Conditions of Work
emergency has been declared by the National Assembly or the Chief
HOURS OF WORK
Article 82. Coverage. The provisions of this Title shall apply to
employees in all establishments and undertakings whether for profit
or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent
on him for support, domestic helpers, persons in the personal service
of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
As used herein, "managerial employees" refer to those whose primary
duty consists of the management of the establishment in which they
are employed or of a department or subdivision thereof, and to other
officers or members of the managerial staff.
"Field personnel" shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty.
Article 83. Normal hours of work. The normal hours of work of any
employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a population of at
least one million (1,000,000) or in hospitals and clinics with a bed
capacity of at least one hundred (100) shall hold regular office hours
for eight (8) hours a day, for five (5) days a week, exclusive of time for
meals, except where the exigencies of the service require that such
personnel work for six (6) days or forty-eight (48) hours, in which case,
they shall be entitled to an additional compensation of at least thirty
percent (30%) of their regular wage for work on the sixth day. For
purposes of this Article, "health personnel" shall include resident
physicians, nurses, nutritionists, dietitians, pharmacists, social
workers, laboratory technicians, paramedical technicians,
psychologists, midwives, attendants and all other hospital or clinic
personnel.
Article 84. Hours worked. Hours worked shall include (a) all time
during which an employee is required to be on duty or to be at a
prescribed workplace; and (b) all time during which an employee is
suffered or permitted to work.
Rest periods of short duration during working hours shall be counted
as hours worked.
Article 85. Meal periods. Subject to such regulations as the Secretary
of Labor may prescribe, it shall be the duty of every employer to give
his employees not less than sixty (60) minutes time-off for their regular
meals.
Article 86. Night shift differential. Every employee shall be paid a
night shift differential of not less than ten percent (10%) of his regular
wage for each hour of work performed between ten oclock in the
evening and six oclock in the morning.
Article 87. Overtime work. Work may be performed beyond eight (8)
hours a day provided that the employee is paid for the overtime work,
an additional compensation equivalent to his regular wage plus at
least twenty-five percent (25%) thereof. Work performed beyond eight
hours on a holiday or rest day shall be paid an additional
compensation equivalent to the rate of the first eight hours on a
holiday or rest day plus at least thirty percent (30%) thereof.
Article 88. Undertime not offset by overtime. Undertime work on any
particular day shall not be offset by overtime work on any other day.
Permission given to the employee to go on leave on some other day
of the week shall not exempt the employer from paying the additional
compensation required in this Chapter.
Article 89. Emergency overtime work. Any employee may be required
by the employer to perform overtime work in any of the following
cases:
When the country is at war or when any other national or local
Executive;
When it is necessary to prevent loss of life or property or in case of
imminent danger to public safety due to an actual or impending
emergency in the locality caused by serious accidents, fire, flood,
typhoon, earthquake, epidemic, or other disaster or calamity;
When there is urgent work to be performed on machines, installations,
or equipment, in order to avoid serious loss or damage to the
employer or some other cause of similar nature;
When the work is necessary to prevent loss or damage to perishable
goods; and
Where the completion or continuation of the work started before the
eighth hour is necessary to prevent serious obstruction or prejudice to
the business or operations of the employer.
Any employee required to render overtime work under this Article shall
be paid the additional compensation required in this Chapter.
Article 90. Computation of additional compensation. For purposes of
computing overtime and other additional remuneration as required by
this Chapter, the "regular wage" of an employee shall include the cash
wage only, without deduction on account of facilities provided by the
employer.
REGULATIONS; RATIONALE
Manila Terminal Co. Inc. vs. CIR
On September 1, 1945, the Manila Terminal Company, Inc.
hereinafter to be referred as to the petitioner, undertook the arrastre
service in some of the piers in Manila's Port Area at the request and
under the control of the United States Army. The petitioner hired some
thirty men as watchmen on twelve-hour shifts at a compensation of
P3 per day for the day shift and P6 per day for the night shift. On
February 1, 1946, the petitioner began the postwar operation of the
arrastre service at the present at the request and under the control of
the Bureau of Customs, by virtue of a contract entered into with the
Philippine Government. The watchmen of the petitioner continued in
the service with a number of substitutions and additions, their salaries
having been raised during the month of February to P4 per day for the
day shift and P6.25 per day for the nightshift. On March 28, 1947,
Dominador Jimenez, a member of the Manila Terminal Relief and
Mutual Aid Association, sent a letter to the Department of Labor,
requesting that the matter of overtime pay be investigated, but nothing
was done by the Department. On April 29, 1947, Victorino Magno
Cruz and five other employees, also member of the Manila Transit
Mutual Aid Association, filed a 5-point demand with the Department
of Labor, including overtime pay, but the Department again filed to do
anything about the matter. On May 27, 1947, the petitioner instituted
the system of strict eight-hour shifts. On June 19, 1947, the Manila
Port Terminal Police Association, not registered in accordance with
the provisions of Commonwealth Act No. 213, filed a petition with the
Court of Industrial Relations. On July 16, 1947, the Manila Terminal
Relief and Mutual Aid Association was organized for the first time,
having been granted certificate No. 375 by the Department of Labor.
On July 28, 1947, Manila Terminal Relief and Mutual Aid Association
filed an amended petition with the Court of Industrial Relations
praying, among others, that the petitioner be ordered to pay its
watchmen or police force overtime pay from the commencement of
their employment. On May 9, 1949, by virtue of Customs
Administrative Order No. 81 and Executive Order No. 228 of the
President of the Philippines, the entire police force of the petitioner
was consolidated with the Manila Harvor Police of the Customs Patrol
Service, a Government agency under the exclusive control of the
Commissioner of Customs and the Secretary of Finance The Manila
Terminal Relief and Mutual Aid Association will hereafter be referred
to as the Association.
Judge V. Jimenez Yanson of the Court of Industrial Relations in his
decision of April 1, 1950, as amended on April 18, 1950, while
dismissing other demands of the Association for lack of jurisdiction,
ordered the petitioner to pay to its police force
(a) Regular or base pay corresponding to four hours' overtime plus 25
per cent thereof as additional overtime compensation for the period
from September 1, 1945 to May 24, 1947;
(b) Additional compensation of 25 per cent to those who worked from
6:00 p.m. to 6:00 a.m. during the same period:
(c) Additional compensation of 50 per cent for work performed on
Sundays and legal holidays during the same period;
(d) Additional compensation of 50 per cent for work performed on
Sundays and legal holidays from May 24, 1947 to May 9, 1949; and
(e) Additional compensation of 25 per cent for work performed at night
from May 29, 1947 to May 9, 1949.
With reference to the pay for overtime service after the watchmen had
been integrated into the Manila Harbor Police, Judge Yanson ruled
that the court has no jurisdiction because it affects the Bureau of
Customs, an instrumentality of the Government having no
independent personality and which cannot be sued without the
consent of the State. (Metran vs. Paredes, 45. Off. Gaz., 2835.)
The petitioner find a motion for reconsideration. The Association also
filed a motion for reconsideration in so far its other demands were
dismissed. Judge Yanson, concurred in by Judge Jose S. Bautista,
promulgated on July 13, 1950, a resolution denying both motions for
reconsideration. Presiding Judge Arsenio C. Roldan, in a separate
opinion concurred in by Judge Modesto Castillo, agreed with the
decision of Judge Yanson of April 1, 1950, as to the dismissal of other
demands of the Association, but dissented therefrom as to the
granting of overtime pay. In a separate decisive opinion, Judge Juan
S. Lanting concurred in the dismissal of other demands of the
Association. With respect to overtime compensation, Judge Lanting
ruled:
1. The decision under review should be affirmed in so far it grants
compensation for overtime on regular days (not Sunday and legal
holidays)during the period from the date of entrance to duty to May
24, 1947, such compensation to consists of the amount corresponding
to the four hours' overtime at the regular rate and an additional amount
of 25 per cent thereof.
2. As to the compensation for work on Sundays and legal holidays,
the petitioner should pay to its watchmen the compensation that
corresponds to the overtime (in excess of 8 hours) at the regular rate
only, that is, without any additional amount, thus modifying the
decision under review accordingly.
3. The watchmen are not entitled to night differential pay for past
services, and therefore the decision should be reversed with the
respect thereto.
The petitioner has filed a present petition for certiorari. Its various
contentions may be briefly summed up in the following propositions:
(1) The Court of Industrial Relations has no jurisdiction to render a
money judgment involving obligation in arrears. (2) The agreement
under which its police force were paid certain specific wages for
twelve-hour shifts, included overtime compensation. (3) The
Association is barred from recovery by estoppel and laches. (4) the
nullity or invalidity of the employment contract precludes any recovery
by the Association. (5) Commonwealth Act No. 4444 does not
authorize recovery of back overtime pay.
The contention that the Court of Industrial Relations has no jurisdiction
to award a money judgment was already overruled by this Court in
G.R. No. L-4337, Detective & protective Bureau, Inc. vs. Court of
Industrial Relations and United Employees Welfare Association, 90
Phil., 665, in this wise: "It is also argued that the respondent court has
no jurisdiction to award overtime pay, which is money judgment. We
believe that under Commonwealth Act No. 103 the Court is
empowered to make the order for the purpose of settling disputes
between the employer and employee1. As a matter of fact this Court
has confirmed an order of the Court of Industrial Relations requiring
the Elks Club to pay to its employees certain sum of money as
overtime back wages from June 3, 1939 to March 13, 1941. This, in
spite the allegation of lack or excess of jurisdiction on the part of said
court. (45 Off. Gaz., 3829; 80 Phil. 272)"
The important point stressed by the petitioner is that the contract
between it and the Association upon the commencement of the
employment of its watchman was to the certain rates of pay, including
overtime compensation namely, P3 per day for the day shift and P6
per day for night shift beginning September 1, 1945, and P4 per day
shift and P6.25 per day for the night shift since February, 1946. The
record does not bear out these allegations. The petitioner has relied
merely on the facts that its watchmen had worked on twelve-hour
shifts at specific wages per day and that no complaint was made
about the matter until, first on March 28, 1947 and, secondly, on April
29, 1947.
In times of acute unemployment, the people, urged by the instinct of
self-preservation, go from place to place and from office to office in
search for any employment, regardless of its terms and conditions,
their main concern in the first place being admission to some work.
Specially for positions requiring no special qualifications, applicants
would be good as rejected if they ever try to be inquisitive about the
hours of work or the amount of salary, ever attempt to dictate their
terms. The petitioner's watchmen must have railroaded themselves
into their employment, so to speak, happy in the thought that they
would then have an income on which to subsist. But, at the same time,
they found themselves required to work for twelve hours a day. True,
there was agreement to work, but can it fairly be supposed that they
had the freedom to bargain in any way, much less to insist in the
observance of the Eight Hour Labor Law?
As was aptly said in Floyd vs. Du Bois Soap Co., 1942, 317 U. S. 596,
63 Sup. Ct. 159; 6 CCH Labor Cases, Par. 51, 147, "A contract of
employment, which provides for a weekly wage for a specified number
of hours, sufficient to cover both the statutory minimum wage and
overtime compensation, if computed on the basis of the statutory
minimum wage, and which makes no provision for a fixed hourly rate
or that the weekly wage includes overtime compensation, does not
meet the requirements of the Act."
Moreover, we note that after the petition had instituted the strict eight-
hour shifts, no reduction was made in the salaries which its watchmen
received under the twelve hour arrangement. Indeed, as admitted by
the petitioner, "when the members or the respondent union were
placed on strict eight-hour shifts, the lowest salary of all the members
of the respondent union was P165 a month, or P5.50 daily, for both
day and night shifts." Although it may be argued that the salary for the
night shift was somewhat lessened, the fact that the rate for the day
shift was increased in a sense tends to militate against the contention
that the salaries given during the twelve-hour shifts included overtime
compensation.
Petitioner's allegation that the association had acquiesced in the
twelve-hour shifts for more than 18 months, is not accurate, because
the watchmen involved in this case did not enter the service of the
petitioner, at one time, on September 1, 1945. As Judge Lanting
found, "only one of them entered the service of the company on said
date, very few during the rest of said month, some during the rest of
that year (1945) and in 1946, and very many in 1947, 1948 and 1949."
The case at bar is quite on all fours with the case of Detective &
Protective Bureau, Inc. vs. Court of Industrial Relations and United
Employees Welfare Association, supra, in which the facts were as
follows: "The record discloses that upon petition properly submitted,
said court made an investigation and found that the members of the
United Employees Welfare Association (hereafter called the
Association) were in the employ of the petitioner Detective and
Protective Bureau, Inc. (herein called the Bureau) which is engaged
in the business of furnishing security guards to commercial and
industrial establishments, paying to said members monthly salaries
out of what it received from the establishments benefited by guard
service. The employment called for daily tours of duty for more than
eight hours, in addition to work on Sundays and holidays. Nonetheless
the members performed their labors without receiving extra
compensation." The only difference is that, while in said case the
employees concerned were paid monthly salaries, in the case now
before us the wages were computed daily. In the case cited, we held
the following:
It appears that the Bureau had been granting the members of the
Association, every month, "two days off" days in which they rendered
no service, although they received salary for the whole month. Said
Bureau contended below that the pay corresponding to said 2 day
vacation corresponded to the wages for extra work. The court rejected
the contention, quite properly we believe, because in the contract
there was no agreement to that effect; and such agreement, if any,
would probably be contrary to the provisions of the Eight-Hour Law
(Act No. 444, sec. 6) and would be null and void ab initio.
It is argued here, in opposition to the payment, that until the
commencement of this litigation the members of the Association never
claimed for overtime pay. That may be true. Nevertheless the law
gives them the right to extra compensation. And they could not be
held to have impliedly waived such extra compensation, for the
obvious reason that could not have expressly waived it.
The foregoing pronouncements are in point. The Association cannot
be said to have impliedly waived the right to overtime compensation,
for the obvious reason that they could not have expressly waived it."
The principle of estoppel and the laches cannot well be invoked
against the Association. In the first place, it would be contrary to the
spirit of the Eight Hour Labor Law, under which as already seen, the
laborers cannot waive their right to extra compensation. In the second
place, the law principally obligates the employer to observe it, so
much so that it punishes the employer for its violation and leaves the
employee or laborer free and blameless. In the third place, the
employee or laborer is in such a disadvantageous position as to be
naturally reluctant or even apprehensive in asserting any claim which
may cause the employer to devise a way for exercising his right to
terminate the employment.
If the principle of estoppel and laches is to be applied, it may bring
about a situation, whereby the employee or laborer, who cannot
expressly renounce their right to extra compensation under the Eight-
Hour Labor Law, may be compelled to accomplish the same thing by
mere silence or lapse of time, thereby frustrating the purpose of law
by indirection.
While counsel for the petitioner has cited authorities in support of the
doctrine invoked, there are also authorities pointed out in the opinion
of Judge Lanting to the contrary. Suffice it to say, in this connection,
that we are inclined to rule adversely against petitioner for the reasons
already stated.
The argument that the nullity or invalidity of the employment contract
precludes recovery by the Association of any overtime pay is also
untenable. The argument, based on the supposition that the parties
are in pari delicto, was in effect turned down in Gotamo Lumber Co.
vs. Court of Industrial Relations,* 47 Off. Gaz., 3421, wherein we
ruled: "The petitioner maintains that as the overtime work had been
performed without a permit from the Department of Labor, no extra
compensation should be authorized. Several decisions of this court
are involved. But those decisions were based on the reasoning that
as both the laborer and employer were duty bound to secure the
permit from the Department of Labor, both were in pari delicto.
However the present law in effect imposed that duty upon the
employer (C.A. No. 444). Such employer may not therefore be heard
to plead his own neglect as exemption or defense.
The employee in rendering extra service at the request of his
employer has a right to assume that the latter has complied with the
requirement of the law, and therefore has obtained the required
permission from the Department of Labor.
Moreover, the Eight-Hour Law, in providing that "any agreement or
contract between the employer and the laborer or employee contrary
to the provisions of this Act shall be null avoid ab initio,"
(Commonwealth Act No. 444, sec. 6), obviously intended said
provision for the benefit of the laborers or employees. The employer
cannot, therefore, invoke any violation of the act to exempt him from
liability for extra compensation. This conclusion is further supported
by the fact that the law makes only the employer criminally liable for
any violation. It cannot be pretended that, for the employer to commit
any violation of the Eight-Hour Labor Law, the participation or
acquiescence of the employee or laborer is indispensable, because
the latter in view of his need and desire to live, cannot be considered
as being on the same level with the employer when it comes to the
question of applying for and accepting an employment.
Petitioner also contends that Commonwealth Act No. 444 does not
provide for recovery of back overtime pay, and to support this
contention it makes referrence to the Fair Labor Standards Act of the
United States which provides that "any employer who violates the
provisions of section 206 and section 207 of this title shall be liable to
the employee or employees affected in the amount of their unpaid
minimum wages or their unpaid overtime compensation as the case
may be," a provision not incorporated in Commonwealth Act No.
444, our Eight-Hour Labor Law. We cannot agree to the proposition,
because sections 3 and 5 of Commonwealth Act 444 expressly
provides for the payment of extra compensation in cases where
overtime services are required, with the result that the employees or
laborers are entitled to collect such extra compensation for past
overtime work. To hold otherwise would be to allow an employer to
violate the law by simply, as in this case, failing to provide for and pay
overtime compensation.
The point is stressed that the payment of the claim of the Association
for overtime pay covering a period of almost two years may lead to
the financial ruin of the petitioner, to the detriment of its employees
themselves. It is significant, however, that not all the petitioner's
watchmen would receive back overtime pay for the whole period
specified in the appealed decision, since the record shows that the
great majority of the watchmen were admitted in 1946 and 1947, and
even 1948 and 1949. At any rate, we are constrained to sustain the
claim of the Association as a matter of simple justice, consistent with
the spirit and purpose of the Eight-Hour Labor Law. The petitioner, in
the first place, was required to comply with the law and should
therefore be made liable for the consequences of its violation.
