the hotel employees to ECOLA, their
increased salaries by 1 January 2001 and 1 January 2002 shall be made the bases. There is no logic in

recognizing the salary increases for one purpose (i.e., to recover the unpaid amounts thereof) but not for
the other (i.e., to determine entitlement to ECOLA). For the Court to rule otherwise would be to sanction
unjust enrichment on the part of the hotel employees, who would be receiving increases in their salaries,
which would place them beyond the coverage of Section 1 of WO No. 9, yet still be paid ECOLA under the
very same provision.
The NLRC, in its Decision dated 9 October 2002, directed Dusit Hotel to increase the salaries of its
employees by P500.00 per month, retroactive to 1 January 2001. After applying the said salary increase,
only 82 hotel employees[29] would have had daily salary rates falling within the range of P250.00
to P290.00. Thus, upon the effectivity of WO No. 9 on 5 November 2001, only the said 82 employees were
entitled to receive the first tranch of ECOLA, equivalent to P15.00 per day.
The NLRC Decision dated 9 October 2002 also ordered Dusit Hotel to effect a second round of increase in
its employees salaries, equivalent to P550.00 per month, retroactive to 1 January 2002. As a result of this
increase, the daily salary rates of all hotel employees were already above P290.00. Consequently, by 1
January 2002, no morehotel employee was qualified to receive ECOLA.
Given that 82 hotel employees were entitled to receive the first tranch of ECOLA from 5 November
2001 to 31 December 2001, the Court must address the assertion of Dusit Hotel that the receipt by said
hotel employees of their shares in the service charges already constituted substantial compliance with
the prescribed payment of ECOLA under WO No. 9.
The Court rules in the negative.
It must be noted that the hotel employees have a right to their share in the service charges collected by
Dusit Hotel, pursuant to Article 96 of the Labor Code of 1991, to wit:
Article 96. Service charges. All service charges collected by hotels, restaurants and similar establishments
shall be distributed at the rate of eighty-five percent (85%) for all covered employees and fifteen percent
(15%) for management. The share of employees shall be equally distributed among them. In case the
service charge is abolished, the share of the covered employees shall be considered integrated in their
wages.

Since Dusit Hotel is explicitly mandated by the afore-quoted statutory provision to pay its employees and
management their respective shares in the service charges collected, the hotel cannot claim that payment
thereof to its 82 employees constitute substantial compliance with the payment of ECOLA under WO No.
9. Undoubtedly, the hotel employees right to their shares in the service charges collected by Dusit Hotel
is distinct and separate from their right to ECOLA; gratification by the hotel of one does not result in the
satisfaction of the other.
The Court, however, finds no basis to hold Dusit Hotel liable for double indemnity. Under Section 2(m) of
DOLE Department Order No. 10, Series of 1998,[30] the Notice of Inspection Result shall specify the
violations discovered, if any, together with the officers recommendation and computation of the unpaid
benefits due each worker with an advice that the employer shall be liable for double indemnity in case of
refusal or failure to correct the violation within five calendar days from receipt of notice. A careful review
of the Notice of Inspection Result dated 29 May 2002, issued herein by the DOLE-NCR to Dusit Hotel,
reveals that the said Notice did not contain such an advice. Although the Notice directed Dusit Hotel to
correct its noted violations within five days from receipt thereof, it was not sufficiently apprised that

failure to do so within the given period would already result in its liability for double indemnity. The lack
of advice deprived Dusit Hotel of the opportunity to decide and act accordingly within the five-day period,
as to avoid the penalty of double indemnity. By 22 October 2002, the DOLE-NCR, through Dir. Maraan,
already issued its Order directing Dusit Hotel to pay 144 of its employees the total amount
of P1,218,240.00, corresponding to their unpaid ECOLA under WO No. 9; plus the penalty of double
indemnity, pursuant to Section 12 of Republic Act No. 6727, as amended by Republic Act No. 8188.[31]
Although the Court is mindful of the fact that labor embraces individuals with a weaker and unlettered
position as against capital, it is equally mindful of the protection that the law accords to capital. While the
Constitution is committed to the policy of social justice and the protection of the working class, it should
not be supposed that every labor dispute will be automatically decided in favor of labor. Management
also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple
fair play.[32]
In sum, the Court holds that the retroactive salary increases should be taken into account in the
determination of which hotel employees were entitled to ECOLA under WO No. 9.After applying the salary
increases retroactive to 1 January 2001, 82 hotel employees still had daily salary rates between P250.00
and P290.00, thus, entitling them to receive the first tranch of ECOLA, equivalent to P15.00 per day,
beginning 5 November 2001, the date of effectivity of WO No. 9, until 31 December 2001. Following the
second round of salary increases retroactive to 1 January 2002, all the hotel employees were already
receiving daily salary rates above P290.00, hence, leaving no one qualified to receive ECOLA. Receipt by
the 82 hotel employees of their shares from the service charges collected by Dusit Hotel shall not be
deemed payment of their ECOLA from 5 November 2001 to 31 December 2001.
WHEREFORE, premises considered, the Decision dated 10 September 2007 and the Resolution dated 4
March 2008 of the Court of Appeals in CA-G.R. SP No. 92798 are hereby AFFIRMED WITH THE FOLLOWING
MODIFICATIONS: (1) Dusit Hotel Nikko is ORDERED to pay its 82 employees who, after applying the salary
increases for 1 January 2001, had daily salaries of P250.00 to P290.00 the first tranch of Emergency Cost
of Living Allowance, equivalent to P15.00 per day, from 5 November 2001 to 31 December 2001, within
ten (10) days from finality of this Decision; and (2) the penalty for double indemnity is DELETED. No costs.
SO ORDERED.

Thirteenth Month Pay

P.D. 851

PRESIDENTIAL DECREE No. 851

December 16, 1976

REQUIRING ALL EMPLOYERS TO PAY THEIR EMPLOYEES A 13th-MONTH PAY

WHEREAS, it is necessary to further protect the level of real wages from the ravage of worldwide
inflation;
WHEREAS, there has been no increase in the legal minimum wage rates since 1970;

WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight
of the working masses so they may properly celebrate Christmas and New Year.
NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the powers vested in me by the
Constitution, do hereby decree as follows:
Section 1. All employers are hereby required to pay all their employees receiving a basic salary of
not more than P1,000 a month, regardless of the nature of their employment, a 13th-month pay not
later than December 24 of every year.
Section 2. Employers already paying their employees a 13th-month pay or its equivalent are not
covered by this Decree.
Section 3. This Decree shall take effect immediately.
Done in the City of Manila, this 16th day of December 1975.

RULES AND REGULATIONS IMPLEMENTING PRESIDENTIAL DECREE NO. 851

By virtue of the powers vested in me by law, the following rules and regulations implementing
Presidential Decree No. 851 are hereby issued for the guidance of all concerned.
Section 1. Payment of 13-month Pay All employers covered by Presidential Decree No. 851,
hereinafter referred to as the "Decree", shall pay to all their employees receiving a basic salary of not
more than P1,000 a month a thirteenth-month pay not later than December 24 of every year.
Section 2. Definition of certain terms As used in this issuance.
(a) "Thirteenth-moth pay" shall mean one twelfth (1/12) of the basic salary of an employee
within a calendar year;
(b) "Basic salary" shall include all remunerations or earnings paid by an employer to an
employee for services rendered but may not include cost-of-living allowances granted
pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing
payments, and all allowances and monetary benefits which are not considered or integrated
as part of the regular or basic salary of the employee at the time of the promulgation of the
Decree on December 16, 1975.
Section 3. Employers covered The Decree shall apply to all employers except to:
(a) Distressed employers, such as (1) those which are currently incurring substantial losses
or (2) in the case of non-profit institutions and organizations, where their income, whether
from donations, contributions, grants and other earnings from any source, has consistently
declined by more than forty (40%) percent of their normal income for the last two (2) years,
subject to the provision of Section 7 of this issuance;

(b) The Government and any of its political subdivisions, including government-owned and
controlled corporations, except those corporations operating essentially as private
subsidiaries of the Government;
(c) Employers already paying their employees 13-month pay or more in a calendar year of its
equivalent at the time of this issuance;
(d) Employers of household helpers and persons in the personal service of another in
relation to such workers; and
(e) Employers of those who are paid on purely commission, boundary, or task basis, and
those who are paid a fixed amount for performing a specific work, irrespective of the time
consumed in the performance thereof, except where the workers are paid on piece-rate
basis in which case the employer shall be covered by this issuance insofar as such workers
are concerned.
As used herein, workers paid on piece-rate basis shall refer to those who are paid a standard
amount for every piece or unit of work produced that is more or less regularly replicated, without
regard to the time spent in producing the same.
The term "its equivalent" as used in paragraph c) hereof shall include Christmas bonus, mid-year
bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th 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. Where an
employer pays less than 1/12th of the employees basic salary, the employer shall pay the difference.
Section 4. Employees covered Except as provided in Section 3 of this issuance, all employees of
covered employers shall be entitled to benefit provided under the Decree who are receiving not more
than P1,000 a month, regardless of their position, designation or employment status, and
irrespective of the method by which their wages are paid, provided that they have worked for at least
one month during the calendar year.
Section 5. Option of covered employers A covered employer may pay one-half of the 13th-month
pay required by the Decree before the opening of the regular school year and the other half on or
before the 24th day of December of every year.
In any establishment where a union has been recognized or certified as the collective bargaining
agent of the employees therein, the periodicity or frequency of payment of the 13th month pay may
be the subject of agreement.
Nothing herein shall prevent employers from giving the benefits provided in the Decree to their
employees who are receiving more than One Thousand (P1,000) Pesos a month or benefits higher
than those provided by the Decree.
Section 6. Special feature of benefit The benefits granted under this issuance shall not be credited
as part of the regular wage of the employees for purposes of determining overtime and premium
pay, fringe benefits, as well as premium contributions to the State Insurance Fund, social security,
medicare and private welfare and retirement plans.
Section 7. Exemption of Distressed employers Distressed employers shall qualify for exemption
from the requirement of the Decree upon prior authorization by the Secretary of Labor. Petitions for

exemptions may be filed within the nearest regional office having jurisdiction over the employer not
later than January 15, 1976. The regional offices shall transmit the petitions to the Secretary of
Labor within 24 hours from receipt thereof.
Section 8. Report of compliance Every covered employer shall make a report of his compliance with
the Decree to the nearest regional labor office not later than January 15 of each year.
The report shall conform substantially with the following form:
REPORT ON COMPLIANCE WITH PD NO. 851
1. Name of establishment
2. Address
3. Principal product or business
4. Total employment
5. Total number of workers benefited
6. Amount granted per employee
7. Total amount of benefits granted
8. Name, position and tel. no. of person giving information
Section 9. Adjudication of claims Non-payment of the thirteenth-month pay provided by the Decree
and these rules shall be treated as money claims cases and shall be processed in accordance with
the Rules Implementing the Labor Code of the Philippines and the Rules of the National Labor
Relations Commission.
Section 10. Prohibition against reduction or elimination of benefits Nothing herein shall be construed
to authorize any employer to eliminate, or diminish in any way, supplements, or other employee
benefits or favorable practice being enjoyed by the employee at the time of promulgation of this
issuance.
Section 11. Transitory Provision These rules and regulations shall take effect immediately and for
purposes of the 13-month pay for 1975, the same shall apply only to those who are employees as of
December 16, 1975.
Manila, Philippines, 22 December 1975.

SUPPLEMENTARY RULES AND REGULATIONS IMPLEMENTING P.D. NO. 851

To insure uniformity in the interpretation, application and enforcement of the provisions of P.D. No.
851 and its implementing regulations, the following clarifications are hereby made for the information
and guidance of all concerned:
1. Contractors and Subcontractors, including Security and Watchman Agencies, are exempt
for the year 1975 subject to the following conditions:
(a) that the contracts of such enterprises were entered into before December 16,
1975;
(b) that such enterprises have complied with all labor standards laws during the year;
(c) that the contract cannot really accomodate 13-month pay or its equivalent; and
(d) that the contract does not provide for cost escalation clause.
This exemption is without prejudice on the part of the workers to negotiate with their
employers or to seek payment thereof by filing appropriate complaints with the Regional
Offices of the Department of Labor.
2. Private school teachers, including faculty members of colleges and universities, are
entitled to 1/12 of their annual basic pay regardless of the number of months they teach or
are paid within a year.
3. New establishments operating for less than one year are not covered except subsidiaries
or branches of foreign and domestic corporations.
4. Overtime pay, earnings and other remunerations which are not part of the basic salary
shall not be included in the computation of the 13-month pay.
5. In view of the lack of sufficient time for the dissemination of the provisions of P.D. No. 851
and its Rules and the unavailability of adequate cash flow due to the long holiday season,
compliance and reporting of compliance with this Decree are hereby extended up to March
31, 1976 except in private schools where compliance for 1975 may be made not later than
30 June 1976.
6. Nothing herein shall sanction the withdrawal or diminution of any compensation, benefits
or any supplements being enjoyed by the employees on the effective date of this issuance.

Revised Guidelines on the Implementation of 13th Month Law

Central Azucarera v. Labor Union, G.R. No. 188949, July 26, 2010

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION

CENTRAL AZUCARERA
DE TARLAC,
Petitioner,

- versus -

CENTRAL AZUCARERA
DE TARLAC LABOR UNION-NLU,
Respondent.

G.R. No. 188949

Present:
CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
Promulgated:
July 26, 2010

x------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the
Decision[1] dated May 28, 2009, and the Resolution[2] dated July 28, 2009 of the Court of Appeals (CA) in
CA-G.R. SP No. 106657.

The factual antecedents of the case are as follows:

Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while respondent is
a legitimate labor organization which serves as the exclusive bargaining representative of petitioners rankand-file employees. The controversy stems from the interpretation of the term basic pay, essential in the
computation of the 13th-month pay.
The facts of this case are not in dispute. In compliance with Presidential Decree (P.D.) No. 851, petitioner
granted its employees the mandatory thirteenth (13th) - month pay since 1975. The formula used by
petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided by twelve
(12). Included in petitioners computation of the Total Basic Annual Salary were the following: basic
monthly salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium pay;
and vacation and sick leaves for each year. Throughout the years, petitioner used this computation until
2006.[3]
On November 6, 2004, respondent staged a strike. During the pendency of the strike, petitioner declared
a temporary cessation of operations. In December 2005, all the striking union members were allowed to
return to work. Subsequently, petitioner declared another temporary cessation of operations for the
months of April and May 2006. The suspension of operation was lifted on June 2006, but the rank-and-

file employees were allowed to report for work on a fifteen (15) day-per-month rotation basis that lasted
until September 2006. In December 2006, petitioner gave the employees their 13th-month pay based on
the employees total earnings during the year divided by 12.[4]
Respondent objected to this computation. It averred that petitioner did not adhere to the usual
computation of the 13th-month pay. It claimed that the divisor should have been eight (8) instead of 12,
because the employees worked for only 8 months in 2006. It likewise asserted that petitioner did not
observe the company practice of giving its employees the guaranteed amount equivalent to their one
month pay, in instances where the computed 13th-month pay was less than their basic monthly pay.[5]
Petitioner and respondent tried to thresh out their differences in accordance with the grievance
procedure as provided in their collective bargaining agreement. During the grievance meeting, the
representative of petitioner explained that the change in the computation of the 13th-month pay was
intended to rectify an error in the computation, particularly the concept of basic pay which should have
included only the basic monthly pay of the employees.[6]
For failure of the parties to arrive at a settlement, respondent applied for preventive mediation before
the National Conciliation and Mediation Board. However, despite four (4) conciliatory meetings, the
parties still failed to settle the dispute. On March 29, 2007, respondent filed a complaint against petitioner
for money claims based on the alleged diminution of benefits/erroneous computation of 13th-month pay
before the Regional Arbitration Branch of the National Labor Relations Commission (NLRC).[7]

On October 31, 2007, the Labor Arbiter rendered a Decision[8] dismissing the complaint and declaring that
the petitioner had the right to rectify the error in the computation of the 13 th-month pay of its
employees.[9] The fallo of the Decision reads:
WHEREFORE, premises considered, the complaint filed by the complainants against the respondents
should be DISMISSED with prejudice for utter lack of merit.
SO ORDERED.[10]

Respondents filed an appeal. On August 14, 2008, the NLRC rendered a Decision[11] reversing the Labor
Arbiter. The dispositive portion of the Decision reads:
WHEREFORE, the decision appealed is reversed and set aside and respondent-appellee Central Azucarera
de Tarlac is hereby ordered to adhere to its established practice of granting 13th[-] month pay on the basis
of gross annual basic which includes basic pay, premium pay for work in rest days and special holidays,
night shift differential and paid vacation and sick leaves for each year.
Additionally, respondent-appellee is ordered to observe the guaranteed one[-]month pay by way of
13th month pay.
SO ORDERED. [12]

Petitioner filed a motion for reconsideration. However, the same was denied in a Resolution dated
November 27, 2008. Petitioner then filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA.[13]
On May 28, 2009, the CA rendered a Decision[14] dismissing the petition, and affirming the decision and
resolution of the NLRC, viz.:
WHEREFORE, the foregoing considered, the petition is hereby DISMISSED and the assailed August 14,
2008 Decision and November 27, 2008 Resolution of the NLRC, are herebyAFFIRMED. No costs.
SO ORDERED.[15]
Aggrieved, petitioner filed the instant petition, alleging that the CA committed a reversible error in
affirming the Decision of the NLRC, and praying that the Decision of the Labor Arbiter be reinstated.
The petition is denied for lack of merit.
The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an additional income
based on wage but not part of the wage. It is equivalent to one-twelfth (1/12) of the total basic salary
earned by an employee within a calendar year. All rank-and-file employees, regardless of their designation
or employment status and irrespective of the method by which their wages are paid, are entitled to this
benefit, provided that they have worked for at least one month during the calendar year. If the employee
worked for only a portion of the year, the 13th-month pay is computed pro rata.[16]
Petitioner argues that there was an error in the computation of the 13th-month pay of its employees as a
result of its mistake in implementing P.D. No. 851, an error that was discovered by the management only
when respondent raised a question concerning the computation of the employees
13th-month pay for 2006. Admittedly, it was an error that was repeatedly committed for almost thirty (30)
years. Petitioner insists that the length of time during which an employer has performed a certain act
beneficial to the employees, does not prove that such an act was not done in error. It maintains that for
the claim of mistake to be negated, there must be a clear showing that the employer had freely,
voluntarily, and continuously performed the act, knowing that he is under no obligation to do
so. Petitioner asserts that such voluntariness was absent in this case.[17]
The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975, defines 13 thmonth pay and basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this issuance:
(a)
within

"Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee
a
calendar
year;

(b) "Basic salary" shall include all remunerations or earnings paid by an employer to an employee for
services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree
No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary
benefits which are not considered or integrated as part of the regular or basic salary of the employee at
the time of the promulgation of the Decree on December 16, 1975.

On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was
issued. The Supplementary Rules clarifies that overtime pay, earnings, and other remuneration that are
not part of the basic salary shall not be included in the computation of the 13th-month pay.

On November 16, 1987, the Revised Guidelines on the Implementation of the 13 th-Month Pay Law was
issued. Significantly, under this Revised Guidelines, it was specifically stated that the minimum 13th-month
pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an
employee within a calendar year.
Furthermore, the term basic salary of an employee for the purpose of computing the 13th-month pay was
interpreted to include all remuneration or earnings paid by the employer for services rendered, but does
not include allowances and monetary benefits which are not integrated as part of the regular or basic
salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night
differential and holiday pay, and cost-of-living allowances. However, these salary-related benefits should
be included as part of the basic salary in the computation of the 13th-month pay if, by individual or
collective agreement, company practice or policy, the same are treated as part of the basic salary of the
employees.
Based on the foregoing, it is clear that there could have no erroneous interpretation or application of what
is included in the term basic salary for purposes of computing the 13th-month pay of employees. From the
inception of P.D. No. 851 on December 16, 1975, clear-cut administrative guidelines have been issued to
insure uniformity in the interpretation, application, and enforcement of the provisions of P.D. No. 851 and
its implementing regulations.
As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based on the employees
gross annual earnings which included the basic monthly salary, premium pay for work on rest days and
special holidays, night shift differential pay and holiday pay continued for almost thirty (30) years and has
ripened into a company policy or practice which cannot be unilaterally withdrawn.
Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits given
to employees cannot be taken back or reduced unilaterally by the employer because the benefit has
become part of the employment contract, written or unwritten. [18] The rule against diminution of benefits
applies if it is shown that the grant of the benefit is based on an express policy or has ripened into a
practice over a long period of time and that the practice is consistent and deliberate. Nevertheless, the
rule will not apply if the practice is due to error in the construction or application of a doubtful or difficult
question of law. But even in cases of error, it should be shown that the correction is done soon after
discovery of the error.[19]
The argument of petitioner that the grant of the benefit was not voluntary and was due to error in the
interpretation of what is included in the basic salary deserves scant consideration. No doubtful or difficult
question of law is involved in this case. The guidelines set by the law are not difficult to decipher. The
voluntariness of the grant of the benefit was manifested by the number of years the employer had paid
the benefit to its employees. Petitioner only changed the formula in the computation of the 13 th-month
pay after almost 30 years and only after the dispute between the management and employees erupted.
This act of petitioner in changing the formula at this time cannot be sanctioned, as it indicates a badge of
bad faith.

Furthermore, petitioner cannot use the argument that it is suffering from financial losses to claim
exemption from the coverage of the law on 13th-month pay, or to spare it from its erroneous unilateral
computation of the 13th-month pay of its employees. Under Section 7 of the Rules and Regulations
Implementing P.D. No. 851, distressed employers shall qualify for exemption from the requirement of the
Decree only upon prior authorization by the Secretary of Labor.[20] In this case, no such prior authorization
has been obtained by petitioner; thus, it is not entitled to claim such exemption.
WHEREFORE, the Decision dated May 28, 2009 and the Resolution dated July 28, 2009 of the Court of
Appeals in CA-G.R. SP No. 106657 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

King of Kings Transport v. Mamac, G.R. No. 166208, June 29, 2007

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

KING OF KINGS TRANSPORT, G.R. No. 166208

INC., CLAIRE DELA FUENTE,
and MELISSA LIM, Present:
Petitioners,
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
- versus - TINGA, and
VELASCO, JR., JJ.
Promulgated:
SANTIAGO O. MAMAC,
Respondent. June 29, 2007
x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

Is a verbal appraisal of the charges against the employee a breach of the procedural due process? This is
the main issue to be resolved in this plea for review under Rule 45 of the September 16, 2004 Decision[1] of
the Court of Appeals (CA) in CA-GR SP No. 81961. Said judgment affirmed the dismissal of bus conductor
Santiago O. Mamac from petitioner King of Kings Transport, Inc. (KKTI), but ordered the bus company to
pay full backwages for violation of the twin-notice requirement and 13th-month pay. Likewise assailed is
the December 2, 2004 CA Resolution[2] rejecting KKTIs Motion for Reconsideration.

The Facts

Petitioner KKTI is a corporation engaged in public transportation and managed by Claire Dela Fuente and
Melissa Lim.

Respondent Mamac was hired as bus conductor of Don Mariano Transit Corporation (DMTC) on April 29,
1999. The DMTC employees including respondent formed theDamayan ng mga Manggagawa, Tsuper
at Conductor-Transport Workers Union and registered it with the Department of Labor and
Employment. Pending the holding of a certification election in DMTC, petitioner KKTI was incorporated
with the Securities and Exchange Commission which acquired new buses. Many DMTC employees were
subsequently transferred to KKTI and excluded from the election.
The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings (KKKK) which was
registered with DOLE. Respondent was elected KKKK president.

Respondent was required to accomplish a Conductors Trip Report and submit it to the company after each
trip. As a background, this report indicates the ticket opening and closing for the particular day of
duty. After submission, the company audits the reports. Once an irregularity is discovered, the company
issues an Irregularity Report against the employee, indicating the nature and details of the
irregularity. Thereafter, the concerned employee is asked to explain the incident by making a written
statement or counter-affidavit at the back of the same Irregularity Report. After considering the
explanation of the employee, the company then makes a determination of whether to accept the
explanation or impose upon the employee a penalty for committing an infraction. That decision shall be
stated on said Irregularity Report and will be furnished to the employee.

Upon audit of the October 28, 2001 Conductors Report of respondent, KKTI noted an irregularity. It
discovered that respondent declared several sold tickets as returned tickets causing KKTI to lose an
income of eight hundred and ninety pesos. While no irregularity report was prepared on the October 28,
2001 incident, KKTI nevertheless asked respondent to explain the discrepancy. In his letter,[3] respondent
said that the erroneous declaration in his October 28, 2001 Trip Report was unintentional. He explained
that during that days trip, the windshield of the bus assigned to them was smashed; and they had to cut
short the trip in order to immediately report the matter to the police. As a result of the incident, he got
confused in making the trip report.

On November 26, 2001, respondent received a letter[4] terminating his employment effective November
29, 2001. The dismissal letter alleged that the October 28, 2001irregularity was an act of fraud against the
company. KKTI also cited as basis for respondents dismissal the other offenses he allegedly committed
since 1999.

On December 11, 2001, respondent filed a Complaint for illegal dismissal, illegal deductions, nonpayment
of 13th-month pay, service incentive leave, and separation pay.He denied committing any infraction and
alleged that his dismissal was intended to bust union activities. Moreover, he claimed that his dismissal
was effected without due process.

In its April 3, 2002 Position Paper,[5] KKTI contended that respondent was legally dismissed after his
commission of a series of misconducts and misdeeds. It claimed that respondent had violated the trust
and confidence reposed upon him by KKTI. Also, it averred that it had observed due process in dismissing
respondent and maintained that respondent was not entitled to his money claims such as service
incentive leave and 13th-month pay because he was paid on commission or percentage basis.

On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes rendered judgment dismissing
respondents Complaint for lack of merit.[6]

Aggrieved, respondent appealed to the National Labor Relations Commission (NLRC). On August 29, 2003,
the NLRC rendered a Decision, the dispositive portion of which reads:

WHEREFORE, the decision dated 16 September 2002 is MODIFIED in that respondent King of Kings
Transport Inc. is hereby ordered to indemnify complainant in the amount of ten thousand pesos (P10,000)
for failure to comply with due process prior to termination.

The other findings are AFFIRMED.

SO ORDERED.[7]

Respondent moved for reconsideration but it was denied through the November 14, 2003 Resolution[8] of
the NLRC.

Thereafter, respondent filed a Petition for Certiorari before the CA urging the nullification of the NLRC
Decision and Resolution.

The Ruling of the Court of Appeals

Affirming the NLRC, the CA held that there was just cause for respondents dismissal. It ruled that
respondents act in declaring sold tickets as returned tickets x x x constituted fraud or acts of dishonesty
justifying his dismissal.[9]

Also, the appellate court sustained the finding that petitioners failed to comply with the required
procedural due process prior to respondents termination. However, following the doctrine in Serrano v.
NLRC,[10] it modified the award of PhP 10,000 as indemnification by awarding full backwages from the time
respondents employment was terminated until finality of the decision.

Moreover, the CA held that respondent is entitled to the 13th-month pay benefit.

Hence, we have this petition.

The Issues

Petitioner raises the following assignment of errors for our consideration:

Whether the Honorable Court of Appeals erred in awarding in favor of the complainant/private
respondent, full back wages, despite the denial of his petition for certiorari.

Whether the Honorable Court of Appeals erred in ruling that KKTI did not comply with the requirements
of procedural due process before dismissing the services of the complainant/private respondent.

Whether the Honorable Court of Appeals rendered an incorrect decision in that [sic] it awarded in favor
of the complaint/private respondent, 13th month pay benefits contrary to PD 851.[11]

The Courts Ruling

The petition is partly meritorious.

The disposition of the first assigned error depends on whether petitioner KKTI complied with the due
process requirements in terminating respondents employment; thus, it shall be discussed secondly.

Non-compliance with the Due Process Requirements

Due process under the Labor Code involves two aspects: first, substantivethe valid and authorized causes
of termination of employment under the Labor Code; and second, proceduralthe manner of
dismissal.[12] In the present case, the CA affirmed the findings of the labor arbiter and the NLRC that the
termination of employment of respondent was based on a just cause. This ruling is not at issue in this
case. The question to be determined is whether the procedural requirements were complied with.

Art. 277 of the Labor Code provides the manner of termination of employment, thus:

Art. 277. Miscellaneous Provisions.x x x

(b) 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 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. Any decision taken by the employer shall be without prejudice
to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the
regional branch of the National Labor Relations Commission. The burden of proving that the termination
was for a valid or authorized cause shall rest on the employer.

Accordingly, the implementing rule of the aforesaid provision states:

SEC. 2. Standards of due process; requirements of notice.In all cases of termination of employment, the
following standards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a)
A written notice served on the employee specifying the ground or grounds for termination, and
giving said employee reasonable opportunity within which to explain his side.

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if he
so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence
presented against him.

(c) A written notice of termination served on the employee, indicating that upon due consideration of
all the circumstances, grounds have been established to justify his termination. [13]

In case of termination, the foregoing notices shall be served on the employees last known address.[14]

To clarify, the following should be considered in terminating the services of employees:

(1) The first written notice to be served on the employees should contain the specific causes or grounds
for termination against them, and a directive that the employees are given the opportunity to submit their
written explanation within a reasonable period. Reasonable opportunity under the Omnibus Rules means
every kind of assistance that management must accord to the employees to enable them to prepare
adequately for their defense.[15] This should be construed as a period of at least five (5) calendar days from
receipt of the notice to give the employees an opportunity to study the accusation against them, consult
a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as
basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the
notice should specifically mention which company rules, if any, are violated and/or which among the
grounds under Art. 282 is being charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct
a hearing or conference wherein the employees will be given the opportunity to: (1) explain and clarify
their defenses to the charge against them; (2) present evidence in support of their defenses; and (3) rebut
the evidence presented against them by the management. During the hearing or conference, the
employees are given the chance to defend themselves personally, with the assistance of a representative

or counsel of their choice. Moreover, this conference or hearing could be used by the parties as an
opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment.

In the instant case, KKTI admits that it had failed to provide respondent with a charge sheet.[16] However,
it maintains that it had substantially complied with the rules, claiming that respondent would not have
issued a written explanation had he not been informed of the charges against him.[17]

We are not convinced.

First, respondent was not issued a written notice charging him of committing an infraction. The law is
clear on the matter. A verbal appraisal of the charges against an employee does not comply with the first
notice requirement. In Pepsi Cola Bottling Co. v. NLRC,[18] the Court held that consultations or conferences
are not a substitute for the actual observance of notice and hearing. Also, in Loadstar Shipping Co., Inc. v.
Mesano,[19] the Court, sanctioning the employer for disregarding the due process requirements, held that
the employees written explanation did not excuse the fact that there was a complete absence of the first
notice.

Second, even assuming that petitioner KKTI was able to furnish respondent an Irregularity Report
notifying him of his offense, such would not comply with the requirements of the law. We observe from
the irregularity reports against respondent for his other offenses that such contained merely a general
description of the charges against him. The reports did not even state a company rule or policy that the
employee had allegedly violated. Likewise, there is no mention of any of the grounds for termination of
employment under Art. 282 of the Labor Code. Thus, KKTIs standard charge sheet is not sufficient notice
to the employee.

Third, no hearing was conducted. Regardless of respondents written explanation, a hearing was still
necessary in order for him to clarify and present evidence in support of his defense. Moreover,
respondent made the letter merely to explain the circumstances relating to the irregularity in his October
28, 2001 Conductors Trip Report. He was unaware that a dismissal proceeding was already being
effected. Thus, he was surprised to receive the November 26, 2001 termination letter indicating as
grounds, not only hisOctober 28, 2001 infraction, but also his previous infractions.

Sanction for Non-compliance with Due Process Requirements

As stated earlier, after a finding that petitioners failed to comply with the due process requirements, the
CA awarded full backwages in favor of respondent in accordance with the doctrine in Serrano v.
NLRC.[20] However, the doctrine in Serrano had already been abandoned in Agabon v. NLRC by ruling that
if the dismissal is done without due process, the employer should indemnify the employee with nominal
damages.[21]

Thus, for non-compliance with the due process requirements in the termination of respondents
employment, petitioner KKTI is sanctioned to pay respondent the amount of thirty thousand pesos (PhP
30,000) as damages.

Thirteenth (13th)-Month Pay

Section 3 of the Rules Implementing Presidential Decree No. 851[22] provides the exceptions in the
coverage of the payment of the 13th-month benefit. The provision states:

SEC. 3. Employers covered.The Decree shall apply to all employers except to:

xxxx

e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which case the employer shall be
covered by this issuance insofar as such workers are concerned.

Petitioner KKTI maintains that respondent was paid on purely commission basis; thus, the latter is not
entitled to receive the 13th-month pay benefit. However, applying the ruling in Philippine Agricultural
Commercial and Industrial Workers Union v. NLRC,[23] the CA held that respondent is entitled to the said
benefit.
It was erroneous for the CA to apply the case of Philippine Agricultural Commercial and Industrial Workers
Union. Notably in the said case, it was established that the drivers and conductors praying for 13th- month
pay were not paid purely on commission. Instead, they were receiving a commission in addition to a fixed
or guaranteed wage or salary.Thus, the Court held that bus drivers and conductors who are paid a fixed
or guaranteed minimum wage in case their commission be less than the statutory minimum, and
commissions only in case where they are over and above the statutory minimum, are entitled to a 13thmonth pay equivalent to one-twelfth of their total earnings during the calendar year.

On the other hand, in his Complaint,[24] respondent admitted that he was paid on commission
only. Moreover, this fact is supported by his pay slips[25] which indicated the varying amount of

commissions he was receiving each trip. Thus, he was excluded from receiving the 13th-month pay
benefit.
WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004 Decision of the CA
is MODIFIED by deleting the award of backwages and 13th-month pay. Instead, petitioner KKTI is ordered
to indemnify respondent the amount of thirty thousand pesos (PhP 30,000) as nominal damages for failure
to comply with the due process requirements in terminating the employment of respondent.

No costs.
SO ORDERED.

Separation Pay

Arts. 283-284, Labor Code

Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to
at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1) whole year.
Article 284. Disease as ground for termination. An employer may terminate the services of an employee
who has been found to be suffering from any disease and whose continued employment is prohibited by
law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid
separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1)
whole year.

Sec. 32, Art. V, R.A. 10361

SEC. 32. Termination of Service. Neither the domestic worker nor the employer may terminate the
contract before the expiration of the term except for grounds provided for in Sections 33 and 34 of this
Act. If the domestic worker is unjustly dismissed, the domestic worker shall be paid the compensation

already earned plus the equivalent of fifteen (15) days work by way of indemnity. If the domestic worker
leaves without justifiable reason, any unpaid salary due not exceeding the equivalent fifteen (15) days
work shall be forfeited. In addition, the employer may recover from the domestic worker costs incurred
related to the deployment expenses, if any: Provided, That the service has been terminated within six (6)
months from the domestic workers employment.
If the duration of the domestic service is not determined either in stipulation or by the nature of the
service, the employer or the domestic worker may give notice to end the working relationship five (5)
days before the intended termination of the service.
The domestic worker and the employer may mutually agree upon written notice to pre-terminate the
contract of employment to end the employment relationship.

Manila Water v. Rosario, G.R. No. 188747, January 29, 2014

G.R. No. 188747

January 29, 2014

MANILA WATER COMPANY, Petitioner,

vs.
CARLITO DEL ROSARIO, Respondent.
DECISION
PEREZ, J.:
This is a Petition for Review on Certiorari1 filed pursuant to Rule 45 of the Revised Rules of Court,
assailing the 31 March 2009 Decision2 rendered by the Fifth Division of the Court of Appeals in CAG.R. SP No. 925 83. In its assailed decision, the appellate court: ( 1) reversed as grave abuse of
discretion the Resolution of the National Labor Relations Commission (NLRC) which dismissed the
petition of Manila Water Company (Manila Water) on technical grounds; and (2) proceeded to affirm
with modification the ruling of the Labor Arbiter. Manila Water was ordered to pay respondent Carlito
Del Rosario (Del Rosario) separation pay to be computed from 1 August 1997 up to June 2000.
In a Resolution3 dated 7 July 2009, the appellate court refused to reconsider its earlier decision.
The Facts
On 22 October 1979, Del Rosario was employed as Instrument Technician by Metropolitan
Waterworks and Sewerage System (MWSS). Sometime in 1996, MWSS was reorganized pursuant
to Republic Act No. 8041 or the National Water Crisis Act of 1995, and its implementing guidelines
Executive Order No. 286. Because of the reorganization, Manila Water absorbed some employees
of MWSS including Del Rosario. On 1 August 1997, Del Rosario officially became an employee of
Manila Water.
Sometime in May 2000, Manila Water discovered that 24 water meters were missing in its
stockroom. Upon initial investigation, it appeared that Del Rosario and his co-employee, a certain
Danilo Manguera, were involved in the pilferage and the sale of water meters to the companys
contractor. Consequently, Manila Water issued a Memorandum dated 23 June 2000, directing Del
Rosario to explain in writing within 72 hours why he should not be dealt with administratively for the

loss of the said water meters.4 In his letter-explanation,5 Del Rosario confessed his involvement in
the act charged and pleaded for forgiveness, promising not to commit similar acts in the future.
On 29 June 2000, Manila Water conducted a hearing to afford Del Rosario the opportunity to
personally defend himself and to explain and clarify his defenses to the charge against him. During
the formal investigation Del Rosario was found responsible for the loss of the water meters and
therefore liable for violating Section 11.1 of the Companys Code of Conduct.6 Manila Water
proceeded to dismiss Del Rosario from employment on 3 July 2000.7
This prompted Del Rosario to file an action for illegal dismissal claiming that his severance from
employment is without just cause. In his Position Paper submitted before the labor officer, Del
Rosario averred that his admission to the misconduct charged was not voluntary but was coerced by
the company. Such admission therefore, made without the assistance of a counsel, could not be
made basis in terminating his employment.
Refuting the allegations of Del Rosario, Manila Water pointed out that he was indeed involved in the
taking of the water meters from the companys stock room and of selling these to a private contractor
for personal gain. Invoking Section 11.1 of the Companys Code of Conduct, Manila Water averred
that such act of stealing the companys property is punishable by dismissal. The company invited the
attention of this Court to the fact that Del Rosario himself confessed his involvement to the loss of
the water meters not only in his letter-explanation, but also during the formal investigation, and in
both instances, pleaded for his employers forgiveness.8
After weighing the positions taken by the opposing parties, including the evidence adduced in
support of their respective cases, the Labor Arbiter issued a Decision9 dated 30 May 2002 dismissing
for lack of merit the complaint filed by Del Rosario who was, however, awarded separation pay.
According to the Labor Arbiter, Del Rosarios length of service for 21 years, without previous
derogatory record, warrants the award of separation pay. The decretal portion of the decision reads:
WHEREFORE, viewed from the foregoing, judgment is hereby rendered DISMISSING the complaint
for illegal dismissal for lack of merit.
[Manila Water] is hereby ordered to pay complainant separation pay equivalent to one-half (1/2)
months salary for every year of service based on his basic salary (Php 11,244.00) at the time of his
dismissal. This shall be computed from [1 August 1997] up to June 2000, the total amount of which
is ONE HUNDRED EIGHTEEN THOUSAND SIXTY-TWO (Php 118,062.00) PESOS.10
In a Resolution11 dated 30 September 2003, the NLRC dismissed the appeal interposed by Manila
Water for its failure to append a certification against forum shopping in its Memorandum of Appeal.
Similarly ill-fated was Manila Waters Motion for Reconsideration which was denied by the NLRC in a
Resolution12 dated 28 April 2005.
On Certiorari, the Court of Appeals in its Decision dated 31 March 2009, reversed the NLRC
Resolution and held that it committed a grave abuse of discretion when it dismissed Manila Waters
appeal on mere technicality. The appellate court, however, proceeded to affirm the decision of the
Labor Arbiter awarding separation pay to Del Rosario. Considering that Del Rosario rendered 21
years of service to the company without previous derogatory record, the appellate court considered
the granting of separation pay by the labor officer justified. The fallo of the assailed Court of Appeals
Decision reads:

WHEREFORE, the petition is partly granted. The assailed Resolutions dated September 30, 2003
and [April 28, 2005] of public respondent NLRC are set aside. The Decision dated May 30, 2002 of
the [L]abor [A]rbiter is reinstated, subject to the modification that the computation of the award of
separation pay [to] private respondent shall be counted from August 1, 1997 x x x up to June 2000.13
In a Resolution14 dated 7 July 2009, the Court of Appeals refused to reconsider its earlier decision.
Unrelenting, Manila Water filed the instant Petition for Review on Certiorari assailing the foregoing
Court of Appeals Decision and Resolution on the sole ground that:
THE [COURT OF APPEALS] SERIOUSLY ERRED IN ISSUING THE QUESTIONED DECISION
AND RESOLUTION WHICH DIRECTLY CONTRAVENE BOOK VI, RULE 1, AND SECTION 7 OF
THE OMNIBUS RULES IMPLEMENTING THE LABOR CODE AND PREVAILING
JURISPRUDENCE WHICH CATEGORICALLY PROVIDE THAT AN EMPLOYEE SEPARATED
FROM SERIOUS MISCONDUCT IS NOT ENTITLED TO TERMINATION (SEPARATION) PAY.15
The Courts Ruling
In the instant petition, Manila Water essentially questions the award of separation pay to respondent
who was dismissed for stealing the companys property which amounted to gross misconduct. It
argues that separation pay or financial assistance is not awarded to employees guilty of gross
misconduct or for cause reflecting on his moral character.16
Del Rosario for his part maintains that there is no legal ground to justify his termination from
employment. He insists that his admission pertaining to his involvement in the loss of the water
meters was merely coerced by the company. Since his dismissal was without valid or just cause, Del
Rosario avers that Manila Water is guilty of illegal dismissal rendering it liable for the payment of
backwages and separation pay.17
It must be stressed at the outset that the correctness of the Labor Arbiters pronouncement on the
legality of Del Rosarios dismissal is no longer an issue and is beyond modification. While Manila
Water timely appealed the ruling of the Labor Arbiter awarding separation pay to Del Rosario, the
latter did not question the dismissal of his illegal termination case.18 It is settled in our jurisprudence
that a party who has not appealed cannot obtain from the appellate court any affirmative relief other
than the ones granted in the appealed decision.19Due process prevents the grant of additional
awards to parties who did not appeal.20 Having said that, this Court will no longer dwell on the issue
of whether or not Del Rosario was illegally dismissed from employment. Included in the closed
aspect of the case is respondents argument that the absence of his counsel when he admitted the
charge against him diminished the evidentiary value of such admission. Nonetheless, it may be
mentioned that the constitutional right to counsel is available only during custodial investigation. If
the investigation is merely administrative conducted by the employer and not a criminal investigation,
the admission made during such investigation may be used as evidence to justify dismissal.21
Our focus will be on the propriety of the award for separation pay.
As a general rule, an employee who has been dismissed for any of the just causes enumerated
under Article 28222 of the Labor Code is not entitled to a separation pay.23 Section 7, Rule I, Book VI
of the Omnibus Rules implementing the Labor Code provides:
Sec. 7. Termination of employment by employer. The just causes for terminating the services of
an employee shall be those provided in Article 282 of the Code. The separation from work of an
employee for a just cause does not entitle him to the termination pay provided in the Code, without

prejudice, however, to whatever rights, benefits and privileges he may have under the applicable
individual or collective agreement with the employer or voluntary employer policy or practice.
In exceptional cases, however, the Court has granted separation pay to a legally dismissed
employee as an act of "social justice" or on "equitable grounds."24 In both instances, it is required that
the dismissal (1) was not for serious misconduct; and (2) did not reflect on the moral character of the
employee.25
In the leading case of Philippine Long Distance Telephone Company v. NLRC,26 we laid down the
rule that separation pay shall be allowed as a measure of social justice only in the instances where
the employee is validly dismissed for causes other than serious misconduct reflecting his moral
character. We clarified that:
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a
fellow worker, the employer may not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his
dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of
course it has. Indeed, if the employee who steals from the company is granted separation pay even
as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if he is again found out. This kind of
misplaced compassion is not going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best[,] it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but only
when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be
permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment
of the guilty. Those who invoke social justice may do so only if their hands are clean and their
motives blameless and not simply because they happen to be poor. This great policy of our
Constitution is not meant for the protection of those who have proved they are not worthy of it, like
the workers who have tainted the cause of labor with the blemishes of their own character.27
In the subsequent case of Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National
Labor Relations Commission,28 we expanded the exclusions and elucidated that separation pay shall
be allowed as a measure of social justice only in instances where the employee is validly dismissed
for causes other than serious misconduct, willful disobedience, gross and habitual neglect of duty,
fraud or willful breach of trust, commission of a crime against the employer or his family, or those
reflecting on his moral character. In the same case, we instructed the labor officials that they must
be most judicious and circumspect in awarding separation pay or financial assistance as the
constitutional policy to provide full protection to labor is not meant to be an instrument to oppress the
employers.29 The commitment of the court to the cause of the labor should not embarrass us from
sustaining the employers when they are right, as here. In fine, we should be more cautious in
awarding financial assistance to the undeserving and those who are unworthy of liberality of the
law.30

Guided by the foregoing rules, we have carefully treaded the path of compassionate justice in the
subsequent cases so as not to slip and favor labor at the expense of management.
In Tirazona v. Phillippine EDS Techno-Service, Inc. (PET, Inc.),31 we denied the award of separation
pay to an employee who was dismissed from employment due to loss of trust and confidence.
While [this] Court commiserates with the plight of Tirazona, who has recently manifested that she
has since been suffering from her poor health condition, the Court cannot grant her plea for the
award of financial benefits based solely on this unfortunate circumstance. For all its conceded merit,
equity is available only in the absence of law and not as its replacement. Equity as an exceptional
extenuating circumstance does not favor, nor may it be used to reward, the indolent or the
wrongdoer for that matter. This Court will not allow a party, in guise of equity, to benefit from its own
fault.32 (Emphasis supplied).
The attendant circumstances in the present case considered, we are constrained to deny Del
Rosario separation pay since the admitted cause of his dismissal amounts to serious misconduct.
He is not only responsible for the loss of the water meters in flagrant violation of the companys
policy but his act is in utter disregard of his partnership with his employer in the pursuit of mutual
benefits.
In the recent case of Daabay v. Coca-Cola Bottlers,33 this Court reiterated our ruling in Toyota and
disallowed the payment of separation pay to an employee who was found guilty of stealing the
companys property. We repeated that an award of separation pay in such an instance is misplaced
compassion for the undeserving who may find their way back and weaken the fiber of labor.
That Del Rosario rendered 21 years of service to the company will not save the day for him. To this
case, Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations Commission is on
all fours, thus:
1wphi 1

Although long years of service might generally be considered for the award of separation benefits or
some form of financial assistance to mitigate the effects of termination, this case is not the
appropriate instance for generosity under the Labor Code nor under our prior decisions. The fact that
private respondent served petitioner for more than twenty years with no negative record prior to his
dismissal, in our view of this case, does not call for such award of benefits, since his violation
reflects a regrettable lack of loyalty and worse, betrayal of the company. If an employee's length of
service is to be regarded as a justification for moderating the penalty of dismissal, such gesture will
actually become a prize for disloyalty, distorting the meaning of social justice and undermining the
efforts of labor to cleanse its ranks of undesirables.34
(Emphasis supplied).
Indubitably, the appellate court erred in awarding separation pay to Del Rosario without taking into
consideration that the transgression he committed constitutes a serious offense. The grant of
separation pay to a dismissed employee is determined by the cause of the dismissal. The years of
service may determine how much separation pay may be awarded. It is, however, not the reason
why such pay should be granted at all.
In sum, we hold that the award of separation pay or any other kind of financial assistance to Del
Rosario, under the nomenclature of compassionate justice, is not warranted in the instant case. A
contrary rule would have the effect of rewarding rather than punishing an erring employee, disturbing
the noble concept of social justice.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision and
Resolution of the Court of Appeals are hereby REVERSED and SET ASIDE.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice

See Toyota v. NLRC, G.R. Nos. 158786 & 158789, October 19, 2007
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION
G.R. Nos. 158786 &158789

Present:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

TOYOTA MOTOR PHILS. CORP. WORKERS ASSOCIATION (TMPCWA), ED CUBELO, EDWIN ALARANA,
ALEX ALEJO, ERWIN ALFONSO, MELVIN APOSTOL, DANIEL AROLLADO, DOMINADOR ARRIOLA, LESTER

ATUN, ROLANDO BALUYOT, RODERICK BAYANI, ABEL BERCES, BENNY BERING, MELCHOR BLANCO,
JERRY BOLOCON, ELMER BULAN, NELSON CABAHUG, JESSIE CABATAY, MARCELO CABEZAS, ROQUE
CANDELARIO, JR., LORENZO CARAQUEO, DENNIS CARINGAL, GIENELL CASABA, CHRISTOPHER
CATAPUSAN, RICO CATRAL, JULIUS COMETA, JAY ANTONIO CORAL, REYNALDO CUEVAS, BENIGNO
DAVID, JR., JOEY DE GUZMAN, LEONARDO DE LEON, ROGELIO DELOS SANTOS, JOSELITO DE OCAMPO,
FRANK MANUEL DIA, ANTONIO DIMAYUGA, ARMANDO ERCILLO, DELMAR ESPADILLA, DENNIS
ESPELOA, JASON FAJILAGUTAN, JOHN FAJURA, MELENCIO FRANCO, DEXTER FULGAR, EDUARDO GADO,
ERWIN GALANG, ROBIN GARCES, ARIEL GARCIA, RONALD GASPI, ANGELO GAVARRA, REYNALDO
GOJAR, EDGAR HILANGA, EUGENE JAY HONDRADA, ALEJANDRO IMPERIAL, FERDINAND JAEN, JOEY
JAVILLONAR, BASILIO LAQUI, ALBERTO LOMBOY, JUDE JONOBELL LOZADA, JOHNNY LUCIDO, ROMMEL
MACALINDONG, NIXON MADRAZO, ROGELIO MAGISTRADO, JR., PHILIP JOHN MAGNAYE, ALLAN JOHN
MALABANAN, ROLANDO MALALUAN, JR., PAULINO MALEON, MANUEL MANALO, JR., JONAMAR
MANAOG, JOVITO MANECLANG, BAYANI MANGUIL, JR., CARLITO MARASIGAN, ROMMEL MARIANO,
BOBIT MENDOZA, ERICSON MONTERO, MARLAW MONTERO, EDWIN NICANOR, RODERICK NIERVES,
LOLITO NUNEZ, FELIMON ORTIZ, EDWIN PECAYO, ERWIN PENA, JOWALD PENAMANTE, JORGE
POLUTAN, EDDIE RAMOS, ROLANDO REYES, PHILIP ROXAS, DAVID SALLAN, JR., BERNARDO SALVADOR,
BALDWIN SAN PABLO, JEFFREY SANGALANG, BERNABE SAQUILABON, ALEX SIERRA, ROMUALDO
SIMBORIO, EDWIN TABLIZO, PETRONIO TACLAN, JR., RODEL TOLENTINO, ROMMEL TOLENTINO, GRANT
ROBERT TORAL, FEDERICO TORRES, JR., EMANNUEL TULIO, NESTOR UMITEN, JR., APOLLO VIOLETA, SR.,
DOMINADOR ZAMORA, JR., ROMMEL ARCETA, ANTONIO BORSIGUE, EMILIO COMPLETO, RANDY
CONSIGNADO, BASILIO DELA CRUZ, ALEXANDER ESTEVA, NIKKO FRANCO, RODEL GAMIT, ROBERTO
GONZALES, PHILIP JALEA, JOEY LLANERA, GERONIMO LOPEZ, RUEL MANEGO, EDWIN MANZANILLA,
KENNETH NATIVIDAD, LARRY ORMILLA, CORNELIO PLATON, PAUL ARTHUR SALES, ALEJANDRO
SAMPANG, LAURO SULIT, ROLANDO TOMAS, JOSE ROMMEL TRAZONA, MICHAEL TEDDY YANGYON,
MAXIMINO CRUZ, VIRGILIO COLANDOG, ROMMEL DIGMA, JOSELITO HUGO, and RICKY
CHAVEZ, Petitioners,
- versus -

G.R. Nos. 158798-99

Promulgated:
October 19, 2007

NATIONAL LABOR RELATIONS COMMISSION, (NLRC-2ND DIVISION), HON. COMMISSIONERS: VICTORINO

CALAYCAY, ANGELITA GACUTAN, and RAUL AQUINO, TOYOTA MOTOR PHILIPPINES CORPORATION,
TAKESHI FUKUDA, and DAVID GO, Respondents,
x-----------------------------------------------x
TOYOTA MOTOR PHILIPPINES CORPORATION,
Petitioner,
- versus -

TOYOTA MOTOR PHILIPPINES CORP. WORKERS ASSOCIATION (TMPCWA),

Respondent.
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
In the instant petition under Rule 45 subject of G.R. Nos. 158786 and 158789, Toyota Motor Philippines
Corporation Workers Association (Union) and its dismissed officers and members seek to set aside the
February 27, 2003 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP Nos. 67100 and 67561, which
affirmed the August 9, 2001 Decision[2] and September 14, 2001 Resolution[3] of the National Labor
Relations Commission (NLRC), declaring illegal the strikes staged by the Union and upholding the dismissal
of the 227 Union officers and members.
On the other hand, in the related cases docketed as G.R. Nos. 158798-99, Toyota Motor Philippines
Corporation (Toyota) prays for the recall of the award of severance compensation to the 227 dismissed
employees, which was granted under the June 20, 2003 CA Resolution[4] in CA-G.R. SP Nos. 67100 and
67561.
In view of the fact that the parties are petitioner/s and respondent/s and vice-versa in the four (4)
interrelated cases, they will be referred to as simply the Union and Toyotahereafter.
The Facts
The Union is a legitimate labor organization duly registered with the Department of Labor and
Employment (DOLE) and is the sole and exclusive bargaining agent of all Toyotarank and file employees.[5]
Toyota, on the other hand, is a domestic corporation engaged in the assembly and sale of vehicles and
parts.[6] It is a Board of Investments (BOI) participant in the Car Development Program and the Commercial
Vehicle Development Program. It is likewise a BOI-preferred non-pioneer export trader of automotive
parts and is under the Special Economic Zone Act of 1995. It is one of the largest motor vehicle
manufacturers in the country employing around 1,400 workers for its plants in Bicutan and Sta. Rosa,
Laguna.It is claimed that its assets amount to PhP 5.525 billion, with net sales of PhP 14.646 billion and
provisions for income tax of PhP 120.9 million.

