Labor Law 1

16
NATIONAL MINES AND ALLIED WORKERS UNION V
SAN ILDEFEONSO COLLEGE, ETC.
299 SCRA 24
DAVIDE JR; November 20, 1998
NATURE
Petition for certiorari seeking to set aside an NLRC decision and resolution denying a
motion for reconsideration
FACTS
- National Mines and Allied Workers Union is the certified bargaining agent of the rank
and file employees of respondent College. Petitioner Juliet Arroyo was the president of
the San Ildefonso College Association of Faculty and Personnel, an affiliate of
NAMAWU. Private respondent Lloren is the directress of the College.
- In February, 1991, ARROYO, a tenured teacher who later became a part-time
teacher, asked that she be allowed to teach on a full-time basis. The COLLEGE denied
her request for her failure to make use of the privilege of her study leave in the two
years she was allowed to do so. The next month, the other individual petitioners, who
were issued yearly appointment, were informed of the non-renewal of their respective
contracts.
- In April, 1991, the SICAFP was formalized into a labor union affiliated with NAMAWU.
- The petitioners and NAMAWU filed a complaint for illegal dismissal, unfair labor
practice, forced resignation, harassment, underpayment of wages, non-payment of
service incentive leave pay, and violation of Waeg Order No. IV-1. They demanded
reinstatement and payment of back wages.
- The Labor Arbiter held private respondents guilty of illegal dismissal, unfair labor
practice interfering with the organization of the labor union. The contracts of employment
were not bilateral agreements, but letters of appointment. When the College opted not to
renew the appointments it merely invoked the expiration of the period fixed in the
appointments without giving any other reason or granting the teachers concerned an
opportunity to explaint heir side. The probationary employees were not even informed of
their performance rating when they were denied renewal of their appointment. The nonrenewal was timely made while individual petitioners were in the process of organizing
themselves into a union. These acts of the College amounted to union busting.
- The Office of the Solicitor General moves for the dismissal of the petition except as to
ARROYO; that all petitioners except ARROYO were legally dismissed. The reason why
she failed to complete her masters degree could not be solely attributed to her. She
initially requested a leave of absence, but the COLLEGE suggested that she teach on a
part-time basis because it was in need of teachers at that time. Also, her dismissal was
without due process.
ISSUE
1. WON ARROYO was legally dismissed
2. WON the other petitioners were permanent employees
HELD
1. NO
Reasoning
- it is undisputed that Arroyo had been teaching in the COLLEGE since 1965 and had
obtained a permanent status; she became a part-time teacher, however, from June 1988
to March 1991.
- She did not lose her permanent status when she requested to teach on a part-time
basis. The reason for the request was that she wanted to pursue a master's degree. The
COLLEGE approved the request, and the study leave was extended for another year. It
would have been unjust and unreasonable to allow ARROYO to pursue her master's
degree, from which the COLLEGE would have also benefited in terms of her higher
learning and experience, and at the same time penalize her with the loss of permanent
status. It would as well be absurd and illogical to maintain that by teaching on a part-time
basis after obtaining the permission to take up a master's degree, ARROYO relinquished
her permanent status.
- When ARROYO subsequently requested that she continue teaching on a full-time
basis, private respondents in its letter of 27 March 1991 refused, citing as reason her
failure "to make use of the privilege granted [her] by the administration regarding [her]
study leave in the past four semesters." This letter served as notice of ARROYO's
termination from employment. No further notice was served. It must be emphasized that
the letter did not indicate that a master's degree was necessary for ARROYO to continue
her service, as now claimed by the COLLEGE. In fact, apart from its mere allegation, the
COLLEGE failed to prove that a master's degree was a pre-requisite for ARROYO's
teaching position. ARROYO, a permanent teacher, could only be dismissed for just cause
and only after being afforded due process, in light of paragraph (b), Article 277 of the
Labor Code.

A2010

- 142 -

Disini

- Arroyos dismissal was substantively and procedurally flawed. It was effected without
just cause and due process. Thus, her termination was void. She is therefore entitled to
reinstatement to her former position without loss of seniority rights and other privileges,
full backwages inclusive of allowances, and other benefits computed from the date of her
actual dismissal to the date of reinstatement
2. NO
Reasoning
- On the issue of whether the individual petitioners were permanent employees, it is the
Manual of Regulations for Private Schools, and not the Labor Code, which is applicable.
This was settled in University of Sto. Tomas v. NLRC, where we explicitly ruled that for a
private school teacher to acquire permanent status in employment and, therefore, be
entitled to security of tenure, the following requisites must concur: (1) the teacher is a fulltime teacher; (2) the teacher must have rendered three (3) consecutive years of service;
and (3) such service must have been satisfactory.
- Eleven of the individual petitioners were full-time teachers during the school year 19901991, but only two, namely, Odiste and Buan had rendered three consecutive years of
service. There is no showing, however, that the two were on a full-time basis during
those three years and that their services were satisfactory. Evidently, not one of the said
teachers can be considered to have acquired a permanent status.
Disposition the decision of the National Labor Relations Commission in NLRC Case
No. RAB-IV-4-3710-91-RI is AFFIRMED, subject to the modification that private
respondent San Ildefonso College is DIRECTED to (1) reinstate petitioner JULIETA
ARROYO to her former position at the time of her dismissal, or to any equivalent position
if reinstatement to such position is no longer feasible, without of loss of seniority rights
and benefits that may be due her; and (2) pay her back wages from the date of her actual
dismissal to the date of her actual reinstatement.

CIELO V NLRC
193 SCRA 410
CRUZ; January 28, 1991
NATURE
Petition for certiorari to review decision of NLRC setting aside decision of Labor Arbiter
for the reinstatement with backwages of Zosimo Cielo.
FACTS
Henry Lei Trucking hired Zosimo Cielo as a truck driver under 6-month Agreement with
stipulations that the term is can be earlier terminated at the option of either party. The
Agreement also stipulated that there was no employer-employee relationship between
the parties and that the nature of the relationship is merely contractual. Lei asked Cielo to
sign an affidavit of having received full payment of wages, which Cielo refused to sign. A
week before the Agreement was supposed to end, Lei notified Cielo of the termination of
his services. Apparently in the Agreements with the drivers, Lei merely fills in the blanks
with the corresponding data such as the drivers name and address, etc.
ISSUE
WON the Agreement was valid
HELD
NO
Ratio Where from the circumstances it is apparent that the periods were imposed in
order to preclude the acquisition of tenurial security by the employee, they should be
struck down or disregarded for being contrary to public policy, morals,etc.
Reasoning
- The Agreement is void ab initio for having a purpose contrary to public policy. The
agreement was a clear attempt to exploit the employee and deprive him of the protection
of the Labor Code by making it appear that the stipulations are governed by the Civil
Code as in ordinary private transactions. In reality the agreement was a contract of
employment into which were read the provisions of the Labor Code and the social justice
policy of the Constitution. That Cielo refused to sign the affidavit was not a just cause for
his termination as he was only protecting his interest against unguarded waiver of the
benefits due him under the Labor Code. Said affidavit which stipulated payment of wages
even suggested that there was indeed an employer-employee relationship.
Disposition NLRC decision set aside. LA decision reinstated.

GENERAL MILLING CORPORATION V TORRES

196 SCRA 215
FELICIANO; April 22, 1991
NATURE
Petition for certiorari review.

Labor Law 1
FACTS
- DOLE NCR issued Alien Employment Permit in favor of petitioner Earl Timothy Cone, a
United States citizen, as sports consultant and assistant coach for GMC. GMC and Cone
entered into a contract of employment whereby the latter undertook to coach GMC's
basketball team. Board of Special Inquiry of the Commission on Immigration and
Deportation approved petitioner Cone's application for a change of admission status from
temporary visitor to prearranged employee.
- On 9 February 1990, petitioner GMC requested renewal of petitioner Cone's alien
employment permit. GMC also requested that it be allowed to employ Cone as fullfledged coach. The DOLE Regional Director, Luna Piezas, granted the request. Alien
Employment Permit was issued.
- Private respondent Basketball Coaches Association of the Philippines ("BCAP")
appealed the issuance of said alien employment permit to the respondent Secretary of
Labor who issued a decision ordering cancellation of petitioner Cone's employment
permit on the ground that there was no showing that there is no person in the Philippines
who is competent, able and willing to perform the services required nor that the hiring of
petitioner Cone would redound to the national interest.
ISSUES
1. WON Secretary of Labor gravely abused his discretion when he revoked petitioner
Cone's alien employment permit
2. WON Section 6 (c), Rule XIV, Book I of the Omnibus Rules Implementing the Labor
Code is null and void as it is in violation of the enabling law as the Labor Code does not
empower respondent Secretary to determine if the employment of an alien would
redound to national interest
HELD
1. NO
- Petitioners have failed to show any grave abuse of discretion or any act without or in
excess of jurisdiction on the part of respondent Secretary of Labor in rendering his
decision, revoking petitioner Cone's Alien Employment Permit.
- The alleged failure to notify petitioners of the appeal filed by private respondent BCAP
was cured when petitioners were allowed to file their Motion for Reconsideration before
respondent Secretary of Labor.
2. NO
- The Labor Code itself specifically empowers respondent Secretary to make a
determination as to the availability of the services of a "person in the Philippines who is
competent, able and willing at the time of application to perform the services for which an
alien is desired." In short, the Department of Labor is the agency vested with jurisdiction
to determine the question of availability of local workers.
- Under Article 40 of the Labor Code, an employer seeking employment of an alien must
first obtain an employment permit from the Department of Labor. Petitioner GMC's right
to choose whom to employ is, of course, limited by the statutory requirement of an alien
employment permit.
- Petitioners will not find solace in the equal protection clause of the Constitution. As
pointed out by the Solicitor-General, no comparison can be made between petitioner
Cone and Mr. Norman Black as the latter is "a long time resident of the country," and
thus, not subject to the provisions of Article 40 of the Labor Code which apply only to
"non-resident aliens." In any case, the term "non-resident alien" and its obverse "resident
alien," here must be given their technical connotation under our law on immigration.
- Neither can petitioners validly claim that implementation of respondent Secretary's
decision would amount to an impairment of the obligations of contracts. The provisions of
the Labor Code and its Implementing Rules and Regulations requiring alien employment
permits were in existence long before petitioners entered into their contract of
employment. It is firmly settled that provisions of applicable laws, especially provisions
relating to matters affected with public policy, are deemed written into contracts. Private
parties cannot constitutionally contract away the otherwise applicable provisions of law.
- In short, the Department of Labor is the agency vested with jurisdiction to determine the
question of availability of local workers. The constitutional validity of legal provisions
granting such jurisdiction and authority and requiring proof of non-availability of local
nationals able to carry out the duties of the position involved, cannot be seriously
questioned.
- Petitioners apparently suggest that the Secretary of Labor is not authorized to take into
account the question of whether or not employment of an alien applicant would "redound
to the national interest" because Article 40 does not explicitly refer to such assessment.
This argument (which seems impliedly to concede that the relationship of basketball
coaching and the national interest is tenuous and unreal) is not persuasive. In the first
place, the second paragraph of Article 40 says: "[t]he employment permit may be issued
to a non-resident alien or to the applicant employer after a determination of the nonavailability of a person in the Philippines who is competent, able and willing at the time of
application to perform the services for which the alien is desired."
- The permissive language employed in the Labor Code indicates that the authority
granted involves the exercise of discretion on the part of the issuing authority. In
the second place, Article 12 of the Labor Code sets forth a statement of objectives that

A2010

- 143 -

Disini

the Secretary of Labor should, and indeed must, take into account in exercising his
authority and jurisdiction granted by the Labor Code.
Disposition Court Resolved to DISMISS the Petition for Certiorari for lack of merit.

MANILA TERMINAL COMPANY INC V CIR(MANILA

TERMINAL RELIEF AND MUTUAL AID ASSN)
91 PHIL 625
PARAS; July 16, 1952
FACTS
- Manila Terminal Co undertook arrastre service in Port Area, under control of US Army.
It hired watchmen on 12 hr shifts.
- Manila Terminal began post-war operation of arrastre service under control of Bureau of
Customs. The watchmen continued in the service, with salary raise.
A member of the Manila Terminal Relief and Mutual Aid Association wrote to Dept of
Labor requesting that the matter of overtime pay be investigated, but nothing happened.
- Members of the Association filed demand with Department of Labor, including overtime
pay, but nothing happened.
- Manila Terminal Company instituted system of strict 8 hr shifts.
- The Association was organized for the first time, and an amended petition was filed with
CIR praying that the petitioner be ordered to pay its watchmen or police force overtime
pay.
- The petitioners police force was consolidated with the Manila Harbor Police of the
Customs Patrol Service, a govt agency under Commissioner of Customs and Secretary
of Finance.
- CIR, while dismissing other demands, ordered the petitioner to pay its police force
regular or base pay and overtime compensation. With reference to overtime pay after
the watchmen had been integrated into the Manila Harbor Police, the judge ruled that
court has no jurisdiction because it affects the Bureau of Customs.
- In a separate opinion, Judge Lanting ruled:
> decision should be affirmed in so far as it grants compensation for overtime on regular
days
> as to compensation for work on Sundays and legal holidays, petitioner should pay
compensation that corresponds to the overtime at the regular rate only
> watchmen are not entitled to night differential
ISSUE
WON overtime pay should be granted to the workers
HELD
YES
- Petitioner stressed that the contract between it and the Association stipulates 12 hrs a
day at certain rates including overtime, but the record does not bear out these
allegations.
- In times of acute employment, people go from office to office to search for work, and the
workers here found themselves required to render 12 hrs a day. True, there was an
agreement, but did the workers have freedom to bargain much less insist in the
observance of the Eight Hour Labor Law?
- We note that after petitioner instituted 8 hr shifts, no reduction was made in salaries
which its watchmen received under the 12 hr agreement.
- Petitioners allegation that the Association had acquiesced in the 12 hr shifts for more
than 18 mos is not accurate. Only one of the members entered in September 1945. The
rest followed during the next few months.
- The Association cant be said to have impliedly waived the right to overtime pay, for the
obvious reason that it could not have expressly waived it.
- Estoppel and laches cant also be invoked against Association. First, it is contrary to
spirit of the Eight Hour Labor Law. Second, law obligates employer to observe it. Third,
employee is at a disadvantage as to be reluctant in asserting any claim.
- The argument that the nullity of the employment contract precludes recovery by the
Association of overtime pay is untenable. The employer may not be heard to plead its
own neglect as exemption or defense.
- Also, Commonwealth Act 444 expressly provides for payment of extra compensation in
cases where overtime services are required.
- The point that payment of overtime pay may lead to ruin of the petitioner cant be
accepted. It is significant that not all watchmen should receive back overtime pay for the
whole period, since the members entered the firm in different times.
- The Eight-Hour Labor Law was designed not only to safeguard the health and welfare
of the laborer or employee, but in a way to minimize unemployment by forcing
employers, in cases where more than 8-hour operation is necessary, to utilize different
shifts of laborers or employees working only for eight hours each.

Labor Law 1
AKLAN ELECTRIC COOPERATIVE INC V NLRC
(RETISO)
323 SCRA 258
GONZAGA-REYES; January 25, 2000
NATURE
Petition for certiorari and prohibition with prayer for writ of preliminary injunction and/or
temporary restraining order
FACTS
- January 22, 1991 by way of a resolution of the Board of Directors of AKELCO it allowed
the temporary holding of office at Amon Theater, Kalibo, Aklan upon the recommendation
of Atty. Leovigildo Mationg, then project supervisor, on the ground that the office at Lezo
was dangerous and unsafe.
- Majority of the employees including the herein complainants, continued to report for
work at Lezo, Aklan and were paid of their salaries. The complainants claimed that
transfer of office from Lezo, Aklan to Kalibo, Aklan was illegal because it failed to comply
with the legal requirements under P.D. 269, thus the they remained and continued to
work at the Lezo Office until they were illegally locked out therefrom by the respondents.
Despite the illegal lock out however, complainants continued to report daily to the
location of the Lezo Office, prepared to continue in the performance of their regular
duties.Complainants who continuously reported for work at Lezo, Aklan were not paid
their salaries from June 1992 up to March 18, 1993.
- LA dismissed the complaints
- NLRC reversed and set aside the LAs decision and held that private respondents are
entitled to unpaid wages from June 16, 1992 to March 18, 1993
- Petitioner claims:
> compensable service is best shown by timecards, payslips and other similar
documents and it was an error for public respondent to consider the computation of the
claims for wages and benefits submitted merely by private respondents as substantial
evidence.
ISSUE
WON private respondents are entitled to payment of wages for the period of June 1992
up to March 18,1993 (what is their proof)
HELD
NO
- NLRC based its conclusion on the following: (a) the letter of Leyson, Office Manager of
AKELCO addressed to AKELCO's General Manager, Atty. Mationg, requesting for the
payment of private respondents' unpaid wages from June 16, 1992 to March 18, 1993;
(b) the memorandum of said Atty. Mationg in answer to the letter request of Leyson
where he made an assurance that he will recommend such request; (c) the private
respondents' own computation of their unpaid wages.
- We find that the foregoing does not constitute substantial evidence to support the
conclusion that private respondents are entitled to the payment of wages from June 16,
1992 to March 18, 1993.
- Substantial evidence is that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion. These evidences relied upon
by public respondent did not establish the fact that private respondents actually rendered
services in the Kalibo office during the stated period.
a. Letter of Pedrito Leyson to Atty. Mationg
> Pedrito Leyson is one of the herein private respondents who are claiming for unpaid
wages and we find his actuation of requesting in behalf of the other private respondents
for the payment of their backwages to be biased and self-serving, thus not credible.
> On the other hand, petitioner was able to show that private respondents did not render
services during the stated period. Petitioner's evidences show that on January 22, 1992,
petitioner's Board of Directors passed a resolution temporarily transferring the Office from
Lezo, Aklan to Amon Theater, Kalibo, Aklan .With the transfer of petitioner's business
office from its former office, Lezo, to Kalibo, Aklan, its equipments, records and facilities
were also removed from Lezo and brought to the Kalibo office where petitioner's official
business was being conducted; thus private respondents' allegations that they continued
to report for work at Lezo to support their claim for wages has no basis.
b. Response of Atty. Mationg to the letter-request of office manager Leyson
> Mationg's offer to recommend the payment of private respondents' wages is hardly
approval of their claim for wages. It is just an undertaking to recommend payment.
Moreover, the offer is conditional. It is subject to the condition that petitioner's Board of
Directors will give its approval and that funds were available. Mationg's reply to Leyson's
letter for payment of wages did not constitute approval or assurance of payment. The fact

A2010

- 144 -

Disini

is that, the Board of Directors of petitioner rejected private respondents demand for
payment (Board Resolution No. 496, s. 1993).
c. the private respondents' own computation of their unpaid wages
> We hold that public respondent erred in merely relying on the computations of
compensable services submitted by private respondents. There must be competent proof
such as time cards or office records to show that they actually rendered compensable
service during the stated period to entitle them to wages. It has been established that the
petitioner's business office was transferred to Kalibo and all its equipments, records and
facilities were transferred thereat and that it conducted its official business in Kalibo
during the period in question. It was incumbent upon private respondents to prove that
they indeed rendered services for petitioner, which they failed to do.

SSS V CA (AYALDE)
348 SCRA 1
YNARES-SANTIAGO; December 14, 2000
NATURE
Petition for review on certiorari
FACTS
- In a petition before the Social Security Commission, Margarita Tana, widow of the late
Ignacio Tana, Sr., alleged that her husband was, before his demise, an employee of
Conchita Ayalde as a farmhand in the two (2) sugarcane plantations she owned in
Pontevedra, La Carlota City (Hda. B-70) and leased from the University of the
Philippines (Hda. B-15-M). She further alleged that Tana worked continuously six (6)
days a week, four (4) weeks a month, and for twelve (12) months every year between
January 1961 to April 1979. For his labor, Tana allegedly received a regular salary
according to the minimum wage prevailing at the time.
- She further alleged that throughout the given period, social security contributions, as
well as medicare and employees compensation premiums were deducted from Tana's
wages. It was only after his death that Margarita discovered that Tana was never
reported for coverage, nor were his contributions/premiums remitted to the SSS.
Consequently, she was deprived of the burial grant and pension benefits accruing to the
heirs of Tana had he been reported for coverage.
- She prayed for the Commission to issue an order directing respondents Conchita
Ayalde and Antero Maghari as her administrator to pay the premium contributions of the
deceased Ignacio Tana, Sr. and report his name for SSS coverage; and for the SSS to
grant petitioner Margarita Tana the funeral and pension benefits due her.
- The SSS revealed that neither Hda. B-70 nor respondents Ayalde and Maghari were
registered members-employers of the SSS, and consequently, Ignacio Tana, Sr. was
never registered as a member-employee. Likewise, SSS records reflected that there
was no way of verifying whether the alleged premium contributions were remitted since
the respondents were not registered members-employers.
- Respondent Antero Maghari raised the defense that he was a mere employee who was
hired as an overseer of Hda. B-70 sometime during crop years 1964-65 to 1971-72, and
as such, his job was limited to those defined for him by the employer which never
involved matters relating to the SSS.
- For her part, respondent Ayalde belied the allegation that Ignacio Tana, Sr. was her
employee, admitting only that he was hired intermittently as an independent contractor to
plow, harrow, or burrow Hda. No. Audit B-15-M. Tana used his own carabao and other
implements, and he followed his own schedule of work hours. Ayalde further alleged that
she never exercised control over the manner by which Tana performed his work as an
independent contractor. Moreover, Ayalde averred that way back in 1971, the University
of the Philippines had already terminated the lease over Hda. B-15-M and she had since
surrendered possession thereof to the University of the Philippines. Consequently,
Ignacio Tana, Sr. was no longer hired to work thereon starting in crop year 1971-72, while
he was never contracted to work in Hda. B-70.
- SSS ruled in favor of Tana. CA ruled in favor of Ayalde.
ISSUE
WON an agricultural laborer who was hired on "pakyaw" basis can be considered an
employee entitled to compulsory coverage and corresponding benefits under the Social
Security Law
HELD
- The mandatory coverage under the SSS Law (Republic Act No. 1161, as amended by
PD 1202 and PD 1636) is premised on the existence of an employer-employee
relationship, and Section 8(d) defines an "employee" as "any person who performs
services for an employer in which either or both mental and physical efforts are used and
who receives compensation for such services where there is an employer-employee
relationship." The essential elements of an employer-employee relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the power of control with regard to the means and methods by which

Labor Law 1
the work is to be accomplished, with the power of control being the most determinative
factor.
- There is no question that Tana was selected and his services engaged by either Ayalde
herself, or by Antero Maghari, her overseer. Corollarily, they also held the prerogative of
dismissing or terminating Tana's employment. The dispute is in the question of payment
of wages. Claimant Margarita Tana and her corroborating witnesses testified that her
husband was paid daily wages "per quincena" as well as on "pakyaw" basis. Ayalde, on
the other hand, insists that Tana was paid solely on "pakyaw" basis. To support her
claim, she presented payrolls covering the period January of 1974 to January of 1976
and November of 1978 to May of 1979.
- A careful perusal of the records readily show that the exhibits offered are not complete,
and are but a mere sampling of payrolls. While the names of the supposed laborers
appear therein, their signatures are nowhere to be found. And while they cover the years
1975, 1976 and portions of 1978 and 1979, they do not cover the 18-year period during
which Tana was supposed to have worked in Ayalde's plantations. Also an admitted fact
is that these exhibits only cover Hda. B70, Ayalde having averred that all her records and
payrolls for the other plantation (Hda. B-15-M) were either destroyed or lost.
- To our mind, these documents are not only sadly lacking, they are also unworthy of
credence. The fact that Tana's name does not appear in the payrolls for the years 1975,
1976 and part of 1978 and 1979, is no proof that he did not work in Hda. B70 in the years
1961 to 1974, and the rest of 1978 and 1979. The veracity of the alleged documents as
payrolls are doubtful considering that the laborers named therein never affixed their
signatures to show that they actually received the amounts indicated corresponding to
their names. Moreover, no record was shown pertaining to Hda. B-15-M, where Tana
was supposed to have worked. Even Ayalde admitted that she hired Tana as "arador"
and sometimes as laborer during milling in Hda. B-15-M.[16] In light of her incomplete
documentary evidence, Ayalde's denial that Tana was her employee in Hda. B-70 or Hda.
B-15-M must fail. In contrast to Ayalde's evidence, or lack thereof, is Margarita Tana's
positive testimony, corroborated by two (2) other witnesses.
- The witnesses did not waver in their assertion that while Tana was hired by Ayalde as
an "arador" on "pakyaw" basis, he was also paid a daily wage which Ayalde's overseer
disbursed every fifteen (15) days. It is also undisputed that they were made to
acknowledge receipt of their wages by signing on sheets of ruled paper, which are
different from those presented by Ayalde as documentary evidence. In fine, we find that
the testimonies of Margarita Tana and the two other witnesses prevail over the
incomplete and inconsistent documentary evidence of Ayalde.
- No particular form of evidence is required to prove the existence of an employeremployee relationship. Any competent and relevant evidence to prove the relationship
may be admitted. For, if only documentary evidence would be required to show that
relationship, no scheming employer would ever be brought before the bar of justice, as
no employer would wish to come out with any trace of the illegality he has authored
considering that it should take much weightier proof to invalidate a written instrument.
- The testimonial evidence of the claimant and her witnesses constitute positive and
credible evidence of the existence of an employer-employee relationship between Tana
and Ayalde. As the employer, the latter is duty-bound to keep faithful and complete
records of her business affairs, not the least of which would be the salaries of the
workers.
- The assertion that Tana is an independent contractor is specious because (1) while
Tana was sometimes hired as an "arador" or plower for intermittent periods, he was hired
to do other tasks in Ayalde's plantations. It is indubitable, as testified by the witnesses,
that Tana worked continuously for Ayalde, not only as "arador" on "pakyaw" basis, but as
a regular farmhand, doing backbreaking jobs for Ayalde's business. There is no shred of
evidence to show that Tana was only a seasonal worker, much less a migrant worker. All
witnesses, including Ayalde herself, testified that Tana and his family resided in the
plantation. If he was a mere "pakyaw" worker or independent contractor, then there
would be no reason for Ayalde to allow them to live inside her property for free. The only
logical explanation is that he was working for most part of the year exclusively for Ayalde,
in return for which the latter gratuitously allowed Tana and his family to reside in her
property; and, (2) Ayalde made much ado of her claim that Tana could not be her
employee because she exercised no control over his work hours and method of
performing his task as "arador." A closer scrutiny of the records, however, reveals that
while Ayalde herself may not have directly imposed on Tana the manner and methods to
follow in performing his tasks, she did exercise control through her overseer.
- Under the circumstances, the relationship between Ayalde and Tana has more of the
attributes of employer-employee than that of an independent contractor hired to perform
a specific project.
- Lastly, as a farm laborer who has worked exclusively for Ayalde for eighteen (18) years,
Tana should be entitled to compulsory coverage under the Social Security Law, whether
his service was continuous or broken.
Disposition Decision of CA reversed. Decision of SSS reinstated.