It is high time that all employers were warned that the public is
interested in the strict enforcement of the Eight-Hour Labor Law. This
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.
Wherefore, the appealed decision, in the form voted by Judge Lanting,
is affirmed, it being understood that the petitioner's watchmen will be
entitled to extra compensation only from the dates they respectively
entered the service of the petitioner, hereafter to be duly determined
by the Court of Industrial Relations. So ordered, without costs.
COVERAGE; EXEMPTION
Article 82. Coverage. The provisions of this Title shall apply to
employees in all establishments and undertakings whether for profit
or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent
on him for support, domestic helpers, persons in the personal service
of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
As used herein, "managerial employees" refer to those whose primary
duty consists of the management of the establishment in which they
are employed or of a department or subdivision thereof, and to other
officers or members of the managerial staff.
"Field personnel" shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty.
Article 276. Government employees. The terms and conditions of
employment of all government employees, including employees of
government-owned and controlled corporations, shall be governed by
the Civil Service Law, rules and regulations. Their salaries shall be
standardized by the National Assembly as provided for in the New
Constitution. However, there shall be no reduction of existing wages,
benefits and other terms and conditions of employment being enjoyed
by them at the time of the adoption of this Code.
Government Employee
Art. 9-B. (Consti)
B. The Civil Service Commission
SECTION 1.
(1) The Civil Service shall be administered by the Civil Service
Commission composed of a Chairman and two
Commissioners who shall be natural-born citizens of the
Philippines and, at the time of their appointment, at least
thirty-five years of age, with proven capacity for public
administration, and must not have been candidates for any
elective position in the elections immediately preceding
their appointment.
(2) The Chairman and the Commissioners shall be appointed
by the President with the consent of the Commission on
Appointments for a term of seven years without
reappointment. Of those first appointed, the Chairman shall
hold office for seven years, a Commissioner for five years,
and another Commissioner for three years, without
reappointment. Appointment to any vacancy shall be only
for the unexpired term of the predecessor. In no case shall
any Member be appointed or designated in a temporary or
acting capacity.
SECTION 2.
(1) The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
including government-owned or controlled
corporations with original charters.
(2) Appointments in the civil service shall be made only
according to merit and fitness to be determined, as far
as practicable, and, except to positions which are
policy-determining, primarily confidential, or highly
technical, by competitive examination.
(3) No officer or employee of the civil service shall be
removed or suspended except for cause provided by
law.
(4) No officer or employee in the civil service shall
engage, directly or indirectly, in any electioneering or
partisan political campaign.
(5) The right to self-organization shall not be denied to
government employees.
(6) Temporary employees of the Government shall be
given such protection as may be provided by law.
(7)
SECTION 3. The Civil Service Commission, as the central personnel
agency of the Government, shall establish a career service and adopt
measures to promote morale, efficiency, integrity, responsiveness,
progressiveness, and courtesy in the civil service. It shall strengthen
the merit and rewards system, integrate all human resources
development programs for all levels and ranks, and institutionalize a
management climate conducive to public accountability. It shall
submit to the President and the Congress an annual report on its
personnel programs.
SECTION 4. All public officers and employees shall take an oath or
affirmation to uphold and defend this Constitution.
Managerial Employees
Article 82. Coverage.
As used herein, "managerial employees" refer to those whose primary
duty consists of the management of the establishment in which they
are employed or of a department or subdivision thereof, and to other
officers or members of the managerial staff.
Asia Pacific Christening vs. Farolan
Petitioner Asia Pacific Chartering (Phils) Inc. was, until 1996,
the general sales agent (GSA) of the Scandinavian Airline System
(SAS), an off-line international airline company with license to do
business in the Philippines. As GSA, petitioner sold passenger and
cargo spaces for airlines operated by SAS.
Respondent Maria Linda R. Farolan was on December 16, 1992 hired
as Sales Manager of petitioner for its passenger and cargo GSA
operations for SAS, following her conformity to a December 10, 1992
1
letter-offer of employment from petitioner through its Vice
President/Comptroller Catalino Bondoc. The pertinent portion of the
letter-offer reads:
Dear Ms. Farolan:
Confirming our previous discussions, ASIA-PACIFIC
CHARTERING PHIL., INC. is pleased to offer you the position
of Sales Manager of its Passenger and Cargo Operations for
SCANDINAVIAN AIRLINES SYSTEM in the Philippines,
commencing on December 16, 1992 on the following terms:
Monthly
Basic Pay
P 22, 000.00
Housing Allowance
4,000.00
Transportation Allowance
(200 liters of gas)
Cash Equivalent
Meal Allowance
750.00
Please affix your signature below if you find the foregoing
acceptable and return to us a signed duplicate.
Meanwhile, we certainly look forward to your joining us
and rest assured of our fullest support.
xxx
(Sgd)
Maria Linda
R. Farolan
Conforme:
(Emphasis
supplied).
It is gathered that Leslie Murray, the then Sales Manager of
petitioner, talked to respondent into accepting the position after
verbally briefing her on the nature of the position.
Soon after respondent assumed her post, she participated in a
2
number of meetings/seminars including a Customer Service Seminar
in Bangkok, Thailand, a Regional Sales Meeting on the technical
aspects of airline commercial operations in February 1993, and a
course on the highly technical airline computer reservations system
called Amadeus, all geared towards improving her marketing and
sales skills.
In September of 1993, respondent, upon instruction of Bondoc,
3
submitted a report RE: OUR COMMENTS AND ACTIONS BEING
TAKEN CONCERNING SAS POOR P & L PERFORMANCE FOR
JANUARY - JULY 1993 the pertinent portions of which read:
1 January to July 1993 Sales x x x
1993 1992 CHANGE
Seaman 233 423 (190)
Expats/Tourists 503 716 (213)
PTAs 346 196 150
Refugees/IOM 53 864 (811)
xxx
Explanations.
1. International Organization for Migration (IOM)-both Vietnam
and Scandinavian Governments have terminated projects for
refugees; hence the tremendous decrease (94%) x x x.
2. Seamans Fares-Rates not competitive enough.
3. Expats/Tourists-In a market where on-line carriers were
dropping rates drastically, we were losing passengers to said
carriers.
1 The present Market:
1. As SAS is off-line, we have no control over space and to an
extent our rates are higher because of proration with delivering
carriers.
2. On-lines do not prorate with other carriers therefore can dive
fares x x x.
I have convinced Mr. Jespersen to bring down the
fares to be more competitive. The reason he did not do
so earlier was because low-yield fares are low in priority
for confirming seats. But now that SAS is considering
increasing their frequencies ex-Hongkong before year-
end, this will be advantageous to boosting our sales.
A. Measures to take remainder of 1993 and for 1994:
1. We have negotiated a lower fare for seamen (effective
September) which is competitive. We are already getting
positive response from agents. Since this(sic) low-yield sales,
Hongkong did not adjust fare accordingly first half of 1993
because of space constraints.
2. As SAS still prefers high-yield sales, we have offered
incentives to Ameco as Asian Development Bank (ADB)
(effective 1st June for one year) with Mr. Jespersens approval x
x x.
In addition, ADB itself is willing to consider proposals we submit
to them in the case of cost-savings. In exchange, they can
endorse to SAS a relevant share of their Europe travel x x x.
3. We have also negotiated a lower net fare for Economy Class.
This rate is also competitive and is in force.
4. Incentive Program for Agents-Using the points system similar
to PALs promo (PALs Smiles), to stimulate sales. We are at
present fine-tuning mechanics for Hongkongs approval which
we intend to launch before Christmas. This promo is self-
sustaining (no significant expenses to be incurred)
5. We are currently pushing sales for Baltic area/Russia as we
have the best rates. We have identified the agents who have
passengers to these destinations and we are focusing on them
x x x. (Emphasis and underscoring supplied).
As reflected in respondents report, there was a drop in SAS sales
revenues which to her was attributable to market forces beyond her
control.
Noting the marked decline in SAS sales revenues, petitioner directed
its high ranking officer Roberto Zozobrado in January 1994 to conduct
an investigation on the matter and identify the problem/s and
implement possible solutions.
Zozobrado thus informally took over some of respondents marketing
and sales responsibilities, albeit respondent retained her title as Sales
Manager and continued to receive her salary as such.
By petitioners claim, Zozobrado found out that respondent did not
adopt any sales strategy nor conduct any sales meeting or develop
other sources of revenue for SAS, she having simply let her sales staff
perform their functions all by themselves; in 1994, Soren Jespersen,
General Manager of SAS in Hongkong, Southern China, Taipei and
the Philippines, came to the Philippines to assess the statistics on
SAS sales revenues and SAS was convinced that respondent was not
fit for the job of Sales Manager; and in view of the changes introduced
by Zozobrado, SAS-GSA sales operations drew positive results.
4
On May 21, 1994, respondent received a message from Jespersen
reading:
Dear Linda and Bob [Zozobrado],
First of all congratulation to your sale result in April. You
reached and exceeded the target by 50% In C/class
(Fantastic!!!) and 1% In M/class. This is the second month
in a row (and the last 2 first in more than a year) and
hopefully the beginning of a new and positive trend.
xxx
As you can see May looks very good.
With the agreed focus on selling the M/class and all the
activities initiated, Im sure that the rest of the period will
pick very soon.
x x x (Underscoring supplied; Quoted verbatim).
5
On July 18, 1994, respondent received another message from
Jespersen reading:
Dear Linda
The sales report for June 1994 did unfortunately not
reach target in C/class but in M/class you managed very
well. Totally 9% below target.
The pre bookings eff. 14 July looks very good and
encouraging and with 2 weeks to go July should not be a
problem. (enclosed)
Please send my regards to all the girls and tell them to
keep up the good work.
Just for reason of clarification. Enclosed to your action list
is a production report for Jan-May 1994. The figures I
send to you is only your long-haul sales and do not
include European sectors. The correct figure for the
period will be 436,000 USD in target for long-haul (actual
362 TUSD) and 642 TUSD total with 514 TUSD achieved.
Please be so kind and inform Bob accordingly.
xxx
On even date, however, petitioner sent respondent a letter of
6
termination on the ground of loss of confidence. The letter reads:
This confirms our (Bob Zozobrado and myself) July 4,
1994 verbal advice to you regarding Managements
decision to terminate your Services as our GSA Manager
for SCANDINAVIAN AIRLINES SYSTEMs Offline
Operations in the Philippines, thirty (30) days upon
receipt of this Notice, due to our loss of confidence in
your Managerial and Marketing capabilities. As explained
to you by Mr. Zozobrado and myself, records will show
that under your Management (or lack of it), our SAS-GSA
performance is, as follows:
 A. 1993 vs. 1992
Gross Revenue - 29 % equivalent of 25% of the total award as attorneys fees.
shortfall
Operating Expenses - 2% over
Net Cash Flow - 79%
shortfall
B. JAN-APR 94 vs. JAN-APR 92
Revenues - Certiorari.
34% shortfall
Operating Expenses - 6% over
Net Cash Flow - 94%
shortfall
Several times in the past, we have made you aware in the
need to improve your sales performance and gain the
respect of your staff which have openly expressed their
concern on their lack of direction under your
management. Even our principal (SAS) had negative
comments about the way you handle urgent requirements
of the Regional Office. SAS was also alarmed by the
aforementioned dismal overall Performance of APC/SAS.
All these prompted us to decide to replace you as our
SAS GSA Manager to save the situation and our
representation of the SAS-GSA in the Philippines.
x x x (Quoted verbatim; Emphasis supplies).
Thus spawned the filing by respondent of a complaint for illegal
dismissal against petitioner, Bondoc, Zozobrado and one Donald
Marshall (the record indicates that he had ceased to be connected
with petitioner when the case was pending before the Labor Arbiter),
with prayer for damages and attorneys fees. In her complaint
petitioner alleged that Bondoc and Zozobrado had asked her to tender
her resignation as she was not the person whom SAS was looking for
7 DEMANDED BY SUCH POSITION.
to handle the position of Sales Manager but that she refused, hence,
8
she was terminated by the letter of July 18, 1994 letter.
The Labor Arbiter, after a detailed analysis of the evidence for both
parties, found for respondent upon the following issues:
1. Whether or not complainant was validly terminated for
cause;
2. Whether or not due process was observed when
complainant was terminated; and
3. Whether or not any of the parties are entitled to
9 TRIGGER THE SHARP DECLINE IN SALES
damages, and disposed in his decision as follows:
WHEREFORE, finding the dismissal of the complainant Ms
Linda Farolan to be without just cause, effected with malice, ill
will and bad faith, respondent Asian Pacific Chartering
Philippine, Inc. is hereby ordered to pay her separation pay of
Forty Four Thousand Pesos (P44,000.00), and all the benefit
that would have been due her under the premises. Asian Pacific
Chartering is likewise ordered to pay complainant moral
damages in the amount of One Million Five Hundred Thousand
Pesos (P1,500,000.00) and exemplary damages in the amount
of Seven Hundred Fifty Thousand Pesos (P750,000.00),
nominal damages of Five Thousand Pesos (P5,000.00) and the
10
On appeal, the NLRC, by Decision of March 22, 1999, reversed the
Labor Arbiters decision, it recognizing the right of petitioner as
employer to terminate or dismiss employees based on loss of trust
and confidence, the right being a management prerogative.
Respondents Motion for Reconsideration of the NLRC Decision
having been denied, she brought her case to the Court of Appeals via
11
12
By Decision of June 28, 2001, the Court of Appeals, as stated early
on, reversed the NLRC decision and disposed as follows:
WHEREFORE, premises considered, the challenged decision
dated March 22, 1999 and the Resolution dated July 16, 1999
of public respondent National Labor Relations Commission
(Second Division) are hereby set aside for having been issued
with grave abuse of discretion amounting to lack or in excess of
jurisdiction. The decision dated September 17, 1998 of Labor
Arbiter Romulus S. Protacio is hereby upheld with modifications
that the award of attorneys fees shall only be equivalent to ten
percent (10%) of the total monetary award. In addition, the
award for nominal damages is deleted for lack of basis.
(Underscoring supplied).
13
Petitioner filed a motion for reconsideration of the Court of Appeals
decision but it was denied, hence, the present Petition for Review
14
on Certiorari anchored on the following grounds:
I
THE CA DEFIED THE WELL-ESTABLISHED RULE
THAT APC, AS EMPLOYER, HAS THE MANAGEMENT
PREROGATIVE TO REPLACE A SALES MANAGER
WHOM IT HAS REASONABLE GROUNDS TO BELIEVE
CANNOT EFFECTIVELY DISCHARGE THE DUTIES
II
THE CA DECISION WAS PREMISED ON LACK OF
EVIDENCE TO DISPROVE RESPONDENTS THEORY
THAT THE POOR SALES PERFORMANCE OF SAS
WAS DUE TO MARKET FORCES BEYOND HER
CONTROL. YET, THE EVIDENCE ON RECORD
SHOWED THE CONTRARY. NO LESS THAN SAS
CONFIRMED THAT RESPONDENT WAS NOT FIT FOR
THE POSITION OF MANAGER AND, THAT NO
SPECIAL CIRCUMSTANCES SUFFICIENT TO
SUPERVENED IN THE PHILIPPINE MARKET.
III
IN AWARDING MORAL AND EXEMPLARY DAMAGES,
THE CA ACTED WITH GRAVE ABUSE OF
DISCRETION. EVEN ASSUMING, THAT
RESPONDENTS TERMINATION WAS WITHOUT JUST
CAUSE, APC IS NOT LIABLE TO PAY DAMAGES
[MILLARES vs. NLRC, 328 SCRA 79 (2001)]
 COROLLARILY, APC IS PRESUMED TO HAVE ACTED
IN GOOD FAITH [GONZALES vs. NLRC, G.R. NO.
131653-26 March 2001]. THE CA, HOWEVER,
REVERSED THE PRESUMPTION. IT PRESUMED-
WITHOUT ANY EVIDENCE WHATSOEVER-THAT APC
ACTED IN BAD FAITH IN TERMINATING
RESPONDENT WITHOUT DUE REGARD TO THE
HARSH CONSEQUENCES OF THE TERMINATION
The issue in the main is whether or not respondents dismissal was
legal.
A statement of the requisites for a valid dismissal of an employee is
thus in order, to wit: (a) the employee must be afforded due process,
i.e., he must be given opportunity to be heard and to defend himself;
and (b) dismissal must be for a valid cause as provided in Article 282
of the Labor Code or any of the authorized causes under Article 283
15
and 284 of the same Code.
As regards the first requisite, the following substantiated findings of
the Labor Arbiter, which were adopted by the Court of Appeals, reflect
respondents deprivation of due process:
xxx
[W]e find that the manner by which complainant was
dismissed violated the basic precepts of fairness and due
process. First, without any semblance of, or written
authority whatsoever (TSN dated January 30, 1996, pp.
46 - 48), respondent Zozobrado took over the functions
of complainant. Complainant claims that she has been
told it was upon the will of respondent Marshall that she
be replaced. Although respondent Zozobrado may have
been merely giving pointers and suggestions to the staff
of complainant, the appearance of authority was
unpleasantly conspicuous. Later, respondent Bondoc
summoned complainant and told her to tender her
resignation or face termination. Complainant, not
having been given a justifiable ground, refused to
resign. Thereafter, she was finally terminated,
without being afforded the opportunity to be heard
and to present evidence in her defense. She was
never given a written notice stating the particular
acts or omission constituting the grounds for her
16
dismissal as required by law. x x x
As regards the second requisite, the rule is settled that in termination
cases, the employer bears the onus of proving that the dismissal is for
just cause failing which the dismissal is not justified and the employee
17
is entitled to reinstatement.
Petitioner claims that respondent failed to live up to managements
expectation in light of her failure to adopt sales and marketing
strategies to increase sales revenues of SAS, which failure is
reflective of her incompetence and inefficiency, thus resulting to loss
of revenues in 1993 and 1994.
Petitioner adds that had it not been through Zozobrados efforts, SAS
sales revenues could not have recovered.
Petitioner further claims that Jespersen was the one who initiated the
termination of respondent because of her dismal performance in
handling its operations.
And petitioner reiterates the principle that the right to dismiss a
managerial employee is a measure of self-preservation, it citing the
18
cases of Grand Motor Parts Corp. v. Minister of Labor et al., and
19
Buiser et al. v. Legardo.
Before passing on petitioners position, this Court deems it imperative
to discuss the nature of respondents job as sales manager of
petitioner. It is not disputed that her job description, and the terms and
conditions of her employment, with the exception of her salary and
allowances, were never reduced to writing.
Recent decisions of this Court distinguish the treatment of managerial
employees from that of rank and file personnel insofar as the
application of the doctrine of loss of trust and confidence is
20
concerned.
Thus with respect to rank and file personnel, loss of trust and
confidence as ground for valid dismissal requires proof of
involvement in the alleged events in question and that mere
uncorroborated assertions and accusations by the employer will
not be sufficient. But as regards a managerial employee, mere
existence of a basis for believing that such employee has
breached the trust of his employer would suffice for his
dismissal. (Underscoring supplied)
As enunciated in Samson v. NLRC, 330 SCRA 460,
Before one may be properly considered a managerial
employee, all the following conditions must be met:
(1) Their primary duty consists of the management of the
establishment in which they are employed or of a department
or subdivision thereof;
(2) They customarily and regularly direct the work of two or
more employees therein;
(3) They have the authority to hire or fire other employees of
lower rank; or their suggestions and recommendations as to the
hiring and firing and as to the promotion or any other change of
status of other employees are given particular weight. (Section
2(b), Rule I, Book III of the Omnibus Rules Implementing
the Labor Code, emphasis supplied).
By respondents claim, her function, as verbally explained to her by
21
Murray, dealt mainly with servicing of existing clientele. Bondoc,
22
however, described respondents functions and duties as critical.
The following ruling of this Court in Paper Industries Corp. of the
23
Philippines v. Laguesma is instructive:
Managerial employees are ranked as Top Managers,
Middle Managers and First Line Managers. The mere fact
that an employee is designated manager does not ipso
facto make him one-designation should be reconciled
with the actual job description of the employee for it is the
job description that determines the nature of employment.
 24
(Underscoring supplied). Position