On February 14, 1999, the Union filed a petition for certification election among the Toyota rank and file
employees with the National Conciliation and Mediation Board (NCMB), which was docketed as Case No.
NCR-OD-M-9902-001. Med-Arbiter Ma. Zosima C. Lameyra denied the petition, but, on appeal, the DOLE
Secretary granted theUnions prayer, and, through the June 25, 1999 Order, directed the immediate
holding of the certification election.[7]
After Toyotas plea for reconsideration was denied, the certification election was conducted. Med-Arbiter
Lameyras May 12, 2000 Order certified the Union as the sole and exclusive bargaining agent of all
the Toyota rank and file employees. Toyota challenged said Order via an appeal to the DOLE Secretary.[8]
In the meantime, the Union submitted its Collective Bargaining Agreement (CBA) proposals to Toyota, but
the latter refused to negotiate in view of its pending appeal. Consequently, the Union filed a notice of
strike on January 16, 2001 with the NCMB, docketed as NCMB-NCR-NS-01-011-01, based on Toyotas
refusal to bargain. On February 5, 2001, the NCMB-NCR converted the notice of strike into a preventive
mediation case on the ground that the issue of whether or not the Union is the exclusive bargaining agent
of all Toyota rank and file employees was still unresolved by the DOLE Secretary.
In connection with Toyotas appeal, Toyota and the Union were required to attend a hearing on February
21, 2001 before the Bureau of Labor Relations (BLR) in relation to the exclusion of the votes of alleged
supervisory employees from the votes cast during the certification election. The February 21,
2001 hearing was cancelled and reset to February 22, 2001. On February 21, 2001, 135 Union officers and
members failed to render the required overtime work, and instead marched to and staged a picket in
front of the BLR office in Intramuros, Manila.[9] The Union, in a letter of the same date, also requested that
its members be allowed to be absent on February 22, 2001 to attend the hearing and instead work on
their next scheduled rest day. This request however was denied by Toyota.
Despite denial of the Unions request, more than 200 employees staged mass actions on February 22 and
23, 2001 in front of the BLR and the DOLE offices, to protest the partisan and anti-union stance of Toyota.
Due to the deliberate absence of a considerable number of employees on February 22 to 23,
2001, Toyota experienced acute lack of manpower in its manufacturing and production lines, and was
unable to meet its production goals resulting in huge losses of PhP 53,849,991.
Soon thereafter, on February 27, 2001, Toyota sent individual letters to some 360 employees requiring
them to explain within 24 hours why they should not be dismissed for their obstinate defiance of the
companys directive to render overtime work on February 21, 2001, for their failure to report for work on
February 22 and 23, 2001, and for their participation in the concerted actions which severely disrupted
and paralyzed the plants operations.[10] These letters specifically cited Section D, paragraph 6 of the
Companys Code of Conduct, to wit:

Inciting or participating in riots, disorders, alleged strikes, or concerted actions detrimental to [Toyotas]
interest.
1st offense dismissal.[11]

Meanwhile, a February 27, 2001 Manifesto was circulated by the Union which urged its members to
participate in a strike/picket and to abandon their posts, the pertinent portion of which reads, as follows:

YANIG sa kanyang komportableng upuan ang management ng TOYOTA. And dating takot, kimi, at
mahiyaing manggagawa ay walang takot na nagmartsa at nagprotesta laban sa desperadong
pagtatangkang baguhin ang desisyon ng DOLE na pabor sa UNYON. Sa tatlong araw na protesta, mahigit
sa tatlong daang manggagawa ang lumahok.
xxxx
HANDA na tayong lumabas anumang oras kung patuloy na ipagkakait ng management ang CBA. Oo
maari tayong masaktan sa welga. Oo, maari tayong magutom sa piketlayn.Subalit may pagkakaiba ba
ito sa unti-unting pagpatay sa atin sa loob ng 12 taong makabaling likod ng pagtatrabaho? Ilang taon na
lang ay magkakabutas na ang ating mga baga sa mga alipato at usok ng welding. Ilang taon na lang ay
marupok na ang ating mga buto sa kabubuhat. Kung dumating na ang panahong ito at wala pa
tayong CBA, paano na? Hahayaan ba nating ang kumpanya lang ang makinabang sa yamang likha ng
higit sa isang dekadang pagpapagal natin?
HUWAG BIBITIW SA NASIMULANG TAGUMPAY!
PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG MAKATARUNGANG CBA!
HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA MANGGAGAWA SA TOYOTA![12] (Emphasis supplied.)
On the next day, the Union filed with the NCMB another notice of strike docketed as NCMB-NCR-NS-02061-01 for union busting amounting to unfair labor practice.
On March 1, 2001, the Union nonetheless submitted an explanation in compliance with the February 27,
2001 notices sent by Toyota to the erring employees. The Union members explained that their refusal to
work on their scheduled work time for two consecutive days was simply an exercise of their constitutional
right to peaceably assemble and to petition the government for redress of grievances. It further argued
that the demonstrations staged by the employees on February 22 and 23, 2001 could not be classified as
an illegal strike or picket, and that Toyota had already condoned the alleged acts when it accepted back
the subject employees.[13]
Consequently, on March 2 and 5, 2001, Toyota issued two (2) memoranda to the concerned employees
to clarify whether or not they are adopting the March 1, 2001 Unions explanation as their own. The
employees were also required to attend an investigative interview,[14] but they refused to do so.
On March 16, 2001, Toyota terminated the employment of 227 employees[15] for participation in
concerted actions in violation of its Code of Conduct and for misconduct under Article 282 of the Labor
Code. The notice of termination reads:
After a careful evaluation of the evidence on hand, and a thorough assessment of your explanation, TMP
has concluded that there are overwhelming reasons to terminate your services based on Article 282 of
the Labor Code and TMPs Code of Conduct.
Your repeated absences without permission on February 22 to 23, 2001 to participate in a concerted
action against TMP constitute abandonment of work and/or very serious misconduct under Article 282 of
the Labor Code.
The degree of your offense is aggravated by the following circumstances:

1.
You expressed to management that you will adopt the unions letter dated March 1, 2001, as
your own explanation to the charges contained in the Due Process Form dated February 27, 2001. It is
evident from such explanation that you did not come to work because you deliberately participated
together with other Team Members in a plan to engage in concerted actions detrimental to TMPs interest.
As a result of your participation in the widespread abandonment of work by Team Members
from February 22 to 23, 2001, TMP suffered substantial damage.
It is significant that the absences you incurred in order to attend the clarificatory hearing conducted by
the Bureau of Labor Relations were unnecessary because the union was amply represented in the said
hearings by its counsel and certain members who sought and were granted leave for the purpose. Your
reason for being absent is, therefore, not acceptable; and
2.
Your participation in the organized work boycott by Team Members on February 22 and 23
led to work disruptions that prevented the Company from meeting its production targets, resulting [in]
foregone sales of more than eighty (80) vehicles, mostly new-model Revos, valued at more than Fifty
Million Pesos (50,000,000.00).
The foregoing is also a violation of TMPs Code of Conduct (Section D, Paragraph 6) to wit:
Inciting or participating in riots, disorders, illegal strikes or concerted actions detrimental to TMPs interest.
Based on the above, TMP Management is left with no other recourse but to terminate your employment
effective upon your receipt thereof.
[Sgd.]
JOSE MARIA ALIGADA
Deputy Division Manager[16]
In reaction to the dismissal of its union members and officers, the Union went on strike on March 17,
2001. Subsequently, from March 28, 2001 to April 12, 2001, theUnion intensified its strike by barricading
the gates of Toyotas Bicutan and Sta. Rosa plants. The strikers prevented workers who reported for work
from entering the plants. In his Affidavit, Mr. Eduardo Nicolas III, Security Department Head, stated that:
3. On March 17, 2001, members of the Toyota Motor Philippines Corporation Workers Association
(TMPCWA), in response to the dismissal of some two hundred twenty seven (227) leaders and members
of TMPCWA and without observing the requirements mandated by the Labor Code, refused to report for
work and picketed TMPC premises from 8:00 a.m. to 5:00 p.m.The strikers badmouthed people coming in
and hurled invectives such as bakeru at Japanese officers of the company. The strikers likewise pounded
the officers vehicle as they tried to enter the premises of the company.
4. On March 28, 2001, the strikers intensified their picketing and barricaded the gates of TMPCs Bicutan
and Sta. Rosa plants, thus, blocking the free ingress/egress to and from the premises. Shuttle buses and
cars containing TMPC employees, suppliers, dealers, customers and other people having business with
the company, were prevented by the strikers from entering the plants.
5. As a standard operating procedure, I instructed my men to take photographs and video footages of
those who participated in the strike. Seen on video footages taken on various dates actively participating
in the strike were union officers Emilio C. Completo, Alexander Esteva, Joey Javellonar and Lorenzo
Caraqueo.

6. Based on the pictures, among those identified to have participated in the March 28, 2001 strike were
Grant Robert Toral, John Posadas, Alex Sierra, Allan John Malabanan, Abel Bersos, Ernesto Bonavente,
Ariel Garcia, Pablito Adaya, Feliciano Mercado, Charlie Oliveria, Philip Roxas, June Lamberte, Manjolito
Puno, Baldwin San Pablo, Joseph Naguit, Federico Torres, Larry Gerola, Roderick Bayani, Allan Oclarino,
Reynaldo Cuevas, Jorge Polutan, Arman Ercillo, Jimmy Hembra, Albert Mariquit, Ramil Gecale, Jimmy
Palisoc, Normandy Castalone, Joey Llanera, Greg Castro, Felicisimo Escrimadora, Rodolfo Bay, Ramon
Clemente, Dante Baclino, Allan Palomares, Arturo Murillo and Robert Gonzales. Attached hereto as
Annexes 1 to 18 are the pictures taken on March 28, 2001 at the Bicutan and Sta. Rosa plants.
7. From March 29 to 31, 2001, the strikers continued to barricade the entrances to TMPCs two (2) plants.
Once again, the strikers hurled nasty remarks and prevented employees aboard shuttle buses from
entering the plants. Among the strikers were Christopher Saldivar, Basilio Laqui, Sabas Bernabise, Federico
Torres, Freddie Olit, Josel Agosto, Arthur Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga, Charlie
Oliveria, Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial, Manjolito Puno, Delmar Espadilla, Domingo
Javier, Apollo Violeta and Elvis Tabinao.[17]

On March 29, 2001, Toyota filed a petition for injunction with a prayer for the issuance of a temporary
restraining order (TRO) with the NLRC, which was docketed as NLRC NCR Case No. INJ-0001054-01. It
sought free ingress to and egress from its Bicutan and Sta. Rosa manufacturing plants. Acting on said
petition, the NLRC, on April 5, 2001, issued a TRO against the Union, ordering its leaders and members as
well as its sympathizers to remove their barricades and all forms of obstruction to ensure free ingress to
and egress from the companys premises. In addition, the NLRC rejected the Unions motion to dismiss
based on lack of jurisdiction.[18]
Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration branch, which
was docketed as NLRC NCR (South) Case No. 30-04-01775-01, and prayed that the erring Union officers,
directors, and members be dismissed.[19]
On April 10, 2001, the DOLE Secretary assumed jurisdiction over the labor dispute and issued an
Order[20] certifying the labor dispute to the NLRC. In said Order, the DOLE Secretary directed all striking
workers to return to work at their regular shifts by April 16, 2001. On the other hand, it ordered Toyota to
accept the returning employees under the same terms and conditions obtaining prior to the strike or at
its option, put them under payroll reinstatement. The parties were also enjoined from committing acts
that may worsen the situation.
The Union ended the strike on April 12, 2001. The union members and officers tried to return to work
on April 16, 2001 but were told that Toyota opted for payroll-reinstatement authorized by the Order of
the DOLE Secretary.
In the meantime, the Union filed a motion for reconsideration of the DOLE Secretarys April 10, 2001
certification Order, which, however, was denied by the DOLE Secretary in her May 25, 2001 Resolution.
Consequently, a petition for certiorari was filed before the CA, which was docketed as CA-G.R. SP No.
64998.

In the intervening time, the NLRC, in compliance with the April 10, 2001 Order of the DOLE Secretary,
docketed the case as Certified Case No. 000203-01.
Meanwhile, on May 23, 2001, at around 12:00 nn., despite the issuance of the DOLE Secretarys
certification Order, several payroll-reinstated members of the Union staged a protest rally in front of
Toyotas Bicutan Plant bearing placards and streamers in defiance of the April 10, 2001 Order.
Then, on May 28, 2001, around forty-four (44) Union members staged another protest action in front of
the Bicutan Plant. At the same time, some twenty-nine (29) payroll-reinstated employees picketed in front
of the Santa Rosa Plants main entrance, and were later joined by other Union members.
On June 5, 2001, notwithstanding the certification Order, the Union filed another notice of strike, which
was docketed as NCMB-NCR-NS-06-150-01. On June 18, 2001, the DOLE Secretary directed the second
notice of strike to be subsumed in the April 10, 2001 certification Order.
In the meantime, the NLRC, in Certified Case No. 000203-01, ordered both parties to submit their
respective position papers on June 8, 2001. The union, however, requested for abeyance of the
proceedings considering that there is a pending petition for certiorari with the CA assailing the validity of
the DOLE Secretarys Assumption of Jurisdiction Order.
Thereafter, on June 19, 2001, the NLRC issued an Order, reiterating its previous order for both parties to
submit their respective position papers on or before June 2, 2001. The same Order also denied the Unions
verbal motion to defer hearing on the certified cases.
On June 27, 2001, the Union filed a Motion for Reconsideration of the NLRCs June 19, 2001 Order, praying
for the deferment of the submission of position papers until its petition for certiorari is resolved by the
CA.
On June 29, 2001, only Toyota submitted its position paper. On July 11, 2001, the NLRC again ordered
the Union to submit its position paper by July 19, 2001, with a warning that upon failure for it to do so,
the case shall be considered submitted for decision.
Meanwhile, on July 17, 2001, the CA dismissed the Unions petition for certiorari in CA-G.R. SP No. 64998,
assailing the DOLE Secretarys April 10, 2001 Order.
Notwithstanding repeated orders to file its position paper, the Union still failed to submit its position
paper on July 19, 2001. Consequently, the NLRC issued an Order directing the Union to submit its position
paper on the scheduled August 3, 2001 hearing; otherwise, the case shall be deemed submitted for
resolution based on the evidence on record.
During the August 3, 2001 hearing, the Union, despite several accommodations, still failed to submit its
position paper. Later that day, the Union claimed it filed its position paper by registered mail.
Subsequently, the NLRC, in its August 9, 2001 Decision, declared the strikes staged by
the Union on February 21 to 23, 2001 and May 23 and 28, 2001 as illegal. The decretal portion reads:

WHEREFORE, premises considered, it is hereby ordered:

(1) Declaring the strikes staged by the Union to be illegal.
(2)
Declared [sic] that the dismissal of the 227 who participated in the illegal strike on February
21-23, 2001 is legal.
(3) However, the Company is ordered to pay the 227 Union members, who participated in the illegal strike
severance compensation in an amount equivalent to one month salary for every year of service, as an
alternative relief to continued employment.
(4) Declared [sic] that the following Union officers and directors to have forfeited their employment status
for having led the illegal strikes on February 21-23, 2001 and May 23 and 28, 2001: Ed Cubelo, Maximino
Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio
Completo, Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue,
Bayani Manguil, Jr., and Mayo Mata.[21]
SO ORDERED.[22]

The NLRC considered the mass actions staged on February 21 to 23, 2001 illegal as the Union failed to
comply with the procedural requirements of a valid strike under Art. 263 of the Labor Code.
After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April 10, 2001, the Union again
staged strikes on May 23 and 28, 2001. The NLRC found the strikes illegal as they violated Art. 264 of the
Labor Code which proscribes any strike or lockout after jurisdiction is assumed over the dispute by the
President or the DOLE Secretary.
The NLRC held that both parties must have maintained the status quo after the DOLE Secretary issued the
assumption/certification Order, and ruled that the Union did not respect the DOLE Secretarys directive.
Accordingly, both Toyota and the Union filed Motions for Reconsideration, which the NLRC denied in
its September 14, 2001 Resolution.[23] Consequently, both parties questioned the August 9, 2001
Decision[24] and September 14, 2001 Resolution of the NLRC in separate petitions for certiorari filed with
the CA, which were docketed as CA-G.R. SP Nos. 67100 and 67561, respectively. The CA then consolidated
the petitions.
In its February 27, 2003 Decision,[25] the CA ruled that the Unions petition is defective in form for its failure
to append a proper verification and certificate of non-forum shopping, given that, out of the 227
petitioners, only 159 signed the verification and certificate of non-forum shopping. Despite the flaw, the
CA proceeded to resolve the petitions on the merits and affirmed the assailed NLRC Decision and
Resolution with a modification, however, of deleting the award of severance compensation to the
dismissed Union members.
In justifying the recall of the severance compensation, the CA considered the participation in illegal strikes
as serious misconduct. It defined serious misconduct as a transgression of some established and definite
rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and

not mere error in judgment. It cited Panay Electric Company, Inc. v. NLRC,[26] where we revoked the grant
of separation benefits to employees who lawfully participated in an illegal strike based on Art. 264 of the
Labor Code, which states that any union officer who knowingly participates in an illegal strike and any
worker or union officer who knowingly participates in the commission of illegal acts during a strike may
be declared to have lost his employment status.[27]
However, in its June 20, 2003 Resolution,[28] the CA modified its February 27, 2003 Decision by reinstating
severance compensation to the dismissed employees based on social justice.
The Issues
Petitioner Union now comes to this Court and raises the following issues for our consideration:
I.
Whether the mere participation of ordinary employees in an illegal strike is enough reason to
warrant their dismissal.
II.
Whether the Union officers and members act of holding the protest rallies in front of the BLR
office and the Office of the Secretary of Labor and Employment on February 22 and 23, 2001 should be
held as illegal strikes. In relation hereto, whether the protests committed on May 23 and 28, 2001, should
be held as illegal strikes. Lastly, whether the Union violated the Assumption of Jurisdiction Order issued
by the Secretary of Labor and Employment.
III.

Whether the dismissal of 227 Union officers and members constitutes unfair labor practice.

IV.
Whether the CA erred in affirming the Decision of the NLRC which excluded the Unions Position
Paper which the Union filed by mail. In the same vein, whether the Unions right to due process was
violated when the NLRC excluded their Position Paper.
V.

Whether the CA erred in dismissing the Unions Petition for Certiorari.

Toyota, on the other hand, presents this sole issue for our determination:
I.
Whether the Court of Appeals erred in issuing its Resolution dated June 20, 2003, partially
modifying its Decision dated February 27, 2003, and awarding severance compensation to the dismissed
Union members.

In sum, two main issues are brought to the fore:

(1) Whether the mass actions committed by the Union on different occasions are illegal strikes; and
(2) Whether separation pay should be awarded to the Union members who participated in the illegal
strikes.

The Courts Ruling

The Union contends that the NLRC violated its right to due process when it disregarded its position paper
in deciding Toyotas petition to declare the strike illegal.
We rule otherwise.
It is entirely the Unions fault that its position paper was not considered by the NLRC. Records readily
reveal that the NLRC was even too generous in affording due process to theUnion. It issued no less than
three (3) orders for the parties to submit its position papers, which the Union ignored until the last
minute. No sufficient justification was offered why the Union belatedly filed its position paper. In Datu
Eduardo Ampo v. The Hon. Court of Appeals, it was explained that a party cannot complain of deprivation
of due process if he was afforded an opportunity to participate in the proceedings but failed to do so. If
he does not avail himself of the chance to be heard, then it is deemed waived or forfeited without violating
the constitutional guarantee.[29] Thus, there was no violation of the Unions right to due process on the
part of the NLRC.
On a procedural aspect, the Union faults the CA for treating its petition as an unsigned pleading and
posits that the verification signed by 159 out of the 227 petitioners has already substantially complied
with and satisfied the requirements under Secs. 4 and 5 of Rule 7 of the Rules of Court.
The Unions proposition is partly correct.
Sec. 4 of Rule 7 of the Rules of Court states:
Sec. 4. Verification.Except when otherwise specifically required by law or rule, pleadings need not be
under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein
are true and correct of his personal knowledge or based on authentic records.
A pleading required to be verified which contains a verification based on information and belief or upon
knowledge, information and belief, or lacks a proper verification, shall be treated as an unsigned pleading.

The verification requirement is significant, as it is intended to secure an assurance that the allegations in
the pleading are true and correct and not the product of the imagination or a matter of speculation.[30] This
requirement is simply a condition affecting the form of pleadings, and noncompliance with the
requirement does not necessarily render it fatally defective. Indeed, verification is only a formal and not
a jurisdictional requirement.[31]
In this case, the problem is not the absence but the adequacy of the Unions verification, since only 159
out of the 227 petitioners executed the verification. Undeniably, the petition meets the requirement on
the verification with respect to the 159 petitioners who executed the verification, attesting that they have
sufficient knowledge of the truth and correctness of the allegations of the petition. However, their
signatures cannot be considered as verification of the petition by the other 68 named petitioners unless
the latter gave written authorization to the 159 petitioners to sign the verification on their behalf. Thus,
in Loquias v. Office of the Ombudsman, we ruled that the petition satisfies the formal requirements only
with regard to the petitioner who signed the petition but not his co-petitioner who did not sign nor
authorize the other petitioner to sign it on his behalf.[32] The proper ruling in this situation is to consider
the petition as compliant with the formal requirements with respect to the parties who signed it and,

therefore, can be given due course only with regard to them. The other petitioners who did not sign the
verification and certificate against forum shopping cannot be recognized as petitioners have no legal
standing before the Court. The petition should be dismissed outright with respect to the non-conforming
petitioners.
In the case at bench, however, the CA, in the exercise of sound discretion, did not strictly apply the ruling
in Loquias and instead proceeded to decide the case on the merits.
The alleged protest rallies in front of the offices of BLR and DOLE Secretary and at the Toyota plants
constituted illegal strikes

When is a strike illegal?

Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal strike, viz:
(1) [when it] is contrary to a specific prohibition of law, such as strike by employees performing
governmental functions; or
(2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor Code on the requisites
of a valid strike]; or
(3) [when it] is declared for an unlawful purpose, such as inducing the employer to commit an unfair labor
practice against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its objective, such as a widespread terrorism of
non-strikers [for example, prohibited acts under Art. 264(e) of the Labor Code]; or
(5) [when it] is declared in violation of an existing injunction[, such as injunction, prohibition, or order
issued by the DOLE Secretary and the NLRC under Art. 263 of the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a no-strike clause or conclusive arbitration
clause.[33]
Petitioner Union contends that the protests or rallies conducted on February 21 and 23, 2001 are not
within the ambit of strikes as defined in the Labor Code, since they were legitimate exercises of their right
to peaceably assemble and petition the government for redress of grievances. Mainly relying on the
doctrine laid down in the case ofPhilippine Blooming Mills Employees Organization v. Philippine Blooming
Mills Co., Inc.,[34] it argues that the protest was not directed at Toyota but towards the Government (DOLE
and BLR). It explains that the protest is not a strike as contemplated in the Labor Code. The Union points
out that in Philippine Blooming Mills Employees Organization, the mass action staged in Malacaang to
petition the Chief Executive against the abusive behavior of some police officers was a proper exercise of
the employees right to speak out and to peaceably gather and ask government for redress of their
grievances.
The Unions position fails to convince us.

While the facts in Philippine Blooming Mills Employees Organization are similar in some respects to that
of the present case, the Union fails to realize one major difference: there was no labor dispute
in Philippine Blooming Mills Employees Organization. In the present case, there was an on-going labor
dispute arising from Toyotas refusal to recognize and negotiate with the Union, which was the subject of
the notice of strike filed by the Union on January 16, 2001. Thus, the Unions reliance on Phililippine
Blooming Mills Employees Organization is misplaced, as it cannot be considered a precedent to the case
at bar.
A strike means any temporary stoppage of work by the concerted action of employees as a result of an
industrial or labor dispute. A labor dispute, in turn, includes any controversy or matter concerning terms
or conditions of employment or the association or representation of persons in negotiating, fixing,
maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of the employer and the employee.[35]
In Bangalisan v. Court of Appeals, it was explained that [t]he fact that the conventional term strike was
not used by the striking employees to describe their common course of action is inconsequential, since
the substance of the situation and not its appearance, will be deemed controlling.[36] The term strike has
been elucidated to encompass not only concerted work stoppages, but also slowdowns, mass leaves, sitdowns, attempts to damage, destroy, or sabotage plant equipment and facilities, and similar activities.[37]
Applying pertinent legal provisions and jurisprudence, we rule that the protest actions undertaken by the
Union officials and members on February 21 to 23, 2001 are not valid and proper exercises of their right
to assemble and ask government for redress of their complaints, but are illegal strikes in breach of the
Labor Code. The Unions position is weakened by the lack of permit from the City of Manila to hold rallies.
Shrouded as demonstrations, they were in reality temporary stoppages of work perpetrated through the
concerted action of the employees who deliberately failed to report for work on the convenient excuse
that they will hold a rally at the BLR and DOLE offices in Intramuros, Manila, on February 21 to 23,
2001. The purported reason for these protest actions was to safeguard their rights against any abuse
which the med-arbiter may commit against their cause. However, the Union failed to advance convincing
proof that the med-arbiter was biased against them. The acts of the med-arbiter in the performance of
his duties are presumed regular. Sans ample evidence to the contrary, the Union was unable to justify the
February 2001 mass actions. What comes to the fore is that the decision not to work for two days was
designed and calculated to cripple the manufacturing arm of Toyota. It becomes obvious that the real and
ultimate goal of the Union is to coerce Toyota to finally acknowledge the Union as the sole bargaining
agent of the company. This is not a legal and valid exercise of the right of assembly and to demand redress
of grievance.
We sustain the CAs affirmance of the NLRCs finding that the protest rallies staged on February 21 to 23,
2001 were actually illegal strikes. The illegality of the Unions mass actions was succinctly elaborated by
the labor tribunal, thus:
We have stated in our questioned decision that such mass actions staged before the Bureau of Labor
Relations on February 21-23, 2001 by the union officers and members fall squarely within the definition
of a strike (Article 212 (o), Labor Code). These concerted actions resulted in the temporary stoppage of
work causing the latter substantial losses. Thus, without the requirements for a valid strike having been
complied with, we were constrained to consider the strike staged on such dates as illegal and all
employees who participated in the concerted actions to have consequently lost their employment status.

If we are going to stamp a color of legality on the two (2) [day-] walk out/strike of respondents without
filing a notice of strike, in effect we are giving license to all the unions in the country to paralyze the
operations of their companies/employers every time they wish to hold a demonstration in front of any
government agency. While we recognize the right of every person or a group to peaceably assemble and
petition the government for redress of grievances, the exercise of such right is governed by existing laws,
rules and regulations.
Although the respondent union admittedly made earnest representations with the company to hold a
mass protest before the BLR, together with their officers and members, the denial of the request by the
management should have been heeded and ended their insistence to hold the planned mass
demonstration. Verily, the violation of the company rule cannot be dismissed as mere absences of two
days as being suggested by the union [are but] concerted actions detrimental to Petitioner Toyotas
interest.[38] (Emphasis supplied.)
It is obvious that the February 21 to 23, 2001 concerted actions were undertaken without satisfying the
prerequisites for a valid strike under Art. 263 of the Labor Code.The Union failed to comply with the
following requirements: (1) a notice of strike filed with the DOLE 30 days before the intended date of
strike, or 15 days in case of unfair labor practice;[39] (2) strike vote approved by a majority of the total
union membership in the bargaining unit concerned obtained by secret ballot in a meeting called for that
purpose; and (3) notice given to the DOLE of the results of the voting at least seven days before the
intended strike. These requirements are mandatory and the failure of a union to comply with them
renders the strike illegal.[40] The evident intention of the law in requiring the strike notice and the strikevote report is to reasonably regulate the right to strike, which is essential to the attainment of legitimate
policy objectives embodied in the law.[41] As they failed to conform to the law, the strikes on February 21,
22, and 23, 2001 were illegal.
Moreover, the aforementioned February 2001 strikes are in blatant violation of Sec. D, par. 6 of Toyotas
Code of Conduct which prohibits inciting or participating in riots, disorders, alleged strikes or concerted
actions detrimental to [Toyotas] interest. The penalty for the offense is dismissal. The Union and its
members are bound by the company rules, and the February 2001 mass actions and deliberate refusal to
render regular and overtime work on said days violated these rules. In sum, the February 2001 strikes and
walk-outs were illegal as these were in violation of specific requirements of the Labor Code and a company
rule against illegal strikes or concerted actions.
With respect to the strikes committed from March 17 to April 12, 2001, those were initially legal as the
legal requirements were met. However, on March 28 to April 12, 2001, the Union barricaded the gates of
the Bicutan and Sta. Rosa plants and blocked the free ingress to and egress from the company
premises. Toyota employees, customers, and other people having business with the company were
intimidated and were refused entry to the plants. As earlier explained, these strikes were illegal because
unlawful means were employed. The acts of the Union officers and members are in palpable violation of
Art. 264(e), which proscribes acts of violence, coercion, or intimidation, or which obstruct the free ingress
to and egress from the company premises. Undeniably, the strikes from March 28 to April 12, 2001 were
illegal.
Petitioner Union also posits that strikes were not committed on May 23 and 28, 2001. The Union asserts
that the rallies held on May 23 and 28, 2001 could not be considered strikes, as the participants were the
dismissed employees who were on payroll reinstatement. It concludes that there was no work stoppage.

This contention has no basis.

It is clear that once the DOLE Secretary assumes jurisdiction over the labor dispute and certifies the case
for compulsory arbitration with the NLRC, the parties have to revert to the status quo ante (the state of
things as it was before). The intended normalcy of operations is apparent from the fallo of the April 10,
2001 Order of then DOLE Secretary Patricia A. Sto. Tomas, which reads:
WHEREFORE, PREMISES CONSIDERED, this Office hereby CERTIFIES the labor dispute at Toyota Motors
Philippines Corporation to the [NLRC] pursuant to Article 263 (g) of the Labor Code, as amended. This
Certification covers the current labor cases filed in relation with the Toyota strike, particularly, the Petition
for Injunction filed with the National Labor Relations Commission entitled Toyota Motor Philippines
Corporation vs. Toyota Motor Philippines Corporation Workers Association (TMPCWA), Ed Cubelo, et al.,
NLRC Injunction Case No. 3401054-01; Toyota Motor Philippines Corporation vs. Toyota Motor Philippines
Corporation Workers Association, et al., NLRC NCR Case No. 3004-01775-01, and such other labor cases
that the parties may file relating to the strike and its effects while this Certification is in effect.
As provided under Article 2634(g) of the Labor Code, all striking workers are directed to return to work at
their regular shifts by April 16, 2001; the Company is in turn directed to accept them back to work under
the same terms and conditions obtaining prior to the work stoppage, subject to the option of the company
to merely reinstate a worker or workers in the payroll in light of the negative emotions that the strike has
generated and the need to prevent the further deterioration of the relationship between the company
and its workers.
Further, the parties are hereby ordered to cease and desist from committing any act that might lead to
the worsening of an already deteriorated situation.[42] (Emphasis supplied.)

It is explicit from this directive that the Union and its members shall refrain from engaging in any activity
that might exacerbate the tense labor situation in Toyota, which certainly includes concerted actions.
This was not heeded by the Union and the individual respondents who staged illegal concerted actions on
May 23 and 28, 2001 in contravention of the Order of the DOLE Secretary that no acts should be
undertaken by them to aggravate the already deteriorated situation.
While it may be conceded that there was no work disruption in the two Toyota plants, the fact still remains
that the Union and its members picketed and performed concerted actions in front of the Company
premises. This is a patent violation of the assumption of jurisdiction and certification Order of the DOLE
Secretary, which ordered the parties to cease and desist from committing any act that might lead to the
worsening of an already deteriorated situation. While there are no work stoppages, the pickets and
concerted actions outside the plants have a demoralizing and even chilling effect on the workers inside
the plants and can be considered as veiled threats of possible trouble to the workers when they go out of
the company premises after work and of impending disruption of operations to company officials and
even to customers in the days to come. The pictures presented by Toyota undoubtedly show that the
company officials and employees are being intimidated and threatened by the strikers. In short,
the Union, by its mass actions, has inflamed an already volatile situation, which was explicitly proscribed
by the DOLE Secretarys Order. We do not find any compelling reason to reverse the NLRC findings that
the pickets on May 23 and 28, 2001 were unlawful strikes.

From the foregoing discussion, we rule that the February 21 to 23, 2001 concerted actions, the March 17
to April 12, 2001 strikes, and the May 23 and 28, 2001 mass actions were illegal strikes.
Union officers are liable for unlawful strikes or illegal acts during a strike

Art. 264 (a) of the Labor Code provides:

ART. 264. PROHIBITED ACTIVITIES
(a) x x x
Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be
entitled to reinstatement with full backwages. Any union officer who knowingly participates in an illegal
strike and any worker or union officer who knowingly participates in the commission of illegal acts during
a strike may be declared to have lost his employment status:Provided, That mere participation of a worker
in a lawful strike shall not constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike.

Art. 264(a) sanctions the dismissal of a union officer who knowingly participates in an illegal strike or who
knowingly participates in the commission of illegal acts during a lawful strike.
It is clear that the responsibility of union officials is greater than that of the members. They are tasked
with the duty to lead and guide the membership in decision making on union activities in accordance with
the law, government rules and regulations, and established labor practices. The leaders are expected to
recommend actions that are arrived at with circumspection and contemplation, and always keep
paramount the best interests of the members and union within the bounds of law. If the implementation
of an illegal strike is recommended, then they would mislead and deceive the membership and the
supreme penalty of dismissal is appropriate. On the other hand, if the strike is legal at the beginning and
the officials commit illegal acts during the duration of the strike, then they cannot evade personal and
individual liability for said acts.
The Union officials were in clear breach of Art. 264(a) when they knowingly participated in the illegal
strikes held from February 21 to 23, 2001, from March 17 to April 12, 2001, and on May 23 and 28,
2001. We uphold the findings of fact of the NLRC on the involvement of said union officials in the unlawful
concerted actions as affirmed by the CA, thus:
As regards to the Union officers and directors, there is overwhelming justification to declare their
termination from service. Having instigated the Union members to stage and carry out all illegal strikes
from February 21-23, 2001, and May 23 and 28, 2001, the following Union officers are hereby terminated
for cause pursuant to Article 264(a) of the Labor Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez,
Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio Completo, Alexander Esteva, Joey
Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil, Jr., and Mayo Mata.[43]

The rule is well entrenched in this jurisdiction that factual findings of the labor tribunal, when affirmed by
the appellate court, are generally accorded great respect, even finality.[44]

Likewise, we are not duty-bound to delve into the accuracy of the factual findings of the NLRC in the
absence of clear showing that these were arbitrary and bereft of any rational basis.[45] In the case at bench,
the Union failed to convince us that the NLRC findings that the Union officials instigated, led, and
knowingly participated in the series of illegal strikes are not reinforced by substantial evidence. Verily,
said findings have to be maintained and upheld. We reiterate, as a reminder to labor leaders, the rule that
[u]nion officers are duty bound to guide their members to respect the law.[46] Contrarily, if the officers
urge the members to violate the law and defy the duly constituted authorities, their dismissal from the
service is a just penalty or sanction for their unlawful acts.[47]
Members liability depends on participation in illegal acts
Art. 264(a) of the Labor Code provides that a member is liable when he knowingly participates in an illegal
act during a strike. While the provision is silent on whether the strike is legal or illegal, we find that the
same is irrelevant. As long as the members commit illegal acts, in a legal or illegal strike, then they can be
terminated.[48] However, when union members merely participate in an illegal strike without committing
any illegal act, are they liable?
This was squarely answered in Gold City Integrated Port Service, Inc. v. NLRC,[49] where it was held that an
ordinary striking worker cannot be terminated for mere participation in an illegal strike. This was an
affirmation of the rulings in Bacus v. Ople[50] and Progressive Workers Union v. Aguas,[51] where it was held
that though the strike is illegal, the ordinary member who merely participates in the strike should not be
meted loss of employment on the considerations of compassion and good faith and in view of the security
of tenure provisions under the Constitution. In Esso Philippines, Inc. v. Malayang Manggagawa sa Esso
(MME), it was explained that a member is not responsible for the unions illegal strike even if he voted for
the holding of a strike which became illegal.[52]
Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history relating to the liability of a
union member in an illegal strike, starting with the rule of vicarious liability, thus:
Under [the rule of vicarious liability], mere membership in a labor union serves as basis of liability for acts
of individuals, or for a labor activity, done on behalf of the union. The union member is made liable on the
theory that all the members are engaged in a general conspiracy, and the unlawful acts of the particular
members are viewed as necessary incidents of the conspiracy. It has been said that in the absence of
statute providing otherwise, the rule of vicarious liability applies.
Even the Industrial Peace Act, however, which was in effect from 1953 to 1974, did not adopt the vicarious
liability concept. It expressly provided that:
No officer or member of any association or organization, and no association or organization participating
or interested in a labor dispute shall be held responsible or liable for the unlawful acts of individual
officers, members, or agents, except upon proof of actual participation in, or actual authorization of, such
acts or of ratifying of such acts after actual knowledge thereof.
Replacing the Industrial Peace Act, the Labor Code has not adopted the vicarious liability rule.[53]

Thus, the rule on vicarious liability of a union member was abandoned and it is only when a striking worker
knowingly participates in the commission of illegal acts during a strike that he will be penalized with
dismissal.
Now, what are considered illegal acts under Art. 264(a)?
No precise meaning was given to the phrase illegal acts. It may encompass a number of acts that violate
existing labor or criminal laws, such as the following:
(1) Violation of Art. 264(e) of the Labor Code which provides that [n]o person engaged in picketing shall
commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the
employers premises for lawful purposes, or obstruct public thoroughfares;
(2) Commission of crimes and other unlawful acts in carrying out the strike;[54] and
(3) Violation of any order, prohibition, or injunction issued by the DOLE Secretary or NLRC in connection
with the assumption of jurisdiction/certification Order under Art. 263(g) of the Labor Code.
As earlier explained, this enumeration is not exclusive and it may cover other breaches of existing laws.
In the cases at bench, the individual respondents participated in several mass actions, viz:
(1) The rallies held at the DOLE and BLR offices on February 21, 22, and 23, 2001;
(2) The strikes held on March 17 to April 12, 2001; and
(3) The rallies and picketing on May 23 and 28, 2001 in front of the Toyota Bicutan and Sta. Rosa plants.
Did they commit illegal acts during the illegal strikes on February 21 to 23, 2001, from March 17 to April
12, 2001, and on May 23 and 28, 2001?
The answer is in the affirmative.
As we have ruled that the strikes by the Union on the three different occasions were illegal, we now
proceed to determine the individual liabilities of the affected union members for acts committed during
these forbidden concerted actions.
Our ruling in Association of Independent Unions in the Philippines v. NLRC lays down the rule on the
liability of the union members:

Decisive on the matter is the pertinent provisions of Article 264 (a) of the Labor Code that: [x x x] any
worker [x x x] who knowingly participates in the commission of illegal acts during a strike may be declared
to have lost his employment status. [x x x] It can be gleaned unerringly from the aforecited provision of
law in point, however, that an ordinary striking employee can not be terminated for mere participation in
an illegal strike. There must be proof that he committed illegal acts during the strike and the striker who
participated in the commission of illegal act[s] must be identified. But proof beyond reasonable doubt
is not required. Substantial evidence available under the circumstances, which may justify the
imposition of the penalty of dismissal, may suffice.

In the landmark case of Ang Tibay vs. CIR, the court ruled Not only must there be some evidence to
support a finding or conclusion, but the evidence must be substantial. Substantial evidence is more than
a mere scintilla. It means such relevant evidence that a reasonable mind might accept as sufficient to
support a conclusion.[55] (Emphasis supplied.)

Thus, it is necessary for the company to adduce proof on the participation of the striking employee in the
commission of illegal acts during the strikes.
After a scrutiny of the records, we find that the 227 employees indeed joined the February 21, 22, and 23,
2001 rallies and refused to render overtime work or report for work. These rallies, as we earlier ruled, are
in reality illegal strikes, as the procedural requirements for strikes under Art. 263 were not complied
with. Worse, said strikes were in violation of the company rule prohibiting acts in citing or participating in
riots, disorders, alleged strikes or concerted action detrimental to Toyotas interest.
With respect to the February 21, 22, and 23, 2001 concerted actions, Toyota submitted the list of
employees who did not render overtime work on February 21, 2001 and who did not report for work on
February 22 and 23, 2001 as shown by Annex I of Toyotas Position Paper in NLRC Certified Case No.
000203-01 entitled In Re: Labor Dispute at Toyota Motor Philippines Corp. The employees who
participated in the illegal concerted actions were as follows:
1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana, Edwin; 5. Alejo, Alex; 6. Alfonso, Erwin;
7. Apolinario, Dennis; 8. Apostol, Melvin; 9. Arceta, Romel; 10. Arellano, Ruel; 11. Ariate, Abraham; 12.
Arollado, Daniel; 13. Arriola, Dominador; 14. Atun, Lester; 15. Bala, Rizalino; 16. Baluyut, Rolando; 17.
Banzuela, Tirso Jr.; 18. Bayani, Roderick; 19. Benabise, Sabas Jr.; 20. Berces, Abel; 21. Bering, Benny; 22.
Birondo, Alberto; 23. Blanco, Melchor; 24. Bolanos, Dexter; 25. Bolocon, Jerry; 26. Borebor, Rurel; 27.
Borromeo, Jubert; 28. Borsigue, Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31. Bustillo, Ernesto Jr.;
32. Caalim, Alexander; 33. Cabahug, Nelson; 34. Cabatay, Jessie; 35. Cabezas, Marcelo; 36. Calalang,
Richard; 37. Candelario, Roque Jr.; 38. Capate, Leo Nelson; 39. Carandang, Resty; 40. Caraqueo, Lorenzo;
41. Caringal, Dennis; 42. Casaba, Gienell; 43. Catapusan, Christopher; 44. Catral, Rico; 45. Cecilio, Felipe;
46. Cinense, Joey; 47. Cometa, Julius; 48. Completo, Emilio; 49. Consignado, Randy; 50. Coral, Jay Antonio;
51. Correa, Claudio Jr.; 52. Cuevas, Reynaldo; 53. Dacalcap, Albert; 54. Dakay, Ryan; 55. Dalanon, Herbert;
56. Dalisay, Rene; 57. David, Benigno Jr.; 58. De Guzman, Joey; 59. Dela Cruz, Basilio; 60. Dela Cruz,
Ferdinand; 61. Dela Torre, Heremo; 62. De Leon, Leonardo; 63. Delos Santos, Rogelio; 64. De Ocampo,
Joselito; 65. De Silva, Leodegario; 66. Del Mundo, Alex; 67. Del Rio, Rey; 68. Dela Ysla, Alex; 69. Dia, Frank
Manuel; 70. Dimayuga, Antonio; 71. Dingcong, Jessiah; 72. Dumalag, Jasper; 73. Duyag, Aldrin; 74. Ercillo,
Armando; 75. Espadilla, Delmar; 76. Espejo, Lionel; 77. Espeloa, Dennis; 78. Esteva, Alexander; 79. Estole,
Francisco; 80. Fajardo, George; 81. Fajilagutan, Jason; 82. Fajura, John; 83. Franco, Melencio; 84. Franco,
Nikko; 85. Fulgar, Dexter; 86. Fulo, Dante; 87. Gado, Eduardo; 88. Galang, Erwin; 89. Gamit, Rodel; 90.
Garces, Robin; 91. Garcia, Ariel; 92. Gaspi, Ronald; 93. Gavarra, Angelo; 94. Gerola, Genaro Jr.; 95. Gerola,
Larry; 96. Gohilde, Michael; 97. Gojar, Regino; 98. Gojar, Reynaldo; 99. Gonzales, Roberto; 100. Gutierrez,
Bernabe; 101. Hilaga, Edgar; 102. Hilanga, Melchor; 103. Hondrada, Eugene Jay; 104. Imperial, Alejandro;
105. Jaen, Ferdinand; 106. Jalea, Philip; 107. Javillonar, Joey; 108. Julve, Frederick; 109. Lalisan, Victorio;
110. Landicho, Danny; 111. Laqui, Basilio; 112. Lavide, Edgar; 113. Lazaro, Orlando; 114. Legaspi, Noel;
115. Lising, Reynaldo Jr.; 116. Llanera, Joey; 117. Lomboy, Alberto; 118. Lopez, Geronimo; 119. Lozada,
Jude Jonobell; 120. Lucido, Johny; 121. Macalindong, Rommel; 122. Madrazo, Nixon; 123. Magbalita,
Valentin; 124. Magistrado, Rogelio Jr.; 125. Magnaye, Philip John; 126. Malabanan, Allan John; 127.

Malabrigo, Angelito; 128. Malaluan, Rolando Jr.; 129. Malate, Leoncio Jr.; 130. Maleon, Paulino; 131.
Manaig, Roger; 132. Manalang, Joseph Patrick; 133. Manalo, Manuel Jr.; 134. Manaog, Jonamar; 135.
Manaog, Melchor; 136. Mandolado, Melvin; 137. Maneclang, Jovito; 138. Manego, Ruel; 139. Manguil,
Bayani Jr.; 140. Manigbas, June; 141. Manjares, Alfred; 142. Manzanilla, Edwin; 143. Marasigan, Carlito;
144. Marcial, Nilo; 145. Mariano, Rommel; 146. Mata, Mayo; 147. Mendoza, Bobit; 148. Mendoza,
Roberto; 149. Milan, Joseph; 150. Miranda, Eduardo; 151. Miranda, Luis; 152. Montero, Ericson; 153.
Montero, Marlaw; 154. Montes, Ruel; 155. Morales, Dennis; 156. Natividad, Kenneth; 157. Nava, Ronaldo;
158. Nevalga, Alexander; 159. Nicanor, Edwin; 160. Nierves, Roderick; 161. Nunez, Alex; 162. Nunez,
Lolito; 163. Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo; 166. Olit, Freddie; 167. Oliver, Rex; 168.
Oliveria, Charlie; 169. Operana, Danny; 170. Oriana, Allan; 171. Ormilla, Larry; 172. Ortiz, Felimon; 173.
Paniterce, Alvin; 174. Parallag, Gerald; 175. Pecayo, Edwin; 176. Pena, Erwin; 177. Penamante, Jowald;
178. Piamonte, Melvin; 179. Piamonte, Rogelio; 180. Platon, Cornelio; 181. Polutan, Jorge; 182. Posada,
John; 183. Puno, Manjolito; 184. Ramos, Eddie; 185. Reyes, Rolando; 186. Roxas, Philip; 187. Sales, Paul
Arthur; 188. Sallan, David Jr.; 189. Salvador, Bernardo; 190. Sampang, Alejandro; 191. San Pablo, Baldwin;
192. Sangalang, Jeffrey; 193. Santiago, Eric; 194. Santos, Raymond; 195. Sapin, Al Jose; 196.Saquilabon,
Bernabe; 197. Serrano, Ariel; 198. Sierra, Alex; 199. Simborio, Romualdo; 200. Sulit, Lauro; 201. Tabirao,
Elvisanto; 202. Tablizo, Edwin; 203. Taclan, Petronio; 204. Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206.
Tecson Alexander; 207. Templo, Christopher; 208. Tenorio, Roderick; 209. Tolentino, Rodel; 210.
Tolentino, Rommel; 211. Tolentino, Romulo Jr.; 212. Tomas, Rolando; 213. Topaz, Arturo Sr.; 214. Toral,
Grant Robert; 215. Torres, Dennis; 216. Torres, Federico; 217. Trazona, Jose Rommel; 218. Tulio,
Emmanuel; 219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221. Vergara, Allan; 222. Vergara, Esdwin; 223.
Violeta, Apollo Sr.; 224. Vistal, Alex; 225. Yangyon, Michael Teddy; 226. Zaldevar, Christopher; and 227.
Zamora, Dominador Jr.