A2010

- 145 -

Disini

MANTRADE/FMMC DIVISION EMPLOYEES AND

WORKERS UNION V BACUNGAN
144 SCRA 510
FERIA; September 30, 1986
NATURE
Petition for Certiorari and Mandamus
FACTS
- Petitioner employees question the validity of the pertinent section of the Rules and
Regulations Implementing the Labor Code as amended on which respondent arbitrator
Froilan M. Bacungan based his decision ruling that Mantrade Devt Corp is not under
legal obligation to pay holiday pay (as provided for in Article 94 of the Labor Code) to its
monthly paid 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, and that this rule is applicable not only as of March 2, 1976 but as of
November 1, 1974.
- Respondent corporation contends, among others that petitioner is barred from pursuing
the present action in view of (1) Article 263 of the Labor Code; (2) the pertinent provision
of the CBA between petitioner and respondent corporation; and (3) Article 2044 of the
Civil Code; that the special civil action of certiorari does not lie because respondent
arbitrator is not an "officer exercising judicial functions" within the contemplation of Rule
65, Section 1, of the Rules of Court; that the instant petition raises an error of judgment
on the part of respondent arbitrator and not an error of jurisdiction; that it prays for the
annulment of certain rules and regulations issued by the DOLE, not for the annulment of
the voluntary arbitration proceedings; and that appeal by certiorari under Section 29 of
the Arbitration Law, Republic Act No. 876, is not applicable to the case at bar because
arbitration in labor disputes is expressly excluded by Section 3 of said law.
ISSUES
1. WON decisions of arbitrators are subject to judicial review
2. WON Mantrade employees are entitled to holiday pay
3. WON mandamus lies in the case at bar
HELD
1. YES
- Oceanic Bic Division (FFW) vs. Romero (July 16, 1984): The decisions of voluntary
arbitrators must be given the highest respect and as a general rule must be accorded a
certain measure of finality. It is not correct, however, that this respect precludes the
exercise of judicial review over their decisions. Article 262 of the Labor Code making
voluntary arbitration awards final, inappealable and executory, except where the money
claims exceed P100,000.00 or 40% of the paid-up capital of the employer or where there
is abuse of discretion or gross incompetence refers to appeals to the National Labor
Relations Commission and not to judicial review. Judicial review still lies where want of
jurisdiction, grave abuse of discretion, violation of due process, denial of substantial
justice, or erroneous interpretation of the Law are brought to SCs attention.
2. YES
- Under Art. 94 of the Labor Code, monthly salaried employees are not among those
excluded from receiving holiday pay. But they appear to be excluded under Sec. 2, Rule
IV, Book III of the Rules and Regulations implementing said provision.
- Insular Bank of Asia and America Employees' Union (IBAAEU) vs. Inciong (October 24,
1984): 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.
- Chartered Bank Employees Association vs. Ople (August 28, 1985): An administrative
interpretation which diminishes the benefits of labor more than what the statute delimits
or withholds is obviously ultra vires.
3. YES
- While it is true that mandamus is not proper to enforce a contractual obligation, the
remedy being an action for specific performance, in view of the above cited subsequent
decisions of this Court clearly defining the legal duty to grant holiday pay to monthly
salaried employees, mandamus is an appropriate equitable remedy.
Disposition Questioned decision of respondent arbitrator is SET ASIDE and respondent
corporation is ordered to GRANT holiday pay to its monthly salaried employees. No
costs.

STATES MARINE CORP V CEBU SEAMENS ASSN

Labor Law 1

A2010

- 146 -

Disini

MILLARES V NLRC
[PAGE 79]

TIPS

Orlando, it will make him the highest paid employee on M/V "Orient Express." It will
create an unfavorable precedent detrimental to the future recruitment, hiring and
deployment of Filipino overseas workers specially in service oriented businesses. It will
also be a case of double compensation that will unjustly enrich Orlando at the expense of
petitioners.
> They also stress that Orlando never complained that they should pay him the said tips.
- Respondent filed a two-page comment to the petition adopting the resolution of the
Court of Appeals dated July 28, 1999.

ACE NAVIGATION CO INC V CA (NLRC, ALONSAGAY)

338 SCRA 380
PUNO; August 15, 2000

ISSUES
1. WON the CA erred in rigidly applying Sec 1310
2. WON the CA erred in ruling that they are the ones liable to pay tips to petitioner
(Orlando)

[PAGE 126]

NATURE
Petitioner for review of the resolutions that dismissed the petition for certiorari (Ang kulit
no? na-dismiss na nga yung certiorari eh pume-petition pa!)
FACTS
- In June 1994, Ace Navigation Co., Inc. recruited private respondent Orlando Alonsagay
to work as a bartender on board the vessel M/V "Orient Express" owned by Conning
Shipping Ltd. Under their POEA approved contract of employment, Orlando shall receive
a monthly basic salary of four hundred fifty U.S. dollars (U.S. $450.00), flat rate, including
overtime pay for 12 hours of work daily plus tips of two U.S. dollars (U.S. $2.00) per
passenger per day. He, was also entitled to 2.5 days of vacation leave with pay each
month. The contract was to last for one (1) year.
- Petitioners alleged that on June 13, 1994, Orlando was deployed and boarded M/V
"Orient Express" at the seaport of Hong Kong.
- After the expiration of the contract, Orlando returned to the Philippines and demanded
from Ace Nav his vacation leave pay.
- Ace Nav did not pay him immediately. It told him that he should have been paid prior to
his disembarkation and repatriation to the Philippines.
- Conning did not remit any amount for his vacation leave pay. Ace Nav promised to
verify the matter and asked Orlando to return after a few days. Orlando never returned.
- On November 25, 1995, Orlando filed a complaint before the labor arbiter for vacation
leave pay of four hundred fifty U.S. dollars and unpaid tips amounting to thirty six,
thousand U.S. dollars
- On November 15, 1996, Labor Arbiter Felipe P. Pati ordered Ace Nav and Conning to
pay jointly and severally Orlando his vacation leave pay of US$450.00. The claim for tips
of Orlando was dismissed for lack of merit.
- Orlando appealed to the NLRC on February 3, 1997. In a decision penned by
Commissioner Vicente S.E. Veloso and concurred in by Commissioner Alberto R.
Quimpo the NLRC ordered Ace Nav and Conning to pay the unpaid tips of Orlando which
amounted to US$36,000.00 in addition to his vacation leave pay.
- Ace Nav and Conning filed a motion for reconsideration on February 2, 1998 which was
denied on May 20, 1999.
- On July 2, 1999, Ace Nav and Conning filed a petition for certiorari before the Court of
Appeals
- On July 28, 1999, the Court of Appeals promulgated a three-page resolution and
concurred in by Associate Justices Eubulo G. Verzola and Elvi John S. Asuncion
dismissing the petition.
- Their motion for reconsideration filed was denied.
Petitioners:
> Petitioners argued that the Court of Appeals erred in rigidly and technically applying
Section 13, Rule 1310- Proof of personal service shall consist of a written admission of
the party served, or the official return of the server, or the affidavit of the party serving,
containing a full statement of the date, place and manner of service. If the service is by
ordinary mail, proof thereof shall consist of an affidavit of the person mailing or facts
showing compliance with section 7 of this Rule. If service is made by registered mail,
proof shall be made by such affidavit and the registry receipt issued by the mailing office.
The registry return card shall be filed immediately upon its receipt, or in lieu thereof of
the unclaimed letter together with the certified or sworn copy of the notice given by the
postmaster to the addressee.
> Section 1, Rule 6511 Section 1.-- When any tribunal, board or officer exercising judicial
or quasi judicial functions has acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the facts
with certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board, officer, and granting such incidental reliefs as law
and justice may require.
> They also contend that the respondent court erred in ruling that they are the ones liable
to pay tips to Orlando. They point out that if tips will be considered as part of the salary of

HELD
1. YES
Ratio Rules of procedure are used to help secure and not override substantial justice.
[Heirs of Francisco Guballa Sr. vs. Court of Appeals] Even the Rules of Court mandates a
liberal construction in order to promote their objective of securing a just, speedy and
inexpensive disposition of every action and proceeding. Since rules of procedure are
mere tools designed to facilitate the attainment of justice, their strict and rigid application
which would result in technicalities that tend to frustrate rather than promote substantial
justice must always be avoided. Thus, the dismissal of an appeal on purely technical
ground is frowned upon especially if it will result to unfairness.
Reasoning
- We apply these sound rules in the case at bar. Petitioners' petition for certiorari before
the Court of Appeals contained the certified true copy of the NLRC's decision dated
November 26, 1997. Its order dated May 2, 199917 and the sworn certification of nonforum shopping. Petitioners also explained that their counsel executed an affidavit of
proof of service and explanation in the afternoon of July 1, 1999. However, he forgot to
attach it when he filed their petition the following day because of the volume and
pressure of work and lack of office personnel. However, the Registry which is the proof of
mailing to Orlando's counsel, issued by the Central Post Office was attached on the
original petition they filed with the respondent court. It was also stamped by the NLRC
which is proof of receipt of the petition by the latter. The affidavit of service, which was
originally omitted, was attached on their motion for reconsideration. Significantly, it was
dated July 1, 1999.
- the subsequent filing of the affidavit of service may be considered as substantial
compliance with the rules.
2. NO
Reasoning
- The word tip has several meanings. It is more frequently used to indicate additional
compensation, and in this sense "tip" is defined as meaning a gratuity; a gift; a present; a
fee; money given, as to a servant to secure better or more prompt service.
- Tipping is done to get the attention and secure the immediate services of a waiter,
porter or others for their services. Since a tip is considered a pure gift out of benevolence
or friendship, it can not be demanded from the customer. Whether or not tips will be
given is dependent on the will and generosity of the giver. Although a customer may give
a tip as a consideration for services rendered, its value still depends on the giver. They
are given in addition to the compensation by the employer. A gratuity given by an
employer in order to inspire the employee to exert more effort in his work is more
appropriately called a bonus.
- The contract of employment between petitioners and Orlando is categorical that the
monthly salary of Orlando is US$450.00 flat rate. This already included his overtime pay
which is integrated in his 12 hours of work. The words "plus tips of US$2.00 per
passenger per day" were written at the line for overtime. Since payment for overtime was
included in the monthly salary of Orlando, the supposed tips mentioned in the contract
should be deemed included thereat.
- The actuations of Orlando during his employment also show that he was aware his
monthly salary is only US$450.00, no more no less. He did not raise any complaint about
the non-payment of his tips during the entire duration of his employment. After the
expiration of his contract, he demanded payment only of his vacation leave pay. He did
not immediately seek the payment of tips. He only asked for the payment of tips when he
filed this case before the labor arbiter. This shows that the alleged non-payment of tips
was a mere afterthought to bloat up his claim. The records of the case do not show that
Orlando was deprived of any monthly salary. It will now be unjust to impose a burden on
the employer who performed the contract in good faith.
- Furthermore, it is presumed that the parties were aware of the plain, ordinary and
common meaning of the word "tip." As a bartender, Orlando can not feign ignorance on
the practice of tipping and that tips are normally paid by customers and not by the
employer.
- However, Orlando should be paid his vacation leave pay. Petitioners denied this liability
by raising the defense that the usual practice is that vacation leave pay is given before
repatriation. But as the labor arbiter correctly observed, petitioners did not present any

Labor Law 1
evidence to prove that they already paid the amount. The burden of proving payment
was not discharged by the petitioners.
Disposition Reversed and set aside

CASH WAGE/COMMISSIONS
SONGCO V NLRC (AGUAS, F.E. ZUELLIG INC)
183 SCRA 610
MEDIALDEA; March 23, 1990
FACTS
- Private respondent F.E. Zuellig (M), Inc., filed with the Department of Labor an
application seeking clearance to terminate the services of petitioners Jose Songco,
Romeo Cipres, and Amancio Manuel 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 CBA entered into between Zuellig and F.E. Zuellig Employees Association, of which
petitioners are members, contains the following provision:
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 salary as 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.
- 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 laborsaving 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.
- In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor
Code provide:
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 onehalf month pay for every year of service, whichever is higher, a fraction of at least
six (6) months being considered as one whole year.
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)
- The Labor Arbiter rendered a decision ordering the respondent 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.
- The appeal by petitioners to the National Labor Relations Commission was dismissed
for lack of merit.
- Petitioners' Arguments
> 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

A2010

- 147 -

Disini

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.
- Respondents Comments
> 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.
ISSUE
WON earned sales commissions and allowances should be included in the monthly
salary of petitioners for the purpose of computation of their separation pa
HELD
YES
- 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.
- 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. "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". 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.
- 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. 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.
- The Court took 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. Also, 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 preceding discussions, if the opposite view is adopted that
commissions, do not form part of wage or salary, then, in effect, this kind of salesmen do
not receive any salary and therefore, not entitled to separation pay in the event of
discharge from employment. 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, the Court 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.
- In carrying out and interpreting the Labor Code's provisions and its implementing
regulations, the workingman's welfare should be the primordial and paramount

Labor Law 1
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", 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.
Disposition The petition was granted.

IRAN V NLRC (RETRALBA)

106 SCRA 444
ROMERO; April 22, 1998
FACTS
- Antonio Iran is engaged in softdrinks merchandising and distribution in Mandaue City,
Cebu, employing truck drivers who double as salesmen, truck helpers, and non-field
personnel in pursuit thereof. He hired private respondents as drivers/salesmen and truck
helpers. Drivers/salesmen drove petitioners delivery trucks and promoted, sold and
delivered softdrinks to various outlets in Mandaue City. The truck helpers assisted in the
delivery of softdrinks to the different outlets covered by the driver/salesmen.
- As part of their compensation, the driver/salesmen and truck helpers of petitioner
received commissions per case of softdrinks sold.
- Sometime in June 1991, Iran discovered cash shortages and irregularities allegedly
committed by private respondents. Pending the investigation of irregularities and
settlement of the cash shortages, Iran required private respondents to report for work
everyday. They were not allowed, however, to go on their respective routes. A few days
thereafter, despite aforesaid order, private respondents stopped reporting for work,
prompting Iran to conclude that the former had abandoned their employment.
Consequently, Iran terminated their services. He also filed a complaint for estafa against
them.
- Private respondents filed complaints against Iran for illegal dismissal, illegal deduction,
underpayment of wages, premium pay for holiday and rest day, holiday pay, service
incentive leave pay, 13th month pay, allowances, separation pay, recovery of cash bond,
damages and attorneys fees.
- Said complaints were consolidated, and assigned to Labor Arbiter Ernesto F. Carreon.
He found that Iran had validly terminated private respondents, there being just cause for
the latters dismissal. Nevertheless, he also ruled that Iran had not complied with
minimum wage requirements in compensating private respondents, and had failed to pay
private respondents their 13th month pay.
- On appeal, NLRC affirmed the validity of private respondents dismissal, but found that
said dismissal did not comply with the procedural requirements for dismissing
employees. MR denied.
ISSUES
1. WON commissions are included in determining compliance with the minimum wage
requirement
2. WON Iran is guilty of procedural lapses in terminating private respondents
If yes, WON P1,000.00 indemnity fee to each of the private respondents is proper
3. WON the advance amount received by private respondents should be credited as part
of their 13th month pay
HELD
1. YES
- The nature of the work of a salesman and the reason for such type of remuneration for
services rendered demonstrate clearly that commissions are part of a salesmans wage
or salary.
- Article 97(f), LC explicitly includes commissions as part of wages. While commissions
are, indeed, incentives or forms of encouragement to inspire employees to put a little
more industry on the jobs particularly assigned to them, still these commissions are direct
remunerations for services rendered.
- Commissions have been defined as the recompense, compensation or reward of an
agent, salesman, executor, trustee, 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.
- SC has taken judicial notice of the fact that some salesmen do not receive any basic
salary but depend entirely on commissions and allowances or commissions alone,
although an employer-employee relationship exists. Undoubtedly, this salary structure is
intended for the benefit of the corporation establishing such, on the apparent assumption
that thereby its salesmen would be moved to greater enterprise and diligence and close
more sales in the expectation of increasing their sales commissions. This, however, does
not detract from the character of such commissions as part of the salary or wage paid to
each of its salesmen for rendering services to the corporation.
- There is no law mandating that commissions be paid only after the minimum wage has

A2010

- 148 -

Disini

been paid to the employee. Verily, the establishment of a minimum wage only sets a floor
below which an employees remuneration cannot fall, not that commissions are excluded
from wages in determining compliance with the minimum wage law.
- Philippine Agricultural Commercial and Industrial Workers Union vs. NLRC: drivers and
conductors who are compensated purely on a commission basis are automatically
entitled to the basic minimum pay mandated by law should said commissions be less
than their basic minimum for eight hours work. Were said commissions equal to or even
exceed the minimum wage, the employer need not pay, in addition, the basic minimum
pay prescribed by law.
2. YES
- In terminating employees, the employer must furnish the worker with two written notices
before the latter can be legally terminated: (a) a notice which apprises the employee of
the particular acts or omissions for which his dismissal is sought, and (b) the subsequent
notice which informs the employee of the employers decision to dismiss him.
- First notice informing the employee that his dismissal is being sought is absent in the
present case. This makes the termination of private respondents defective, for which Iran
must be sanctioned for his non-compliance with the requirements of or for failure to
observe due process.
- Section 2 of Book V, Rule XIV of the Omnibus Rules Implementing the Labor Code
requires that in cases of abandonment of work, notice should be sent to the workers last
known address. If indeed private respondents had abandoned their jobs, it was
incumbent upon Iran to comply with this requirement. This, Iran failed to do, entitling
respondents to nominal damages in the amount of P5,000.00 each, in accord with recent
jurisprudence, to vindicate or recognize their right to procedural due process which was
violated by Iran.
3. YES
- Iran is entitled to credit only the amounts paid for the particular year covered by said
vouchers.
- While it is true that the vouchers evidencing payments of 13 th month pay were
submitted only on appeal, it would have been more in keeping with the directive of Article
221 of the Labor Code for the NLRC to have taken the same into account.
- In labor cases, technical rules of evidence are not binding. Labor officials should use
every and all reasonable means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law or procedure.
- The intent of P.D. No. 851 is the granting of additional income in the form of 13 th month
pay to employees not as yet receiving the same and not that a double burden should be
imposed on the employer who is already paying his employees a 13 th month pay or its
equivalent. An employer who pays less than 1/12 th of the employees basic salary as their
13th month pay is only required to pay the difference.
Disposition NLRC decision modified. Case remanded to the Labor Arbiter for a
recomputation of the alleged deficiencies. No costs.

WAGES AND SALARY

GAA V CA (EUROPHIL INDUSTRIES CORP.)
140 SCRA 304 (85)
PATAJO; December 31, 1985
NATURE
A petition for review on certiorari of the decision of the Court of Appeals affirming the
decision of the Court of First Instance of Manila.
FACTS
- Respondent Europhil Industries Corporation was formerly one of the tenants in Trinity
Building at T.M. Kalaw Street, Manila, while petitioner Rosario A. Gaa was then the
building administrator.
- December 12, 1973: Europhil Industries commenced an action in CFI for damages
against petitioner "for having perpetrated certain acts that Europhil Industries considered
a trespass upon its rights, namely, cutting of its electricity, and removing its name from
the building directory and gate passes of its officials and employees." Court ruled in favor
of Europhil.
- A writ of garnishment was issued pursuant to which Deputy Sheriff Cesar A. Roxas
served a Notice of Garnishment upon El Grande Hotel, where petitioner was then
employed, garnishing her "salary, commission and/or remuneration." Gaa filed with the
CFI a motion to lift said garnishment on the ground that her "salaries, commission and or
remuneration" are exempted from execution under Article 1708 of the New Civil Code.
- CA dismissed the petition, saying that Gaa is not a mere laborer as contemplated under
Article 1708. The term laborer does not apply to one who holds a managerial or
supervisory position like that of petitioner, but only to those "laborers occupying the lower
strata."
ISSUE
WON Gaa is a laborer falling under the exception of Art. 1708 of the Civil Code

Labor Law 1
HELD
NO, Gaa is not a laborer as contemplated by the Civil Code.
Ratio The term "wages" as distinguished from "salary", applies to the compensation for
manual labor, skilled or unskilled, paid at stated times, and measured by the day, week,
month, or season, while "salary" denotes a higher degree of employment, or a superior
grade of services, and implies a position of office.
Reasoning
- The legislature intended the exemption in Article 1708 of the New Civil Code to operate
in favor of laboring men or women in the sense that their work is manual. Persons
belonging to this class usually look to the reward of a day's labor for immediate or
present support, and such persons are more in need of the exemption than any others.
LABORER: everyone who performs any kind of mental or physical labor, but as
commonly and customarily used and understood, it only applies to one engaged in some
form of manual or physical labor.
WAGE: the pay given "as hire or reward to artisans, mechanics, domestics or menial
servants, and laborers employed in manufactories, agriculture, mines, and other manual
occupation and usually employed to distinguish the sums paid to persons hired to
perform manual labor, skilled or unskilled, paid at stated times, and measured by the day,
week, month, or season."
- Petitioner is not an ordinary or rank and file laborer but "a responsibly-placed
employee," of El Grande Hotel, "responsible for planning, directing, controlling, and
coordinating the activities of all housekeeping personnel" to ensure the cleanliness,
maintenance and orderliness of all guest rooms, function rooms, public areas, and the
surroundings of the hotel. Petitioner is occupying a position equivalent to that of a
managerial or supervisory position.
Disposition Decision of the CA affirmed, with costs against the petitioner.

EQUITABLE BANKING CORP V SADAC

490 SCRA 380
CHICO-NAZARIO; June 8, 2006
NATURE
Petition for Review on Certiorari, with Motion to Refer the Petition to the Court En Banc,
seeking to reverse the Decision and Resolution of the CA which reversed and set aside
the Resolutions of the NLRC.
FACTS
- Respondent Sadac was appointed Vice President of the Legal Department of petitioner
Bank and subsequently General Counsel thereof. Nine lawyers of petitioner Banks Legal
Department accused Sadac of abusive conduct and petitioned for a change in leadership
of the department. On the ground of lack of confidence in Sadac, under the rules of client
and lawyer relationship, petitioner Bank instructed him to deliver all materials in his
custody in all cases in which the latter was appearing as its counsel of record.
- Sadac requested for a full hearing and formal investigation but the same remained
unheeded. He 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 his services. Finally, Sadac was removed from his
office and ordered disentitled to any compensation and other benefits. Labor Arbiter
Jovencio Ll. Mayor, Jr., dismissed the complaint for lack of merit. On appeal, the NLRC
reversed the Labor Arbiter and declared Sadacs dismissal as illegal.
ISSUE
1. WON Sadac is entitled to full backwages including salary increases
2. WON Sadac is entitled to receive certain benefits
3. WON the CA erred in awarding attorneys fees to Sadac
4. WON Sadac is entitled to legal interest
5. WON the petition should be heard by the court en banc
HELD
1. NO
Ratio The outstanding feature of backwages is the degree of assuredness to an
employee that he would have had them as earnings had he not been illegally terminated
from his employment. Salary increases, however, are a mere expectancy. There is no
vested right to salary increases.
Reasoning
- 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.
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. When there is an
award of backwages this actually refers to backwages without qualifications and
deductions. An unqualified award of backwages means that the employee is paid at the

A2010

- 149 -

Disini

wage rate at the time of his dismissal. 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.
Obiter
Broadly, the word "salary" means a recompense or consideration made to a person for
his pains or industry in another mans business. It carries with it the fundamental idea of
compensation for services rendered. In labor law, the distinction between salary and
wage appears to be merely semantics. That wage and salary are synonymous has been
settled. 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".
2. NO
Ratio Sadac did not present any evidence to prove entitlement to these claims.
Reasoning
- Petitioner Banks computation contains no 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 Sadac means that the latter is also entitled to
the other benefits as claimed by him but not acknowledged by the Bank.
3. NO
Ratio The decision of the CA AFFIRMED with MODIFICATION the NLRC decision, which
modification did not touch upon the award of attorneys fees as granted, hence, the
award stands.
Reasoning
- When a final judgment becomes executory, it thereby becomes immutable and
unalterable. The CAs decision became final and executory. This renders moot whatever
argument petitioner Bank raised against the grant of attorneys fees to Sadac.
4. YES
Ratio The legal interest of 12% per annum shall be imposed from the time judgment
becomes final and executory, until full satisfaction thereof.
Reasoning
- The CA was not in error in imposing the same notwithstanding that the parties were at
variance in the computation of Sadacs backwages. What is significant is that the
decision which awarded backwages to Sadac became final and executory. Therefore,
petitioner Bank is liable to pay interest from the date of finality of the decision.
5. NO
Ratio The instant case is not one that should be heard by the Court en banc.
Reasoning
- We are not herein modifying or reversing a doctrine or principle laid down by the Court
en banc or in a division.
Disposition The petition is PARTIALLY GRANTED and PARTIALLY DENIED. The
decision of the CA is hereby MODIFIED.