The absence of a written job description or prescribed work standards, 1960-1967 Express Tours, Inc.
however, leaves this Court in the dark. Clerk-Reservations&

Even assuming, however, that respondent was a managerial Ticketing

employee, the stated ground (in the letter of termination) for her
dismissal, loss of confidence, should have a basis and determination 1968-1970 House of Travel, Inc.
thereof cannot be left entirely to the employer. Sales Manager

Loss of trust and confidence to be a valid ground for an employees 1971-1973 Super Travel
dismissal must be based on a willful breach and founded on clearly Manager, Administration
24
established facts. A breach is willful if it is done intentionally, 1973-1978 American Express,
knowingly and purposely, without justifiable excuse, as distinguished Manager, World Health
from an act done carelessly, thoughtlessly, heedlessly or
25
inadvertently. Inc.
Organization Account
Respondents detailed REPORT dated September 8, 1993, quoted
above, relative to SAS profit and loss for 1993, which was closely 1978-1983 F.A.R. Travel
examined and analyzed by the Labor Arbiter, contains an explanation President & General Manager
of what brought about the decline in sales revenues. And it contains Masters, Inc.
too a number of recommended measures on improvement of sales for
the remainder of 1993 and for 1994. 1983-1984 Cebu Plaza
Director, Convention
As did the Labor Arbiter and the Court of Appeals, this Court finds
respondents explanation in her Report behind the decline in sales 1985-1989 American Express,
revenues as due to market forces beyond respondents control Manager-World Health
plausible. In any event, there is no showing that the decline is
Inc.
reflective of any willfull breach of duties by respondent.
Organization In-Plant Office
The two letters sent by SAS to respondent in 1994 in fact negate willful
breach of her duties by respondent. The first (received on May 21, Senior Manager-Asian
1994) congratulated her and Zozobrado for exceeding sale (sic) result
in April 1994. Petitioners argument that respondent could not invoke Development Bank In-Plant Office
these letters in her favor as they were intended for Zozobrado fails.
The letters were addressed to respondent and Zozobrado. The 1992-1994 Asia Pacific Sales
second letter (received on July 18, 1994) which was addressed to Manager, Passenger
respondent, while noting that the sales for June 1994 did not reach
the target in C/class, noted that in M/class she managed very well. Chartering Phil. Inc. &Cargo GSA
And it went on to state that [t]he pre-bookings eff. 14 July looks (sic) Operations,
very good and encouraging and with 2 weeks to go July should not be
a problem. In fact it requested respondent to send . . . regards to all Scandinavian Airlines
the girls and tell them to keep up the good work.
System.
While petitioner attributes the improvement of sales in 1994 to
Zozobrado, the fact remains that respondent was still the Sales (Exhibit A, p. 72, Court of Appeals Rollo),
Manager up to July 1994, in charge of those sales meetings during
which pertinent market strategies were developed and utilized to This Court is not prepared to find for petitioner. It bears noting that
increase sales. there is no showing that respondent represented herself as
possessed of the highest degree of skill and care known in the trade.
In another vein, petitioner attributes loss of confidence to respondents And it is not disputed that respondent was approached by petitioners
alleged gross inefficiency and incompetence, it citing, as earlier then Sales Manager Murray, and offered the position of Sales
stated, the cases of Grand Motor Parts Corp. (supra) and Buiser et al. Manager. She thus could not just be unceremoniously discharged for
26
(supra). loss of confidence arising from alleged incompetency .

The Grand Motors case, however, involved a probationary employee- While an employee may be dismissed because of
manager who failed to, among other things, submit required monthly inefficiency, neglect or carelessness, the law implies a
reports and violated company policy, clearly mirroring his situation or undertaking by an employee in entering into
insubordination and disrespect to express instructions of a contract of employment that he is competent to perform
management. the work undertaken and is possessed of the requisite
skill and knowledge to enable him to do so, and that he
While this Court, in the Buiser case (supra), held that [f]ailure to will do the work of the employer in a careful manner. If he
observe prescribed standards of work, or to fulfill reasonable work is not qualified to do the work which he undertakes, if he
assignments due to inefficiency may be just cause for dismissal, is incompetent, unskillful or inefficient, or if he executes
petitioner has neither shown what standards of work or reasonable his work in a negligent manner or is otherwise guilty of
work assignments were prescribed which respondent failed to neglect of duty, he may lawfully be discharged before the
observe nor that if she did fail to observe any such, it was due to 27
expiration of his term of employment.
inefficiency.
In fine, this Court finds that respondent had been illegally dismissed
Finally and at all events, given respondents previous work experience
and is accordingly entitled to reinstatement to her former position
as herein below indicated, to wit:

Period Company
 28
without loss of seniority rights and payment of backwages. But as
the matter of reinstatement is no longer feasible as the GSA contract
between SAS and petitioner had been terminated in May of 1996,
respondent is, as correctly held by the Court of Appeals, entitled to
separation pay in an amount equivalent to one (1) month salary for
every year of service, a fraction of six (6) months to be considered a
year.
Having been hired on December 16, 1992 and terminated on July 18,
1994, respondent is considered to have worked for two (2) years for
purposes of computing her separation pay.
Respondent is also entitled to the award of backwages computed from
July 18, 1994 up to May of 1996.
As regards the award to respondent of moral and exemplary
damages, petitioner assails it in this wise: The award of damages in
so far as the same was based solely on respondents affidavit
containing general and uncorroborated statement that she suffered
damages as a result of her termination is null and void [it being]
insufficient to overcome the presumption o good faith.
The following pertinent portions of petitioners Affidavit which Affidavit
was submitted as part of her testimony are self-explanatory, however.
xxx
8. On July 4, 1994, Messrs. Bondoc and Zozobrado summoned
me and without any clear explanation, ordered me to submit a
letter of resignation; they informed me that I was not the person
whom SAS was looking for to handle the position of Sales
Manager; even as I was deeply hurt, shocked, and humiliated,
I declined to resign from my position as I strongly believed that
the instruction for me to resign was unjust and violative of my
rights; during the conference, I was never given the chance to
know precisely why I was being asked to resign or to explain
my position; furthermore, I was informed then that Mr. Donald
Marshall was the one who decided and insisted on my
termination.
9. On July 18, 1994, again without regard to the basic
requirements of due process, I was given a notice of termination
signed by Mr. Bondoc; the supposed ground for my termination
was APCs alleged loss of confidence in my managerial and
marketing capabilities due to the companys alleged dismal
performance during my term of office as GSA Sales Manager;
once more, I was never called to answer this charge; a copy of
the notice of termination is hereto attached as Annex E;
10. The news of my termination circulated at once in the travel
industry and as a result, I was and still am frequently asked by
my friends and acquaintances in the industry about my
termination from APC to my endless humiliation and
embarrassment; this up to now causes me endless emotional
pain that I even avoid my friends and acquaintances for fear
that they might look at me differently after my termination from
APC; my reputation as a professional has been totally shattered
by the unjust act of APC;
11. Because of the extreme social humiliation, and serious
anxiety over my now besmirched reputation in the travel
industry, I decided to seek legal advise; on July 21, 1994, my
counsel wrote APC demanding for my immediate reinstatement
without loss of seniority rights and for damages; a copy of the
letter-demand is hereto attached as Annex F;
x x x.
They need no amplification and/or corroboration. Indeed, petitioner
was deprived of due process and denied basic precepts of fairness
when she was terminated. Her resultant sufferings thus entitle her to
an award of moral damages.
To warrant award of moral damages, it must be shown that the
dismissal of the employee was attended to by bad faith, or
constituted an act opposite to labor, or was done in a manner
29
contrary to morals, good customs or public policy.
Award of moral and exemplary damages for an illegally
dismissed employee is proper where the employee had been
32
harassed and arbitrarily terminated by the employer.
In determining the amount of moral damages recoverable,
however, the business, social and financial position of the
offended party and the business or financial position of the
33
offender are taken into account. Given petitioners business
position or standing before and at the time of termination and
petitioners business and financial position, this Court reduces
the amount of moral damages awarded to P500,000.00 which
it finds reasonable. The amount of exemplary damages
awarded is accordingly reduced too to P250,000.00.
WHEREFORE, the decision of the Court of Appeals is hereby
AFFIRMED with the MODIFICATION that the amount of moral
damages and exemplary damages awarded to respondent, Ma. Linda
R. Farolan, is hereby reduced to Five Hundred Thousand
(P500,000.00) Pesos and Two Hundred Fifty Thousand
(P250,000.00) Pesos, respectively.
Costs against petitioner.
SO ORDERED.
Chario Penaranda vs. Baganga Plywood
Corp
Sometime in June 1999, Petitioner Charlito Pearanda was hired as
an employee of Baganga Plywood Corporation (BPC) to take charge
of the operations and maintenance of its steam plant boiler. 6 In May
2001, Pearanda filed a Complaint for illegal dismissal with money
claims against BPC and its general manager, Hudson Chua, before
the NLRC.7
After the parties failed to settle amicably, the labor arbiter8 directed
the parties to file their position papers and submit supporting
documents.9 Their respective allegations are summarized by the labor
arbiter as follows:
"[Pearanda] through counsel in his position paper alleges that he
was employed by respondent [Baganga] on March 15, 1999 with a
monthly salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer
until he was illegally terminated on December 19, 2000. Further, [he]
alleges that his services [were] terminated without the benefit of due
process and valid grounds in accordance with law. Furthermore, he
was not paid his overtime pay, premium pay for working during
holidays/rest days, night shift differentials and finally claims for
payment of damages and attorneys fees having been forced to litigate
the present complaint.
"Upon the other hand, respondent [BPC] is a domestic corporation
duly organized and existing under Philippine laws and is represented
herein by its General Manager HUDSON CHUA, [the] individual
respondent. Respondents thru counsel allege that complainants
separation from service was done pursuant to Art. 283 of the Labor
Code. The respondent [BPC] was on temporary closure due to repair
and general maintenance and it applied for clearance with the
Department of Labor and Employment, Regional Office No. XI to shut
down and to dismiss employees (par. 2 position paper). And due to
the insistence of herein complainant he was paid his separation
benefits (Annexes C and D, ibid). Consequently, when respondent
[BPC] partially reopened in January 2001, [Pearanda] failed to
reapply. Hence, he was not terminated from employment much less
illegally. He opted to severe employment when he insisted payment
of his separation benefits. Furthermore, being a managerial employee
he is not entitled to overtime pay and if ever he rendered services
beyond the normal hours of work, [there] was no office order/or
authorization for him to do so. Finally, respondents allege that the
claim for damages has no legal and factual basis and that the instant
complaint must necessarily fail for lack of merit."10
The labor arbiter ruled that there was no illegal dismissal and that
petitioners Complaint was premature because he was still employed
by BPC.11 The temporary closure of BPCs plant did not terminate his
employment, hence, he need not reapply when the plant reopened.
According to the labor arbiter, petitioners money claims for illegal
dismissal was also weakened by his quitclaim and admission during
the clarificatory conference that he accepted separation benefits, sick
and vacation leave conversions and thirteenth month pay.12
Nevertheless, the labor arbiter found petitioner entitled to overtime
pay, premium pay for working on rest days, and attorneys fees in the
total amount of P21,257.98.13
Ruling of the NLRC
Respondents filed an appeal to the NLRC, which deleted the award
of overtime pay and premium pay for working on rest days. According
to the Commission, petitioner was not entitled to these awards
because he was a managerial employee.14
Ruling of the Court of Appeals
In its Resolution dated January 27, 2003, the CA dismissed
Pearandas Petition for Certiorari. The appellate court held that he
failed to: 1) attach copies of the pleadings submitted before the labor
arbiter and NLRC; and 2) explain why the filing and service of the
Petition was not done by personal service.15
In its later Resolution dated July 4, 2003, the CA denied
reconsideration on the ground that petitioner still failed to submit the
pleadings filed before the NLRC.16
Hence this Petition.17
The Issues
Petitioner states the issues in this wise:
"The [NLRC] committed grave abuse of discretion amounting to
excess or lack of jurisdiction when it entertained the APPEAL of the
respondent[s] despite the lapse of the mandatory period of TEN
DAYS.1avvphil.net
"The [NLRC] committed grave abuse of discretion amounting to an
excess or lack of jurisdiction when it rendered the assailed
RESOLUTIONS dated May 8, 2002 and AUGUST 16, 2002
REVERSING AND SETTING ASIDE the FACTUAL AND LEGAL
FINDINGS of the [labor arbiter] with respect to the following:
"I. The finding of the [labor arbiter] that [Pearanda] is a
regular, common employee entitled to monetary benefits
under Art. 82 [of the Labor Code].
"II. The finding that [Pearanda] is entitled to the payment
of OVERTIME PAY and OTHER MONETARY
BENEFITS."18
The Courts Ruling
The Petition is not meritorious.
Preliminary Issue:
Resolution on the Merits
The CA dismissed Pearandas Petition on purely technical grounds,
particularly with regard to the failure to submit supporting documents.
In Atillo v. Bombay,19 the Court held that the crucial issue is whether
the documents accompanying the petition before the CA sufficiently
supported the allegations therein. Citing this case, Piglas-Kamao v.
NLRC20 stayed the dismissal of an appeal in the exercise of its equity
jurisdiction to order the adjudication on the merits.
The Petition filed with the CA shows a prima facie case. Petitioner
attached his evidence to challenge the finding that he was a
managerial employee.21 In his Motion for Reconsideration, petitioner
also submitted the pleadings before the labor arbiter in an attempt to
comply with the CA rules.22 Evidently, the CA could have ruled on the
Petition on the basis of these attachments. Petitioner should be
deemed in substantial compliance with the procedural requirements.
Under these extenuating circumstances, the Court does not hesitate
to grant liberality in favor of petitioner and to tackle his substantive
arguments in the present case. Rules of procedure must be adopted
to help promote, not frustrate, substantial justice.23 The Court frowns
upon the practice of dismissing cases purely on procedural grounds.24
Considering that there was substantial compliance, 25 a liberal
interpretation of procedural rules in this labor case is more in keeping
with the constitutional mandate to secure social justice.26
First Issue:
Timeliness of Appeal
Under the Rules of Procedure of the NLRC, an appeal from the
decision of the labor arbiter should be filed within 10 days from receipt
thereof.27
Petitioners claim that respondents filed their appeal beyond the
required period is not substantiated. In the pleadings before us,
petitioner fails to indicate when respondents received the Decision of
the labor arbiter. Neither did the petitioner attach a copy of the
challenged appeal. Thus, this Court has no means to determine from
the records when the 10-day period commenced and terminated.
Since petitioner utterly failed to support his claim that respondents
appeal was filed out of time, we need not belabor that point. The
parties alleging have the burden of substantiating their allegations.28
Second Issue:
Nature of Employment
Petitioner claims that he was not a managerial employee, and
therefore, entitled to the award granted by the labor arbiter.
Article 82 of the Labor Code exempts managerial employees from the
coverage of labor standards. Labor standards provide the working
conditions of employees, including entitlement to overtime pay and
premium pay for working on rest days.29 Under this provision,
managerial employees are "those whose primary duty consists of the
management of the establishment in which they are employed or of a
department or subdivision."30
The Implementing Rules of the Labor Code state that managerial
employees are those who meet the following conditions:
"(1) Their primary duty consists of the management of the
establishment in which they are employed or of a department or
subdivision thereof;
"(2) They customarily and regularly direct the work of two or more
employees therein;
"(3) They have the authority to hire or fire other employees of lower
rank; or their suggestions and recommendations as to the hiring and
firing and as to the promotion or any other change of status of other
employees are given particular weight."31
The Court disagrees with the NLRCs finding that petitioner was a
managerial employee. However, petitioner was a member of the
managerial staff, which also takes him out of the coverage of labor
standards. Like managerial employees, officers and members of the
managerial staff are not entitled to the provisions of law on labor
standards.32 The Implementing Rules of the Labor Code define
members of a managerial staff as those with the following duties and
responsibilities:
"(1) The primary duty consists of the performance of work directly
related to management policies of the employer;
"(2) Customarily and regularly exercise discretion and independent
judgment;
"(3) (i) Regularly and directly assist a proprietor or a managerial
employee whose primary duty consists of the management of the
establishment in which he is employed or subdivision thereof; or (ii)
execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge; or
(iii) execute under general supervision special assignments and
tasks; and
"(4) who do not devote more than 20 percent of their hours worked in
a workweek to activities which are not directly and closely related to
the performance of the work described in paragraphs (1), (2), and (3)
above."33
As shift engineer, petitioners duties and responsibilities were as
follows:
"1. To supply the required and continuous steam to all consuming
units at minimum cost.
"2. To supervise, check and monitor manpower workmanship as well
as operation of boiler and accessories.
"3. To evaluate performance of machinery and manpower.
"4. To follow-up supply of waste and other materials for fuel.
"5. To train new employees for effective and safety while working.
"6. Recommend parts and supplies purchases.
"7. To recommend personnel actions such as: promotion, or
disciplinary action.
"8. To check water from the boiler, feedwater and softener, regenerate
softener if beyond hardness limit.
"9. Implement Chemical Dosing.
"10. Perform other task as required by the superior from time to
time."34
The foregoing enumeration, particularly items 1, 2, 3, 5 and 7
illustrates that petitioner was a member of the managerial staff. His
duties and responsibilities conform to the definition of a member of a
managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant
boiler. His work involved overseeing the operation of the machines
and the performance of the workers in the engineering section. This
work necessarily required the use of discretion and independent
judgment to ensure the proper functioning of the steam plant boiler.
As supervisor, petitioner is deemed a member of the managerial
staff.35
Noteworthy, even petitioner admitted that he was a supervisor. In his
Position Paper, he stated that he was the foreman responsible for the
operation of the boiler.36 The term foreman implies that he was the
representative of management over the workers and the operation of
the department.37 Petitioners evidence also showed that he was the
supervisor of the steam plant.38 His classification as supervisor is
further evident from the manner his salary was paid. He belonged to
the 10% of respondents 354 employees who were paid on a monthly
basis; the others were paid only on a daily basis.39
On the basis of the foregoing, the Court finds no justification to award
overtime pay and premium pay for rest days to petitioner.
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.
Field Personnel
Article 82. Coverage.
"Field personnel" shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty.
Merdicar Fishing Corp vs. NLRC
This case originated from a complaint filed on September 20, 1990 by
private respondent Fermin Agao, Jr. against petitioner for illegal
dismissal, violation of P.D. No. 851, and non-payment of five days
service incentive leave for 1990. Private respondent had been
employed as a bodegero or ships quartermaster on February 12,
1988. He complained that he had been constructively dismissed by
petitioner when the latter refused him assignments aboard its boats
after he had reported to work on May 28, 1990.i
Private respondent alleged that he had been sick and thus allowed to
go on leave without pay for one month from April 28, 1990 but that
when he reported to work at the end of such period with a health
clearance, he was told to come back another time as he could not be
reinstated immediately. Thereafter, petitioner refused to give him
work. For this reason, private respondent asked for a certificate of
employment from petitioner on September 6, 1990. However, when
he came back for the certificate on September 10, petitioner refused
to issue the certificate unless he submitted his resignation. Since
private respondent refused to submit such letter unless he was given
separation pay, petitioner prevented him from entering the premises.ii
Petitioner, on the other hand, alleged that it was private respondent
who actually abandoned his work. It claimed that the latter failed to
report for work after his leave had expired and was, in fact, absent
without leave for three months until August 28, 1998. Petitioner further
claims that, nonetheless, it assigned private respondent to another
vessel, but the latter was left behind on September 1, 1990.
Thereafter, private respondent asked for a certificate of employment
on September 6 on the pretext that he was applying to another fishing
company. On September 10, 1990, he refused to get the certificate
and resign unless he was given separation pay.iii
On February 18, 1992, Labor Arbiter Arthur L. Amansec rendered a
decision disposing of the case as follows:
ACCORDINGLY, respondents are ordered to reinstate
complainant with backwages, pay him his 13th month pay and
incentive leave pay for 1990.
All other claims are dismissed.
SO ORDERED.
Petitioner appealed to the NLRC which, on August 30, 1993,
dismissed the appeal for lack of merit. The NLRC dismissed
petitioners claim that it cannot be held liable for service incentive leave
pay by fishermen in its employ as the latter supposedly are field
personnel and thus not entitled to such pay under the Labor Code.iv
The NLRC likewise denied petitioners motion for reconsideration of its
decision in its order dated October 25, 1993.
Hence, this petition. Petitioner contends:
I
THE RESPONDENT COMMISSION PALPABLY ERRED
IN RULING AND SUSTAINING THE VIEW THAT
FISHING CREW MEMBERS, LIKE FERMIN AGAO, JR.,
 CANNOT BE CLASSIFIED AS FIELD PERSONNEL
UNDER ARTICLE 82 OF THE LABOR CODE.
II
THE RESPONDENT COMMISSION ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION WHEN IT UPHELD THE
FINDINGS OF THE LABOR ARBITER THAT HEREIN
PETITIONER HAD CONSTRUCTIVELY DISMISSED
FERMIN AGAO, JR., FROM EMPLOYMENT.
The petition has no merit.
Art. 82 of the Labor Code provides:
ART. 82. Coverage. - The provisions of this Title [Working
Conditions and Rest Periods] shall apply to employees in all
establishments and undertakings whether for profit or not, but
not to government employees, field personnel, members of the
family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another,
and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
.... ... ...
Field personnel shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable
certainty.
Petitioner argues essentially that since the work of private respondent
is performed away from its principal place of business, it has no way
of verifying his actual hours of work on the vessel. It contends that
private respondent and other fishermen in its employ should be
classified as field personnel who have no statutory right to service
incentive leave pay.
In the case of Union of Filipro Employees (UFE) v. Vicar,v this Court
explained the meaning of the phrase whose actual hours of work in
the field cannot be determined with reasonable certainty in Art. 82 of
the Labor Code, as follows:
Moreover, the requirement that actual hours of work in the field
cannot be determined with reasonable certainty must be read
in conjunction with Rule IV, Book III of the Implementing Rules
which provides:
Rule IV Holidays with Pay
Section 1. Coverage - This rule shall
apply to all employees except:
.... ... ...
(e) Field personnel and other
employees whose time and performance is
unsupervised by the employer xxx (Italics
supplied)
While contending that such rule added another element not
found in the law (Rollo, p. 13), the petitioner nevertheless
attempted to show that its affected members are not covered
by the abovementioned rule. The petitioner asserts that the
companys sales personnel are strictly supervised as shown by
the SOD (Supervisor of the Day) schedule and the company
circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-
55).
Contrary to the contention of the petitioner, the Court finds that
the aforementioned rule did not add another element to the
Labor Code definition of field personnel. The clause whose
time and performance is unsupervised by the employer did not
amplify but merely interpreted and expounded the clause
whose actual hours of work in the field cannot be determined
with reasonable certainty. The former clause is still within the
scope and purview of Article 82 which defines field personnel.
Hence, in deciding whether or not an employees actual working
hours in the field can be determined with reasonable certainty,
query must be made as to whether or not such employees time
and performance is constantly supervised by the employer.vi
Accordingly, it was held in the aforementioned case that salesmen of
Nestle Philippines, Inc. were field personnel:
It is undisputed that these sales personnel start their field
work at 8:00 a.m. after having reported to the office and
come back to the office at 4:00 p.m. or 4:30 p.m. if they
are Makati-based.
The petitioner maintains that the period between 8:00
a.m. to 4:00 or 4:30 p.m. comprises the sales personnels
working hours which can be determined with reasonable
certainty.
The Court does not agree. The law requires that the
actual hours of work in the field be reasonably
ascertained. The company has no way of determining
whether or not these sales personnel, even if they report
to the office before 8:00 a.m. prior to field work and come
back at 4:30 p.m., really spend the hours in between in
actual field work.vii
In contrast, in the case at bar, during the entire course of their fishing
voyage, fishermen employed by petitioner have no choice but to
remain on board its vessel. Although they perform non-agricultural
work away from petitioners business offices, the fact remains that
throughout the duration of their work they are under the effective
control and supervision of petitioner through the vessels patron or
master as the NLRC correctly held.viii
Neither did petitioner gravely abuse its discretion in ruling that private
respondent had constructively been dismissed by petitioner. Such
factual finding of both the NLRC and the Labor Arbiter is based not
only on the pleadings of the parties but also on a medical certificate
of fitness which, contrary to petitioners claim, private respondent
presented when he reported to work on May 28, 1990.ix As the NLRC
held:
Anent grounds (a) and (b) of the appeal, the respondent,
in a nutshell, would like us to believe that the Arbiter
abused his discretion (or seriously erred in his findings
of facts) in giving credence to the factual version of the
complainant. But it is settled that (W)hen confronted with
conflicting versions of factual matters, the Labor Arbiter
has the discretion to determine which party deserves
credence on the basis of evidence received. [Gelmart
Industries (Phils.), Inc. vs. Leogardo, 155 SCRA 403,
409, L-70544, November 5, 1987]. And besides, it is
settled in this jurisdiction that to constitute abandonment
of position, there must be concurrence of the intention to
abandon and some overt acts from which it may be
inferred that the employee concerned has no more
interest in working (Dagupan Bus Co., Inc. vs. NLRC,
191 SCRA 328), and that the filing of the complaint which
asked for reinstatement plus backwages (Record, p. 20)
is inconsistent with respondents defense of
abandonment (Hua Bee Shirt Factory vs. NLRC, 188
SCRA 586).x
It is trite to say that the factual findings of quasi-judicial bodies are
generally binding as long as they are supported substantially by
evidence in the record of the case. This is especially so where, as
here, the agency and its subordinate who heard the case in the first
instance are in full agreement as to the facts.xi
As regards the labor arbiters award which was affirmed by respondent
NLRC, there is no reason to apply the rule that reinstatement may not
be ordered if, as a result of the case between the parties, their relation
is strained.xii Even at this late stage of this dispute, petitioner continues
to reiterate its offer to reinstate private respondent.xiii
WHEREFORE, the petition is DISMISSED.
SO ORDERED.