Toyotas Position Paper containing the list of striking workers was attested to as true and correct under
oath by Mr. Jose Ma. Aligada, First Vice President of the Group Administration Division of Toyota. Mr.
Emerito Dumaraos, Assistant Department Manager of the Production Department of Toyota, likewise
submitted a June 29, 2001 Affidavit[56] confirming the low attendance of employees on February 21, 22,
and 23, 2001, which resulted from the intentional absences of the aforelisted striking workers. TheUnion,
on the other hand, did not refute Toyotas categorical assertions on the participation of said workers in
the mass actions and their deliberate refusal to perform their assigned work on February 21, 22, and 23,
2001. More importantly, it did not deny the fact of absence of the employees on those days from
the Toyota manufacturing plants and their deliberate refusal to render work. Their admission that they
participated in the February 21 to 23, 2001 mass actions necessarily means they were absent from their
work on those days.
Anent the March 28 to April 12, 2001 strikes, evidence is ample to show commission of illegal acts like
acts of coercion or intimidation and obstructing free ingress to or egress from the company premises. Mr.
Eduardo Nicolas III, Toyotas Security Chief, attested in his affidavit that the strikers badmouthed people
coming in and shouted invectives such as bakeru at Japanese officers of the company. The strikers even
pounded the vehicles of Toyota officials. More importantly, they prevented the ingress
of Toyota employees, customers, suppliers, and other persons who wanted to transact business with the
company. These were patent violations of Art. 264(e) of the Labor Code, and may even constitute crimes
under the Revised Penal Code such as threats or coercion among others.

On March 28, 2001, the following have committed illegal actsblocking the ingress to or egress from the
two (2) Toyota plants and preventing the ingress of Toyotaemployees on board the company shuttle at
the Bicutan and Sta. Rosa Plants, viz:
1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan John Malabanan; 5. Abel Berces; 6. Ariel
Garcia; 7. Charlie Oliveria; 8. Manjolito Puno; 9. Baldwin San Pablo; 10. Federico Torres; 11. Larry Gerola;
12. Roderick Bayani; 13. Allan Oclarino; 14. Reynaldo Cuevas; 15. George Polutan; 16. Arman Ercillo; 17.
Joey Llanera; and 18. Roberto Gonzales

Photographs were submitted by Toyota marked as Annexes 1 through 18 of its Position Paper, vividly
showing the participation of the aforelisted employees in illegal acts.[57]
To further aggravate the situation, a number of union members committed illegal acts (blocking the
ingress to and egress from the plant) during the strike staged on March 29, 2001 at the Toyota plant in
Bicutan, to wit:
1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4. Freddie Olit; and 5. Joel Agosto

Pictures marked as Annexes 21 to 22 of Toyotas Position Paper reveal the illegal acts committed by the
aforelisted workers.[58]
On the next day, March 30, 2001, several employees again committed illegal acts (blocking ingress to and
egress from the plant) during the strike at the Bicutan plant, to wit:
1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4. Ferdinand Jaen; 5. Wilfredo Tagle; 6. Alejandro
Imperial; 7. Manjolito Puno; 8. Delmar Espadilla; 9. Apollo Violeta; and 10. Elvis Tabirao

Pictures marked as Annexes 25 to 26 and 28 of Toyotas Position Paper show the participation of these
workers in unlawful acts.[59]
On April 5, 2001, seven (7) Toyota employees were identified to have committed illegal acts (blocking
ingress to and egress from the plant) during the strike held at the Bicutan plant, to wit:
1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4. Bernardo Salvador; 5. Antonio Dimayuga; 6. Rurel
Borebor; and 7. Alberto Lomboy

The participations of the strikers in illegal acts are manifest in the pictures marked as Annexes 32 and 33
of Toyotas Position Paper.[60]
On April 6, 2001, only Rogelio Piamonte was identified to have committed illegal acts (blocking ingress to
and egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant.[61] Then, on April 9,
2001, Alvin Paniterce, Dennis Apolinario, and Eduardo Miranda[62] were identified to have committed

illegal acts (blocking ingress to and egress from the Toyota plant) during the strike at the Toyota Santa
Rosa plant and were validly dismissed by Toyota.
Lastly, the strikers, though on payroll reinstatement, staged protest rallies on May 23, 2001 and May 28,
2001 in front of the Bicutan and Sta. Rosa plants. These workers acts in joining and participating in the
May 23 and 28, 2001 rallies or pickets were patent violations of the April 10, 2001 assumption of
jurisdiction/certification Order issued by the DOLE Secretary, which proscribed the commission of acts
that might lead to the worsening of an already deteriorated situation. Art. 263(g) is clear that strikers who
violate the assumption/certification Order may suffer dismissal from work. This was the situation in the
May 23 and 28, 2001 pickets and concerted actions, with the following employees who committed illegal
acts:
a. Strikers who joined the illegal pickets on May 23, 2001 were (1) Dennis Apolinario; (2) Abel Berces; (3)
Benny Bering; (4) Dexter Bolaos; (5) Freddie Busano; (6) Ernesto Bustillo, Jr.; (7) Randy Consignado; (8)
Herbert Dalanon; (9) Leodegario De Silva; (10) Alexander Esteva; (11) Jason Fajilagutan; (12) Nikko Franco;
(13) Genaro Gerola, Jr.; (14) Michael Gohilde; (15) Rogelio Magistrado; (16) Rolando Malaluan, Jr.; (17)
Leoncio Malate, Jr.; (18) Edwin Manzanilla; (19) Nila Marcial; (20) Roderick Nierves; (21) Larry Ormilla;
(22) Filemon Ortiz; (23) Cornelio Platon; (24) Alejandro Sampang; (25) Eric Santiago; (26) Romualdo
Simborio; (27) Lauro Sulit; and (28) Rommel Tagala.
Pictures show the illegal acts (participation in pickets/strikes despite the issuance of a return-to-work
order) committed by the aforelisted strikers.[63]
b. Strikers who participated in the May 28, 2001 were (1) Joel Agosto; (2) Alex Alejo; (3) Erwin Alfonso; (4)
Dennis Apolinario; (5) Melvin Apostol; (6) Rommel Arceta; (7) Lester Atun; (8) Abel Berces; (9) Benny
Bering; (10) Dexter Bolanos; (11) Marcelo Cabezas; (12) Nelson Leo Capate; (13) Lorenzo Caraqueo; (14)
Christopher Catapusan; (15) Ricky Chavez; (16) Virgilio Colandog; (17) Claudio Correa; (18) Ed Cubelo; (19)
Reynaldo Cuevas; (20) Rene Dalisay; (21) Benigno David, Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz;
(24) Roel Digma; (25) Aldrin Duyag; (26) Armando Ercillo; (27) Delmar Espadilla; (28) Alexander Esteva;
(29) Nikko Franco; (30) Dexter Fulgar; (31) Dante Fulo; (32) Eduardo Gado; (33) Michael Gohilde; (34)
Eugene Jay Hondrada II; (35) Joey Javillonar; (36) Basilio Laqui; (37) Alberto Lomboy; (38) Geronimo Lopez;
(39) Rommel Macalindog; (40) Nixon Madrazo; (41) Valentin Magbalita; (42) Allan Jon Malabanan; (43)
Jonamar Manaog; (44) Bayani Manguil; (45) June Manigbas; (46) Alfred Manjares; (47) Edwin Manzanilla;
(48) Mayo Mata; (49) Leo Ojenal; (50) Allan Oriana; (51) Rogelio Piamonte; (52) George Polutan; (53) Eric
Santiago; (54) Bernabe Saquilabon; (55) Alex Sierra; (56) Romualdo Simborio; (57) Lauro Sulit; (58)
Elvisanto Tabirao; (59) Edwin Tablizo; (60) Emmanuel Tulio; (61) Nestor Umiten; (62) Joseph Vargas; (63)
Edwin Vergara; and (64) Michael Teddy Yangyon.
Toyota presented photographs which show said employees conducting mass pickets and concerted
actions.[64]
Anent the grant of severance compensation to legally dismissed union members, Toyota assails the turnaround by the CA in granting separation pay in its June 20, 2003 Resolution after initially denying it in its
February 27, 2003 Decision. The company asseverates that based on the CA finding that the illegal acts of
said union members constitute gross misconduct, not to mention the huge losses it suffered, then the
grant of separation pay was not proper.

The general rule is that when just causes for terminating the services of an employee under Art. 282 of
the Labor Code exist, the employee is not entitled to separation pay.The apparent reason behind the
forfeiture of the right to termination pay is that lawbreakers should not benefit from their illegal acts. The
dismissed employee, however, is entitled to whatever rights, benefits and privileges [s/he] may have
under the applicable individual or collective bargaining agreement with the employer or voluntary
employer policy or practice[65] or under the Labor Code and other existing laws. This means that the
employee, despite the dismissal for a valid cause, retains the right to receive from the employer benefits
provided by law, like accrued service incentive leaves. With respect to benefits granted by the CBA
provisions and voluntary management policy or practice, the entitlement of the dismissed employees to
the benefits depends on the stipulations of the CBA or the company rules and policies.
As in any rule, there are exceptions. One exception where separation pay is given even though an
employee is validly dismissed is when the court finds justification in applying the principle of social justice
well entrenched in the 1987 Constitution. In Phil. Long Distance Telephone Co. (PLDT) v. NLRC, the Court
elucidated why social justice can validate the grant of separation pay, thus:
The reason is that our Constitution is replete with positive commands for the promotion of social justice,
and particularly the protection of the rights of the workers. The enhancement of their welfare is one of
the primary concerns of the present charter. In fact, instead of confining itself to the general commitment
to the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution
contains a separate article devoted to the promotion of social justice and human rights with a separate
sub-topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management,
in the advancement of the national economy and the welfare of the people in general. The categorical
mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis
to justify the award of separation pay in proper cases even if the dismissal be for cause.[66]

In the same case, the Court laid down the rule that severance compensation shall be allowed only when
the cause of the dismissal is other than serious misconduct or that which reflects adversely on the
employees moral character. The Court succinctly discussed the propriety of the grant of separation pay in
this wise:

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal
only and that the separation pay has nothing to do with the wrong he has committed. Of course it
has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly
dismissed, it is not unlikely that he will commit a similar offense in his next employment because he thinks
he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do
labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the
protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by
the underprivileged. At best it may mitigate the penalty but it certainly will not condone the
offense. Compassion for the poor is an imperative of every humane society but only when the recipient is
not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of
scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke
social justice may do so only if their hands are clean and their motives blameless and not simply because
they happen to be poor. This great policy of our Constitution is not meant for the protection of those who
have proved they are not worthy of it, like the workers who have tainted the cause of labor with the
blemishes of their own character.[67]

Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation pay based
on social justiceserious misconduct (which is the first ground for dismissal under Art. 282) or acts that
reflect on the moral character of the employee. What is unclear is whether the ruling likewise precludes
the grant of separation pay when the employee is validly terminated from work on grounds laid down in
Art. 282 of the Labor Code other than serious misconduct.
A recall of recent cases decided bearing on the issue reveals that when the termination is legally justified
on any of the grounds under Art. 282, separation pay was not allowed. In Ha Yuan Restaurant v.
NLRC,[68] we deleted the award of separation pay to an employee who, while unprovoked, hit her coworkers face, causing injuries, which then resulted in a series of fights and scuffles between them. We
viewed her act as serious misconduct which did not warrant the award of separation pay. In House of Sara
Lee v. Rey,[69] this Court deleted the award of separation pay to a branch supervisor who regularly, without
authorization, extended the payment deadlines of the companys sales agents.Since the cause for the
supervisors dismissal involved her integrity (which can be considered as breach of trust), she was not
worthy of compassion as to deserve separation pay based on her length of service. In Gustilo v. Wyeth
Phils., Inc.,[70] this Court found no exceptional circumstance to warrant the grant of financial assistance to
an employee who repeatedly violated the companys disciplinary rules and regulations and whose
employment was thus terminated for gross and habitual neglect of his duties. In the doctrinal case of San
Miguel v. Lao,[71] this Court reversed and set aside the ruling of the CA granting retirement benefits or
separation pay to an employee who was dismissed for willful breach of trust and confidence by causing
the delivery of raw materials, which are needed for its glass production plant, to its competitor. While a
review of the case reports does not reveal a case involving a termination by reason of the commission of
a crime against the employer or his/her family which dealt with the issue of separation pay, it would be
adding insult to injury if the employer would still be compelled to shell out money to the offender after
the harm done.
In all of the foregoing situations, the Court declined to grant termination pay because the causes for
dismissal recognized under Art. 282 of the Labor Code were serious or grave in nature and attended by
willful or wrongful intent or they reflected adversely on the moral character of the employees. We
therefore find that in addition to serious misconduct, in dismissals based on other grounds under Art. 282
like willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and
commission of a crime against the employer or his family, separation pay should not be conceded to the
dismissed employee.
In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the courts may
opt to grant separation pay anchored on social justice in consideration of the length of service of the

employee, the amount involved, whether the act is the first offense, the performance of the employee
and the like, using the guideposts enunciated in PLDT on the propriety of the award of separation pay.
In the case at bench, are the 227 striking employees entitled to separation pay?
In the instant case, the CA concluded that the illegal strikes committed by the Union members constituted
serious misconduct.[72]
The CA ratiocinated in this manner:
Neither can social justice justify the award to them of severance compensation or any other form of
financial assistance. x x x
xxxx
Considering that the dismissal of the employees was due to their participation in the illegal strikes as
well as violation of the Code of Conduct of the company, the same constitutes serious misconduct. A
serious misconduct is a transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. In
fact, in Panay Electric Company, Inc. v. NLRC, the Supreme Court nullified the grant of separation benefits
to employees who unlawfully participated in an illegal strike in light of Article 264, Title VIII, Book V of the
Labor Code, that, any union officer who knowingly participates in an illegal strike and any worker or union
officer who knowingly participates in the commission of illegal acts during a strike may be declared to
have lost his employment status.
The constitutional guarantee on social justice is not intended only for the poor but for the rich as well. It
is a policy of fairness to both labor and management.[73] (Emphasis supplied.)

In disposing of the Unions plea for reconsideration of its February 27, 2003 Decision, the CA however
performed a volte-face by reinstating the award of separation pay.
The CAs grant of separation pay is an erroneous departure from our ruling in Phil. Long Distance Telephone
Co. v. NLRC that serious misconduct forecloses the award of separation pay. Secondly, the advertence to
the alleged honest belief on the part of the 227 employees that Toyota committed a breach of the duty
to bargain collectively and an abuse of valid exercise of management prerogative has not been
substantiated by the evidence extant on record. There can be no good faith in intentionally incurring
absences in a collective fashion from work on February 22 and 23, 2001 just to attend the DOLE
hearings. The Unions strategy was plainly to cripple the operations and bring Toyota to its knees by
inflicting substantial financial damage to the latter to compel union recognition. The Union officials and
members are supposed to know through common sense that huge losses would befall the company by
the abandonment of their regular work. It was not disputed that Toyota lost more than PhP 50 million
because of the willful desertion of company operations in February 2001 by the dismissed union
members. In addition, further damage was experienced by Toyota when the Union again resorted to
illegal strikes from March 28 to April 12, 2001, when the gates of Toyota were blocked and barricaded,
and the company officials, employees, and customers were intimidated and harassed.Moreover, they
were fully aware of the company rule on prohibition against concerted action inimical to the interests of

the company and hence, their resort to mass actions on several occasions in clear violation of the company
regulation cannot be excused nor justified. Lastly, they blatantly violated the assumption/certification
Order of the DOLE Secretary, exhibiting their lack of obeisance to the rule of law. These acts indeed
constituted serious misconduct.
A painstaking review of case law renders obtuse the Unions claim for separation pay. In a slew of cases,
this Court refrained from awarding separation pay or financial assistance to union officers and members
who were separated from service due to their participation in or commission of illegal acts during
strikes. In the recent case of Pilipino Telephone Corporation v. Pilipino Telephone Employees Association
(PILTEA),[74] this Court upheld the dismissal of union officers who participated and openly defied the
return-to-work order issued by the DOLE Secretary. No separation pay or financial assistance was
granted. In Sukhothai Cuisine and Restaurant v. Court of Appeals,[75] this Court declared that the union
officers who participated in and the union members who committed illegal acts during the illegal strike
have lost their employment status. In this case, the strike was held illegal because it violated agreements
providing for arbitration. Again, there was no award of separation pay nor financial
assistance. In Philippine Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel Employees Union,[76] the
strike was declared illegal because the means employed was illegal. We upheld the validity of dismissing
union members who committed illegal acts during the strike, but again, without awarding separation pay
or financial assistance to the erring employees. InSamahang Manggagawa sa Sulpicio Lines, Inc. v. Sulpicio
Lines,[77] this Court upheld the dismissal of union officers who participated in an illegal strike sans any
award of separation pay. Earlier, in Grand Boulevard Hotel v. Genuine Labor Organization of Workers in
Hotel, Restaurant and Allied Industries,[78] we affirmed the dismissal of theUnions officers who
participated in an illegal strike without awarding separation pay, despite the NLRCs declaration urging the
company to give financial assistance to the dismissed employees.[79] In Interphil Laboratories Union-FFW,
et al. v. Interphil Laboratories, Inc.,[80] this Court affirmed the dismissal of the union officers who led the
concerted action in refusing to render overtime work and causing work slowdowns. However, no
separation pay or financial assistance was allowed. In CCBPI Postmix Workers Union v. NLRC,[81] this Court
affirmed the dismissal of union officers who participated in the strike and the union members who
committed illegal acts while on strike, without awarding them separation pay or financial assistance. In
1996, in Allied Banking Corporation v. NLRC,[82] this Court affirmed the dismissal of Union officers and
members, who staged a strike despite the DOLE Secretarys issuance of a return to work order but did not
award separation pay. In the earlier but more relevant case of Chua v. NLRC,[83] this Court deleted the
NLRCs award of separation benefits to an employee who participated in an unlawful and violent strike,
which strike resulted in multiple deaths and extensive property damage. In Chua, we viewed the
infractions committed by the union officers and members as a serious misconduct which resulted in the
deletion of the award of separation pay in conformance to the ruling in PLDT. Based on existing
jurisprudence, the award of separation pay to the Union officials and members in the instant petitions
cannot be sustained.
One last point to considerit is high time that employer and employee cease to view each other as
adversaries and instead recognize that theirs is a symbiotic relationship, wherein they must rely on each
other to ensure the success of the business. When they consider only their own self-interests, and when
they act only with their own benefit in mind, both parties suffer from short-sightedness, failing to realize
that they both have a stake in the business. The employer wants the business to succeed, considering the
investment that has been made. The employee in turn, also wants the business to succeed, as continued
employment means a living, and the chance to better ones lot in life. It is clear then that they both have
the same goal, even if the benefit that results may be greater for one party than the other. If this becomes
a source of conflict, there are various, more amicable means of settling disputes and of balancing interests

that do not add fuel to the fire, and instead open avenues for understanding and cooperation between
the employer and the employee. Even though strikes and lockouts have been recognized as effective
bargaining tools, it is an antiquated notion that they are truly beneficial, as they only provide short-term
solutions by forcing concessions from one party; but staging such strikes would damage the working
relationship between employers and employees, thus endangering the business that they both want to
succeed. The more progressive and truly effective means of dispute resolution lies in mediation,
conciliation, and arbitration, which do not increase tension but instead provide relief from them. In the
end, an atmosphere of trust and understanding has much more to offer a business relationship than the
traditional enmity that has long divided the employer and the employee.
WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are DENIED while those in G.R. Nos. 15879899 are GRANTED.
The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and 67561 restoring the grant of severance
compensation is ANNULLED and SET ASIDE.
The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9,
2001 Decision of the NLRC but deleted the grant of severance compensation,
is REINSTATED and AFFIRMED.
No costs.
SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

Bani Rural Bank v. Guzman, G.R. No. 170904, November 13, 2013

G.R. No.170904

November 13, 2013

BANI RURAL BANK INC. ENOC THEATER I AND II and/or RAFAEL DE GUZMAN, Petitioners,
vs.
TERESA DE GUZMAN, EDGAR C. TAN and TERESA G. TAN, Respondents.
DECISION
BRION, J.:
We pass upon the petition for review on certiorari1 under Rule 45 of the Rules of Court filed by
petitioners Bani Rural Bank, Inc., ENOC Theater I and II, and Rafael de Guzman. They assail the
decision2 dated September 1, 2005 and the resolution3 dated December 14, 2005 of the Court of
Appeals CA) in CA-G.R. SP No. 70085. The assailed CA rulings, in turn, affirmed the computation of

the backwages due respondents Teresa de Guzman and Edgar C. Tan4 made by the National Labor
Relations Commission (NLRC).
The Facts
The respondents were employees of Bani Rural Bank, Inc. and ENOC Theatre I and II who filed a
complaint for illegal dismissal against the petitioners. The complaint was initially dismissed by Labor
Arbiter Roque B. de Guzman on March 15, 1994. On appeal, the National Labor Relations
Commission (NLRC) reversed Labor Arbiter De Guzman's findings, and ruled that the respondents
had been illegally dismissed. In a resolution5dated March 17, 1995 the NLRC ordered the petitioners
to:
... [R]einstate the two complainants to their former positions, without loss o seniority rights and other
benefits and privileges, with backwages from the time o their dismissal (constructive) until their
actual reinstatement, less earnings elsewhere.6
The parties did not file any motion for reconsideration or appeal. The March 17, 1995 resolution of
the NLRC became final and executory and the computation of the awards was remanded to the
labor arbiter for execution purposes.
The first computation of he monetary award under the March ,17 1995 resolution of the NLRC
The computation of the respondents' backwages, under the terms of the March 17 1995 NLRC
resolution was remanded to Labor Arbiter Rolando D. Gambito. First, Labor Arbiter Gambito
deducted the earnings derived by the respondents either from Bani Rural Bank, Inc. or ENOC
Theatre I and II. Second, Labor Arbiter Gambito fixed the period of backwages from the respondents'
illegal dismissal until August 25 1995 or the date when the respondents allegedly manifested that
they no longer wanted to be reinstated.7
The respondents appealed Labor Arbiter Gambito's computation with the NLRC. In a
Decision8 dated July 31, 1998, the NLRC modified the terms of the March 17, 1995 resolution insofar
as it clarified the phrase less earnings elsewhere. The NLRC additionally awarded the payment of
separation pay, in lieu of reinstatement, under the following terms:
The decision of this Commission is hereby MODIFIED to the extent that: (1) the phrase earnings
elsewhere in its dispositive portion shall exclude the complainants' salaries from the Rural Bank of
Mangantarem; and (2) in lieu of reinstatement, the respondents are hereby ordered to pay the
complainants separation pay equivalent to one month salary for every year of service computed from
the start of their employment up to the date of the finality of the decision.9
The NLRC justified the award of separation pay on account of the strained relations between the
parties. In doing so, the NLRC ruled:
Insofar as the second issue is concerned, it should be noted: (1) that in his report dated November
8, 1995, the NLRC Sheriff stated that on October 5, 1995, he went to the Sub-Arbitration Branch to
serve the writ of execution upon the complainants; that they did not appear, but instead, sent a
representative named Samuel de la Cruz who informed him that they were interested, not on being
reinstated, but only in the monetary award; (2) that in a letter dated October 9, 1995, the
complainants authorized one Samuel de la Cruz to get a copy of the writ of execution; and (3) that
during the pre-execution conference, the respondents' counsel manifested that the respondents

were requiring the complainants to report for work on Monday and, in turn, the complainants' counsel
manifested that the complainants were asking to be reinstated. The proceedings already protracted
as it is-would be delayed further if this case were to be remanded to the Labor Arbiter for a hearing
to ascertain the correctness of the above-mentioned sheriff's report. Besides, if both parties were
really interested in the complainants being reinstated, as their counsels stated during the preexecution conference, the said reinstatement should already have been effected. Since neither party
has actually done anything to implement the complainants' reinstatement, it would appear that the
relations between them have been strained to such an extent as to make the resumption of the
employer-employee relationship unpalatable to both of them. Under the circumstances, separation
pay may be awarded in lieu of reinstatement.10
The respondents filed a motion for reconsideration on whether the award of backwages was still
included in the judgment. The NLRC dismissed the motion for having been filed out of time.
On January 29, 1999, the July 31, 1998 decision of the NLRC lapsed to finality and became
executory.
The second computation of the monetary awards under the July 31, 998 decision of the NLRC
The recomputation of the monetary awards of the respondents' backwages and separation pay,
according to the decision dated July 31, 1998 and the modified terms of the March 17, 1995
resolution of the NLRC, was referred to Labor Arbiter Gambito. In the course of the recomputation,
the petitioners filed before Labor Arbiter Gambito a Motion to Quash Writ of
Execution and Suspend Further Execution they reiterated their position that the respondents
backwages should be computed only up to August 25, 1995, citing the alleged manifestation made
by the respondents, through Samuel de la Cruz, as their basis.
In an order11 dated July 12, 2000, Labor Arbiter Gambito computed the respondents backwages only
up to August 25, 1995.
The NLRCs Ruling
The respondents appealed the July 12, 2000 order of Labor Arbiter Gambito to the NLRC, which
reversed Labor Arbiter Gambito s order. In its decision12 dated September 28, 2001, the NLRC ruled
that the computation of the respondents backwages should be until January 29 1999 which was the
date when the July 31, 1998 decision attained finality:
WHEREFORE, the Order of Labor Arbiter Rolando D. Gambito dated July 12, 2000 is SET ASIDE.
In lieu thereof, judgment is hereby rendered by ordering respondents to p y complainants
backwages up to January 29, 1999 as above discussed.13
The NLRC emphasized that the issue relating to the computation of the respondents backwages had
been settled in its July 31, 1998 decision. In a resolution dated January 23, 2002, the NLRC denied
the motion for reconsideration filed by the petitioners.
The petitioners disagreed with the NLRC s ruling and filed a petition for certiorari with the CA, raising
the following issues:
(A) THE COMMISSION ACTED WITHOUT JURISDICTION AND WITH GRAVE . ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT REVERSED AND

SET ASIDE THE ORDER OF LABOR ARBITER ROLANDO D. GAMBITO DATED JULY 12,
2000 AND ORDERED THE COMPUTATION OF PRIVATE RESPONDENTS BACKWAGES
TO COVER THE PERIOD AFTER AUGUST 25, 1995, OR UNTIL JANUARY 29, 1999, THE
DATE OF FINALITY OF THE SECOND RESOLUTION OF THE COMMISSION.
(B) THE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION FOR DENYING PETITIONERS MOTION FOR RECONSIDERA
TION.14
The CA Rulings
The CA found the petition to be without merit. It held that certiorari was not the proper remedy since
no error of jurisdiction was raised or no grave abuse of discretion was committed by the NLRC. The
CA stated that:
The extraordinary remedy of certiorari is proper if the tribunal, board or officer exercising judicial or
quasi-judicial functions acted without or in grave abuse of discretion amounting to lack or excess of
jurisdiction and there is no appeal or any plain, speedy, and adequate remedy in law. When a court,
tribunal or officer has jurisdiction over the person and the subject matter of dispute, the decision on
all other questions arising in the case is an exercise of that jurisdiction. Consequently, all errors
committed in the exercise of said jurisdiction are merely errors of judgment. Under prevailing
procedural rules and jurisprudence, errors of judgment are not proper subjects of a special civil
action for certiorari.15
Thus, the CA echoed the NLRCs conclusions:
As explained in the assailed Decision, what is controlling for purposes of the backwages is the
NLRC s Resolution dated 17 March 1995 which decreed that private respondents are entitled to
backwages from the time of their dismissal (constructive) until their actual reinstatement; and
considering that the award of reinstatement was set aside by the NLRC in its final and executory
Decision dated 3 July 1998 which ordered the payment of separation pay in lieu of reinstatement to
be computed up to the finality on 29 January 1999 of said Decision dated 3 July 1998, then the
computation of the backwages should also end on said date, which is 29 January 1999.16
Citing the case of Chronicle Securities Corp. v. NLRC,17 the CA held that backwages are granted to
an employee or worker who had been illegally dismissed from employment. If reinstatement is no
longer possible, the backwages shall be computed from the time of the illegal termination up to the
finality of the decision.
The Present Petition
The petitioners argue that the following reversible errors were committed by the CA, namely:
(1) In ruling that no grave abuse of discretion was committed by the NLRC when it issued the
September 28, 2001 decision, the January 23, 2002 resolution and the July 31, 1998
decision, which modified the final and executory resolution dated March 17, 1995 of the
NLRC computing the backwages only until the reinstatement of the respondents;
(2) When it manifestly overlooked or misappreciated relevant facts, i.e. Labor Arbiter
Gambito s computation did conform to the NLRC s March 17, 1995 resolution considering

the manifestation of Samuel that the respondents no longer wanted to be reinstated, in

response to the order of execution dated August 25, 1995; and
(3) When it declared that only errors o judgment, and not jurisdiction, were committed by the
NLRC.
In their Comment,18 the respondents contend that the computation of the backwages until January
29, 1999 was consistent with the tenor of the decision dated July 31, 1998 and the modified March
17, 1995 resolution of the NLRC.
After the petitioners filed their Reply,19 the Court resolved to give due course to the petition; in
compliance with our directive, the parties submitted their respective memoranda repeating the
arguments in the pleadings earlier filed.20
The Issue
As presented, the issue boils down to whether the respondents backwages had been correctly
computed under the decision dated September 28, 2001 of the NLRC, as confirmed by the CA, in
light of the circumstance that there were two final NLRC decisions affecting the computation of the
backwages.
The Court s Ruling
We find the petition unmeritorious.
Preliminary considerations
In Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division),21 we held that a
decision in an illegal dismissal case consists essentially of two components:
The first is that part of the decision that cannot now be disputed because it has been confirmed with
finality. This is the finding of the illegality of the dismissal and the awards of separation pay in lieu of
reinstatement, backwages.
The second part is the computation of the awards made.22
The first part of the decision stems from the March 17, 1995 NLRC resolution finding an illegal
dismissal and defining the legal consequences of this dismissal. The second part involves the
computation of the monetary award of backwages and the respondents' reinstatement. Under the
terms of the March 17, 1995 resolution, the respondents' backwages were to be computed from the
time of the illegal dismissal up to their reinstatement.
In the first computation of the backwages, Labor Arbiter Gambito confronted the following
circumstances and the Sheriffs Report dated November 8, 1995:23 first, how to interpret the phrase
less earnings elsewhere as stated in the dispositive portion of the March 17, 1995 resolution of the
NLRC; second, the effect of the alleged manifestation (dated October 9, 1995) of Samuel that the
respondents were only interested in the monetary award, not in their reinstatement; and third, the
effect of the respondents' counsel's statement during the pre-execution proceedings that the
respondents simply wanted to be reinstated.

The records indicate that the respondents denied Samuel's statement and asked for reinstatement
through their counsel. Nevertheless, Labor Arbiter Gambito relied on Samuel's statement and fixed
the computation date of the respondents' backwages to be up to and until August 25, 1995 or the
date the order of execution was issued for the NLRC's March 17, 1995 decision. As stated in his July
12, 2000 order,24 Labor Arbiter Gambito found it fair and just that in the execution of the NLRC's
decision, the computation of the respondents' backwages should "stop at that time when it was put
on record by them [respondents] that they had no desire to return to work."25
The NLRC disregarded Labor Arbiter Gambito's first computation. In the dispositive portion of its July
31, 1998 decision, the NLRC modified the final March 17, 1995 resolution. The first part of this
decision -the original ruling of illegal dismissal -was left untouched while the second part of the
decision -the monetary award and its computation -was altered to conform with the strained relations
between the parties that became manifest during the execution phase of the March 17, 1995
resolution.
The effect of the modification of the March 17, 1995 resolution of the NLRC was two-fold: , the
reinstatement aspect of the March 1 7, 1995 resolution was expressly substituted by an order of
payment of separation pay; and two the July 31, 1998 decision of the NLRC now provided for two
monetary awards (backwages and separation pay). The July 31, 1998 decision of the NLRC became
final since neither parties appealed.
Immutability of Judgment
That there is already a final and executory March 17, 1995 resolution finding that respondents have
been illegally dismissed, and awarding backwages and reinstatement, is not disputed. That there,
too, is the existence of another final and executory July 31, 1998 decision modifying the
reinstatement aspect of the March 17, 1995 resolution, by awarding separation pay, is likewise
beyond dispute.
As a rule, "a final judgment may no longer be altered, amended or modified, even if the alteration,
amendment or modification is meant to correct what is perceived to be an erroneous conclusion of
fact or law and regardless of what court, be it the highest Court of the land, rendered it. Any attempt
on the part of the x x x entities charged with the execution of a final judgment to insert, change or
add matters not clearly contemplated in the dispositive portion violates the rule on immutability of
judgments."26 An exception to this rule is the existence of supervening events27 which refer to facts
transpiring after judgment has become final and executory or to new circumstances that developed
after the judgment acquired finality, including matters that the parties were not aware of prior to or
during the trial as they were not yet in existence at that time.28
Under the circumstances of this case, the existence of the strained relations between the petitioners
and the respondents was a supervening event that justified the NLRC s modification of its final
March 17, 1995 resolution. The NLRC, in its July 31, 1998 decision, based its conclusion that
strained relations existed on the conduct of the parties during the first execution proceedings before
Labor Arbiter Gambito. The NLRC considered the delay in the respondents reinstatement and the
parties conflicting claims on whether the respondents wanted to be reinstated.29 The NLRC also
observed that during the intervening period from the first computation (which was done in 1995) to
the appeal and resolution of the correctness of the first computation (subject of the NLRC s July 31,
1998 decision), neither party actually did anything to implement the respondents reinstatement. The
NLRC considered these, actions as indicative of the strained relations between the parties so that
neither of them actually wanted to implement the reinstatement decree in the March 17, 1995
resolution. The NLRC concluded that the award of reinstatement was no longer possible; thus, it

awarded separation pay, in lieu of reinstatement. Unless exceptional reasons are presented, these
above findings and conclusion can no longer be disturbed after they lapsed to finality.
Appeal of labor case under Rule 45
A review of the CA s decision in a labor case, brought to the Court via Rule 45 of the Rules of Court,
is limited to a review of errors of law imputed to the CA. In Montoya v. Transmed Manila
Corporation,30 we laid down the basic approach in reviews of Rule 45 decisions of the CA in labor
cases, as follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the
review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the
review of questions of law raised against the assailed CA decision. In ruling for legal correctness, we
have to view the CA decision in the same context that the petition for certiorari it ruled upon was
presented to it; we have to examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not
on the basis of whether the NLRC decision on the merits of the case was correct. In other words, we
have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it. This is the approach that should be basic in a Rule 45 review of
a CA ruling in a labor case. In question form, the question to ask is: Did the C correctly determine
whether the NLRC committed grave abuse of discretion in ruling on the case?
This manner of review was reiterated in Holy Child Catholic School v Hon. Patricia Sta. Tomas, etc.,
et al.,31where the Court limited its review under Rule 45 of the CA s decision in a labor case to the
determination of whether the CA correctly resolved the presence or absence of grave abuse of
discretion in the decision of the Secretary of Labor, and not on the basis of whether the latter's
decision on the merits of the case was strictly correct.
Grave abuse of discretion, amounting to lack or excess of jurisdiction, has been defined as the
capricious and whimsical exercise of judgment amounting to or equivalent to lack of
jurisdiction.32 There is grave abuse of discretion when the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and must be so patent and so gross as
to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act
at all in contemplation of law."33
With this standard in mind, we find no reversible error committed by the CA when it found no grave
abuse of discretion in the NLRC's ruling. We find the computation of backwages and separation pay
in the September 28, 2001 decision of the NLRC consistent with the provisions of law and
jurisprudence. The computation conforms to the terms of the March 17, 1995 resolution (on illegal
dismissal and payment of backwages) and the July 31, 1998 decision (on the computation of the
backwages and the payment of separation pay).
Article 279 of the Labor Code, as amended,34 provides backwages and reinstatement as basic
awards and consequences of illegal dismissal:
Article 279. Security of Tenure. -x x x 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.
"By jurisprudence derived from this provision, separation pay may [also] be awarded to an illegally
dismissed employee in lieu of reinstatement."35 Section 4(b), Rule I of the Rules Implementing Book

VI of the Labor Code provides the following instances when the award of separation pay, in lieu of
reinstatement to an illegally dismissed employee, is proper: (a) when reinstatement is no longer
possible, in cases where the dismissed employee s position is no longer available; (b) the continued
relationship between the employer and the employee is no longer viable due to the strained relations
between them; and (c) when the dismissed employee opted not to be reinstated, or the payment of
se aration benefits would be for the best interest of the parties involved.36 In these instances,
separation pay is the alternative remedy to reinstatement in addition to the award of
backwages.37 The payment of separation pay and reinstatement are exclusive remedies. The
payment of separation pay replaces the legal consequences of reinstatement to an employee who
was illegally dismissed.38
For clarity, the bases for computing separation pay and backwages are different. Our ruling in
Macasero v. Southern Industrial Gases Philippines39 provides us with the manner these awards
should be computed:
[U]nder Article 279 of the Labor Code and as held in a catena of cases, an employee who is
dismissed without just cause and without due process is entitled to backwages and reinstatement or
payment of separation pay in lieu thereof:
Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The
two reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible
because of strained relations between the employee and the employer, separation pay is granted. In
effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay
if reinstatement is no longer viable, and backwages.
The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up
to the date of actual reinstatement. Where reinstatement is no longer viable as an option, separation
pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages.40
The computation of separation pay is based on the length of the employee s service; and the
computation of backwages is based on the actual period when the employee was unlawfully
prevented from working.41
The basis of computation of backwages
The computation of backwages depends on the final awards adjudged as a consequence of illegal
dismissal, in that:
First, when reinstatement is ordered, the general concept under Article 279 of the Labor Code, as
amended, computes the backwages from the time of dismissal until the employees reinstatement.
The computation of backwages (and similar benefits considered part of the backwages) can even
continue beyond the decision of the labor arbiter or NLRC and ends only when the employee is
actually reinstated.42
Second, when separation pay is ordered in lieu of reinstatement (in the event that this aspect of the
case is disputed) or reinstatement is waived by the employee (in the event that the payment of
separation pay, in lieu, is not disputed), backwages is computed from the time of dismissal until the
finality of the decision ordering separation pay.

Third, when separation pay is ordered after the finality of the decision ordering the reinstatement by
reason of a supervening event that makes the award of reinstatement no longer possible (as in the
case), backwages is computed from the time of dismissal until the finality of the decision ordering
separation pay.
The above computation of backwages, when separation pay is ordered, has been the Court s
consistent ruling. In Session Delights Ice Cream and Fast Foods v. Court Appeals Sixth Division, we
explained that the finality of the decision becomes the reckoning point because in allowing
separation pay, the final decision effectively declares that the employment relationship ended so that
separation pay and backwages are to be computed up to that point.43
We may also view the proper computation of backwages (whether based on reinstatement or an
order of separation pay) in terms of the life of the employment relationship itself.
1w phi 1

When reinstatement is ordered, the employment relationship continues. Once the illegally dismissed
employee is reinstated, any compensation and benefits thereafter received stem from the employee
s continued employment. In this instance, backwages are computed only up until the reinstatement
of the employee since after the reinstatement, the employee begins to receive compensation from
his resumed employment.
When there is an order of separation pay (in lieu of reinstatement or when the reinstatement aspect
is waived or subsequently ordered in light of a supervening event making the award of reinstatement
no longer possible), the employment relationship is terminated only upon the finality of the decision
ordering the separation pay. The finality of the decision cuts-off the employment relationship and
represents the final settlement of the rights and obligations of the parties against each other. Hence,
backwages no longer accumulate upon the finality of the decision ordering the payment of
separation pay since the employee is no longer entitled to any compensation from the employer by
reason of the severance of his employment.
The computation of the respondents backwages
As the records show, the contending parties did not dispute the NLRC s order of separation pay that
replaced the award of reinstatement on the ground of the supervening event arising from the newlydiscovered strained relations between the parties. The parties allowed the NLRC s July 31, 1998
decision to lapse into finality and recognized, by their active participation in the second computation
of the awards, the validity and binding effect on them of the terms of the July 31, 1998 decision.
Under these circumstances, while there was no express modification on the period for computing
backwages stated in the dispositive portion of the July 31, 1998 decision of the NLRC, it is
nevertheless clear that the award of reinstatement under the March 17, 1995 resolution (to which the
respondents backwages was initially supposed to have been computed) was substituted by an
award of separation pay. As earlier stated, the awards of reinstatement and separation pay are
exclusive remedies; the change of awards (from reinstatement to separation pay) under the NLRC s
July 31, 1998 not only modified the awards granted, but also changed the manner the respondents
backwages is to be computed. The respondents backwages can no longer be computed up to the
point of reinstatement as there is no longer any award of reinstatement to speak of.
We also emphasize that the payment of backwages and separation pay cannot be computed from
the time the respondents allegedly expressed their wish to be paid separation pay. In the first place,
the records show that the alleged manifestation by the respondents, through Samuel, was actually a
mere expression of interest.44More importantly, the alleged manifestation was disregarded in the
NLRC's July 31, 1998 decision where the NLRC declared that the award of separation pay was due

to the supervening event arising from the strained relations (not a waiver of reinstatement) that
justified the modification of the NLRC's final March 17, 1995 resolution on the award of
reinstatement. Simply put, insofar as the computation of the respondents' backwages, we are guided
by the award, modified to separation pay, under the NLRC's July 31, 1998 decision.
Thus, the computation of the respondents' backwages must be from the time of the illegal dismissal
from employment until the finality of the decision ordering the payment of separation pay. It is only
when the NLRC rendered its July 31, 1998 decision ordering the payment of separation pay (which
both parties no longer questioned and which thereafter became final) that the issue of the
respondents' employment with the petitioners was decided with finality, effectively terminating it. The
respondents' backwages, therefore, must be computed from the time of their illegal dismissal until
January 29, 1999, the date of finality of the NLRC's July 31, 1998 Decision. As a final point, the CA s
ruling must be modified to include legal interest commencing from the finality of the NLRC's July 31,
1998 decision. The CA failed to consider that the NLRC's July 31, 1998 decision, once final,
becomes a judgment for money from which another consequence flows -the payment of interest in
case of delay.45 Under the circumstances, the payment of legal interest of six percent (6) upon the
finality of the judgment is proper. It is not barred by the principle of immutability of judgment as it is
compensatory interest arising from the final judgment.46
WHEREFORE, premises considered, we DENY the petition and thus effectively AFFIRM with
MODIFICATION the decision dated September 1 2005 and the resolution dated December 14, 2005
of the Court of Appeals in CA-G.R. SP No. 70085. The petitioners Bani Rural Bank, Inc., Enoc
Theatre I and II and/or Rafael de Guzman, are ORDERED to PAY respondents Teresa de Guzman,
Edgar C. Tan and Teresa G. Tan the following:
(a) Backwages computed from the date the petitioners illegally dismissed the respondents up
to January 29, 1999, the date of the finality of the decision dated July 31, 1998 of the
National Labor Relations Commission in NLRC CN. SUB-RAB-01-07- 7-0136-93 CA No. L001403 and NLRC CN. SUB-RAB-01-07-7-0137-93 CA No. L-001405;
(b) Separation pay computed from respondents' first day of employment up to January 29,
1999 at the rate of one (1) month pay per year of service; and
(c) Legal interest of six percent (6) per annum of the total monetary awards computed from
January 29, 1999 until their full satisfaction.
The labor arbiter is hereby ORDERED to make another recomputation according to the above
directives.
SO ORDERED.
ARTURO D. BRION
Associate Justice

PAL v. NLRC, G.R. No. 123294, October 20, 2010

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION

PHILIPPINE AIRLINES, INC.,

Petitioner,

G.R. No. 123294

Present:

- versus -

CORONA, C.J.,
Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.

NATIONAL LABOR RELATIONS COMMISSION and

Promulgated:
AIDA M. QUIJANO,
Respondents.
October 20, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

LEONARDO-DE CASTRO, J.:

This is a Petition for Certiorari under Rule 65 of the Rules of Court seeking to annul, reverse and set aside
the following issuances of public respondent National Labor Relations Commission (NLRC): (1)
Decision[1] dated September 29, 1995 in NLRC NCR CA 007860-94 (NLRC NCR 00-03-0185991), entitled Aida M. Quijano v. Philippine Airlines, Inc., which set aside the Decision[2] of Labor Arbiter
Roberto I. Santos and ordered petitioner Philippine Airlines, Inc. (PAL) to pay private respondent Aida M.
Quijano (Quijano) her separation pay in accordance with petitioners Special Retirement & Separation
Program, and (2) Resolution[3] dated November 14, 1995 denying petitioners Motion for Reconsideration
thereof.
It bears stressing that pursuant to St. Martin Funeral Home v. National Labor Relations
Commission[4] and In Re: Dismissal of Special Civil Actions in NLRC Cases,[5] all special civil actions arising
out of any decision, final resolution or order of the NLRC must be filed with the Court of Appeals. However,
since both parties of this case had filed their respective Memoranda prior to the promulgation of our
decision in St. Martin Funeral Home, this case was no longer referred to the Court of Appeals.
The following are the pertinent facts, as summarized by the NLRC:
Complainant Quijano rose from the ranks starting as accounting clerk in December 1967 until she became
effective September 1, 1984, Manager-Agents Services Accounting Division (ASAD), vice Josefina Sioson.

ASAD, the specific unit in PAL charged with the processing, verification, reconciliation, and validation of
all claims for commission filed by agents worldwide, is under the direct supervision and control of the Vice
President-Comptroller, and within the scope of the audit program of the Vice President-Internal Audit &
Control.
On May 5, 1989, an investigating committee chaired by Leslie W. Espino (hereinafter referred to as the
Espino Committee) formally charged Quijano as Manager-ASAD in connection with the processing and
payment of commission claims to Goldair Pty. Ltd. (Goldair for short) wherein PAL overpaid commissions
to the latter amounting to several million Australian dollars during the period 1984-1987. Specifically,
Quijano was charged as Manager-ASAD with the following:
Failure on the job and gross negligence resulting in loss of trust and confidence in that you failed to:
a.
Exercise the necessary monitoring, control and supervision over your Senior Accounts Analyst to
ensure that the latter was performing the basic duties and responsibilities of her job in checking and
verifying the correctness and validity of the commission claims from Goldair.
b.
Adopt and perform the necessary checks and verification procedures as demanded by your position
in order to ensure that the commission claims of Goldair which you were approving for payment were
correct and valid claims thus resulting in consistent substantial overpayments to Goldair over a period of
more than three years.
c.
Require or otherwise cause a final reconciliation of the remaining balance due as commission
claims to Goldair for a particular month such that a claim for a particular month was never liquidated in a
final amount and thus contributing to consistent overpayments to Goldair.
The Senior Accounts Analyst referred to in the charge was Dora Jane Prado Curammeng who was included
as a respondent. Curammeng was specifically assigned to handle and process commissions of agents in,
among others, the Australia Region, and Goldair was among the travel agents whose production reports
and commission claims were handled by her. Curammeng was accused of failing to verify the
completeness of the documents supporting the claims; to trace and match each ticket in the production
report submitted by Goldair with the IATA, BSP and CTO sales report; and to perform a complete
verification of the net/net amounts claimed in the production reports against the approved marketing
arrangements. However, Curammeng had already resigned and became a resident of Canada at the time
of the investigation conducted by the Espino Committee.
Pending further investigation, the Espino Committee placed Quijano under preventive suspension and at
the same time required her to submit her answer to the charges. As directed, Quijano submitted her
answer wherein, among others, she explained as follows:
My staff processes production reports submitted by both passenger and cargo agents. In 1984, they were
only seven (7) people (with one on loan to Financial Analysis Division) and yet they process commission
claims of an average of PHP four billion annually. My colleagues who are responsible for processing and
recording gross passenger and cargo sales have around 51 people. Just the ratio of my staff to accounting
sales staff, which is one to seven, would indicate the heavy load our unit experience.

I wish to emphasize however, that the staff assigned under my division have been selected on the basis
of their judgment competence considering the very nature of marketing arrangements with agents are
strictly private and confidential. Under the circumstances I have just mentioned, my staffs judgment and
competence is heavily relied on particularly when random checking of commission claims for traffic
documents and airway bills against sales reports is being performed by them. I also seek your appreciation
of the work environment we are in and the intermittent conflicts we experience due to the pressure of
prompt settlement of claims to agents and yet having the satisfaction that the processing procedures are
adequate.
xxxx
May I reiterate to the Committee that when my staff informed me of their findings of double claims on
the production reports for the months of October and November 1987, I followed this up with a
representative of Goldair. On June 1988, I received a handwritten note from the representative of Goldair
signed by its General Manager Aleco Papazoglou, a xerox copy of it is hereto attached as Annex A. Mr.
Papazoglou, in this note, guaranteed to me that he will undertake to collect any excessive payments on
the agent fees from his agents and pay these to us afterwards.
At this point, I would like to emphasize that ASAD, before known as Confidential Staff under the Office of
the VP-Comptroller, became a unit since 1976. Due to the confidential nature of its functions, the
accounting procedures were not written. The procedures being performed by the staff were mainly
practices handed down from their predecessors. Further, the procedures were tailored to adopt to the
market environment of the country which were based on the approved marketing arrangements. But of
course, there were inherent internal controls.
A final check whether accounting procedures being observed were appropriate in accordance with
accounting standards, is the periodic examination of both our internal and external auditors.
During all these 4-1/2 years I have been with ASAD, I did not receive any feedback that there were
weaknesses or lapses in accounting controls and procedures being followed.
In 1985, Cressop Mccormick & Paget made a study of the CMAs. They conducted an interview of all key
personnel including me who were involved in handling CMAs. It was of course necessary for them to
observe and evaluate the existing accounting procedures and controls. Their report, however, did not
mention any adverse findings concerning my division.
In 1986, Sycip, Gorres, Velayo & Co. were engaged to look into the CMA functional specifications and to
propose the best method of allocating commission expenses to flown revenues. To be able for them to
render a report, it is, of course, necessary for them to delve into the reports we receive and the records
we maintain. It is safe to surmise that they walked through our accounting procedures. No mention,
however, of weaknesses on our accounting procedures and controls was made in their report.
Again, during the early part of 1987, all the production reports from Australia for the period April to
September 1986 were borrowed and audited by Internal Audit and control. We apprised the auditor then
of the various procedures we observed in processing these production reports. We did not receive any
adverse feedback about their audit. Our confidence that the AMAs were properly enforced by Australian
agents and that there were no irregularities committed were thus regained. We shifted our concentration

to the other agents particularly those under Nett-Nett settlement arrangements and tried to recall any
commission that should be disallowed.
In the middle of 1987, a special team from the Commission on Audit conducted a fraud audit and again,
interviewed my staff and I on our accounting procedures. Incentive commission figures by agent by
country were also furnished to them. I wasnt informed of any flaws in our accounting procedures and
control nor existence of any fraud.
My division underwent scrutiny of three (3) prestigious consulting firms and of our own internal audit. I
relied heavily on the absence of any unfavorable findings on accounting procedures and controls from
them since their studies were quite extensive and lengthy. It is quite surprising at times why I am now
asked how I could have failed to observe that certain accounting procedures were not being followed by
my staff.
xxxx
Also, Internal Audit & Control made a regular audit in Australia in November, 1986 headed by no less than
the Vice President-Internal Audit & Control. They did not discover any fraud nor report any questionable
transaction on Passenger but on Cargo transaction only. If they, the auditors, did not find any discrepancy
when their concentration is on Australia alone, how much more with us when our concentration is on the
whole system? The production reports of Goldair was borrowed and assessed by the auditor before and
after the regular audit.
The other members of the Espino Committee were Ricardo G. Paloma, then Senior Vice PresidentStrategic Planning & Corporate Services wrote a dissenting opinion to the Final Draft Majority Report in
the following manner, to wit:
A new set of procedures was apparently installed by Romeo Ines and Josefina Sioson in April, 1984
(without any evident formal authorization by the Comptroller Dept.) upon receipt of Aleco Papazoglous
letter that automatic payment be made upon presentation of his production reports in Manila Gold Air
gained immunity against any possibility of cross of their production reports: it was simply impossible to
cross check the production reports against sales reports are not yet in by the time the hand carried
production reports arrive in ASAD.
Upon assumption of office by Aida Quijano this new set of procedure was carried over. She was made to
understand that these were the OFFICIAL PROCEDURES, contrary to the actual procedure which called for
production reports being initially checked by PAL Melbourne during the 1981 to 1983 period. This initial
check which had until them been handled by the Regional Office was combined with the secondary check
and were all dumped on ASAD.
A mitigating factor in Quijanos favor is that UNSEEN HANDS designed or allowed this new procedures to
be put in place. Ines, who became the VP Internal Audit should have known the prescribed procedures (or
at the very least the actual practice during the period 1981 to 1983 when he was the VP Comptroller) and
yet, did not alert her. Unknowingly, Quijano allowed the by-pass and the automatic payment of 80% upon
presentation of production reports because Sioson assured her that was the procedure previously
followed. Trustingly, she became a participant in this mess.