GRATUITY AND WAGES

PLASTIC TOWN CENTER CORPORATION V NLRC
(NAGKAKAISANG LAKAS NG MANGGAGAWA (NLM)KATIPUNAN)
172 SCRA 380
GUTIERREZ; April 19,1989
NATURE
Petition for review of the decision of the NLRC
FACTS
- There are 2 provisions of the CBA in question in this case.
1) P1 increase in salary is granted every July 1. Also, section 3 provides: It is agreed and
understood by the parties herein that the aforementioned increase in pay shall be
credited against future allowances or wage orders hereinafter implemented or enforced
by virtue of Letters of Instructions, Decrees and other labor legislation.
- Wage order number 4, effective on May 1 1984, provided for the integration of the
emergency cost of living allowances (ECOLA). It also provided that the minimum daily
wage rate be P32. Petitioner Plastic Town incurred a deficiency of P1 after integrating the
ECOLA. They then advanced the implementation of the wage increase as provided for by
the CBA. The petitioner argues that it did not credit the Pl.00 per day across the board
increase under the CBA as compliance with Wage Order No. 5 implemented on June
16,1984 since it gave an additional P3.00 per day to the basic salary pursuant to said
order. It, however, credited the Pl.00 a day increase to the requirement under Wage
Order No. 4 to which the private respondents allegedly did not object.
2) gratuity pay to resigning employees

Labor Law 1
- Gratuity pay is based on the monthly salary. Petitioner argues that the computation of
the monthly salary should be the equivalent of 26 days of salary, not 30 days as the
respondents aver.
ISSUES
1. WON the petitioners can credit the P1 increase in the CBA as compliance with wage
order number 4
2. WON the monthly salary is equivalent to 26 days
HELD
1. NO.
- In the case at bar, the petitioner alleges that on May 1, 1984, it granted a Pl.00
increase pursuant to Wage Order No. 4 which in consonance with Section 3 of the CBA
was to be credited to the July 1, 1984 increase under the CBA. It was, therefore, a July
increase. Section 3 of the CBA, however, clearly states that CBA granted increases shall
be credited against future allowances or wage orders. Thus, the CBA increase to be
effected on July 1, 1984 can not be retroactively applied to mean compliance with Wage
Order No. 4 which took effect on May 1, 1984.
2. NO. It should be 30 days
- To say that awarding the daily wage earner salary for more than 26 days is paying him
for days he does not work misses the point entirely. The issue here is not payment for
days worked but payment of gratuity pay equivalent to one month or 30 days salary
- From the foregoing, gratuity pay is therefore, not intended to pay a worker for actual
services rendered. It is a money benefit given to the workers whose purpose is "to
reward employees or laborers, who have rendered satisfactory and efficient service to
the company." (Sec. 2, CBA) While it may be enforced once it forms part of a contractual
undertaking, the grant of such benefit is not mandatory so as to be considered a part of
labor standard law unlike the salary, cost of living allowances, holiday pay, leave benefits,
etc., which are covered by the Labor Code. Nowhere has it ever been stated that gratuity
pay should be based on the actual number of days worked over the period of years
forming its basis. We see no point in counting the number of days worked over a ten-year
period to determine the meaning of "two and one- half months' gratuity." Moreover any
doubts or ambiguity in the contract between management and the union members should
be resolved in the light of Article 1702 of the Civil Code 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
Disposition Decision affirmed

13TH MONTH PAY

AGABON V NLRC
[PAGE 35]

B. PAYMENT OF WAGES

9.03 FORM
FULL PAYMENT
LOPEZ SUGAR CORPORATION V FRANCO
458 SCRA 515
CALLEJO; May 16, 2005
NATURE
Petition for review on certiorari of the Decision of the Court of Appeals (CA)
FACTS
- Franco, Pabalan, Perrin and Candelario were supervisory employees of the Lopez
Sugar Corporation (the Corporation, for brevity). Franco was barely 20 years old when he
was employed in 1974 as Fuel-in-Charge. His co-employee, Pabalan, was about 28
years old when he was hired by the Corporation as Shift Supervisor in the Sugar Storage
Department in 1975. Perrin and Candelario were employed in 1975 and 1976,
respectively, as Planter Service Representatives (PSRs), who rose from the ranks and,
by 1994, occupied supervisory positions in the Corporations Cane Marketing Section.
- The supervisory employees of the Corporation, spearheaded by Franco, Pabalan,
Perrin and Candelario, decided to form a labor union called Lopez Sugar Corporation
Supervisors Association. Franco was elected president and Pabalan as treasurer.
Perrin and Candelario, on the other hand, were among its active members.The officers of
the union and the management held a meeting, which led to the submission of the
unions proposals for a CBA on July 24, 1995.

A2010

- 150 -

Disini

- The Corporations president issued a Memorandum to the vice-president and

department heads for the adoption of a special retirement program for supervisory and
middle level managers. He emphasized that the management shall have the final say on
who would be covered, and that the program would be irrevocable once approved.
Perrin and Candelario were on leave when they were invited by Juan Masa, Jr., head of
the Cane Marketing Section, to the Northeast Beach Resort in Escalante, Negros
Occidental. The latter informed them that they were all included in the special retirement
program and would receive their respective notices of dismissal shortly.
- Masa, Pabalan, Franco, Perrin and Candelario received copies of the Memorandum
dated August 25, 1995 from the Corporations Vice-President for Administration and
Finance, informing them that they were included in the special retirement program for
supervisors and middle level managers; hence, their employment with the Corporation
was to be terminated effective September 29, 1995, and they would be paid their salaries
until September 27, 1995. The private respondents received their respective separation
pays and executed their respective Release Waiver and Quitclaim after receiving their
clearances from the Corporation.
- The private respondents filed separate complaints against the corporation with the
NLRC for illegal dismissal, unfair labor practice, reinstatement and damages.
- The Corporation maintained that the termination of the employment of the complainants
was in response to the challenges brought about by the General Agreement on Tariff and
Trade (GATT), the AFTA and other international trade agreements, which greatly affected
the local sugar industry and a study done by Sycip, Gorres, Velayo and Company (SGV)
regarding the Corporation and its operations to identify changes that could be
implemented to achieve cost effectiveness and global competitiveness
- Labor Arbiter rendered judgment in favor of the Corporation and ordered the dismissal
of the complainants. The complainants appealed to the NLRC that granted their appeal
and reversed the decision of the Labor Arbiter. The CA rendered judgment dismissing the
petition, on the ground that the NLRC did not commit grave abuse of discretion in
rendering judgment against the Corporation.
ISSUES
1. WON there was proof of redundancy in the fulfillment of the jobs of the employees and
whether there is a criteria, guideline, or standard for selection. If not whether it was
meant to intimidate the union
2. WON the waiver and quitclaim was valid
HELD
1. NO
- The SC agreed with the ruling of the CA that the petitioner illegally dismissed the private
respondents from their employment by including them in its special retirement program,
thus, debilitating the union, rendering it pliant by decapacitating its leadership. As such,
the so-called downsizing of the Cane Marketing Department and SMSD based on the
SGV Study Report was a farce capricious and arbitrary.
- Complainants are not in a position to anticipate how respondent will present its case for
redundancy particular[ly] because no standard, criteria or guidelines for the selection of
dismissed employees was made known to them, and all that they were told was that you
were selected as among those who will be separated from the service; nonetheless, this
early, it is possible to point out certain facts which throw light on the plausibility or want of
it, of the ground relied upon.
1. No contingency has occurred, of the kind mentioned by the Supreme Court in the
Wiltshire case, (over-hiring of workers, decreased volume of business or dropping of a
particular service line) which would explain the dismissal on the ground of redundancy;
over-hiring of workers cannot conceivably occur in the level of the supervisors; on the
other hand, it would have required an event of cataclysmic proportion to justify the
dismissal for redundancy of a full one-third of the supervisors in an establishment, and if
such an event were to occur it would have resulted in tremendous losses which is not
true here because the dismissal is not on account of or to prevent losses;
2. In no other category of employees did positions suddenly become redundant except
among the supervisors who have just organized themselves into a labor union and were
working for their first-ever CBA in the establishment;
3. The dismissal came at the precise time when the Lopez Sugar Central Supervisors
Association (LSCA) had presented its CBA proposals and was expecting the companys
reply as mandated by law; in fact, the reply was overdue, being required to be submitted
by management within ten (10) days from receipt of the union proposal; there is no better
proof that the dismissals have served their hidden purpose than that the CBA negotiation
has ended to all intents and purpose, before management could even present its
counterproposal. Certainly, it would be farfetched to say that the remaining union officers
and members have abandoned its objective of having a CBA for reasons other than the
fear of suffering the fate of those who had been dismissed.
- The absence of criteria, guidelines, or standard for selection of dismissed employees
renders the dismissals whimsical, capricious and vindictive; in the case of the
complainants Franco and Pabalan, who are the Union President and Treasurer,
respectively, the reason for their inclusion is obvious. Additionally, it must be mentioned
that in the case of Pabalan, there were three shift supervisors, one for each 8-hour shift
before the program was implemented, namely, Pabalan, Bitera and Lopez; Pabalan and

Labor Law 1
Bitera (a union director) were terminated, leaving Lopez alone, who worked on 12-hour
shift duty with Henry Villa, department head who was forced to perform the work of shift
supervisor; Pabalan was offered to be rehired as an employee of BUGLAS, a labor-only
contractor but he refused; an employee, Eugenio Bolanos was assigned from another
department to do the work of shift supervisor and three of them (Lopez, Villa and
Bolanos) now divide shift duties among themselves. There is no explanation why among
the shift supervisors it was Pabalan and Bitera who were included in the program.
- In the case of complainants [P]errin and Candelario, both Planter Service
Representatives, the manipulation is even more apparent; one year before the program
was instituted, two new PSRs were hired (Labrador and Cambate) bringing to six the
total number of PSRs; after the termination of [P]errin and Candelario, who have served
for nearly 20 years, two new PSRs were hired (Oropel and Jeres) on contractual basis
and whose compensation is based on pakiao; additionally, Candelario was hired after his
dismissal under the same arrangement as Oropel and Jeres, which lasted only up to
January 1996 when management learned of the filing of the first of these cases; [P]errin,
on his part, was offered the same arrangement but he refused.
- The rehiring of dismissed employees through a labor-only contractor exposes the
program as a circumvention of the law. This is true in the case of the following
supervisors who were terminated with complainant but were subsequently employed to
do exactly the same work, but as employees of BUGLAS, a labor-only contractor which
supplies laborers to respondent LSC. The above re-hiring in addition to other
circumstances earlier mentioned, such as the hiring of 2 men PSRs after Candelario and
[P]errin were terminated; the short-lived rehiring of the former and the offer to hire the
latter which he refused, all indicate that there was no redundancy.
- None of the work has been phased out or rendered obsolete by any event that took
place. As to duplication of functions, it must be mentioned that the positions of
complainants have existed for a long time judging from their years of service with
respondent; the observation of the Supreme Court in the Wiltshire case to the effect that
in a well-organized establishment, duplication of functions is hardly to be expected is
pertinent.
- Foremost, the petitioner failed to formulate fair and reasonable criteria in ascertaining
what positions were declared redundant and accordingly obsolete, such as preferred
status, efficiency or seniority. It, likewise, failed to formulate fair and reasonable
parameters to determine who among the supervisors and middle-level managers should
be retired for redundancy. Using the SGV report as anchor, the petitioner came out
with a special retirement program for its 108 supervisors and middle-level managers,
making it clear that its decision to eliminate them was final and irrevocable. Moreover, the
private respondents were not properly apprised of the existence of the special retirement
program, as well as the criteria for the selection of the supervisors to be retired, and
those to be retained or transferred or demoted.
- Contrary to its submissions, the petitioner downsized the Cane Marketing Department
by eliminating private respondents Perrin and Candelario; and Franco and Candelario
from the Sugar and Molasses Storage Department. The downsizing of personnel was not
among the foregoing recommendations, and yet this was what the petitioner did, through
its special retirement program, by including private respondents Franco and Pabalan,
thereby terminating their employment. It is too much of a coincidence that the two private
respondents were active members of the union.
Recommendations were made relating to the Cane Marketing Department, the report
recommended the beefing up of the petitioners planter service representative force,
while eliminating those who were ineffective. There is no showing in the record that
respondents Perrin and Candelario were eliminated solely because they were inefficient.
Neither is there any substantial evidence on record that the private respondents
performance had been deteriorating; on the contrary, they had been so far so efficient
that they had been given promotions from time to time during their employment. Yet, the
petitioner eliminated private respondents Perrin and Candelario and retained three
PSRs, namely, Danilo Villanueva, Roberto Combate and Danilo Labrador, who were
employed with the petitioner from one to three years and transferred Raymundo de la
Rosa, who had been working there for only six years. Again, it is too much of a
coincidence that Franco and Pabalan, the President and Treasurer, respectively, of the
union, were included in the special retirement program.
- As may be expected, the dismissals generated a general perception that management
was sending a strong message that all employees hold their position at its pleasure, and
that it was within its power to dismiss anyone anytime. With the dismissal of the union
officers and with the membership now effectively threatened, the union virtually collapsed
as an organization. Out of fear, no one would even assume the position of union
President. An indication of this sad state of affairs into which the union has fallen is that
nothing came out of its CBA proposal. It has been a year and three months as of this
writing since the respondent informed the union that its proposal had been referred to the
companys external counsel, but no counter-proposal has been submitted and no single
conference has been held since then.
- Redundancy exists when the service capability of the work force is in excess of what is
reasonably needed to meet the demands on the enterprise. A redundant position is one
rendered superfluous by any number of factors, such as over-hiring of workers,
decreased volume of business, dropping of a particular product line previously
manufactured by the company or phasing out of a service activity priorly undertaken by

A2010

Disini

- 151 -

the business. Under these conditions, the employer has no legal obligation to keep in its
payroll more employees than are necessary for the operation of its business.
- As seen in the case it was seen that contrary to the petitioners claim, the employer
must comply with the following requisites to ensure the validity of the implementation of a
redundancy program: (1) a written notice served on both the employees and the
Department of Labor and Employment at least one month prior to the intended date of
retrenchment; (2) payment of separation pay equivalent to at least one month pay or at
least one month pay for every year of service, whichever is higher; (3) good faith in
abolishing the redundant positions; and (4) fair and reasonable criteria in ascertaining
what positions are to be declared redundant and accordingly abolished.
- And as emphasized in the case of Panlilio v. National Labor Relations Commission that
it is imperative for the employer to have fair and reasonable criteria in implementing its
redundancy program, such as but not limited to (a) preferred status; (b) efficiency; and
(c) seniority.
- The general rule is that the characterization by an employer of an employees services
as no longer necessary or sustainable is an exercise of business judgment on the part of
the employer. The wisdom or soundness of such characterization or decision is not, as a
general rule, subject to discretionary review on the part of the Labor Arbiter, the NLRC
and the CA. Such characterization may, however, be rejected if the same is found to be
in violation of the law or is arbitrary or malicious.
2. NO
- While it may be true that the private respondents signed separate Deeds of Release
Waiver and Quitclaim and received separation pay, nonetheless, we find and so hold that
the NLRC did not err in nullifying the decision of the Labor Arbiter.
- The Release Waiver and Quitclaim were not verified by the complainants. Under
prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt of
his claims does not necessarily result in the waiver thereof. The law does not consider
as valid any agreement whereby a worker agrees to receive less compensation than
what he is entitled to recover. A deed of release or quitclaim cannot bar an employee
from demanding benefits to which he is legally entitled. We have herefore (sic) explained
that the reason why quitclaims are commonly frowned upon as contrary to public policy
and why they are held to be ineffective to bar claims for the full measures of the workers
legal rights is the fact the employer and the employee obviously do not stand on the
same footing. The employer drove the employees to the wall. The latter must have to
get hold of the money. Because out of job, they had to face the harsh necessities of life.
x x x (Marcos vs. NLRC, G.R. No. 111744, September 8, 1995). The private respondents
had no other recourse but to execute the said Release Waiver and Quitclaim because
the petitioner made it clear in its Memorandum dated August 8, 1995 that it had the final
say on who would be included in its special retirement program. Their dismissal from the
petitioner corporation was a fait accompli, solely because they organized a union that
would bargain for reasonable terms and conditions of employment sought to be included
in a CBA. In fine, the private respondents were left to fend for themselves, with no
source of income from then on; prospects for new jobs were dim. Their backs against
the wall, the private respondents were forced to sign the said documents and receive
their separation pay.
Disposition petition is DENIED for lack of merit.

G&M INC V BATOMALAGUE

[PAGE 116]

PAYROLL PAYMENT
CHAVEZ V NLRC
[PAGE 59]
PHIL GLOBAL COMMUNICATIONS INC V DE VERA
[PAGE 52]

CASH WAGE
CONGSON V NLRC
243 SCRA 260
PADILLA; April 5, 1995
NATURE
Appeal from a decision of NLRC
FACTS
- Petitioner Dominico C. Congson is the registered owner of Southern Fishing Industry.
Private respondents Bargo, Himeno, Badagos, et al were hired on various dates by

Labor Law 1
Congson as regular piece-rate workers. They were uniformly paid at a rate of P1 per tuna
weighing 30-80 kilos per movement, that is from the fishing boats down to petitioner's
storage plant at a load/unload cycle of work until the tuna catch reached its final
shipment/destination. They did the work of unloading tuna from fishing boats to truck
haulers; unloading them again at petitioner's cold storage plant for filing, storing,
cleaning, and maintenance; and finally loading the processed tuna for shipment. They
worked 7 days/week.
- In June 1990, Congson notified his workers of his proposal to reduce the rate-per-tuna
movement due to the scarcity of tuna. Private respondents resisted Congson's proposed
rate reduction. When they reported for work the next day, they were informed that they
had been replaced by a new set of workers. When they requested for a dialogue with the
management, they were instructed to wait for further notice. They waited for the notice of
dialogue for a full week but in vain.
- So private complainant workers filed complaint against Congson for underpayment of
wages, non-payment of overtime pay, 13th month pay, holiday pay, rest day pay, and 5day service incentive leave pay; and for constructive dismissal. Labor Arbiter and NLRC
ruled in favor of private respondent workers. NLRC found Congson guilty of illegal
dismissal. It held that private respondents did not abandon their work, but that Congson
replaced private respondents with a new set of workers without just cause and the
required notice and hearing. It also affirmed Labor Arbiters findings and monetary
awards. Hence, this appeal.
ISSUES
1. WON there was grave abuse of discretion on the part of respondent NLRC in
upholding Labor Arbiters award of salary differentials
2. WON NLRC was correct in affirming LAs award of separation pay
HELD
1. NO
- Petitioner Congson argues that despite the fact that private respondents' actual cash
wage fell below the minimum wage fixed by law, respondent NLRC should have
considered as forming a substantial part of private respondents' total wages the cash
value of the tuna liver and intestines private respondents were entitled to retrieve.
Petitioner therefore argues that the combined value of private respondents' cash wage
and the monetary value of the tuna liver and intestines clearly exceeded the minimum
wage fixed by law.
- Rule: Congsons practice of paying the private respondents the minimum wage by
means of legal tender combined with tuna liver and intestines runs counter to the above
cited provision of the Labor Code. The fact that said method of paying the minimum
wage was not only agreed upon by both parties in the employment agreement but even
expressly requested by private respondents, does not shield petitioner. Article 102 1 of the
Labor Code is clear. Wages shall be paid only by means of legal tender. The only
instance when an employer is permitted to pay wages informs other than legal tender,
that is, by checks. or money order, is when the circumstances prescribed in the second
paragraph of Article 102 are present.
2. YES
- Congson contends that: assuming arguendo that Labor Arbiter's findings were proper
as to private respondents' illegal dismissal, it did not state the reason why instead of
reinstatement, separation pay has to be awarded. Petitioner submits that under existing
laws and jurisprudence, whenever there is a finding of illegal dismissal, the available and
logical remedy is reinstatement. As a permissible exception to the general rule,
separation pay may be awarded to the employee in lieu of reinstatement, by reason of
strained relationship between the employer and employee. Since there was no finding or
even allegation of strained relationship between .petitioner and private respondents,
NLRC should have deleted the award of separation pay.
- A careful scrutiny of the records of the case discloses the existence of strained
relationship between the petitioner Congson and private respondents: [a] petitioner
consistently refused to re-admit private respondents in his establishment. Petitioner even
replaced private respondents with a new set of workers to perform the tasks of private
respondents [b] private respondents themselves, from the very start, had already
indicated their aversion to their continued employment in petitioner's establishment.
Disposition Petition DISMISSED. Challenged decision of NLRC AFFIRMED.

PAYROLL ENTRIES
KAR ASIA V CORONA
437 SCRA 184
1

Article 102. Forms of Payment. No. employer shall pay the wages of an employee by means of, promissory notes,
vouchers, coupons, tokens tickets, chits, or any object other than legal tender, even when expressly requested by the
employee.
Payment of wages by check or money order shall be allowed when such manner of payment is customary on the date
of effectivity of this Code, or is necessary as specified in appropriate regulations to be issued by the Secretary of Labor
or as stipulated in a collective bargaining agreement.

A2010

- 152 -

Disini

YNARES-SANTIAGO; August 24, 2004

FACTS
- Respondents, regular employees of petitioner KAR ASIA, Inc., an automotive dealer in
Davao City, filed on September 24, 1997 claimubg that they were not paid their cost of
living allowance (COLA) for the months of December 1993 and December 1994.
- Petitioner company and its president Celestino Barretto countered by saying that
respondents had already been paid their COLA for the said periods. Petitioners
presented in evidence the payrolls for December 1993 and December 1994 showing that
the respondents acknowledged in writing the receipt of their COLA, and the affidavits of
Ermina Daray and Cristina Arana, cashiers of KAR ASIA, refuting respondents claim that
they were made to sign blank pieces of paper.
- Labor Arbiter rendered a decision in favor of petitioners. NLRC affirmed the decision of
the Labor Arbiter. Court of Appeals reversed the decision of the NLRC and ordered
petitioner company to pay the respondents the P25.00 per day COLA for the period
December 1 to 31, 1994, plus interest thereon at the rate of 1% per month computed
from the time the same was withheld from respondents up to the time they were actually
paid the respective sums due them
ISSUE
WON not the petitioner company paid the respondents the COLA for December 1993
and December 1994 as mandated by RTWPB XI Wage Order No. 3
HELD
YES
Ratio A close scrutiny of the payroll for the December 1993 COLA readily disclose the
signatures of the respondents opposite their printed names and the numeric value of
P654.00. Respondents averment that the petitioner company harassed them into signing
the said payroll without giving them its cash equivalent cannot be given credence. He
who asserts not he who denies must prove; unfortunately, the respondents miserably
failed to discharge this burden
Reasoning
- The payrolls for December 1 to 15, 1994 and December 16 to 31, 1994 indicate an
allowance of P327.00 for each period, or a total of P654.00 for the entire month.
However, a casual observation of the payroll for the December 1993 COLA will also show
that the respondents signed for the amount of P654.00. Also, the allowances appearing
in the two separate payslips for December 1 to 15, 1994 and December 16 to 31, 1994
sum up to a total of P654.00. Although the numeric figures in the December 1994 payroll
and the payslips for the same period were denominated merely as allowances while
those in the December 1993 payroll were specifically identified as COLA, the fact that
they add up to the same figure, i.e., P654.00, is not a coincidence
- While ordinarily a payslip is only a statement of the gross monthly income of the
employee, his signature therein coupled by an acknowledgement of full compensation
alter the legal complexion of the document. The payslip becomes a substantial proof of
actual payment. Moreover, there is no hard-and-fast rule requiring that the employees
signature in the payroll is the only acceptable proof of payment. By implication, the
respondents, in signing the payslips with their acknowledgement of full compensation,
unqualifiedly admitted the receipt thereof, including the COLA for December 1994

9.04 TIME PAYMENT

9.05 PLACE PAYMENT
LABOR ADVISORY ON PAYMENT OF SALARIES THRU
AUTOMATED TELLER MACHINE (ATM)
- Article 104 of the Labor Code, as amended, requires that payment of wages shall be
made at or near the place of undertaking, except as otherwise provided by such
regulations as the Secretary of Labor and Employment may prescribe under conditions
that would ensure prompt payment and protection of wages.
- Based on Article 104, as well as the provisions of Sec. 4, Rule VIII, Book III of the
Codes Implementing Rules and considering present-day circumstances, practices and
technology, employers may adopt a system of payment other than in the workplace, such
as through automated teller machine (ATM) of banks, provided that the following
conditions are met:
1. The ATM systems of payment is with the written consent of the employees concerned.
2. The employees are given reasonable time to withdraw their wages from the bank
facility which time, if done during working hours, shall be considered compensable
hours worked.

Labor Law 1
3. The system shall allow workers to receive their wages within the period or frequency
and in the amount prescribed under the Labor Code, as amended.
4. There is a bank or ATM facility within a radius of one kilometer to the place of work.
5. Upon request of the concerned employee/s, the employer shall issue a record of
payment of wages, benefits and deductions for particular period.
6. There shall be no additional expenses and no diminution of benefits and privileges as
a result of the ATM system of payment.
7. The employer shall assume responsibility in case the wage protection provisions of
law and regulations are not complied with under the arrangement.
- Done in the City of Manila, this 25th day of November 1996.
Sgd. Leonardo A. Quisumbing
Secretary.