Auto Bus Transportation Systems vs.
Bautista
Since 24 May 1995, respondent Antonio Bautista has been employed
by petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-
conductor with travel routes Manila-Tuguegarao via Baguio, Baguio-
Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent
was paid on commission basis, seven percent (7%) of the total gross
income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus No. 114
along Sta. Fe, Nueva Vizcaya, the bus he was driving accidentally
bumped the rear portion of Autobus No. 124, as the latter vehicle
suddenly stopped at a sharp curve without giving any warning.
Respondent averred that the accident happened because he was
compelled by the management to go back to Roxas, Isabela, although
he had not slept for almost twenty-four (24) hours, as he had just
arrived in Manila from Roxas, Isabela. Respondent further alleged that
he was not allowed to work until he fully paid the amount of
P75,551.50, representing thirty percent (30%) of the cost of repair of
the damaged buses and that despite respondents pleas for
reconsideration, the same was ignored by management. After a
month, management sent him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for
Illegal Dismissal with Money Claims for nonpayment of 13th month pay
and service incentive leave pay against Autobus.
Petitioner, on the other hand, maintained that respondents
employment was replete with offenses involving reckless imprudence,
gross negligence, and dishonesty. To support its claim, petitioner
presented copies of letters, memos, irregularity reports, and warrants
of arrest pertaining to several incidents wherein respondent was
involved.
Furthermore, petitioner avers that in the exercise of its management
prerogative, respondents employment was terminated only after the
latter was provided with an opportunity to explain his side regarding
the accident on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting
evidence presented by the parties, Labor Arbiter Monroe C. Tabingan
promulgated a Decision,[4] the dispositive portion of which reads:
WHEREFORE, all premises considered, it is hereby found that
the complaint for Illegal Dismissal has no leg to stand on. It is
hereby ordered DISMISSED, as it is hereby DISMISSED.
However, still based on the above-discussed premises, the
respondent must pay to the complainant the following:
a. his 13th month pay from the date of his hiring to the date
of his dismissal, presently computed at P78,117.87;
b. his service incentive leave pay for all the years he had
been in service with the respondent, presently computed
at P13,788.05.
All other claims of both complainant and respondent are hereby
dismissed for lack of merit.[5]
Not satisfied with the decision of the Labor Arbiter, petitioner appealed
the decision to the NLRC which rendered its decision on 28
September 2001, the decretal portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree
No. 851, particularly Sec. 3 provides:
Section 3. Employers covered. The Decree shall apply to
all employers except to:
xxx xxx xxx
e) employers of those who are paid on purely
commission, boundary, or task basis, performing a
specific work, irrespective of the time consumed in the
performance thereof. xxx.
Records show that complainant, in his position paper, admitted
that he was paid on a commission basis.
In view of the foregoing, we deem it just and equitable to modify
the assailed Decision by deleting the award of 13th month pay
to the complainant.
WHEREFORE, the Decision dated 29 September 2000 is
MODIFIED by deleting the award of 13th month pay. The other
findings are AFFIRMED.[6]
In other words, the award of service incentive leave pay was
maintained. Petitioner thus sought a reconsideration of this
aspect, which was subsequently denied in a Resolution by the
NLRC dated 31 October 2001.
Displeased with only the partial grant of its appeal to the NLRC,
petitioner sought the review of said decision with the Court of Appeals
which was subsequently denied by the appellate court in a Decision
dated 06 May 2002, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is
DISMISSED for lack of merit; and the assailed Decision of
respondent Commission in NLRC NCR CA No. 026584-2000 is
hereby AFFIRMED in toto. No costs.[7]
Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to service incentive
leave;
2. Whether or not the three (3)-year prescriptive period provided
under Article 291 of the Labor Code, as amended, is
applicable to respondents claim of service incentive leave
pay.
RULING OF THE COURT
The disposition of the first issue revolves around the proper
interpretation of Article 95 of the Labor Code vis--vis Section 1(D),
Rule V, Book III of the Implementing Rules and Regulations of the
Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of
five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees
except:
(d) Field personnel and other employees whose performance is
unsupervised by the employer including those who are engaged
on task or contract basis, purely commission basis, or those
who are paid in a fixed amount for performing work irrespective
of the time consumed in the performance thereof; . . .
A careful perusal of said provisions of law will result in the conclusion
that the grant of service incentive leave has been delimited by the
Implementing Rules and Regulations of the Labor Code to apply only
to those employees not explicitly excluded by Section 1 of Rule V.
According to the Implementing Rules, Service Incentive Leave shall
not apply to employees classified as field personnel. The phrase other
employees whose performance is unsupervised by the employer must
not be understood as a separate classification of employees to which
service incentive leave shall not be granted. Rather, it serves as an
amplification of the interpretation of the definition of field personnel
under the Labor Code as those whose actual hours of work in the field
cannot be determined with reasonable certainty.[8]
The same is true with respect to the phrase those who are engaged
on task or contract basis, purely commission basis. Said phrase
should be related with field personnel, applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by
the particular terms that they follow.[9] Hence, employees engaged on
task or contract basis or paid on purely commission basis are not
automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel.
Therefore, petitioners contention that respondent is not entitled to the
grant of service incentive leave just because he was paid on purely
commission basis is misplaced. What must be ascertained in order to
resolve the issue of propriety of the grant of service incentive leave to
respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, field personnel shall refer
to non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer
and whose actual hours of work in the field cannot be determined with
reasonable certainty. This definition is further elaborated in the
Bureau of Working Conditions (BWC), Advisory Opinion to Philippine
Technical-Clerical Commercial Employees Association[10] which
states that:
As a general rule, [field personnel] are those whose
performance of their job/service is not supervised by the
employer or his representative, the workplace being away from
the principal office and whose hours and days of work cannot
be determined with reasonable certainty; hence, they are paid
specific amount for rendering specific service or performing
specific work. If required to be at specific places at specific
times, employees including drivers cannot be said to be field
personnel despite the fact that they are performing work away
from the principal office of the employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates
that under said advisory opinion, no employee would ever be
considered a field personnel because every employer, in one way or
another, exercises control over his employees. Petitioner further
argues that the only criterion that should be considered is the nature
of work of the employee in that, if the employees job requires that he
works away from the principal office like that of a messenger or a bus
driver, then he is inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the
definition of a field personnel is not merely concerned with the location
where the employee regularly performs his duties but also with the
fact that the employees performance is unsupervised by the
employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of
business of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. Thus, in order to
conclude whether an employee is a field employee, it is also
necessary to ascertain if actual hours of work in the field can be
determined with reasonable certainty by the employer. In so doing, an
inquiry must be made as to whether or not the employees time and
performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of
Appeals:
It is of judicial notice that along the routes that are plied
by these bus companies, there are its inspectors
assigned at strategic places who board the bus and
inspect the passengers, the punched tickets, and the
conductors reports. There is also the mandatory once-a-
week car barn or shop day, where the bus is regularly
checked as to its mechanical, electrical, and hydraulic
aspects, whether or not there are problems thereon as
reported by the driver and/or conductor. They too, must
be at specific place as [sic] specified time, as they
generally observe prompt departure and arrival from their
point of origin to their point of destination. In each and
every depot, there is always the Dispatcher whose
function is precisely to see to it that the bus and its crew
leave the premises at specific times and arrive at the
estimated proper time. These, are present in the case at
bar. The driver, the complainant herein, was therefore
under constant supervision while in the performance of
this work. He cannot be considered a field personnel. [11]
We agree in the above disquisition. Therefore, as correctly concluded
by the appellate court, respondent is not a field personnel but a
regular employee who performs tasks usually necessary and
desirable to the usual trade of petitioners business. Accordingly,
respondent is entitled to the grant of service incentive leave.
The question now that must be addressed is up to what amount of
service incentive leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative issue
of whether or not the three (3)-year prescriptive period under Article
291 of the Labor Code is applicable to respondents claim of service
incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from
employer-employee relationship shall be filed within three (3) years
from the time the cause of action accrued; otherwise, they shall be
forever barred.
In the application of this section of the Labor Code, the pivotal
question to be answered is when does the cause of action for money
claims accrue in order to determine the reckoning date of the three-
year prescriptive period.
It is settled jurisprudence that a cause of action has three elements,
to wit, (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the
named defendant to respect or not to violate such right; and (3) an act
 of his dismissal. It was only upon his filing of a complaint for illegal
dismissal, one month from the time of his dismissal, that respondent
or omission on the part of such defendant violative of the right of the
demanded from his former employer commutation of his accumulated
plaintiff or constituting a breach of the obligation of the defendant to
leave credits. His cause of action to claim the payment of his
the plaintiff.[12]
accumulated service incentive leave thus accrued from the time when
To properly construe Article 291 of the Labor Code, it is essential to his employer dismissed him and failed to pay his accumulated leave
ascertain the time when the third element of a cause of action credits.
transpired. Stated differently, in the computation of the three-year
Therefore, the prescriptive period with respect to his claim for service
prescriptive period, a determination must be made as to the period
incentive leave pay only commenced from the time the employer
when the act constituting a violation of the workers right to the benefits
failed to compensate his accumulated service incentive leave pay at
being claimed was committed. For if the cause of action accrued more
the time of his dismissal. Since respondent had filed his money claim
than three (3) years before the filing of the money claim, said cause
after only one month from the time of his dismissal, necessarily, his
of action has already prescribed in accordance with Article 291. [13]
money claim was filed within the prescriptive period provided for by
Consequently, in cases of nonpayment of allowances and other Article 291 of the Labor Code.
monetary benefits, if it is established that the benefits being claimed
WHEREFORE, premises considered, the instant petition is hereby
have been withheld from the employee for a period longer than three
DENIED. The assailed Decision of the Court of Appeals in CA-G.R.
(3) years, the amount pertaining to the period beyond the three-year
SP. No. 68395 is hereby AFFIRMED. No Costs.
prescriptive period is therefore barred by prescription. The amount
that can only be demanded by the aggrieved employee shall be SO ORDERED.
limited to the amount of the benefits withheld within three (3) years
before the filing of the complaint.[14]