It should be noted that the Romeo Ines mentioned in the dissenting opinion is the same Romeo R. Ines
who was one of the members of the Espino Committee and who was later named a respondent in the
second Goldair charge, together with Chairman Espino. Romeo R. Ines was the VP-Comptroller for the
period 1981-1983 and VP-Internal Audit for the period 1984-1987. While Josefina Sioson, as earlier shown,
was the Manager-ASAD during the period 1981-1983 until she was replaced by Quijano on September 1,
1984. Incidentally, as found by respondents witness Benigno Datoc, the Goldair fraud started in 1981 and
continued until its discovery sometime in the latter part of 1987. And as of that year, Goldair had been
PALs agent for about seventeen (17) years already.
On July 2, 1990, another Administrative charge involving the same Goldair anomaly was filed, this time
including Committee Chairman Leslie W. Espino and Committee Member Romeo R. Ines and several
others, for gross incompetence and inefficiency, negligence, imprudence, mismanagement, dereliction of
duty, failure to observe and/or implement administrative and executive policies, and related acts or
omissions. Pending the result of investigation by another committee chaired by Judge Martin S. Ocampo,
the PAL Board of Directors suspended respondents Leslie W. Espino, Executive Vice-President and Chief
Operating Officer; Ramon C. Lozon, Senior Vice-President-Finance; Romeo R. Ines, Vice President-Internal
Audit & Control; Josefina Sioson, Manager-Staff Pricing; except respondents VP-Comptroller Robin C. Dui
and Manager-ASAD Aida Quijano who were already suspended by the Espino Committee, and respondent
Juan Yoga, former Regional Vice President-Australia who has already retired.
Meantime, PAL filed a civil case in Australia against Goldair seeking to recover AUD 11 million. Twice,
Quijano went to Australia as witness for PAL. Thereafter, a settlement was reached whereby Goldair was
to pay PAL a total of around AUD 7 million inclusive of court costs. A criminal case was nevertheless filed
against Goldairs owner, Alexandro Papazoglou, by the Fraud Squad Victorian Police.
The Ocampo Committee having submitted its findings to the PAL Board of Directors, the latter, in a
resolution dated January 18, 1991, considered respondents Leslie W. Espino, Ramon C. Lozon, Romeo R.
Ines, Robin C. Dui, Josefina Sioson, and Aida M. Quijano, resigned from the service effective immediately,
for loss of confidence and for acts inimical to the interest of the company.
The Board found as follows:
This is the extended Resolution.
The Goldair fraud has caused a total loss to PAL as of August 1990 in the amount of AUD 14.6 million (PHP
204 million). Goldair is a company that served then as the General Sales Agent of PAL in Australia against
Goldair, a settlement was reached whereby Goldair was to pay PAL a total of around AUD 7 million
inclusive of court costs. This settlement is said to be the most practical and realistic under the
circumstances. A criminal case was nevertheless filed against Goldairs owner, Alexandro Papazoglou, by
the Fraud Squad Victorian Police. Hearings are still going on.
According to the evidence received and evaluated by the investigating committee, PAL lost the above
huge sum of money to Goldair as a result of false, padded, erroneous or irregular claims for commissions
submitted by Goldair and unwittingly paid by PAL. The Agents Services Accounting Division (ASAD), one
of the divisions under the Comptroller Department, is the specific unit in the company charged with the
processing, verification, and validation of all claims for commissions filed by the companys agents
worldwide (excluding the U.S. which is processed by the San Francisco Regional Office). Consequently,

responsibility for the Goldair fraud has been attributed mainly to the failure of ASAD to properly process
and validate Goldairs commission claims prior to payment.
Thus, the following lapses or irregularities were uncovered in the course of the investigations that have
been conducted:
1.
No adequate effort was exerted to see to it that the supporting documents (photocopies of
tickets submitted and attached to the production report were complete). Neither was a verification or
comparison made between the tickets and the production report.
2.
The simple and basic step of verifying the names of the passengers and their ticket numbers
against ticket numbers, even on a check basis, to see whether they were reported more than once was
not accomplished. If done, double or multiple reporting of tickets could have been readily detected.
3.
Validation of the correctness of prorate values, by performing the proration, was not
undertaken.
4.
No reconciliation was made of all the amounts due the agent for a particular month. Such
reconciliation would have disclosed whether or not the account for a particular month could be closed.
5.

Production reports were not cross-checked against sales report or flight coupon registers.

6.
Superiors failed to adequately monitor the activities of their subordinates to ensure that the
latter were performing their duties.
7.
The policy that cash vouchers could be approved only by duly authorized persons was in
several cases violated.
Resolving the case of Quijano, the Board said:
The charge against Ms. Quijano is that:
Quijano was the Manager-ASAD (Agents Services Accounting Division) in 1984-87, and responsible for the
final scrutiny of agents Production Reports and final recommendation for payment of travel agents
commissions.
As Manager-ASAD from 1984 to 1987 (when the fraud was discovered), she failed to uncover or detect
and report or grossly disregarded the fraud although the commissions vis--vis production were
scandalously high.
Ms. Quijano claims that she relied heavily on Ms. Curammengs judgment competence to perform her
work, particularly the completeness of the documents check. She argues that if she were to do the
completeness check herself, there would be no need for the analyst. This argument, however, wittingly
or unwittingly, misconceives the nature of her job. Precisely, her basic role and duty as a manager was to
make sure that the analysts in her division were performing the tasks assigned to them. But Ms. Quijano
did not see to it that the completeness check was actually being performed by Ms. Curammeng. This lapse
in control, contributed materially to the double, multiple and fictitious reporting of tickets, and double
claims for commissions perpetrated by Goldair. Ms. Quijano was certainly not expected to personally do
and perform the completeness check herself. But as manager, it was clearly incumbent upon her to see

to it that this completeness check was being done by her subordinates competently and efficiently. Yet,
Ms. Quijano even failed to adopt ways and means of keeping herself sufficiently informed of the activities
of her staff members so as to prevent or at least discover at an early stage the fraud being perpetrated
on a massive scale by Goldair against her company.
Her incompetence at her job is patent.
Her motion for reconsideration having been denied by the Board in a Resolution dated February 19, 1991,
Quijano filed on March 25, 1991 the instant case against PAL for illegal suspension and illegal dismissal.[6]

The Labor Arbiter dismissed private respondents complaint in a Decision dated September 7, 1994, the
dispositive portion of which reads:
WHEREFORE, in conformity with the opinion above-expressed, judgment is hereby rendered dismissing
the above-captioned case for lack of merit and, consequently, the respondent is absolved from any
liability.[7]

Undeterred, private respondent filed an appeal before the NLRC which rendered the assailed Decision
dated September 29, 1995, the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing considerations, the decision appealed from should be, as it is
hereby, VACATED and SET ASIDE and another one entered, directing the Philippine Airlines, Inc., thru its
responsible officials, to pay Aida M. Quijano her separation pay in accordance with its Special Retirement
& Separation Program dated February 15, 1988, plus ten percent (10%) of the total amount by way of
attorneys fee.[8]

Petitioner filed a Motion for Reconsideration but this was denied by the NLRC in its Resolution dated
November 14, 1995, the dispositive portion of which reads:
After due consideration of the Motion for Reconsideration filed by respondent-appellee on October 20,
1995, from the Decision of September 29, 1995, the Commission (Second Division) RESOLVED to deny the
same for lack of merit.[9]
Hence, this petition for certiorari.
Both parties submitted their respective Memoranda[10] in late 1997, however, on September 11, 1998,
petitioner filed a Motion for Suspension of Proceedings[11] based on Presidential Decree No. 902-A which
reads, in part:
That upon appointment of management committee, rehabilitation receiver, board or body, pursuant to
this Decree, all actions for claims against corporations, partnerships or associations under management
or receivership pending before any court, tribunal, board or body shall be suspended
accordingly.[12] (Underscoring supplied.)

The said motion referred to an Order[13] dated June 23, 1998 of the Securities and Exchange Commission
(SEC) which appointed an Interim Rehabilitation Receiver for petitioner pursuant to Presidential Decree
No. 902-A that was followed by the issuance of another Order[14] dated July 1, 1998 which commanded
that all claims against PAL are deemed suspended.
After hearing both parties on the question of whether or not the Court should render judgment during
the state of suspension of claims, we ruled in the negative in a Resolution[15] dated September 4, 2000,
the dispositive portion of which reads:
IN VIEW THEREOF, the Motion for Suspension of Proceedings of petitioner is GRANTED.[16]

Private respondent filed a Motion for Reconsideration[17] on October 3, 2000 of the above Resolution but
we denied the same in a Resolution[18] dated November 13, 2000.
Since then petitioner was required by this Court to submit periodic status reports on the rehabilitation
proceedings, the last of which was dated October 22, 2007,[19]declaring that the petitioners request to
exit from rehabilitation had been granted by the SEC via an Order[20] issued on September 28, 2007, the
dispositive portion of which reads:
WHEREFORE, in the light of the foregoing, and considering PALs firm commitment to settle its outstanding
obligations as well as the fact that its operations and its financial condition have
been normalized and stabilized in conformity with the Amended and Restated Rehabilitation Plan
exemplifying a successful corporate rehabilitation, the PALs request to exit from rehabilitation is
hereby GRANTED.
The PRR is likewise directed to furnish all creditors and parties concerned with copies of this Order at the
expense of the Petitioner and submit proof of service thereof to the Commission, within fifteen (15) days
from date of receipt of this Order.[21]

Considering the foregoing and the fact that both parties have long submitted their respective Memoranda
in the instant case, private respondent filed a Motion to Resume Proceedings and to Render
Judgment[22] on December 11, 2007. In compliance with this Courts Resolution[23] dated January 21, 2008
requiring petitioner to comment on private respondents motion, petitioner filed a
Comment/Manifestation[24] on February 28, 2008 which confirmed that with the issuance of the Securities
and Exchange Commissions September 28, 2007 Order granting PALs request to exit from rehabilitation,
there is no longer any legal impediment to the resumption of the instant proceedings.
In the instant petition, petitioner puts forward a singular argument, to wit:
ASSUMING ARGUENDO (WITHOUT ADMITTING) THAT THE EQUITABLE CONSIDERATIONS CITED BY THE
NLRC DID EXIST, THE SAME CANNOT JUSTIFY THE AWARD OF SEPARATION PAY TO MRS. QUIJANO (despite
the finding that she was legally suspended and thereafter legally dismissed) IN THE FACE OF
OVERWHELMING EVIDENCE SUBMITTED BY PETITIONER WHICH CLEARLY SHOW THAT PHILIPPINE
AIRLINES, INC. LOST SEVERAL MILLION AUSTRALIAN DOLLARS AS A RESULT OF THE FRAUD COMMITTED
BY GOLDAIR AND THAT SAID FRAUD COULD ONLY HAVE BEEN MADE POSSIBLE BY MRS. QUIJANOS PATENT
MISMANAGEMENT AND GROSS INCOMPETENCE AS ASAD MANAGER IN FAILING TO DETECT THE

IRREGULARITY. IN AWARDING SEPARATION PAY TO MRS. QUIJANO, THE NLRC COMMITTED A GRAVE
ABUSE OF ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION.[25]

We affirm the NLRC ruling with modification.

At the onset, it should be noted that the parties do not dispute the validity of private respondents
dismissal from employment for loss of confidence and acts inimical to the interest of the employer. The
assailed September 29, 1995 Decision of the NLRC was emphatic in declaring that it was not prepared to
rule as illegal the preventive suspension and eventual dismissal from the service of [private
respondent][26] and rightfully so because the last position that private respondent held, Manager-ASAD
(Agents Services Accounting Division), undeniably qualifies as a position of trust and confidence.
Loss of confidence as a just cause for termination of employment is premised from the fact that an
employee concerned holds a position of trust and confidence. This situation holds where a person is
entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of
the employers property. But, in order to constitute a just cause for dismissal, the act complained of must
be work-related such as would show the employee concerned to be unfit to continue working for the
employer.[27]
The January 18, 1991 Resolution of the PAL Board of Directors, the relevant portions of which are
discussed in the narration of the facts of this case as culled from the assailed September 29, 1995 NLRC
Decision, clearly laid out the reasons why it considered private respondent along with her other coemployees in PAL resigned from the service effective immediately for loss of confidence and for acts
inimical to the interest of the company. In private respondents case, the Resolution underscored her acts
of mismanagement and gross incompetence which made her fail to detect the irregularities in the Goldair
account that resulted in huge financial losses for petitioner. Admittedly, the said findings are not backed
by proof beyond reasonable doubt but are, nevertheless, given credence since they have been adopted
by both the labor arbiter and the NLRC and are supported by substantial evidence. As we have consistently
held, the degree of proof required in labor cases is not as stringent as in other types of cases.[28]
As a general rule, employers are allowed a wider latitude of discretion in terminating the employment of
managerial personnel or those who, while not of similar rank, perform functions which by their nature
require the employers full trust and confidence. This must be distinguished from the case of ordinary rank
and file employees, whose termination on the basis of these same grounds requires a higher proof of
involvement in the events in question; mere uncorroborated assertions and accusations by the employer
will not suffice.[29]
Having succinctly disposed of the issue of the validity of private respondents dismissal, we now delve into
the true crux of this controversy which is the legality of the award of separation pay to private respondent
despite having been lawfully terminated for a just cause.
Petitioner argues that, in light of the fact that a just cause forms the basis for her lawful termination from
the job, private respondent is not entitled to separation pay.Likewise, petitioner insists that even
assuming that the equitable considerations cited by the NLRC did exist, the same cannot justify the award
of separation pay. And, in awarding the same, the NLRC committed grave abuse of discretion amounting
to lack of jurisdiction.

We do not agree.
Grave abuse of discretion is an evasion of a positive duty or a virtual refusal to perform a duty enjoined
by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence
but on caprice, whim and despotism.[30] This Court holds that the NLRC did not gravely abuse its discretion
in granting separation pay to private respondent as the same is not characterized by caprice or
arbitrariness being rooted in established jurisprudence.
The language of Article 279 of the Labor Code is pregnant with the implication that a legally dismissed
employee is not entitled to separation pay, to wit:
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.

However, in exceptional cases, this Court has granted separation pay to a legally dismissed employee as
an act of social justice or based on equity. In both instances, it is required that the dismissal (1) was not
for serious misconduct; and (2) does not reflect on the moral character of the employee [31] or would
involve moral turpitude. This equitable and humanitarian principle was first discussed by the Court in the
landmark case of Philippine Long Distance Telephone Co. (PLDT) v. National Labor Relations
Commission,[32] wherein it was held:
Strictly speaking, however, it is not correct to say that there is no express justification for the grant of
separation pay to lawfully dismissed employees other than the abstract consideration of equity. The
reason is that our Constitution is replete with positive commands for the promotion of social justice, and
particularly the protection of the rights of the workers. The enhancement of their welfare is one of the
primary concerns of the present charter. In fact, instead of confining itself to the general commitment to
the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution
contains a separate article devoted to the promotion of social justice and human rights with a separate
sub-topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management,
in the advancement of the national economy and the welfare of the people in general. The categorical
mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis
to justify the award of separation pay in proper cases even if the dismissal be for cause.
xxxx
There should be no question that where it comes to such valid but not iniquitous causes as failure to
comply with work standards, the grant of separation pay to the dismissed employee may be both just and
compassionate, particularly if he has worked for some time with the company. For example, a subordinate
who has irreconcilable policy or personal differences with his employer may be validly dismissed for
demonstrated loss of confidence, which is an allowable ground. A working mother who has to be
frequently absent because she has also to take care of her child may also be removed because of her poor
attendance, this being another authorized ground. It is not the employee's fault if he does not have the
necessary aptitude for his work but on the other hand the company cannot be required to maintain him
just the same at the expense of the efficiency of its operations. He too may be validly replaced. Under
these and similar circumstances, however, the award to the employee of separation pay would be
sustainable under the social justice policy even if the separation is for cause.

But where the cause of the separation is more serious than mere inefficiency, the generosity of the law
must be more discerning. There is no doubt it is compassionate to give separation pay to a salesman if he
is dismissed for his inability to fill his quota but surely he does not deserve such generosity if his offense
is misappropriation of the receipts of his sales. This is no longer mere incompetence but clear dishonesty.
A security guard found sleeping on the job is doubtless subject to dismissal but may be allowed separation
pay since his conduct, while inept, is not depraved. But if he was in fact not really sleeping but sleeping
with a prostitute during his tour of duty and in the company premises, the situation is changed completely.
This is not only inefficiency but immorality and the grant of separation pay would be entirely unjustified.
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social justice.[33]

In Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor Relations
Commission,[34] we clarified that the grant of separation pay may still be precluded even if the ground for
the employees dismissal is not serious misconduct under Article 282(a) of the Labor Code but other just
causes under the same article and/or other authorized causes provided for under the Labor
Code. However, the TMPCWA case still recognized the social justice exception prescribed in Philippine
Long Distance Telephone Company. To quote the relevant portions of that decision:
Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation pay based
on social justiceserious misconduct (which is the first ground for dismissal under Art. 282) or acts that
reflect on the moral character of the employee. What is unclear is whether the ruling likewise precludes
the grant of separation pay when the employee is validly terminated from work on grounds laid down in
Art. 282 of the Labor Code other than serious misconduct.
A recall of recent cases decided bearing on the issue reveals that when the termination is legally justified
on any of the grounds under Art. 282, separation pay was not allowed. x x x.
xxxx
In all of the foregoing situations, the Court declined to grant termination pay because the causes for
dismissal recognized under Art. 282 of the Labor Code were serious or grave in nature and attended by
willful or wrongful intent or they reflected adversely on the moral character of the employees. We
therefore find that in addition to serious misconduct, in dismissals based on other grounds under Art. 282
like willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and
commission of a crime against the employer or his family, separation pay should not be conceded to the
dismissed employee.
In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the courts may
opt to grant separation pay anchored on social justice in consideration of the length of service of the
employee, the amount involved, whether the act is the first offense, the performance of the employee

and the like, using the guideposts enunciated in PLDT on the propriety of the award of separation
pay.[35] (Emphases supplied.)

In other words, under the present jurisprudential framework, the grant of separation pay as a matter of
equity to a validly dismissed employee is not contingent on whether the ground for dismissal is expressly
under Article 282(a) but whether the ground relied upon is akin to serious misconduct or involves willful
or wrongful intent on the part of the employee.
It, thus, becomes pertinent to examine the ground relied upon for the dismissal of private respondent and
to determine if the special circumstances described in PLDT are present in the case at bar.
Serious misconduct as a valid cause for the dismissal of an employee is defined simply as improper or
wrong conduct. It is a transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error of judgment. To
be serious within the meaning and intendment of the law, the misconduct must be of such grave and
aggravated character and not merely trivial or unimportant. However serious such misconduct, it must,
nevertheless, be in connection with the employees work to constitute just cause for his separation. The
act complained of must be related to the performance of the employees duties such as would show him
to be unfit to continue working for the employer.[36] On the other hand, moral turpitude has been defined
as everything which is done contrary to justice, modesty, or good morals; an act of baseness, vileness or
depravity in the private and social duties which a man owes his fellowmen, or to society in general,
contrary to justice, honesty, modesty, or good morals.[37]
In the case at bar, the transgressions imputed to private respondent have never been firmly established
as deliberate and willful acts clearly directed at making petitioner lose millions of pesos. At the very most,
they can only be characterized as unintentional, albeit major, lapses in professional judgment. Likewise,
the same cannot be described as morally reprehensible actions. Thus, private respondent may be granted
separation pay on the ground of equity which this Court had defined as justice outside law, being ethical
rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts of
conscience and not on any sanction of positive law, for equity finds no room for application where there
is law.[38]
A perusal of the assailed September 29, 1995 NLRC Decision would show that the following equitable
considerations were relied upon by the NLRC to arrive at its assailed ruling, to wit:
a)
The Goldair fraud was found to have started in 1981. Private respondent became the ManagerASAD only on September 1, 1984. The former Manager-ASAD from 1981 to August 1984 was Josefina
Sioson.[39]
b)
ASAD is under the direct supervision and control of the Vice President-Comptroller and within
the scope of the audit program of the Vice President-Internal Audit and Control. The VP-Comptroller for
the period 1981 to 1983 and the VP-Internal Audit for the period 1984 to 1987 was Romeo Ines.[40]
c)
The accounting procedures and controls inherited by private respondent when she took over
ASAD were subjected to the scrutiny of prestigious accounting firms like Cressop, McCormick & Paget in
1985, the Sycip, Gorres, Velayo & Co., Inc. in 1986, including a special team from the Commission on Audit
in 1987 all of which made no adverse findings concerning ASAD.[41]

d)
No less than the VP-Internal Audit made a regular audit in Australia in November 1986 and in
the early part of 1987, by borrowing all production reports covering April to September 1986, but found
no irregularities nor made any adverse feedback against ASAD.[42]
e)
Private respondent was the first to discover the overpayment of commission claims to Goldair
in 1984 in rate differences in net/net settlement which, after her intervention, did not recur. She was also
the one who first discovered the fraud in double and fictitious commission claims and promptly took
action when she withheld all provisional payments due Goldair.[43]
f)
Even after the Goldair anomaly was discovered, private respondent could have availed of PALs
Special Retirement and Separation Program, but she stayed put and had gone twice to Australia, while
under preventive suspension, to attend court proceedings as a witness for petitioner enabling the said
company to recover and minimize its economic loss.[44]
g)
Private respondent has no derogatory record during the entire period of her employment with
petitioner for more than two decades. She steadily rose from the ranks until she became the ASAD
Manager.[45]
h)
In the dissenting opinion of Ricardo Paloma, Vice Chairman of the Espino Committee and PAL
Senior VP Strategic Planning and Corporate Service, to the Final Draft Majority Report, he observed that
a mitigating factor in [private respondents] favor is that UNSEEN HANDS designed or allowed this new
procedures to be put in place. Ines, who became the VP Internal Audit should have known the prescribed
procedures (or at the very least the actual practice during the period 1981 to 1983 when he was the VP
Comptroller) and yet, did not alert her. Unknowingly, [private respondent] allowed the by-pass and the
automatic payment of 80% upon presentation of production reports because Sioson assured her that was
the procedure previously followed. Trusting, she became a participant in this mess.[46]
Considering the foregoing uncontroverted special circumstances, we rule that the NLRC did not commit
grave abuse of discretion amounting to lack of jurisdiction in ordering petitioner to pay private respondent
separation pay for equitable considerations.
However, we do not agree with the NLRC that private respondents separation pay should be awarded in
accordance with PALs Special Retirement & Separation Program dated February 15, 1988 plus ten percent
(10%) of the total amount by way of attorneys fees.
At the risk of stating the obvious, private respondent was not separated from petitioners employ due to
mandatory or optional retirement but, rather, by termination of employment for a just cause. Thus, any
retirement pay provided by PALs Special Retirement & Separation Program dated February 15, 1988 or,
in the absence or legal inadequacy thereof, by Article 287 of the Labor Code[47] does not operate nor can
be made to operate for the benefit of private respondent. Even private respondents assertion that, at the
time of her lawful dismissal, she was already qualified for retirement does not aid her case because the
fact remains that private respondent was already terminated for cause thereby rendering nugatory any
entitlement to mandatory or optional retirement pay that she might have previously possessed.
Likewise, attorneys fees are not proper in this case because the same can only be awarded when the
employee is illegally dismissed in bad faith and is compelled to litigate or incur expenses to protect his

rights by reason of the unjustified act of his employer.[48] The aforementioned conditions do not obtain in
this case.
As to the matter of the proper amount of separation pay to be awarded to private respondent on the
basis of equitable considerations, our pronouncement in Yrasuegui v. Philippine Airlines, Inc.[49] is
instructive, to wit:
Here, We grant petitioner separation pay equivalent to one-half (1/2) months pay for every year of
service. It should include regular allowances which he might have been receiving. We are not blind to the
fact that he was not dismissed for any serious misconduct or to any act which would reflect on his moral
character. We also recognize that his employment with PAL lasted for more or less a decade.

Private respondents circumstances are more or less identical to the above-cited case in the sense that, as
previously discussed, her dismissal was neither for serious misconduct nor for an offense involving moral
turpitude. Furthermore, her employment with petitioner spanned more than two decades unblemished
with any derogatory record prior to the infractions at issue in the case at bar.
WHEREFORE, the assailed NLRC Decision dated September 29, 1995 as well as the Resolution dated
November 14, 1995 are AFFIRMED with the MODIFICATIONthat petitioner Philippine Airlines, Inc. pay
private respondent Aida Quijano one-half (1/2) month salary for every year of service as separation pay
on equitable grounds.

SO ORDERED.

Solidbank v. NLRC, G.R. No. 165951, March 30, 2010

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION

SOLIDBANK CORPORATION,
Petitioner,
- versus -

NATIONAL LABOR RELATIONS COMMISSION;

RODOLFO N. BOMBITA, DANILO J. MEDRANO,
DONALD F. MAGLEO, RONALD M. PASIMIO, JOSE R.
PACHECO, ALFREDO TAN, JUSTICE Z. DEMERRE,
SOFIA G. YAP, NICHOLAS DEL ROSARIO, RAMON R.
ABASTA, LUIS S. MASTRILL, REYNALDO E. ALLADO,
DANILO NERY, GRACIANO M. DEL ROSARIO,
GEALDINO M. PARAM, LUCINA D. DE CASTRO,
GLORIA MARAYAG, ROLANDO A. ARIO, BEDELL F.
FERRANCULO, MA. BELLA A. PERALTA, DIONILO M.
MARFIL, TERESITA E. ANGELES, ZENAIDA Q. CAETE,
CHERRY KRISTIN C. BAUTISTA, CECILIA S. ABELLA,
MARIE ABIGAIL TONGSON, MADEMIOSETTE
PRINSIPE, RICARDO APOLINAR, BENJAMIN O.
CASTAEDA, JR., LUIS DEL MORAL, JR., JOSE G.
RICAFORTE, JR., PATRICIA LEE, ENRIQUE T.
CASTELLVI, RENATO P. MALLARI, ESTRELLA LOPEZ,
MOISES ANGELES, ROLANDO CUNDANGAN,
CONRADO GALANG, CLARO I. NEPOMUCENO,
FLORESITA GOCE, ALBERTO CABALLERO, LEONARDO
SANGA, WINIFREDO MARTINEZ, MA. VICTORIA
LABORTE, ROBERTO F. MADRID, EVELYN S. SERVIETO,
MILAGROS MUJER, GIL CABAAS, LILIA CUAN, NORMA
V. GO, IRMA M. MANAOIS, WILFREDO B. REYES,
TESSIE MATEO, RESURECCION SANTOS, BIENVENIDO
M. SILANGIL, GODOFREDO F. DE LEON, NORMAN R.
REYES,
ALFONSO
S.
MORALES,
JR.,
MERCEDITA I. MAGSUMBOL, ROSARIO G. UMALI,
VICENTA LOPEZ, PRISCILLA F. CRUZ, MA. CARMEN A.
YAZON, MARIE EMILLE C. DELA CRUZ, DOROTEA YAP,
RUCIA T. PO, ROMEO C. ROSARIO, RUBEN A.
FELEBRICO, RUBY ROSA M. CARZA, ROBERTO S. DE
GUZMAN, LEONORA T. COMIA, RAMON L. YU,
ERLINDA T. CALUMAG, JANE CUA, FILINO G.
MARQUEZ, JAIME C. CHAM, FELOMINO V. LEGARDA,
JUANITO B. ARCEO, MANUEL B. MANZANO,
ROBERTO T. TUALE, SAMUEL Z. ARCILLA, CLEMENTE
N. AGCAMARAN, BENJAMINA D. MONCADA,
ILDEFENSO F. TAGAYON, CARMELO INAMAC,
MARICEL D. SALIRE, RICARDO M. BONDOC,
ROLANDO M. HALLIG, ROMEO C. BONDOC, HENRY F.

G.R. No. 165951

LEE LEONG, FRANCISCA S. ZABALA, RENE G. ALBANA,

EDUARDO T. JUAN, MERLIN L. VILLASIS, EDWIN O.
CACHO, NICOLAS S. DIAZ, EDUARDO M. LIMBAGA,
JESUS P. TREYES, MAXIMO S. MUOZ, JR., MAYNARDO
B. DYTUCO, AIDA J. PALAFOX, EVANGELINE S.
YANZON, DARIO V. ABOGA, MODESTO V. BALTAZAR,
ROBERTO L. MAPA, ISAURO A. ARELLANO, MAXIMO
D. SUNER, NOMER A. VIDAL, EDUARDO V. ILAGAN,
ROMEO D. MENDOZA, FLORO A. BUSTO, FREDDIE L.
UYACO, JOE M. LICAYU, YODEL C. MORALES,
ALEXANDER V. CABALLERO, HERMIN A. DOLORITO,
EDWARD C. YOUNG, MA. TERESA R. LEGASPI, ELMER
F. CIERVA, ROMEO MERCADO, HUMBERTO S.
RANCO, CONCEPCION S. YADAO, CARLO C. DELA
RIARTE, EDWIN R. ERMITA, RAYMUND NIETES,
JENNIFER T. ABESAMIS, ARNULFO ALVARES, LUISITO
J. ESTEBAN, CONCHITINA C. MESINA, PING CHAN C.
YAO, LARIZA V. LLANES, LEONARDO S. AVELINO, JR.,
JAIME T. ESMERALDA, EDUARDO S. BUENVENTURA,
JOSEFINA M. NIEVES, ERMENILDA P. IGNACIO, MA.
VICTORIA G. CAPULONG, TERESA C. ANDRES, EVELYN
C. DELROSARIO, and CONSOLACION AUREA M.
SAURA,
Respondents.
Present:

CORONA, J., Chairperson,

VELASCO, JR.,
NACHURA,
PERALTA, and
MENDOZA, JJ.

Promulgated:
March 30, 2010
x--------------------------------------------------x

DECISION

PERALTA, J.:
Before this Court is a Petition for Review on certiorari,[1] under Rule 45 of the Rules of Court, seeking to
set aside the May 28, 2004 Decision[2] and October 28, 2004 Resolution[3] of the Court of Appeals (CA), in
CA-G.R. SP No. 76879. The CA awarded financial assistance to respondents Rodolfo Bombita et al. out of

compassionate justice despite the fact that petitioner Solidbank Corporation had already paid the
respondents their separation pay in accordance with Article 283 of the Labor Code.
The facts of the case are as follows:
Sometime in May 2000, petitioner decided to cease its commercial banking operations and forthwith
surrendered to the Bangko Central ng Pilipinas its expanded banking license.As a result of petitioners
decision to cease its operations, 1,867 of its employees would be terminated.
On July 25, 2000, petitioner sent individual letters to its employees, including respondents, advising them
of its decision to cease operations and informing them that their employment would be terminated. The
pertinent portions of said letter are hereunder reproduced, to wit:
With the cessation of the banking operations of Solidbank Corporation and the surrender of its banking
license to the Bangko Sentral ng Pilipinas (BSP), the employment of all Solidbankers will have to be
terminated.
We regret that your services as an employee of Solidbank are hereby terminated, effective the close of
business hours on 31 August 2000. Your separation package will be in accordance with the implementing
guidelines issued to all officers and staff in President/CEO D.N. Vistans Memorandum of 14 July 2000. You
will receive your separation pay only upon release of your clearance, but not later than the effectivity date
of your termination from the Bank.
We wish you success in your future endeavors.[4]

On July 31, 2000, petitioner sent to the Department of Labor and Employment a letter[5] dated July 28,
2000, informing said office of the termination of its employees, the pertinent portions of which read:
In compliance with the provisions of Article 283 of the Labor Code, we would like to inform the
Department of Labor and Employment that Solidbank Corporation will cease operations and surrender its
banking license to the Bangko Sentral ng Pilipinas effective 31 August 2000.
Due to the cessation of the Banks operations, the employment of all officers and staff of Solidbank will be
terminated effective the close of business hours on 31 August 2000. As a result, the Bank will implement
a separation program in accordance with the attached guidelines. The separation package offered to
Solidbankers is more than what is required by law.[6]

Petitioner granted to its employees separation pay equivalent to 150% of gross monthly pay per year of
service, and cash equivalent of earned and accrued vacation and sick leaves as a result of their
dismissal. Upon receipt of their separation pay, the employees of petitioner, including respondents,
individually signed a Release, Waiver, and Quitclaim.[7]
On September 27, 2000, respondents filed with the Labor Arbiter (LA) complaints for illegal dismissal,
underpayment of separation pay, plus damages and attorneys fees, and these were docketed as NLRC
NCR Case Nos. 30-09-03843-00, 30-1004350-00, 30-10-03928-00, 30-10-04200-00, and 30-10-04036-00.

On July 22, 2002, the LA rendered a Decision[8] ruling that respondents were validly terminated from
employment as a result of petitioners decision to cease its banking operations. The LA, however, inspired
by compassionate justice, awarded financial assistance of one months salary to respondents. The
dispositive portion of the Decision reads:
WHEREFORE, the Complaints for illegal dismissal filed by the complainants under the above-stated case
numbers are hereby dismissed for lack of merit. However, inspired by compassionate justice, this Office
hereby orders the respondent Solidbank Corporation to provide each complainant a financial assistance
of one months salary.
Metrobanks motion to dismiss the claim against it for want of jurisdiction is DENIED for lack of merit.

Complainants motion to admit annexes dated March 12, 2001, together with their motions to amend
affidavits/complaints dated January 22, 2001 are hereby GRANTED for being meritorious.
Solidbanks counterclaim is dismissed for lack of merit.
SO ORDERED.[9]
Both parties appealed the LAs Decision to the National Labor Relations Commission (NLRC).
On October 29, 2002, the NLRC rendered a Decision[10] affirming the findings of the LA that respondents
were validly terminated. The NLRC ruled that the closure of a business is an authorized cause sanctioned
under Article 283 of the Labor Code and one that is ultimately a management prerogative. The NLRC,
however, modified the LAs Decision by increasing the amount of financial assistance to two months salary
out of compassionate justice. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the Decision appealed from is affirmed with modification as to the
award of the financial assistance.
SO ORDERED.[11]

Aggrieved by the NLRC Decision, petitioner then appealed to the CA, specifically questioning the grant of
financial assistance to respondents.
On May 28, 2004, the CA rendered a Decision reversing the Decision of the NLRC. The CA shared the view
of the LA that respondents should only be awarded one months salary as financial assistance and not two
months salary as previously decreed by the NLRC. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the assailed Decision is hereby REVERSED, and the 22 July
2002 Decision of the Labor Arbiter is hereby REINSTATED.
SO ORDERED.[12]
Petitioner then filed a motion for reconsideration, which was, however, denied by the CA in a Resolution
dated October 28, 2004.
Hence, herein petition, with petitioner raising the following assignment of errors, to wit:

THERE IS NO LEGAL BASIS FOR THE COURT OF APPEALS AWARD OF FINANCIAL ASSISTANCE EQUIVALENT
TO ONE-MONTHS SALARY TO THE RESPONDENTS AFTER ITS FINDING THAT SOLIDBANK HAS MORE
THAN COMPLIED WITH THE MANDATE OF THE LAW ON PAYMENT OF SEPARATION PAY.[13]
THE AWARD OF FINANCIAL ASSISTANCE CANNOT BE JUSTIFIED ON THE BASIS OF COMPASSIONATE
JUSTICE AND AS A FORM OF EQUITABLE RELIEF.[14]
TO SUSTAIN THE COURT OF APPEALS AWARD OF FINANCIAL ASSISTANCE TO THE 140 VALIDLYDISMISSED RESPONDENTS WOULD RESULT IN A HIGHLY ANOMALOUS SITUATION WHERE THE SAID
RESPONDENTS WOULD BE ACCORDED BETTER BENEFITS THAN OTHER FORMER SOLIDBANK EMPLOYEES
WHO WERE SIMILARLY SITUATED.[15]
The petition is meritorious. The errors being interrelated, this Court shall discuss the same seriatim.
Before anything else, this Court shall first address the allegations raised by respondents in their
Comment,[16] which deal with the issue of the validity of their termination. Respondents, in the main, claim
that their termination was unlawful as petitioner did not really cease its operations.[17] Thus,
notwithstanding their admission that the LA, the NLRC, and the CA all ruled in unison that their
termination was in accordance with law, respondents seek this Courts discretion to reverse such findings.
On this note, it is well settled that this Court is not a trier of facts. To begin with, the question of whether
respondents were dismissed for authorized cause is a question of fact which is beyond the province of a
petition for review on certiorari. It is fundamental that the scope of the Supreme Courts judicial review
under Rule 45 of the Rules of Court is confined only to errors of law. It does not extend to questions of
fact; more so, in labor cases where the doctrine applies with greater force.[18]
The LA and the NLRC have already determined the factual issues, and these were affirmed by the CA. Thus,
they are accorded not only great respect but also finality, and are deemed binding upon this Court so long
as they are supported by substantial evidence. A heavy burden rests upon respondents to convince the
Court that it should take exception from such a settled rule.[19]
Moreover, what is damning to the cause of the respondents is the fact that the issue of the validity of
their dismissal is now already final. As correctly manifested by petitioner, respondents had earlier filed
with this Court a petition for review[20] dated December 28, 2004, docketed as G.R. No. 165985,
entitled Rodolfo Bombita, et al. v. Solidbank Corporation, et al., which questioned the validity of their
termination. A perusal of said petition shows that the issues raised therein are the very same issues
respondents now raise in their Comment. On February 21, 2005, this Courts Second Division issued a
Resolution[21] denying respondents petition for review. On September 20, 2005, an Entry of
Judgment[22] was rendered. Based on the foregoing, the validity of the termination of respondents is an
issue that this Court must no longer look into as a necessary consequence of the denial of their petition
for review before this Court.
Now, going to the issues raised by petitioner, this Court finds the same to be impressed with merit.
Article 283 of the Labor Code provides:

ARTICLE 283. Closure of establishment and reduction of personnel. - The employer may also terminate
the employment of any employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving
a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before
the intended date thereof. In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment
or undertaking not due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. [23]

Based on Article 283, in case of cessation of operations, the employer is only required to pay his
employees a separation pay of one month pay or at least one-half month pay for every year of service,
whichever is higher. That is all that the law requires.
In the case at bar, petitioner paid respondents the following: (a) separation pay computed at 150% of
their gross monthly pay per year of service; and (b) cash equivalent of earned and accrued vacation and
sick leaves. Clearly, petitioner had gone over and above the requirements of the law. Despite this,
however, petitioner has been ordered to pay respondents an additional amount, equivalent to one
months salary, as a form of financial assistance.
The LA awarded the financial assistance out of compassionate justice. The CA affirmed such grant also out
of compassionate justice and as a form of equitable relief for the employees who were suddenly dismissed
due to exigencies of business.[24]
After a thorough consideration of the circumstances at bar, this Court finds that the award of financial
assistance is bereft of legal basis and serves to penalize petitioner who has complied with the
requirements of the law.
It behooves this Court as to why the CA affirmed the grant of financial assistance notwithstanding its
pronouncement that it would be inequitable to allow respondents to receive benefits than those
prescribed by law and jurisprudence, to wit:
In the instant case, both the Labor Arbiter and the NLRC upheld the validity of the dismissal of the
employees and of the quitclaim agreements between the affected employees and employer Solidbank.
However, it was a strange occurrence when the NLRC granted an additional award of separation pay in an
amount equivalent to two months salary to each employee. This means that Solidbank now has the
obligation to pay the employees not only their wages, benefits and other privileges under the law, and
separation pay in an amount equivalent to 150% of their one months pay, but also financial assistance
equivalent to two months pay to each employee. Such a situation cannot be upheld by this Court. As
discussed above, all that the law requires in cases of dismissal due to an authorized cause is that the
employer must pay financial assistance or separation pay in an amount equivalent to one months pay
or one-half months for every year of service, whichever is higher. Solidbank has complied with the
mandate of the law. Hence, it would be unjust and inequitable to allow the employees to receive higher
benefits than those prescribed by the Labor Code and jurisprudence.[25]

Moreover, a review of jurisprudence relating to the application of compassionate and social justice in
granting financial assistance in labor cases shows that the same has been generally used in instances when
an employee has been dismissed for a just cause under Article 282 of the Labor Code and not when an
employee has been dismissed for anauthorized cause under Article 283.
As a general rule, an employee who has been dismissed for any of the just causes enumerated under
Article 282[26] of the Labor Code is not entitled to separation pay.[27]Although by way of exception, the
grant of separation pay or some other financial assistance may be allowed to an employee dismissed for
just causes on the basis of equity.[28]
The reason that the law does not statutorily grant separation pay or financial assistance in instances of
termination due to a just cause is precisely because the cause for termination is due to the acts of the
employee. In such instances, however, this Court, inspired by compassionate and social justice, has in the
past awarded financial assistance to dismissed employees when circumstances warranted such an award.
In Central Philippines Bandag Retreaders, Inc. v. Diasnes,[29] this Court discussed the parameters of
awarding separation pay to dismissed employees as a measure of financial assistance, viz:
To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must demur the award of
separation pay based on social justice when an employees dismissal is based on serious misconduct or
willful disobedience; gross and habitual neglect of duty; fraud or willful breach of trust; or commission of
a crime against the person of the employer or his immediate family -grounds under Art. 282 of the Labor
Code that sanction dismissals of employees. They must be most judicious and circumspect in awarding
separation pay or financial assistance as the constitutional policy to provide full protection to labor is not
meant to be an instrument to oppress the employers. The commitment of the Court to the cause of labor
should not embarrass us from sustaining the employers when they are right, as here. In fine, we should
be more cautious in awarding financial assistance to the undeserving and those who are unworthy of the
liberality of the law.[30]

Thus, in Philippine Commercial International Bank v. Abad,[31] this Court, having considered the
circumstances present therein and as a measure of social justice, awarded separation pay to a dismissed
employee for a just cause under Article 282. The same concession was given by this Court in Aparente, Sr.
v. National Labor Relations Commission[32] and Tanala v. National Labor Relations Commission.[33]
Looking now at Article 283, this Court holds that the same was drafted by the legislature, taking the best
interest of laborers in mind. It is clear that the causes of the termination of an employee under Article 283
are due to circumstances beyond their control, such as when management decides to reduce personnel
based on valid grounds, or when the employer decides to cease operations. Thus, the bias towards labor
is very apparent, as the employer is statutorily required to pay separation pay, the amount of which is
also statutorily prescribed.
While the CA should not be faulted for sympathizing with the plight of respondents as they suddenly lost
their means of livelihood, this Court holds that it is precisely because of the sudden loss of
employment one that is beyond the control of labor that the law statutorily grants separation pay and
dictates how the same should be computed. Thus, any business establishment that decides to cease its

operations has the burden of complying with the law. This Court should refrain from adding more than
what the law requires, as the same is within the realm of the legislature.
It bears to stress, however, that petitioner may, as it has done, grant on a voluntary and ex gratia
basis, any amount more than what is required by the law, but to insist that more financial assistance be
given is certainly something that this Court cannot countenance, as the same serves to penalize petitioner,
which has already given more than what the law requires. Moreover, any award of additional financial
assistance to respondents would put them at an advantage and in a better position than the rest of their
co-employees who similarly lost their employment because of petitioners decision to cease its operations.
Withal, the law, in protecting the rights of the laborers, authorizes neither oppression nor self-destruction
of the employer. While the Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will be automatically decided in favor
of labor. The management also has its own rights, as such, are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for those with less privileges in life, the Supreme Court has
inclined more often than not toward the worker and upheld his cause in his conflicts with the employer.
Such favoritism, however, has not blinded the Court to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and applicable law and doctrine.[34]
WHEREFORE, premises considered, the petition is GRANTED. The May 28, 2004 Decision and October 28,
2004 Resolution of the Court of Appeals, in CA-G.R SP No. 76879, are REVERSED and SET ASIDE.
SO ORDERED.

Escario v. NLRC, G.R. No. 160302, September 27, 2010

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
DANILO ESCARIO,
PANFILO AGAO,
ARSENIO AMADOR,
ELMER COLICO,
ROMANO DELUMEN, DOMINADOR AGUILO,
OLYMPIO GOLOSINO, RICARDO LABAN,
LORETO MORATA,
ROBERTO TIGUE,
GILBERT VIBAR,
THOMAS
MANCILLA,
JR.,
NESTOR
LASTIMOSO,
JIMMY MIRABALLES,

G.R. No. 160302

Present:

CARPIO MORALES, Chairperson

PERALTA,*
BERSAMIN,
VILLARAMA, JR., and

JAILE OLISA, ISIDRO SANCHEZ, ANTONIO SERENO, JJ.

SARCIA, OSCAR CONTRERAS, ROMEO
ZAMORA, MARIANO GAGAL, ROBERTO
MARTIZANO, DOMINGO SANTILLICES, ARIEL
ESCARIO, HEIRS OF FELIX LUCIANO, AND Promulgated:
MALAYANG
SAMAHAN
NG
MGA
MANGGAGAWA SA BALANCED FOODS,
Petitioners,
September 27, 2010
-versus NATIONAL LABOR RELATIONS COMMISSION
(THIRD
DIVISION),
PINAKAMASARAP
CORPORATION,
DR. SY LIAN TIN, AND DOMINGO TAN,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION

BERSAMIN, J.:
Conformably with the long honored principle of a fair days wage for a fair days labor, employees
dismissed for joining an illegal strike are not entitled to backwages for the period of the strike even if they
are reinstated by virtue of their being merely members of the striking union who did not commit any
illegal act during the strike.
We apply this principle in resolving this appeal via a petition for review on certiorari of the decision dated
August 18, 2003 of the Court of Appeals (CA),[1] affirming the decision dated November 29, 2001 rendered
by the National Labor Relations Commission (NLRC) directing their reinstatement of the petitioners to
their former positions without backwages, or, in lieu of reinstatement, the payment of separation pay
equivalent to one-half month per year of service.[2]
Antecedents
The petitioners were among the regular employees of respondent Pinakamasarap Corporation (PINA), a
corporation engaged in manufacturing and selling food seasoning. They were members of petitioner
Malayang Samahan ng mga Manggagawa sa Balanced Foods (Union).

At 8:30 in the morning of March 13, 1993, all the officers and some 200 members of the Union walked
out of PINAs premises and proceeded to the barangay office to show support for Juanito Caete, an officer
of the Union charged with oral defamation by Aurora Manor, PINAs personnel manager, and Yolanda
Fabella, Manors secretary.[3] It appears that the proceedings in the barangay resulted in a settlement, and
the officers and members of the Union all returned to work thereafter.

As a result of the walkout, PINA preventively suspended all officers of the Union because of the March 13,
1993 incident. PINA terminated the officers of the Union after a month.
On April 14, 1993, PINA filed a complaint for unfair labor practice (ULP) and damages. The complaint was
assigned to then Labor Arbiter Raul Aquino, who ruled in his decision dated July 13, 1994 that the March
13, 1993 incident was an illegal walkout constituting ULP; and that all the Unions officers, except Caete,
had thereby lost their employment.[4]
On April 28, 1993, the Union filed a notice of strike, claiming that PINA was guilty of union busting through
the constructive dismissal of its officers.[5] On May 9, 1993, the Union held a strike vote, at which a
majority of 190 members of the Union voted to strike.[6] The strike was held in the afternoon of June 15,
1993.[7]
PINA retaliated by charging the petitioners with ULP and abandonment of work, stating that they had
violated provisions on strike of the collective bargaining agreement (CBA), such as: (a) sabotage by the
insertion of foreign matter in the bottling of company products; (b) decreased production output by
slowdown; (c) serious misconduct, and willful disobedience and insubordination to the orders of the
Management and its representatives; (d) disruption of the work place by invading the premises and
perpetrating commotion and disorder, and by causing fear and apprehension; (e) abandonment of work
since June 28, 1993 despite notices to return to work individually sent to them; and (f) picketing within
the company premises on June 15, 1993 that effectively barred with the use of threat and intimidation
the ingress and egress of PINAs officials, employees, suppliers, and customers. [8]
On September 30, 1994, the Third Division of the National Labor Relations Commission (NLRC) issued a
temporary restraining order (TRO), enjoining the Unions officers and members to cease and desist from
barricading and obstructing the entrance to and exit from PINAs premises, to refrain from committing any
and all forms of violence, and to remove all forms of obstructions such as streamers, placards, or human
barricade.[9]
On November 29, 1994, the NLRC granted the writ of preliminary injunction.[10]
On August 18, 1998, Labor Arbiter Jose G. de Vera (LA) rendered a decision, to wit:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the
subject strike to be illegal.
The complainants prayer for decertification of the respondent union being outside of the jurisdiction of
this Arbitration Branch may not be given due course.
And finally, the claims for moral and exemplary damages for want of factual basis are dismissed.
SO ORDERED.[11]
On appeal, the NLRC sustained the finding that the strike was illegal, but reversed the LAs ruling that there
was abandonment, viz:
However, we disagree with the conclusion that respondents union members should be considered to have
abandoned their employment.
Under Article 264 of the Labor Code, as amended, the union officers who knowingly participate in the
illegal strike may be declared to have lost their employment status. However, mere participation of a

union member in the illegal strike does not mean loss of employment status unless he participates in the
commission of illegal acts during the strike. While it is true that complainant thru individual memorandum
directed the respondents to return to work (pp. 1031-1112, Records) there is no showing that respondents
deliberately refused to return to work. A worker who joins a strike does so precisely to assert or improve
the terms and conditions of his work. If his purpose is to abandon his work, he would not go to the trouble
of joining a strike (BLTB v. NLRC, 212 SCRA 794).
WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED in that complainant
company is directed to reinstate respondents named in the complaint to their former positions but
without backwages. In the event that reinstatement is not feasible complainant company is directed to
pay respondents separation pay at one (1/2) half month per year of service.
SO ORDERED.[12]
Following the denial of their motion for reconsideration, the petitioners assailed the NLRCs decision
through a petition for certiorari in the Court of Appeals (CA),claiming that the NLRC gravely abused its
discretion in not awarding backwages pursuant to Article 279 of the Labor Code, and in not declaring their
strike as a good faith strike.
On August 18, 2003, the CA affirmed the NLRC.[13] In denying the petitioners claim for full backwages, the
CA applied the third paragraph of Article 264(a) instead of Article 279 of the Labor Code, explaining that
the only instance under Article 264 when a dismissed employee would be reinstated with full backwages
was when he was dismissed by reason of an illegal lockout; that Article 264 was silent on the award of
backwages to employees participating in a lawful strike; and that a reinstatement with full backwages
would be granted only when the dismissal of the petitioners was not done in accordance with Article 282
(dismissals with just causes) and Article 283 (dismissals with authorized causes) of the Labor Code.
The CA disposed thus:[14]
WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit and the assailed 29
November 2001 Decision of respondent Commission in NLRC NRC CA No. 009701-95 is hereby
AFFIRMED in toto. No costs.
SO ORDERED.[15]
On October 13, 2003, the CA denied the petitioners motion for reconsideration.[16]
Hence, this appeal via petition for review on certiorari.
Issue
The petitioners posit that they are entitled to full backwages from the date of dismissal until the date of
actual reinstatement due to their not being found to have abandoned their jobs. They insist that the CA
decided the question in a manner contrary to law and jurisprudence.
Ruling

We sustain the CA, but modify the decision on the amount of the backwages in order to accord with equity
and jurisprudence.
I
Third Paragraph of Article 264 (a),
Labor Code, is Applicable

The petitioners contend that they are entitled to full backwages by virtue of their reinstatement, and
submit that applicable to their situation is Article 279, not the third paragraph of Article 264(a), both of
the Labor Code.
We do not agree with the petitioners.
Article 279 provides:
Article 279. Security of Tenure. In 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.