9.06 DIRECT PAYMENT

9.07 CONTRACTOR SUB-CONTRACTOR
C. PROHIBITION REGARDING WAGES

9.08 NON-INTERFERRENCE DISPOSAL OF

WAGES
9.09 WAGE DEDUCTION
WAGE DEDUCTION
RADIO COMMUNICATIONS OF THE PHILS INC V SEC
OF LABOR
169 SCRA 38
REGALADO; January 9, 1989
FACTS
- On May 4, 1981, petitioner, a domestic corporation engaged in the telecommunications
business, filed with the National Wages Council an application for exemption from the
coverage of Wage Order No. 1. The application was opposed by respondent United
RCPI Communications Labor Association (URCPICLA-FUR), a labor organization
affiliated with the Federation of Unions of Rizal (FUR).
- On May 22, 1981, the National Wages Council disapproved said application and
ordered petitioner to pay its covered employees the mandatory living allowance of P2.00
daily effective March 22, 1981.
- As early as March 13, 1985, before the aforesaid case was elevated to this Court,
respondent union filed a motion for the issuance of a writ of execution, asserting therein
its claim to 15% of the total backpay due to all its members as "union service fee" for
having successfully prosecuted the latter's claim for payment of wages and for
reimbursement of expenses incurred by FUR and prayed for the segregation and
remittance of said amount to FUR thru its National President.
- On October 24, 1985, without the knowledge and consent of respondent union,
petitioner entered into a compromise agreement with Buklod ng Manggagawa sa RCPINFL (BMRCPI-NFL) as the new bargaining agent of oppositors RCPI employees.
- Thereupon, the parties filed a joint motion praying for the dismissal of the decision of
the National Wages Council for it had already been novated by the Compromise
Agreement re-defining the rights and obligations of the parties. Respondent Union on
November 7, 1985 countered by opposing the motion and alleging that one of the
signatories thereof- BMRCPI-NFL is not a party in interest in the case but that it was
respondent Union which represented oppositors RCPI employees all the way from the
level of the National Wages Council up the Supreme Court. Respondent Union therefore
claimed that the Compromise Agreement is irregular and invalid, apart from the fact that
there was nothing to compromise in the face of a final and executory decision.
- Director Severo M. Pucan issued an Order dated November 25, 1985 awarding to
URCPICLA-FUR and FUR 15% of the total backpay of RCPI employees as their union
service fees, and directing RCPI to deposit said amount with the cashier of the Regional
Office for proper disposition to said awardees.
- Despite said order, petitioner paid in full the covered employees on November 29, 1985,
without deducting the union service fee of 15%.

A2010

- 153 -

Disini

- In an order dated May 7, 1986, NCR officer-in-charge found petitioner RCPI and its
employees jointly and severally liable for the payment of the 15% union service fee
amounting to P427,845.60 to private respondent URCPICLA-FUR and consequently
ordered the garnishment of petitioner's bank account to enforce said claim.
- Secretary of Labor and Employment issued an order on August 18, 1986 modifying the
order appealed from by holding petitioner solely liable to respondent union for 10% of the
awarded amounts as attorney's fees
ISSUE
WON public respondents acted with grave abuse of discretion amounting to lack of
jurisdiction in holding the petitioner solely liable for "union service fee' to respondent
URCPICLA-FUR
HELD
NO. Attorney's fee due the oppositor is chargeable against RCPI.
Ratio The defaulting employer or government agency remains liable for attorney's fees
because it compelled the complainant to employ the services of counsel by unjustly
refusing to recognize the validity of the claim. (Cristobal vs. ECC)
Reasoning
- It is undisputed that oppositor (private respondent herein) was the counsel on record of
the RCPI employees in their claim for EC0LA under Wage Order No. 1 since the
inception of the proceedings at the National Wages Council up to the Supreme Court. It
had therefore a valid claim for attorney's fee which it called union service fee.
- As is evident in the compromise agreement, petitioner was bound to pay only 30% of
the amount due each employee on November 30, 1985, while the balance of 70% would
still be the subject of renegotiation by the parties. Yet, despite such conditions beneficial
to it, petitioner paid in full the backpay of its employees on November 29, 1985, ignoring
the service fee due the private respondent.
- Worse, petitioner supposedly paid to one Atty. Rodolfo M. Capocyan the 10% fee that
properly pertained to herein private respondent, an unjustified and baffling diversion of
funds.
- Finally, petitioner cannot invoke the lack of an individual written authorization from the
employees as a shield for its fraudulent refusal to pay the service fee of private
respondent. Be that as it may, the lack thereof was remedied and supplied by the
execution of the compromise agreement whereby the employees, expressly approved
the 10% deduction and held petitioner RCPI free from any claim, suit or complaint arising
from the deduction thereof. When petitioner was thereafter again ordered to pay the 10%
fees to respondent union, it no longer had any legal basis or subterfuge for refusing to
pay the latter.
- We agree that Article 222 of the Labor Code requiring an individual written authorization
as a prerequisite to wage deductions seeks to protect the employee against unwarranted
practices that would diminish his compensation without his knowledge and consent.
However, for all intents and purposes, the deductions required of the petitioner and the
employees do not run counter to the express mandate of the law since the same are not
unwarranted or without their knowledge and consent. Also, the deductions for the union
service fee in question are authorized by law and do not require individual check-off
authorizations.
Disposition the order of the Secretary of Labor of August 16, 1986 is hereby AFFIRMED
and the petition at bar is DISMISSED, with double costs against petitioner. The
temporary restraining order issued pursuant to the Resolution of the Court of June 22,
1987 is LIFTED and declared of no further force and effect.

APODACA V NLRC (MIRASOL, INTRANS PHILS)

172 SCRA 442
GANCAYCO; April 18, 1989
NATURE
Special civil action for certiorari
FACTS
- Petitioner was employed in respondent corporation
- 1975: petitioner was appointed President and General Manager of respondent
corporation
- 1985: Respondent Mirasol persuaded petitioner to subscribe to 1,500 shares of
respondent corporation at P100 per share (total of P150,000). He made an initial
payment of P37,500.
- January, 1986: petitioner resigned
- December, 1986: petitioner instituted with NLRC a complaint for the payment of his
unpaid wages, his cost of living allowance, the balance of his gas and representation
expenses, and his bonus compensation for 1986.
- Private respondents admitted there is due to the petitioner P17,060, but this was
applied to the unpaid balance of his subscription in the amount of P95,439.93

Labor Law 1
- Petitioner questioned the set off since there was no call or notice for the payment of the
unpaid subscription, and that the alleged obligation is not enforceable.
- The NLRC held that a stockholder who fails to pay his unpaid subscription on call
becomes a debtor of the corporation and that the set-off of said obligation against the
wages and other due to petitioner is not contrary to law, morals, public policy
ISSUE
1. WON the NLRC has jurisdiction to resolve a claim for non-payment of stock
subscriptions to a corporation
2. WON an obligation arising from the non-payment of stock subscription can be offset
against a money claim of any employee against an employer
HELD
1. NO
Reasoning
- The NLRC has no jurisdiction to determine such intra-corporate dispute between the
stockholder and the corporation as in the matter of unpaid subscriptions. This is within
the exclusive jurisdiction of the Securities and Exchange Commission.
2. NO
Reasoning
- Assuming arguendo that the NLRC may exercise jurisdiction in this case, the unpaid
subscriptions are not due and payable until a call is made by the corporation for
payment. It does not appear that a notice of such call has been sent to petitioner. The
records only show that the respondent corporation deducted the amount due to petitioner
from the amount receivable from him from for the unpaid subscriptions. This set-off was
without lawful basis. As there was no notice or call for payment, the same is not yet due
or payable.
- Assuming that there had been a call for payment, the NLRC still cannot validly set it off
against the wages and other benefits due petitioner.
- Art. 113 of the Labor code allows such a deduction from the wages of the employees by
employer in only 3 instances: (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 checkoff 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.
Disposition The petition is GRANTED and the questioned decision of the NLRC dated
September 18, 1987 is hereby set aside and another judgment is hereby rendered
ordering private respondents to pay petitioner the amount of P17,060.07 plus legal
interest computed from the time of the filing of the complaint on December 19, 1986, with
costs against private respondents.

CHECK OFF
MANILA TRADING & SUPPLY CO V MANILA TRADING
LABOR ASSN
93 PHIL 288
REYES; April 29, 1953
NATURE
Petition for certiorari to set aside decision of CIR.
FACTS
- On October 10, 1950, the Manila Trading Labor Association, composed of workers of
Manila Trading and Supply Co., made a demand upon said company for increase of
wages, increase of personnel, Christmas bonus, and other gratuities and privileges. As
the demand was refused and the Department of Labor - whose intervention had been
sought by the association - failed to effect an amicable settlement, the Head of the
Department certified the dispute to the Court of Industrial Relations on October 25, and
there it was docketed as case No. 521-V. The company, on its part, on that same day
applied to the Court of Industrial Relations for authority to lay off 50 laborers due to "poor
business," the application being docketed as Case No. 415-V (4).
- To resolve the disputes involved in the two cases the Court of Industrial Relations
conducted various hearings between October 26, 1950, and January 18, 1951. Of their
own volition the president and vice-president of the association attended some if not all
of the hearings, and though they absented themselves from work for that reason they
afterwards claimed that they were entitled to their wages. The Court of Industrial
Relations found merit in the claim, and at their instance, ordered the company to pay
them their wages corresponding to the days they were absent from work while in
attendance at the hearings.
- Contending that the industrial court had no authority to issue such an order, the
company asks this Court to have it annulled. Opposing the petition, the association, on

A2010

- 154 -

Disini

its part, contends that the order comes within the broad powers of the industrial court in
the settlement of disputes between capital and labor.
ISSUE
WON Court of Industrial Relations may require an employer to pay the wages of officers
of its employees' labor union while attending the hearing of cases between the employer
and the union

HELD
Ratio When in 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.
Reasoning
- The age-old rule governing the relation between labor and capital or management and
employee is that of 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.
- The respondent association, however, claims that it was not the one that brought the
cases to the Court of Industrial Relations, and the point is made that "if the laborer who is
dragged to court is deprived of his wages while attending court hearings, he would in
effect be denied the opportunity to defend himself and protect his interests and those of
his fellow workers." But while it is true that it was the Secretary of Labor who certified the
dispute involved in case No. 521-V to the Court of Industrial Relations, the fact remains
that the dispute was initiated by a demand from the labor association. The truth,
therefore, is that while one of the cases was filed by the employer, the offer was initiated
by the employees. It may be conceded that the employer is in most cases in a better
position to bear the burdens of a litigation than the employees. But as was said in the
case of J. P. Heilbronn Co. vs. National Labor Union, supra, "It is hardly fair for an
employee or laborer to fight or litigate against his employer on the employer's time." The
most that could be conceded in favor of the claimants herein is to have the absences
occasioned by their attendance at the hearings charged against their vacation leave if
they have any, or as suggested by three of the Justices who signed the decision in the
case just cited, to have the wages they failed to earn charged as damages in the event
the cases whose hearings they attended are decided in favor of the association. But the
majority of the Justices make no commitment on this latter point.
Disposition Petition for certiorari is granted and the order complained of set aside.

9.10 DEPOSIT
DENTECH MANUFACTURING V NLRC (MARBELLA)
172 SCRA 588
GANCAYCO; April 19, 1989
FACTS
- Dentech Manufacturing Corporation is a domestic corporation organized under
Philippine laws owned and managed by the petitioner Jacinto Ledesma. The firm is
engaged in the manufacture and sale of dental equipment and supplies.
- Private respondents Benjamin Marbella, Armando Torno, Juanito Tajan, Jr. and Joel
Torno are members of the Confederation of Citizens Labor Union (CCLU), a labor
organization registered with the DOLE. They used to be the employees of Dentech,
working as welders, upholsterers and painters. They were already employed with the
company when it was still a sole proprietorship. They were dismissed from the firm
beginning February 14, 1985.
- They filed a Complaint with the NLRC against Dentech and Ledesma for, among others,
illegal dismissal and violation of PD 851. They were originally joined by another
employee, one Raymundo Labarda, who later withdrew his Complaint. At first, they only
sought the payment of their 13th month pay under PD 851 as well as their separation
pay, and the refund of the cash bond they filed with the company at the start of their
employment. Later on, they sought their reinstatement as well as the payment of their
13th month pay and service incentive leave pay, and separation pay in the event that
they are not reinstated. It is alleged that they were dismissed from the firm for pursuing
union activities.
- Dentech argued that they are not entitled to a 13th month pay. They maintained that
each of the private respondents receive a total monthly compensation of more that

Labor Law 1
P1,000 and that under Section 1 of PD 851, such employees are not entitled to receive a
13th month pay. Also, the company is in bad financial shape and that pursuant to Section
3, the firm is exempted from complying with the provisions of the Decree. Dentech also
contended that the refund of the cash bond filed by the Marbella, et al., is improper
inasmuch as the proceeds of the same had already been given to a certain carinderia to
pay for their outstanding accounts.
ISSUES
1. WON the private respondents are entitled as a matter of right to a 13th month pay
2. WON the refund of the cash bond is proper
HELD
1. YES
Reasoning
- PD 851 was signed into law in 1975 by then President Ferdinand Marcos. Under the
original provisions of Section 1, all employers are 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. Under
Section 3 of the rules and regulations implementing PD 851, financially distressed
employers, i.,e., those currently incurring substantial losses, are not covered by the
Decree. Section 7 requires, however, that such distressed employers must obtain the
prior authorization of the Secretary of Labor before they may qualify for such exemption.
- On May 1, 1978, PD 1364 was signed into law. The Decree enjoined the DOLE to stop
accepting applications for exemption under PD 851. On August 13, 1986, President
Corazon Aquino issued Memorandum Order No. 28 which modified Section 1 of PD 851.
The said issuance eliminated the P1,000 salary ceiling.
- It clearly appears that Dentech has no basis to claim that it is exempted from complying
with the provisions of the law relating to the 13 th month pay. The P1,000 salary ceiling
provided in PD 851 pertains to basic salary, not total monthly compensation. Dentech
admits that Marbella, at al., work only five days a week and that they each receive a
basic daily wage of P40 only. A simple computation of the basic daily wage multiplied by
the number of working days in a month results in an amount of less than P1,000. Thus,
there is no basis for the contention that the company is exempted from the provision of
PD 851 which mandated the payment of 13th month compensation to employees
receiving less than P1,000 a month. [NOTE: Corys Memo (1986) is not yet applicable as
of the time Marbella, et al., were dismissed (1985).]
- Even assuming, arguendo, that Marbella, et al., are each paid a monthly salary of over
P1,000, Dentech is still not in a position to claim exemption. The rules and regulations
implementing PD 851 provide that a distressed employer shall qualify for exemption from
the requirements of the Decree only upon prior authorization from the Secretary of Labor.
No such prior authorization had been obtained by Dentech.
2. YES
Reasoning
- The refund of the cash bond is in order. Article 114 of the Labor Code prohibits an
employer from requiring his employees to file a cash bond or to make deposits, subject to
certain exceptions.
- Art. 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 in appropriate
rules and regulations.
- Dentech has not satisfactorily disputed the applicability of this provision to the case at
bar. Considering further that it failed to show that it is authorized by law to require
Marbella, et al., to file the cash bond in question, the refund is in order.
- The allegation that the proceeds of the cash bond had already been given to a certain
carinderia to pay for the accounts of the private respondents does not merit serious
consideration. No evidence or receipt has been shown to prove such payment.
Disposition Petition is hereby DISMISSED for lack of merit.

FIVE J TAXI V NLRC

235 SCRA 556
REGALADO; August 22, 1994
NATURE
Special civil action for certiorari to annul NLRC decision
FACTS
- Maldigan and Sabsalon were hired by the petitioners as taxi drivers. They paid daily
"boundary" of P700 for air-conditioned or P450 for non-air-conditioned taxi, P20 for car
washing, and a P15 deposit to answer for any deficiency in their "boundary," for every
actual working day.

A2010

- 155 -

Disini

- In less than 4 months, Maldigan already failed to report for work. Later, petitioners
learned that he was working for "Mine of Gold" Taxi Company. - Sabsalon was held up by
his armed passenger who took all his money and stabbed him. After his hospital
discharge, he went to his home province to recuperate. He was re-admitted by
petitioners after 4 years under the same terms and conditions, but he was only allowed to
drive only every other day. However, on several occasions, he failed to report for work
during his schedule.
-Sept. 1991: Sabsalon failed to remit his "boundary" for the previous day. Also, he
abandoned his taxicab in Makati without fuel refill worth P300. He adamantly refused to
report to work despite demands. Afterwards it was revealed that he was driving a taxi for
"Bulaklak Company."
- 1989: Maldigan requested petitioners for the reimbursement of his daily cash deposits
for 2 years, but petitioners told him that nothing was left of his deposits as these were not
even enough to cover the amount spent for the repairs of the taxi he was driving
- When Maldigan insisted on the refund, petitioners terminated his services. Sabsalon
claimed that his termination from employment was effected when he refused to pay for
the washing of his taxi seat covers. They filed a complaint for illegal dismissal and illegal
deductions
- Labor arbiter dismissed case holding that the unreasonable delay in filing the case (two
years) was not consistent with the natural reaction of a person who claimed to be unjustly
treated.
- NLRC: Private respondents dismissal was legal since they voluntarily left to work for
another company. The deductions were held illegal and it ordered petitioners to
reimburse the accumulated deposits and car wash payments, plus interest thereon at the
legal rate from the date of promulgation of judgment to the date of actual payment, and
10% of the total amount as and for attorney's fees
ISSUE
WON private respondents are entitled to the refund of deposits
HELD
YES
- NLRC held that the daily deposits made by respondents to defray any shortage in their
"boundary" is covered by the general prohibition in Article 114 of the Labor Code and that
there is no showing that the Secretary of Labor has recognized the same as a "practice"
in the taxi industry.
Art. 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.
- Article 114 does not apply to or permit deposits to defray any deficiency which
the taxi driver may incur in the remittance of his "boundary ." Also, when private
respondents stopped working for petitioners, the alleged purpose for which petitioners
required such unauthorized deposits no longer existed. In other case, any balance due to
private respondents after proper accounting must be returned to them with legal interest.
-The evidence shows that Sabsalon was able to withdraw his deposits through vales or
he incurred shortages, such that he is even indebted to petitioners in the amount of
P3,448.00. With respect to Maldigan's deposits, nothing was mentioned questioning the
same. Since the evidence shows that he had not withdrawn the same, he should be
reimbursed the amount of his accumulated cash deposits.
- On car wash payment: No refund. There was nothing to prevent private respondents
from cleaning the taxi units themselves, if they wanted to save their P20. Also, car
washing after a tour of duty is a practice in the taxi industry, and is, in fact, dictated by fair
play.
- On attorneys fees: Article 222 of the Labor Code, as amended by Section 3 of PD.
1691, states that non-lawyers may appear before the NLRC or any labor arbiter only (1) if
they represent themselves, or (2) if they represent their organization or the members
thereof. While it may be true that Guillermo H. Pulia was the authorized representative of
private respondents, he was a non-lawyer who did not fall in either of the foregoing
categories. Hence, by clear mandate of the law, he is not entitled to attorney's fees.
Disposition NLRC decision MODIFIED by deleting the awards for reimbursement of car
wash expenses and attorney's fees and directing NLRC to order and effect the
computation and payment by petitioners of the refund for Maldigan's deposits, plus legal
interest thereon from the date of finality of this resolution up to the date of actual payment
thereof.

9.11 WITHHOLDING OF WAGES; RECORD

KEEPING
SPECIAL STEEL CORP V VILLAREAL

Labor Law 1
[PAGE 32]

PACIFIC CUSTOMS BROKERAGE V INTER-ISLAND

DOCKMEN AND LABOR UNION AND CIR
89 PHIL 722
BAUTISTA ANGELO; August 24, 1951
NATURE
Petition for review on certiorari
FACTS
- Inter-island Dockmen and Labor Union filed petition in CIR against Pacific Customs
Brokerage praying that said company be ordered to desist from dismissing members of
said union, to turn over to the treasurer of union all dues and fees withheld by the
company and to reinstate with backpay the workers.
- A motion was filed by labor union praying that Pacific Customs Brokerage be ordered to
pay union members their wages which was allegedly withheld by it for certain alleged
damages caused by said members for staging a strike. To this motion, Pacific objected.
ISSUE
WON Pacific Customs Brokerage can be compelled by CIR to pay wages of the union
members in spite of the writ of garnishment issued by CFI in civil case, directing the
sheriff to levy upon moneys of Pacific Customs Brokerage Workers Union which are in
the possession of Pacific Customs Brokerage
HELD
YES
- Pacific Customs Brokerage contends otherwise because the moneys having been
garnished, are in custodia legis, and cant be controlled by CIR. The Court noticed that
this is the same argument advanced by petitioner before the respondent court in its effort
to frustrate the purpose of the motion of the labor union, and the respondent court found
said argument untenable. Art 1708 of new Civil Code provides, Laborers wages shall
not be subject to execution or attachment, except for debts incurred for food, shelter,
clothing, medical attendance.
- Pacific Customs Brokerage doesnt dispute that money garnished is intended to pay
wages of members of labor union. There is nothing to show that such money was
garnished or attached for debts incurred for food, shelter, clothing and medical
attendance. The writ of garnishment issued by the court, while it purports to include all
moneys and properties belonging to the employing company, cannot, in any manner,
touch or affect what said company has in its possession to pay the wages of its laborers.
- When CFI issued writ of garnishment, its scope could not have been extended to
include money intended to pay the wages of members of labor union.
- But before the order of the respondent court can be enforced there is need of lifting the
garnishment by presentation of a motion to that effect by the labor union.
- Petitioner's contention that the motion should be denied because it is predicated on a
labor contract entered into between the petitioner and the Pacific Customs Brokerage
Workers Union has no foundation in fact, it appearing that the members of the two labor
unions are one and the same. The members of the Pacific Customs Brokerage Workers'
Union are the same laborers now members of the petitioner union.

GAA V CA
[PAGE 148]

RECORD-KEEPING
SOUTH MOTORISTS ENTERPRISES V TOSOC [SEC
OF DOLE]
181 SCRA 386
MELENCIO-HERRERA; January 23, 1990
NATURE
Certiorari

A2010

- 156 -

Disini

FACTS
- January 1983, complaints for non-payment of emergency cost of living allowances were
filed by 46 workers, Tosoc, et als., against SOUTH MOTORISTS(SM) before the Naga
City District Office of Regional Office No. 5 of the then Ministry of Labor
- 10 January 1983 a Special Order was issued by the District Labor Officer directing its
Labor Regulation Officers to conduct an inspection and verification of SOUTH
MOTORISTS' employment records.
- On the date of the inspection and verification, SOUTH MOTORISTS was unable to
present its employment records on the allegation that they had been sent to the main
office in Manila.
- The case was then set for conference on 25 January 1983 but was reset twice.
- SM kept on requesting for postponements on the ground that the documents were still
being prepared and collated and that a formal manifestation or motion would follow.
Nothing did.
- After the submission of an Inspection Report on the basis of which an Order dated 14
April 1983 was issued by Labor Officer Domingo Reyes directing SMto pay Tosoc, et als.,
the total amount of P184,689.12 representing the latter's corresponding emergency cost
of living allowances.
- SM FILED a M for R BUT was denied.
- 11 July 1988, the Secretary of Labor and Employment affirmed the appealed Order.
- 28 July 1988, SM FILED another MR BUT WAS DENIED; FILED ANOTHER MR BUT
WAS STILL DENIED.
CLAIMS:
- SOUTH MOTORISTS: this falls under the original and exclusive jurisdiction of Labor
Arbiters (LA- a trier of facts, may determine after hearing such questions as WON an EREE relp exists; WON the workers were project workers; WON the employees worked
continuously or WON they should receive emergency cost of living allowances and if
entitled, how much each should receive..)
- TOSOC et al: maintain otherwise.
ISSUE
WON Regional Directors of DOLE have jurisdiction to validly act on/ award money claims
HELD
YES
Ratio Regional Directors are empowered to hear and decide, in a summary proceeding,
claims for recovery of wages and other monetary claims and benefits, including legal
interest, subject to the concurrence of the following requisites:
1) the claim is presented by an employee or person employed in domestic or household
service, or househelper under the Code;
2) the claim arises from employer-employee relations;
3) the claimant no longer being employed, does not seek reinstatement; and
4) the aggregate money claim of each employee or househelper does not exceed
P5,000.00 (Art. 129, Labor Code, as amended by R.A. 6715).
But where these requisites do not concur, the Labor Arbiters shall have exclusive original
jurisdiction over claims arising from employer-employee relationship except claims for
employees' compensation, social security, medicare and maternity benefits (parag. 6, Art.
217, Labor Code as amended by R.A. 6715).
Reasoning
- Two provisions of law are crucial to the issueA129 and A217 of the LC, as recently
amended by Republic Act No. 6715, approved on 2 March 1989. Said amendments,
being curative in nature, have retroactive effect and, thus, should apply in this case
(BRIAD AGRO vs. DE LA CERNA, G.R. No. 82805, and CAMUS ENGINEERING vs. DE
LA CERNA, G.R. No. 83225, 9 November 1989).
- The aforesaid Articles, as amended, respectively read as follows:
Art. 129. Recovery of wages, simple money claims and other benefits. Upon
complaint of any interested party, the Regional Director of the Department of Labor
and Employment or any of the duly authorized hearing officers of the Department is
empowered, through summary proceeding and after due notice, to hear and decide
cases involving the recovery of wages and other monetary claims and benefits,
including legal interest, owing to an employee or person employed in domestic or
household service and househelper under this Code, arising from employer-employee
relations: Provided, That such complaint does not include a claim for reinstatement:
Provided, further, That the aggregate claim of each employee or househelper
does not exceed five thousand pesos (P5,000.00). . . .
and
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as
otherwise provided under this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:
xxx xxx xxx

Labor Law 1
(6) Except claims for employees compensation, social security, medicare and
maternity benefits, all other claims arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000), whether or not accompanied with a
claim for reinstatement.
xxx xxx xxx
- In accordance said articles, those awards in excess of P5,000.00, particularly those
given to Gavino, Euste, Brequillo, Cis, Agreda, Galona, Tosoc, Guinoo, Cea, Guinoo, and
Osoc, each of which exceeds P5,000.00, should be ventilated in a proceeding before the
LAs.
- SM also caused the resetting of all subsequent hearings on the ground that the
documents were still being prepared and collated. - Having been given the opportunity to
put forth its case, SM has only itself to blame for having failed to avail of the same
- What is more, its repeated failure to attend the hearings, and to submit any motion as
manifested may be construed as a waiver of its right to adduce evidence to controvert
the worker's claims.
Disposition The award P l84,689.12 was MODIFIED. The individual claims of Gavino,
Euste ,Brequillo, Cis, Agreda, Galona, Tosoc, Guinoo, Cea, Guinoo, and Osoc, each of
which exceeds P5,000.00, were remanded to the LA for proper disposition. All other
individual awards not in excess of P5,000.00 were AFFIRMED.