It is essential at this point, however, to recognize that the service

incentive leave is a curious animal in relation to other benefits granted EMPLOYMENT OF HOUSEHELPERS
by the law to every employee. In the case of service incentive leave,
the employee may choose to either use his leave credits or commute
it to its monetary equivalent if not exhausted at the end of the year.[15] Article 141. Coverage. This Chapter shall apply to all persons
Furthermore, if the employee entitled to service incentive leave does rendering services in households for compensation.
not use or commute the same, he is entitled upon his resignation or
separation from work to the commutation of his accrued service
"Domestic or household service" shall mean service in the employers
incentive leave. As enunciated by the Court in Fernandez v. NLRC:[16]
home which is usually necessary or desirable for the maintenance and
The clear policy of the Labor Code is to grant service incentive enjoyment thereof and includes ministering to the personal comfort
leave pay to workers in all establishments, subject to a few and convenience of the members of the employers household,
exceptions. Section 2, Rule V, Book III of the Implementing including services of family drivers.
Rules and Regulations provides that [e]very employee who has
rendered at least one year of service shall be entitled to a yearly Article 142. Contract of domestic service. The original contract of
service incentive leave of five days with pay. Service incentive domestic service shall not last for more than two (2) years but it may
leave is a right which accrues to every employee who has be renewed for such periods as may be agreed upon by the parties.
served within 12 months, whether continuous or broken
reckoned from the date the employee started working, including Article 145. Assignment to non-household work. No househelper
authorized absences and paid regular holidays unless the shall be assigned to work in a commercial, industrial or agricultural
working days in the establishment as a matter of practice or
enterprise at a wage or salary rate lower than that provided for
policy, or that provided in the employment contracts, is less than
agricultural or non-agricultural workers as prescribed herein.
12 months, in which case said period shall be considered as
one year. It is also commutable to its money equivalent if not
used or exhausted at the end of the year. In other words, an Piece Workers
employee who has served for one year is entitled to it. He may
use it as leave days or he may collect its monetary value. To Labor Congress vs. NLRC
limit the award to three years, as the solicitor general
recommends, is to unduly restrict such right.[17] [Italics supplied]
The antecedents of this case as summarized by the Office of the
Correspondingly, it can be conscientiously deduced that the cause of Solicitor General in its Manifestation and Motion in Lieu of Comment,iv
action of an entitled employee to claim his service incentive leave pay are as follows:
accrues from the moment the employer refuses to remunerate its
The 99 persons named as petitioners in this proceeding
monetary equivalent if the employee did not make use of said leave
were rank-and-file employees of respondent Empire
credits but instead chose to avail of its commutation. Accordingly, if
Food Products, which hired them on various dates
the employee wishes to accumulate his leave credits and opts for its
(Paragraph 1, Annex A of Petition, Annex B; Page 2,
commutation upon his resignation or separation from employment, his
Annex F of Petition).
cause of action to claim the whole amount of his accumulated service
incentive leave shall arise when the employer fails to pay such amount Petitioners filed against private respondents a complaint
at the time of his resignation or separation from employment. for payment of money claim[s] and for violation of labor
standard[s] laws (NLRC Case No. RAB-111-10-1817-90).
Applying Article 291 of the Labor Code in light of this peculiarity of the
They also filed a petition for direct certification of
service incentive leave, we can conclude that the three (3)-year
petitioner Labor Congress of the Philippines as their
prescriptive period commences, not at the end of the year when the
bargaining representative (Case No. R0300-9010-RU-
employee becomes entitled to the commutation of his service
005).
incentive leave, but from the time when the employer refuses to pay
its monetary equivalent after demand of commutation or upon On October 23, 1990, petitioners represented by LCP
termination of the employees services, as the case may be. President Benigno B. Navarro, Sr. and private
respondents Gonzalo Kehyeng and Evelyn Kehyeng in
The above construal of Art. 291, vis--vis the rules on service incentive
behalf of Empire Food Products, Inc. entered into a
leave, is in keeping with the rudimentary principle that in the
Memorandum of Agreement which provided, among
implementation and interpretation of the provisions of the Labor Code
others, the following:
and its implementing regulations, the workingmans welfare should be
the primordial and paramount consideration.[18] The policy is to extend 1. That in connection with the pending Petition for Direct
the applicability of the decree to a greater number of employees who Certification filed by the Labor Congress with the DOLE,
can avail of the benefits under the law, which is in consonance with Management of the Empire Food Products has no
the avowed policy of the State to give maximum aid and protection to objection [to] the direct certification of the LCP Labor
labor.[19] Congress and is now recognizing the Labor Congress of
the Philippines (LCP) and its Local Chapter as the SOLE
In the case at bar, respondent had not made use of his service
and EXCLUSIVE Bargaining Agent and Representative
incentive leave nor demanded for its commutation until his
for all rank and file employees of the Empire Food
employment was terminated by petitioner. Neither did petitioner
compensate his accumulated service incentive leave pay at the time

Products regarding WAGES, HOURS OF WORK, AND
OTHER TERMS AND CONDITIONS OF
EMPLOYMENT;
2. That with regards [sic] to NLRC CASE NO. RAB-III-10-
1817-90 pending with the NLRC parties jointly and
mutually agreed that the issues thereof, shall be
discussed by the parties and resolve[d] during the
negotiation of the Collective Bargaining Agreement;
3. That Management of the Empire Food Products shall
make the proper adjustment of the Employees Wages
within fifteen (15) days from the signing of this Agreement
and further agreed to register all the employees with the
SSS;
4. That Employer, Empire Food Products thru its
Management agreed to deduct thru payroll deduction
UNION DUES and other Assessment[s] upon submission
by the LCP Labor Congress individual Check-Off
Authorization[s] signed by the Union Members indicating
the amount to be deducted and further agreed all
deduction[s] made representing Union Dues and
Assessment[s] shall be remitted immediately to the LCP
Labor Congress Treasurer or authorized representative
within three (3) or five (5) days upon deductions [sic],
Union dues not deducted during the period due, shall be
refunded or reimbursed by the Employer/Management.
Employer/Management further agreed to deduct Union
dues from non-union members the same amount
deducted from union members without need of individual
Check-Off Authorizations [for] Agency Fee;
5. That in consideration [of] the foregoing covenant,
parties jointly and mutually agreed that NLRC CASE NO.
RAB-III-10-1817-90 shall be considered provisionally
withdrawn from the Calendar of the National Labor
Relations Commission(NLRC), while the Petition for
direct certification of the LCP Labor Congress parties
jointly move for the direct certification of the LCP Labor
Congress;
6. That parties jointly and mutually agreed that upon
signing of this Agreement, no Harassments [sic], Threats,
Interferences [sic] of their respective rights under the law,
no Vengeance or Revenge by each partner nor any act
of ULP which might disrupt the operations of the
business;
7. Parties jointly and mutually agreed that pending
negotiations or formalization of the propose[d] CBA, this
Memorandum of Agreement shall govern the parties in
the exercise of their respective rights involving the
Management of the business and the terms and
condition[s] of employment, and whatever problems and
grievances may arise by and between the parties shall be
resolved by them, thru the most cordial and good
harmonious relationship by communicating the other
party in writing indicating said grievances before taking
any action to another forum or government agencies;
8. That parties [to] this Memorandum of Agreement jointly
and mutually agreed to respect, abide and comply with all
the terms and conditions hereof. Further agreed that
violation by the parties of any provision herein shall
constitute an act of ULP. (Annex A of Petition).
In an Order dated October 24, 1990, Mediator Arbiter Antonio
Cortez approved the memorandum of agreement and certified
LCP as the sole and exclusive bargaining agent among the
rank-and-file employees of Empire Food Products for purposes
of collective bargaining with respect to wages, hours of work
and other terms and conditions of employment (Annex B of
Petition).
On November 9, 1990, petitioners through LCP President
Navarro submitted to private respondents a proposal for
collective bargaining (Annex C of Petition).
On January 23, 1991, petitioners filed a complaint docketed as
NLRC Case No. RAB-III-01-1964-91 against private
respondents for:
a. Unfair Labor Practice by way of Illegal Lockout and/or
Dismissal;
b. Union busting thru Harassments [sic], threats, and
interfering with the rights of employees to self-
organization;
c. Violation of the Memorandum of Agreement dated
October 23, 1990;
d. Underpayment of Wages in violation of R.A. No. 6640
and R.A. No. 6727, such as Wages promulgated by the
Regional Wage Board;
e. Actual, Moral and Exemplary Damages. (Annex D of
Petition)
After the submission by the parties of their respective position
papers and presentation of testimonial evidence, Labor Arbiter
Ariel C. Santos absolved private respondents of the charges of
unfair labor practice, union busting, violation of the
memorandum of agreement, underpayment of wages and
denied petitioners prayer for actual, moral and exemplary
damages. Labor Arbiter Santos, however, directed the
reinstatement of the individual complainants:
The undersigned Labor Arbiter is not oblivious to the fact
that respondents have violated a cardinal rule in every
establishment that a payroll and other papers evidencing
hours of work, payments, etc. shall always be maintained
and subjected to inspection and visitation by personnel of
the Department of Labor and Employment. As such
penalty, respondents should not escape liability for this
technicality, hence, it is proper that all individual
complainants except those who resigned and executed
quitclaim[s] and releases prior to the filing of this
complaint should be reinstated to their former position[s]
with the admonition to respondents that any harassment,
intimidation, coercion or any form of threat as a result of
this immediately executory reinstatement shall be dealt
with accordingly.
SO ORDERED. (Annex G of Petition)
On appeal, the National Labor Relations Commission vacated
the Decision dated April 14, 1972 [sic] and remanded the case
to the Labor Arbiter for further proceedings for the following
reasons:
The Labor Arbiter, through his decision, noted that xxx
complainant did not present any single witness while
respondent presented four (4) witnesses in the persons
of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng
and Elvira Bulagan xxx (p. 183, Records), that xxx
complainant before the National Labor Relations
Commission must prove with definiteness and clarity the
offense charged. xxx (Record, p. 183); that xxx
complainant failed to specify under what provision of the
Labor Code particularly Art. 248 did respondents violate
so as to constitute unfair labor practice xxx (Record, p.
183); that complainants failed to present any witness who
may describe in what manner respondents have
committed unfair labor practice xxx (Record, p. 185); that
xxx complainant LCP failed to present anyone of the so-
called 99 complainants in order to testify who committed
the threats and intimidation xxx (Record, p. 185).
Upon review of the minutes of the proceedings on record,
however, it appears that complainant presented
witnesses, namely, BENIGNO NAVARRO, JR. (28
February 1991, RECORD, p. 91; 8 March 1991,
RECORD, p. 92, who adopted its POSITION PAPER
AND CONSOLIDATED AFFIDAVIT, as Exhibit A and the
annexes thereto as Exhibit B, B-1 to B-9, inclusive.
Minutes of the proceedings on record show that
complainant further presented other witnesses, namely:
ERLINDA BASILIO (13 March 1991, RECORD, p. 93;
LOURDES PANTILLO, MARIFE PINLAC, LENIE
GARCIA (16 April 1991, Record, p. 96, see back portion
thereof; 2 May 1991, Record, p. 102; 16 May 1991,
Record, p. 103; 11 June 1991, Record, p. 105). Formal
offer of Documentary and Testimonial Evidence was
made by complainant on June 24, 1991 (Record, p. 106-
109)
The Labor Arbiter must have overlooked the testimonies
of some of the individual complainants which are now on

record. Other individual complainants should have been
summoned with the end in view of receiving their
testimonies. The complainants should be afforded the
time and opportunity to fully substantiate their claims
against the respondents. Judgment should be rendered
only based on the conflicting positions of the parties. The
Labor Arbiter is called upon to consider and pass upon
the issues of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view [that]
the case should be remanded to the Labor Arbiter of
origin for further proceedings.(Annex H of Petition)
In a Decision dated July 27, 1994, Labor Arbiter Santos made
the following determination:
Complainants failed to present with definiteness and
clarity the particular act or acts constitutive of unfair labor
practice.
It is to be borne in mind that a declaration of unfair labor
practice connotes a finding of prima facie evidence of
probability that a criminal offense may have been
committed so as to warrant the filing of a criminal
information before the regular court. Hence, evidence
which is more than a scintilla is required in order to
declare respondents/employers guilty of unfair labor
practice. Failing in this regard is fatal to the cause of
complainants. Besides, even the charge of illegal lockout
has no leg to stand on because of the testimony of
respondents through their guard Orlando Cairo (TSN,
July 31, 1991 hearing; p. 5-35) that on January 21, 1991,
complainants refused and failed to report for work, hence
guilty of abandoning their post without permission from
respondents. As a result of complainants[] failure to
report for work, the cheese curls ready for repacking were
all spoiled to the prejudice of respondents. Under cross-
examination, complainants failed to rebut the authenticity
of respondents witness testimony
As regards the issue of harassments [sic], threats and
interference with the rights of employees to self-
organization which is actually an ingredient of unfair labor
practice, complainants failed to specify what type of
threats or intimidation was committed and who committed
the same. What are the acts or utterances constitutive of
harassments [sic] being complained of? These are the
specifics which should have been proven with
definiteness and clarity by complainants who chose to
rely heavily on its position paper through generalizations
to prove their case.
Insofar as violation of [the] Memorandum of Agreement
dated October 23, 1990 is concerned, both parties
agreed that:
2 - That with regards [sic] to the NLRC Case No.
RAB III-10-1817-90 pending with the NLRC, parties
jointly and mutually agreed that the issues thereof
shall be discussed by the parties and resolve[d]
during the negotiation of the CBA.
The aforequoted provision does not speak of [an]
obligation on the part of respondents but on a resolutory
condition that may occur or may not happen. This cannot
be made the basis of an imposition of an obligation over
which the National Labor Relations Commission has
exclusive jurisdiction thereof.
Anent the charge that there was underpayment of wages,
the evidence points to the contrary. The enumeration of
complainants wages in their consolidated Affidavits of
merit and position paper which implies underpayment has
no leg to stand on in the light of the fact that complainants
admission that they are piece workers or paid on a pakiao
[basis] i.e. a certain amount for every thousand pieces of
cheese curls or other products repacked. The only
limitation for piece workers or pakiao workers is that they
should receive compensation no less than the minimum
wage for an eight (8) hour work [sic]. And compliance
therewith was satisfactorily explained by respondent
Gonzalo Kehyeng in his testimony (TSN, p. 12-30) during
the July 31, 1991 hearing. On cross-examination,
complainants failed to rebut or deny Gonzalo Kehyengs
testimony that complainants have been even receiving
more than the minimum wage for an average workers
[sic]. Certainly, a lazy worker earns less than the
minimum wage but the same cannot be attributable to
respondents but to the lazy workers.
Finally, the claim for moral and exemplary damages has
no leg to stand on when no malice, bad faith or fraud was
ever proven to have been perpetuated by respondents.
WHEREFORE, premises considered, the complaint is
hereby DISMISSED for utter lack of merit. (Annex I of
Petition).iv
On appeal, the NLRC, in its Resolution dated 29 March 1995,iv
affirmed in toto the decision of Labor Arbiter Santos. In so doing, the
NLRC sustained the Labor Arbiters findings that: (a) there was a
dearth of evidence to prove the existence of unfair labor practice and
union busting on the part of private respondents; (b) the agreement of
23 October 1990 could not be made the basis of an obligation within
the ambit of the NLRCs jurisdiction, as the provisions thereof,
particularly Section 2, spoke of a resolutory condition which could or
could not happen; (c) the claims for underpayment of wages were
without basis as complainants were admittedly pakiao workers and
paid on the basis of their output subject to the lone limitation that the
payment conformed to the minimum wage rate for an eight-hour
workday; and (d) petitioners were not underpaid.
Their motion for reconsideration having been denied by the NLRC in
its Resolution of 31 October 1995,iv petitioners filed the instant special
civil action for certiorari raising the following issues:
I
WHETHER OR NOT THE PUBLIC RESPONDENT
NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION WHEN IT
DISREGARDED OR IGNORED NOT ONLY THE
EVIDENCE FAVORABLE TO HEREIN PETITIONERS,
APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN
DECISIONS AND THAT OF THIS HONORABLE
HIGHEST TRIBUNAL WHICH [WAS] TANTAMOUNT
NOT ONLY TO THE DEPRIVATION OF PETITIONERS
RIGHT TO DUE PROCESS BUT WOULD RESULT [IN]
MANIFEST INJUSTICE.
II
WHETHER OR NOT THE PUBLIC RESPONDENT
GRAVELY ABUSED ITS DISCRETION WHEN IT
DEPRIVED THE PETITIONERS OF THEIR
CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION,
SECURITY OF TENURE, PROTECTION TO LABOR,
JUST AND HUMANE CONDITIONS OF WORK AND
DUE PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE
ILLEGALLY EASED OUT [OF] OR CONSTRUCTIVELY
DISMISSED FROM THEIR ONLY MEANS OF
LIVELIHOOD.
IV
WHETHER OR NOT PETITIONERS SHOULD BE
REINSTATED FROM THE DATE OF THEIR DISMISSAL
UP TO THE TIME OF THEIR REINSTATEMENT, WITH
BACKWAGES, STATUTORY BENEFITS, DAMAGES
AND ATTORNEYS FEES.iv
We required respondents to file their respective Comments.
In their Manifestation and Comment, private respondents asserted
that the petition was filed out of time. As petitioners admitted in their
Notice to File petition for Review on Certiorari that they received a
copy of the resolution (denying their motion for reconsideration) on 13
December 1995, they had only until 29 December 1995 to file the
petition. Having failed to do so, the NLRC thus already entered
judgment in private respondents favor.
In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who
filed the notice to file a petition for review on their behalf, mistook
which reglementary period to apply. Instead of using the reasonable
time criterion for certiorari under Rule 65, he used the 15-day period
for petitions for review on certiorari under Rule 45. They hastened to
add that such was a mere technicality which should not bar their
petition from being decided on the merits in furtherance of substantial