By its use of the phrase unjustly dismissed, Article 279 refers to a dismissal that is unjustly done, that is,
the employer dismisses the employee without observing due process, either substantive or
procedural. Substantive due process requires the attendance of any of the just or authorized causes for
terminating an employee as provided under Article 278 (termination by employer), or Article 283 (closure
of establishment and reduction of personnel), or Article 284 (disease as ground for termination), all of
the Labor Code; while procedural due process demands compliance with the twin-notice requirement.[17]
In contrast, the third paragraph of Article 264(a) states:
Art. 264. Prohibited activities. (a) xxx
Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be
entitled to reinstatement with full backwages. Any union officer who knowingly participates in an illegal
strike and any worker or union officer who knowingly participates in the commission of illegal acts during
a strike may be declared to have lost his employment status; Provided, That mere participation of a worker
in a lawful strike shall not constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike.
xxx
Contemplating two causes for the dismissal of an employee, that is: (a) unlawful lockout; and (b)
participation in an illegal strike, the third paragraph of Article 264(a) authorizes the award of full
backwages only when the termination of employment is a consequence of an unlawful lockout. On the
consequences of an illegal strike, the provision distinguishes between a union officer and a union member
participating in an illegal strike. A union officer who knowingly participates in an illegal strike is deemed

to have lost his employment status, but a union member who is merely instigated or induced to
participate in the illegal strike is more benignly treated. Part of the explanation for the benign
consideration for the union member is the policy of reinstating rank-and-file workers who are misled into
supporting illegal strikes, absent any finding that such workers committed illegal acts during the period of
the illegal strikes.[18]
The petitioners were terminated for joining a strike that was later declared to be illegal. The NLRC ordered
their reinstatement or, in lieu of reinstatement, the payment of their separation pay, because they were
mere rank-and-file workers whom the Unions officers had misled into joining the illegal strike. They were
not unjustly dismissed from work. Based on the text and intent of the two aforequoted provisions of
the Labor Code, therefore, it is plain that Article 264(a) is the applicable one.
II
Petitioners not entitled to backwages
despite their reinstatement:
A fair days wage for a fair days labor

The petitioners argue that the finding of no abandonment equated to a finding of illegal dismissal in their
favor. Hence, they were entitled to full backwages.
The petitioners argument cannot be sustained.
The petitioners participation in the illegal strike was precisely what prompted PINA to file a complaint to
declare them, as striking employees, to have lost their employment status. However, the NLRC ultimately
ordered their reinstatement after finding that they had not abandoned their work by joining the illegal
strike. They were thus entitled only to reinstatement, regardless of whether or not the strike was the
consequence of the employers ULP,[19] considering that a strike was not a renunciation of the employment
relation.[20]
As a general rule, backwages are granted to indemnify a dismissed employee for his loss of earnings during
the whole period that he is out of his job. Considering that an illegally dismissed employee is not deemed
to have left his employment, he is entitled to all the rights and privileges that accrue to him from the
employment.[21] The grant of backwages to him is in furtherance and effectuation of the public objectives
of the Labor Code, and is in the nature of a command to the employer to make a public reparation for his
illegal dismissal of the employee in violation of the Labor Code.[22]
That backwages are not granted to employees participating in an illegal strike simply accords with the
reality that they do not render work for the employer during the period of the illegal strike.[23] According
to G&S Transport Corporation v. Infante:[24]
With respect to backwages, the principle of a fair days wage for a fair days labor remains as the basic
factor in determining the award thereof. If there is no work performed by the employee there can be no
wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked
out, suspended or dismissed or otherwise illegally prevented from working. xxx In Philippine Marine
Officers Guild v. Compaia Maritima, as affirmed in Philippine Diamond Hotel and Resort v. Manila Diamond
Hotel Employees Union, the Court stressed that for this exception to apply, it is required that the strike
be legal, a situation that does not obtain in the case at bar. (emphasis supplied)

The petitioners herein do not deny their participation in the June 15, 1993 strike. As such, they did not
suffer any loss of earnings during their absence from work. Their reinstatement sans backwages is in
order, to conform to the policy of a fair days wage for a fair days labor.
Under the principle of a fair days wage for a fair days labor, the petitioners were not entitled to the wages
during the period of the strike (even if the strike might be legal), because they performed no work during
the strike. Verily, it was neither fair nor just that the dismissed employees should litigate against their
employer on the latters time.[25]Thus, the Court deleted the award of backwages and held that the striking
workers were entitled only to reinstatement in Philippine Diamond Hotel and Resort, Inc. (Manila
Diamond Hotel) v. Manila Diamond Hotel Employees Union,[26] considering that the striking employees did
not render work for the employer during the strike.
III
Appropriate Amount for Separation Pay
Is One Month per Year of Service

The petitioners were ordered reinstated because they were union members merely instigated or induced
to participate in the illegal strike. By joining the strike, they did not renounce their employment relation
with PINA but remained as its employees.
The absence from an order of reinstatement of an alternative relief should the employer or a supervening
event not within the control of the employee prevent reinstatement negates the very purpose of the
order. The judgment favorable to the employee is thereby reduced to a mere paper victory, for it is all too
easy for the employer to simply refuse to have the employee back. To safeguard the spirit of social justice
that the Court has advocated in favor of the working man, therefore, the right to reinstatement is to be
considered renounced or waived only when the employee unjustifiably or unreasonably refuses to return
to work upon being so ordered or after the employer has offered to reinstate him.[27]
However, separation pay is made an alternative relief in lieu of reinstatement in certain circumstances,
like: (a) when reinstatement can no longer be effected in view of the passage of a long period of time or
because of the realities of the situation; (b) reinstatement is inimical to the employers interest; (c)
reinstatement is no longer feasible; (d) reinstatement does not serve the best interests of the parties
involved; (e) the employer is prejudiced by the workers continued employment; (f) facts that make
execution unjust or inequitable have supervened; or (g) strained relations between the employer and
employee.[28]
Here, PINA manifested that the reinstatement of the petitioners would not be feasible because: (a) it
would inflict disruption and oppression upon the employer; (b) petitioners [had] stayed away for more
than 15 years; (c) its machines had depreciated and had been replaced with newer, better ones; and (d)
it now sold goods through independent distributors, thereby abolishing the positions related to sales and
distribution.[29]
Under the circumstances, the grant of separation pay in lieu of reinstatement of the petitioners was
proper. It is not disputable that the grant of separation pay or some other financial assistance to an
employee is based on equity, which has been defined as justice outside law, or as being ethical rather
than jural and as belonging to the sphere of morals than of law.[30] This Court has granted separation pay

as a measure of social justice even when an employee has been validly dismissed, as long as the dismissal
has not been due to serious misconduct or reflective of personal integrity or morality.[31]
What is the appropriate amount for separation pay?
In G & S Transport,[32] the Court awarded separation pay equivalent to one month salary per year of
service considering that 17 years had passed from the time when the striking employees were refused
reinstatement. In Association of Independent Unions in the Philippines v. NLRC,[33] the Court allowed
separation pay equivalent to one month salary per year of service considering that eight years had elapsed
since the employees had staged their illegal strike.
Here, we note that this case has dragged for almost 17 years from the time of the illegal strike. Bearing in
mind PINAs manifestation that the positions that the petitioners used to hold had ceased to exist for
various reasons, we hold that separation pay equivalent to one month per year of service in lieu of
reinstatement fully aligns with the aforecited rulings of the Court on the matter.
WHEREFORE, we affirm the decision dated August 18, 2003 of the Court of Appeals, subject to the
modification to the effect that in lieu of reinstatement the petitioners are granted backwages equivalent
of one month for every year of service.
SO ORDERED.

Motorola Phils. v. Ambrocio G.R. No. 173279, March 20, 2009

DECISION

CARPIO MORALES, J.:

On petition for review on certiorari is the Court of Appeals March 1, 2006 Resolution1 and June 27,
2006 Resolution2 reinstating the appeal of respondent Imelda B. Ambrocio and 2353 other
respondents from the December 13, 2004 Resolution4 and September 30, 2005 Resolution5 of the
National Labor Relations Commission (NLRC) in NLRC RAB IV Case Nos. 4-13771-01-C, and 413772-01-C.
Culled from the five-volume records of the case are the following undisputed facts:
Sometime in 1997, Motorola Philippines, Inc. (MPI), a subsidiary of Motorola U.S., decided to close
its Paraaque plant in order to consolidate its operations at its Carmona, Cavite plant. It thus offered
to its affected employees a redundancy/separation package consisting of the following benefits and
emoluments:
1) separation pay equivalent to two months salary per year of service;
2) two-year health insurance policy;

3) one-year life insurance policy;

4) cost of stock liquidation transactions on the employees stock options;
5) orientation program on fund management; and
6) orientation program and training on livelihood options.
Out of about 900 employees who availed of the package and were consequently separated from
employment on July 24, 1998 when MPIs Paraaque plant finally closed shop, 236 employees
including respondents herein, filed on July 24, 2001 two separate complaints against MPI, for
payment of retirement pay equivalent to one month salary per year of service, alleging that they
were entitled thereto under Sec. III-B of MPIs Retirement Plan.6
For its part, MPI alleged that the applicable retirement plan was not Sec. III-B, but Policy 1215,
specifically Sec. III par. 6 thereof which reads:
In case of voluntary separation from the company due to Labor Saving devices or redundancy,
retrenchment program initiated by the Company as a result of a merger or to prevent losses or other
similar causes, the company shall provide a separation pay equivalent to one (1) months pay per
year of service, inclusive of any service benefit eligibility under the Retirement Plan.7 (Italics and
underscoring supplied)
MPI thus insisted that respondents had already received such one-month pay, the same having
been included in the cash component of the separation/redundancy package, which consisted of
two-months pay per year of service, paid to them.
Labor Arbiter Waldo Emerson Gan, by Decision8 of December 16, 2002, found MPI and its officers
liable to respondents for the payment of "retirement pay service benefits" under Sec. III-B of the
Retirement Plan, as well as for interest thereon at 15% per annum, moral and exemplary damages
equivalent to 25% of the total monetary award in each case, and attorneys fees equivalent to 15%
of the total monetary award in each case.
In arriving at the decision, the Arbiter noted that retirement pay is separate and distinct from
separation pay, hence, respondents were entitled to their claim of another separate one-month pay
per year of service; that Policy 1215 was unfair; and that the quitclaims and waivers signed by
respondents were void for they were forced and defrauded into signing them.
MPI appealed to the NLRC, which move was opposed by respondents, they alleging that the appeal
was not perfected since the surety bond was filed not by MPI but by Motorola Communications
Philippines, Inc. (MCPI) "for and in behalf of Motorola Philippines, Inc. and/or SCG Corporation," and
that the initial amount of the bond posted was insufficient, being way below the amount of the total
monetary award.
Respondents opposition notwithstanding, the NLRC gave due course to MPIs appeal by Resolution
of December 13, 2004, it holding that there is nothing in the law which requires that only the
employer can post the appeal bond in order to perfect it, hence, MCPI was not precluded from filing
the same on behalf of MPI and/or SCG Corporation.
The NLRC further held that the "rationale behind the requirement for the posting of an appeal bond
to perfect an appeal is to guarantee the payment of the employees valid and legal claims against

any occurrence, during the pendency of the appeal, that would defeat or diminish recovery under the
appealed judgment if it is subsequently affirmed," and this was complied with by MCPIs filing of the
appeal bond in favor of MPI.
Moreover, the NLRC gave credence to MPIs explanation that prior to MPIs transfer of ownership to
SCG Corporation, it was a sister company of MCPI, and the posting of the appeal bond by MCPI in
favor of MPI/SCG Corporation was in fact in compliance with the indemnity agreement Motorola,
Inc., MCPIs parent company, entered into with SCG that SCG would be free from any and all
liability arising from or related to the claims of MPIs former employees who were separated when
SCG acquired its business.
Respecting the merits of the appeal, the NLRC held that MPI was not liable for payment of the socalled "retirement service benefits" under Sec. III-B of the Retirement Plan, consistent with its earlier
findings in "Fe de Vera, et al. v. Motorola Philippines, Inc., et al., and Yolanda Rombaon, et al. v.
Motorola Philippines, Inc. cases filed by former employees of MPI which it decided on appeal.
In granting MPIs appeal and dismissing the complaint of respondents, the NLRC held that the
benefits received by respondents for involuntary separation under MPIs retirement plan included
the service pay benefits under either Sec. III-B of the Retirement Plan or Policy 1215 which both
grant exactly the same benefit in case of involuntary separation one months pay for every year of
service.
The NLRC added that retirement pay is due only if an employee retires, and since none of
respondents retired but were actually involuntarily separated due to redundancy, then they cannot
avail of such pay.
The NLRC thus concluded that since respondents availed of the separation package consisting of
two months pay for every year of service (as well as other emoluments) under MPIs retirement plan
and Article 283 of the Labor Code, as amended, they no longer have any cause of action.
Contrary to the arbiters observation, the NLRC held that Policy 1215 was fair, for it did not revoke
nor reduce any of the benefits granted under Sec. III-B of the Retirement Plan.
On the quitclaims and waivers executed by respondents, the NLRC found the same to be valid, it
noting that respondents were given every opportunity to ask questions and review them in
connection with the redundancy program through the meetings and seminars held, and pamphlets
and other materials were in fact distributed and explained to them by MPIs officers.
The NLRC deleted the arbiters award of damages and attorneys fees, finding no basis therefor.
And with respect to the complaint of the four respondents namely Conchita V. Consibido, Violeta P.
Guevarra, Liza Moya and Mila Samortin, the NLRC held that their cause of action had prescribed,
their complaints having been filed three (3) years and one day from the time they were separated.
Finally, the NLRC rebuked the arbiter for granting monetary claims to persons, who were not listed
as complainants in the two complaints, also named as respondents herein, viz: Rizalino Bancoleta,
Elizabeth Sunga, Eva Bancoleta, Imelda de Villa, Maria Riza Berni, and Minda San Pablo.
Their motion for reconsideration having been denied by Resolution dated September 30, 2005,
respondents appealed to the Court of Appeals.

Initially, the appellate court dismissed the petition by Resolution9 promulgated on January 10, 2006
on the following technicalities: the signatory to the certification against non-forum shopping had no
apparent authorization; the copies of the assailed NLRC resolutions appended to the petition were
not certified true copies; and the copy of MPIs reply to the opposition as mentioned in the petition
was not attached as required under Section 3 of Rule 46.
However, by the first challenged Resolution of March 1, 2006, the appellate court reinstated the
petition on respondents motion for reconsideration.
MPI filed a motion for reconsideration of the said Resolution of March 1, 2006, questioning the
reinstatement of the petition, noting10 that respondents motion for reconsideration was filed out of
time on February 8, 2006 or 11 days after the January 10, 2006 Resolution was received by
respondents on January 13, 2006. MPI concluded that since respondents motion for reconsideration
was filed out of time, then the January 10, 2006 Resolution dismissing the petition had attained
finality.
MPI, in any event, pointed out that the petition remained defective for the following reasons: the
certification against forum shopping was signed by one Fe de Vera who is not a party to the case nor
was authorized to sign it, ostensibly to "simplify the tedious individual signing of several legal
documents," and the belated submission of the special power of attorneys (SPAs) in favor of de Vera
did not cure the defect; the SPAs are dubious; and there was no explanation as to the belated filing
of the Motion for Reconsideration as required under the Rules.
The appellate court, by Resolution dated June 27, 2006, denied MPIs motion for reconsideration,
justifying its reinstatement of the petition with the fact that the petition was filed by more than a
hundred complainants, hence, impressed it with a strong public interest warranting a suspension of
the Rules in line with Amorganda v. CA.11
Hence, the instant petition for review on certiorari wherein MPI faults the appellate court to have
committed grave abuse of discretion in reinstating respondents petition, and in, among other things,
applying the Amorganda ruling given that respondents did not give any explanation at all for their
belated filing of their Motion for Reconsideration.
And MPI maintains that the attachments to the Motion for Reconsideration did not cure the fatal
defects in the petition.
The petition is impressed with merit.
Procedural rules are not to be belittled or dismissed simply because their non-observance may have
resulted in prejudicing a partys substantive rights. The bare invocation of "substantial justice" is not
a magic wand that will compel the court to suspend the rules of procedure. Rather, the appellate
court needs to assess if the appeal is absolutely meritorious on its face. Only after such finding, can
it ease the often stringent rules of procedure.12 (Emphasis supplied)
In the present case, aside from the appellate courts declaration that the fact that the "case has been
filed by more than a hundred petitioners is sufficient to impress it with a strong public interest," no
compelling reason was proffered to justify the acceptance of respondents motion for reconsideration
which was admittedly filed out of time or 11 days beyond the reglementary period.
It is a hornbook doctrine that the 15-day reglementary period for filing a motion for reconsideration is
non-extendible. Provisions of the Rules of Court prescribing the time within which certain acts must
be done or certain proceedings taken are considered absolutely indispensable to the prevention of

needless delays and to the orderly and speedy discharge of judicial businesses and strict
compliance with such rules is mandatory and imperative.13
The citation by the appellate court of the ruling in Amorganda is misplaced. In Amorganda, the Court
stated that the therein petitioners motion for reconsideration which was filed two calendar days late
should have been given due course by the appellate court, as the counsels mistaken belief that the
last day for filing the motion, a Saturday, was a legal holiday, is pardonable.14 The Court went on to
note that "anyway, the delay of two (2) calendar days one of which was a Sunday- in the filing of
the motion for reconsideration did not prejudice the cause of private respondents, or that said private
respondents suffered material injury by reason of the delay," and that "private respondents who
appear to be guilty of coercion, stand to unjustly profit from their fraudulent and deceitful act at the
expense of petitioners."15
1avvphi 1

In the case at bar, not only was there a considerable delay of 11 days beyond the 15-day
reglementary period;no explanation therefor was proffered by respondents. That respondents
numbered more than a hundred does not, per se, justify the relaxation of procedural rules.
The unexplained delay in the filing of respondents motion for reconsideration before the appellate
court is not just a technical lapse which can be excused. More importantly, it is a jurisdictional defect
to thus render the January 10, 2006 Resolution final and executory. As such, the appellate court
erred in taking cognizance of the motion for reconsideration.
Technicality aside, on the merits, respondents have no cause of action as against petitioners with
respect to their claim for additional retirement benefits. Article 283 of the Labor Code, as amended,
provides:
ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate
the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the [Department] of Labor and Employment at least one
(1) month before the intended date thereof. In case of termination due to the installation of laborsaving devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation
of operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year." (Emphasis supplied)
Separation pay has been defined as the amount that an employee receives at the time of his
severance and is designed to provide the employee with the wherewithal during the period he is
looking for another employment,16 and is recoverable only in the instances enumerated under
Articles 283 and 284 of the Labor Code, as amended, or in illegal dismissal cases when
reinstatement is no longer possible.
Retirement pay, on the other hand, presupposes that the employee entitled to it has reached the
compulsory retirement age or has rendered the required number of years as provided for in the
collective bargaining agreement (CBA), the employment contract or company policy, or in the
absence thereof, in Republic Act No. 7641 or the Retirement Law.

It is admitted that respondents were terminated pursuant to a redundancy, and not due to retirement
program, hence, they were entitled to a separation pay of one month salary per year of service.
As correctly ruled by the NLRC, by whatever version of MPIs Retirement Plan would be made
applicable, respondents are entitled to a separation pay of one month salary per year of service.
Under Sec. III-B of the Plan on which respondents rely, "[i]n case of involuntary separation with the
company due to retrenchment/redundancy, the employee shall be given a service benefit equivalent
to one month per year of service." On the other hand, based on Policy 1215 on which MPI relies,
under the same circumstances, the company shall provide its employee a separation pay equivalent
to one (1) months pay per year of service, inclusive of any service benefit eligibility under the
Retirement Plan.
Thus, when respondents were paid a separation pay of two months salary for every year of service
under the Redundancy Package, they already received what was due them under the law and in
accordance with MPIs plan.
WHEREFORE, the petition of Motorola is hereby GRANTED. The Resolution of the Court of Appeals
dated March 1, 2006 and its Resolution dated June 27, 2006 are SET ASIDE. Respondents petition
for certiorari is DISMISSED.
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice

Sec. 6, R.A. 9231

Section 6. Section 16 of the same Act, is hereby amended to read as follows:

"Sec. 16. Penal Provisions "a) Any employer who violates Sections 12, 12-A, and Section 14 of this act, as amended, shall be
penalized by imprisonment of six (6) months and one (1) day to six (6) years or a fine of not less than
Fifty thousand pesos (P50,000.00) but not more than Three hundred thousand pesos (P300,000.00) or
both at the discretion of the court.
"b) Any person who violates the provision of Section 12-D of this act or the employer of the
subcontractor who employs, or the one who facilitates the employment of a child in hazardous work,
shall suffer the penalty of a fine of not less than One hundred thousand pesos (P100,000.00) but not
more than One million pesos (P1,000,000.00), or imprisonment of not less than twelve (12) years and
one (1) day to twenty (20) years, or both such fine and imprisonment at the discretion of the court.
"c) Any person who violates Sections 12-D(1) and 12-D(2) shall be prosecuted and penalized in
accordance with the penalty provided for by R. A. 9208 otherwise known as the "Anti-trafficking in
Persons Act of 2003": Provided, That Such penalty shall be imposed in its maximum period.

"d) Any person who violates Section 12-D (3) shall be prosecuted and penalized in accordance with R.A.
9165, otherwise known as the "Comprehensive Dangerous Drugs Act of 2002"; Provided, That such
penalty shall be imposed in its maximum period.
"e) If a corporation commits any of the violations aforecited, the board of directors/trustees and
officers, which include the president, treasurer and secretary of the said corporation who participated in
or knowingly allowed the violation, shall be penalized accordingly as provided for under this Section.
"f) Parents, biological or by legal fiction, and legal guardians found to be violating Sections 12, 12-A, 12-B
and 12-C of this Act shall pay a fine of not less than Ten thousand pesos (P10,000.00) but not more than
One hundred thousand pesos (P100,000.00), or be required to render community service for not less
than thirty (30) days but not more than one (1) year, or both such fine and community service at the
discretion of the court: Provided, That the maximum length of community service shall be imposed on
parents or legal guardians who have violated the provisions of this Act three (3) times; Provided, further,
That in addition to the community service, the penalty of imprisonment of thirty (30) days but not more
than one (1) year or both at the discretion of the court, shall be imposed on the parents or legal
guardians who have violated the provisions of this Act more than three (3) times.
"g) The Secretary, of Labor and Employment or his/her duly authorized representative may, after due
notice and hearing, order the closure of any business firm or establishment found to have violated any
of the provisions of this Act more than three (3) times. He/she shall likewise order the immediate
closure of such firm or establishment if:
"(1) The violation of any provision of this Act has resulted in the death, insanity or serious physical injury
of a child employed in such establishment; or
"(2) Such firm or establishment is engaged or employed in prostitution or in obscene or lewd shows.
"h) In case of such closure, the employer shall be required to pay the employee(s) the separation pay
and other monetary benefits provided for by law."

Retirement Pay

Art. 287, Labor Code

Article 287. Retirement. Any employee may be retired upon reaching the retirement age established in
the collective bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have
earned under existing laws and any collective bargaining agreement and other agreements: Provided,
however, That an employees retirement benefits under any collective bargaining and other agreements
shall not be less than those provided therein.
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five
(65) years which is hereby declared the compulsory retirement age, who has served at least five (5)
years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least

one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being
considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean
fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more
than five (5) days of service incentive leaves.
Retail, service and agricultural establishments or operations employing not more than ten (10)
employees or workers are exempted from the coverage of this provision.
Violation of this provision is hereby declared unlawful and subject to the penal provisions under Article
288 of this Code.

Serrano v. Santos Transit, G.R. No. 187698, August 9, 2010

THIRD DIVISION

RODOLFO J. SERRANO,
Petitioner,

G.R. No. 187698

Present:

- versus -

CARPIO MORALES, J., Chairperson,

BRION,
BERSAMIN,
ABAD,* and
VILLARAMA, JR., JJ.

SEVERINO SANTOS TRANSIT and/or SEVERINO Promulgated:

SANTOS,
Respondents.
August 9, 2010
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CARPIO MORALES, J.:

Petitioner Rodolfo J. Serrano was hired on September 28, 1992 as bus conductor by respondent Severino
Santos Transit, a bus company owned and operated by its co-respondent Severino Santos.
After 14 years of service or on July 14, 2006, petitioner applied for optional retirement from the company
whose representative advised him that he must first sign the already prepared Quitclaim before his
retirement pay could be released. As petitioners request to first go over the computation of his retirement

pay was denied, he signed the Quitclaim on which he wrote U.P. (under protest) after his signature,
indicating his protest to the amount of P75,277.45 which he received, computed by the company at 15
days per year of service.
Petitioner soon after filed a complaint[1] before the Labor Arbiter, alleging that the company erred in its
computation since under Republic Act No. 7641, otherwise known as the Retirement Pay Law, his
retirement pay should have been computed at 22.5 days per year of service to include the cash equivalent
of the 5-day service incentive leave (SIL) and 1/12 of the 13th month pay which the company did not.
The company maintained, however, that the Quitclaim signed by petitioner barred his claim and, in any
event, its computation was correct since petitioner was not entitled to the 5-day SIL and pro-rated
13th month pay for, as a bus conductor, he was paid on commission basis. Respondents, noting that the
retirement differential pay amounted to onlyP1,431.15, explained that in the computation of petitioners
retirement pay, five months were inadvertently not included because some index cards containing his
records had been lost.
By Decision[2] of February 15, 2007, Labor Arbiter Cresencio Ramos, Jr. ruled in favor of petitioner,
awarding him P116,135.45 as retirement pay differential, and 10% of the total monetary award as
attorneys fees. In arriving at such computation, the Labor Arbiter ratiocinated:
In the same Labor Advisory on Retirement Pay Law, it was likewise decisively made clear that the law
expanded the concept of one-half month salary from the usual one-month salary divided by two, to wit:
B. COMPUTATION OF RETIREMENT PAY
A covered employee who retires pursuant to RA 7641 shall be entitled to retirement pay equivalent to at
least one-half (1/12) month salary for every year of service, a fraction of at least six (6) months being
considered as one whole year.
The law is explicit that one-half month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the
13th month pay and the cash equivalent of not more than five (5) days service incentive leaves unless the
parties provide for broader inclusions. Evidently, the law expanded the concept of one-half month salary
from the usual one-month salary divided by two.
The retirement pay is equal to half-months pay per year of service. But half-months pay is expanded
because it means not just the salary for 15 days but also one-twelfth of the 13th-month pay and the cash
value of five-day service incentive leave. THIS IS THE MINIMUM. The retirement pay package can be
improved upon by voluntary company policy, or particular agreement with the employee, or through a
collective bargaining agreement. (The Labor Code with Comments and Cases, C.A. Azcunea, Vol. II, page
765, Fifth Edition 2004).
Thus, having established that 22.5 days pay per year of service is the correct formula in arriving at the
complete retirement pay of complainant and inasmuch as complainants daily earning is based on
commission earned in a day, which varies each day, the next critical issue that needs discernment is the
determination of what is a fair and rational amount of daily earning of complainant to be used in the
computation of his retirement pay.

While complainant endeavored to substantiate his claim that he earned average daily commission
of P700.00, however, the documents he presented are not complete, simply representative copies,
therefore unreliable. On the other haNd, while respondents question complainants use of P700.00 (daily
income) as basis in determining the latters correct retirement pay, however it does not help their defense
that they did not present a single Conductors Trip Report to contradict the claim of complainant. Instead,
respondents adduced a handwritten summary of complainants monthly income from 1993 until June
2006. It must be noted also that complainant did not contest the amounts stated on the summary of his
monthly income as reported by respondents. Given the above considerations, and most importantly that
complainant did not dispute the figures stated in that document, we find it logical, just and equitable for
both parties to rely on the summary of monthly income provided by respondent, thus, we added
complainants monthly income from June 2005 until June 2006 or the last twelve months and we arrived
atP189,591.30) and we divided it by twelve (12) to arrive at complainants average monthly earning
of P15,799.28. Thereafter, the average monthly of P15,799.28 is divided by twenty-six (26) days, the
factor commonly used in determining the regular working days in a month, to arrive at his average daily
income of P607.66. Finally, P607.66 (average daily income) x 22.5 days =P13,672.35 x 14 (length of
service) = P191,412.90 (COMPLETE RETIREMENT PAY). However, inasmuch as complainant already
received P75,277.45,
the
retirement
differential
pay
due
him
is P116,135.45
(P191,412.90 P75,277.45). (underscoring partly in the original and partly supplied)

The National Labor Relations Commission (NLRC) to which respondents appealed reversed the Labor
Arbiters ruling and dismissed petitioners complaint by Decision[3]dated April 23, 2008. It, however,
ordered respondents to pay retirement differential in the amount of P2,365.35.
Citing R & E Transport, Inc. v. Latag,[4] the NLRC held that since petitioner was paid on purely commission
basis, he was excluded from the coverage of the laws on 13thmonth pay and SIL pay, hence, the 1/12 of the
13th month pay and the 5-day SIL should not be factored in the computation of his retirement pay.
Petitioners motion for reconsideration having been denied by Resolution[5] of June 27, 2008, he appealed
to the Court of Appeals.
By the assailed Decision[6] of February 11, 2009, the appellate court affirmed the NLRCs ruling, it merely
holding that it was based on substantial evidence, hence, should be respected.
Petitioners motion for reconsideration was denied, hence, the present petition for review on certiorari.
The petition is meritorious.
Republic Act No. 7641 which was enacted on December 9, 1992 amended Article 287 of the Labor Code
by providing for retirement pay to qualified private sector employees in the absence of any retirement
plan in the establishment. The pertinent provision of said law reads:
Section 1. Article 287 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code
of the Philippines, is hereby amended to read as follows:
xxxx

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixtyfive (65) years which is hereby declared the compulsory retirement age, who has served at least five (5)
years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered
as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean
fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than
five (5) days of service incentive leaves.
Retail, service and agricultural establishments or operations employing not more than (10) employees
or workers are exempted from the coverage of this provision.
x x x x (emphasis and underscoring supplied)
Further, the Implementing Rules of said law provide:

RULE II
Retirement Benefits
SECTION 1.
General Statement on Coverage. This Rule shall apply to all employees in the private sector, regardless
of their position, designation or status and irrespective of the method by which their wages are paid,
except to those specifically exempted under Section 2 hereof. As used herein, the term Act shall refer to
Republic Act No. 7641 which took effect on January 7, 1993.
SECTION 2
Exemptions. This Rule shall not apply to the following employees:
2.1 Employees of the National Government and its political subdivisions, including Government-owned
and/or controlled corporations, if they are covered by the Civil Service Law and its regulations.
2.2 Domestic helpers and persons in the personal service of another.
2.3 Employees of retail, service and agricultural establishment or operations regularly employing not
more than ten (10) employees. As used in this sub-section;
xxxx

SECTION 5
Retirement Benefits.
5.1 In the absence of an applicable agreement or retirement plan, an employee who retires pursuant to
the Act shall be entitled to retirement pay equivalent to at least one-half () month salary for every year
of service, a fraction of at least six (6) months being considered as one whole year.

5.2 Components of One-half () Month Salary. For the purpose of determining the minimum retirement
pay due an employee under this Rule, the term one-half month salary shall include all of the following:
(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used herein, the term
salary includes all remunerations paid by an employer to his employees for services rendered during
normal working days and hours, whether such payments are fixed or ascertained on a time, task, piece
of commission basis, or other method of calculating the same, and includes the fair and reasonable value,
as determined by the Secretary of Labor and Employment, of food, lodging or other facilities customarily
furnished by the employer to his employees. The term does not include cost of living allowances, profitsharing payments and other monetary benefits which are not considered as part of or integrated into the
regular salary of the employees.
(b) The cash equivalent of not more than five (5) days of service incentive leave;
(c) One-twelfth of the 13th month pay due the employee.
(d) All other benefits that the employer and employee may agree upon that should be included in the
computation of the employees retirement pay.
x x x x (emphasis supplied)

Admittedly, petitioner worked for 14 years for the bus company which did not adopt any retirement
scheme. Even if petitioner as bus conductor was paid on commission basis then, he falls within the
coverage of R.A. 7641 and its implementing rules. As thus correctly ruled by the Labor Arbiter, petitioners
retirement pay should include the cash equivalent of the 5-day SIL and 1/12 of the 13th month pay.
The affirmance by the appellate court of the reliance by the NLRC on R & E Transport, Inc. is erroneous. In
said case, the Court held that a taxi driver paid according to theboundary system is not entitled to the
13th month and the SIL pay, hence, his retirement pay should be computed on the sole basis of his salary.
For purposes, however, of applying the law on SIL, as well as on retirement, the Court notes that there is
a difference between drivers paid under the boundary system and conductors who are paid on
commission basis.
In practice, taxi drivers do not receive fixed wages. They retain only those sums in excess of the boundary
or fee they pay to the owners or operators of the vehicles.[7]Conductors, on the other hand, are paid a
certain percentage of the bus earnings for the day.
It bears emphasis that under P.D. 851 or the SIL Law, the exclusion from its coverage of workers who are
paid on a purely commission basis is only with respect to field personnel. The more recent case of Auto
Bus Transport Systems, Inc., v. Bautista[8] clarifies that an employee who is paid on purely commission
basis is entitled to SIL:
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive
leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to
those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules,
Service Incentive Leave shall not apply to employees classified as field personnel. The phrase other
employees whose performance is unsupervised by the employer must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather, it serves as an

amplification of the interpretation of the definition of field personnel under the Labor Code as those
whose actual hours of work in the field cannot be determined with reasonable certainty.

The same is true with respect to the phrase those who are engaged on task or contract basis,
purely commission basis. Said phrase should be related with field personnel, applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms
that they follow. Hence, employees engaged on task or contract basis or paid on
purely commission basis are not automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel.
xxxx
According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural 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. This
definition is further elaborated in the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine
Technical-Clerical Commercial Employees Association which states that:
As a general rule, [field personnel] are those whose performance of their job/service is not supervised by
the employer or his representative, the workplace being away from the principal office and whose hours
and days of work cannot be determined with reasonable certainty; hence, they are paid specific amount
for rendering specific service or performing specific work. If required to be at specific places at specific
times, employees including drivers cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employee.
x x x x (emphasis, italics and underscoring supplied)
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision of February 11, 2009 and
Resolution of April 28, 2009 are REVERSED and SET ASIDE and the Labor Arbiters Decision dated February
15, 2007 is REINSTATED.
SO ORDERED.

Eligir v. PAL, G.R. No. 181995, July 16, 2012

G.R. No. 181995

July 16, 2012

BIBIANO C. ELEGIR, Petitioner,

vs.
PHILIPPINE AIRLINES, INC., Respondent.
DECISION
REYES, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set
aside the Decision1 dated August 6, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 79111, which
reversed and set aside the Decision2 dated March 18, 2002 and Order3 dated June 30, 2003 of the
National Labor Relations Commission (NLRC) in NLRC NCR Case No. 00-08-06135-97 and NLRC NCR CA
No. 015030-98.
Factual Antecedents
As culled from the records, the instant case stemmed from the following factual antecedents:
Petitioner Bibiano C. Elegir (petitioner) was hired by Philippine Airlines, Inc. (PAL) as a commercial pilot,
specifically designated as HS748 Limited First Officer, on March 16, 1971.4
In 1995, PAL embarked on a refleeting program and acquired new and highly sophisticated aircrafts.
Subsequently, it sent an invitation to bid to all its flight deck crew, announcing the opening of eight (8)
B747-400 Captain positions that were created by the refleeting program. The petitioner, who was then
holding the position of A-300 Captain, submitted his bid and was fortunately awarded the same.5 The
petitioner, together with seven (7) other pilots, was sent for training at Boeing in Seattle, Washington,
United States of America on May 8, 1995, to acquire the necessary skills and knowledge in handling the
new aircraft. He completed his training on September 19, 1995.6
On November 5, 1996, after rendering twenty-five (25) years, eight (8) months and twenty (20) days of
continuous service, the petitioner applied for optional retirement authorized under the Collective
Bargaining Agreement (CBA) between PAL and the Airline Pilots Association of the Philippines (ALPAP),
in which he was a member of good standing. In response, PAL asked him to reconsider his decision,
asseverating that the company has yet to recover the full value of the costs of his training. It warned him
that if he leaves PAL before he has rendered service for at least three (3) years, it shall be constrained to
deduct the costs of his training from his retirement pay.7
On November 6, 1996, the petitioner went on terminal leave for thirty (30) days and thereafter made
effective his retirement from service. Upon securing his clearance, however, he was informed that the
costs of his training will be deducted from his retirement pay, which will be computed at the rate
of P 5,000.00 per year of service. The petitioner, through his counsel, sent PAL a correspondence,
asserting that his retirement benefits should be based on the computation stated in Article 287 of the
Labor Code, as amended by Republic Act (R.A.) No. 7641, and that the costs of his training should not be
deducted therefrom. In its Reply dated August 4, 1997, PAL refused to yield to the petitioners demand
and maintained that his retirement pay should be based on PAL-ALPAP Retirement Plan of 1967 (PALALPAP Retirement Plan) and that he should reimburse the company with the proportionate costs of his
training. Thus, on August 27, 1997, the petitioner filed a complaint for non-payment of retirement pay,
moral damages, exemplary damages and attorneys fees against PAL.8
On February 6, 1998, the Labor Arbiter (LA) rendered a Decision,9the pertinent portions of which read:
From the foregoing, it is manifestly clear that an employees retirement benefits under any collective
bargaining agreement shall not be less than those provided under the New Retirement Pay Law and if
such benefits are less, the employee shall pay the difference between the amount due the employee
and that provided under the CBA or individual agreement or retirement plan (Par. 3.2, Sec. 3, rules
Implementing the New Retirement Pay Law).

Thus, applying the pertinent CBA provision in correlation with the New Retirement Pay Law,
complainant should receive the following amount, to wit:
22.5 x 26 yrs. x P138,447.00= P2,700,301.50
If we were to follow the PALs computation of petitioners retirement pay, the latters retirement
benefits in the amount of P125,000.00 based on Section 2, Article VII of the Retirement Plan of the CBA
at P5,000.00 per every year of service would be much less than his monthly salary of P138,477.00 at the
time of his retirement. This was never envisioned by the law. Instead, it is the clear intention of our law
makers to provide a bigger and better retirement pay or benefits under existing laws and/or existing
CBA or other agreements.
xxxx
WHEREFORE, in view of the foregoing, we find PAL liable to the petitioner for the payment of his
retirement benefits as follows:
Retirement Benefits
(22.5 x 26 years x P138,477.00)

P 2,700,301.50

Accrued Trip Leave

760,299.37

Accrued Vacation Leave

386,546.44

1996 Unutilized days off

105,089.46

Nov. 96 Prod. Allow. (net)

1,726.92

Unpaid Salary 12/1/-5/96

22,416.65

1996 w/tax refund

2,464.42

13th month backpay for the year

1988-1991
171,262.50

TOTAL

P 4,150,106.20

plus legal interest of 12% per annum from November 06, 1996.
Finally, ten percent (10%) of all sums owing to petitioner is hereby adjudged as attorneys fees.
SO ORDERED.10
The LA ratiocinated that PAL had no right to withhold the payment of the petitioners retirement
benefits simply because he retired from service before the lapse of three (3) years. To begin with, there

was no document evidencing the fact that the petitioner was required to stay with PAL for three (3)
years from the completion of his training or that he was bound to reimburse the company of the costs of
his training should he retire from service before the completion of the period. The LA likewise dismissed
the theory espoused by PAL that the petitioners submission of his bid for the new position which
necessarily requires training created an innominate contract of du ut facias between him and the
company since their relationship is governed by the CBA between the management and the ALPAP.11
On appeal, the NLRC took a different stance and modified the decision of the LA in its Decision dated
March 18, 2002, which pertinently states:
Considering that [petitioner] was only fifty-two (52) years when he opted to retire on November 6,
1996, he was, strictly, not yet qualified to receive the benefits provided under said Article 287 of the
Labor Code, as amended by R.A. 7641. However, petitioner is eligible for retirement under the CBA
between respondent PAL and ALPAP, as he had already served for more than 25 years with said
respondent. This is covered by the provision in the first paragraph of Article 287 of the Labor Code which
states that an employee may be retired upon reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract, inasmuch as the CBA in question does
not provide for any retirement age, but limited itself to the number of years of service or flying hours of
the employee concerned. Consequently, anytime that an employee of respondent PAL reaches twenty
(20) years of service or 20,000 (flying) hours as a pilot of PAL, then his age at that precise time would be
considered as the retirement age, as far as he is concerned.
The retirement benefits of petitioner should, therefore, be computed in accordance with both Article
287 of the Labor Code and the Retirement Plan in the CBA of PAL and ALPAP.
On the second issue, we rule that petitioner is under obligation to reimburse a portion of the expenses
incurred for his training as B747-400 Captain.
It would be grossly unfair and unjust to PAL if the petitioner would be allowed to reap the fruits of this
training, which upgraded his knowledge and skills that would enable him to demand higher pay, if he
would not be made to return said benefits in the form of service for a reasonable period of time, say
three (3) years as PALs company policy demands. x x x
xxxx
Thus, with the adjudged reimbursement for training expenses of P921,281.71 (sic), the awards due to
petitioner shall be, as follows:
Retirement Pay (P138,477.00 divided by 2 times 26)

- P1,800,201.00

Service Incentive Leave (P138,477.00 divided by 30 x 5)

- 23,074.50

Accrued Trip Leave

- 386,546.44

13th Month Pay

- 138,477.00

1996 Unutilized days off

- 105,089.48

Nov. 1996 Productive Allowance (net)

- 1,726.92

Unpaid salary 12/1-5/96

- 22,416.63

1996 w/ tax refund

- 2,464.42

TOTAL

- [P] 2,479.996.39

LESS:
Reimbursement of training expenses

981,281.71

1996 13thmonth pay overpayment

19,837.16

1996 Christmas bonus overpayment

11,539.75

PESALA

567.93

TOTAL

- 1,013,226.55

RETIREMENT PAY STILL PAYABLE

- [P] 1,466,769.81

IN VIEW OF THE FOREGOING, the decision of the Labor Arbiter should be MODIFIED by increasing the
awards to the petitioner to ONE MILLION FOUR HUNDRED SIXTY SIX THOUSAND SEVEN HUNDRED SIXTYNINE and 84/100 (P1,466,769.84) PESOS as computed above.
SO ORDERED.12
Both PAL and petitioner filed their respective motions for partial reconsideration from the decision of
the NLRC. In its Motion for Partial Reconsideration,13 PAL asseverated that the decision of the NLRC,
directing the computation of the petitioners retirement benefits based on Article 287 of the Labor
Code, instead of the CBA, was inconsistent with the disposition of this Court in Philippine Airlines, Inc. v.
Airline Pilots Association of the Philippines.14 It emphasized that in said case, this Court sustained PALs
position and directed the payment of retirement benefits of the complainant pilot in accordance with
the PAL-ALPAP Retirement Plan. However, in an Order15 dated June 30, 2003, the NLRC denied PALs
motion for reconsideration.
Unyielding, PAL filed a petition for certiorari with the CA. In said petition, PAL emphasized that the
petitioners case should be decided in light of the ruling in Philippine Airlines, Inc., where this Court held
that the computation of the retirement pay of a PAL pilot who retired before reaching the retirement
age of sixty (60) should be based on the PAL-ALPAP Retirement Plan or at the rate of P5,000.00 for every
year of service.16

In its Decision dated August 6, 2007, the CA ruled that the petitioners retirement pay should be
computed in accordance with PAL-ALPAP Retirement Plan and the PAL Pilots Retirement Benefit Plan as
was held in Philippine Airlines, Inc. It held, thus:
The present case squarely falls within the state of facts upon which the ruling in Philippine Airlines, Inc.,
vs. Airline Pilots Association of the Philippines was enunciated. Petitioner herein applies for retirement
at an age below 60. A distinction was made between a pilot who retires at the age of sixty and another
who retires earlier. The Supreme Court was explicit when it declared:
"A pilot who retires after twenty years of service or after flying 20,000 hours would still be in the prime
of his life and at the peak of his career, compared to one who retires at the age of 60 years old."
Furthermore, petitioner would not be getting less if his retirement pay is computed on the PAL-ALPAP
retirement plan rather than the formula provided by the Labor Code. Petitioner did not refute that he
already got retirement benefits from another retirement plan the PAL Pilots Retirement Plan. It
appearing that the retirement benefits amounting to P1,800,201.00 being the main bone of contention
herein, this Court proceeds to compute the balance of Capt. Elegirs retirement benefits as follows:
Retirement Pay (P5,000 x 25 years)

P125,000.00

Trip Leave Pay

757,564.04

Vacation Leave Pay

385,155.76

1996 Unutilized Day-Off

104,711.38

Productivity Allowance for 1996

1,726.92

Unpaid Salary for December 1-5, 1996

22,335.00

1996 Withholding Tax Refund

2,464.42

P1,398,957.52
Less Accountabilities:
Training Cost

P981,281.71

1996 13th Month Pay Overpayment 19,837.16

1996 Christmas Bonus

11,539.75

PESALA

567.93

BALANCE

1,013,226.55

P 385,730.97

pursuant to the ruling in G.R. No. 143686.

xxxx
WHEREFORE, the petition is GRANTED. The Decision of public respondent dated March 18, 2002 and its
Order of June 30, 2003 are REVERSED and SET ASIDE. The retirement benefits of petitioner Capt. Bibiano
Elegir shall be based on the 1967 PAL-ALPAP Retirement Plan andthe PAL Pilots Retirement Benefit Plan
and the balance still due him, pegged at P385,730.97.
SO ORDERED.17 (Citation omitted and emphasis supplied)
The petitioner filed a motion for reconsideration but the same was denied in a Resolution18 dated
February 21, 2008. Aggrieved, the petitioner appealed to this Court.
Essentially, we are called upon to rule on the following issues:
1. Whether the petitioners retirement benefits should be computed based on Article 287 of the Labor
Code or on PALs retirement plans;
2. Whether the petitioner should reimburse PAL with the proportionate costs of his training; and
3. Whether interest should be imposed on the monetary award in favor of the petitioner.
The Ruling of this Court
The petitioners retirement pay should be computed based on PALs retirement plans.
The petitioner maintains that it is Article 287 of the Labor Code which should be applied in the
computation of his retirement pay since the same provides for higher benefits. He contends that the CA
erroneously resorted to the ruling in Philippine Airlines, Inc. since the circumstances in the said case,
which led this Court to rule in favor of the applicability of PALs retirement plans in computing
retirement benefits, are unavailing in the present case. Specifically, he pointed out that the pilot in
Philippine Airlines, Inc. retired at the age of forty-five (45), while he opted to retire at fifty-two (52). He
further emphasized that the ruling was anchored on a finding that the retirement benefits that the pilot
would get under Article 287 of the Labor Code are less than those he would get under PALs retirement
plans.19
Apparently, the petitioner failed to appreciate the heart behind the ruling in Philippine Airlines, Inc. To
recapitulate, the case stemmed from PALs unilateral act of retiring airline pilot Captain Albino Collantes
(Collantes) under the authority of Section 2, Article VII of the PAL-ALPAP Retirement Plan. Thereafter,
ALPAP filed a Notice of Strike with the Department of Labor and Employment (DOLE), asseverating that
the retirement of Collantes constituted illegal dismissal and union busting. The Secretary of Labor
assumed jurisdiction and eventually upheld PALs action of retiring Collantes as a valid exercise of its
option under Section 2, Article VII of the PAL-ALPAP Retirement Plan. It further directed for the

computation of Collantes retirement benefits on the basis of Article 287 of the Labor Code.20 Acting on
Collantes petition for certiorari, the CA held that the pilots retirement benefits should be based on
Article 287 of the Labor Code and not on the PAL-ALPAP Retirement Plan. On appeal to this Court, we
reversed the CA and ruled that Collantes retirement benefits should be computed based on the PALALPAP Retirement Plan and the PAL Pilots Retirement Benefit Plan and not on Article 287 of the Labor
Code since the benefits under the two (2) plans are substantially higher than the latter. The dispositive
portion of the decision reads:
WHEREFORE, in view of all the foregoing, the petition is GRANTED. The March 2, 2000 Decision and the
June 19, 2000 Resolution of the Court of Appeals in CA-G.R. SP No. 54403 are REVERSED and SET ASIDE.
The Order of the Secretary of Labor in NCMB-NCR-N.S. 12-514-97 dated June 13, 1998, is MODIFIED as
follows: The retirement benefits to be awarded to Captain Albino Collantes shall be based on the 1967
PAL-ALPAP Retirement Plan and the PAL Pilots Retirement Benefit Plan. The directive contained in
subparagraph (2) of the dispositive portion thereof, which required petitioner to consult the pilot
involved before exercising its option to retire him, is DELETED. The said Order is AFFIRMED in all other
respects.
SO ORDERED.21 (Emphasis supplied)
It bears reiterating that there are only two retirement schemes at point in this case: (1) Article 287 of
the Labor Code, and; (2) the PAL-ALPAP Retirement Plan and the PAL Pilots Retirement Benefit Plan.
The two retirement schemes are alternative in nature such that the retired pilot can only be entitled to
that which provides for superior benefits.
Article 287 of the Labor Code states:
Art. 287. Retirement. - Any employee may be retired upon reaching the retirement age established in
the collective bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have
earned under existing laws and any collective bargaining agreement and other agreements: provided,
however, that an employees retirement benefits under any collective bargaining and other agreements
shall not be less than those provided herein.
In the absence of a retirement plan or agreement plan providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixtyfive (65) years which is hereby declared as the compulsory retirement age, who has served at least five
(5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at
least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being
considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shallmean
fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more
than five (5) days of service incentive leaves. x x x (Emphasis supplied)
It can be clearly inferred from the language of the foregoing provision that it is applicable only to a
situation where (1) there is no CBA or other applicable employment contract providing for retirement
benefits for an employee, or (2) there is a CBA or other applicable employment contract providing for

retirement benefits for an employee, but it is below the requirement set by law. The rationale for the
first situation is to prevent the absurd situation where an employee, deserving to receive retirement
benefits, is denied them through the nefarious scheme of employers to deprive employees of the
benefits due them under existing labor laws. On the other hand, the second situation aims to prevent
private contracts from derogating from the public law.22
The primary application of existing CBA in computing retirement benefits is implied in the title of R.A.
No. 7641 which amended Article 287 of the Labor Code. The complete title of R.A. No. 7641 reads: "An
Act Amending Article 287 of Presidential Decree No. 442, As Amended, otherwise known as the Labor
Code of the Philippines, By Providing for Retirement Pay to Qualified Private Sector in the Absence of
Any Retirement Plan in the Establishment."23
Emphasis must be placed on the fact that the purpose of the amendment is not merely to establish
precedence in application or accord blanket priority to existing CBAs in computing retirement benefits.
The determining factor in choosing which retirement scheme to apply is still superiority in terms of
benefits provided. Thus, even if there is an existing CBA but the same does not provide for retirement
benefits equal or superior to that which is provided under Article 287 of the Labor Code, the latter will
apply. In this manner, the employee can be assured of a reasonable amount of retirement pay for his
sustenance.
Consistent with the purpose of the law, the CA correctly ruled for the computation of the petitioners
retirement benefits based on the two (2) PAL retirement plans because it is under the same that he will
reap the most benefits. Under the PAL-ALPAP Retirement Plan, the petitioner, who qualified for late
retirement after rendering more than twenty (20) years of service as a pilot, is entitled to a lump sum
payment of P125,000.00 for his twenty-five (25) years of service to PAL. Section 2, Article VII of the PALALPAP Retirement Plan provides:
Section 2. Late Retirement. Any member who remains in the service of the company after his normal
retirement date may retire either at his option or at the option of the Company, and when so retired he
shall be entitled either: (a) to a lump sum payment of P5,000.00 for each completed year of service
rendered as a pilot, or (b) to such termination pay benefits to which he may be entitled under existing
laws, whichever is the greater amount.24
Apart from the abovementioned benefit, the petitioner is also entitled to the equity of the retirement
fund under PAL Pilots Retirement Benefit Plan, which pertains to the retirement fund raised from
contributions exclusively from PAL of amounts equivalent to 20% of each pilots gross monthly pay. Each
pilot stands to receive the full amount of the contribution upon his retirement which is equivalent to
240% of his gross monthly income for every year of service he rendered to PAL. This is in addition to the
amount of not less than P100,000.00 that he shall receive under the PAL-ALPAP Retirement Plan.25
In sum, therefore, the petitioner will receive the following retirement benefits:
(1) P125,000.00 (25 years x P5,000.00) for his 25 years of service to PAL under the PAL-ALPAP
Retirement Plan, and;
(2) 240% of his gross monthly salary for every year of his employment or, more specifically, the
summation of PALs monthly contribution of an amount equivalent to 20% of his actual monthly salary,
under the PAL Pilots Retirement Benefit Plan.