D. OTHER FORMS OF RENUMERATIO N

A2010

- 157 -

Disini

WON respondent NLRC committed grave abuse of discretion in not reversing that portion
of the decision of the labor arbiter ordering petitioner to pay private respondent his share
in the service charge which was collected during the time he was not working in the hotel
HELD
NO
- Damalerio is entitled not only to full backwages but also to other benefits, including a
just share in the service charges, to be computed from the start of his preventive
suspension until his reinstatement.
- However, mindful of the animosity and strained relations between the parties,
emanating from this litigation, we uphold the ruling a quo that in lieu of reinstatement,
separation pay may be given to the private respondent, at the rate of one month pay for
every year of service. Should petitioner opt in favor of separation pay, the private
respondent shall no longer be entitled to share in the service charges collected during his
preventive suspension.
Disposition Petition dismissed

TIPS
ACE NAVIGATION CO INC V CA
[PAGE 146]

9.12 SERVICE CHARGES

9.13 THIRTEENTH MONTH PAY [PD 851]

SERVICE CHARGES

COVERAGE

MARANAW HOTELS AND RESORT CORPORATION V

NLRC (DAMALERIO)
303 SCRA 540
PURISIMA; February 23, 1999
NATURE
Special Civil Action in the Supreme Court
FACTS
- Damalerio, a room attendant of the Century Park Sheraton Hotel, operated by Maranaw
Hotel and Resort Corporation, was seen by hotel guest Glaser with left hand inside the
latter's suitcase. Confronted with what he was doing, Damalerio explained that he was
trying to tidy up the room. Not satisfied with the explanation of Damalerio, Glaser lodged
a written complaint before Despuig, shift-in-charge of security of the hotel. Glaser also
reported that Damalerio had previously asked from him souvenirs, cassettes, and other
giveaways. The complaint was later brought by Despuig to the attention of Major
Buluran, Chief of Security of the hotel.
- Damalerio was given a Disciplinary Action Notice (DAN ). The next day, an
administrative hearing was conducted on the matter. Among those present at the hearing
were the room attendant, floor supervisor, chief of security, personnel representative,
and senior floor supervisor, and union representative.
- Damalerio received a memorandum issued by San Gabriel, Sr. Floor Supervisor,
bearing the approval of Kirit, Executive Housekeeper, stating that he (Damalerio) was
found to have committed qualified theft in violation of House Rule No. 1, Section 3 of
Hotel Rules and Regulations. The same memorandum served as a notice of termination
of his employment.
- Damalerio filed with the Labor Arbiter a Complaint for illegal dismissal against the
petitioner. After the parties had sent in their position papers, Labor Arbiter rendered
judgment finding the dismissal of complainant to be illegal and ordering the respondents
to reinstate him to his former or equivalent position without loss of seniority rights and
with backwages from April 15, 1992 when he was preventively suspended up to actual
reinstatement and other benefits, including but not limited to his share in the charges
and/or tips which he failed to receive, and all other CBA benefits that have accrued since
his dismissal.
- From the aforesaid Labor Arbiter's disposition, the petitioner appealed to the NLRC,
which modified the appealed decision by giving petitioner the option of paying Damalerio
a separation pay equivalent to one month pay for every year of service, instead of
reinstating him.
- Petitioner interposed a motion for reconsideration but to no avail. NLRC denied the
same. Undaunted, petitioner brought this matter to the Court.
ISSUES

ULTRA VILLA FOOD HAUS V GENISTON

309 SCRA 17
KAPUNAN; June 23, 1999.
FACTS
- Geniston claims he is employed as a do it all guy in the UVFH owned by Rosie Tio. He
claims he was employed as a waiter, driver and maintenance guy in the restaurant. Tio
claims Geniston is her personal driver. Tio works as a manager of the CFC Corporation.
- On May 12, 1992, Tio called Genistons house to ask him to report for work even
though it was a holiday because she needed to do something important in the office.
(The election that year was on May 11. May 11 & 12 were holidays.) His wife took the call
and informed Tio that he wasnt there as he was working as a poll watcher.
- Tio says that Geniston abandoned his work. Geniston was dismissed. He filed case for
illegal dismissal and asked for benefits, including 13th month pay. LA found that he wasnt
an employee of UVFH, but instead was a personal driver of Tio. It found that his claim of
being a waiter isnt true because the positions of waiter and driver are incongruent --- as
a waiter he would have to be at the resto all day; as a driver, he would have to be away
from the resto. LA also told Tio to indemnify Geniston for P1k for failing to comply with
the due process requirement. NLRC reversed LAs decision.
ISSUES
1. WON Geniston was a personal driver and not an employee of UVHF
2. WON personal drivers are entitled to 13th month pay, according to the law
3. WON Geniston abandoned his work
HELD
1. YES
- The facts support Tios claim that Geniston was her personal driver. He was not in the
payroll of UVFH; UVFH employees attested that he was not one of them; warehousemen
of CFC Corp described Genistons relationship to Tio, ie, he brings her to work,
waits/sleeps in her car until she goes out for lunch, brings her back after lunch, then
waits/sleeps in her car until she goes home.
2. NO
- Art 141 of the LC defines Domestic or household service as to include services of
family drivers.
- The Revised Guidelines on the Implementation of the 13th Month Pay Law excludes
employers of household helpers from the coverage of PD 851, thus:
2.. Exempted Employers
The following employers are still not covered by P.D. No. 851:
a. . . .;
b. Employers of household helpers . . .;
c. . . .;
d. . . .

Labor Law 1
- BUT Geniston was awarded 13th month pay in view of Tios practice of according
private respondent such benefit. Indeed, petitioner admitted that she gave private
respondent 13th month pay every December.
3. NO
- To constitute abandonment, two requisites must concur: (1) the failure to report to work
or absence without valid or justifiable reason, and (2) a clear intention to sever the
employer-employee relationship as manifested by some overt acts, with the second
requisite as the more determinative factor. The burden of proving abandonment as a just
cause for dismissal is on the employer. Petitioner failed to discharge this burden.
Note
- The court also found that Geniston is not entitled to the other benefits he was asking for
because Art 82 (LC) excludes domestic helpers from the mandatory grant of overtime
pay, holiday pay, premium pay and service incentive leave.
Disposition NLRC decision is reversed.

PETROLEUM SHIPPING V NLRC

[PAGE 79]

MANNER OF WAGE PAYMENT

JACKSON BLDG V NLRC (GUMOGDA)
246 SCRA 329
QUIASON; July 14, 1995
FACTS
- Ferdinand Gumogda underwent an appendectomy. Because his doctor advised him to
rest for at least 30 days, Gumogda filed for a 45-day LOA. He came back 50 days after
the operation but to his surprise, her wasnt allowed to return to work because according
to petitioners, Gumogda had abandoned his work. The Labor Arbiter and NLRC ruled in
favor of Gumogda. Petitioners appealed.
ISSUES
1. WON private respondent abandoned his work;
2. WON petitioners are liable for the payment of private respondent's back wages,
differential pay, thirteenth-month pay and service-incentive leave pay for 1991
HELD
1. NO
- For abandonment to be a valid ground for dismissal, two requisites must be copresent:
the intention by an employee to abandon coupled with an overt act from which it may be
inferred that the employee had no more intention to resume his work (People's Security,
Inc. vs. National Labor Relations Commission, 226 SCRA 146 [1993]).
- In the instant case, the said requisites are not present.
2. YES
- Gumogda heeded doctors advise and even exceeded the number of days
recommended by his doctor for his recuperation. In fact, he reported back for work 50
days after his operation. This would clearly show that private respondent was ready to
assume his responsibilities considering that he had fully recovered from the operation.
Furthermore, the filing of a complaint from illegal dismissal by private respondent is
inconsistent with the allegation of petitioners that he had abandoned his job. Surely, an
employee's posture will be illogical if he abandons his work and then immediately files an
action for his reinstatement. Article 279 of the Labor Code of the Philippines provides that
"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 back wages, 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."
Also, Gumogda is likewise entitled to the thirteenth-month pay. Presidential Degree No.
851, as amended by Memorandum Order No. 28, provides that employees are
entitled to the thirteenth-month pay benefit regardless of their designation and
irrespective of the method by which their wages are paid.
Disposition Petition is DISMISSED.

WAGE DIFFERENCE
JPL MARKETING PROMOTIONS V CA (GONZALES,
ABESA & ANNIPOT)
463 SCRA 136
TINGA; July 8, 2005
NATURE

A2010

- 158 -

Disini

Petition for review of the decision of the CA

FACTS
- JPL Marketing and Promotions is a domestic corporation engaged in the business of
recruitment and placement of workers.
- Gonzales, Abesa III and Aninipot were employed by JPL as merchandisers on separate
dates and assigned at different establishments in Naga City and Daet, Camarines Norte
as attendants to the display of California Marketing Corporation (CMC), one of
petitioners clients.
- On 13 August 1996, JPL notified private respondents that CMC would stop its direct
merchandising activity effective 15 August 1996.
- They were advised to wait for further notice as they would be transferred to other
clients.
- On 17 October 1996, Abesa and Gonzales filed before the NLRC complaints for illegal
dismissal, praying for separation pay, 13 th month pay, service incentive leave pay and
payment for moral damages. Aninipot filed a similar case thereafter.
- Labor Arbiter Gelacio L. Rivera, Jr. dismissed the complaints for lack of merit.
- The Labor Arbiter held that:
1. The private respondents may be deemed to have severed their relation with JPL, and
cannot charge JPL with illegal dismissal, as they applied for different jobs even before
the lapse of the six (6)-month period given by law to JPL to provide them with new
assignments.
2. The claims for 13th month pay and service incentive leave pay should be denied
since private respondents were paid way above the applicable minimum wage
during their employment.
- NLRC affirmed the finding that there was no illegal dismissal, but ordered the payment
of separation pay, service incentive leave pay, and13th month pay.
- JPL filed a petition with the CA, claiming that private respondents were not entitled to
the separation pay, service incentive leave pay and 13th month pay.
- CA affirmed in toto the NLRC resolution. While conceding that there was no illegal
dismissal, it justified the award of separation pay on the grounds of equity and social
justice. The Court of Appeals rejected JPLs argument that the difference in the
amounts of private respondents salaries and the minimum wage in the region
should be considered as payment for their service incentive leave and 13 th month
pay.
- MFR denied, hence, this petition
ISSUES
1. WON private respondents were illegally dismissed, and thus entitled to separation pay
2. WON private respondents are entitled to 13 th month pay and service incentive leave
pay
HELD
1. NO
- Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases
of dismissals due to any of these reasons: (a) installation of labor saving devices; (b)
redundancy; (c) retrenchment; (d) cessation of the employer's business; and (e) when
the employee is suffering from a disease and his continued employment is prohibited by
law or is prejudicial to his health and to the health of his co-employees. However,
separation pay shall be allowed as a measure of social justice in those cases where the
employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character, but only when he was illegally dismissed.
- The common denominator of the instances where payment of separation pay is
warranted is that the employee was dismissed by the employer
- In the instant case, there was no dismissal to speak of. What they received from JPL
was not a notice of termination of employment, but a memo informing them of the
termination of CMCs contract with JPL. More importantly, they were advised that they
were to be reassigned. At that time, there was no severance of employment to speak of.
- Art. 286 of the Labor Code allows the bona fide suspension of the operation of a
business or undertaking for a period not exceeding six (6) months, wherein an
employee/employees are placed on the so-called floating status.
- As clearly borne out by the records of this case, private respondents sought
employment from other establishments even before the expiration of the six (6)-month
period provided by law. JPL did not terminate their employment; they themselves severed
their relations with JPL. Thus, they are not entitled to separation pay.
2. YES
- JPL cannot escape the payment of 13 th month pay and service incentive leave pay to
private respondents. Said benefits are mandated by law and should be given to
employees as a matter of right.
- Admittedly, private respondents were not given their 13 th month pay and service
incentive leave pay while they were under the employ of JPL. Instead, JPL provided
salaries which were over and above the minimum wage.
- The Court rules that the difference between the minimum wage and the actual salary
received by private respondents cannot be deemed as their 13th month pay and service
incentive leave pay as such difference is not equivalent to or of the same import as the

Labor Law 1
said benefits contemplated by law. Thus, as properly held by the Court of Appeals and
by the NLRC, private respondents are entitled to the 13 th month pay and service
incentive leave pay.
Disposition Petition granted in part. Award of separation pay deleted.

HOUSEHELPERS
ULTRAVILLA FOOD HOUSE V GENISTON
[PAGE 157]

GOVERNMENT EMPLOYEES
ALLIANCE OF GOVERNMENT WORKERS V MINISTER
OF LABOR (PNB)
124 SCRA 1
GUTIERREZ JR; August 3, 1983
NATURE
Petition to review decision of the Minister of Labor and Employment
FACTS
- Petitioner Alliance of Government Workers (AGW) is a registered labor federation while
the other petitioners are its affiliate unions with members who are employees of PNB,
MWSS, GSIS, SSS, PVTA, PNC, PUP, and PGEA.
- PD 851 was enacted:
WHEREAS, it is necessary to further protect the level of real wages from the ravage
of world-wide inflation;
WHEREAS, there has been no increase case 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 Pl,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.
- According to the petitioners, P.D. No. 851 requires all employers to pay the 13th-month
pay to their employees with one sole exception found in Section 2. BUT Sec.3 of the
Rules and Regulations Implementing PD 851 included other types of employers not
exempted by the decree. (1) Distressed employees, (2) Government employees 2, (3)
Those already paying 13th month pay, (4) Household helpers, (5) Those paid on purely
commission, boundary or task basis.
- Sec 3 is then challenged as a substantial modification by rule of a Presidential Decree
and an unlawful exercise of legislative power.
- Sol Gen: What the P.D. No. 851 intended to cover are only those in the private sector
whose real wages require protection from world-wide inflation. This is emphasized by the
"whereas" clause which states that 'there has been no increase in the legal minimum
wage rates since 1970'. This could only refer to the private sector, and not to those in the
government service because at the time of the enactment of PD 851 in 1975, only the
employees in the private sector had not been given any increase in their minimum wage.
The employees in the government service had already been granted in 1974 a ten
percent across-the-board increase.
ISSUE
WON the branches, agencies, subdivisions, and instrumentalities of the Government,
including GOCCs are required to pay all their employees receiving a basic salary of not
more than P1,000.00 a month, a 13th month pay (not later than December 24 of every
year)
HELD
NO
Ratio Since the terms and conditions of government employment are fixed by law,
government workers cannot use the same weapons employed by workers in the private
2

b) The Government and any of its political subdivisions, including government-owned and controlled corporations,
except)t those corporation, operating essentially as private, ,subsidiaries of the government

A2010

Disini

- 159 -

sector to secure concessions from their employers. Subject to the minimum requirements
of wage laws and other labor and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled through the process of collective
bargaining. In government employment, however, it is the legislature and, where properly
given delegated power, the administrative heads of government which fix the terms and
conditions of employment.
Reasoning
- An analysis of the "whereases" of P.D. No. 851 shows that the President had in mind
only workers in private employment when he issued the decree. There was no intention
to cover persons working in the government service.
- Under the present Constitution, govemment-owned or controlled corporations are
specifically mentioned as embraced by the civil service. The amendment was intended to
correct the situation where more favored employees of the government could enjoy the
benefits of two worlds. They were protected by the laws governing government
employment.
- Why are the GOCCs part of the Civil Service?
(1) Nature of the public employer and peculiar character of public service: the Govt
protects the interests of ALL people in the public service, hence there would never be
conflicting interests.
(2) Govt agencies have a right to demand undivided allegiance.
(3) Governmental machinery must be impartial and non-political.
(4) To meet increasing social challenges of the times- the tendency towards a greater
socialization of economic forces.
- Section 63, Article XII-B of the Constitution gives added reasons why the government
employees represented by the petitioners cannot expect treatment in matters of salaries
different from that extended to all others government personnel.
- The Solicitor-General correctly points out that to interpret P.D. No. 851 as including
government employees would upset the compensation levels of government employees
in violation of those fixed.
Disposition Petition is DISMISSED for lack of merit.

SEPARATE OPINION
FERNANDO [concur pro hac vice]
- The approach taken by opinion of the Court is distinguished by its conformity to the
prevailing doctrine of statutory construction that unless so specified, the government
does not fall within the terms of any legislation or decree.
- "Since the terms and conditions of government employment are fixed by law,
government workers cannot use the same weapons employed by workers in the private
sector to secure concessions from their employers.
- In government employment, however, it is the legislature and, where properly given
delegated power, the administrative heads of government which fix the terms and
conditions of employment. This is effected through statutes or administrative circulars,
rules, and regulations, not through collective bargaining agreements.

MAKASIAR [dissent]
- It will be noted that the PD 851 provides only one exception in its Section 2: "Employers
already paying their employees a 13th-month pay or its equivalent..." Hence, all other
employers, whether of the private sectors or of GOCCs and government agencies, are
thereunder obligated to pay their employees.
- If the President intended to favor only employees of the private sector, he could have
easily inserted the phrase "in the private sector between the words "wages" and "from" in
the first WHEREAS, and between the words masses" and "so" in the third WHEREAS; or
the President could have included the other four classes of employers in the questioned
Section 3.
- The position taken by public respondents is repugnant to the social justice guarantee
under the new Constitution. The laboring masses of the government- owned and
-controlled agencies are entitled to such dignity, welfare and security as well as an
equitable share in the profits of respondents which will inevitably contribute to enhancing
their dignity, welfare and security, as much as those of the workers and employees of the
private sector.
- Basic rule is that all doubts should be interpreted in favor of labor.
- To deny them this right would render the State culpable of failing to "afford protection to
labor, promote... equality in employment as well as "just and humane conditions of
work."

TERMINATED EMPLOYEES
3

SEC. 6. The National Assembly shall provide for the standardization of compensation of government officials and
employees, including those in government-owned or controlled corporations, taking into account the nature of the
responsibilities pertaining to, and the qualifications required for the positions concerned.

Labor Law 1
ARCHILLES MANUFACTURING CORP V NLRC
(MANUEL, ET AL)
244 SCRA 750
BELLOSILLO; June 2, 1995
NATURE
Appeal on certiorari
FACTS
- Private respondents Geronimo Manuel, Arnulfo Diaz, Jaime Carunungan and Benjamin
Rindon were employed by Archilles Manufacturing Corporation, (Alberto Yu - Chairman)
and (Adrian Yu-VP) as laborers in its steel factory located in Bulacan, each receiving a
daily wage of P96.00.
- ARCHILLES was maintaining a bunkhouse in the work area which served as resting
place for its workers. In 1988 a mauling incident nearly took place involving a relative of
an employee. As a result, ARCHILLES prohibited its workers from bringing any member
of their family to the bunkhouse. But despite this prohibition, private respondents
continued to bring their respective families to the bunkhouse, causing annoyance and
discomfort to the other workers. This was brought to the attention of ARCHILLES.
- The management ordered private respondent to remove their families from the
bunkhouse and to explain their violation of the company rule. Private respondents
removed their families from the premises but failed to report to the management as
required; instead, they absented themselves from 14 to 18 May 1990. Consequently,
ARCHILLES terminated their employment for abandonment and for violation of the
company rule regarding the use of the bunkhouse. 3
- Private respondents filed a complaint for illegal dismissal. The Labor Arbiter found the
dismissal of private respondents illegal and ordered their reinstatement as well as the
payment to them the backwages, proportionate 13th month pay for the year 1990 and
attorney'sfees. ARCHILLES appealed.
- NLRC set aside the decision of the LA and ruled that the dismissal of private
respondents was valid. However, it ordered ARCHILLES to pay private respondents their
"withheld" salaries from 19 September 1991and to pay their proportionate 13th month
pay for 1990.
ISSUE
WON dismissal for cause results in the forfeiture of the employee's right to a 13th month
pay
HELD
NO
- Paragraph 6 of the Revised Guidelines on the Implementation of the 13th Month Pay
Law (P. D. 851) provides that "an employee who has resigned or whose services were
terminated at any time before the payment of the 13th month pay is entitled to this
monetary benefit in proportion to the length of time he worked during the year, reckoned
from the time he started working during the calendar year up to the time of his
resignation or termination from the service . . . The payment of the 13th month pay may
be demanded by the employee upon the cessation of employer-employee relationship.
This is consistent with the principle of equity that as the employer can require the
employee to clear himself of all liabilities and property accountability, so can the
employee demand the payment of all benefits due him upon the termination of the
relationship."
- Furthermore, Sec. 4 of the original Implementing Rules of P.D. 851 mandates
employers to pay their employees a 13th month pay not later than the 24th of December
every year provided that they have worked for at least one (1) month during a calendar
year. In effect, this statutory benefit is automatically vested in the employee who
has at least worked for one month during the calendar year. As correctly stated by
the Solicitor General, such benefit may not be lost or forfeited even in the event of
the employee's subsequent dismissal for cause without violating his property
rights.

RATIONALE PD 851 WHEREAS CLAUSE AND

LIMITATIONS
BASIC WAGE/COMMISSIONS
BOIE TAKEDA V DELA SERNA
228 SCRA 329
NARVASA; December 10, 1993
NATURE

A2010

- 160 -

Disini

Petition for review via certiorari and for issuance of writ of prohibition (consolidated)
FACTS
(HISTORY OF 13TH MONTH PAY PD 851)
- Initially, PD 851 ordered the payment of 13th month pay to workers receiving basic
salary of not more than P1,000.00 a month, regardless of the nature of the employment.
- DECEMBER 22, 1975: Rules and Regulations Implementing P.D. 851 promulgated by
Labor Minister Ople, defined 13th month pay, and basic salary as including 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; and exempted 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 from payment of 13th month pay
- Supplementary Rules and Regulations implementing P.D. 851 were subsequently
issued by Minister Ople, which enumerated items not included in the computation of the
13th month pay: overtime pay, earnings and other remunerations which are not part
of the basic salary
- AUGUST 13, 1986: President Corazon C. Aquino promulgated Memorandum Order No.
28 which modified PD 851 by removing the salary ceiling of P1,000.00 a month set
by the latter,
- NOVEMBER 16, 1987: Revised Guidelines on the Implementation of the 13th Month Pay
Law were promulgated by Sec. Drilon which, among other things, enumerated
remunerative items not embraced in the concept of 13th month pay (allowances
and monetary benefits which are not considered or 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), and
specifically dealt with employees who are paid a fixed or guaranteed wage plus
commission (Employees who are paid a fixed or guaranteed wage plus commission
are also entitled to the mandated 13th month pay based on their total earnings during
the calendar year, i.e., on both their fixed or guaranteed wage and commission)
- DOLE conducted a routine inspection in the premises of both Boie Takeda and
Philippine Fuji Xerox Corp. It was found that both companies failed to pay the 13 th month
pay of their employees for the years 1986, 1987, and 1988. Both companies were
ordered to restitute the said underpayment within 5-10 days. Both companies appealed
but were denied.
- BASIC CONTENTION OF THE PETITIONERS : commissions should not be included in the
computation of the basic salary as basis for the 13th month pay
- BASIC CONTENTION OF THE RESPONDENTS: Commissions are now included in the
computation for the 13th month pay, as clarified by the Revised Guidelines issued by Sec.
Drilon
ISSUE
WON the Revised Guidelines on the Implementation of the 13th Month Pay Law issued
by Labor Sec. Drilon should be declared null and void as being violative of the law
said Guidelines were issued to implement, hence issued with grave abuse of discretion
correctible by the writ of prohibition and certiorari (Thus, commissions should not be
included in the computation for basic salary as basis for 13th month pay)
HELD
YES
- In including commissions in the computation of the 13th month pay, the second
paragraph of Section 5(a) of the Revised Guidelines on the Implementation of the 13th
Month Pay Law unduly expanded the concept of "basic salary" as defined in P.D. 851. It
is a fundamental rule that implementing rules cannot add to or detract from the
provisions of the law it is designed to implement. Administrative regulations
adopted under legislative authority by a particular department must be in harmony
with the provisions of the law they are intended to carry into effect. They cannot
widen its scope. An administrative agency cannot amend an act of Congress.
Ratio. In remunerative schemes consisting of a fixed or guaranteed wage plus
commission, the fixed or guaranteed wage is patently the "basic salary" for this is what
the employee receives for a standard work period. Commissions are given for extra
efforts exerted in consummating sales or other related transactions. They are, as such,
additional pay, which this Court has made clear do not form part of the "basic salary."
Reasoning
- San Miguel Corp. vs. Inciong discussion on history of 13th Month Pay Law. The
exclusion of all allowances and monetary benefits such as profit-sharing payments,
COLA, overtime pay, premiums for special holiday, and the like indicate the intention to
strip basic salary of other payments, and any and all additions which may be in the form
of allowances or fringe benefits. If they were not excluded, it is hard to find any
earnings and other remunerations (exclusionary phrase) expressly excluded in the
computation of the 13th month pay. Then the exclusionary provision would prove to be
idle and with no purpose.