justice, especially considering that respondents neither denied nor
contradicted the facts and issues raised in the petition.
In its Manifestation and Motion in Lieu of Comment, the Office of the
Solicitor General (OSG) sided with petitioners. It pointed out that the
Labor Arbiter, in finding that petitioners abandoned their jobs, relied
solely on the testimony of Security Guard Rolando Cairo that
petitioners refused to work on 21 January 1991, resulting in the
spoilage of cheese curls ready for repacking. However, the OSG
argued, this refusal to report for work for a single day did not constitute
abandonment, which pertains to a clear, deliberate and unjustified
refusal to resume employment, and not mere absence. In fact, the
OSG stressed, two days after allegedly abandoning their work,
petitioners filed a complaint for, inter alia, illegal lockout or illegal
dismissal. Finally, the OSG questioned the lack of explanation on the
part of Labor Arbiter Santos as to why he abandoned his original
decision to reinstate petitioners.
In view of the stand of the OSG, we resolved to require the NLRC to
file its own Comment.
In its Comment, the NLRC invokes the general rule that factual
findings of an administrative agency bind a reviewing court and
asserts that this case does not fall under the exceptions. The NLRC
further argues that grave abuse of discretion may not be imputed to
it, as it affirmed the factual findings and legal conclusions of the Labor
Arbiter only after carefully reviewing, weighing and evaluating the
evidence in support thereof, as well as the pertinent provisions of law
and jurisprudence.
In their Reply, petitioners claim that the decisions of the NLRC and
the Labor Arbiter were not supported by substantial evidence; that
abandonment was not proved; and that much credit was given to self-
serving statements of Gonzalo Kehyeng, owner of Empire Foods, as
to payment of just wages.
On 7 July 1997, we gave due course to the petition and required the
parties to file their respective memoranda. However, only petitioners
and private respondents filed their memoranda, with the NLRC merely
adopting its Comment as its Memorandum.
We find for petitioners.
Invocation of the general rule that factual findings of the NLRC bind
this Court is unavailing under the circumstances. Initially, we are
unable to discern any compelling reason justifying the Labor Arbiters
volte face from his 14 April 1992 decision reinstating petitioners to his
diametrically opposed 27 July 1994 decision, when in both instances,
he had before him substantially the same evidence. Neither do we
find the 29 March 1995 NLRC resolution to have sufficiently discussed
the facts so as to comply with the standard of substantial evidence.
For one thing, the NLRC confessed its reluctance to inquire into the
veracity of the Labor Arbiters factual findings, staunchly declaring that
it was not about to substitute [its] judgment on matters that are within
the province of the trier of facts. Yet, in the 21 July 1992 NLRC
resolution,iv it chastised the Labor Arbiter for his errors both in
judgment and procedure, for which reason it remanded the records of
the case to the Labor Arbiter for compliance with the pronouncements
therein.
What cannot escape from our attention is that the Labor Arbiter did
not heed the observations and pronouncements of the NLRC in its
resolution of 21 July 1992, neither did he understand the purpose of
the remand of the records to him. In said resolution, the NLRC
summarized the grounds for the appeal to be:
1. that there is a prima facie evidence of abuse of
discretion and acts of gross incompetence committed by the
Labor Arbiter in rendering the decision.
2. that the Labor Arbiter in rendering the decision
committed serious errors in the findings of facts.
After which, the NLRC observed and found:
Complainant alleged that the Labor Arbiter disregarded the
testimonies of the 99 complainants who submitted their
Consolidated Affidavit of Merit and Position Paper which was
adopted as direct testimonies during the hearing and cross-
examined by respondents counsel.
The Labor Arbiter, through his decision, noted that x x x
complainant did not present any single witness while
respondent presented four (4) witnesses in the persons of
Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan x x x (Records, p. 183), that x x x complainant before
the National Labor Relations Commission must prove with
definiteness and clarity the offense charged. x x x (Record, p.
183; that x x x complainant failed to specify under what
provision of the Labor Code particularly Art. 248 did
respondents violate so as to constitute unfair labor practice x x
x (Record, p. 183); that complainants failed to present any
witness who may describe in what manner respondents have
committed unfair labor practice x x x (Record, p. 185); that x x
x complainant a [sic] LCP failed to present anyone of the so
called 99 complainants in order to testify who committed the
threats and intimidation x x x (Record, p. 185).
Upon review of the minutes of the proceedings on record,
however, it appears that complainant presented witnesses,
namely BENIGNO NAVARRO, JR. (28 February 1991,
RECORD, p. 91; 8 March 1991, RECORD, p. 92), who adopted
its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as
Exhibit A and the annexes thereto as Exhibit B, B-1 to B-9,
inclusive. Minutes of the proceedings on record show that
complainant further presented other witnesses, namely:
ERLINDA BASILIO (13 March 1991, RECORD, p. 93;
LOURDES PANTILLO, MARIFE PINLAC, LENI GARCIA (16
April 1991, Record, p. 96, see back portion thereof; 2 May 1991,
Record, p. 102; 16 May 1991, Record, p. 103; 11 June 1991,
Record, p. 105). Formal offer of Documentary and Testimonial
Evidence was made by the complainant on June 24, 1991
(Record, p. 106-109).
The Labor Arbiter must have overlooked the testimonies of
some of the individual complainants which are now on record.
Other individual complainants should have been summoned
with the end in view of receiving their testimonies. The
complainants should [have been] afforded the time and
opportunity to fully substantiate their claims against the
respondents. Judgment should [have been] rendered only
based on the conflicting positions of the parties. The Labor
Arbiter is called upon to consider and pass upon the issues of
fact and law raised by the parties.
Toward this end, therefore, it is Our considered view the
case should be remanded to the Labor Arbiter of origin
for further proceedings.
Further, We take note that the decision does not contain
a dispositive portion or fallo. Such being the case, it may
be well said that the decision does not resolve the issues
at hand. On another plane, there is no portion of the
decision which could be carried out by way of execution.
It may be argued that the last paragraph of the decision
may be categorized as the dispositive portion thereof:
xxxxx
The undersigned Labor Arbiter is not
oblivious [to] the fact that respondents have
violated a cardinal rule in every
establishment that a payroll and other papers
evidencing hour[s] of work, payment, etc.
shall always be maintained and subjected to
inspection and visitation by personnel of the
Department of Labor and Employment. As
such penalty, respondents should not
escape liability for this technicality, hence, it
is proper that all the individual complainants
except those who resigned and executed
quitclaim[s] and release[s] prior to the filing of
this complaint should be reinstated to their
former position with the admonition to
respondents that any harassment,
intimidation, coercion or any form of threat as
a result of this immediately executory
reinstatement shall be dealt with accordingly.
SO ORDERED.
It is Our considered view that even assuming arguendo
that the respondents failed to maintain their payroll and
other papers evidencing hours of work, payment etc.,
such circumstance, standing alone, does not warrant the
directive to reinstate complainants to their former
positions. It is [a] well settled rule that there must be a
finding of illegal dismissal before reinstatement be
mandated.

In this regard, the LABOR ARBITER is hereby directed to
include in his clarificatory decision, after receiving
evidence, considering and resolving the same, the
requisite dispositive portion.iv
Apparently, the Labor Arbiter perceived that if not for petitioners, he
would not have fallen victim to this stinging rebuke at the hands of the
NLRC. Thus does it appear to us that the Labor Arbiter, in concluding
in his 27 July 1994 Decision that petitioners abandoned their work,
was moved by, at worst, spite, or at best, lackadaisically glossed over
petitioners evidence. On this score, we find the following observations
of the OSG most persuasive:
In finding that petitioner employees abandoned their
work, the Labor Arbiter and the NLRC relied on the
testimony of Security Guard Rolando Cairo that on
January 21, 1991, petitioners refused to work. As a result
of their failure to work, the cheese curls ready for
repacking on said date were spoiled.
The failure to work for one day, which resulted in the
spoilage of cheese curls does not amount to
abandonment of work. In fact two (2) days after the
reported abandonment of work or on January 23, 1991,
petitioners filed a complaint for, among others, unfair
labor practice, illegal lockout and/or illegal dismissal. In
several cases, this Honorable Court held that one could
not possibly abandon his work and shortly thereafter
vigorously pursue his complaint for illegal dismissal (De
Ysasi III v. NLRC, 231 SCRA 173; Ranara v. NLRC, 212
SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328;
Atlas Consolidated Mining and Development Corp. v.
NLRC, 190 SCRA 505; Hua Bee Shirt Factory v. NLRC,
186 SCRA 586; Mabaylan v. NLRC, 203 SCRA 570 and
Flexo Manufacturing v. NLRC, 135 SCRA 145). In Atlas
Consolidated, supra, this Honorable Court explicitly
stated:
It would be illogical for Caballo, to abandon
his work and then immediately file an action
seeking for his reinstatement. We can not
believe that Caballo, who had worked for
Atlas for two years and ten months, would
simply walk away from his job unmindful of
the consequence of his act, i.e. the forfeiture
of his accrued employment benefits. In
opting to finally to [sic] contest the legality of
his dismissal instead of just claiming his
separation pay and other benefits, which he
actually did but which proved to be futile after
all, ably supports his sincere intention to
return to work, thus negating Atlas stand that
he had abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable Court
stressed that it is the clear, deliberate and unjustified
refusal to resume employment and not mere absence
that constitutes abandonment. The absence of petitioner
employees for one day on January 21, 1991 as testified
[to] by Security Guard Orlando Cairo did not constitute
abandonment.
In his first decision, Labor Arbiter Santos expressly
directed the reinstatement of the petitioner employees
and admonished the private respondents that any
harassment, intimidation, coercion or any form of threat
as a result of this immediately executory reinstatement
shall be dealt with accordingly.
In his second decision, Labor Arbiter Santos did not state
why he was abandoning his previous decision directing
the reinstatement of petitioner employees.
By directing in his first decision the reinstatement of
petitioner employees, the Labor Arbiter impliedly held that
they did not abandon their work but were not allowed to
work without just cause.
That petitioner employees are pakyao or piece workers
does not imply that they are not regular employees
entitled to reinstatement. Private respondent Empire
Food Products, Inc. is a food and fruit processing
company. In Tabas v. California Manufacturing Co., Inc.
(169 SCRA 497), this Honorable Court held that the work
of merchandisers of processed food, who coordinate with
grocery stores and other outlets for the sale of the
processed food is necessary in the day-to-day
operation[s] of the company. With more reason, the work
of processed food repackers is necessary in the day-to-
day operation[s] of respondent Empire Food Products.iv
It may likewise be stressed that the burden of proving the existence
of just cause for dismissing an employee, such as abandonment, rests
on the employer, iv a burden private respondents failed to discharge.
Private respondents, moreover, in considering petitioners
employment to have been terminated by abandonment, violated their
rights to security of tenure and constitutional right to due process in
not even serving them with a written notice of such termination.iv
Section 2, Rule XIV, Book V of the Omnibus Rules Implementing the
Labor Code provides:
SEC. 2. Notice of Dismissal. - Any employer who seeks
to dismiss a worker shall furnish him a written notice
stating the particular acts or omission constituting the
grounds for his dismissal. In cases of abandonment of
work, the notice shall be served at the workers last known
address.
Petitioners are therefore entitled to reinstatement with full back wages
pursuant to Article 279 of the Labor Code, as amended by R.A. No.
6715. Nevertheless, the records disclose that taking into account the
number of employees involved, the length of time that has lapsed
since their dismissal, and the perceptible resentment and enmity
between petitioners and private respondents which necessarily
strained their relationship, reinstatement would be impractical and
hardly promotive of the best interests of the parties. In lieu of
reinstatement then, separation pay at the rate of one month for every
year of service, with a fraction of at least six (6) months of service
considered as one (1) year, is in order.iv
That being said, the amount of back wages to which each petitioner
is entitled, however, cannot be fully settled at this time. Petitioners, as
piece-rate workers having been paid by the piece,iv there is need to
determine the varying degrees of production and days worked by
each worker. Clearly, this issue is best left to the National Labor
Relations Commission.
As to the other benefits, namely, holiday pay, premium pay, 13th
month pay and service incentive leave which the labor arbiter failed to
rule on but which petitioners prayed for in their complaint,iv we hold
that petitioners are so entitled to these benefits. Three (3) factors lead
us to conclude that petitioners, although piece-rate workers, were
regular employees of private respondents. First, as to the nature of
petitioners tasks, their job of repacking snack food was necessary or
desirable in the usual business of private respondents, who were
engaged in the manufacture and selling of such food products;
second, petitioners worked for private respondents throughout the
year, their employment not having been dependent on a specific
project or season; and third, the length of timeiv that petitioners worked
for private respondents. Thus, while petitioners mode of
compensation was on a per piece basis, the status and nature of their
employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees
from receiving benefits such as nighttime pay, holiday pay, service
incentive leaveiv and 13th month pay,iv inter alia, field personnel and
other employees whose time and performance is unsupervised by the
employer, including those who are engaged on task or contract basis,
purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance
thereof. Plainly, petitioners as piece-rate workers do not fall within this
group. As mentioned earlier, not only did petitioners labor under the
control of private respondents as their employer, likewise did
petitioners toil throughout the year with the fulfillment of their quota as
supposed basis for compensation. Further, in Section 8 (b), Rule IV,
Book III which we quote hereunder, piece workers are specifically
mentioned as being entitled to holiday pay.
SEC. 8. Holiday pay of certain employees.-
(b) Where a covered employee is paid by results or
output, such as payment on piece work, his holiday
pay shall not be less than his average daily
earnings for the last seven (7) actual working days
preceding the regular holiday: Provided, however,
that in no case shall the holiday pay be less than
the applicable statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13th