As stated in the records, the petitioner already received the amount due to him under the PAL Pilots
Retirement Benefit Plan.26 As much as we would like to demonstrate with specificity the amount of the
petitioners entitlement under said plan, we are precluded from doing so because there is no record of
the petitioners salary, including increments thereto, attached to the records of this case. To reiterate,
the benefit under the PAL Pilots Retirement Benefit Plan pertains to the totality of PALs monthly
contribution for every pilot, which amounts to 20% of the actual monthly salary. Necessarily, the
computation of this benefit requires a record of the petitioners salary, which was unfortunately not
submitted by either of the parties. At any rate, the petitioner did not dispute the fact that he already
received his entitlement under the PAL Pilots Retirement Benefit Plan nor did he question the propriety
of the amount tendered. Thus, we can reasonably assume that he received the rightful amount of his
entitlement under the plan.
On the other hand, under Article 287 of the Labor Code, the petitioner would only be receiving a
retirement pay equivalent to at least one-half (1/2) of his monthly salary for every year of service, a
fraction of at least six (6) months being considered as one whole year. To stress, one-half (1/2) month
salary means 22.5 days: 15 days plus 2.5 days representing one-twelfth (1/12) of the 13th month pay
and the remaining 5 days for service incentive leave.27
Comparing the benefits under the two (2) retirement schemes, it can readily be perceived that the 22.5
days worth of salary for every year of service provided under Article 287 of the Labor Code cannot
match the 240% of salary or almost two and a half worth of monthly salary per year of service provided
under the PAL Pilots Retirement Benefit Plan, which will be further added to the P125,000.00 to which
the petitioner is entitled under the PAL-ALPAP Retirement Plan. Clearly then, it is to the petitioners
advantage that PALs retirement plans were applied in the computation of his retirement benefits.
The petitioner should reimburse PAL with the costs of his training.
As regards the issue of whether the petitioner should be obliged to reimburse PAL with the costs of his
training, the ruling in Almario v. Philippine Airlines, Inc.28 is controlling. Essentially, in the mentioned
case, this Court recognized the right of PAL to recoup the costs of a pilots training in the form of service
for a period of at least three (3) years. This right emanated from the CBA between PAL and ALPAP, which
must be complied with good faith by the parties. Thus:
"The CBA is the law between the contracting parties the collective bargaining representative and the
employer-company. Compliance with a CBA is mandated by the expressed policy to give protection to
labor. In the same vein, CBA provisions should be "construed liberally rather than narrowly and
technically, and the courts must place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and purpose which it is intended to serve." This is
founded on the dictum that a CBA is not an ordinary contract but one impressed with public interest. It
goes without saying, however, that only provisions embodied in the CBA should be so interpreted and
complied with. Where a proposal raised by a contracting party does not find print in the CBA, it is not a
part thereof and the proponent has no claim whatsoever to its implementation."
In N.S. Case No. 11-506-87, "In re Labor Dispute at the Philippine Airlines, Inc.," the Secretary of the
Department of Labor and Employment (DOLE), passing on the failure of PAL and ALPAP to agree on the
terms and conditions for the renewal of their CBA which expired on December 31, 1987 and construing
Section 1 of Article XXIII of the 1985-1987 CBA, held:

xxxx
Section 1, Article XXIII of the 1985-1987 CBA provides:
Pilots fifty-five (55) years of age or over who have not previously qualified in any Company turbo-jet
aircraft shall not be permitted to bid into the Companys turbo-jet operations. Pilots fifty-five (55) years
of age or over who have previously qualified in the companys turbo-jet operations may be by-passed at
Company option, however, any such pilot shall be paid the by-pass pay effective upon the date a junior
pilot starts to occupy the bidded position.
x x x PAL x x x proposed to amend the provision in this wise:
The compulsory retirement age for all pilots is sixty (60) years. Pilots who reach the age of fifty-five (55)
years and over without having previously qualified in any Company turbo-jet aircraft shall not be
permitted to occupy any position in the Companys turbo-jet fleet. Pilots fifty-four (54) years of age and
over are ineligible for promotion to any position in Group I. Pilots reaching the age of fifty-five (55) shall
be frozen in the position they currently occupy at that time and shall be ineligible for any further
movement to any other positions.
PALs contention is basically premised on prohibitive training costs. The return on this investment in the
form of the pilot promoted is allegedly five (5) years. Considering the pilots age, the chances of full
recovery are asserted to be quite slim.
ALPAP opposed the proposal and argued that the training cost is offset by the pilots maturity, expertise
and experience.
By way of compromise, we rule that a pilot should remain in the position where he is upon reaching age
fifty-seven (57), irrespective of whether or not he has previously qualified in the Companys turbo-jet
operations. The rationale behind this is that a pilot who will be compulsorily retired at age sixty (60)
should no longer be burdened with training for a new position. But if a pilot is only at age fifty-five (55),
and promotional positions are available, he should still be considered and promoted if qualified,
provided he has previously qualified in any company turbo-jet aircraft. In the latter case, the prohibitive
training costs are more than offset by the maturity, expertise, and experience of the pilot.
Thus, the provision on age limit should now read:
Pilots fifty-seven (57) years of age shall be frozen in their positions.1wphi1 Pilots fifty-five (55) [sic]
years of age provided they have previously qualified in any company turbo-jet aircraft shall be permitted
to occupy any position in the companys turbo-jet fleet.29 (Citations omitted and emphasis supplied)
Further, we considered PALs act of sending its crew for training as an investment which expects an
equitable return in the form of service within a reasonable period of time such that a pilot who decides
to leave the company before it is able to regain the full value of the investment must proportionately
reimburse the latter for the costs of his training. We ratiocinated:
It bears noting that when Almario took the training course, he was about 39 years old, 21 years away
from the retirement age of 60. Hence, with the maturity, expertise, and experience he gained from the
training course, he was expected to serve PAL for at least three years to offset "the prohibitive costs"
thereof.

The pertinent provision of the CBA and its rationale aside, contrary to Almarios claim, Article 22 of the
Civil Code which reads:
"Art. 22. Every person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall
return the same to him," applies.
This provision on unjust enrichment recognizes the principle that one may not enrich himself at the
expense of another. An authority on Civil Law writes on the subject, viz:
"Enrichment of the defendant consists in every patrimonial, physical, or moral advantage, so long as it is
appreciable in money. It may consist of some positive pecuniary value incorporated into the patrimony
of the defendant, such as: (1) the enjoyment of a thing belonging to the plaintiff; (2) the benefits from
service rendered by the plaintiff to the defendant; (3) the acquisition of a right, whether real or
personal; (4) the increase of value of property of the defendant; (5) the improvement of a right of the
defendant, such as the acquisition of a right of preference; (6) the recognition of the existence of a right
in the defendant; and (7) the improvement of the conditions of life of the defendant.
x x x x"
Admittedly, PAL invested for the training of Almario to enable him to acquire a higher level of skill,
proficiency, or technical competence so that he could efficiently discharge the position of A-300 First
Officer. Given that, PAL expected to recover the training costs by availing of Almarios services for at
least three years. The expectation of PAL was not fully realized, however, due to Almarios resignation
after only eight months of service following the completion of his training course. He cannot, therefore,
refuse to reimburse the costs of training without violating the principle of unjust enrichment.30 (Citation
omitted and emphasis supplied)
After perusing the records of this case, we fail to find any significant fact or circumstance that could
warrant a departure from the established jurisprudence. The petitioner admitted that as in Almario, the
prevailing CBA between PAL and ALPAP at the time of his retirement incorporated the same stipulation
in Section 1, Article XXIII of the 1985-1987 CBA31 which provides:
Pilots fifty-seven (57) years of age shall be frozen in their positions. Pilots fifty-five (55) [sic] years of age
provided they have previously qualified in any company turbo-jet aircraft shall be permitted to occupy
any position in the companys turbo-jet fleet.32
As discussed in Almario, the above provision initially set the age of fifty-five (55) years as the reckoning
point when a pilot becomes disqualified to bid for a higher position. The age of disqualification was set
at 55 years old to enable PAL to fully recover the costs of the pilots training within a period of five (5)
years before the pilot reaches the compulsory retirement age of sixty (60). The DOLE Secretary however
lowered the age to fifty-seven (57), thereby cutting the supposed period of recovery of investment to
three (3) years. The DOLE Secretary justified the amendment in that the "prohibitive training costs are
more than offset by the maturity, expertise and the experience of the pilot."33
By carrying over the same stipulation in the present CBA, both PAL and ALPAP recognized that the
companys effort in sending pilots for training abroad is an investment which necessarily expects a
reasonable return in the form of service for a period of at least three (3) years. This stipulation had been

repeatedly adopted by the parties in the succeeding renewals of their CBA, thus validating the
impression that it is a reasonable and acceptable term to both PAL and ALPAP. Consequently, the
petitioner cannot conveniently disregard this stipulation by simply raising the absence of a contract
expressly requiring the pilot to remain within PALs employ within a period of 3 years after he has been
sent on training. The supposed absence of contract being raised by the petitioner cannot stand as the
CBA clearly covered the petitioners obligation to render service to PAL within 3 years to enable it to
recoup the costs of its investment.
Further, to allow the petitioner to leave the company before it has fulfilled the reasonable expectation
of service on his part will amount to unjust enrichment. Pertinently, Article 22 of the New Civil Code
states:
Art. 22. Every person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall
return the same to him.
There is unjust enrichment when a person unjustly retains a benefit at the loss of another, or when a
person retains the money or property of another against the fundamental principles of justice, equity
and good conscience. Two conditions must concur: (1) a person is unjustly benefited; and (2) such
benefit is derived at the expense of or with damages to another. The main objective of the principle of
unjust enrichment is to prevent one from enriching oneself at the expense of another. It is commonly
accepted that this doctrine simply means that a person shall not be allowed to profit or enrich himself
inequitably at anothers expense.34 The enrichment may consist of a patrimonial, physical, or moral
advantage, so long as it is appreciable in money.35It must have a correlative prejudice, disadvantage or
injury to the plaintiff which may consist, not only of the loss of the property or the deprivation of its
enjoyment, but also of the non-payment of compensation for a prestation or service rendered to the
defendant without intent to donate on the part of the plaintiff, or the failure to acquire something what
the latter would have obtained.36
As can be gathered from the facts, PAL invested a considerable amount of money in sending the
petitioner abroad to undergo training to prepare him for his new appointment as B747-400 Captain. In
the process, the petitioner acquired new knowledge and skills which effectively enriched his technical
know-how. As all other investors, PAL expects a return on investment in the form of service by the
petitioner for a period of 3 years, which is the estimated length of time within which the costs of the
latters training can be fully recovered. The petitioner is, thus, expected to work for PAL and utilize
whatever knowledge he had learned from the training for the benefit of the company. However, after
only one (1) year of service, the petitioner opted to retire from service, leaving PAL stripped of a
necessary manpower.
Undeniably, the petitioner was enriched at the expense of PAL. After undergoing the training fully
shouldered by PAL, he acquired a higher level of technical competence which, in the professional realm,
translates to a higher compensation. To prove this point, his monthly salary of P125,692.00 was
increased to P131,703.00 while he was still undergoing training. After his training, his salary was further
increased to P137,977.00.37Further, his training broadened his opportunities for a better employment as
in fact he was able to transfer to another airline company immediately after he left PAL.38 To allow the
petitioner to simply leave the company without reimbursing it for the proportionate amount of the
expenses it incurred for his training will only magnify the financial disadvantage sustained by PAL.

Reason and fairness dictate that he must return to the company a proportionate amount of the costs of
his training.
Award of interest not warranted under the circumstances.
The petitioner claims that the CA should have imposed interest on the monetary award in his favor. To
support his claim, he cited the case of Eastern Shipping Lines, Inc. v. Court of Appeals,39 where this Court
summarized the rules in the imposition of the proper interest rates:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until
the demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.40 (Citations omitted and emphasis supplied)
The petitioner, however, took the foregoing guidelines out of context and entertained a misplaced
supposition that all judgments which include a monetary award must be imposed with interest. The
jurisprudential guideline clearly referred to breach of an obligation consisting of a forbearance of
money, goods or credit before the imposition of a legal interest of 12% can be warranted. Such essential
element is nowhere to be found in the facts of this case. Even granting that an interest of 6% may be
imposed in cases of breached obligations not constituting loan or forbearance of money, loan or credit,
such depends upon the discretion of the court. If at all, the monetary award in favor of the petitioner
will earn legal interest from the time the judgment becomes final and executory until the same is fully
satisfied, regardless of the nature of the breached obligation. The imposition is justified considering that

the interim period from the finality of judgment, awarding a monetary claim and until payment thereof,
is deemed to be equivalent to a forbearance of credit.41
WHEREFORE, in view of the foregoing disquisitions, the petition is DENIED. The Decision dated August 6,
2007 of the Court of Appeals in CA-G.R. SP No. 79111 is AFFIRMED. The Labor Arbiter is hereby
DIRECTED to compute Bibiano C. Elegir's retirement pay based on the 1967 PAL-ALPAP Retirement Plan
and the PAL Pilots' Retirement Benefit Plan, crediting Philippine Airlines, Inc. for the amount it had
already paid the petitioner under the mentioned plans.
SO ORDERED.
BIENVENIDO L. REYES
Associate justice

Grace Christian School v. Lavandera, G.R. No. 177845, August 20, 2014

G.R. No. 177845

August 20, 2014

GRACE CHRISTIAN HIGH SCHOOL, represented by its Principal, DR. JAMES TAN, Petitioner,
vs.
FILIPINAS A. LAVANDERA, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 is the Decision2 dated April 30, 2007 of the Court of
Appeals (CA) in CA-G.R. SP. No. 75958 which affirmed with modification the Decision3 dated August
30, 2002 of the National Labor Relations Commission (NLRC) in NLRC CA No. 031739-02, applying
the 22.5-day multiplier in computing respondent Filipinas A. Lavandera' s (Filipinas) retirement
benefits differential, with legal interest reckoned from the filing date of the latter's illegal dismissal
complaint.
The Facts
Filipinas was employed by petitioner Grace Christian High School (GCHS) as high school teacher
since June1977, with a monthly salary of 18,662.00 as of May 31, 2001.4
On August 30, 2001,5 Filipinas filed a complaint for illegal (constructive) dismissal, non-payment of
service incentive leave (SIL) pay, separation pay, service allowance, damages, and attorneys fees
against GCHS6and/or its principal,7 Dr. James Tan. She alleged that on May 11, 2001, she was
informed that her serviceswere to be terminated effective May 31, 2001, pursuant to GCHS
retirement plan which gives the school the option to retire a teacher who has rendered at least 20
years of service, regardless of age, with a retirement pay of one-half () month for every year of
service. At that time, Filipinas was only 58 years old and still physically fit to work. She pleaded with
GCHS toallow her to continue teaching but her services were terminated,8 contrary to the provisions
of Republic Act No. (RA) 7641,9 otherwise known as the "Retirement Pay Law."

For their part, GCHS denied that they illegally dismissed Filipinas. They asserted that the latter was
considered retired on May 31, 1997 after having rendered 20 years of service pursuant to GCHS
retirement plan and that she was duly advised that her retirement benefits in the amount of
136,210.00 based on her salary atthe time of retirement, i.e., 13,621.00, had been deposited to the
trustee-bank in her name. Nonetheless, her services were retained on a yearly basis until May 11,
2001 when she was informed that her year-to-year contract would no longer be renewed.10
The LA Ruling
In a Decision11 dated March 26, 2002, the Labor Arbiter (LA) dismissed the illegal dismissal
complaint for lack of merit.
The LA found that GCHS has a retirement plan for its faculty and non-faculty members which
pertinently provides:
ARTICLE X
RETIREMENT DATES12
Section 1. Normal Retirement Date For qualified members of the Plans, the normal retirement date
shall be the last day of the month during which he attains age sixty (60) regardless of length of
service or upon completion of 20 years of service unless extended at the option of the School. Such
extension is subject tothe approval of the School on a case to case and year to year basis. The
School reserves the right to require an employee before it approveshis application for an extension
of service beyond the normal retirement date, to have a licensed physician appointed by the School,
certify that the employee concerned has no physical and/or mental impediments which will prevent
the employee from performing the duties in the School.13 (Emphasis supplied)
Consequently, the LA ruled that Filipinas was not terminated from employment but was considered
retired14 as of May 31, 1997 after rendering 20 years of service15 and was only allowed by GCHS to
continue teaching on a year-to-year basis (until May 31, 2001)in the exercise of its option to do so
under the aforementioned retirement plan until she was informed that her contract would not be
renewed.16
Nonetheless, the LA found the retirement benefits payable under GCHS retirement plan to be
deficient vis--vis those provided under RA 7641,17 and, accordingly, awarded Filipinas retirement
pay differentials based on her latest salaryas follows:
P18,662.00/30 = P622.06/day
P622.06 x 22.5 = P13,996.35 x 20 =

P279,927.00
- P136,210.00

18

P143,717.00
The LA, however, denied Filipinasclaims for service allowance, salary increase, and damages for
lack of sufficient bases, but awarded her attorneys fees equivalent to five percent (5%) of the total
award, or the amount of P7,185.85.19
Dissatisfied, GCHS filed an appeal before the NLRC.
The NLRC Ruling

In a Decision20 dated August 30, 2002 (August 30, 2002 Decision), the NLRC set aside the LAs
award, and ruled that Filipinas retirement pay should be computed based on her monthly salary at
the time of her retirementon May 31, 1997, i.e., 13,621.00. Moreover, it held that under Article 287 of
the Labor Code, as amended by RA 7641, the retirement package consists of 15 days salary, plus
13th month pay and SIL pay pro-rated to their one-twelfth (1/12) equivalent.21
In view of the foregoing, the NLRC awarded Filipinas retirement pay differentials in the amount of
27,057.20consisting of one-twelfth (1/12) of the 13th month pay and SIL pay based on her salary at
the time of her retirement on May 31, 1997, or 13,621.00 multiplied by 20 years. It, however, deleted
the award of attorneys fees for failure of Filipinas to show that GCHS had unreasonably and in bad
faith refused to pay her retirement benefits.22
Aggrieved, Filipinas filed a petition for certioraribefore the CA.
The CA Ruling
In a Decision23 dated April 30, 2007, the CA affirmed with modification the NLRCs Decision. It held
that the Court, in the case of Capitol Wireless, Inc.v. Sec. Confesor,24 has simplified the computation
of "one-half month salary" by equating it to"22.5 days" which is "arrived at after adding 15 days plus
2.5 days representing one-twelfth of the 13th month pay, plus 5 days of [SIL]."25 Accordingly, it
computed Filipinas retirement benefits differential as follows:
1w phi1

Monthly salary

P13,624.00

30 days

30 days

Daily rate

P454.13

x 22.5 days

x 22.5 days

1/2 month salary28

P10,218.00

x 20 years

26

27

x 20 years

Total amount of retirement benefits P204,360.00

- Amount deposited in trust
Retirement benefits differential

P136,210.00
P68,150.00

29

The CA further imposed legal interestat the rate of six percent (6%) per annum on the award
reckoned from the date of the filing of the illegal dismissal complaint until actual payment30 pursuant
to the Courts Decision in Manuel L. Quezon University v. NLRC(MLQU v. NLRC).31 Unperturbed,
GCHS filed the instant petition.
The Issue before the Court
The essential issue in this case is whether or not the CA committed reversible error in using the
multiplier "22.5 days" in computing the retirement pay differentials of Filipinas.

The Courts Ruling

The petition is bereft of merit.
RA 7641, which was enacted on December 9, 1992, amended Article 287 of the Labor Code,
providing for the rules on retirement pay to qualified private sector employees in the absence of any
retirement plan in the establishment. The said law32 states that "an employees retirement benefits
under any collective bargaining [agreement (CBA)] and other agreements shall not be less than
those provided" under the same that is, at least onehalf (1/2) month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year and that "[u]nless
the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen
(15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five
(5) days of service incentive leaves."
The foregoing provision is applicable where (a) there is no CBA or other applicable agreement
providing for retirement benefits to employees, or (b) there is a CBA or other applicableagreement
providing for retirement benefits but it is below the requirement set by law.33 Verily, the determining
factor in choosing which retirement scheme to apply is still superiority in terms of benefits provided.34
In the present case, GCHS has a retirement plan for its faculty and non-faculty members, which
gives it the option to retire a teacher who has rendered at least 20 years of service, regardless of
age, with a retirement pay of one-half (1/2) month for every year ofservice. Considering, however,
that GCHS computed Filipinas retirement pay without including one-twelfth (1/12) of her 13th month
pay and the cash equivalent of her five (5) days SIL, both the NLRC and the CA correctly ruled that
Filipinas retirement benefits should be computed in accordance withArticle 287 of the Labor Code,
as amended by RA 7641, being the more beneficent retirement scheme. They differ, however, in the
resulting benefit differentials due to divergent interpretations of the term "one-half (1/2) month salary"
as used under the law.
The Court, in the case of Elegir v. Philippine Airlines,Inc.,35 has recently affirmed that "one-half (1/2)
month salary means 22.5 days: 15 days plus 2.5 days representingone-twelfth (1/12) of the 13th
month pay and the remaining 5 days for [SIL]."36 The Court sees no reason to depart from this
interpretation. GCHS argument37therefore that the 5 days SIL should be likewise pro-rated to their
1/12 equivalent must fail.
1wphi1

Section 5.2, Rule II38 of the Implementing Rules of Book VI of the Labor Code, as amended,
promulgated to implement RA 7641, further clarifies what comprises the " month salary" due a
retiring employee, to wit:
RULE II
Retirement Benefits
xxxx
SEC. 5. Retirement Benefits.
xxxx
5.2 Components of One-half (1/2) Month Salary. For the purpose of determining the minimum
retirement pay due an employee under this Rule, the term "one-half month salary" shall include all
the following:

(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used herein,
the term "salary" includes all remunerations paid by an employer to his employees for
services rendered during normal working days and hours, whether such payments are fixed
or ascertained on a time, task, piece or commission basis, or other method of calculating the
same, and includes the fair and reasonable value, as determined by the Secretary of Labor
and Employment, of food, lodging or other facilities customarily furnished by the employer to
his employees. The term does not include cost of living allowance,profit-sharing payments
and other monetary benefits which are not considered as part of or integrated into the regular
salary of the employees.
(b) The cash equivalent of not more than five (5) days of service incentive leave;
(c) One-twelfth of the 13th month paydue the employee.
(d) All other benefits that the employer and employee may agree upon that should be
included in the computation of the employees retirement pay.
x x x x (Emphases supplied)
The foregoing rules are, thus, clear that the whole 5 days of SIL are included in the computation of a
retiring employees pay,39 as correctly ruled by the CA.
1w phi 1

Nonetheless, the Court finds that the award of legal interest at the rate of 6% per annum on the
amount ofP68,150.00 representing the retirement pay differentials due Filipinas should be reckoned
from the rendition of the LA's Decision on March 26, 2002 and not from the filing of the illegal
dismissal complaint as ordered by the CA,40 in accordance with the ruling in Eastern Shipping Lines,
Inc. v. CA41 (Eastern Shipping). Unlike in MLQU v. NLRC, where the retired teachers sued for the
payment of the deficiency in their retirement benefits, Filipinas' complaint was for illegal
(constructive) dismissal, and the obligation to provide retirement pay was only determined upon the
rendition of the LA's Decision, which also found the same to be deficient vis-a-vis those provided
under RA 7641. As such, it is only from the date of the LA's Decision that GCHS' obligation to pay
Filipinas her retirement pay differentials may be deemed to have been reasonably ascertained and
its payment legally adjudged to be due, although the actual base for the computation of legal interest
shall be on the amount finally adjudged. As held in the Eastern Shipping case:42
When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged. (Emphases supplied)
WHEREFORE, the petition is DENIED. The Decision dated April 30, 2007 of the Court of Appeals in
CA-G.R. SP. No. 75958 is hereby AFFIRMED with MODIFICATION that the legal interest at the rate
of six percent (6%) per annum on the amount of P68,150.00 representing the retirement pay
differentials payable by petitioner Grace Christian High School to respondent Filipinas A. Lavandera
shall be reckoned from the promulgation of the Labor Arbiter's Decision on March 26, 2002 until full
payment.

SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice

Unilever v. Rivera, G.R. No. 201701, June 3, 2013

G.R. No. 201701

June 3, 2013

UNILEVER PHILIPPINES, INC., Petitioner,

vs.
MARIA RUBY M. RIVERA, Respondent.
DECISION
MENDOZA, J.:
Subject of this disposition is the petition for review on certiorari1 under Rule 45 of the Rules of Court
filed by petitioner Unilever Philippines, Inc. (Unilever) questioning the June 22, 2011 Decision2 and
the April 25, 2012 Resolution3 of the Court of Appeals (CA)-Cagayan de Oro City, in CA G.R. SP No.
02963-MIN, an Illegal Dismissal case filed by respondent Maria Ruby M. Rivera (Rivera). The CA
affirmed with modification the March 31, 2009 Resolution of the National Labor Relations
Commission (NLRC) finding Rivera's dismissal from work to be valid as it was for a just cause and
declaring that she was not entitled to any retirement benefit. The CA, however, awarded separation
pay in her favor as a measure of social justice.
The Facts
Unilever is a company engaged in the production, manufacture, sale, and distribution of various
food, home and personal care products, while Rivera was employed as its Area Activation Executive
for Area 9 South in the cities of Cotabato and Davao. She was primarily tasked with managing the
sales, distribution and promotional activities in her area and supervising Ventureslink International,
Inc. (Ventureslink), a third party service provider for the companys activation projects. Unilever
enforces a strict policy that every trade activity must be accompanied by a Trade Development
Program (TDP) and that the allocated budget for a specific activity must be used for such activity
only.4
Sometime in 2007, Unilevers internal auditor conducted a random audit and found out that there
were fictitious billings and fabricated receipts supposedly from Ventureslink amounting
to P11,200,000.00. It was also discovered that some funds were diverted from the original intended
projects. Upon further verification, Ventureslink reported that the fund deviations were upon the
instruction of Rivera.
On July 16, 2007, Unilever issued a show-cause notice to Rivera asking her to explain the following
charges, to wit: a) Conversion and Misappropriation of Resources; b) Breach of Fiduciary Trust; c)
Policy Breaches; and d) Integrity Issues.
Responding through an email, dated July 16, 2007, Rivera admitted the fund diversions, but
explained that such actions were mere resourceful utilization of budget because of the difficulty of

procuring funds from the head office.5 She insisted that the diverted funds were all utilized in the
companys promotional ventures in her area of coverage.
Through a letter, dated August 23, 2007, Unilever found Rivera guilty of serious breach of the
companys Code of Business Principles compelling it to sever their professional relations. In a letter,
dated September 20, 2007, Rivera asked for reconsideration and requested Unilever to allow her to
receive retirement benefits having served the company for fourteen (14) years already. Unilever
denied her request, reasoning that the forfeiture of retirement benefits was a legal consequence of
her dismissal from work.
On October 19, 2007, Rivera filed a complaint for Illegal Dismissal and other monetary claims
against Unilever.
On April 28, 2008, the Labor Arbiter (LA) dismissed her complaint for lack of merit and denied her
claim for retirement benefits, but ordered Unilever to pay a proportionate 13th month pay and the
corresponding cash equivalent of her unused leave credits. The decretal portion of the LA decision
reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing for lack of merit the
illegal dismissal complaint. However, UNILEVER PHILIPPINES, INC. is hereby ordered to pay
complainant the total amount of PESOS: FIFTY SEVEN THOUSAND EIGHTY TWO & 90/100 ONLY
(P57,082.90) representing proportionate 13th month pay and unused leave credits.
The complaint against individual respondents Recto Sampang and Alejandro Concha are likewise
dismissed for it was not shown that they acted in bad faith in the dismissal of complainant. Moreover,
their legal personality is separate and distinct from that of the corporation.
All other money claims are dismissed for lack of basis.6
On appeal, the NLRC partially granted Riveras prayer. In its Resolution, dated November 28, 2008,
the NLRC held that although she was legally dismissed from the service for a just cause, Unilever
was guilty of violating the twin notice requirement in labor cases. Thus, Unilever was ordered to pay
her P30,000.00 as nominal damages, retirement benefits and separation pay. The dispositive portion
reads:
WHEREFORE, foregoing premises considered, the appeal is PARTIALLY GRANTED. The assailed
Decision dated 28 April 2008 is hereby MODIFIED in the sense that respondent UNILEVER
PHILIPPINES, INC. is hereby ordered to pay the following sums:
1. The amount of P30,000.00 representing nominal damages for violation of complainants
right to procedural due process;
2. Retirement benefits under the companys applicable retirement policy or written
agreement, and in the absence of which, to pay complainant her retirement pay equivalent to
at least one-half (1/2) month salary for every year of service, a fraction of at least six (6)
months being considered as one whole year;
3. Separation pay under the companys applicable policy or written agreement, and in the
absence of which, to pay separation pay equivalent to at least one-half (1/2) month salary for
every year of service, a fraction of at least six (6) months being considered as one whole
year.

The rest of the Decision is hereby AFFIRMED.

SO ORDERED.7
Unilever asked for a reconsideration of the NLRC decision. In its Resolution, dated March 31, 2009,
the NLRC modified its earlier ruling by deleting the award of separation pay and reducing the
nominal damages fromP30,000.00 to P20,000.00, but affirmed the award of retirement benefits to
Rivera. The fallo reads:
WHEREFORE, foregoing premises considered, the instant Motion for Partial Reconsideration is
PARTLY GRANTED. The Resolution dated 28 November 2008 of the Commission is hereby
RECONSIDERED as follows:
(1)The award of separation pay is hereby deleted for lack of factual and legal basis; and
(2)The award of nominal damages is hereby tempered and reduced to the amount
of P20,000.00.
The rest of the award for retirement benefits is affirmed in toto.
SO ORDERED.8
Unsatisfied with the ruling, Unilever elevated the case to CA-Cagayan de Oro City via a petition for
certiorari under Rule 65 of the Rules of Court.
On June 22, 2011, the CA affirmed with modification the NLRC resolution. Justifying the deletion of
the award of retirement benefits, the CA explained that, indeed, under Unilevers Retirement Plan, a
validly dismissed employee cannot claim any retirement benefit regardless of the length of service.
Thus, Rivera is not entitled to any retirement benefit. It stated, however, that there was no proof that
she personally gained any pecuniary benefit from her infractions, as her instructions were aimed at
increasing the sales efficiency of the company and competing in the local market. For said reason,
the CA awarded separation pay in her favor as a measure of social justice.9 The decretal portion of
the CA decision reads:
WHEREFORE, the assailed Resolution dated March 31, 2009 of the NLRC (Branch 5), Cagayan De
Oro City is hereby AFFIRMED with MODIFICATION. Consequently, UNILEVER is directed to pay
MARIA RUBY M. RIVERA the following:
a) Separation pay, to be computed based on the companys applicable policy or written
agreement, or in the absence thereof, the equivalent of at least one-half (1/2) month salary
for every year of service, a fraction of at least six (6) months being considered as one whole
year;
b) P20,000.00 as nominal damages; and
c) Proportionate 13th month pay and unused leave credits, to be computed based on her
salary during the period relevant to the case.
The award of retirement benefits is hereby DELETED.

SO ORDERED.10
Unilever filed a motion for partial reconsideration,11 but it was denied in a Resolution, dated April 25,
2012.
Hence, this petition.12
In support of its position, Unilever submits for consideration the following
GROUNDS
I.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
GRANTING AFFIRMATIVE RELIEFS IN FAVOR OF RIVERA EVEN IF SHE DID NOT FILE ANY
PETITION FOR CERTIORARI TO CHALLENGE THE NLRC RESOLUTIONS.
II.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
AWARDING SEPARATION PAY IN FAVOR OF RIVERA CONSIDERING THAT THE LATTER WAS
VALIDLY DISMISSED FROM EMPLOYMENT BASED ON JUST CAUSES UNDER THE LAW.
III.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
RULING THAT THE COMPANY VIOLATED RIVERAS RIGHT TO PROCEDURAL DUE PROCESS
BEFORE TERMINATING HER EMPLOYMENT, AND CONSEQUENTLY, IN AWARDING NOMINAL
DAMAGES.13
Unilever argues that Rivera did not file any separate petition for certiorari before the CA. Neither did
she file any comment on its petition. Hence, it was erroneous for the CA to grant an affirmative relief
because it was inconsistent with the doctrine that a party who has not appealed cannot obtain from
the appellate court any affirmative relief other than the ones granted in the appealed decision. The
petitioner stresses that Rivera misappropriated company funds amounting to millions of pesos and
that granting her separation pay undermines the serious misdeeds she committed against the
company. Moreover, the length of her service with Unilever does not mitigate her offense, but even
aggravates the depravity of her acts.14
The petition is partly meritorious.
The pivotal issue in the case at bench is whether or not a validly dismissed employee, like Rivera, is
entitled to an award of separation pay.
As a general rule, an employee who has been dismissed for any of the just causes enumerated
under Article 28215of the Labor Code is not entitled to a separation pay.16 Section 7, Rule I, Book VI
of the Omnibus Rules Implementing the Labor Code provides:
Sec. 7. Termination of employment by employer. The just causes for terminating the services of
an employee shall be those provided in Article 282 of the Code. The separation from work of an
employee for a just cause does not entitle him to the termination pay provided in the Code, without

prejudice, however, to whatever rights, benefits and privileges he may have under the applicable
individual or collective agreement with the employer or voluntary employer policy or practice.
In exceptional cases, however, the Court has granted separation pay to a legally dismissed
employee as an act of "social justice" or on "equitable grounds." In both instances, it is required that
the dismissal (1) was not for serious misconduct; and (2) did not reflect on the moral character of the
employee.17 The leading case of Philippine Long Distance Telephone Co. vs. NLRC18 is instructive
on this point:
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a
fellow worker, the employer may not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his
dismissal only and the separation pay has nothing to do with the wrong he has committed. Of course
it has. Indeed, if the employee who steals from the company is granted separation pay even as he is
validly dismissed, it is not unlikely that he will commit a similar offense in his next employment
because he thinks he can expect a like leniency if he is again found out. This kind of misplaced
compassion is not going to do labor in general any good as it will encourage the infiltration of its
ranks by those who do not deserve the protection and concern of the Constitution.
1wphi 1

The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best, it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great policy of our Constitution is not meant for
the protection of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character.19
In the subsequent case of Toyota Motor Philippines Corporation Workers Association (TMPCWA) v.
National Labor Relations Commission,20 it was further elucidated that "in addition to serious
misconduct, in dismissals based on other grounds under Art. 282 like willful disobedience, gross and
habitual neglect of duty, fraud or willful breach of trust, and commission of a crime against the
employer or his family, separation pay should not be conceded to the dismissed employee."21 In
Reno Foods, Inc, v. Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan,22 the Court wrote that
"separation pay is only warranted when the cause for termination is not attributable to the
employees fault, such as those provided in Articles 283 and 284 of the Labor Code, as well as in
cases of illegal dismissal in which reinstatement is no longer feasible. It is not allowed when an
employee is dismissed for just cause."23
In this case, Rivera was dismissed from work because she intentionally circumvented a strict
company policy, manipulated another entity to carry out her instructions without the companys
knowledge and approval, and directed the diversion of funds, which she even admitted doing under
the guise of shortening the laborious process of securing funds for promotional activities from the
head office. These transgressions were serious offenses that warranted her dismissal from

employment and proved that her termination from work was for a just cause. Hence, she is not
entitled to a separation pay.
More importantly, Rivera did not appeal the March 31, 2009 ruling of the NLRC disallowing the
award of separation pay to her. It was Unilever who elevated the case to the CA. It is axiomatic that
a party who does not appeal, or file a petition for certiorari, is not entitled to any affirmative
relief.24 Due process prevents the grant of additional awards to parties who did not appeal.25 An
appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the
judgment, but he cannot seek modification or reversal of the judgment or claim affirmative relief
unless he has also appealed.26 It was, therefore, erroneous for the CA to grant an affirmative relief to
Rivera who did not ask for it.
Lastly, Unilever questions the grant of nominal damages in favor of Rivera for its alleged nonobservance of the requirements of procedural due process. It insists that she was given ample
opportunity "to explain her side, interpose an intelligent defense and adduce evidence on her
behalf." 27
The Court is not persuaded. Section 2, Rule XXIII, Book V of the Rules Implementing the Labor
Code expressly states:
Section 2. Standard of due process: requirements of notice.
In all cases of termination of employment, the following standards of due process shall be
substantially observed.
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination,
and giving to said employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of
counsel if the employee so desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and
(c) A written notice of termination served on the employee indicating that upon due
consideration of all the circumstance, grounds have been established to justify his
termination.
In case of termination, the foregoing notices shall be served on the employees last known address.
King of Kings Transport, Inc. v. Mamac28 detailed the steps on how procedural due process can be
satisfactorily complied with. Thus:
To clarify, the following should be considered in terminating the services of employees:
(1) The first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice to

give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify
their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management. During the hearing
or conference, the employees are given the chance to defend themselves personally, with
the assistance of a representative or counsel of their choice. Moreover, this conference or
hearing could be used by the parties as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that: (1) all circumstances involving
the charge against the employees have been considered; and (2) grounds have been
established to justify the severance of their employment.29
In this case, Unilever was not direct and specific in its first notice to Rivera. The words it used were
couched in general terms and were in no way informative of the charges against her that may result
in her dismissal from employment. Evidently, there was a violation of her right to statutory due
process warranting the payment of indemnity in the form of nominal damages. Hence, the Court
finds no compelling reason to reverse the award of nominal damages in her favor. The Court,
however, deems it proper to increase the award of nominal damages from P20,000.00
to P30,000.00, as initially awarded by the NLRC, in accordance with existing jurisprudence.30
WHEREFORE, the petition is hereby PARTIALLY GRANTED. The June 22, 2011 Decision and the
April 25, 2012 Resolution of the Court of Appeals (CA)-Cagayan de Oro City in CA-G.R. SP No.
02963-MIN are AFFIRMED with MODIFICATION. The dispositive portion should read as follows:
1wphi1

WHEREFORE, the March 31, 2009 Resolution of the NLRC (Branch 5), Cagayan de Oro City, is
hereby AFFIRMED with MODIFICATION. UNILEVER PHILIPPINES, INC., is hereby directed to pay
MARIA RUBY M. RIVERA the following:
a) P30,000.00 as nominal damages; and
b) Proportionate 13th month pay and unused leave credits, to be computed based on her
salary during the period relevant to the case.
The award of retirement benefit is DELETED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice

Women Workers
Provisions against discrimination
Art. 135, Labor Code
Article 135. Discrimination prohibited. It shall be unlawful for any employer to discriminate against any
woman employee with respect to terms and conditions of employment solely on account of her sex.
The following are acts of discrimination:
Payment of a lesser compensation, including wage, salary or other form of remuneration and fringe
benefits, to a female employees as against a male employee, for work of equal value; and
Favoring a male employee over a female employee with respect to promotion, training opportunities,
study and scholarship grants solely on account of their sexes.
Criminal liability for the willful commission of any unlawful act as provided in this Article or any violation
of the rules and regulations issued pursuant to Section 2 hereof shall be penalized as provided in Articles
288 and 289 of this Code: Provided, That the institution of any criminal action under this provision shall
not bar the aggrieved employee from filing an entirely separate and distinct action for money claims,
which may include claims for damages and other affirmative reliefs. The actions hereby authorized shall
proceed independently of each other. (As amended by Republic Act No. 6725, May 12, 1989)

Chapter II, Sec. 4 (b), R.A. 9710, Magna Carta of Women

(b) "Discrimination Against Women" refers to any gender-based distinction, exclusion, or restriction
which has the effect or purpose of impairing or nullifying the recognition, enjoyment, or exercise by
women, irrespective of their marital status, on a basis of equality of men and women, of human rights
and fundamental freedoms in the political, economic, social, cultural, civil, or any other field.
It includes any act or omission, including by law; policy, administrative measure, or practice, that directly
or indirectly excludes or restricts women in the recognition and promotion of their rights and their
access to and enjoyment of opportunities, benefits, or privileges.
A measure or practice of general application is discrimination against women if it fails to provide for
mechanisms to offset or address sex or gender-based disadvantages or limitations of women, as a result
of which women are denied or restricted in the recognition and protection of their rights and in their
access to and enjoyment of opportunities, benefits, or privileges; or women, more than men, are shown
to have suffered the greater adverse effects of those measures or practices.
Provided, finally, That discrimination compounded by or intersecting with other grounds, status, or
condition, such as ethnicity, age, poverty, or religion shall be considered discrimination against women
under this Act.

Rule II, Sec. 7 (c), Implementing Rules of R.A. 9710

C. Discrimination Against Women refers to any gender based distinction, exclusion, or restriction
which has the effect or purpose of impairing or nullifying the recognition, enjoyment, or exercise by
women, irrespective of their marital status, on a basis of equality of men and women, of human rights
and fundamental freedoms in the political, economic, social, cultural, civil, or any other field. It includes
any act or omission, including by law, policy, administrative measure, or practice, that directly or
indirectly excludes or restricts women in the recognition and promotion of their rights and their access
to and enjoyment of opportunities, benefits, or privileges. A measure or practice of general application
is discrimination against women if it fails to provide for mechanisms to offset or address sex or gender
based disadvantages or limitations of women, as a result of which women are denied or restricted in the
recognition and protection of their rights and in their access to and enjoyment of opportunities,
benefits, or privileges; or women, more than men, are shown to have suffered the greater adverse
effects of those measures or practices. Provided, finally, That discrimination compounded by or
intersecting with other grounds, status, or condition, such as ethnicity, age, poverty, or religion shall be
considered discrimination against women under the Act;

Rule V, Sec. 25, Implementing Rules of R.A. 9710

SECTION 25. Right to Decent Work The State shall progressively realize and ensure decent work
standards for women that involve the creation of jobs of acceptable quality in conditions of freedom,
equity, security, and human dignity.
A. The DOLE in the case of private sector and the CSC in the case of public sector shall:
1. Advance womens right to decent work by promoting womens rights at work,
creating opportunities for women employment, enhancing social protection
coverage, and strengthening tripartism and social dialogue. To achieve this, the
DOLE and CSC shall facilitate adequate consultative mechanisms with workers and
employers groups, government and non-government organizations;
2. Together with other concerned agencies ensure the provision of support services
and gears to protect women from occupational and health hazards taking into
account womens maternal functions. Further:
a. Women workers shall be protected against safety and health hazards,
including, but not limited to, exposure to hazardous chemicals, infections,
conditions leading to musculoskeletal disorders, work environment leading
to noise-induces hearing loss, and exposure to radiation and psychological
stressors.
b. By reason of the hazardous nature of work that may cause injury or
impairment in the function of any part of the body, every employer shall
provide their women employees with appropriate personal protective
equipment (PPE) to prevent injury or impairment in any part of their bodies
as well as ensure proper maintenance of the PPE used in the workplace.

c. The DOLE, through its concerned agencies, shall make available

occupational safety and health (OSH)- related programs and services to
women workers in the formal and informal sectors. These include, but are
not limited to, the conduct of OSH orientations and trainings, medical
surveillance and research, screening tests for reproductive tract diseases,
provisions for technical support/advice, and development of information,
education and communication materials.
3. Work closely with both the employers and unions or worker representatives, in the
private sector in promoting a safe and healthy workplace. Further:
a. Employers both in the public and private sectors shall provide services in
support to balancing family obligations and work responsibilities. These
include family health services but not limited to: day care and child minding
centers, breastfeeding or lactation stations with appropriate facilities and
corresponding nursing/lactation breaks, health education, counseling on
breastfeeding, seminars on responsible parenthood and family planning,
non-sexist child-rearing, shared parenting and family responsibility, annual
family day, flexible work arrangements, and anti-sexual harassment
initiatives.

Compliance by government agencies and private employers shall be monitored by the CSC and DOLE,
respectively. In establishing facilities as required by law, the LGUs shall make compliance thereof a prerequisite in the grant of any form of building and business permit.

b. In the exercise of their labor rights, women workers are free to exercise
their right to self-organization and are encouraged to form unions and join
associations. The DOLE and CSC shall ensure that such rights are respected
regardless of the workers status and place of employment. DOLE and CSC
shall also support programs that will encourage women to develop their
leadership skills to accelerate their qualifications in positions of leadership.
c. Employees who are members of indigenous communities shall be allowed
to observe their cultural practices in the workplace provided that the
employer is notified by the applicant or employee about the cultural
practice/s that she needs to observe and the cultural practice/s will neither
hamper work efficiency of the employee nor be prejudicial to the operation
of the workplace.
B. In recognition of the temporary nature of overseas work and the need to exert all
efforts to address the causes of out-migration, the National Anti-Poverty Commission
(NAPC), in the exercise of its oversight functions in the implementation of the Social
Reform Agenda, shall ensure that policies and programs in addressing poverty reduction

as well as initiatives taken by civil society and the basic sectors shall include local
employment and other economic opportunities for women.
C. DTI, DOLE, other concerned government agencies, and the LGUs shall initiate
investment friendly policies, systems, programs and procedures as well as provide
technical assistance and supporting financial arrangements to returning women migrant
workers to help them establish local business.
D. The DFA, DOLE, Philippine Overseas Employment Administration (POEA), and Overseas
Workers' Welfare Administration (OWWA) shall be responsible in protecting the rights
and promoting the welfare of women migrant workers especially those classified under
the vulnerable skills categories. These agencies shall review and forge bilateral and
multilateral labor agreements to ensure safe migration, better work conditions that will
curb violence against women migrant workers; conduct professional and personal
development among women migrant workers through livelihood and skills development
trainings, seminars, and scholarship grants; and mainstream entrepreneurship and GAD
in skills training, counseling and other support services for the families of the migrant
workers.

Stipulations against marriage

Art. 136, Labor Code
Article 136. Stipulation against marriage. It shall be unlawful for an employer:
1. to require as a condition of employment or continuation of employment that a woman
employee shall not get married, or
2. to stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed
resigned or separated, or
3. to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely
by reason of her marriage.

See Philippine Telegraph v. NLRC, G.R. No. 118978, May 23, 1997
G.R. No. 118978 May 23, 1997
PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.

REGALADO, J.:

Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and
Telephone Company (hereafter, PT & T) invokes the alleged concealment of civil status and
defalcation of company funds as grounds to terminate the services of an employee. That employee,
herein private respondent Grace de Guzman, contrarily argues that what really motivated PT & T to
terminate her services was her having contracted marriage during her employment, which is
prohibited by petitioner in its company policies. She thus claims that she was discriminated against
in gross violation of law, such a proscription by an employer being outlawed by Article 136 of the
Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary
Project Worker," for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F.
Tenorio who went on maternity leave. 1 Under the Reliever Agreement which she signed with petitioner
company, her employment was to be immediately terminated upon expiration of the agreed period.
Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private
respondent's services as reliever were again engaged by petitioner, this time in replacement of one
Erlinda F. Dizon who went on leave during both periods. 2 After August 8, 1991, and pursuant to their
Reliever Agreement, her services were terminated.

On September 2, 1991, private respondent was once more asked to join petitioner company as a
probationary employee, the probationary period to cover 150 days. In the job application form that
was furnished her to be filled up for the purpose, she indicated in the portion for civil status therein
that she was single although she had contracted marriage a few months earlier, that is, on May 26,
1991. 3
It now appears that private respondent had made the same representation in the two successive
reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner
supposedly learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent
to private respondent a memorandum dated January 15, 1992 requiring her to explain the
discrepancy. In that memorandum, she was reminded about the company's policy of not accepting
married women for employment. 4
In her reply letter dated January 17, 1992, private respondent stated that she was not aware of
PT&T's policy regarding married women at the time, and that all along she had not deliberately
hidden her true civil status. 5Petitioner nonetheless remained unconvinced by her explanations. Private
respondent was dismissed from the company effective January 29, 1992, 6 which she readily contested by
initiating a complaint for illegal dismissal, coupled with a claim for non-payment of cost of living
allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations Commission
in Baguio City.