Labor Law 1
Disposition the consolidated petitions are hereby GRANTED. The second paragraph of
Section 5 (a) of the Revised Guidelines on the Implementation of the 13th Month Pay
Law issued on November 126, 1987 by then Labor Secretary Franklin M. Drilon is
declared null and void as being violative of the law said Guidelines were issued to
implement, hence issued with grave abuse of discretion correctible by the writ of
prohibition and certiorari. The assailed Orders of January 17, 1990 and October 10, 1991
based thereon are SET ASIDE. SO ORDERED

PHIL DUPLICATORS V NLRC (PHIL DUP. EMPLOYEES

UNION)
241 SCRA 380
FELICIANO; February 15, 1995
FACTS
- The Court rendered a decision dismissing a petition for certiorari by Phil. Duplicators,
Inc (PDI). The Court upheld the decision of public respondent NLRC ordering PDI to pay
13th month pay to private respondent employees computed on the basis of their fixed
wages plus sales commissions.
- PDI filed an MFR, invoking the decisions in the 2 consolidated cases of Boie-Takeda
Chem. vs Hon. Dionisio de la Serna and Phil. Fuji Xerox Corp. vs Hon. Cresenciano
Trajano. PDI alleged that the decision in the Duplicators case should be reversed since
the Boie-Takeda decision went directly opposite and contrary to the conclusion reached
in the former further seeking to dismiss the money claims of private respondent union. In
view of the nature of the issues raised, the Court considered the MFR and accepted it as
a banc case.
ISSUES
1. WON the Duplicators decision goes against the Boie-Takeda decision
2. WON the sales commission earned by the salesmen of PDI constitute a part of their
wage and should be included in the computation of 13th month pay
HELD
1. NO
- The doctrines enunciated in the 2 cases present different factual situations. The socalled commissions received by the Boie-Takeda medical reps or by the rank and file
employees of Fuji were characterized as productivity bonuses. These are additional
monetary benefits generally tied to the capacity for revenue production of a corporation.
As such, they more closely resemble profit-sharing payments and are not directly related
to the amount of work actually done by an employee.
-The commissions paid to the medical reps were not sales commissions in the same
sense as in the Duplicators case. Medical representatives are not salesmen; they merely
promote products and leave samples with physicians. As such, no actual sales are made
placing the commissions in the nature of a profit-sharing bonus.
2. YES
- The commissions received by every duplicating machine sold constitute part of the
basic compensation of PDIs salesmen, apart from a small fixed wage. It is important to
note that the fixed portion of their salaries represent only 15-30% of an employees total
earnings in a year. Considering this, the sales commissions were an integral part of PDIs
basic salary structure and not mere profit-sharing payments or fringe benefits.
-The Supplementary Rules and Regulations Implementing P.D. 851(The 13 th Month Pay
Law) clarifies the scope of items excluded in the computation of 13 th month pay. Section
4 of the Law states that Overtime pay, earnings and other remunerations which are not
part of the basic salary shall not be included in the computation of the 13 th month pay.
What constitutes other remunerations not part of basic salary is a question to be
resolved on a case-to-case basis. In the instant case, it is important to distinguish the
productivity bonuses granted in Boie-Takeda from the sales commissions of the
Duplicators case.
- A productivity bonus is something extra given to an employee for which no specific
additional services are rendered. Since a bonus is a gratuity of the employer, the
recipient cannot demand its payment as a matter of right. If an employer cannot be
compelled to pay a productivity bonus to his employees, then it follows that the bonus
should not fall under basic salary when computing 13th month pay.
- Sales commissions, on the other hand, are directly proportional to the extent or energy
of an employees work. Such commissions are paid upon the specific results achieved by
a salesman and form an integral part of his basic pay and should thus be included in the
computation of 13th month pay.
Disposition MFR is denied for lack of merit

A2010

Disini

- 161 IRAN V NLRC

[PAGE 148]

HONDA PHILS INC V SAMAHAN NG MALAYANG

MANGGAGAWA SA HONDA
460 SCRA 186
YNARES-SANTIAGO; June 15, 2005
FACTS
- A Collective Bargaining Agreement (CBA) was forged between petitioner Honda and
respondent union Samahan ng Malayang Manggagawa sa Honda (respondent union).
Among others, the CBA provides that the Company will maintain the present practice in
the implementation of the 13th month pay, shall grant a 14 th Month Pay, computed on the
same basis as computation of 13th Month Pay and shall continue the practice of
granting, in its discretion, financial assistance to covered employees in December of
each year, of not less than 100% of basic pay. This CBA is effective until year 2000.
- In 1998, the two parties started re-negotiations for the 4 th and 5th years of their CBA
(meaning for yr 1999 to 2000). However, the talks bogged down. The union filed a
Notice of Strike on the ground of bargaining deadlock. Thereafter, Honda filed a Notice
of Lockout. DOLE intervened and ordered the parties to cease and desist from
committing acts that would aggravate the situation. Both parties complied accordingly.
- On May 11, 1999, however, respondent union filed a second Notice of Strike on the
ground of unfair labor practice alleging that Honda illegally contracted out work to the
detriment of the workers. The DOLE again intervened and the striking employees were
ordered to return to work and the management accepted them back under the same
terms prior to the strike staged.
- On November 22, 1999, the management of Honda issued a memorandum[4]
announcing its new computation of the 13th and 14th month pay to be granted to all its
employees whereby the thirty-one (31)-day long strike shall be considered unworked
days for purposes of computing said benefits. As per the companys new formula, the
amount equivalent to 1/12 of the employees basic salary shall be deducted from these
bonuses, with a commitment however that in the event that the strike is declared legal,
Honda shall pay the amount deducted (In effect, this enabled them to devise a formula
using 11/12 of the total annual salary as base amount for computation instead of the
entire amount for a 12-month period.
- The union opposed the pro-rated computation of the bonuses.
ISSUE
WON the pro-rated computation of the 13th month pay and the other bonuses in question
is valid and lawful
HELD
NO
Reasoning
- The said pro-rated computation is violative of the provisions of the CBA. A collective
bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA
may establish such stipulations, clauses, terms and conditions as they may deem
convenient provided these are not contrary to law, morals, good customs, public order or
public policy. Thus, where the CBA is clear and unambiguous, it becomes the law
between the parties and compliance therewith is mandated by the express policy of the
law.
- It is violative of the provision of P.D. No. 851 which, provided 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.
- The act has ripened into a practice and therefore can no longer be withdrawn, reduced,
diminished, discontinued or eliminated. Honda did not adduce evidence to show that the
13th month, 14th month and financial assistance benefits were previously subject to
deductions or pro-rating or that these were dependent upon the companys financial
standing.
- It is more in keeping with the underlying principle for the grant of this benefit. It is
primarily given to alleviate the plight of workers and to help them cope with the exorbitant
increases in the cost of living. To allow the pro-ration of the 13th month pay in this case
is to undermine the wisdom behind the law and the mandate that the workingmans
welfare should be the primordial and paramount consideration.
- To rule otherwise inevitably results to dissuasion, if not a deterrent, for workers from the
free exercise of their constitutional rights to self-organization and to strike in accordance
with law.
Disposition Denied.

SUBSTITUTE PAYMENTS

Labor Law 1
FRAMANLIS FARMS INC V MOLE
171 SCRA 87
GRINO-AQUINO; March 8, 1989

A2010

- 162 -

Disini

- The failure of the Minister's decision to identify the pakyaw and non-pakyaw workers
does not render said decision invalid. The workers may be identified or determined in the
proceedings for execution of the judgment.
Disposition petition for certiorari is dismissed with costs against the petitioners.

NATURE
Petition for certiorari to reverse the denied MFR denied by MOLE order.
FACTS
(The facts are difficult to digest because they involved numbers. For recitation purposes,
the reasoning is enough.)
- Employees of the petitioners filed against their employer and the other petitioners 2
labor standard cases in the RTC alleging that they were not paid emergency cost of living
allowance (ECOLA), minimum wage 13th month pay, holiday pay, and service incentive
leave pay.
- Petitioners, in an answer to the amended complaint, alleged that (1) the private
respondents were not regular workers, but were migratory (sacadas) or pakyaw workers
who were hired seasonally, or only during the milling season, to so piece-of work on the
farms, hence they were not entitled to benefits being claimed, (2) they applied for an
exception to pay for the living allowance although the MOLE has no ruling yet.
- The claims for holiday pay, service incentive pay, social amelioration bonus and
underpayment fo minimum wage were not controverted. On the other claims, the
petitioners submitted only random payrolls which showed that the women workers were,
although the male workers received P10 more or less, per day.
- In an Order, the Minister of Labor (MOLE), through Assistant Regional Director Dante
Ardivilla, adopting the recommendations of the Chief of the Labor Regulation Section,
Bacolod District Office, directed the respondents (now petitioners) to pay: (1) deficiency
payments under PD 925,PD 1614 , under Ministry Order No. 5, under PD 1678, service
incentive leave pay, holiday pay and social amelioration bonus and 13 th month pay and
emergency living allowance under PD 1123
- Upon the petitioners' appeal of that Order, the Deputy MOLE modified it ordering the
employer to all non-pakyaw workers their claim for holiday and incentive leave pay, their
13th month pay, pay differentials and ECOLA excluding the pakyaw workers from holiday
and service incentive leave pay
- Framanlis filed for MFR, which was denied hence, this petition for certiorari
ISSUE
1. WON Minister erred in requiring the petitioners to pay wage differentials to their
pakyaw workers who worked for at least eight hours daily
2. WON benefits in form of food and electricity are equivalent to the 13th month pay
HELD
1. NO
- In 1976, PD No. 928 fixed a minimum wage for agricultural workers in any plantation or
agricultural enterprise irrespective of WON the worker was paid on a piece-rate basis.
However, effective July 1, 1978, the minimum wage was increased (Sec. 1, PD 1389).
Subsequently, PD 1614 provided for another increase in the daily wage of all workers
effective April 1, 1979. The petitioners admit that those were the minimum rates
prevailing then. Therefore, the respondent Minister did not err in requiring the petitioners
to pay wage differentials to their pakyaw workers who worked for at least eight hours
daily and earned less than P8.00 per day in 1978 to 1979.
2. NO
- With regard to the 13th month pay, petitioners admitted that they failed to pay their
workers 13th month pay. However, they argued that they substantially complied with the
law by giving their workers a yearly bonus and other non-monetary benefits amounting to
not less than 1/12th of their basic salary in weekly subsidy of choice pork meat, free
choice pork meat and free light or electricity which were allegedly "the equivalent" of the
13th month pay.
- Under Section 3 of PD No. 851 4, such benefits in the form of food or free electricity,
assuming they were given, were not a proper substitute for the 13th month pay required
by law.
- Neither may year-end rewards for loyalty and service be considered in lieu of 13th
month pay according to Section 10 of the Rules and Regulations Implementing
Presidential Decree No.

Section 3. Employees covered The Decree shall apply to all employees except to:
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 1/12 of the basic salary but shall not include cash and
stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as nonmonetary benefits.
"Where an employer pays less than 1/12 of the employee's basic salary the employer shall pay the difference."

14th MONTH PAY

KAMAYA PORT HOTEL V NLRC (FEDERATION OF
FREE WORKERS)
177 SCRA 87
FERNAN; August 31, 1989
NATURE
Petition for review on certiorari
FACTS
- Respondent Memia Quiambao with thirty others who are members of the Federation of
Free Workers (FFW) were employed by Kamaya as hotel crew. On the basis of the
profitability of the company's business operations, management granted a 14th
month pay to its employees starting in 1979. In January 1982, the hotel converted into
a training center for Libyan scholars. Hoever, the Libyans preterminated their program
leaving Kamayan without any business, aside from the fact that it was not paid for the
use of the hotel premises. All in all Kamayan allegedly suffered losses amounting to P2
million.
- Although Kamayan reopened the hotel premises to the public, it was not able to pick-up
its lost patronage. In a couple of months it effected a retrenchment program until finally, it
totally closed its business.
- FFW then filed with the Ministry of Labor and Employment a complaint against
petitioner for illegal suspension, violation of the CBA and non-payment of the 14th month
pay. Records however show that the case was submitted for decision on the sole issue of
alleged non-payment of the 14th month pay for the year 1982.
- The LA rendered a decision ordering Kamaya to pay the 14th month pay. On appeal,
the NLRCaffirmed the grant of the 14th month pay on the ground that the granting of this
14th month pay has already ripened into a company practice which respondent company
cannot withdraw unilaterally. This 14th month pay is now an existing benefit which cannot
be withdrawn without violating article 100 of the Labor Code. To allow its withdrawal now
would certainly amount to a diminution of existing benefits which complainants are
presently enjoying.
ISSUE
WON the latter tribunal committed grave abuse of discretion when it adopted the Labor
Arbiter's decision saying that the 14th month pay cannot be withdrawn without violating
Article 100 of the Labor Code
HELD
YES
- Art. 100 of the LC states: 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.
- It is patently obvious that Article 100 is clearly without applicability. The date of
effectivity of the Labor Code is May 1, 1974. In the case at bar, petitioner extended its
14th month pay beginning 1979 until 1981. What is demanded is payment of the 14th
month pay for 1982. Indubitably from these facts alone, Article 100 of the Labor Code
cannot apply.
- Moreover, there is no law that mandates the payment of the 14th month pay. This is
emphasized in the grant of exemption under Presidential Decree 851 (13th Month Pay
Law) which states: "Employers already paying their employees a 13th month pay or its
equivalent are not covered by this Decree." Necessarily then, only the 13th month pay is
mandated. Having enjoyed the additional income in the form of the 13th month pay,
private respondents' insistence on the 14th month pay for 1982 is already an
unwarranted expansion of the liberality of the law.
- Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore,
gratuitous in nature. The granting of the 14th month pay is a management prerogative

Labor Law 1
which cannot be forced upon the employer. It is something given in addition to what is
ordinarily received by or strictly due the recipient. It is a gratuity to which the recipient has
no right to make a demand.
- This Court is not prepared to compel petitioner to grant the 14th month pay solely
because it has allegedly ripened into a company practice" as the labor arbiter has put it.
Having lost its catering business derived from Libyan students, Kamaya Hotel should not
be penalized for its previous liberality.
An employer may not be obliged to assume a "double burden" of paying the 13th month
pay in addition to bonuses or other benefits aside from the employee's basic salaries or
wages. Restated differently, we rule that an employer may not be obliged to assume the
onerous burden of granting bonuses or other benefits aside from the employee's basic
salaries or wages in addition to the required 13th month pay.
Disposition petition is hereby GRANTED. The portion of the decision of the National
Labor Relations Commission dated June 25, 1986 ordering the payment of 14th month
pay to private respondents is set aside.

DIMINUTION
DAVAO FRUITS CORP V ASSOCIATED LABOR
UNIONS
[PAGE 3]

MANAGEMENT FUNCTION
BUSINESSDAY INFORMATION SYSTEMS AND
SERVICES INC V NLRC (MOYA)
221 SCRA 9
GRIO-AQUINO; April 5, 1993
NATURE
PETITION for certiorari of the decision of the National Labor Relations Commission.
FACTS
- BSSI was engaged in the manufacture and sale of computer forms. Due to financial
reverses, its creditors, the Development Bank of the Philippines (DBP) and the Asset
Privatization Trust (APT), took possession of its assets, including a manufacturing plant
in Marilao, Bulacan.
- As a retrenchment measure, some plant employees, including the private respondents,
were laid off on May 16, 1988, after
prior notice, and were paid separation pay equivalent to one-half (1/2) month pay for
every year of service. Upon receipt on her separation may, the private respondents
signed individual releases and quitclaims in favor of BSSI.
- BSSI retained some employees in an attempt to rehabilitate its business as a trading
company.
- However, barely two and a half months later, these remaining employees were likewise
discharged because the company decided to cease business operations altogether.
Unlike the private respondents, that batch of employees received separation pay
equivalent to a full month's salary for every year of service plus mid-year bonus.
- Protesting against the discrimination in the payment of their separation benefits, the
twenty-seven (27) private respondents filed complaints against the BSSI and Raul
Locsin.
ISSUES
1. WON there was unlawful discrimination in the payment of separation benefits to the
employees.
2. WON the company is obliged to pay mid-year bonus.
3. WON Locsin should be held liable.
HELD
1. YES
- Petitioners' right to terminate employees on account of retrenchment to prevent losses
or closure of business operations, is recognized by law, but it may not pay separation
benefits unequally for such discrimination breeds resentment and ill-will among those
who have been treated less generously than others.
- The respondents cited financial business difficulties to justify their termination of the
complainants' employment. They were given one-half (1/2) month of their salary for every
year of service. Due to continuing looms, they closed operations where they dismissed
the second batch of employees who were given one (1) month pay for every year they
served. The third batch of employees were terminated and were likewise given one (1)
monthly pay for every year of service. The business climate when the complainants were

A2010

- 163 -

Disini

terminated did not at all defer improvement-wise. The interval between the dates of
termination was so close to each other, so that, no improvement in business maybe likely
expected.
- The law requires the granting of the same amount of separation benefits to the affected
employees in any of the cases. The respondent argued that the giving of more
separation benefit to the second and third batches of employees separated was their
expression of gratitude and benevolence to the remaining employees who have tried to
save and make the company viable in the remaining lays of operations. This justification
is not plausible. There are workers in the first batch who have rendered more years of
service and more efficient than those separated subsequently, yet, they did not receive
the same recognition.
- There was impermissible discrimination against the private respondents in the payment
of their separation benefits. The law requires an employer to extend equal treatment to
its employees. It may not, in the guise of exercising management prerogatives, grant
greater benefits to some and less to others. Management prerogatives are not absolute
prerogatives but are subject to legal limits, collective bargaining agreements, or general
principles of fair play and justice
2. NO
- The grant of a bonus is a prerogative, not an obligation, of the employer. The matter of
giving a bonus over and above the worker's lawful salaries and allowances is entirely
dependent on the financial capability of the employer to give it. The fact that the
company's business was no longer profitable (it was in fact moribund) plus the fact that
the private respondents did not work up to the middle of the year (they were discharged
in May 1993) were valid reasons for not granting them a mid-year bonus.
3. NO
- A corporate officer is not personally liable for the money claims of discharged corporate
employees unless he acted with evident malice and bad faith in terminating their
employment. There is no evidence in this case that Locsin acted in bad faith or with
malice in carrying out the retrenchment and eventual closure of the company, hence, he
may not be held personally and solidarily liable with the company for the satisfaction of
the judgment in favor of the retrenched employees.
Disposition The resolution of the NLRC ordering the petitioner company to pay
separation pay differentials to the private respondents is AFFIRMED. However, the
award of mid-year bonus to them is hereby deleted and set aside. Petitioner Raul Locsin
is absolved from any personal liability to the respondent employees. No costs.

ASIAN TRANSUNION CORP V CA

[PAGE 45]

NATURE BONUS WHEN DEMANDABLE

AMERICAN WIRE AND CABLE DAILY RATED
EMPLOYEES UNION V AMERICAN WIRE AND CABLE
CO INC
[PAGE 4]
LUZON STEVEDORING CORP V CIR
15 SCRA 660
BENGZON; December 31, 1965
NATURE
Appeal from judgment and order of the Court of Industrial Relations
FACTS
- The appeal is a consolidation of three actions filed for or against Luzon
Stevedoring Corporation and Luzteveco Employees Association in connection with a
strike called by the Union on January 2, 1959. The atrike came after another strike in
1958 and which was just decided on by the said Court.
- In any case, the strike was declared illegal due to four factors cited as follows:
a. the strike was declared without prior notice
b. the reduction from fifteen to ten days Christmas bonus could not be unfair labor
practice considering the nature of the collective bargaining contracts then existing
between the parties
c. the strike, being not only illegal, was conducted in a manner not sanctioned by law,
specially the commission of
illegal acts at he picket line
d. the workers at the Pandacan Bulk Oil Terminal are bound by the provisions of the
no strike clause of the CBA.
ISSUE

Labor Law 1
WON the reduction of the bonus constituted unfair labor practice (the issue is being
limited to this as this is the only issue called to be discussed under the outline)
HELD
NO
- As a rule a bonus is an amount granted and paid to an employee for his industry and
loyalty which contributed to the success of the employers business and made possible
the realization of profits. It is an act of generosity for which the employee ought to be
thankful and grateful. From a legal point of view, a bonus is not a demandable and
enforceable obligation. It would be different if this bonus was made part of the wage,
salary, or compensation.
Reasoning
- There was no showing that the Christmas bonus was pat of the CBA as part of the
salary or compensation. Thus, the grant of this is contingent upon the profits being
realized. The reduced bonus in 1958 was a necessary consequence of a reduced profit
in that year. and there being no clear showing that the reduction was aimed to
discriminate against the Union, the finding of the CIR stands.
Disposition Ruling of the CIR is affirmed

LIBERATION STEAMSHIP CO INC V CIR

23 SCRA 1105
REYES JBL; June 27, 1968
NATURE
PETITIONS for review by certiorari of a resolution of the Court of Industrial Relations.
FACTS
- Petitions filed separately by the Liberation Steamship Co., Inc. (LISTCO) and the
National Development Company (NDC) for the review of the CIR resolution en banc of
September 2, 1965 modifying the decision of the trial Judge of May 13, 1964
- NDC, a government-owned and controlled corporation, in 1961 was the owner and
operator of the vessels M/S "Doa Alicia", "Doa Nati" and "Doa Aurora". It can be
gathered from the records that prior to April 15, 1961, said corporation decided to
dispose of these three vessels; and in the bidding that ensued, LISTCO won. The crew
members of the three vessels, through the Philippine Maritime Industrial Union (PMIU),
made representations with both the seller and the purchaser to retain them in the service
of' the vessels. And when in the final deed of sale no provision on the hiring of the
complement of the vessels was included, the crew-members declared a strike on April
15, 1961. On April 25, 1961, the dispute was certified by the President to the CIR
- April 29, 1961 - the Industrial Court ordered that the three Doa vessels mentioned in
the presidential certification had already been sold by the government to the Liberation
Steamship Company. Hence, the said company is indispensable party in this litigation,
without whom no final determination of this case can be had.
- May 3, 1961- acting upon NDC's petition, alleging that the strike was causing the
corporation an actual loss of about P15,000.00 daily, the court issued a return-to-work
order, the pertinent part of which reads:
"During the pendency of this case, the management shall refrain from dismissing any
employee or laborer, unless with the express authority of this Court.
- June 17, 1961 (Over a month arid a half after this order) - representatives of the
LISTCO posted notices around the M/S "Doha Alicia" to the effect that the officers and
members of the crew not otherwise appointed by the said new owner will be ejected. On
the same day, 30 security guards and about 50 men with luggages came aboard the said
vessels and never departed therefrom until the vessel left port on June 21, 1961, only
after the remaining members of the original crew had been sent down.
- The unlicensed crew members of the three "Doa" vessels thus petitioned the Industrial
Court for an order to restrain LISTCO from carrying out its ejection threat of the officers
and/or crew members of the M/S "Doha Alicia" and of the two other "Doa" vessels upon
their delivery to the new owner.
- June 30, 1961 - restraining order was issued against NDC and LISTCO, directing the
maintenance of status quo during the pendency of the dispute.
- Petitioners' demands included
To NDC
> payments by NDC of a gratuity equivalent to one month salary for every year of service
from their employment up to the termination of their services on account of the sale of the
vessels to LISTCO
> payment of strike-duration pay
> commutation of accumulated vacation and sick leaves
> unpaid overtime services rendered from the dates of their employment
> gratuity and accumulated vacation and sick leaves to the officers and/or crew members
who were on leave and were required by the NDC to man the Pew cargo liners from
Japan to the Philippines.
To LISTCO
> retention as officers and/or crew members of the "Doa" vessels

A2010

- 164 -

Disini

> observance or continuation of the collective bargaining contract between NDC and the
union until its expiration in June, 1962,
> separation pay for any officer and/or crew members retained but separated by LISTCO
from the service within one year from the turnover of the vessels.
- May 13, 1964 - the TRIAL COURT rendered judgment:
> demand gratuity pay was denied
> entitled to accumulation of sick and vacation leaves with pay not exceeding 5 months
> claim for unpaid overtime was ruled out on the ground of prescription
> denied the demand for gratuity because gratuity is essentially voluntary and the
management cannot be compelled to give the same.
> NDC responsible for the ejection of the crew of the M/S "Doa Alicia", in view of its
failure to incorporate in the deed of sale in favor of LISTCO a provision on the retention
of the services of the complement of the vessels, in spite of the latter's requests therefor
prior to the consummation of the sale.
> NDC ordered to pay the back wages of the ejected crew up to the date of their actual
reinstatement.
> LISTCO was completely exonerated from any liability, the trial court reasoning that the
lay off of the crew of the M/S "Doa Alicia" was committed on June 21, 1961, or before
said respondent became subject to the restraining order of June 30, 1961.
- September 2, 1965 CIR, upon the MFR of NDC, modified the decision of the trial
Judge
> NDC and LISTCO solidarity liable for payment of the backwages
> LISTCO equally responsible, the court en banc took into account the fact that as of
April 29, 1961, it was already an indispensable party to the case. Thus, with knowledge
of the restraining order of May 3, 1961 to the "management" against unauthorized
dismissal of employees and laborers, the court held that LISTCO could not claim to have
acted in good faith when it ejected the crew of the M/S "Doa Alicia" on June 21, 1961.
> increased the allowable accumulated vacation and sick leaves with pay of the
petitioners, from 5 to 10 months because of RA1081.
> new sale of the "Doa" vessels had taken place during the pendency of the motion for
reconsideration, the case was ordered reopened, but only for the purpose of determining
the merits of the demand for gratuity pay.
- LISTCO assails
> ruling on paying, jointly and severally with the NDC, back wages to the affected officers
and crew members of the M/S "Doa Alicia", claiming
(1) that the Industrial Court was without jurisdiction over its persons, LISTCO not being a
party to the labor dispute certified to it by the President;
(2) that the restraining order of May 3, 1961 did not include this petitioner; and
(3) that it cannot legally be compelled to retain the services of the original crew of the
M/S "Doa Alicia"
- NDC raises
(1) legality of the strike staged by the crews of the three vessels and of their right to
strike-duration pay
(2) liability for such strike-duration pay and for reinstatement of the officers and crewmembers who were not reemployed after the conclusion of the Agreement of November
28, 1961
(3) jurisdiction of' the Court of Industrial Relations over the officers of the vessels
(4) legality of the ruling that the crew-members are entitled to accumulated sick and
vacation leaves with pay
(5) correctness of the order of the court en banc to reopen the case, insofar as the
union's demands for gratuity are concerned
ISSUES
1. WON CIR has jurisdiction over the case since, at that time, LISTCO is not an
employer of the petitioners
2. WON LISTCO is bound by the TRO
3. WON NDC is liable for backwages
4. WON crew-members are entitled to accumulated sick and vacation leaves with pay
5. WON crew-members are entitled to gratuity
HELD
1. YES
- It cannot be denied that when the certification was made by the President on April 25,
1961, and the Court of Industrial Relations assumed jurisdiction over the case, the three
"Doa" vessels were still owned and operated by the NDC. Understandably, the
presidential certification mentioned only the crew of the vessels and the NDC as parties
to the dispute. Although not originally named as respondent. the court, informed of the
consummation of the sale, ordered the inclusion of LISTCO as an indispensable party.
- LISTCO cannot contest the authority of the trial judge in ordering it to be impleaded in
the proceeding.
(1) this being a certified case, the CIR, in the exercise of its arbitration power, can direct
the inclusion or exclusion of parties therefrom; it is clothed with authority to issue such
order or orders as may be necessary to make effective the exercise of its jurisdiction,
which may include the bringing in of parties into the case.