iv
Month Pay Law, in view of the modifications to P.D. No. 851 by
Memorandum Order No. 28, clearly exclude the employer of piece
rate workers from those exempted from paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d. Employers of those who are paid on
purely commission, boundary or task basis,
and those who are paid a fixed amount for
performing specific work, irrespective of the
time consumed in the performance thereof,
except where the workers are paid on piece-
rate basis in which case the employer shall
grant the required 13th month pay to such
workers. (italics supplied)
The Revised Guidelines as well as the Rules and Regulations identify
those workers who fall under the piece-rate category as those who
are paid a standard amount for every piece or unit of work produced
that is more or less regularly replicated, without regard to the time
spent in producing the same.iv
As to overtime pay, the rules, however, are different. According to
Sec. 2(e), Rule I, Book III of the Implementing Rules, workers who are
paid by results including those who are paid on piece-work, takay,
pakiao, or task basis, if their output rates are in accordance with the
standards prescribed under Sec. 8, Rule VII, Book III, of these
regulations, or where such rates have been fixed by the Secretary of
Labor in accordance with the aforesaid section, are not entitled to
receive overtime pay. Here, private respondents did not allege
adherence to the standards set forth in Sec. 8 nor with the rates
prescribed by the Secretary of Labor. As such, petitioners are beyond
the ambit of exempted persons and are therefore entitled to overtime
pay. Once more, the National Labor Relations Commission would be
in a better position to determine the exact amounts owed petitioners,
if any.
As to the claim that private respondents violated petitioners right to
self-organization, the evidence on record does not support this claim.
Petitioners relied almost entirely on documentary evidence which, per
se, did not prove any wrongdoing on private respondents part. For
example, petitioners presented their complaintiv to prove the violation
of labor laws committed by private respondents. The complaint,
however, is merely the pleading alleging the plaintiffs cause or causes
of action.iv Its contents are merely allegations, the verity of which shall
have to be proved during the trial. They likewise offered their
Consolidated Affidavit of Merit and Position Paperiv which, like the
offer of their Complaint, was a tautological exercise, and did not help
nor prove their cause. In like manner, the petition for certification
electioniv and the subsequent order of certificationiv merely proved that
petitioners sought and acquired the status of bargaining agent for all
rank-and-file employees. Finally, the existence of the memorandum
of agreementiv offered to substantiate private respondents non-
compliance therewith, did not prove either compliance or non-
compliance, absent evidence of concrete, overt acts in contravention
of the provisions of the memorandum.
IN VIEW WHEREOF, the instant petition is hereby GRANTED. The
Resolution of the National Labor Relations Commission of 29 March
1995 and the Decision of the Labor Arbiter of 27 July 1994 in NLRC
Case No. RAB-III-01-1964-91 are hereby SET ASIDE, and another is
hereby rendered:
1. DECLARING petitioners to have been illegally
dismissed by private respondents, thus entitled to full
back wages and other privileges, and separation pay in
lieu of reinstatement at the rate of one months salary for
every year of service with a fraction of six months of
service considered as one year;
2. REMANDING the records of this case to the National
Labor Relations Commission for its determination of
the back wages and other benefits and separation
pay, taking into account the foregoing observations;
and
3. DIRECTING the National Labor Relations
Commission to resolve the referred issues within
sixty (60) days from its receipt of a copy of this
decision and of the records of the case and to submit
to this Court a report of its compliance hereof within
ten (10) days from the rendition of its resolution.
Costs against private respondents.
SO ORDERED.
Normal Hours of Work
Article 83. Normal hours of work. The normal hours of work of any
employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a population of at
least one million (1,000,000) or in hospitals and clinics with a bed
capacity of at least one hundred (100) shall hold regular office hours
for eight (8) hours a day, for five (5) days a week, exclusive of time for
meals, except where the exigencies of the service require that such
personnel work for six (6) days or forty-eight (48) hours, in which case,
they shall be entitled to an additional compensation of at least thirty
percent (30%) of their regular wage for work on the sixth day. For
purposes of this Article, "health personnel" shall include resident
physicians, nurses, nutritionists, dietitians, pharmacists, social
workers, laboratory technicians, paramedical technicians,
psychologists, midwives, attendants and all other hospital or clinic
personnel.
Compensable Hours of Work In General
Article 84. Hours worked. Hours worked shall include
(a) all time during which an employee is required to be on duty or to
be at a prescribed workplace; and
(b) all time during which an employee is suffered or permitted to work.
Rest periods of short duration during working hours shall be counted
as hours worked.
Meal Period
Article 85. Meal periods. Subject to such regulations as the Secretary
of Labor may prescribe, it shall be the duty of every employer to give
his employees not less than sixty (60) minutes time-off for their regular
meals.
Philippine Airlines, Inc., vs. NLRC
The facts are as follow:
Private respondent was employed as flight surgeon at petitioner
company. He was assigned at the PAL Medical Clinic at Nichols and
was on duty from 4:00 in the afternoon until 12:00 midnight.
On February 17, 1994, at around 7:00 in the evening, private
respondent left the clinic to have his dinner at his residence, which
was about five-minute drive away. A few minutes later, the clinic
received an emergency call from the PAL Cargo Services. One of its
employees, Mr. Manuel Acosta, had suffered a heart attack. The
nurse on duty, Mr. Merlino Eusebio, called private respondent at home
to inform him of the emergency. The patient arrived at the clinic at
7:50 in the evening and Mr. Eusebio immediately rushed him to the
hospital. When private respondent reached the clinic at around 7:51
in the evening, Mr. Eusebio had already left with the patient. Mr.
Acosta died the following day.
Upon learning about the incident, PAL Medical Director Dr. Godofredo
B. Banzon ordered the Chief Flight Surgeon to conduct an
investigation. The Chief Flight Surgeon, in turn, required private
respondent to explain why no disciplinary sanction should be taken
against him.
In his explanation, private respondent asserted that he was entitled to
a thirty-minute meal break; that he immediately left his residence upon
being informed by Mr. Eusebio about the emergency and he arrived
at the clinic a few minutes later; that Mr. Eusebio panicked and
brought the patient to the hospital without waiting for him.
Finding private respondents explanation unacceptable, the
management charged private respondent with abandonment of post
while on duty. He was given ten days to submit a written answer to
the administrative charge.

In his answer, private respondent reiterated the assertions in his
previous explanation. He further denied that he abandoned his post
on February 17, 1994. He said that he only left the clinic to have his
dinner at home. In fact, he returned to the clinic at 7:51 in the evening
upon being informed of the emergency.
After evaluating the charge as well as the answer of private
respondent, petitioner company decided to suspend private
respondent for three months effective December 16, 1994.
Private respondent filed a complaint for illegal suspension against
petitioner.
On July 16, 1996, Labor Arbiter Romulus A. Protasio rendered a
decisionvi declaring the suspension of private respondent illegal. It
also ordered petitioner to pay private respondent the amount
equivalent to all the benefits he should have received during his period
of suspension plus P500,000.00 moral damages. The dispositive
portion of the decision reads:
WHEREFORE, in view of all the foregoing, judgment is hereby
rendered declaring the suspension of complainant as illegal, and
ordering the respondents the restitution to the complainant of all
employment benefits equivalent to his period of suspension, and the
payment to the complainant of P500,000.00 by way of moral
damages.vi
Petitioner appealed to the NLRC. The NLRC, however, dismissed the
appeal after finding that the decision of the Labor Arbiter is supported
by the facts on record and the law on the matter.vi The NLRC likewise
denied petitioners motion for reconsideration.vi
Hence, this petition raising the following arguments:
1. The public respondents acted without or in excess of their
jurisdiction and with grave abuse of discretion in nullifying
the 3-month suspension of private respondent despite the
fact that the private respondent has committed an offense
that warranted the imposition of disciplinary action.
2. The public respondents acted without or in excess of their
jurisdiction and with grave abuse of discretion in holding the
petitioner liable for moral damages:
(a) Despite the fact that no formal hearing
whatsoever was conducted for
complainant to substantiate his claim;
(b) Despite the absence of proof that the
petitioner acted in bad faith in imposing the
3-month suspension; and
(c) Despite the fact that the Labor Arbiter's
award of moral damages is highly irregular,
considering that it was more than what the
private respondent prayed for.vi
We find that public respondents did not err in nullifying the
three-month suspension of private respondent. They, however, erred
in awarding moral damages to private respondent.
First, as regards the legality of private respondents suspension.
The facts do not support petitioners allegation that private respondent
abandoned his post on the evening of February 17, 1994. Private
respondent left the clinic that night only to have his dinner at his
house, which was only a few minutes drive away from the clinic. His
whereabouts were known to the nurse on duty so that he could be
easily reached in case of emergency. Upon being informed of Mr.
Acostas condition, private respondent immediately left his home and
returned to the clinic. These facts belie petitioners claim of
abandonment.
Petitioner argues that being a full-time employee, private respondent
is obliged to stay in the company premises for not less than eight (8)
hours. Hence, he may not leave the company premises during such
time, even to take his meals.
We are not impressed.
Articles 83 and 85 of the Labor Code read:
Art. 83. Normal hours of work.The normal hours of work of any
employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a population of at
least one million (1,000,000) or in hospitals and clinics with a bed
capacity of at least one hundred (100) shall hold regular office hours
for eight (8) hours a day, for five (5) days a week, exclusive of time
for meals, except where the exigencies of the service require that
such personnel work for six (6) days or forty-eight (48) hours, in which
case they shall be entitled to an additional compensation of at least
thirty per cent (30%) of their regular wage for work on the sixth day.
For purposes of this Article, health personnel shall include: resident
physicians, nurses, nutritionists, dieticians, pharmacists, social
workers, laboratory technicians, paramedical technicians,
psychologists, midwives, attendants and all other hospital or clinic
personnel. (emphasis supplied)
Art. 85. Meal periods.Subject to such regulations as the Secretary of
Labor may prescribe, it shall be the duty of every employer to give his
employees not less than sixty (60) minutes time-off for their regular
meals.
Section 7, Rule I, Book III of the Omnibus Rules Implementing the
Labor Code further states:
Sec. 7. Meal and Rest Periods.Every employer shall give his
employees, regardless of sex, not less than one (1) hour time-off for
regular meals, except in the following cases when a meal period of
not less than twenty (20) minutes may be given by the employer
provided that such shorter meal period is credited as compensable
hours worked of the employee;(a) Where the work is non-
manual work in nature or does not involve strenuous physical
exertion;
(b) Where the establishment regularly operates not less than
sixteen hours a day;
(c) In cases of actual or impending emergencies or there is
urgent work to be performed on machineries, equipment or
installations to avoid serious loss which the employer would otherwise
suffer; and
(d) Where the work is necessary to prevent serious loss of
perishable goods.
Rest periods or coffee breaks running from five (5) to twenty
(20) minutes shall be considered as compensable working time.
Thus, the eight-hour work period does not include the meal
break. Nowhere in the law may it be inferred that employees must
take their meals within the company premises. Employees are not
prohibited from going out of the premises as long as they return to
their posts on time. Private respondents act, therefore, of going home
to take his dinner does not constitute abandonment.
We now go to the award of moral damages to private
respondent.
Not every employee who is illegally dismissed or suspended is
entitled to damages. As a rule, moral damages are recoverable only
where the dismissal or suspension of the employee was attended by
bad faith or fraud, or constituted an act oppressive to labor, or was
done in a manner contrary to morals, good customs or public policy.vi
Bad faith does not simply mean negligence or bad judgment. It
involves a state of mind dominated by ill will or motive. It implies a
conscious and intentional design to do a wrongful act for a dishonest
purpose or some moral obliquity.vi The person claiming moral
damages must prove the existence of bad faith by clear and
convincing evidence for the law always presumes good faith.vi
In the case at bar, there is no showing that the management of
petitioner company was moved by some evil motive in suspending
private respondent. It suspended private respondent on an honest,
albeit erroneous, belief that private respondents act of leaving the
company premises to take his meal at home constituted abandonment
of post which warrants the penalty of suspension. Also, it is evident
from the facts that petitioner gave private respondent all the
opportunity to refute the charge against him and to defend himself.
These negate the existence of bad faith on the part of petitioner.
Under the circumstances, we hold that private respondent is not
entitled to moral damages.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The
portion of the assailed decision awarding moral damages to private
respondent is DELETED. All other aspects of the decision are
AFFIRMED.
SO ORDERED.
Shorter Meal Period (Less than One hour,
but not less than 20 minutes)

--
Waiting Time
Arica vs. NLRC
This case stemmed from a complaint filed on April 9, 1984 against
private respondent Stanfilco for assembly time, moral damages and
attorney's fees, with the aforementioned Regional Arbitration Branch
No. XI, Davao City.
After the submission by the parties of their respective position papers
(Annex "C", pp. 30-40; Annex "D", Rollo, pp. 41-50), Labor Arbiter
Pedro C. Ramos rendered a decision dated October 9, 1985 (Annex
'E', Rollo, pp. 51-58) in favor of private respondent STANFILCO,
holding that:
Given these facts and circumstances, we cannot but agree with
respondent that the pronouncement in that earlier case, i.e. the thirty-
minute assembly time long practiced cannot be considered waiting
time or work time and, therefore, not compensable, has become the
law of the case which can no longer be disturbed without doing
violence to the time- honored principle of res-judicata.
WHEREFORE, in view of the foregoing considerations, the instant
complaint should therefore be, as it is hereby, DISMISSED.
SO ORDERED. (Rollo, p. 58)
On December 12, 1986, after considering the appeal memorandum of
complainant and the opposition of respondents, the First Division of
public respondent NLRC composed of Acting Presiding
Commissioner Franklin Drilon, Commissioner Conrado Maglaya,
Commissioner Rosario D. Encarnacion as Members, promulgated its
Resolution, upholding the Labor Arbiters' decision. The Resolution's
dispositive portion reads:
Surely, the customary functions referred to in the above- quoted
provision of the agreement includes the long-standing practice and
institutionalized non-compensable assembly time. This, in effect,
estopped complainants from pursuing this case.
The Commission cannot ignore these hard facts, and we are
constrained to uphold the dismissal and closure of the case.
WHEREFORE, let the appeal be, as it is hereby dismissed, for lack of
merit.
SO ORDERED. (Annex "H", Rollo, pp. 86-89).
On January 15, 1987, petitioners filed a Motion for Reconsideration
which was opposed by private respondent (Annex "I", Rollo, pp. 90-
91; Annex J Rollo, pp. 92-96).
Public respondent NLRC, on January 30, 1987, issued a resolution
denying for lack of merit petitioners' motion for reconsideration (Annex
"K", Rollo, p. 97).
Hence this petition for review on certiorari filed on May 7, 1987
The Court in the resolution of May 4, 1988 gave due course to this
petition.
Petitioners assign the following issues:
1) Whether or not the 30-minute activity of the petitioners before the
scheduled working time is compensable under the Labor Code.
2) Whether or not res judicata applies when the facts obtaining in the
prior case and in the case at bar are significantly different from each
other in that there is merit in the case at bar.
3) Whether or not there is finality in the decision of Secretary Ople in
view of the compromise agreement novating it and the withdrawal of
the appeal.
4) Whether or not estoppel and laches lie in decisions for the
enforcement of labor standards (Rollo, p. 10).
Petitioners contend that the preliminary activities as workers of
respondents STANFILCO in the assembly area is compensable as
working time (from 5:30 to 6:00 o'clock in the morning) since these
preliminary activities are necessarily and primarily for private
respondent's benefit.
These preliminary activities of the workers are as follows:
(a) First there is the roll call. This is followed by getting their individual
work assignments from the foreman.
(b) Thereafter, they are individually required to accomplish the
Laborer's Daily Accomplishment Report during which they are often
made to explain about their reported accomplishment the following
day.
(c) Then they go to the stockroom to get the working materials, tools
and equipment.
(d) Lastly, they travel to the field bringing with them their tools,
equipment and materials.
All these activities take 30 minutes to accomplish (Rollo, Petition, p.
11).
Contrary to this contention, respondent avers that the instant
complaint is not new, the very same claim having been brought
against herein respondent by the same group of rank and file
employees in the case of Associated Labor Union and Standard Fruit
Corporation, NLRC Case No. 26-LS-XI-76 which was filed way back
April 27, 1976 when ALU was the bargaining agent of respondent's
rank and file workers. The said case involved a claim for "waiting
time", as the complainants purportedly were required to assemble at
a designated area at least 30 minutes prior to the start of their
scheduled working hours "to ascertain the work force available for the
day by means of a roll call, for the purpose of assignment or
reassignment of employees to such areas in the plantation where they
are most needed." (Rollo, pp. 64- 65)
Noteworthy is the decision of the Minister of Labor, on May 12, 1978
in the aforecited case (Associated Labor Union vs. Standard (Phil.)
Fruit Corporation, NLRC Case No. 26-LS-XI-76 where significant
findings of facts and conclusions had already been made on the
matter.
The Minister of Labor held:
The thirty (30)-minute assembly time long practiced and
institutionalized by mutual consent of the parties under Article IV,
Section 3, of the Collective Bargaining Agreement cannot be
considered as waiting time within the purview of Section 5, Rule I,
Book III of the Rules and Regulations Implementing the Labor Code.
...
Furthermore, the thirty (30)-minute assembly is a deeply- rooted,
routinary practice of the employees, and the proceedings attendant
thereto are not infected with complexities as to deprive the workers
the time to attend to other personal pursuits. They are not new
employees as to require the company to deliver long briefings
regarding their respective work assignments. Their houses are
situated right on the area where the farm are located, such that after
the roll call, which does not necessarily require the personal presence,
they can go back to their houses to attend to some chores. In short,
they are not subject to the absolute control of the company during this
period, otherwise, their failure to report in the assembly time would
justify the company to impose disciplinary measures. The CBA does
not contain any provision to this effect; the record is also bare of any
proof on this point. This, therefore, demonstrates the indubitable fact
that the thirty (30)-minute assembly time was not primarily intended
for the interests of the employer, but ultimately for the employees to
indicate their availability or non-availability for work during every
working day. (Annex "E", Rollo, p. 57).
Accordingly, the issues are reduced to the sole question as to whether
public respondent National Labor Relations Commission committed a
grave abuse of discretion in its resolution of December 17, 1986.
The facts on which this decision was predicated continue to be the
facts of the case in this questioned resolution of the National Labor
Relations Commission.
It is clear that herein petitioners are merely reiterating the very same
claim which they filed through the ALU and which records show had
already long been considered terminated and closed by this Court in
G.R. No. L-48510. Therefore, the NLRC can not be faulted for ruling
that petitioners' claim is already barred by res-judicata.
Be that as it may, petitioners' claim that there was a change in the
factual scenario which are "substantial changes in the facts" makes
respondent firm now liable for the same claim they earlier filed against
 CASE AT BAR. It is beyond dispute that the petitioners members
are full-time employees receiving their monthly salaries irrespective of
respondent which was dismissed. It is thus axiomatic that the non-
the number of working days or teaching hours in a month. However,
compensability of the claim having been earlier established, constitute
they find themselves in a most peculiar situation whereby they are
the controlling legal rule or decision between the parties and remains
forced to go on leave during semestral breaks. These semestral
to be the law of the case making this petition without merit.
breaks are in the nature of work interruptions beyond the employees
control. The duration of the semestral break varies from year to year
As aptly observed by the Solicitor General that this petition is "clearly
dependent on a variety of circumstances affecting at times only the
violative of the familiar principle of res judicata. There will be no end
private respondent but at other times all educational institutions in the
to this controversy if the light of the Minister of Labor's decision dated
country. As such, these breaks cannot be considered as absences
May 12, 1979 that had long acquired the character of finality and
within the meaning of the law for which deductions may be made from
which already resolved that petitioners' thirty (30)-minute assembly
monthly allowances. The "No work, no pay" principle does not apply
time is not compensable, the same issue can be re-litigated again."
in the instant case. The petitioners members received their regular
(Rollo, p. 183)
salaries during this period. It is clear from the aforequoted provision
This Court has held:
of law that it contemplates a "no work" situation where the employees
voluntarily absent themselves. Petitioners, in the case at bar, certainly
In this connection account should be taken of the cognate principle
do not, ad voluntatem, absent themselves during semestral breaks.
that res judicata operates to bar not only the relitigation in a
Rather, they are constrained to take mandatory leave from work. For
subsequent action of the issues squarely raised, passed upon and
this they cannot be faulted nor can they be begrudged that which is
adjudicated in the first suit, but also the ventilation in said subsequent
due them under the law.
suit of any other issue which could have been raised in the first but
was not. The law provides that 'the judgment or order is, with respect
3. ID.; ID.; ID.; EMPLOYEES WHETHER PAID ON MONTHLY OR
to the matter directly adjudged or as to any other matter that could
DAILY BASIS ENTITLED TO DAILY LIVING ALLOWANCE WHEN
have been raised in relation thereto, conclusive between the parties
PAID THEIR BASIC WAGE. Respondents contention that the
and their successors in interest by title subsequent to the
"factor receiving a salary alone should not be the basis of receiving
commencement of the action .. litigating for the same thing and in the
ECOLA", is likewise, without merit. Particular attention is brought to
same capacity.' So, even if new causes of action are asserted in the
the Implementing Rules and Regulations of Wage Order No. 1 to wit:
second action (e.g. fraud, deceit, undue machinations in connection
"Sec. 5. Allowance for Unworked Days. a) All covered employees
with their execution of the convenio de transaccion), this would not
whether paid on a monthly or daily basis shall be entitled to their daily
preclude the operation of the doctrine of res judicata. Those issues
living allowance when they are paid their basic.." . .
are also barred, even if not passed upon in the first. They could have
been, but were not, there raised. (Vda. de Buncio v. Estate of the late
4. ID.; ID.; ID.; PURPOSE OF THE LAW. The legal principles of
Anita de Leon, 156 SCRA 352 [1987]).
"No work, no pay; No pay, no ECOLA" must necessarily give way to
the purpose of the law to augment the income of employees to enable
Moreover, as a rule, the findings of facts of quasi-judicial agencies
them to cope with the harsh living conditions brought about by
which have acquired expertise because their jurisdiction is confined
inflation; and to protect employees and their wages against the
to specific matters are accorded not only respect but at times even
ravages brought by these conditions. Significantly, it is the
finality if such findings are supported by substantial evidence (Special
commitment of the State to protect labor and to provide means by
Events & Central Shipping Office Workers Union v. San Miguel
which the difficulties faced by the working force may best be
Corporation, 122 SCRA 557 [1983]; Dangan v. NLRC, 127 SCRA 706
alleviated.
[1984]; Phil. Labor Alliance Council v. Bureau of Labor Relations, 75
SCRA 162 [1977]; Mamerto v. Inciong, 118 SCRA 265 (1982];
5. ID.; ID.; ID.; PRESIDENTIAL DECREE 451; CONSTRUED.
National Federation of Labor Union (NAFLU) v. Ople, 143 SCRA 124
Respondent overlooks the elemental principle of statutory
[1986]; Edi-Staff Builders International, Inc. v. Leogardo, Jr., 152
construction that the general statements in the whereas clauses
SCRA 453 [1987]; Asiaworld Publishing House, Inc. v. Ople, 152
cannot prevail over the specific or particular statements in the law
SCRA 219 [1987]).
itself which define or limit the purposes of the legislation or proscribe
certain acts. True, the whereas clauses of PD 451 provide for salary
The records show that the Labor Arbiters' decision dated October 9,
and or wage increase and other benefits, however, the same do not
1985 (Annex "E", Petition) pointed out in detail the basis of his findings
delineate the source of such funds and it is only in Section 3 which
and conclusions, and no cogent reason can be found to disturb these
provides for the limitations wherein the intention of the framers of the
findings nor of those of the National Labor Relations Commission
law is clearly outlined. The law is clear. The sixty (60%) percent
which affirmed the same.
incremental proceeds from the tuition increase are to be devoted
entirely to wage or salary increases which means increases in basic
PREMISES CONSIDERED, the petition is DISMISSED for lack of
salary. The law cannot be construed to include allowances which are
merit and the decision of the National Labor Relations Commission is
benefits over and above the basic salaries of the employees.
AFFIRMED.
6. REMEDIAL LAW; APPEALS; FINDINGS OF FACT OF NATIONAL
SO ORDERED.
LABOR RELATIONS COMMISSION ARE BINDING WHEN FULLY
SUBSTANTIATED BY EVIDENCE. As evidenced by the payrolls
Inactive Due to Work Interruptions submitted by them during the period September 16 to September 30,
1981, the faculty members have been paid for the extra loads. We
University of Pangasinan Faculty Union vs. agree with the respondents that this issue involves a question of fact
properly within the competence of the respondent NLRC to pass
University of Pangasinan upon. The findings of fact of the respondent Commission are binding
on this Court there being no indication of their being unsubstantiated
SYLLABUS by evidence.