At the preliminary conference conducted in connection therewith, private respondent volunteered the
information, and this was incorporated in the stipulation of facts between the parties, that she had
failed to remit the amount of P2,380.75 of her collections. She then executed a promissory note for
that amount in favor of petitioner 7. All of these took place in a formal proceeding and with the agreement
of the parties and/or their counsel.

On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that
private respondent, who had already gained the status of a regular employee, was illegally
dismissed by petitioner. Her reinstatement, plus payment of the corresponding back wages and
COLA, was correspondingly ordered, the labor arbiter being of the firmly expressed view that the
ground relied upon by petitioner in dismissing private respondent was clearly insufficient, and that it
was apparent that she had been discriminated against on account of her having contracted marriage
in violation of company rules.

On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the
labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed
been the subject of an unjust and unlawful discrimination by her employer, PT & T. However, the
decision of the labor arbiter was modified with the qualification that Grace de Guzman deserved to
be suspended for three months in view of the dishonest nature of her acts which should not be
condoned. In all other respects, the NLRC affirmed the decision of the labor arbiter, including the
order for the reinstatement of private respondent in her employment with PT & T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in
its resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions
of the labor arbiter and respondent NLRC, as well as the denial resolution of the latter.
1. Decreed in the Bible itself is the universal norm that women should be regarded with love and
respect but, through the ages, men have responded to that injunction with indifference, on the
hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against
womankind been so pervasive as in the field of labor, especially on the matter of equal employment
opportunities and standards. In the Philippine setting, women have traditionally been considered as
falling within the vulnerable groups or types of workers who must be safeguarded with preventive
and remedial social legislation against discriminatory and exploitative practices in hiring, training,
benefits, promotion and retention.
The Constitution, cognizant of the disparity in rights between men and women in almost all phases
of social and political life, provides a gamut of protective provisions. To cite a few of the primordial
ones, Section 14, Article II 8 on the Declaration of Principles and State Policies, expressly recognizes the
role of women in nation-building and commands the State to ensure, at all times, the fundamental equality
before the law of women and men. Corollary thereto, Section 3 of Article XIII 9 (the progenitor whereof
dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full protection to
labor and to promote full employment and equality of employment opportunities for all, including an
assurance of entitlement to tenurial security of all workers. Similarly, Section 14 of Article XIII 10 mandates
that the State shall protect working women through provisions for opportunities that would enable them to
reach their full potential.

2. Corrective labor and social laws on gender inequality have emerged with more frequency in the
years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely
due to our country's commitment as a signatory to the United Nations Convention on the Elimination
of All Forms of Discrimination Against Women (CEDAW). 11
Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits discrimination
against women with respect to terms and conditions of employment, promotion, and training
opportunities; Republic Act No. 6955 13 which bans the "mail-order-bride" practice for a fee and the export
of female labor to countries that cannot guarantee protection to the rights of women workers; Republic
Act No. 7192 14 also known as the "Women in Development and Nation Building Act," which affords
women equal opportunities with men to act and to enter into contracts, and for appointment, admission,
training, graduation, and commissioning in all military or similar schools of the Armed Forces of the
Philippines and the Philippine National Police; Republic Act No. 7322 15 increasing the maternity benefits
granted to women in the private sector; Republic Act No. 7877 16 which outlaws and punishes sexual
harassment in the workplace and in the education and training environment; and Republic Act No.
8042, 17 or the "Migrant Workers and Overseas Filipinos Act of 1995," which prescribes as a matter of
policy, inter alia, the deployment of migrant workers, with emphasis on women, only in countries where
their rights are secure. Likewise, it would not be amiss to point out that in the Family Code, 18 women's
rights in the field of civil law have been greatly enhanced and expanded.

In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to
138 thereof. Article 130 involves the right against particular kinds of night work while Article 132
ensures the right of women to be provided with facilities and standards which the Secretary of Labor
may establish to ensure their health and safety. For purposes of labor and social legislation, a
woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar establishments
shall be considered as an employee under Article 138. Article 135, on the other hand, recognizes a
woman's right against discrimination with respect to terms and conditions of employment on account
simply of sex. Finally, and this brings us to the issue at hand, Article 136 explicitly prohibits
discrimination merely by reason of the marriage of a female employee.
3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of
protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua
non prior to severance of the employment ties of an individual under his employ, to convincingly
establish, through substantial evidence, the existence of a valid and just cause in dispensing with the
services of such employee, one's labor being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the company falls within the socalled management prerogatives, which prescriptions encompass the matter of hiring, supervision of
workers, work assignments, working methods and assignments, as well as regulations on the
transfer of employees, lay-off of workers, and the discipline, dismissal, and recall of employees. 19 As
put in a case, an employer is free to regulate, according to his discretion and best business judgment, all
aspects of employment, "from hiring to firing," except in cases of unlawful discrimination or those which
may be provided by law. 20

In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination,
afforded all women workers by our labor laws and by no less than the Constitution. Contrary to
petitioner's assertion that it dismissed private respondent from employment on account of her
dishonesty, the record discloses clearly that her ties with the company were dissolved principally
because of the company's policy that married women are not qualified for employment in PT & T,
and not merely because of her supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent to private respondent by Delia M.
Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that
"you're fully aware that the company is not accepting married women employee (sic), as it was
verbally instructed to you." 21 Again, in the termination notice sent to her by the same branch supervisor,
private respondent was made to understand that her severance from the service was not only by reason
of her concealment of her married status but, over and on top of that, was her violation of the company's
policy against marriage ("and even told you that married women employees are not applicable [sic] or
accepted in our company.") 22 Parenthetically, this seems to be the curious reason why it was made to
appear in the initiatory pleadings that petitioner was represented in this case only by its said supervisor
and not by its highest ranking officers who would otherwise be solidarily liable with the corporation. 23

Verily, private respondent's act of concealing the true nature of her status from PT & T could not be
properly characterized as willful or in bad faith as she was moved to act the way she did mainly
because she wanted to retain a permanent job in a stable company. In other words, she was
practically forced by that very same illegal company policy into misrepresenting her civil status for
fear of being disqualified from work. While loss of confidence is a just cause for termination of
employment, it should not be simulated. 24 It must rest on an actual breach of duty committed by the
employee and not on the employer's caprices. 25 Furthermore, it should never be used as a subterfuge for
causes which are improper, illegal, or unjustified. 26

In the present controversy, petitioner's expostulations that it dismissed private respondent, not
because the latter got married but because she concealed that fact, does have a hollow ring. Her
concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in her
which justified her dismissal.
Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless
takes umbrage over the concealment of that fact. This improbable reasoning, with interstitial
distinctions, perturbs the Court since private respondent may well be minded to claim that the
imputation of dishonesty should be the other way around.
Petitioner would have the Court believe that although private respondent defied its policy against its
female employees contracting marriage, what could be an act of insubordination was
inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the
same time, declaring that marriage as a trivial matter to which it supposedly has no objection. In
other words, PT & T says it gives its blessings to its female employees contracting marriage, despite
the maternity leaves and other benefits it would consequently respond for and which obviously it
would have wanted to avoid. If that employee confesses such fact of marriage, there will be no
sanction; but if such employee conceals the same instead of proceeding to the confessional, she will
be dismissed. This line of reasoning does not impress us as reflecting its true management policy or
that we are being regaled with responsible advocacy.
This Court should be spared the ennui of strained reasoning and the tedium of propositions which
confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it was its
unlawful policy against married women, both on the aspects of qualification and retention, which
compelled private respondent to conceal her supervenient marriage. It was, however, that very
policy alone which was the cause of private respondent's secretive conduct now complained of. It is
then apropos to recall the familiar saying that he who is the cause of the cause is the cause of the
evil caused.
Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly
misappropriated company funds, as an additional ground to dismiss her from employment, is
somewhat insincere and self-serving. Concededly, private respondent admitted in the course of the
proceedings that she failed to remit some of her collections, but that is an altogether different story.
The fact is that she was dismissed solely because of her concealment of her marital status, and not
on the basis of that supposed defalcation of company funds. That the labor arbiter would thus
consider petitioner's submissions on this supposed dishonesty as a mere afterthought, just to bolster
its case for dismissal, is a perceptive conclusion born of experience in labor cases. For, there was
no showing that private respondent deliberately misappropriated the amount or whether her failure to
remit the same was through negligence and, if so, whether the negligence was in nature simple or
grave. In fact, it was merely agreed that private respondent execute a promissory note to refund the
same, which she did, and the matter was deemed settled as a peripheral issue in the labor case.
Private respondent, it must be observed, had gained regular status at the time of her dismissal.
When she was served her walking papers on January 29, 1992, she was about to complete the
probationary period of 150 days as she was contracted as a probationary employee on September
2, 1991. That her dismissal would be effected just when her probationary period was winding down
clearly raises the plausible conclusion that it was done in order to prevent her from earning security
of tenure. 27 On the other hand, her earlier stints with the company as reliever were undoubtedly those of
a regular employee, even if the same were for fixed periods, as she performed activities which were
essential or necessary in the usual trade and business of PT & T. 28 The primary standard of determining
regular employment is the reasonable connection between the activity performed by the employee in
relation to the business or trade of the employer. 29

As an employee who had therefore gained regular status, and as she had been dismissed without
just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to
full back wages, inclusive of allowances and other benefits or their monetary equivalent. 30 However,
as she had undeniably committed an act of dishonesty in concealing her status, albeit under the
compulsion of an unlawful imposition of petitioner, the three-month suspension imposed by respondent
NLRC must be upheld to obviate the impression or inference that such act should be condoned. It would
be unfair to the employer if she were to return to its fold without any sanction whatsoever for her act
which was not totally justified. Thus, her entitlement to back wages, which shall be computed from the
time her compensation was withheld up to the time of her actual reinstatement, shall be reduced by
deducting therefrom the amount corresponding to her three months suspension.

4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by
petitioner PT & T. The Labor Code state, in no uncertain terms, as follows:
Art. 136. Stipulation against marriage. It shall be unlawful for an employer to
require as a condition of employment or continuation of employment that a woman
shall not get married, or to stipulate expressly or tacitly that upon getting married, a
woman employee shall be deemed resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason
of marriage.
This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree
No. 148, 31better known as the "Women and
Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, 32 entitled "An Act
to Regulate the Employment of Women and Children, to Provide Penalties for Violations Thereof, and for
Other Purposes." The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which
became law on March 16, 1923 and which regulated the employment of women and children in shops,
factories, industrial, agricultural, and mercantile establishments and other places of labor in the then
Philippine Islands.

It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et
al. vs. Philippine Air Lines, 33 a decision that emanated from the Office of the President. There, a policy
of Philippine Air Lines requiring that prospective flight attendants must be single and that they will be
automatically separated from the service once they marry was declared void, it being violative of the clear
mandate in Article 136 of the Labor Code with regard to discrimination against married women. Thus:

Of first impression is the incompatibility of the respondent's policy or regulation with

the codal provision of law. Respondent is resolute in its contention that Article 136 of
the Labor Code applies only to women employed in ordinary occupations and that
the prohibition against marriage of women engaged in extraordinary occupations, like
flight attendants, is fair and reasonable, considering the pecularities of their chosen
profession.
We cannot subscribe to the line of reasoning pursued by respondent. All along, it
knew that the controverted policy has already met its doom as early as March 13,
1973 when Presidential Decree No. 148, otherwise known as the Women and Child
Labor Law, was promulgated. But for the timidity of those affected or their labor
unions in challenging the validity of the policy, the same was able to obtain a
momentary reprieve. A close look at Section 8 of said decree, which amended
paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the
same provision reproduced verbatim in Article 136 of the Labor Code, which was
promulgated on May 1, 1974 to take effect six (6) months later, or on November 1,
1974.

It cannot be gainsaid that, with the reiteration of the same provision in the new Labor
Code, all policies and acts against it are deemed illegal and therefore abrogated.
True, Article 132 enjoins the Secretary of Labor to establish standards that will
ensure the safety and health of women employees and in appropriate cases shall by
regulation require employers to determine appropriate minimum standards for
termination in special occupations, such as those of flight attendants, but that is
precisely the factor that militates against the policy of respondent. The standards
have not yet been established as set forth in the first paragraph, nor has the
Secretary of Labor issued any regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards or regulations which
are as yet to be established, the policy of respondent against marriage is patently
illegal. This finds support in Section 9 of the New Constitution, which provides:
Sec. 9. The State shall afford protection to labor, promote full employment and
equality in employment, ensure equal work opportunities regardless of sex, race, or
creed, and regulate the relations between workers and employees. The State shall
assure the rights of workers to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work . . . .
Moreover, we cannot agree to the respondent's proposition that termination from
employment of flight attendants on account of marriage is a fair and reasonable
standard designed for their own health, safety, protection and welfare, as no basis
has been laid therefor. Actually, respondent claims that its concern is not so much
against the continued employment of the flight attendant merely by reason of
marriage as observed by the Secretary of Labor, but rather on the consequence of
marriage-pregnancy. Respondent discussed at length in the instant appeal the
supposed ill effects of pregnancy on flight attendants in the course of their
employment. We feel that this needs no further discussion as it had been adequately
explained by the Secretary of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent went as far as invoking
the provisions of Articles 52 and 216 of the New Civil Code on the preservation of
marriage as an inviolable social institution and the family as a basic social institution,
respectively, as bases for its policy of non-marriage. In both instances, respondent
predicates absence of a flight attendant from her home for long periods of time as
contributory to an unhappy married life. This is pure conjecture not based on actual
conditions, considering that, in this modern world, sophisticated technology has
narrowed the distance from one place to another. Moreover, respondent overlooked
the fact that married flight attendants can program their lives to adapt to prevailing
circumstances and events.
Article 136 is not intended to apply only to women employed in ordinary occupations,
or it should have categorically expressed so. The sweeping intendment of the law, be
it on special or ordinary occupations, is reflected in the whole text and supported by
Article 135 that speaks of non-discrimination on the employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial
Corporation 34considered as void a policy of the same nature. In said case, respondent, in dismissing
from the service the complainant, invoked a policy of the firm to consider female employees in the project
it was undertaking as separated the moment they get married due to lack of facilities for married women.
Respondent further claimed that complainant was employed in the project with an oral understanding that

her services would be terminated when she gets married. Branding the policy of the employer as an
example of "discriminatory chauvinism" tantamount to denying equal employment opportunities to women
simply on account of their sex, the appellate court struck down said employer policy as unlawful in view of
its repugnance to the Civil Code, Presidential Decree No. 148 and the Constitution.

Under American jurisprudence, job requirements which establish employer preference or conditions
relating to the marital status of an employee are categorized as a "sex-plus" discrimination where it
is imposed on one sex and not on the other. Further, the same should be evenly applied and must
not inflict adverse effects on a racial or sexual group which is protected by federal job discrimination
laws. Employment rules that forbid or restrict the employment of married women, but do not apply to
married men, have been held to violate Title VII of the United States Civil Rights Act of 1964, the
main federal statute prohibiting job discrimination against employees and applicants on the basis of,
among other things, sex. 35
Further, it is not relevant that the rule is not directed against all women but just against married
women. And, where the employer discriminates against married women, but not against married
men, the variable is sex and the discrimination is unlawful. 36 Upon the other hand, a requirement that
a woman employee must remain unmarried could be justified as a "bona fide occupational qualification,"
or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a
general principle, such as the desirability of spreading work in the workplace. A requirement of that nature
would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job
performance. Thus, in one case, a no-marriage rule applicable to both male and female flight attendants,
was regarded as unlawful since the restriction was not related to the job performance of the flight
attendants. 37

5. Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on
the right of a woman to be free from any kind of stipulation against marriage in connection with her
employment, but it likewise assaults good morals and public policy, tending as it does to deprive a
woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual
as an intangible and inalienable right. 38 Hence, while it is true that the parties to a contract may
establish any agreements, terms, and conditions that they may deem convenient, the same should not be
contrary to law, morals, good customs, public order, or public policy.39 Carried to its logical consequences,
it may even be said that petitioner's policy against legitimate marital bonds would encourage illicit or
common-law relations and subvert the sacrament of marriage.

Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the
parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much
public interest that the same should yield to the common good. 40 It goes on to intone that neither
capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience
of the public. 41 In the final reckoning, the danger of just such a policy against marriage followed by
petitioner PT & T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable
social institution and, ultimately, of the family as the foundation of the nation. 42That it must be effectively
interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of
the laws of the land is not only in order but imperatively required.

ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is
hereby DISMISSED for lack of merit, with double costs against petitioner.
SO ORDERED.
Romero, Puno, Mendoza and Torres, Jr., JJ., concur.

See Duncan v. Glaxo, G.R. No. 162994, September 17, 2004

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162994

September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners,

vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.
RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with constitutional overtones, involving the
validity of the policy of a pharmaceutical company prohibiting its employees from marrying
employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc.
(Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and
orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees
to study and abide by existing company rules; to disclose to management any existing or future
relationship by consanguinity or affinity with co-employees or employees of competing drug
companies and should management find that such relationship poses a possible conflict of interest,
to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform
management of any existing or future relationship by consanguinity or affinity with co-employees or
employees of competing drug companies. If management perceives a conflict of interest or a
potential conflict between such relationship and the employees employment with the company, the
management and the employee will explore the possibility of a "transfer to another department in a
non-counterchecking position" or preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte
sales area.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay.
She supervised the district managers and medical representatives of her company and prepared
marketing strategies for Astra in that area.

Even before they got married, Tecson received several reminders from his District Manager
regarding the conflict of interest which his relationship with Bettsy might engender. Still, love
prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict
of interest. Tecsons superiors reminded him that he and Bettsy should decide which one of them
would resign from their jobs, although they told him that they wanted to retain him as much as
possible because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a relationship
with an employee of a competitor company. He explained that Astra, Bettsys employer, was
planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the
redundancy package to be offered by Astra. With Bettsys separation from her company, the
potential conflict of interest would be eliminated. At the same time, they would be able to avail of the
attractive redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In September 1999,
Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not have a milk
division, the potential conflict of interest would be eliminated. His application was denied in view of
Glaxos "least-movement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales
area. Tecson asked Glaxo to reconsider its decision, but his request was denied.
Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos
Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until February
7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as
medical representative in the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued
samples of products which were competing with similar products manufactured by Astra. He was
also not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance machinery level, they submitted the
matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half () month pay for
every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the
National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos
policy on relationships between its employees and persons employed with competitor companies,
and affirming Glaxos right to transfer Tecson to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the
NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on
the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxos
policy prohibiting its employees from having personal relationships with employees of competitor
companies is a valid exercise of its management prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was
denied by the appellate court in its Resolution dated March 26, 2004.5

Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the
NCMBs finding that the Glaxos policy prohibiting its employees from marrying an employee of a
competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was
constructively dismissed when he was transferred to a new sales territory, and deprived of the
opportunity to attend products seminars and training sessions.6
Petitioners contend that Glaxos policy against employees marrying employees of competitor
companies violates the equal protection clause of the Constitution because it creates invalid
distinctions among employees on account only of marriage. They claim that the policy restricts the
employees right to marry.7
They also argue that Tecson was constructively dismissed as shown by the following circumstances:
(1) he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-SurigaoAgusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars
and training sessions for medical representatives, and (4) he was prohibited from promoting
respondents products which were competing with Astras products.8
In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from
having a relationship with and/or marrying an employee of a competitor company is a valid exercise
of its management prerogatives and does not violate the equal protection clause; and that Tecsons
reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City
and Agusan del Sur sales area does not amount to constructive dismissal.9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it
has a genuine interest in ensuring that its employees avoid any activity, relationship or interest that
may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having
personal or family interests in any competitor company which may influence their actions and
decisions and consequently deprive Glaxo of legitimate profits. The policy is also aimed at
preventing a competitor company from gaining access to its secrets, procedures and policies.10
It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or
future relationships with employees of competitor companies, and is therefore not violative of the
equal protection clause. It maintains that considering the nature of its business, the prohibition is
based on valid grounds.11
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential
conflict of interest. Astras products were in direct competition with 67% of the products sold by
Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of
its management prerogatives.12 In any case, Tecson was given several months to remedy the
situation, and was even encouraged not to resign but to ask his wife to resign form Astra instead.13
Glaxo also points out that Tecson can no longer question the assailed company policy because
when he signed his contract of employment, he was aware that such policy was stipulated therein. In
said contract, he also agreed to resign from respondent if the management finds that his relationship
with an employee of a competitor company would be detrimental to the interests of Glaxo.14
Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from
seminars regarding respondents new products did not amount to constructive dismissal.
It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines SurCamarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo
asserts that in effecting the reassignment, it also considered the welfare of Tecsons family. Since

Tecsons hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo
assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to
him and his family as he would be relocating to a familiar territory and minimizing his travel
expenses.15
In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-asthma
drug was due to the fact that said product was in direct competition with a drug which was soon to
be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in
Tecsons receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer
to the Butuan City sales area (his paraphernalia was delivered to his new sales area instead of Naga
City because the supplier thought he already transferred to Butuan).16
The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling
that Glaxos policy against its employees marrying employees from competitor companies is valid,
and in not holding that said policy violates the equal protection clause of the Constitution; (2)
Whether Tecson was constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners
provides:

10. You agree to disclose to management any existing or future relationship you may have,
either by consanguinity or affinity with co-employees or employees of competing drug
companies. Should it pose a possible conflict of interest in management discretion, you
agree to resign voluntarily from the Company as a matter of Company policy.
17
The same contract also stipulates that Tescon agrees to abide by the existing company rules of
Glaxo, and to study and become acquainted with such policies.18 In this regard, the Employee
Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may run
counter to the responsibilities which they owe Glaxo Wellcome.
Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial or otherwise, in any
competitor supplier or other businesses which may consciously or unconsciously
influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate
profit.
b. To refrain from using their position in Glaxo Wellcome or knowledge of Company
plans to advance their outside personal interests, that of their relatives, friends and
other businesses.

c. To avoid outside employment or other interests for income which would impair
their effective job performance.
d. To consult with Management on such activities or relationships that may lead to
conflict of interest.
1.1. Employee Relationships
Employees with existing or future relationships either by consanguinity or affinity with coemployees of competing drug companies are expected to disclose such relationship to the
Management. If management perceives a conflict or potential conflict of interest, every effort
shall be made, together by management and the employee, to arrive at a solution within six
(6) months, either by transfer to another department in a non-counter checking position, or
by career preparation toward outside employment after Glaxo Wellcome. Employees must
be prepared for possible resignation within six (6) months, if no other solution is feasible.19
No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy
prohibiting an employee from having a relationship with an employee of a competitor company is a
valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information from competitors, especially so that it and Astra are rival
companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor companies
upon Glaxos employees is reasonable under the circumstances because relationships of that nature
might compromise the interests of the company. In laying down the assailed company policy, Glaxo
only aims to protect its interests against the possibility that a competitor company will gain access to
its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the
Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right
to reasonable returns on investments and to expansion and growth.20 Indeed, while our laws
endeavor to give life to the constitutional policy on social justice and the protection of labor, it does
not mean that every labor dispute will be decided in favor of the workers. The law also recognizes
that management has rights which are also entitled to respect and enforcement in the interest of fair
play.21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business
confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and
female applicants or employees who are married to a competitor. Consequently, the court ruled than
an employer that discharged an employee who was married to an employee of an active competitor
did not violate Title VII of the Civil Rights Act of 1964.23The Court pointed out that the policy was
applied to men and women equally, and noted that the employers business was highly competitive
and that gaining inside information would constitute a competitive advantage.
The challenged company policy does not violate the equal protection clause of the Constitution as
petitioners erroneously suggest. It is a settled principle that the commands of the equal protection
clause are addressed only to the state or those acting under color of its authority.24 Corollarily, it has
been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no
shield against merely private conduct, however, discriminatory or wrongful.25 The only exception
occurs when the state29 in any of its manifestations or actions has been found to have become

entwined or involved in the wrongful private conduct.27 Obviously, however, the exception is not
present in this case. Significantly, the company actually enforced the policy after repeated requests
to the employee to comply with the policy. Indeed, the application of the policy was made in an
impartial and even-handed manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the policy in its employee handbook,
it is clear that Glaxo does not impose an absolute prohibition against relationships between its
employees and those of competitor companies. Its employees are free to cultivate relationships with
and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of
interest between the employee and the company that may arise out of such relationships. As
succinctly explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the company
remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a
personal prerogative that belongs only to the individual. However, an employees personal
decision does not detract the employer from exercising management prerogatives to ensure
maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company policy which forms part of
respondents Employee Code of Conduct and of its contracts with its employees, such as that signed
by Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that
restriction when he signed his employment contract and when he entered into a relationship with
Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo,
the stipulations therein have the force of law between them and, thus, should be complied with in
good faith."29 He is therefore estopped from questioning said policy.
The Court finds no merit in petitioners contention that Tescon was constructively dismissed when he
was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao
City-Agusan del Sur sales area, and when he was excluded from attending the companys seminar
on new products which were directly competing with similar products manufactured by Astra.
Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued
employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.30 None of these conditions are present in the instant case. The record
does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer.
As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning
Tecson to the Butuan City sales area:
. . . In this case, petitioners transfer to another place of assignment was merely in keeping
with the policy of the company in avoidance of conflict of interest, and thus validNote that
[Tecsons] wife holds a sensitive supervisory position as Branch Coordinator in her
employer-company which requires her to work in close coordination with District Managers
and Medical Representatives. Her duties include monitoring sales of Astra products,
conducting sales drives, establishing and furthering relationship with customers, collection,
monitoring and managing Astras inventoryshe therefore takes an active participation in
the market war characterized as it is by stiff competition among pharmaceutical companies.
Moreover, and this is significant, petitioners sales territory covers Camarines Sur and
Camarines Norte while his wife is supervising a branch of her employer in Albay. The
proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of
interest not only possible, but actual, as learning by one spouse of the others market
strategies in the region would be inevitable. [Managements] appreciation of a conflict of
interest is therefore not merely illusory and wanting in factual basis31

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a
complaint filed by a medical representative against his employer drug company for illegal dismissal
for allegedly terminating his employment when he refused to accept his reassignment to a new area,
the Court upheld the right of the drug company to transfer or reassign its employee in accordance
with its operational demands and requirements. The ruling of the Court therein, quoted hereunder,
also finds application in the instant case:
By the very nature of his employment, a drug salesman or medical representative is
expected to travel. He should anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot even assign its representatives
or detail men to new markets calling for opening or expansion or to areas where the need for
pushing its products is great. More so if such reassignments are part of the employment
contract.33
As noted earlier, the challenged policy has been implemented by Glaxo impartially and
disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson
several chances to eliminate the conflict of interest brought about by his relationship with Bettsy.
When their relationship was still in its initial stage, Tecsons supervisors at Glaxo constantly
reminded him about its effects on his employment with the company and on the companys interests.
After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the
company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in
its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from
her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the
conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was
constrained to reassign Tecson to a sales area different from that handled by his wife for Astra.
Notably, the Court did not terminate Tecson from employment but only reassigned him to another
area where his home province, Agusan del Sur, was included. In effecting Tecsons transfer, Glaxo
even considered the welfare of Tecsons family. Clearly, the foregoing dispels any suspicion of
unfairness and bad faith on the part of Glaxo.34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.

Star Paper v. Simbol, G.R. No. 164774, April 12, 2006

G.R. No. 164774

April 12, 2006

STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners,

vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.
DECISION
PUNO, J.:

We are called to decide an issue of first impression: whether the policy of the employer banning spouses
from working in the same company violates the rights of the employee under the Constitution and the
Labor Code or is a valid exercise of management prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated August 3, 2004
in CA-G.R. SP No. 73477 reversing the decision of the National Labor Relations Commission (NLRC) which
affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading principally of
paper products. Josephine Ongsitco is its Manager of the Personnel and Administration Department
while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia
(Comia) and Lorna E. Estrella (Estrella) were all regular employees of the company.1
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee of
the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the couple
that should they decide to get married, one of them should resign pursuant to a company policy
promulgated in 1995,2 viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree
of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female) developed a
friendly relationship during the course of their employment and then decided to get married, one of
them should resign to preserve the policy stated above.3
Simbol resigned on June 20, 1998 pursuant to the company policy.4
Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee, whom
she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company policy, one
must resign should they decide to get married. Comia resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker. Petitioners stated
that Zuiga, a married man, got Estrella pregnant. The company allegedly could have terminated her
services due to immorality but she opted to resign on December 21, 1999.6
The respondents each signed a Release and Confirmation Agreement. They stated therein that they
have no money and property accountabilities in the company and that they release the latter of any
claim or demand of whatever nature.7
Respondents offer a different version of their dismissal. Simbol and Comia allege that they did not resign
voluntarily; they were compelled to resign in view of an illegal company policy. As to respondent
Estrella, she alleges that she had a relationship with co-worker Zuiga who misrepresented himself as a
married but separated man. After he got her pregnant, she discovered that he was not separated. Thus,
she severed her relationship with him to avoid dismissal due to the company policy. On November 30,
1999, she met an accident and was advised by the doctor at the Orthopedic Hospital to recuperate for
twenty-one (21) days. She returned to work on December 21, 1999 but she found out that her name
was on-hold at the gate. She was denied entry. She was directed to proceed to the personnel office

where one of the staff handed her a memorandum. The memorandum stated that she was being
dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for
twenty-one (21) days and has not been given a chance to explain. The management asked her to write
an explanation. However, after submission of the explanation, she was nonetheless dismissed by the
company. Due to her urgent need for money, she later submitted a letter of resignation in exchange for
her thirteenth month pay.8
Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation pay and
attorneys fees. They averred that the aforementioned company policy is illegal and contravenes Article
136 of the Labor Code. They also contended that they were dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of
merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation perceived as
management prerogative. This management prerogative is quite broad and encompassing for it covers
hiring, work assignment, working method, time, place and manner of work, tools to be used, processes
to be followed, supervision of workers, working regulations, transfer of employees, work supervision,
lay-off of workers and the discipline, dismissal and recall of workers. Except as provided for or limited by
special law, an employer is free to regulate, according to his own discretion and judgment all the aspects
of employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January 11,
2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a Resolution11 dated
August 8, 2002. They appealed to respondent court via Petition for Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor Relations
Commission is hereby REVERSED and SET ASIDE and a new one is entered as follows:
(1) Declaring illegal, the petitioners dismissal from employment and ordering private respondents to
reinstate petitioners to their former positions without loss of seniority rights with full backwages from
the time of their dismissal until actual reinstatement; and
(2) Ordering private respondents to pay petitioners attorneys fees amounting to 10% of the award and
the cost of this suit.13
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:
1. x x x the subject 1995 policy/regulation is violative of the constitutional rights towards marriage and
the family of employees and of Article 136 of the Labor Code; and
2. x x x respondents resignations were far from voluntary.14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor under the following
provisions, viz.:

Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the rights
of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate
in policy and decision-making processes affecting their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and similar subjects.
Art. 1702. 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.
The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar involves
Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or continuation of
employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon
getting married a woman employee shall be deemed resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision. Petitioners allege that its policy
"may appear to be contrary to Article 136 of the Labor Code" but it assumes a new meaning if read
together with the first paragraph of the rule. The rule does not require the woman employee to resign.
The employee spouses have the right to choose who between them should resign. Further, they are free
to marry persons other than co-employees. Hence, it is not the marital status of the employee, per se,
that is being discriminated. It is only intended to carry out its no-employment-for-relatives-within-thethird-degree-policy which is within the ambit of the prerogatives of management.16
It is true that the policy of petitioners prohibiting close relatives from working in the same company
takes the nature of an anti-nepotism employment policy. Companies adopt these policies to prevent the
hiring of unqualified persons based on their status as a relative, rather than upon their ability.17 These
policies focus upon the potential employment problems arising from the perception of favoritism
exhibited towards relatives.

With more women entering the workforce, employers are also enacting employment policies specifically
prohibiting spouses from working for the same company. We note that two types of employment
policies involve spouses: policies banning only spouses from working in the same company (no-spouse
employment policies), and those banning all immediate family members, including spouses, from
working in the same company (anti-nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19 there are
twenty state statutes20 in the United States prohibiting marital discrimination. Some state courts21 have
been confronted with the issue of whether no-spouse policies violate their laws prohibiting both marital
status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States, complainants utilize two
theories of employment discrimination: the disparate treatment and the disparate impact. Under
the disparate treatment analysis, the plaintiff must prove that an employment policy is discriminatory
on its face. No-spouse employment policies requiring an employee of a particular sex to either quit,
transfer, or be fired are facially discriminatory. For example, an employment policy prohibiting the
employer from hiring wives of male employees, but not husbands of female employees, is
discriminatory on its face.22
On the other hand, to establish disparate impact, the complainants must prove that a facially neutral
policy has a disproportionate effect on a particular class. For example, although most employment
policies do not expressly indicate which spouse will be required to transfer or leave the company, the
policy often disproportionately affects one sex.23
The state courts rulings on the issue depend on their interpretation of the scope of marital status
discrimination within the meaning of their respective civil rights acts. Though they agree that the term
"marital status" encompasses discrimination based on a person's status as either married, single,
divorced, or widowed, they are divided on whether the term has a broader meaning. Thus, their
decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's status as married, single,
divorced, or widowed reason that if the legislature intended a broader definition it would have either
chosen different language or specified its intent. They hold that the relevant inquiry is if one is married
rather than to whom one is married. They construe marital status discrimination to include only
whether a person is single, married, divorced, or widowed and not the "identity, occupation, and place
of employment of one's spouse." These courts have upheld the questioned policies and ruled that they
did not violate the marital status discrimination provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it encompassed the
identity, occupation and employment of one's spouse. They strike down the no-spouse employment
policies based on the broad legislative intent of the state statute. They reason that the no-spouse
employment policy violate the marital status provision because it arbitrarily discriminates against all
spouses of present employees without regard to the actual effect on the individual's qualifications or
work performance.27 These courts also find the no-spouse employment policy invalid for failure of the
employer to present any evidence of business necessity other than the general perception that spouses
in the same workplace might adversely affect the business.28 They hold that the absence of such a bona
fide occupational qualification29 invalidates a rule denying employment to one spouse due to the

current employment of the other spouse in the same office.30 Thus, they rule that unless the employer
can prove that the reasonable demands of the business require a distinction based on marital status and
there is no better available or acceptable policy which would better accomplish the business purpose, an
employer may not discriminate against an employee based on the identity of the employees
spouse.31 This is known as thebona fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an employers nospouse rule, the exception is interpreted strictly and narrowly by these state courts. There must be a
compelling business necessity for which no alternative exists other than the discriminatory practice.32 To
justify a bona fide occupational qualification, the employer must prove two factors: (1) that the
employment qualification is reasonably related to the essential operation of the job involved; and, (2)
that there is a factual basis for believing that all or substantially all persons meeting the qualification
would be unable to properly perform the duties of the job.33
The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the
standard ofreasonableness of the company policy which is parallel to the bona fide occupational
qualification requirement. In the recent case of Duncan Association of Detailman-PTGWO and Pedro
Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying employees of any competitor
company. We held that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information from competitors. We considered the
prohibition against personal or marital relationships with employees of competitor companies upon
Glaxos employeesreasonable under the circumstances because relationships of that nature might
compromise the interests of Glaxo. In laying down the assailed company policy, we recognized that
Glaxo only aims to protect its interests against the possibility that a competitor company will gain access
to its secrets and procedures.35
The requirement that a company policy must be reasonable under the circumstances to qualify as a
valid exercise of management prerogative was also at issue in the 1997 case of Philippine Telegraph and
Telephone Company v. NLRC.36 In said case, the employee was dismissed in violation of petitioners
policy of disqualifying from work any woman worker who contracts marriage. We held that the company
policy violates the right against discrimination afforded all women workers under Article 136 of the
Labor Code, but established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified as a "bona fide
occupational qualification," or BFOQ, where the particular requirements of the job would justify the
same, but not on the ground of a general principle, such as the desirability of spreading work in the
workplace. A requirement of that nature would be valid provided it reflects an inherent
quality reasonably necessary for satisfactory job performance.37 (Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of reasonableness must
be clearly established to uphold the questioned employment policy. The employer has the burden to
prove the existence of a reasonable business necessity. The burden was successfully discharged in
Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.

Petitioners sole contention that "the company did not just want to have two (2) or more of its
employees related between the third degree by affinity and/or consanguinity"38 is lame. That the second
paragraph was meant to give teeth to the first paragraph of the questioned rule39 is evidently not the
valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they were found fit for the
job, but were asked to resign when they married a co-employee. Petitioners failed to show how the
marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the
Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how
this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting
Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised
on the mere fear that employees married to each other will be less efficient. If we uphold the
questioned rule without valid justification, the employer can create policies based on an unproven
presumption of a perceived danger at the expense of an employees right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a co-employee, but
they are free to marry persons other than co-employees. The questioned policy may not facially violate
Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact
theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the
discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate business
concern in imposing the questioned policy cannot prejudice the employees right to be free from
arbitrary discrimination based upon stereotypes of married persons working together in one company.40
Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot
benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we
cannot prudently draw inferences from the legislatures silence41 that married persons are not protected
under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of
petitioners to present undisputed proof of a reasonable business necessity, we rule that the questioned
policy is an invalid exercise of management prerogative. Corollarily, the issue as to whether respondents
Simbol and Comia resigned voluntarily has become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact that her
resignation letter was written in her own handwriting. Both ruled that her resignation was voluntary and
thus valid. The respondent court failed to categorically rule whether Estrella voluntarily resigned but
ordered that she be reinstated along with Simbol and Comia.
Estrella claims that she was pressured to submit a resignation letter because she was in dire need of
money. We examined the records of the case and find Estrellas contention to be more in accord with
the evidence. While findings of fact by administrative tribunals like the NLRC are generally given not only
respect but, at times, finality, this rule admits of exceptions,42 as in the case at bar.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her alleged
immoral conduct. At first, she did not want to sign the termination papers but she was forced to tender
her resignation letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because she got impregnated by a
married man and she could not stand being looked upon or talked about as immoral43 is incredulous. If

she really wanted to avoid embarrassment and humiliation, she would not have gone back to work at
all. Nor would she have filed a suit for illegal dismissal and pleaded for reinstatement. We have held that
in voluntary resignation, the employee is compelled by personal reason(s) to dissociate himself from
employment. It is done with the intention of relinquishing an office, accompanied by the act of
abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal dismissal.
Given the lack of sufficient evidence on the part of petitioners that the resignation was voluntary,
Estrellas dismissal is declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated August 3, 2004
isAFFIRMED.1avvphil.net
SO ORDERED.

Prohibited Acts
Art. 137, Labor Code
Article 137. Prohibited acts.
It shall be unlawful for any employer:
To deny any woman employee the benefits provided for in this Chapter or to discharge any woman
employed by him for the purpose of preventing her from enjoying any of the benefits provided under
this Code.
To discharge such woman on account of her pregnancy, or while on leave or in confinement due to her
pregnancy;
To discharge or refuse the admission of such woman upon returning to her work for fear that she may
again be pregnant.

Del Monte v. Velasco, G.R. No. 153477, March 6, 2007

G.R. NO. 153477

March 6, 2007

DEL MONTE PHILIPPINES, INC., Petitioner,

vs.
LOLITA VELASCO, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a Petition for Certiorari under Rule 45 seeking to reverse and set aside the
Decision1 dated July 23, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 56571 which affirmed the
Decision dated May 27, 1999 of the National Labor Relations Commission (NLRC); and the CA
Resolution2 dated May 7, 2002 which denied the petitioner's Motion for Reconsideration.
The facts of the case, as stated by the CA, are as follows:

Lolita M. Velasco (respondent) started working with Del Monte Philippines (petitioner) on October 21,
1976 as a seasonal employee and was regularized on May 1, 1977. Her latest assignment was as Field
Laborer.
On June 16, 1987, respondent was warned in writing due to her absences. On May 4, 1991, respondent,
thru a letter, was again warned in writing by petitioner about her absences without permission and a
forfeiture of her vacation leave entitlement for the year 1990-1991 was imposed against her.
On September 14, 1992, another warning letter was sent to respondent regarding her absences without
permission during the year 1991-1992. Her vacation entitlement for the said employment year affected
was consequently forfeited.
In view of the said alleged absences without permission, on September 17, 1994, a notice of hearing was
sent to respondent notifying her of the charges filed against her for violating the Absence Without
Official Leave rule: that is for excessive absence without permission on August 15-18, 29-31 and
September 1-10, 1994. The hearing was set on September 23, 1994.
Respondent having failed to appear on September 23, 1994 hearing, another notice of hearing was sent
to her resetting the investigation on September 30, 1994. It was again reset to October 5, 1994.
On January 10, 1995, after hearing, the petitioner terminated the services of respondent effective
January 16, 1994 due to excessive absences without permission.
Feeling aggrieved, respondent filed a case for illegal dismissal against petitioner asserting that her
dismissal was illegal because she was on the family way suffering from urinary tract infection, a
pregnancy-borne, at the time she committed the alleged absences. She explained that for her absence
from work on August 15, 16, 17 & 18, 1994 she had sent an application for leave to her supervisor,
Prima Ybaez. Thereafter, she went to the company hospital for check-up and was advised accordingly
to rest in quarters for four (4) days or on August 27 to 30, 1994. Still not feeling well, she failed to work
on September 1, 1994 and was again advised two days of rest in quarters on September 2-3, 1994.
Unable to recover, she went to see an outside doctor, Dr. Marilyn Casino, and the latter ordered her to
rest for another five (5) consecutive days, or from September 5 to 9, 1994. She declared she did not file
the adequate leave of absence because a medical certificate was already sufficient per company policy.
On September 10, 1994 she failed to report to work but sent an application for leave of absence to her
supervisor, Prima Ybaez, which was not anymore accepted.3
On April 13, 1998, the Labor Arbiter dismissed the Complaint for lack of merit. The Labor Arbiter held
that the respondent was an incorrigible absentee; that she failed to file leaves of absence; that her
absences in 1986 and 1987 were without permission; that the petitioner gave the respondent several
chances to reform herself; and that the respondent did not justify her failure to appear during the
scheduled hearings and failed to explain her absences.
Respondent appealed to the NLRC. On May 29, 1999, the NLRC issued its Resolution, the dispositive
portion of which reads:
WHEREFORE, foregoing considered, the instant decision is hereby VACATED and a new one entered
declaring the dismissal of complainant as ILLEGAL. In consonance with Art. 279 of the Labor [Code], her

reinstatement with full backwages from the date of her termination from employment to her actual
reinstatement is necessarily decreed.4
The NLRC held that, under the company rules, the employee may make a subsequent justification of her
absenteeism, which she was able to do in the instant case; that while it is not disputed that the
respondent incurred absences exceeding six (6) days within one employment year a ground for
dismissal under the company rules the petitioner actually admitted the fact that the respondent had
been pregnant, hence, negating petitioners assertion that the respondent failed to give any explanation
of her absences; that the records bear the admission of petitioners officer of the receipt of the hospital
record showing the cause of her absences ("RIQ advice" or "rest-in-quarters") for August 19-20, 1994
which, in turn, could already serve as reference in resolving the absences on August 15 to 18; that the
petitioner further admitted that the respondent was under "RIQ advice" on September 2-3, 1994 and
yet insisted in including these dates among respondents 16 purported unexplained absences; that it is
sufficient notice for the petitioner, "a plain laborer" with "unsophisticated judgment," to send word to
her employer through a co-worker on August 15 to 16, 1994 that she was frequently vomiting; that the
sheer distance between respondents home and her workplace made it difficult to send formal notice;
that respondent even sent her child of tender age to inform her supervisor about her absence on
September 5, 1994 due to stomach ache, but her child failed to approach the officer because her child
felt ashamed, if not mortified; that respondents narration that she had to bear pains during her
absences on September 21 to 27, 1994 is credible; that she dared not venture through the roads for fear
of forest creatures or predators; that the petitioner is guilty of unlawfully discharging respondent on
account of her pregnancy under Article 137(2) of the Labor Code; and, that petitioners reference to the
previous absenteeism of respondent is misplaced because the latter had already been penalized
therefor.
Petitioners Motion for Reconsideration was denied on September 30, 1999.
The petitioner then appealed to the CA. On July 23, 2001, the CA promulgated its Decision the
dispositive portion of which states:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the instant petition is DISMISSED, the Resolutions, dated
May 27, 1999 and September 30, 1999 of the National Labor Relations Commission in NLRC CA No. M003926-98, are hereby AFFIRMED in toto.
SO ORDERED.5
In affirming the NLRC, the CA held that absences due to a justified cause cannot be a ground for
dismissal; that it is undisputed that the respondent was pregnant at the time she incurred the absences
in question; that the certification issued by a private doctor duly established this fact; that it was no less
than petitioners company doctor who advised the respondent to have rest-in-quarters for four days on
account of a pregnancy- related sickness; that it had been duly established that respondent filed leaves
of absence though the last had been refused by the company supervisor; that the dismissal of an
employee due to prolonged absence with leave by reason of illness duly established by the presentation
of a medical certificate is not justified; that it is undisputed that respondents sickness was pregnancyrelated; that under Article 137(2) of the Labor Code, the petitioner committed a prohibited act in
discharging a woman on account of her pregnancy.

On May 7, 2002, the CA denied petitioners Motion for Reconsideration.

Hence, the instant Petition raising the following issues:
I.
The court of appeals seriously erred In considering respondents Excessive aWOPs as justified Simply on
account of her pregnancy.
II.
THE COURT OF APPEALS SERIOUSLY ERRED IN NOT CONSIDERING THAT RESPONDENTS LATEST STRING
OF ABSENCES INCURRED WITHOUT ANY PRIOR PERMISSION, AND AS ABOVE SHOWN, WITHOUT ANY
VALID JUSTIFICATION, TAKEN TOGETHER WITH HER DAMAGING awop history, established her gross and
habitual neGlect of duties, a just and valid ground for dismissal.
III.
The court of appeals seriously erred in holding that respondents dismissal was in violation of article 137
(prohibiting an employer to discharge an employee on account of her pregnancy).
IV.
The court of appeals seriously erred in awarding full backwages in favor of respondent notwithstanding
petitioners evident good faith.6
The essential question is whether the employment of respondent had been validly terminated on the
ground of excessive absences without permission. Corollary to this is the question of whether the
petitioner discharged the respondent on account of pregnancy, a prohibited act.
The petitioner posits the following arguments: (a) The evidence proffered by the respondent, to wit: (1)
the Discharge Summary indicating that she had been admitted to the Phillips Memorial Hospital on
August 23, 1994 and discharged on August 26, 1994, and that she had been advised to "rest in quarters"
for four days from August 27, 1994 to August 30, 1994, and (2) the Medical Certificate issued by Dr.
Marilyn M. Casino stating that respondent had sought consultation on September 4, 2002 because of
spasm in the left iliac region, and was advised to rest for five days (from September 4, 1994 up to
September 8, 1994), due to urinary tract infection, all in all establish respondents sickness only from
August 23, 1994 up to August 30, 1994 and from September 4, 1994 up to September 8, 1994. In other
words, respondent was absent without permission on several other days which were not supported by
any other proof of illness, specifically, on August 15, 16, 17, 18, 31, 1994 and September 1, 2, 3, 9, and
10, 1994, and, hence, she is guilty of ten unjustified absences; (b) Per Filflex Industrial and
Manufacturing Co. v. National Labor Relations Commission (Filflex),7 if the medical certificate fails to
refer to the specific period of the employees absence, then such absences, attributable to chronic
asthmatic bronchitis, are not supported by competent proof and, hence, they are unjustified. By parity
of reasoning, in the absence of evidence indicating any pregnancy-borne illness outside the period
stated in respondents medical certificate, such illness ought not to be considered as an acceptable
excuse for respondents excessive absences without leave; (c) Respondents latest string of absences,
taken together with her long history of absenteeism without permission, established her gross and
habitual neglect of duties, as established by jurisprudence; (d) The respondent was dismissed not by

reason of her pregnancy but on account of her gross and habitual neglect of duties. In other words, her
pregnancy had no bearing on the decision to terminate her employment; and, (e) Her state of
pregnancy per se could not excuse her from filing prior notice for her absence.
Petitioners arguments are without merit.
First. The Filflex Industrial and Manufacturing Co. case is not applicable, principally because the nature
and gravity of the illness involved in that case chronic asthmatic bronchitis are different from the
conditions that are present in the instant case, which is pregnancy and its related illnesses.
The Court takes judicial notice of the fact that the condition of asthmatic bronchitis may be intermittent,
in contrast to pregnancy which is a continuing condition accompanied by various symptoms and related
illnesses. Hence, as to the former, if the medical certificate or other proof proffered by the worker fails
to correspond with the dates of absence, then it can be reasonably concluded that, absent any other
proof, such absences are unjustified. This is the ruling in Filflex which cannot be applied in a straighthand fashion in cases of pregnancy which is a long-term condition accompanied by an assortment of
related illnesses.
In this case, by the measure of substantial evidence, what is controlling is the finding of the NLRC and
the CA that respondent was pregnant and suffered from related ailments. It would be unreasonable to
isolate such condition strictly to the dates stated in the Medical Certificate or the Discharge Summary. It
can be safely assumed that the absences that are not covered by, but which nonetheless approximate,
the dates stated in the Discharge Summary and Medical Certificate, are due to the continuing condition
of pregnancy and related illnesses, and, hence, are justified absences.
As the CA and the NLRC correctly noted, it is not disputed that respondent was pregnant and that she
was suffering from urinary tract infection, and that her absences were due to such facts. The petitioner
admits these facts in its Petition for Review.8 And, as the CA aptly held, it was no less than the company
doctor who advised the respondent to have "rest-in-quarters" for four days on account of a pregnancyrelated sickness.9
On this note, this Court upholds and adopts the finding of the NLRC, thus:
In this jurisdiction tardiness and absenteeism, like abandonment, are recognized forms of neglect of
duties, the existence of which justify the dismissal of the erring employee. Respondents rule penalizing
with discharge any employee who has incurred six (6) or more absences without permission
or subsequent justification is admittedly within the purview of the foregoing standard.
However, while it is not disputed that complainant incurred absences exceeding six (6) days as she
actually failed to report for work from August 15-18, 23-26, 29-31, September 1-3, 5-10, 12-17, 21-24,
26-30, and October 1-3, 1994, her being pregnant at the time these absences were incurred is not
questioned and is even admitted by respondent. It thus puzzles us why respondent asserts complainant
failed to explain satisfactorily her absences on August 15-18, 29-31, September 1-3 and 5-10, 1994, yet
reconsidered the rest of her absences for being covered with "rest-in-quarters" (RIQ) advice from its
hospital personnel when this advice was unquestionably issued in consideration of the physiological and
emotional changes complainant, a conceiving mother, naturally developed. Medical and health reports
abundantly disclose that during the first trimester of pregnancy, expectant mothers are plagued with
morning sickness, frequent urination, vomiting and fatigue all of which complainant was similarly

plagued with. Union official IBB Lesnas observation on complainant being [sic] apparently not feeling
well during the investigation conducted by respondent on October 5, 1994 even remains in the
records of said proceedings. For respondent to isolate the absences of complainant in August and midSeptember, 1994 from the absences she incurred later in said month without submitting any evidence
that these were due to causes not in manner associated with her [ ] condition renders its justification
of complainants dismissal clearly not convincing under the circumstances.
Despite contrary declaration, the records bear the admission of respondents P/A North Supervisor,
PB Ybanez, of her receipt of the hospital record showing complainants RIQ advice for August 19-20,
1994 which could already serve as respondents reference in resolving the latters absences on August
15 to 18, 1994. Respondent further admitted complainant was under RIQ advice on September 2-3,
1994, yet, insisted in including these dates among her 16 purported unexplained absences justifying
termination of her employment.10 (emphasis supplied)
Petitioners contention that the cause for the dismissal was gross and habitual neglect unrelated to her
state of pregnancy is unpersuasive.
The Court agrees with the CA in concluding that respondents sickness was pregnancy-related and,
therefore, the petitioner cannot terminate respondents services because in doing so, petitioner will, in
effect, be violating the Labor Code which prohibits an employer to discharge an employee on account of
the latters pregnancy.11
Article 137 of the Labor Code provides:
Art. 137. Prohibited acts. It shall be unlawful for any employer:
(1) To deny any woman employee the benefits provided for in this Chapter or to discharge any woman
employed by him for the purpose of preventing her from enjoying any of the benefits provided under
this Code;
(2) To discharge such woman on account of her pregnancy, while on leave or in confinement due to
her pregnancy; or
(3) To discharge or refuse the admission of such woman upon returning to her work for fear that she
may again be pregnant. (Emphasis supplied)
Second. The petitioner stresses that many women go through pregnancy and yet manage to submit
prior notices to their employer, especially if "there is no evidence on record indicating a condition of
such gravity as to preclude efforts at notifying petitioner of her absence from work in series."12 But it
must be emphasized that under petitioners company rules, absences may be subsequently
justified.13 The Court finds no cogent reason to disturb the findings of the NLRC and the CA that the
respondent was able to subsequently justify her absences in accordance with company rules and policy;
that the respondent was pregnant at the time she incurred the absences; that this fact of pregnancy and
its related illnesses had been duly proven through substantial evidence; that the respondent attempted
to file leaves of absence but the petitioners supervisor refused to receive them; that she could not have
filed prior leaves due to her continuing condition; and that the petitioner, in the last analysis, dismissed
the respondent on account of her pregnancy, a prohibited act.