Labor Law 1
(2) what confers jurisdiction on the Industrial Court is not the form or manner of
certification by the President, but the referral to said court of the industrial dispute
between the employer and the employee. Thus, the court is not deprived of jurisdiction
over a case simply because the certification of the President is erroneous. That LISTCO
was not so named in the certification would not make it any less the employer of the
petitioning employees within the contemplation of law, since by the transfer of ownership
of the vessels it actually became such employer.
2. YES
- April 29, 1961 LISTCO, as the new owner of the vessels, was included as an
indispensable party in the litigation, "without which no final determination of this case can
be had." It was, therefore, made of record that LISTCO was then already the owner and
operator of the ships, there having been no showing that the management thereof was
lodged in another; it was a party against which any appropriate order shall be binding
and enforceable. The order of the trial judge to "the management", to reinstate the
strikers under the last terms existing before the dispute arose and to refrain from
dismissing any employee or laborer, could not have been directed solely against the
NDC but also to LISTCO which had the power to admit or discharge employees.
3. YES
- there is no reason for exempting the NDC from liability for payment of the employees'
back wages. CIRs back to work order simultaneously ordering management to refrain
from dismissing laborers without the labor court's authority was already in full force,
having been issued since May 3. Yet, in its letter dated June 17, 1961 and sent to the
Master of the M/S "Doa Alicia", the General Manager of the NDC "enjoined" the officers
and crew members thereof, who were not selected by the new owner to debark. This
letter, in effect, was a defiance of the Industrial Court's injunction, just as the
LISTCO's replacement of the "Doa Alicia" crew was in disregard of the same order.
This cooperation and concordant action of both appellants, plainly contrary to the
express CIR order of May 3, justifies their being held solidarily liable for the back wages
of the officers and crew of said motor vessel.
4. YES
- RIGHT TO ACCUMULATION OF SICK AND VACATION LEAVES WITH PAY - The
lower court's recognition of the right of the employees of the NDC, admittedly a
government-owned and controlled corporation to accumulation of sick and vacation
leaves with pay is based on the provisions of Government Enterprises Counsel Circular
No. 4 of March 1948 and of Sections 294-286 of the Administrative Code as amended by
Republic Act No. 1081, which increased the allowable accumulated vacation and sick of
government employees to 10 months. The fact that the officers and unlicensed members
of the crew of the vessel had a collective bargaining contract that did not contain any
provision on the payment of accumulated leaves does not by itself bar the employees'
resort to the Leave Law. The rule is that the law forms part of, and into, every contract,
unless clearly excluded therefrom in those cases where such exclusion is allowed.
5. There should be a reopening of the case to determine whether such conditions
operated in the instant case
- GRANT OF GRATUITY; NORMALLY DISCRETIONARY BUT MAY BECOME PART OF
COMPENSATION.- While normally discretionary, the grant of a gratuity or bonus by
reason of its long and regular concession may become regarded as part of regular
compensation. (Phil. Education Co., Inc., vs. C.I.R., 92 Phil., 382, 385). For this reason,
where there is a resale of the vessels to another party during the pendency of the motion
for reconsideration, the court may order the reopening of the case insofar as the
demands for gratuity are concerned, in order to determine whether aforecited conditions
operated in the instant case.
Disposition resolution appealed from is hereby affirmed

MARCOS V NLRC (INSULAR LIFE ASSURANCE CO

LTD)
248 SCRA 146
REGALADO; September 8, 1995
NATURE
Petition for certiorari
FACTS
- Petitioners were regular employees of private respondent Insular Life Assurance Co.,
Ltd., but they were dismissed when their positions were declared redundant. A special
redundancy benefit was paid to them. However, not included in this redundancy benefit
were their respective service awards and other prorated bonuses which they had earned
at the time they were dismissed. Because of this, petitioners questioned the redundancy
package. Nevertheless, they signed a Release and Quitclaim but with a written protest
reiterating their previous demand that they were nonetheless entitled to receive their
service awards.
- Petitioners inquired from the Legal Service of the Department of Labor and Employment
whether respondent corporation could legally refuse the payment of their service awards
as mandated in their Employee's Manual.

A2010

- 165 -

Disini

- DOLE ruled in their favor. However, this decision was overturned by the NLRC
affirming the validity of the Release and Quitclaim which consequently bar the
petitioners to demand for service awards and other bonuses. Thus, this petition.
ISSUE
WON respondent NLRC committed reversible error or grave abuse of discretion in
affirming the validity of the "Release and Quitclaim" and, consequently, that petitioners
are not entitled to payment of service awards and other bonuses

HELD
YES
Ratio On Release and Quitclaim - The fact that an employee has signed a
satisfaction receipt for his claims does not necessarily result in the waiver thereof. The
law does not consider as valid any agreement whereby a worker agrees to receive less
compensation than what he is entitled to recover. A deed of release or quitclaim cannot
bar an employee from demanding benefits to which he is legally entitled. Renuntiatio
non praesumitur. While there may be possible exceptions to this holding, we do not
perceive any in the case at bar.
Reasoning
a. The element of total voluntariness in executing that instrument is negated by the fact
that they expressly stated therein their claim for the service awards, a manifestation
equivalent to a protest and a disavowal of any waiver thereof.
b. Petitioners even sought the opinion of the Department of Labor and Employment to
determine where and how they stood in the controversy. This act only shows their
adamant desire to obtain their service awards and to underscore their disagreement with
the "Release and Quitclaim" they were virtually forced to sign in order to receive their
separation pay.
c. While rights may be waived, the same must not be contrary to law, public order, public
policy, morals or good customs or prejudicial to a third person with a right recognized by
law.
- Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the
quitclaim obligates the workers concerned to forego their benefits while at the same time
exempting the employer from any liability that it may choose to reject. This runs counter
to Art. 22 of the Civil Code which provides that no one shall be unjustly enriched at the
expense of another.
Ratio On Service Awards and other Bonuses - The petitioners are entitled to receive
service awards and other bonuses. The contention of the respondent that service award
is a bonus and therefore is an act of gratuity which the complainants have no right to
demand and service awards are governed by respondent's employee's manual and (are)
therefore contractual in nature is not impressive.
Reasoning
a. Anniversary and performance bonuses have ripened into a company practice
therefore become demandable. It is not disputed that it is respondent's practice to give
an anniversary bonus every five years from its incorporation. The prerogative of the
employer to determine who among its employees shall be entitled to receive bonuses
which are, as a matter of practice, given periodically cannot be exercised arbitrarily.
b. Pursuant to their policies on the matter, the service award differential is given at the
end of the year to an employee who has completed years of service divisible by 5.
c. A bonus is not a gift or gratuity, but is paid for some services or consideration and is
in addition to what would ordinarily be given. The term "bonus" as used in employment
contracts, also conveys an idea of something which is gratuitous, or which may be
claimed to be gratuitous, over and above the prescribed wage which the employer
agrees to pay.
- If one enters into a contract of employment under an agreement that he shall be paid
a certain salary by the week or some other stated period and, in addition, a bonus, in
case he serves for a specified length of time, there is no reason for refusing to enforce
the promise to pay the bonus, if the employee has served during the stipulated time,
on the ground that it was a promise of a mere gratuity.
Disposition The assailed decision and resolution of respondent National Labor
Relations Commissions are hereby SET ASIDE and the decision of Labor Arbiter Alex
Arcadio Lopez is REINSTATED.

PHILIPPINE NATIONAL CONSTRUCTION CORP V

NLRC (ANGELES, PABLO, JR)
307 SCRA 218
18 May 1999
NATURE
Petition for certiorari of a decision of NLRC.
FACTS

Labor Law 1

A2010

- ANGELES and PABLO, JR. [COMPLAINANTS, for brevity] were employed by PNCC as
tollway guards. Acting on a private complaint regarding mulcting activities of some of its
tollway personnel, PNCC created an investigating team. During its investigation, said
team saw COMPLAINANTS accept cash and a dog from a motorist.
- After due investigation, COMPLAINANTS were dismissed by PNCC for serious
misconduct. When the COMPLAINANTS complaint for illegal dismissal reached NLRC,
the latter held that COMPLAINANTS act of receiving a sum of money and a dog from
motorists constituted bribery which was a sufficient ground for their dismissal. NLRC,
nonetheless, ordered PNCC to pay COMPLAINANTS their mid-year bonus for 1994,
among others. Hence, the present petition.

- 166 -

Disini

2. Wage differentials under Wage Order No. 6 for November 1, 1984 and the
corresponding adjustment thereof; and
3. Holiday pay under Article 94 of the Labor Code, but not to exceed three (3) years.
- Petitioner now contends that the NLRC gravely abused its discretion in ruling as it did
for the succeeding reasons stated in its Petition
ISSUES
1. WON petitioner should pay the unpaid bonus
2. WON petitioner should pay the 13th month pay
3. WON petitioner complied with Wage Order No.6
4. WON petitioner complied with Art.94 of the Labor Code on holiday pay

ISSUE
WON COMPLAINANTS entitled to the disputed mid-year bonus

HELD
NO
Ratio A bonus is a gift from the employer and the grant thereof is a management
prerogative. A bonus becomes a demandable or enforceable obligation only when it is
made part of the compensation of the employee. Whether a bonus forms part of
wages depends upon the circumstances for its payment. If it is additional
compensation which the employer promised and agreed to give without any conditions
imposed for its payment, such as success of business or greater production or output,
then it is part of the wage. But if it is paid only if profits are realized or if a certain level of
productivity is achieved, it cannot be considered part of the wage. Where it is
payable only to some employees and only when their labor becomes more efficient or
more productive, it is only an inducement for efficiency, a prize therefor, not a part of the
wage [citing Metro Transit vs NLRC, 245 SCRA 767 (1995)].
YEAR

MID- YEAR BONUS

CHRISTMAS BONUS

13TH MO. PAY

previous
years

one mo. basic

one mo. basic

one mo. Basic

1984

[one mo. basic]

-none-

one-half mo. Basic

1985

one-half mo. basic

-none-

one-half mo. Basic

1986

one-half mo. basic

one-half mo. basic

one mo. Basic

1987

one-half mo. basic

one-half mo. basic

one mo. basic

- COMPLAINANTS neither alleged nor adduced evidence to show that the bonus they
are claiming is a regular benefit which has become part of their compensation. Thus, the
presumption is that it is not a demandable obligation from the employer and the latter
may not be compelled to grant the same to undeserving employees.
Disposition NLRC decision set aside.

PRODUCERS BANK OF THE PHILIPPINES V NLRC

(PRODUCERS BANK EMPLOYEES ASSN)
355 SCRA 489
GONZAGA-REYES; March 28, 2001
NATURE
A special civil action for certiorari with prayer for preliminary injunction and/or restraining
order seeking the nullification of the decision of NLRC
FACTS
- The present petition originated from a complaint filed by private respondent with the
Arbitration Branch, National Capital Region, National Labor Relations Commission
(NLRC), charging petitioner with diminution of benefits, non-compliance with Wage Order
No. 6 and non-payment of holiday pay. In addition, private respondent prayed for
damages.
- Labor Arbiter Nieves found private respondent's claims to be unmeritorious and
dismissed its complaint.
- NLRC4 granted all of private respondent's claims, except for damages ordering
respondent- appellee to pay complainant-appellant:
1. The unpaid bonus (mid-year and Christmas bonus) and 13th month pay;

HELD
1. NO
Ratio A bonus is an amount granted and paid to an employee for his industry and loyalty
which contributed to the success of the employer's business and made possible the
realization of profits. It is an act of generosity granted by an enlightened employer to spur
the employee to greater efforts for the success of the business and realization of bigger
profits. The granting of a bonus is a management prerogative, something given in
addition to what is ordinarily received by or strictly due the recipient.13 Thus, a bonus is
not a demandable and enforceable obligation, except when it is made part of the wage,
salary or compensation of the employee.
- However, an employer cannot be forced to distribute bonuses which it can no longer
afford to pay. To hold otherwise would be to penalize the employer for his past
generosity.
Reasoning
- private respondent declared in its position papers filed with the NLRC that Producers
Bank of the Philippines has been providing several benefits to its employees since 1971
when it started its operation. Among the benefits it had been regularly giving is a midyear bonus equivalent to an employee's one-month basic pay and a Christmas bonus
equivalent to an employee's one whole month salary (basic pay plus allowance).
However, it has changed this practice. In a tabular form, here are the bank's violations:
- Private respondent argues that the mid-year and Christmas bonuses, by reason of their
having been given for thirteen consecutive years, have ripened into a vested right and,
as such, can no longer be unilaterally withdrawn by petitioner without violating Art.100 of
PD No. 4429 which prohibits the diminution or elimination of benefits already being
enjoyed by the employees.
- Petitioner was not only experiencing a decline in its profits, but was reeling from
tremendous losses triggered by a bank-run which began in 1983. In such a depressed
financial condition, petitioner cannot be legally compelled to continue paying the same
amount of bonuses to its employees. Thus, the conservator was justified in reducing the
mid-year and Christmas bonuses of petitioner's employees. To hold otherwise would be
to defeat the reason for the conservatorship which is to preserve the assets and restore
the viability of the financially precarious bank.
2. NO
Ratio The intention of the law was to grant some relief - not to all workers - but only to
those not actually paid a 13th month salary or what amounts to it, by whatever name
called. 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. To impose upon an employer already
giving his employees the equivalent of a 13th month pay would be to penalize him for his
liberality and in all probability, the employer would react by withdrawing 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.
Reasoning
- Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas
bonuses it has been giving its employees from 1984 to 1988 exceeds the basic salary for
one month (except for 1985 where a total of one month basic salary was given). Hence,
this amount should be applied towards the satisfaction of the 13th month pay, pursuant to
Section 2 of PD 851. PD 851, which was issued by President Marcos on 16 December
1975, requires all employers to pay their employees receiving a basic salary of not more
than P 1,000 a month, regardless of the nature of the employment, a 13th month pay, not
later than December 24 of every year.30 However, employers already paying their
employees a 13th month pay or its equivalent are not covered by the law.
- It is noted that, for each and every year involved, the total amount given by petitioner
would still exceed, or at least be equal to, one month basic salary and thus, may be
considered as an "equivalent" of the 13th month pay mandated by PD 851.
Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as part
of the 13th month pay.
3. YES
Ratio The creditability provision in Wage Order No. 6 is based on important public policy,
that is, the encouragement of employers to grant wage and allowance increases to their

Labor Law 1
employees higher than the minimum rates of increases prescribed by statute or
administrative regulation. To obliterate the creditability provisions in the Wage Orders
through interpretation or otherwise, and to 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 interest of labor is concerned. The creditability provisions in the Wage Orders prevent
the penalizing of employers who are industry leaders and who do not wait for statutorily
prescribed increases in salary or allowances and pay their workers more than what the
law or regulations require.
Reasoning
- Wage Order No.6, which came into effect on 1 November 1984, increased the statutory
minimum wage of workers, with different increases being specified for agricultural
plantation and non-agricultural workers. The bone of contention, however, involves
Section 4 thereof5
- On 16 November 1984, the parties entered into a CBA providing for the following salary
adjustments6
- Petitioner argues that it complied with Wage Order No. 6 because the first year salary
and allowance increase provided for under the collective bargaining agreement can be
credited against the wage and allowance increase mandated by such wage order.
- It would be inconsistent with the above stated rationale underlying the creditability
provision of Wage Order No. 6 if, after applying the first year increase to Wage Order No.
5, the balance was not made chargeable to the increases under Wage Order No. 6 for
the fact remains that petitioner actually granted wage and allowance increases sufficient
to cover the increases mandated by Wage Order No. 5 and part of the increases
mandated by Wage Order No. 6.
4. YES
Ratio We agree with the labor arbiter that the reduction of the divisor to 303 was done for
the sole purpose of increasing the employees' overtime pay, and was not meant to
exclude holiday pay from the monthly salary of petitioner's employees. In fact, it was
expressly stated in the inter-office memorandum that the divisor of 314 will still be used in
the computation for cash conversion and in the determination of the daily rate. Thus,
based on the records of this case and the parties' own admissions, the Court holds that
petitioner has complied with the requirements of Article 94 of the Labor Code
Reasoning
- Article 94 of the Labor Code provides that every worker shall be paid his regular daily
wage during regular holidays and that 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.
- In this case, the Labor Arbiter found that the divisor used by petitioner in arriving at the
employees' daily rate for the purpose of computing salary-related benefits is 314.
However, the divisor was reduced to 303 by virtue of an inter-office memo.
- the acting Conservator approved the use of 303 days as divisor in the computation of
Overtime pay.
- Corollarily, the Acting Conservator also approved the increase of meal allowance from
P25.00 to P30.00 for a minimum of four (4) hours of work for Saturdays.
- the Labor Arbiter observed that the reduction of the divisor to 303 was for the sole
purpose of increasing the employees' overtime pay and was not meant to replace the
use of 314 as the divisor in the computation of the daily rate for salary-related benefits.
As to private respondent's claim for damages, the NLRC was correct in ruling that there
is no basis to support the same.
Disposition Decision of public respondent is SET ASIDE, with the exception of public
respondent's ruling on damages.

PHIL DUPLICATORS INC V NLRC

[PAGE 161]
MANILA ELECTRIC CO V QUISUMBING
[PAGE 19]

All wage increase in wage and/or allowance granted by employers between June 17, 1984 and the effectivity of this
Order shall be credited as compliance with the minimum wage and allowance adjustments prescribed herein, provided
that where the increases are less than the applicable amount provided in this Order, the employer shall pay the
difference. Such increases shall not include anniversary wage increases provided in collective bargaining agreements
unless the agreement expressly provide otherwise.

Article VIII. Section 1. Salary Adjustments. ...(i) Effective March 1, 1984 - P225.00 per month as salary increase plus
P100.00 per month as increase in allowance to employees within the bargaining unit on March 1, 1984.
(ii) Effective March 1,1985 -P125.00 per month as salary increase plus P100.00 per month as increase in allowance to
employees within the bargaining unit on March 1,1985.
(iii) Effective March 1,1986 -P125.00 per month as salary increase plus P100.00 per month as increase in allowance to
employees within the bargaining unit on March 1, 1986.
- In addition, the collective bargaining agreement of the parties also included a provision on the chargeability of such
salary or allowance increases against government-ordered or legislated income adjustments

A2010

- 167 -

Disini

PHILIPPINE APPLIANCE CORPORATION (PHILACOR)

V CA (PHILACOR WORKERS UNION)
430 SCRA 525
YNARES-SANTIAGO; June 3, 2004
NATURE
Appeal by Certiorari to set aside CA decision denying petitioners partial appeal as well
as CA resolution denying the MFR.
FACTS
- Petitioner is a domestic corp. engaged in manufacturing refrigerators, freezers, and
washing machines. Respondent United Philacor Workers Union NAFLU is the duly
elected collective bargaining representative of the rank and file employees of petitioner.
- During one collective bargaining negotiation, petitioner offered P4000 to each employee
as an early conclusion bonus, or a unilateral incentive for the speeding up of
negotiations between the parties and to encourage respondent union to exert their best
efforts to conclude a CBA. Upon conclusion of the CBA negotiations, petitioner
accordingly gave this early signing bonus.
- After this CBA expired in Aug.1999, the 2 parties began negotiations for a new CBA but
after 11 meetings, respondent union declared a deadlock and a few days later filed a
notice of strike. A conciliation and mediation conference was held but it still left the ff.
issues unresolved: wages, rice subsidy, signing and retroactive bonus. Failure to come to
an agreement led respondent union to go on an 11-day strike which resulted in stoppage
of manufacturing operations as well as losses for petitioner. This constrained petitioner to
file a petition before the DOLE and the Labor Secretary Laguesma resolved the dispute
by issuing an order which, among others, granted a signing bonus of P3,000 to the
union.
- Petitioner filed a MFR, stating that it accepted the decision but took exception to the
award of the signing bonus, claiming that it is not demandable or enforceable since it is in
the nature of an incentive. Labor Sec. denied this motion. Petitioner then filed for
Certiorari with the CA which was dealt with similarly. The Labor Secs award of signing
bonus was affirmed since petitioner itself offered the same incentive to expedite the CBA
negotiations, which they did not withdraw and was still outstanding when the dispute
reached the DOLE. Petitioner filed a MFR which was again denied, leading to this
petition.
ISSUE
WON the signing bonus awarded by the Labor Secretary (and affirmed by respondent
CA) was proper
HELD
NO
Ratio A signing bonus may not be demanded as a matter of right if it is not agreed upon
by the parties or unilaterally offered as an additional incentive. It is not a demandable and
enforceable obligation. The condition for awarding it must be duly satisfied.
Reasoning
- 2 things militate against the grant of the signing bonus: first, the non-fulfillment of the
condition for which it was offered, i.e., the speedy and amicable conclusion of the CBA
negotiations; and second, the failure of respondent union to prove that the grant of the
said bonus is a long established tradition or a regular practice on the part of petitioner.
Petitioner admits, and respondent union does not dispute, that it offered an early
conclusion bonus or an incentive for a swift finish to the CBA negotiations.
- A signing bonus is justified by and is the consideration paid for the goodwill that existed
in the negotiations that culminated in the signing of a CBA. In the case at bar, the CBA
negotiation between petitioner and respondent union failed. Respondent union went on
strike for eleven days and blocked the ingress to and egress from petitioners work
plants. The labor dispute had to be referred to the Secretary of Labor and Employment
because neither of the parties was willing to compromise their respective positions
regarding the four remaining items which stood unresolved. While we do not fault any
one party for the failure of the negotiations, it is apparent that there was no more goodwill
between the parties and that the CBA was clearly not signed through their mutual efforts
alone. Hence, the payment of the signing bonus is no longer justified and to order such
payment would be unfair and unreasonable for petitioner.
- We have consistently ruled that although a bonus is not a demandable and enforceable
obligation, it may nevertheless be granted on equitable considerations as when the
giving of such bonus has been the companys long and regular practice. To be
considered a regular practice, however, the giving of the bonus should have been done
over a long period of time, and must be shown to have been consistent and deliberate.
The test or rationale of this rule on long practice requires an indubitable showing that the
employer agreed to continue giving the benefits knowing fully well that said employees
are not covered by the law requiring payment thereof. Respondent does not contest the
fact that petitioner initially offered a signing bonus only during the previous CBA
negotiation. Previous to that, there is no evidence on record that petitioner ever offered

Labor Law 1
the same or that the parties included a signing bonus among the items to be resolved in
the CBA negotiation. Hence, the giving of such bonus cannot be deemed as an
established practice considering that the same was given only once.
Disposition petition is GRANTED. CA decision affirming the Order of the Secretary of
Labor and Employment is REVERSED and SET ASIDE.

9.15 PRODUCTIVITY INCENTIVES ACT OF 1990

RA 6971
E. WAGE RECOVERY, LIABILITIES, AND
WORKER PREFERENCE

A2010

EMPLOYER, INDEPENDENT CONTRACTOR AND SUBCONTRACTOR AND LABORONLY CONTRACTING

SENTINEL SECURITY AGENCY INC V NLRC
[PAGE 140]
LAPANDAY AGRICULTURA DEVT CORP V CA
[PAGE 7]
OSM SHIPPING V NLRC (GUERRERO)
398 SCRA 606
PANGANIBAN; March 5, 2003
FACTS
- Fermin Guerrero was hired by OSM for and in behalf of its principal, Phil Carrier
Shipping Agency Services Co. (PCSASCO) as a Master Mariner of M/V Princess Hoa for
a contract period of 10 months. Guerrero alleged that for almost 7 months (from start of
his work in July 1994 until Jan 1995), despite the services he rendered, no compensation
or remuneration was ever paid to him. He was forced to disembark because he cannot
even buy his basic personal necessities (wawa naman!). He filed for illegal dismissal and
non-payment of wages, etc.
- OSM: Philippine Carrier Shipping Lines Co. (PCSLC) is the disponent owner/employer,
and PCSLC is now responsible for the payment of complainant's wages (Because
Concorde Pacific, an American company w/c owns M/V Princess Hoa, decided to use
ship in the coastwise trade. Since the M/V Princess Hoa was a foreign registered vessel
and could not be used in the coastwise trade, the shipowner converted the vessel to
Philippine registry on Sept 28, 1994 by way of bareboat chartering it out to another entity
named Philippine Carrier Shipping Lines Co. [PCSLC]. To do this, the shipowner had to
terminate its management agreement with PCSASCO on Sept 28, 1994 by a letter of
termination. Consequently, PCSASCO terminated its crew agreement with OSM in a
letter dated Dec 5, 1994. Because of the bareboat charter of the vessel to PCSLC and its
subsequent conversion to Philippine registry and use in coastwise trade as well as to the
termination of the management agreement and crew agency agreement, a termination of
contract ensued whereby PCSLC, the bareboat charterer, became the disponent
owner/employer of the crew.)
- NLRC: OSM Shipping Phils. Inc. and its principal, PCSASCO are jointly and severally
ordered to pay complainant
ISSUE
WON OSM is liable for the payment of unpaid salary of Guerrero
HELD
YES
- Petitioner, as manning agent, is jointly and severally liable with its principal, PCSASCO,
for private respondent's claim. This conclusion is in accordance with Section 1 of Rule II
of the POEA Rules and Regulations7.

Disini

MANILA ELECTRIC CO V BENAMIRA

[PAGE 62]

9.17 WORKER PREFERENCE BANKRUPTCY

CIVIL CODE LABOR CODE
REPUBLIC V PERALTA
150 SCRA 37
FELICIANO; May 20, 1987
NATURE:
Review on certiorari
FACTS:
- The Republic of the Philippines seeks the review on certiorari of the Order of the CFI of
Manila in its Civil Case No. 108395 entitled "In the Matter of Voluntary Insolvency of
Quality Tobacco Corporation, Quality Tobacco.
- In its questioned Order, the trial court held that the above-enumerated claims of USTC
and FOITAF (hereafter collectively referred to as the "Unions") for separation pay of their
respective members embodied in final awards of the NLRC were to be preferred over the
claims of the Bureau of Customs and the BIR. The trial court, in so ruling, relied primarily
upon Article 110 of the Labor Code.
- The Solicitor General, in seeking the reversal of the questioned Orders, argues that
Article 110 of the Labor Code is not applicable as it speaks of "wages," a term which he
asserts does not include the separation pay claimed by the Unions. "Separation pay," the
Solicitor General contends: is given to a laborer for a separation from employment
computed on the basis of the number of years the laborer was employed by the
employer; it is a form of penalty or damage against the employer in favor of the
employee for the latter's dismissal or separation from service
ISSUE
WON separation pay of their respective members embodied in final awards of the NLRC
were to be preferred over the claims of the Bureau of Customs and the BIR (WON
separation pay is included in the term wages8)
HELD
1. YES
Ratio For the specific purposes of Article 110 9 and in the context of insolvency
termination or separation pay is reasonably regarded as forming part of the remuneration
or other money benefits accruing to employees or workers by reason of their having
8

Article 97 (f) of the Labor Code defines "wages" in the following terms:
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 and reasonable
value' shall not include any profit to the employer or to any person affiliated with the employer.(emphasis
supplied)

SEC. 1. Requirements for Issuance of License. Every applicant for license to operate a private employment agency
or manning agency shall submit a written application together with the following requirements:
xxx
xxx
f. A verified undertaking stating that the applicant:
xxx
xxx
xxx
(3)
Shall assume joint and solidary liability with the employer for all claims and liabilities which may arise in
connection with the implementation of the contract; including but not limited to payment of wages, health and disability
compensation and reparation.

- 168 -

- Joint and solidary liability is meant to assure aggrieved workers of immediate and
sufficient payment of what is due them. The fact that petitioner and its principal have
already terminated their agency agreement does not relieve the former of its liability. The
reason for this ruling was given by this Court in Catan National Labor Relations
Commission, which we reproduce in part as follows:
"This must be so, because the obligations covenanted in the [manning] agreement
between the local agent and its foreign principal are not coterminus with the term of
such agreement so that if either or both of the parties decide to end the agreement,
the responsibilities of such parties towards the contracted employees under the
agreement do not at all end, but the same extends up to and until the expiration of
the, employment contracts of the employees recruited and employed pursuant to the
said recruitment agreement. Otherwise, this will render nugatory the very purpose for
which the law governing the employment of workers for foreign jobs abroad was
enacted."
Disposition NLRC Decision REINSTATED and AFFIRMED

Article 110. Worker preference in case of bankruptcy In the event of bankruptcy or liquidation of an employer's
business, his workers shall enjoy first preference as regards wages due them for services rendered during the period
prior to the bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Union paid wages shall be
paid in full before other creditors may establish any claim to a share in the assets of the employer. (emphasis supplied).

Labor Law 1
previously rendered services to their employer; as such, they fall within the scope of
"remuneration or earnings for services rendered or to be rendered ." Liability for
separation pay might indeed have the effect of a penalty, so far as the employer is
concerned. So far as concerns the employees, however, separation pay is additional
remuneration to which they become entitled because, having previously rendered
services, they are separated from the employer's service.
Reasoning
- We note, in this connection, that in Philippine Commercial and Industrial Bank (PCIB)
us. National Mines and Allied Workers Union, the Solicitor General took a different view
and there urged that the term "wages" under Article 110 of the Labor Code may be
regarded as embracing within its scope severance pay or termination or separation pay.
In PCIB, this Court agreed with the position advanced by the Solicitor General. We see
no reason for overturning this particular position.
- The resolution of the issue of priority among the several claims filed in the insolvency
proceedings instituted by the Insolvent cannot, however, rest on a reading of Article 110
of the labor Code alone.
- Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in
isolation. Rather, Article 110 must be read in relation to the provisions of the Civil Code
concerning the classification, concurrence and preference of credits, which provisions
find particular application in insolvency proceedings where the claims of all creditors,
preferred or non-preferred, may be adjudicated in a binding manner.
Disposition MODIFIED and REMANDED to the trial court for further proceedings in
insolvency.

PHILIPPINE EXPORT V CA (DIEHL)

251 SCRA 354
VITUG; December 12, 1995
NATURE
Petition for review on certiorari
FACTS
- On 13 May 1988, private respondent Raimund Diehl, a resident alien, lodged a
complaint for illegal dismissal against the Philippine German Wire Mesh Reinforcing
Corporation ("FILFORCE") with the National Labor Relations Commission ("NLRC").
Parenthetically, five (5) years earlier, or on 28 July 1983, FILFORCE had mortgaged its
plant and other property located at EPZA, Mariveles, Bataan, in favor of herein petitioner
Philippine Export and Foreign Loan Guarantee Corporation ("PHILGUARANTEE"), a
government owned and controlled corporation, to secure a guarantee which the latter
executed in favor of Kuwait Asia Bank, E.C., over fifty one percent (51%) of the
US$1,357,600.00 loan which had been extended to FILFORCE by the bank.
- The Labor Arbiter rendered a judgment favorable to Diehl. Since no appeal was filed,
the decision became final and the Labor Arbiter issued a writ of execution directing NLRC
Sheriff to execute the judgment against FILFORCE and Basilio Sison. Failing to collect
the sum due, the Sheriff was directed to cause the satisfaction of the award by levying on
the property of FILFORCE. The Deputy Sheriff effected the levy and scheduled a public
auction sale.
- Since the assets had previously been mortgaged to it, PHILGUARANTEE filed a thirdparty claim which resulted in the suspension of the scheduled auction sale. Upon the
submission by Diehl of an indemnity bond issued by Plaridel Surety and Insurance
Company, with a face value of P1,320,772.11, the Deputy Sheriff issued a notice
resetting the auction sale. PHILGUARANTEE promptly filed a petition/manifestation
before the Labor Arbiter questioning, among other things, the integrity of the indemnity
bond posted by Diehl and, at the same time, asserting its superior right and prior lien
over the levied property. Deputy Sheriff proceeded, nonetheless, with the auction sale at
which Diehl was declared the sole and winning bidder.
- PHILGUARANTEE went to the Regional Trial Court of Makati and there filed a
complaint for "Annulment of Sale, Recovery of Possession and Injunction with Urgent
Prayer for the Issuance of a Writ of Preliminary Injunction and/or Temporary Restraining
Order and/or Status Quo Order".
ISSUE
WON CA can issue a preliminary injunction
HELD
- The appellate court did not commit error. The question of whether or not the trial court
below was in any good position to take cognizance over the complaint filed by
PHILGUARANTEE and to issue an injunctive relief depended, in turn, on whether or not
the acts complained of arose out of, or were connected or interwoven with, cases falling
under the exclusive jurisdiction of the Labor Arbiter or the NLRC. While, ostensibly, the
complaint filed with the trial court was for the annulment of sale, recovery of possession
and injunction, in essence, however, the action challenged the legal propriety of the
execution sale, as well as the acts performed by the Labor Arbiter and the Deputy Sheriff

A2010

- 169 -

Disini

in the conduct thereof, and the subsequent issuance of an alias writ of execution. In
reality, petitioner's action to annul the execution sale was a motion to quash the writ of
execution on a case aptly within the jurisdiction of the Labor Arbiter. The case brought
before the trial court, being a matter growing out of the labor dispute decided by the
Labor Arbiter, clearly fell outside the competence of the trial court.
- Another reason that militates against the trial court's assumption of jurisdiction over the
case is Article 254 of the Labor Code which states:
Art. 254. Injunction prohibited. No temporary or permanent injunction or restraining
order in any case involving or growing out of labor disputes shall be issued by any
court or other entity,
The Court, however, cannot end its ponencia on this simple case without calling attention
to serious lapses in the proceedings before the Labor Arbiter concerning the third party
claim of PHILGUARANTEE. Section 2, Rule VI, of the Manual of Instructions for Sheriffs
of the NLRC prescribes in detail the procedure that must be followed in the event that the
property levied upon to satisfy a final judgment is claimed by any person other than the
losing party, viz.:
Sec. 2. Proceedings. If property levied upon be claimed by any person other than
the losing party or his agent, such person shall make an affidavit of his title thereto or
right to the possession thereof, stating the grounds of such right or title and shall file
the same with the sheriff and copies thereof served upon the Labor Arbiter or proper
officer issuing the writ and upon the prevailing party. Upon receipt of the third party
claim, all proceedings with respect to the execution of the property subject of the third
party claim shall automatically be suspended and the Labor Arbiter or proper officer
issuing the writ shall conduct a hearing with due notice to all parties concerned and
resolve the validity of the claim within ten (10) working days from receipt thereof and
his decision is appealable to the Commission within ten (10) working days from
notice, and the Commission shall likewise resolve the appeal within the same period.
However, should the prevailing party put up an indemnity bond in a sum not less than
the value of the property levied, the execution shall proceed. In case of disagreement
as to such value, the same shall be determined by the Labor Arbiter, National Labor
Relations Commission or the Philippine Overseas Employment Administration issuing
the writ, as the case may be.
Evidently, the Court's exhortation in Guimoc v. Rosales, i.e., that "(i)n executing an order,
resolution, or decision of the NLRC, the sheriff of the Commission, or other officer acting
as such, must be guided strictly by the Sheriff's Manual . . .," was not properly heeded.
- We could consider the following:
1. The Manual requires that the indemnity bond that must be posted up by the
prevailing party should be in a sum not less than the value of the property levied.
Here, Diehl has put up a bond of only P1,320,772.11; the appraised value, however,
totals P4,934,000.00.
2. The Manual provides that in case of disagreement on the value of the property
levied, the matter shall be determined by the Labor Arbiter. Not only did
PHILGUARANTEE promptly challenge the integrity of the bond submitted by Diehl but
it also did question the amount of the bond. Since the difference is substantial, it
should have behooved the Labor Arbiter to take more than just a passing glance on
the claim of PHILGUARANTEE.
- A final observation. On 21 March 1989, Article 110 of the Labor Code was amended by
Republic Act No. 6715 so as to read:
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards their wages and other monetary claims, any provisions of law to the contrary
notwithstanding. Such unpaid wages and monetary claims shall be paid in full before
claims of the Government and other creditors may be paid.
- In Development Bank of the Philippines vs. National Labor Relations Commission (183
SCRA 328, 336-339), the Court has said:
The amendment expands worker preference to cover not only unpaid wages but also
other monetary claims to which even claims of the Government must be deemed
subordinate.
xxx xxx xxx
Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been
eliminated. Does this mean then that liquidation proceedings have been done away
with?
We opine in the negative, upon the following considerations:
1. Because of its impact on the entire system of credit, Article 110 of the Labor Code
cannot be viewed in isolation but must be read in relation to the Civil Code scheme on
classification and preference of credits.
xxx xxx xxx
2. In the same way that the Civil Code provisions on classification of credits and the
Insolvency Law have been brought into harmony, so also must the kindred provisions
of the Labor Law be made to harmonize with those laws.
3. In the event of insolvency, a principal objective should be to effect an equitable
distribution of the insolvent's property among his creditors. To accomplish this there
must first be some proceeding where notice to all of the insolvent's creditors may be
given and where the claims of preferred creditors may be bindingly adjudicated (De
Barretto vs. Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). The

Labor Law 1
rationale therefore has been expressed in the recent case of DBP vs. Secretary of
Labor (G.R. No. 79351, 28 November 1989), which we quote:
xxx xxx xxx
4. A distinction should be made between a preference of credit and a lien. A
preference applies only to claims which do not attach to specific properties. A lien
creates a charge on a particular property. The right of first preference as regards
unpaid wages recognized by Article 110 does not constitute a lien on the property of
the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a
preference in application. It is a method adopted to determine and specify the order in
which credits should be paid in the final distribution of the proceeds of the insolvent's
assets. It is a right to a first preference in the discharge of the funds of the judgment
debtor.
xxx xxx xxx
6. Even if Article 110 and its implementing Rule, as amended, should be interpreted to
mean "absolute preference," the same should be given only prospective effect in line
with the cardinal rule that laws shall have no retroactive effect, unless the contrary is
provided (Article 4, Civil Code). Thereby, any infringement on the constitutional
guarantee on non-impairment of the obligation of contracts (Section 10, Article III,
1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated
by several years the amendatory law, RA No. 6715. To give Article 110 retroactive
effect would be to wipe out the mortgage in DBP's favor and expose it to a risk which
it sought to protect itself against by requiring a collateral in the form of real property.
In fine, the right to preference given to workers under Article 110 of the Labor Code
cannot exist in any effective way prior to the time of its presentation in distribution
proceedings. It will find application when, in proceedings such as insolvency, such
unpaid wages shall be paid in full before the "claims of the Government and other
creditors" may be paid. But, for an orderly settlement of a debtor's assets, all creditors
must be convened, their claims ascertained and inventoried, and thereafter the
preferences determined in the course of judicial proceedings which have for their
object the subjection of the property of the debtor to the payment of his debts or other
lawful obligations. Thereby, an orderly determination of preference of creditors' claims
is assured (Philippine Savings Bank vs. Lantin, No. L-33929, September 2, 1983, 124
SCRA 476); the adjudication made will be binding on all parties-in-interest, since
those proceedings are proceedings in rem; and the legal scheme of classification,
concurrence and preference of credits in the Civil Code, the Insolvency Law, and the
Labor Code is preserved in harmony.
Disposition Petition DENIED. Assailed decision of the CA AFFIRMED.

BARAYOGA V ASSET PRIVATIZATION TRUST

473 SCRA 690
PANGANIBAN; October 24, 2005
NATURE
Petition for review of the decision of the CA reversing the findings of the NLRC
FACTS
- Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia
Sugar Development Corporation (BISUDECO), a sugar plantation mill located in Himaao,
Pili, Camarines Sur.
- On December 8, 1986, Respondent Asset Privatization Trust (APT), a public trust was
created under Proclamation No. 50, as amended, mandated to take title to and
possession of, conserve, provisionally manage and dispose of non-performing assets of
the Philippine government identified for privatization or disposition.
- Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino
issued Administrative Order No. 14 identifying certain assets of government institutions
that were to be transferred to the National Government and among the assets transferred
was the financial claim of the Philippine National Bank against BISUDECO in the form of
a secured loan.
- Consequently, by virtue of a Trust Agreement executed between the National
Government and APT on February 27, 1987, APT was constituted as trustee over
BISUDECOs account with the PNB. Sometime later, on August 28, 1988, BISUDECO
contracted the services of Philippine Sugar Corporation (Philsucor) to take over the
management of the sugar plantation and milling operations until August 31, 1992.
- Meanwhile, because of the continued failure of BISUDECO to pay its outstanding loan
with PNB, its mortgaged properties were foreclosed and subsequently sold in a public
auction to APT, as the sole bidder. On April 2, 1991, APT was issued a Sheriffs
Certificate
of
Sale.
- On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal,
illegal deduction and underpayment of wages and other labor standard benefits plus
damages.
- On March 2, 1993, the union filed an amended complaint, impleading as additional
party respondents APT and Pensumil, the company that took over its sugar milling
operations.

A2010

- 170 -

Disini

- In their Position Paper, the union alleged that when Philsucor initially took over the
operations of the company, it retained BISUDECOs existing personnel under the same
terms and conditions of employment. Nonetheless, at the start of the season sometime
in May 1991, Philsucor started recalling workers back to work, to the exception of the
union members. Management told them that they will be re-hired only if they resign from
the union. Just the same, thereafter, the company started to employ the services of
outsiders
under
the
pakyaw
system.
- BISUDECO, Pensumil and APT all interposed the defense of lack of employeremployee relationship.
ISSUE
WON APT is liable for the claims of petitioners against their former employer
HELD
NO
- Responsibility for the liabilities of a mortgagor towards its employees cannot be
transferred via an auction sale to a purchaser who is also the mortgagee-creditor of the
foreclosed assets and chattels. Clearly, the mortgagee-creditor has no employeremployee relations with the mortgagors workers. The mortgage constitutes a lien on the
determinate properties of the employer-debtor, because it is a specially preferred credit
to which the workers monetary claims is deemed subordinate.
- The duties and liabilities of BISUDECO, including its monetary liabilities to its
employees, were not all automatically assumed by APT as purchaser of the foreclosed
properties at the auction sale. Any assumption of liability must be specifically and
categorically agreed upon. In Sundowner Development Corp. v. Drilon the Court ruled
that, unless expressly assumed, labor contracts like collective bargaining agreements are
not enforceable against the transferee of an enterprise. Labor contracts are in personam
and thus binding only between the parties.
- No succession of employment rights and obligations can be said to have taken place
between the two. Between the employees of BISUDECO and APT, there is no privity of
contract that would make the latter a substitute employer that should be burdened with
the obligations of the corporation.
- The rule has been laid down that the sale or disposition must be motivated by good
faith as an element of exemption from liability. Indeed, an innocent transferee of a
business establishment has no liability to the employees of the transferor to continue
employing them. Nor is the transferee liable for past unfair labor practices of the
previous owner, except, when the liability therefor is assumed by the new employer
under the contract of sale, or when liability arises because of the new owners
participation in thwarting or defeating the rights of the employees.
- The liabilities of the previous owner to its employees are not enforceable against the
buyer or transferee, unless (1) the latter unequivocally assumes them; or (2) the sale or
transfer was made in bad faith. Thus, APT cannot be held responsible for the monetary
claims of petitioners who had been dismissed even before it actually took over
BISUDECOs assets.
- it should be remembered that APT merely became a transferee of BISUDECOs assets
for purposes of conservation because of its lien on those assets -- a lien it assumed as
assignee of the loan secured by the corporation from PNB. Subsequently, APT, as the
highest bidder in the auction sale, acquired ownership of the foreclosed properties.
- Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by
Republic Act No. 6715, which reads:
Article 110. Workers preference in case of bankruptcy. In the event of bankruptcy
or liquidation of the employers business, his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims shall be paid in full before the
claims of the Government and other creditors may be paid.
- This Court has ruled in a long line of cases that under Articles 2241 and 2242 of the
Civil Code, a mortgage credit is a special preferred credit that enjoys preference
with respect to a specific/determinate property of the debtor. On the other hand,
the workers preference under Article 110 of the Labor Code is an ordinary
preferred credit. While this provision raises the workers money claim to first
priority in the order of preference established under Article 2244 of the Civil Code,
the claim has no preference over special preferred credits.
- Thus, the right of employees to be paid benefits due them from the properties of their
employer cannot have any preference over the latters mortgage credit. In other words,
being a mortgage credit, APTs lien on BISUDECOs mortgaged assets is a special
preferred lien that must be satisfied first before the claims of the workers.
- In Development Bank of the Philippines v. NLRC the rationale of this ruling was
explained as follows:
A preference applies only to claims which do not attach to specific properties. A lien
creates a charge on a particular property. The right of first preference as regards
unpaid wages recognized by Article 110 does not constitute a lien on the property of
the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a
preference in application. It is a method adopted to determine and specify the order
in which credits should be paid in the final distribution of the proceeds of the
insolvents assets. It is a right to a first preference in the discharge of the funds of the

Labor Law 1
judgment debtor. Furthermore, workers claims for unpaid wages and monetary
benefits cannot be paid outside of a bankruptcy or judicial liquidation proceedings
against the employer. It is settled that the application of Article 110 of the Labor Code
is contingent upon the institution of those proceedings, during which all creditors are
convened, their claims ascertained and inventoried, and their preferences determined.
Assured thereby is an orderly determination of the preference given to creditors
claims; and preserved in harmony is the legal scheme of classification, concurrence
and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code.
The Court hastens to add that the present Petition was brought against APT alone. In
holding that the latter, which has never really been an employer of petitioners, is not
liable for their claims, this Court is not reversing or ruling upon their entitlement to
back wages and other unpaid benefits from their previous employer.
Disposition Petition denied

RECEIVERSHIP
RUBBERWORLD (PHILS) INC V NLRC
336 S 433
PARDO; July 26, 2000
NATURE
Petition to annul the resolution of the National Labor Relations Commission
FACTS
- Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin Camitan, Alicia M. San
Pedro, and Felomena Tolin were employed as dispatcher, warehouseman, issue monitor,
foreman, jacks cementer and outer sole attacher, respectively. On August 26, 1994,
Rubberworld filed with the Department of Labor and Employment a notice of temporary
shutdown of operations to take effect on September 26, 1994. Before the effectivity date,
however, Rubberworld was forced to prematurely shutdown its operations. On November
11, 1994, private respondents filed with the National Labor Relations Commission a
complaint against petitioner for illegal dismissal and non-payment of separation pay.On
November 22, 1994, Rubberworld filed with the Securities and Exchange Commission
(SEC) a petition for declaration of suspension of payments with a proposed rehabilitation
plan
- On December 28, 1994, SEC issued the following order:
"Accordingly, with the creation of the Management Committee, all actions for claims
against Rubberworld Philippines, Inc. pending before any court, tribunal, office, board,
body, Commission or sheriff are hereby deemed SUSPENDED."Consequently, all
pending incidents for preliminary injunctions, writ or attachments, foreclosures and the
like are hereby rendered moot and academic.
- On January 24, 1995, petitioners submitted to the labor arbiter a motion to suspend the
proceedings invoking the SEC order dated December 28, 1994. The labor arbiter did not
act on the motion and ordered the parties to submit their respective position papers.
- On December 10, 1995, the labor arbiter rendered a decision, which provides: "In the
light of the foregoing, respondents are hereby declared guilty of Illegal Shurtdown. On
February 5, 1996, petitioners appealed to the National Labor Relations Commission
(NLRC) alleging abuse of discretion and serious errors in the findings of facts of the labor
arbiter. On August 30, 1996, NLRC issued a resolution affirming the decision with
modification in that the award of moral and exemplary damages were deleted
ISSUE
WON the Department of Labor and Employment, the Labor Arbiter and the National
Labor Relations Commission may legally act on the claims of respondents despite the
order of the Securities and Exchange Commission suspending all actions against a
company under rehabilitation by a management committee created by the Securities and
Exchange Commission.
HELD
NO
- The petition is hereby granted. The decision of the labor arbiter dated December 10,
1995 and the NLRC resolution dated August 30, 1996, are SET ASIDE.
Ratio Presidential Decree No. 902-A is clear that "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." The law did not
make any exception in favor of labor claims. The justification for the automatic stay of all
pending actions for claims is to enable the management committee or the rehabilitation
receiver to effectively exercise its/his powers free from any judicial or extra judicial
interference that might unduly hinder or prevent the 'rescue' of the debtor company. To
allow such other actions to continue would only add to the burden of the management
committee or rehabilitation receiver, whose time, effort and resources would be wasted in
defending claims against the corporation instead of being directed toward its restructuring
and rehabilitation. Thus, the labor case would defeat the purpose of an automatic stay. To

A2010

- 171 -

Disini

rule otherwise would open the floodgates to numerous claims and would defeat the
rescue efforts of the management committee.
- This finds ratiocination in that the power to hear and decide labor disputes is deemed
suspended when the Securities and Exchange Commission puts the corporation under
rehabilitation. Thus, when NLRC proceeded to decide the case despite the SEC
suspension order, the NLRC acted without or in excess of its jurisdiction to hear and
decide cases. As a consequence, any resolution, decision or order that it rendered or
issued without jurisdiction is a nullity.

9.18 WAGE RECOVERY AND ATTORNEYS

FEES
PLACEWELL INTERNATIONAL V CAMOTE
[PAGE 117]