Third. Petitioners reliance on the jurisprudential rule that the totality of the infractions of an employee
may be taken into account to justify the dismissal, is tenuous considering the particular circumstances
obtaining in the present case. Petitioner puts much emphasis on respondents "long history" of
unauthorized absences committed several years beforehand. However, petitioner cannot use these
previous infractions to lay down a pattern of absenteeism or habitual disregard of company rules to
justify the dismissal of respondent. The undeniable fact is that during her complained absences in 1994,
respondent was pregnant and suffered related illnesses. Again, it must be stressed that respondents
discharge by reason of absences caused by her pregnancy is covered by the prohibition under the Labor
Code. Since her last string of absences is justifiable and had been subsequently explained, the petitioner
had no legal basis in considering these absences together with her prior infractions as gross and habitual
neglect.
The Court is convinced that the petitioner terminated the services of respondent on account of her
pregnancy which justified her absences and, thus, committed a prohibited act rendering the dismissal
illegal.
In fine, the Court finds no cogent reason to disturb the findings of the CA and the NLRC.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated July 23, 2001 and the
Resolution dated May 7, 2002 of the Court of Appeals are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

Anti-Sexual Harassment Act, R.A. 7877

REPUBLIC ACT No. 7877
AN ACT DECLARING SEXUAL HARASSMENT UNLAWFUL IN THE EMPLOYMENT, EDUCATION OR
TRAINING ENVIRONMENT, AND FOR OTHER PURPOSES.
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
Section 1. Title. - This Act shall be known as the "Anti-Sexual Harassment Act of 1995."
Section 2. Declaration of Policy. - The State shall value the dignity of every individual, enhance the
development of its human resources, guarantee full respect for human rights, and uphold the dignity of
workers, employees, applicants for employment, students or those undergoing training, instruction or
education. Towards this end, all forms of sexual harassment in the employment, education or training
environment are hereby declared unlawful.
Section 3. Work, Education or Training -Related, Sexual Harassment Defined.
WHERE: Work, education or training-related sexual harassment
WHO: committed by:

1. an employer, employee, manager, supervisor, agent of the employer, teacher,

instructor, professor, coach, trainor, or
2. any other person who, having authority, influence or moral ascendancy over another in
a work or training or education environment,
HOW: demands, requests or otherwise requires any sexual favor from the other, regardless of whether
the demand, request or requirement for submission is accepted by the object of said Act.
(a) In a work-related or employment environment, sexual harassment is committed when:
(1) The sexual favor is made as a condition in the hiring or in the employment, re-employment or
continued employment of said individual, or in granting said individual favorable compensation, terms
of conditions, promotions, or privileges; or the refusal to grant the sexual favor results in limiting,
segregating or classifying the employee which in any way would discriminate, deprive or diminish
employment opportunities or otherwise adversely affect said employee;
(2) The above acts would impair the employee's rights or privileges under existing labor laws; or
(3) The above acts would result in an intimidating, hostile, or offensive environment for the employee.
(b) In an education or training environment, sexual harassment is committed:
(1) Against one who is under the care, custody or supervision of the offender;
(2) Against one whose education, training, apprenticeship or tutorship is entrusted to the offender;
(3) When the sexual favor is made a condition to the giving of a passing grade, or the granting of honors
and scholarships, or the payment of a stipend, allowance or other benefits, privileges, or consideration;
or
(4) When the sexual advances result in an intimidating, hostile or offensive environment for the student,
trainee or apprentice.
OTHER PERSONS LIABLE: Any person who directs or induces another to commit any act of sexual
harassment as herein defined, or who cooperates in the commission thereof by another without which
it would not have been committed, shall also be held liable under this Act.
Section 4. Duty of the Employer or Head of Office in a Work-related, Education or Training Environment.
- It shall be the duty of the employer or the head of the work-related, educational or training
environment or institution, to prevent or deter the commission of acts of sexual harassment and to
provide the procedures for the resolution, settlement or prosecution of acts of sexual harassment.
Towards this end, the employer or head of office shall:
(a) Promulgate appropriate rules and regulations in consultation with and joint1y approved by the
employees or students or trainees, through their duly designated representatives, prescribing the
procedure for the investigation of sexual harassment cases and the administrative sanctions therefor.
Administrative sanctions shall not be a bar to prosecution in the proper courts for unlawful acts of
sexual harassment.

The said rules and regulations issued pursuant to this subsection (a) shall include, among others,
guidelines on proper decorum in the workplace and educational or training institutions.
(b) Create a committee on decorum and investigation of cases on sexual harassment. The committee
shall conduct meetings, as the case may be, with officers and employees, teachers, instructors,
professors, coaches, trainors, and students or trainees to increase understanding and prevent incidents
of sexual harassment. It shall also conduct the investigation of alleged cases constituting sexual
harassment.
In the case of a work-related environment, the committee shall be composed of at least one (1)
representative each from the management, the union, if any, the employees from the supervisory rank,
and from the rank and file employees.
In the case of the educational or training institution, the committee shall be composed of at least one
(1) representative from the administration, the trainors, instructors, professors or coaches and students
or trainees, as the case may be.
The employer or head of office, educational or training institution shall disseminate or post a copy of
this Act for the information of all concerned.
Section 5. Liability of the Employer, Head of Office, Educational or Training Institution. - The employer or
head of office, educational or training institution shall be solidarily liable for damages arising from the
acts of sexual harassment committed in the employment, education
or training environment if the employer or head of office, educational or training institution is informed
of such acts by the offended party and no immediate action is taken.
Section 6. Independent Action for Damages. - Nothing in this Act shall preclude the victim of work,
education or training-related sexual harassment from instituting a separate and independent action for
damages and other affirmative relief.
Section 7. Penalties. - Any person who violates the provisions of this Act shall, upon conviction, be
penalized by imprisonment of not less than one (1) month nor more than six (6) months, or a fine of not
less than Ten thousand pesos (P10,000) nor more than Twenty thousand pesos (P20,000), or both such
fine and imprisonment at the discretion of the court.
Any action arising from the violation of the provisions of this Act shall prescribe in three (3) years.
Section 8. Separability Clause. - If any portion or provision of this Act is declared void or
unconstitutional, the remaining portions or provisions hereof shall not be affected by such declaration.
Section 9. Repealing Clause. - All laws, decrees, orders, rules and regulations, other issuances, or parts
thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly.
Section 10. Effectivity Clause.- This Act shall take effect fifteen (15) days after its complete publication in
at least two (2) national newspapers of general circulation.

Implementing Rules, RA 7877 (Civil Service)

Domingo v. Rayala, GR 155831, February 18, 2008

THIRD DIVISION
MA. LOURDES T. DOMINGO,
Petitioner,

G.R. No. 155831

- versus ROGELIO I. RAYALA,

Respondent.
x-------------------------x
ROGELIO I. RAYALA,
Petitioner,

G.R. No. 155840

- versus OFFICE OF THE PRESIDENT; RONALDO V. ZAMORA, in his

capacity as Executive Secretary; ROY V. SENERES, in his
capacity as Chairman of the National Labor Relations
Commission (in lieu of RAUL T. AQUINO, in his capacity
as Acting Chairman of the National labor Relations
Commission); and MA. LOURDES T. DOMINGO,
Respondents.
x-------------------------x
The REPUBLIC OF THE PHILIPPINES, represented by the
OFFICE OF THE PRESIDENT; and ALBERTO G. ROMULO, in
his capacity as Executive Secretary,
G.R. No. 158700
Petitioners,

Present:
- versus -

ROGELIO I. RAYALA,
Respondent.

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CORONA,*
NACHURA, and
REYES, JJ.
Promulgated:

February 18, 2008

x------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:

Sexual harassment is an imposition of misplaced superiority which is enough to dampen an employees

spirit and her capacity for advancement. It affects her sense of judgment; it changes her life.[1]
Before this Court are three Petitions for Review on Certiorari assailing the October 18, 2002 Resolution of
the CAs Former Ninth Division[2] in CA-G.R. SP No. 61026. The Resolution modified the December 14, 2001
Decision[3] of the Court of Appeals Eleventh Division, which had affirmed the Decision of the Office of the
President (OP) dismissing from the service then National Labor Relations Commission (NLRC) Chairman
Rogelio I. Rayala (Rayala) for disgraceful and immoral conduct.
All three petitions stem from the same factual antecedents.
On November 16, 1998, Ma. Lourdes T. Domingo (Domingo), then Stenographic Reporter III at the NLRC,
filed a Complaint for sexual harassment against Rayala before Secretary Bienvenido Laguesma of the
Department of Labor and Employment (DOLE).
To support the Complaint, Domingo executed an Affidavit narrating the incidences of sexual harassment
complained of, thus:
xxxx
4. Sa simula ay pabulong na sinasabihan lang ako ni Chairman Rayala ng mga salitang Lot, gumaganda ka
yata?
5. Sa ibang mga pagkakataon nilalapitan na ako ni Chairman at hahawakan ang aking balikat sabay pisil sa
mga ito habang ako ay nagta-type at habang nagbibigay siya ng diktasyon. Sa mga pagkakataong ito,

kinakabahan ako. Natatakot na baka mangyari sa akin ang mga napapabalitang insidente na nangyari na
noon tungkol sa mga sekretarya niyang nagbitiw gawa ng mga mahahalay na panghihipo ni Chairman.
6. Noong ika-10 ng Setyembre, 1998, nang ako ay nasa 8th Floor, may nagsabi sa akin na kailangan akong
bumaba sa 7th Floor kung nasaan ang aming opisina dahil sa may koreksyon daw na gagawin sa mga papel
na tinayp ko. Bumaba naman ako para gawin ito. Habang ginagawa ko ito, lumabas si Chairman Rayala sa
silid ni Mr. Alex Lopez. Inutusan ako ni Chairman na sumunod sa kaniyang silid. Nang nasa silid na kami,
sinabi niya sa akin:
Chairman: Lot, I like you a lot. Naiiba ka sa lahat.
At pagkatapos ako ay kaniyang inusisa tungkol sa mga personal na bagay sa aking buhay. Ang ilan dito ay
tungkol sa aking mga magulang, kapatid, pag-aaral at kung may boyfriend na raw ba ako.
Chairman: May boyfriend ka na ba?
Lourdes: Dati nagkaroon po.
Chairman: Nasaan na siya?
Lourdes: Nag-asawa na ho.
Chairman: Bakit hindi kayo nagkatuluyan?
Lourdes: Nainip po.
Chairman: Pagkatapos mo ng kurso mo ay kumuha ka ng Law at ako ang bahala sa iyo, hanggang ako pa
ang Chairman dito.
Pagkatapos ay kumuha siya ng pera sa kaniyang amerikana at inaabot sa akin.
Chairman: Kuhanin mo ito.
Lourdes: Huwag na ho hindi ko kailangan.
Chairman: Hindi sige, kuhanin mo. Ayusin mo ang dapat ayusin.
Tinanggap ko po ang pera ng may pag-aalinlangan. Natatakot at kinakabahan na kapag hindi ko tinanggap
ang pera ay baka siya magagalit kasabay na rito ang pagtapon sa akin kung saan-saan opisina o kaya ay
tanggalin ako sa posisyon.
Chairman: Paglabas mo itago mo ang pera. Ayaw ko ng may makaka-alam nito. Just the two of us.
Lourdes: Bakit naman, Sir?
Chairman: Basta. Maraming tsismosa diyan sa labas. But I dont give them a damn. Hindi ako mamatay sa
kanila.
Tumayo na ako at lumabas. Pumanhik na ako ng 8th Floor at pumunta ako sa officemate ko na si Agnes
Magdaet. Ikinwento ko ang nangyari sa akin sa opisina ni Chairman. Habang kinikwento ko ito kay Agnes
ay binilang namin ang pera na nagkakahalaga ng tatlong libong piso (PHP 3,000). Sinabi ni Agnes na isauli
ko raw ang pera, pero ang sabi ko ay natatakot ako baka magalit si Sir. Nagsabi agad kami kay EC Perlita
Velasco at sinalaysay ko ang nangyari. Sinabi niya na isauli ko ang pera at noong araw ding iyon ay
nagpasiya akong isauli na nga ito ngunit hindi ako nagkaroon ng pagkakataon dahil marami siyang naging
bisita. Isinauli ko nga ang pera noong Lunes, Setyembre 14, 1998.
7. Noong huling linggo ng Setyembre, 1998, ay may tinanong din sa akin si Chairman Rayala na hindi ko
masikmura, at sa aking palagay at tahasang pambabastos sa akin.

Chairman: Lot, may ka live-in ka ba?

Lourdes: Sir, wala po.
Chairman: Bakit malaki ang balakang mo?
Lourdes: Kayo, Sir ha! Masama sa amin ang may ka live-in.
Chairman: Bakit, ano ba ang relihiyon ninyo?
Lourdes: Catholic, Sir. Kailangan ikasal muna.
Chairman: Bakit ako, hindi kasal.
Lourdes: Sir, di magpakasal kayo.
Chairman: Huh. Ibahin na nga natin ang usapan.
8. Noong Oktubre 29, 1998, ako ay pumasok sa kwarto ni Chairman Rayala. Ito ay sa kadahilanang ang fax
machine ay nasa loob ng kaniyang kwarto. Ang nag-aasikaso nito, si Riza Ocampo, ay naka-leave kaya ako
ang nag-asikaso nito noong araw na iyon. Nang mabigyan ko na ng fax tone yung kausap ko, pagharap ko
sa kanan ay nakaharang sa dadaanan ko si Chairman Rayala.Tinitingnan ako sa mata at ang titig niya ay
umuusad mula ulo hanggang dibdib tapos ay ngumiti na may mahalay na pakahulugan.
9. Noong hapon naman ng pareho pa ring petsa, may nag-aapply na sekretarya sa opisina, sinabi ko ito
kay Chairman Rayala:
Lourdes: Sir, si Pinky po yung applicant, mag-papainterview po yata sa inyo.
Chairman: Sabihin mo magpa-pap smear muna siya
Chairman: O sige, i-refer mo kay Alex. (Alex Lopez, Chief of Staff).
10. Noong Nobyembre 9, 1998, ako ay tinawag ni Chairman Rayala sa kaniyang opisina upang kuhanin ko
ang diktasyon niya para kay ELA Oscar Uy. Hindi pa kami nakakatapos ng unang talata, may pumasok na
bisita si Chairman, si Baby Pangilinan na sinamahan ni Riza Ocampo. Pinalabas muna ako ni
Chairman. Nang maka-alis na si Ms. Pangilinan, pinapasok na niya ako ulit. Umupo ako. Lumapit sa likuran
ko si Chairman, hinawakan ang kaliwang balikat ko na pinipisil ng kanang kamay niya at sinabi:
Chairman: Saan na ba tayo natapos?
Palakad-lakad siya sa aking likuran habang nag-didikta. Huminto siya pagkatapos, at nilagay niya ang
kanang kamay niya sa aking kanang balikat at pinisil-pisil ito pagkatapos ay pinagapang niya ito sa kanang
bahagi ng aking leeg, at pinagapang hanggang kanang tenga at saka kiniliti. Dito ko inalis ang kaniyang
kamay sa pamamagitan ng aking kaliwang kamay. At saka ko sinabi:
Lourdes: Sir, yung kamay ninyo alisin niyo!
Natapos ko rin ang liham na pinagagawa niya pero halos hindi ko na maintindihan ang na-isulat ko dahil
sa takot at inis na nararamdaman ko.[4]

After the last incident narrated, Domingo filed for leave of absence and asked to be immediately
transferred. Thereafter, she filed the Complaint for sexual harassment on the basis of Administrative
Order No. 250, the Rules and Regulations Implementing RA 7877 in the Department of Labor and
Employment.

Upon receipt of the Complaint, the DOLE Secretary referred the Complaint to the OP, Rayala being a
presidential appointee. The OP, through then Executive Secretary Ronaldo Zamora, ordered Secretary
Laguesma to investigate the allegations in the Complaint and create a committee for such purpose. On
December 4, 1998, Secretary Laguesma issued Administrative Order (AO) No. 280, Series of
1998,[5] constituting a Committee on Decorum and Investigation (Committee) in accordance with Republic
Act (RA) 7877, the Anti-Sexual Harassment Act of 1995.[6]
The Committee heard the parties and received their respective evidence. On March 2, 2000, the
Committee submitted its report and recommendation to Secretary Laguesma. It found Rayala guilty of the
offense charged and recommended the imposition of the minimum penalty provided under AO 250, which
it erroneously stated as suspension for six (6) months.
The following day, Secretary Laguesma submitted a copy of the Committee Report and Recommendation
to the OP, but with the recommendation that the penalty should be suspension for six (6) months and
one (1) day, in accordance with AO 250.
On May 8, 2000, the OP, through Executive Secretary Zamora, issued AO 119,[7] the pertinent portions of
which read:
Upon a careful scrutiny of the evidence on record, I concur with the findings of the Committee as to the
culpability of the respondent [Rayala], the same having been established by clear and convincing
evidence. However, I disagree with the recommendation that respondent be meted only the penalty of
suspension for six (6) months and one (1) day considering the circumstances of the case.
What aggravates respondents situation is the undeniable circumstance that he took advantage of his
position as the superior of the complainant. Respondent occupies the highest position in the NLRC, being
its Chairman. As head of said office, it was incumbent upon respondent to set an example to the others
as to how they should conduct themselves in public office, to see to it that his subordinates work
efficiently in accordance with Civil Service Rules and Regulations, and to provide them with healthy
working atmosphere wherein co-workers treat each other with respect, courtesy and cooperation, so that
in the end the public interest will be benefited (City Mayor of Zamboanga vs. Court of Appeals, 182 SCRA
785 [1990]).
What is more, public service requires the utmost integrity and strictest discipline (Gano vs. Leonen, 232
SCRA 99 [1994]). Thus, a public servant must exhibit at all times the highest sense of honesty and integrity,
and utmost devotion and dedication to duty (Sec. 4 (g), RA 6713), respect the rights of others and shall
refrain from doing acts contrary to law, and good morals (Sec. 4(c)). No less than the Constitution
sanctifies the principle that a public office is a public trust, and enjoins all public officers and employees
to serve with the highest degree of responsibility, integrity, loyalty and efficiency (Section 1, Article XI,
1987 Constitution).
Given these established standards, I see respondents acts not just [as] a failure to give due courtesy and
respect to his co-employees (subordinates) or to maintain good conduct and behavior but defiance of the
basic norms or virtues which a government official must at all times uphold, one that is contrary to law
and public sense of morality. Otherwise stated, respondent to whom stricter standards must apply being
the highest official [of] the NLRC had shown an attitude, a frame of mind, a disgraceful conduct, which
renders him unfit to remain in the service.

WHEREFORE, in view of the foregoing, respondent Rogelio I. Rayala, Chairman, National Labor Relations
Commission, is found guilty of the grave offense of disgraceful and immoral conduct and is
hereby DISMISSED from the service effective upon receipt of this Order.
SO ORDER[ED].

Rayala filed a Motion for Reconsideration, which the OP denied in a Resolution[8] dated May 24, 2000. He
then filed a Petition for Certiorari and Prohibition with Prayer for Temporary Restraining Order under Rule
65 of the Revised Rules on Civil Procedure before this Court on June 14, 2000.[9] However, the same was
dismissed
in
a
Resolution
dated
June
26,
2000
for
disregarding the hierarchy of courts.[10] Rayala filed a Motion for
Reconsideration[11] on August 15, 2000. In its Resolution[12] dated September 4, 2000, the Court recalled
its June 26 Resolution and referred the petition to the Court of Appeals (CA) for appropriate action.
The CA rendered its Decision[13] on December 14, 2001. It held that there was sufficient evidence on record
to create moral certainty that Rayala committed the acts he was charged with. It said:
The complainant narrated her story complete with details. Her straightforward and uninhibited testimony
was not emasculated by the declarations of Commissioner Rayala or his witnesses. x x x
Moreover, Commissioner Rayala has not proven any vicious motive for Domingo and her witnesses to
invent their stories. It is very unlikely that they would perjure themselves only to accommodate the
alleged conspiracy to oust petitioner from office. Save for his empty conjectures and speculations, Rayala
failed to substantiate his contrived conspiracy. It is a hornbook doctrine that conspiracy must be proved
by positive and convincing evidence (People v. Noroa, 329 SCRA 502 [2000]). Besides, it is improbable that
the complainant would concoct a story of sexual harassment against the highest official of the NLRC and
thereby expose herself to the possibility of losing her job, or be the subject of reprisal from her superiors
and perhaps public ridicule if she was not telling the truth.

It also held that Rayalas dismissal was proper. The CA pointed out that Rayala was dismissed for
disgraceful and immoral conduct in violation of RA 6713, the Code of Conduct and Ethical Standards for
Public Officials and Employees. It held that the OP was correct in concluding that Rayalas acts violated RA
6713:
Indeed, [Rayala] was a public official, holding the Chairmanship of the National Labor Relations
Commission, entrusted with the sacred duty of administering justice. Occupying as he does such an
exalted position, Commissioner Rayala must pay a high price for the honor bestowed upon him. He must
comport himself at all times in such a manner that the conduct of his everyday life should be beyond
reproach and free from any impropriety. That the acts complained of were committed within the
sanctuary of [his] office compounded the objectionable nature of his wrongdoing. By daring to violate the
complainant within the solitude of his chambers, Commissioner Rayala placed the integrity of his office in
disrepute. His disgraceful and immoral conduct warrants his removal from office.[14]

Thus, it dismissed the petition, to wit:

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby DISMISSED and Administrative Order No.
119 as well [as] the Resolution of the Office of the President in O.P. Case No. 00-E-9118 dated May 24,
2000 are AFFIRMED IN TOTO. No cost.
SO ORDERED.[15]

Rayala timely filed a Motion for Reconsideration. Justices Vasquez and Tolentino voted to affirm the
December 14 Decision. However, Justice Reyes dissented mainly because AO 250 states that the penalty
imposable is suspension for six (6) months and one (1) day.[16] Pursuant to the internal rules of the CA, a
Special Division of Five was constituted.[17] In its October 18, 2002 Resolution, the CA modified its earlier
Decision:
ACCORDINGLY, the Decision dated December [14], 2001 is MODIFIED to the effect that the penalty of
dismissal is DELETED and instead the penalty of suspension from service for the maximum period of one
(1) year is HEREBY IMPOSED upon the petitioner. The rest of the challenged decision stands.
SO ORDERED.

Domingo filed a Petition for Review[18] before this Court, which we denied in our February 19, 2003
Resolution for having a defective verification. She filed a Motion for Reconsideration, which the Court
granted; hence, the petition was reinstated.
Rayala likewise filed a Petition for Review[19] with this Court essentially arguing that he is not guilty of any
act of sexual harassment.
Meanwhile, the Republic filed a Motion for Reconsideration of the CAs October 18, 2002 Resolution. The
CA denied the same in its June 3, 2003 Resolution, the dispositive portion of which reads:
ACCORDINGLY, by a majority vote, public respondents Motion for Reconsideration, (sic) is DENIED.
SO ORDERED.

The Republic then filed its own Petition for Review.[20]

On June 28, 2004, the Court directed the consolidation of the three (3) petitions.
G.R. No. 155831
Domingo assails the CAs resolution modifying the penalty imposed by the Office of the President. She
raises this issue:
The Court of Appeals erred in modifying the penalty for the respondent from dismissal to suspension from
service for the maximum period of one year. The President has the prerogative to determine the proper
penalty to be imposed on an erring Presidential appointee. The President was well within his power when
he fittingly used that prerogative in deciding to dismiss the respondent from the service.[21]

She argues that the power to remove Rayala, a presidential appointee, is lodged with the President who
has control of the entire Executive Department, its bureaus and offices. The OPs decision was arrived at
after affording Rayala due process. Hence, his dismissal from the service is a prerogative that is entirely
with the President.[22]
As to the applicability of AO No. 250, she argues that the same was not intended to cover cases against
presidential appointees. AO No. 250 refers only to the instances wherein the DOLE Secretary is the
disciplining authority, and thus, the AO does not circumscribe the power of the President to dismiss an
erring presidential appointee.
G.R. No. 155840
In his petition, Rayala raises the following issues:
I.
CONTRARY TO THE FINDINGS OF THE COURT OF APPEALS, THE ACTS OF HEREIN PETITIONER
DO NOT CONSTITUTE SEXUAL HARASSMENT AS LAID DOWN BY THE En Banc RULING IN THE CASE
OF AQUINO vs. ACOSTA, ibid., AS WELL AS IN THE APPLICATION OF EXISTING LAWS.
II.
CONTRARY TO THE FINDINGS OF THE HONORABLE COURT OF APPEALS, INTENT IS AN
INDISPENSABLE ELEMENT IN A CASE FOR SEXUAL HARASSMENT. THE HONORABLE COURT ERRED IN ITS
FINDING THAT IT IS AN OFFENSE THAT IS MALUM PROHIBITUM.
III.
THE INVESTIGATION COMMITTEE, THE OFFICE OF THE PRESIDENT, AND NOW, THE
HONORABLE COURT OF APPEALS, HAS MISAPPLIED AND EXPANDED THE DEFINITION OF SEXUAL
HARASSMENT IN THE WORKPLACE UNDER R.A. No. 7877, BY APPLYING DOLE A.O. 250, WHICH RUNS
COUNTER TO THE RECENT PRONOUNCEMENTS OF THIS HONORABLE SUPREME COURT. [23]

Invoking Aquino v. Acosta,[24] Rayala argues that the case is the definitive ruling on what constitutes sexual
harassment. Thus, he posits that for sexual harassment to exist under RA 7877, there must be: (a) demand,
request, or requirement of a sexual favor; (b) the same is made a pre-condition to hiring, re-employment,
or continued employment; or (c) the denial thereof results in discrimination against the employee.
Rayala asserts that Domingo has failed to allege and establish any sexual favor, demand, or request from
petitioner in exchange for her continued employment or for her promotion. According to Rayala, the acts
imputed to him are without malice or ulterior motive. It was merely Domingos perception of malice in his
alleged acts a product of her own imagination[25] that led her to file the sexual harassment complaint.
Likewise, Rayala assails the OPs interpretation, as upheld by the CA, that RA 7877 is malum
prohibitum such that the defense of absence of malice is unavailing. He argues that sexual harassment is
considered an offense against a particular person, not against society as a whole. Thus, he claims that
intent is an essential element of the offense because the law requires as a conditio sine qua non that a
sexual favor be first sought by the offender in order to achieve certain specific results. Sexual harassment
is committed with the perpetrators deliberate intent to commit the offense.[26]

Rayala next argues that AO 250 expands the acts proscribed in RA 7877. In particular, he assails the
definition of the forms of sexual harassment:
Rule IV
FORMS OF SEXUAL HARASSMENT
Section 1. Forms of Sexual Harassment. Sexual harassment may be committed in any of the following
forms:
a) Overt sexual advances;
b) Unwelcome or improper gestures of affection;
c) Request or demand for sexual favors including but not limited to going out on dates, outings or the like
for the same purpose;
d) Any other act or conduct of a sexual nature or for purposes of sexual gratification which is generally
annoying, disgusting or offensive to the victim.[27]

He posits that these acts alone without corresponding demand, request, or requirement do not constitute
sexual harassment as contemplated by the law.[28] He alleges that the rule-making power granted to the
employer in Section 4(a) of RA 7877 is limited only to procedural matters. The law did not delegate to the
employer the power to promulgate rules which would provide other or additional forms of sexual
harassment, or to come up with its own definition of sexual harassment.[29]
G.R. No. 158700
The Republic raises this issue:
Whether or not the President of the Philippines may validly dismiss respondent Rayala as Chairman of
the NLRC for committing acts of sexual harassment.[30]

The Republic argues that Rayalas acts constitute sexual harassment under AO 250. His acts constitute
unwelcome or improper gestures of affection and are acts or conduct of a sexual nature, which are
generally annoying or offensive to the victim.[31]
It also contends that there is no legal basis for the CAs reduction of the penalty imposed by the OP. Rayalas
dismissal is valid and warranted under the circumstances. The power to remove the NLRC Chairman solely
rests upon the President, limited only by the requirements under the law and the due process clause.
The Republic further claims that, although AO 250 provides only a one (1) year suspension, it will not
prevent the OP from validly imposing the penalty of dismissal on Rayala. It argues that even though Rayala
is a presidential appointee, he is still subject to the Civil Service Law. Under the Civil Service Law,
disgraceful and immoral conduct, the acts imputed to Rayala, constitute grave misconduct punishable by

dismissal from the service.[32] The Republic adds that Rayalas position is invested with public trust and his
acts violated that trust; thus, he should be dismissed from the service.
This argument, according to the Republic, is also supported by Article 215 of the Labor Code, which states
that the Chairman of the NLRC holds office until he reaches the age of 65 only during good
behavior.[33] Since Rayalas security of tenure is conditioned upon his good behavior, he may be removed
from office if it is proven that he has failed to live up to this standard.
All the issues raised in these three cases can be summed up in two ultimate questions, namely:
(1) Did Rayala commit sexual harassment?
(2) If he did, what is the applicable penalty?

Initially, however, we must resolve a procedural issue raised by Rayala. He accuses the Office of the
Solicitor General (OSG), as counsel for the Republic, of forum shopping because it filed a motion for
reconsideration of the decision in CA-G.R. SP No. 61026 and then filed a comment in G.R. No. 155840
before this Court.
We do not agree.
Forum shopping is an act of a party, against whom an adverse judgment or order has been rendered in
one forum, of seeking and possibly securing a favorable opinion in another forum, other than by appeal
or special civil action for certiorari.[34] It consists of filing multiple suits involving the same parties for the
same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable
judgment.[35]
There is forum shopping when the following elements concur: (1) identity of the parties or, at least, of the
parties who represent the same interest in both actions; (2) identity of the rights asserted and relief
prayed for, as the latter is founded on the same set of facts; and (3) identity of the two preceding
particulars such that any judgment rendered in the other action will amount to res judicata in the action
under consideration or will constitute litis pendentia.[36]
Reviewing the antecedents of these consolidated cases, we note that the CA rendered the assailed
Resolution on October 18, 2002. The Republic filed its Motion for Reconsideration on November 22, 2002.
On the other hand, Rayala filed his petition before this Court on November 21, 2002. While the Republics
Motion for Reconsideration was pending resolution before the CA, on December 2, 2002, it was directed
by this Court to file its Comment on Rayalas petition, which it submitted on June 16, 2003.
When the CA denied the Motion for Reconsideration, the Republic filed its own Petition for Review with
this Court on July 3, 2003. It cited in its Certification and Verification of a Non-Forum Shopping (sic), that
there was a case involving the same facts pending before this Court denominated as G.R. No. 155840.
With respect to Domingos petition, the same had already been dismissed on February 19, 2003. Domingos
petition was reinstated on June 16, 2003 but the resolution was received by the OSG only on July 25, 2003,
or after it had filed its own petition.[37]
Based on the foregoing, it cannot be said that the OSG is guilty of forum shopping. We must point out that
it was Rayala who filed the petition in the CA, with the Republic as the adverse party. Rayala himself filed

a motion for reconsideration of the CAs December 21, 2001 Decision, which led to a more favorable
ruling, i.e., the lowering of the penalty from dismissal to one-year suspension. The parties adversely
affected by this ruling (Domingo and the Republic) had the right to question the same on motion for
reconsideration. But Domingo directly filed a Petition for Review with this Court, as did Rayala. When the
Republic opted to file a motion for reconsideration, it was merely exercising a right. That Rayala and
Domingo had by then already filed cases before the SC did not take away this right. Thus, when this Court
directed the Republic to file its Comment on Rayalas petition, it had to comply, even if it had an unresolved
motion for reconsideration with the CA, lest it be cited for contempt.
Accordingly, it cannot be said that the OSG file[d] multiple suits involving the same parties for the same
cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment.
We now proceed to discuss the substantive issues.
It is noteworthy that the five CA Justices who deliberated on the case were unanimous in upholding the
findings of the Committee and the OP. They found the assessment made by the Committee and the OP to
be a meticulous and dispassionate analysis of the testimonies of the complainant (Domingo), the
respondent (Rayala), and their respective witnesses. [38] They differed only on the appropriate imposable
penalty.
That Rayala committed the acts complained of and was guilty of sexual harassment is, therefore, the
common factual finding of not just one, but three independent bodies: the Committee, the OP and the
CA. It should be remembered that when supported by substantial evidence, factual findings made by
quasi-judicial and administrative bodies are accorded great respect and even finality by the courts.[39] The
principle, therefore, dictates that such findings should bind us.[40]
Indeed, we find no reason to deviate from this rule. There appears no valid ground for this Court to review
the factual findings of the CA, the OP, and the Investigating Committee. These findings are now conclusive
on the Court. And quite significantly, Rayala himself admits to having committed some of the acts imputed
to him.
He insists, however, that these acts do not constitute sexual harassment, because Domingo did not allege
in her complaint that there was a demand, request, or requirement of a sexual favor as a condition for
her continued employment or for her promotion to a higher position.[41] Rayala urges us to apply to his
case our ruling in Aquino v. Acosta.[42]
We find respondents insistence unconvincing.
Basic in the law of public officers is the three-fold liability rule, which states that the wrongful acts or
omissions of a public officer may give rise to civil, criminal and administrative liability. An action for each
can proceed independently of the others.[43] This rule applies with full force to sexual harassment.
The law penalizing sexual harassment in our jurisdiction is RA 7877. Section 3 thereof defines work-related
sexual harassment in this wise:
Sec. 3. Work, Education or Training-related Sexual Harassment Defined. Work, education or trainingrelated sexual harassment is committed by an employer, manager, supervisor, agent of the employer,
teacher, instructor, professor, coach, trainor, or any other person who, having authority, influence or

moral ascendancy over another in a work or training or education environment, demands, requests or
otherwise requires any sexual favor from the other, regardless of whether the demand, request or
requirement for submission is accepted by the object of said Act.
(a) In a work-related or employment environment, sexual harassment is committed when:
(1) The sexual favor is made as a condition in the hiring or in the employment, re-employment or
continued employment of said individual, or in granting said individual favorable compensation, terms,
conditions, promotions, or privileges; or the refusal to grant the sexual favor results in limiting,
segregating or classifying the employee which in a way would discriminate, deprive or diminish
employment opportunities or otherwise adversely affect said employee;
(2) The above acts would impair the employees rights or privileges under existing labor laws; or
(3) The above acts would result in an intimidating, hostile, or offensive environment for the employee.

This section, in relation to Section 7 on penalties, defines the criminal aspect of the unlawful act of sexual
harassment. The same section, in relation to Section 6, authorizes the institution of an independent civil
action for damages and other affirmative relief.
Section 4, also in relation to Section 3, governs the procedure for administrative cases, viz.:
Sec. 4. Duty of the Employer or Head of Office in a Work-related, Education or Training Environment. It
shall be the duty of the employer or the head of the work-related, educational or training environment or
institution, to prevent or deter the commission of acts of sexual harassment and to provide the
procedures for the resolution, settlement or prosecution of acts of sexual harassment. Towards this end,
the employer or head of office shall:
(a)
Promulgate appropriate rules and regulations in consultation with and jointly approved by the
employees or students or trainees, through their duly designated representatives, prescribing the
procedure for the investigation or sexual harassment cases and the administrative sanctions therefor.
Administrative sanctions shall not be a bar to prosecution in the proper courts for unlawful acts of sexual
harassment.
The said rules and regulations issued pursuant to this section (a) shall include, among others, guidelines
on proper decorum in the workplace and educational or training institutions.
(b)
Create a committee on decorum and investigation of cases on sexual harassment. The
committee shall conduct meetings, as the case may be, with other officers and employees, teachers,
instructors, professors, coaches, trainors and students or trainees to increase understanding and prevent
incidents of sexual harassment. It shall also conduct the investigation of the alleged cases constituting
sexual harassment.
In the case of a work-related environment, the committee shall be composed of at least one (1)
representative each from the management, the union, if any, the employees from the supervisory rank,
and from the rank and file employees.

In the case of the educational or training institution, the committee shall be composed of at least one (1)
representative from the administration, the trainors, teachers, instructors, professors or coaches and
students or trainees, as the case maybe.
The employer or head of office, educational or training institution shall disseminate or post a copy of this
Act for the information of all concerned.

The CA, thus, correctly ruled that Rayalas culpability is not to be determined solely on the basis of Section
3, RA 7877, because he is charged with the administrative offense, not the criminal infraction, of sexual
harassment.[44] It should be enough that the CA, along with the Investigating Committee and the Office of
the President, found substantial evidence to support the administrative charge.
Yet, even if we were to test Rayalas acts strictly by the standards set in Section 3, RA 7877, he would still
be administratively liable. It is true that this provision calls for a demand, request or requirement of a
sexual favor. But it is not necessary that the demand, request or requirement of a sexual favor be
articulated in a categorical oral or written statement. It may be discerned, with equal certitude, from the
acts of the offender. Holding and squeezing Domingos shoulders, running his fingers across her neck and
tickling her ear, having inappropriate conversations with her, giving her money allegedly for school
expenses with a promise of future privileges, and making statements with unmistakable sexual overtones
all these acts of Rayala resound with deafening clarity the unspoken request for a sexual favor.
Likewise, contrary to Rayalas claim, it is not essential that the demand, request or requirement be made
as a condition for continued employment or for promotion to a higher position. It is enough that the
respondents acts result in creating an intimidating, hostile or offensive environment for the
employee.[45] That the acts of Rayala generated an intimidating and hostile environment for Domingo is
clearly shown by the common factual finding of the Investigating Committee, the OP and the CA that
Domingo reported the matter to an officemate and, after the last incident, filed for a leave of absence
and requested transfer to another unit.
Rayalas invocation of Aquino v. Acosta[46] is misplaced, because the factual setting in that case is different
from that in the case at bench. In Aquino, Atty. Susan Aquino, Chief of the Legal and Technical Staff of the
Court of Tax Appeals (CTA), charged then CTA Presiding Judge (now Presiding Justice) Ernesto Acosta of
sexual harassment. She complained of several incidents when Judge Acosta allegedly kissed her,
embraced her, and put his arm around her shoulder. The case was referred to CA Justice Josefina G.
Salonga for investigation. In her report, Justice Salonga found that the complainant failed to show by
convincing evidence that the acts of Judge Acosta in greeting her with a kiss on the cheek, in a `beso-beso
fashion, were carried out with lustful and lascivious desires or were motivated by malice or ill motive. It
is clear from the circumstances that most of the kissing incidents were done on festive and special
occasions, and they took place in the presence of other people and the same was by reason of the
exaltation or happiness of the moment. Thus, Justice Salonga concluded:
In all the incidents complained of, the respondent's pecks on the cheeks of the complainant should be
understood in the context of having been done on the occasion of some festivities, and not the assertion
of the latter that she was singled out by Judge Acosta in his kissing escapades. The busses on her cheeks
were simply friendly and innocent, bereft of malice and lewd design. The fact that respondent judge kisses
other people on the cheeks in the 'beso-beso' fashion, without malice, was corroborated by Atty. Florecita

P. Flores, Ms. Josephine Adalem and Ms. Ma. Fides Balili, who stated that they usually practice 'beso-beso'
or kissing on the cheeks, as a form of greeting on occasions when they meet each other, like birthdays,
Christmas, New Year's Day and even Valentine's Day, and it does not matter whether it is Judge Acosta's
birthday or their birthdays. Theresa Cinco Bactat, a lawyer who belongs to complainant's department,
further attested that on occasions like birthdays, respondent judge would likewise greet her with a peck
on the cheek in a 'beso-beso' manner. Interestingly, in one of several festive occasions, female employees
of the CTA pecked respondent judge on the cheek where Atty. Aquino was one of Judge Acosta's well
wishers.
In sum, no sexual harassment had indeed transpired on those six occasions. Judge Acosta's acts of bussing
Atty. Aquino on her cheek were merely forms of greetings, casual and customary in nature. No evidence
of intent to sexually harass complainant was apparent, only that the innocent acts of 'beso-beso' were
given malicious connotations by the complainant. In fact, she did not even relate to anyone what
happened to her. Undeniably, there is no manifest sexual undertone in all those incidents.[47]

This Court agreed with Justice Salonga, and Judge Acosta was exonerated.
To repeat, this factual milieu in Aquino does not obtain in the case at bench. While in Aquino, the Court
interpreted the acts (of Judge Acosta) as casual gestures of friendship and camaraderie, done during
festive or special occasions and with other people present, in the instant case, Rayalas acts of holding and
squeezing Domingos shoulders, running his fingers across her neck and tickling her ear, and the
inappropriate comments, were all made in the confines of Rayalas office when no other members of his
staff were around.More importantly, and a circumstance absent in Aquino, Rayalas acts, as already
adverted to above, produced a hostile work environment for Domingo, as shown by her having reported
the matter to an officemate and, after the last incident, filing for a leave of absence and requesting
transfer to another unit.
Rayala also argues that AO 250 does not apply to him. First, he argues that AO 250 does not cover the
NLRC, which, at the time of the incident, was under the DOLE only for purposes of program and policy
coordination. Second, he posits that even assuming AO 250 is applicable to the NLRC, he is not within its
coverage because he is a presidential appointee.
We find, however, that the question of whether or not AO 250 covers Rayala is of no real consequence.
The events of this case unmistakably show that the administrative charges against Rayala were for
violation of RA 7877; that the OP properly assumed jurisdiction over the administrative case; that the
participation of the DOLE, through the Committee created by the Secretary, was limited to initiating the
investigation process, reception of evidence of the parties, preparation of the investigation report, and
recommending the appropriate action to be taken by the OP. AO 250 had never really been applied to
Rayala. If it was used at all, it was to serve merely as an auxiliary procedural guide to aid the Committee
in the orderly conduct of the investigation.
Next, Rayala alleges that the CA erred in holding that sexual harassment is an offense malum prohibitum.
He argues that intent is an essential element in sexual harassment, and since the acts imputed to him
were done allegedly without malice, he should be absolved of the charges against him.
We reiterate that what is before us is an administrative case for sexual harassment. Thus, whether
the crime of sexual harassment is malum in se or malum prohibitum is immaterial.

We also reject Rayalas allegations that the charges were filed because of a conspiracy to get him out of
office and thus constitute merely political harassment. A conspiracy must be proved by clear and
convincing evidence. His bare assertions cannot stand against the evidence presented by Domingo. As we
have already ruled, the acts imputed to Rayala have been proven as fact. Moreover, he has not proven
any ill motive on the part of Domingo and her witnesses which would be ample reason for her to conjure
stories about him. On the contrary, ill motive is belied by the fact that Domingo and her witnesses all
employees of the NLRC at that time stood to lose their jobs or suffer unpleasant consequences for coming
forward and charging their boss with sexual harassment.
Furthermore, Rayala decries the alleged violation of his right to due process. He accuses the Committee
on Decorum of railroading his trial for violation of RA 7877. He also scored the OPs decision finding him
guilty of disgraceful and immoral conduct under the Revised Administrative Code and not for violation of
RA 7877. Considering that he was not tried for disgraceful and immoral conduct, he argues that the verdict
is a sham and total nullity.
We hold that Rayala was properly accorded due process. In previous cases, this Court held that:
[i]n administrative proceedings, due process has been recognized to include the following: (1) the right to
actual or constructive notice of the institution of proceedings which may affect a respondents legal
rights; (2) a real opportunity to be heard personally or with the assistance of counsel, to present witnesses
and evidence in ones favor, and to defend ones rights; (3) a tribunal vested with competent jurisdiction
and so constituted as to afford a person charged administratively a reasonable guarantee of honesty as
well as impartiality; and (4) a finding by said tribunalwhich is supported by substantial evidence
submitted for consideration during the hearing or contained in the records or made known to the parties
affected.[48]

The records of the case indicate that Rayala was afforded all these procedural due process safeguards.
Although in the beginning he questioned the authority of the Committee to try him,[49] he appeared,
personally and with counsel, and participated in the proceedings.
On the other point raised, this Court has held that, even in criminal cases, the designation of the offense
is not controlling, thus:
What is controlling is not the title of the complaint, nor the designation of the offense charged or the
particular law or part thereof allegedly violated, these being mere conclusions of law made by the
prosecutor, but the description of the crime charged and the particular facts therein recited. The acts or
omissions complained of must be alleged in such form as is sufficient to enable a person of common
understanding to know what offense is intended to be charged, and enable the court to pronounce proper
judgment. No information for a crime will be sufficient if it does not accurately and clearly allege the
elements of the crime charged. Every element of the offense must be stated in the information. What
facts and circumstances are necessary to be included therein must be determined by reference to the
definitions and essentials of the specified crimes. The requirement of alleging the elements of a crime in
the information is to inform the accused of the nature of the accusation against him so as to enable him
to suitably prepare his defense.[50]

It is noteworthy that under AO 250, sexual harassment amounts to disgraceful and immoral
conduct.[51] Thus, any finding of liability for sexual harassment may also be the basis of culpability for
disgraceful and immoral conduct.
With the foregoing disquisitions affirming the finding that Rayala committed sexual harassment, we now
determine the proper penalty to be imposed.
Rayala attacks the penalty imposed by the OP. He alleges that under the pertinent Civil Service Rules,
disgraceful and immoral conduct is punishable by suspension for a period of six (6) months and one (1)
day to one (1) year. He also argues that since he is charged administratively, aggravating or mitigating
circumstances cannot be appreciated for purposes of imposing the penalty.
Under AO 250, the penalty for the first offense is suspension for six (6) months and one (1) day to one (1)
year, while the penalty for the second offense is dismissal.[52]On the other hand, Section 22(o), Rule XVI
of the Omnibus Rules Implementing Book V of the Administrative Code of 1987[53] and Section 52 A(15) of
the Revised Uniform Rules on Administrative Cases in the Civil Service[54] both provide that the first offense
of disgraceful and immoral conduct is punishable by suspension of six (6) months and one (1) day to one
(1) year. A second offense is punishable by dismissal.
Under the Labor Code, the Chairman of the NLRC shall hold office during good behavior until he or she
reaches the age of sixty-five, unless sooner removed for causeas provided by law or becomes
incapacitated to discharge the duties of the office.[55]
In this case, it is the President of the Philippines, as the proper disciplining authority, who would
determine whether there is a valid cause for the removal of Rayala as NLRC Chairman. This power,
however, is qualified by the phrase for cause as provided by law. Thus, when the President found that
Rayala was indeed guilty of disgraceful and immoral conduct, the Chief Executive did not have unfettered
discretion to impose a penalty other than the penalty provided by law for such offense. As cited above,
the imposable penalty for the first offense of either the administrative offense of sexual harassment or
for disgraceful and immoral conduct is suspension of six (6) months and one (1) day to one (1) year.
Accordingly, it was error for the Office of the President to impose upon Rayala the penalty of dismissal
from the service, a penalty which can only be imposed upon commission of a second offense.
Even if the OP properly considered the fact that Rayala took advantage of his high government position,
it still could not validly dismiss him from the service. Under theRevised Uniform Rules on Administrative
Cases in the Civil Service,[56] taking undue advantage of a subordinate may be considered as an aggravating
circumstance[57] and where only aggravating and no mitigating circumstances are present, the maximum
penalty shall be imposed.[58] Hence, the maximum penalty that can be imposed on Rayala is suspension
for one (1) year.
Rayala holds the exalted position of NLRC Chairman, with the rank equivalent to a CA Justice. Thus, it is
not unavailing that rigid standards of conduct may be demanded of him. In Talens-Dabon v. Judge
Arceo,[59] this Court, in upholding the liability of therein respondent Judge, said:
The actuations of respondent are aggravated by the fact that complainant is one of his subordinates over
whom he exercises control and supervision, he being the executive judge. He took advantage of his
position and power in order to carry out his lustful and lascivious desires. Instead of he being in loco
parentis over his subordinate employees, respondent was the one who preyed on them, taking advantage
of his superior position.

In yet another case, this Court declared:

As a managerial employee, petitioner is bound by more exacting work ethics. He failed to live up to his
higher standard of responsibility when he succumbed to his moral perversity. And when such moral
perversity is perpetrated against his subordinate, he provides a justifiable ground for his dismissal for lack
of trust and confidence. It is the right, nay, the duty of every employer to protect its employees from
oversexed superiors.[60]

It is incumbent upon the head of office to set an example on how his employees should conduct
themselves in public office, so that they may work efficiently in a healthy working atmosphere. Courtesy
demands that he should set a good example.[61]
Rayala has thrown every argument in the book in a vain effort to effect his exoneration. He even puts
Domingos character in question and casts doubt on the morality of the former President who ordered,
albeit erroneously, his dismissal from the service. Unfortunately for him, these are not significant factors
in the disposition of the case. It is his character that is in question here and sadly, the inquiry showed that
he has been found wanting.
WHEREFORE, the foregoing premises considered, the October 18, 2002 Resolution of the Court of Appeals
in CA-G.R. SP No. 61026 is AFFIRMED. Consequently, the petitions in G.R. Nos. 155831, 155840, and
158700 are DENIED. No pronouncement as to costs.
SO ORDERED.