1. LABOR AND SOCIAL LEGISLATIONS; LABOR LAWS; DECISION

PRESIDENTIAL DECREES ON EMERGENCY COST OF LIVING
ALLOWANCE; REQUISITES FOR ENTITLEMENT TO
ALLOWANCES PROVIDED THEREUNDER. The various GUTIERREZ, JR., J.:
Presidential Decrees on ECOLAs to wit: PDs 1614, 1634, 1678 and
1713, provide on "Allowances of Fulltime Employees . . ." that
"Employees shall be paid in full the required monthly allowance
This is a petition for review on certiorari pursuant to Rule 65 of the
regardless of the number of their regular working days if they incur no
Rules of Court to annul and to set aside the decision of respondent
absences during the month. If they incur absences without pay, the
National Labor Relations Commission (NLRC) dated October 25,
amounts corresponding to the absences may be deducted from the
1982, dismissing the appeal of petitioner in NLRC Case No. RBI-47-
monthly allowance . . ." ; and on "Leave of Absence Without Pay", that
82, entitled "University of Pangasinan Faculty Union, complainant,
"All covered employees shall be entitled to the allowance provided
versus University of Pangasinan, Respondent." chanrobles law library
herein when they are on leave of absence with pay."cralaw virtua1aw
: red
library

2. ID.; ID.; ID.; "NO WORK, NO PAY" PRINCIPLE NOT APPLICABLE


Petitioner is a labor union composed of faculty members of the
respondent University of Pangasinan, an educational institution duly
organized and existing by virtue of the laws of the Philippines.
On December 18, 1981, the petitioner, through its President, Miss
Consuelo Abad, filed a complaint against the private respondent with
the Arbitration Branch of the NLRC, Dagupan District Office, Dagupan
City. The complaint seeks: (a) the payment of Emergency Cost of
Living Allowances (ECOLA) for November 7 to December 5, 1981, a
semestral break; (b) salary increases from the sixty (60%) percent of
the incremental proceeds of increased tuition fees; and (c) payment
of salaries for suspended extra loads.
The petitioners members are full-time professors, instructors, and
teachers of respondent University. The teachers in the college level
teach for a normal duration of ten (10) months a school year, divided
into two (2) semesters of five (5) months each, excluding the two (2)
months summer vacation. These teachers are paid their salaries on a
regular monthly basis.
In November and December, 1981, the petitioners members were
fully paid their regular monthly salaries. However, from November 7
to December 5, during the semestral break, they were not paid their
ECOLA. The private respondent claims that the teachers are not
entitled thereto because the semestral break is not an integral part of
the school year and there being no actual services rendered by the
teachers during said period, the principle of "No work, no pay" applies.
During the same school year (1981-1982), the private respondent was
authorized by the Ministry of Education and Culture to collect, as it did
collect, from its students a fifteen (15%) percent increase of tuition
fees. Petitioners members demanded a salary increase effective the
first semester of said schoolyear to be taken from the sixty (60%)
percent incremental proceeds of the increased tuition fees. Private
respondent refused, compelling the petitioner to include said demand
in the complaint filed in the case at bar. While the complaint was
pending in the arbitration branch, the private respondent granted an
across-the-board salary increase of 5.86%. Nonetheless, the
petitioner is still pursuing full distribution of the 60% of the incremental
proceeds as mandated by the Presidential Decree No. 451.
Aside from their regular loads, some of petitioners members were
given extra loads to handle during the same 1981-1982 schoolyear.
Some of them had extra loads to teach on September 21, 1981, but
they were unable to teach as classes in all levels throughout the
country were suspended, although said days was proclaimed by the
President of the Philippines as a working holiday. Those with extra
loads to teach on said day claimed they were not paid their salaries
for those loads, but the private respondent claims otherwise.
The issue to be resolved in the case at bar are
following:chanrob1es virtual 1aw library
I
"WHETHER OR NOT PETITIONERS MEMBERS ARE ENTITLED
TO ECOLA DURING THE SEMESTRAL BREAK FROM NOVEMBER
7 TO DECEMBER 5, 1981 OF THE 1981-82 SCHOOL YEAR.
II
"WHETHER OR NOT 60% OF THE INCREMENTAL PROCEEDS OF
INCREASED TUITION FEES SHALL BE DEVOTED EXCLUSIVELY
TO SALARY INCREASE,
III
"WHETHER OR NOT ALLEGED PAYMENT OF SALARIES FOR
EXTRA LOADS ON SEPTEMBER 21, 1981 WAS PROVEN BY
SUBSTANTIAL EVIDENCE."cralaw virtua1aw library
Anent the first issue, the various Presidential Decrees on ECOLAs to
wit: PDs 1614, 1634, 1678 and 1713, provide on "Allowances of
Fulltime Employees . . ." that "Employees shall be paid in full the
required monthly allowance regardless of the number of their regular
working days if they incur no absences during the month. If they incur
absences without pay, the amounts corresponding to the absences
may be deducted from the monthly allowance . . ." ; and on "Leave of
Absence Without Pay", that "All covered employees shall be entitled
to the allowance provided herein when they are on leave of absence
with pay."cralaw virtua1aw library
It is beyond dispute that the petitioners members are full-time
employees receiving their monthly salaries irrespective of the number
of working days or teaching hours in a month. However, they find
themselves in a most peculiar situation whereby they are forced to go
on leave during semestral breaks. These semestral breaks are in the
nature of work interruptions beyond the employees control. The
duration of the semestral break varies from year to year dependent
on a variety of circumstances affecting at times only the private
respondent but at other times all educational institutions in the
country. As such, these breaks cannot be considered as absences
within the meaning of the law for which deductions may be made from
monthly allowances. The "No work, no pay" principle does not apply
in the instant case. The petitioners members received their regular
salaries during this period. It is clear from the aforequoted provision
of law that it contemplates a "no work" situation where the employees
voluntarily absent themselves. Petitioners, in the case at bar, certainly
do not, ad voluntatem, absent themselves during semestral breaks.
Rather, they are constrained to take mandatory leave from work. For
this they cannot be faulted nor can they be begrudged that which is
due them under the law. To a certain extent, the private respondent
can specify dates when no classes would be held. Surely, it was not
the intention of the framers of the law to allow employers to withhold
employee benefits by the simple expedient of unilaterally imposing
"no work" days and consequently avoiding compliance with the
mandate of the law for those days.chanrobles.com.ph : virtual law
library
Respondents contention that "the fact of receiving a salary alone
should not be the basis of receiving ECOLA", is, likewise, without
merit. Particular attention is brought to the Implementing Rules and
Regulations of Wage Order No. 1 to wit.
SECTION 5. Allowance for Unworked Days.
"a) All covered employees whether paid on a monthly or daily basis
shall be entitled to their daily living allowance when they are paid their
basic wage."cralaw virtua1aw library
x x x
This provision, at once refutes the above contention. It is evident that
the intention of the law is to grant ECOLA upon the payment of basic
wages. Hence, we have the principle of "No pay, no ECOLA" the
converse of which finds application in the case at bar. Petitioners
cannot be considered to be on leave without pay so as not to be
entitled to ECOLA, for, as earlier stated, the petitioners were paid their
wages in full for the months of November and December of 1981,
the notwithstanding the intervening semestral break. This, in itself, is a
tacit recognition of the rather unusual state of affairs in which teachers
find themselves. Although said to be on forced leave, professors and
teachers are, nevertheless, burdened with the task of working during
a period of time supposedly available for rest and private matters.
There are papers to correct, students to evaluate, deadlines to meet,
and periods within which to submit grading reports. Although they may
be considered by the respondent to be on leave, the semestral break
could not be used effectively for the teachers own purposes for the
nature of a teachers job imposes upon him further duties which must
be done during the said period of time. Learning is a never ending
process. Teachers and professors must keep abreast of
developments all the time. Teachers cannot also wait for the opening
of the next semester to begin their work. Arduous preparation is
necessary for the delicate task of educating our children. Teaching
involves not only an application of skill and an imparting of knowledge,
but a responsibility which entails self dedication and sacrifice. The
task of teaching ends not with the perceptible efforts of the petitioners
members but goes beyond the classroom: a continuum where only
the visible labor is relieved by academic intermissions. It would be
most unfair for the private respondent to consider these teachers as
employees on leave without pay to suit its purposes and, yet, in the
meantime, continue availing of their services as they prepare for the
next semester or complete all of the last semesters requirements.
Furthermore, we may also by analogy apply the principle enunciated
in the Omnibus Rules Implementing the Labor Code to
wit:chanrob1es virtual 1aw library
Sec. 4. Principles in Determining Hours Worked. The following
general principles shall govern in determining whether the time spent
by an employee is considered hours worked for purposes of this
Rule:chanrob1es virtual 1aw library

x x x "whereas"
"(d) The time during which an employee is inactive by reason of
interruptions in his work beyond his control shall be considered time
either if the imminence of the resumption of work requires the
employees presence at the place of work or if the interval is too brief
to be utilized effectively and gainfully in the employees own interest."
(Emphasis supplied).
The petitioners members in the case at bar, are exactly in such a
situation. The semestral break scheduled is an interruption beyond
petitioners control and it cannot be used "effectively nor gainfully in
the employees interest. Thus, the semestral break may also be
considered as "hours worked." For this, the teachers are paid regular
salaries and, for this, they should be entitled to ECOLA. Not only do
the teachers continue to work during this short recess but much less
do they cease to live for which the cost of living allowance is intended.
The legal principles of "No work, no pay; No pay, no ECOLA" must
necessarily give way to the purpose of the law to augment the income
of employees to enable them to cope with the harsh living conditions
brought about by inflation; and to protect employees and their wages
against the ravages brought by these conditions. Significantly, it is the
commitment of the State to protect labor and to provide means by
which the difficulties faced by the working force may best be
alleviated. To submit to the respondents interpretation of the no work,
no pay policy is to defeat this noble purpose. The Constitution and the
law mandate otherwise.chanrobles.com:cralaw:red
With regard to the second issue, we are called upon to interpret and
apply Section 3 of Presidential Decree 451 to wit:chanrob1es virtual
1aw library
SEC. 3. Limitations. The increase in tuition or other school fees or
other charges as well as the new fees or charges authorized under
the next preceding section shall be subject to the following
conditions:jgc:chanrobles.com.ph
"(a) That no increase in tuition or other school fees or charges shall
be approved unless sixty (60%) per centum of the proceeds is
allocated for increase in salaries or wages of the members of the
faculty and all other employees of the school concerned, and the
balance for institutional development, student assistance and
extension services, and return to investments: Provided, That in no
case shall the return to investments exceed twelve (12%) per centum
of the incremental proceeds; . . ."cralaw virtua1aw library
x x x go to wage increases and 40% to institutional developments, student
This Court had the occasion to rule squarely on this point in the very
recent case entitled, University of the East v. University of the East
Faculty Association, 117 SCRA 554. We held
that:jgc:chanrobles.com.ph
"In effect, the problem posed before Us is whether or not the reference
in Section 3(a) to increase in salaries or wages of the faculty and all
other employees of the schools concerned as the first purpose to
which the incremental proceeds from authorized increases to tuition
fees may be devoted, may be construed to include allowances and
benefits. In the negative, which is the position of respondents, it would
follow that such allowances must be taken in resources of the school
not derived from tuition fees.
"Without delving into the factual issue of whether or not there could
be any such other resources, We note that among the items of second
purpose stated in provision in question is return in investment. And
the law provides only for a maximum, not a minimum. In other words,
the schools may get a return to investment of not more than 12%, but
if circumstances warrant, there is no minimum fixed by law which they
should get.
"On this predicate, We are of the considered view that, if the school
happen to have no other resources to grant allowances and benefits,
either mandated by law or secured by collective bargaining, such
allowances and benefits should be charged against the return to
investments referred to in the second purpose stated in Section 3(a)
of P.D. 451."cralaw virtua1aw library
Private respondent argues that the above interpretation "disregarded
the intention and spirit of the law" which intention is clear from the
clauses as follows:jgc:chanrobles.com.ph
"It is imperative that private educational institutions upgrade
classroom instruction . . . provide salary and or wage increases and
other benefits . . ."cralaw virtua1aw library
Respondent further contends that PD 451 was issued to alleviate the
sad plight of private schools, their personnel and all those directly or
indirectly on school income as the decree was aimed
". . . to upgrade classroom instruction by improving their facilities and
bring competent teachers in all levels of education, provide salary and
or wage increases and other benefits to their teaching, administrative,
and other personnel to keep up with the increasing cost of living."
(Emphasis supplied)
Respondent overlooks the elemental principle of statutory
construction that the general statements in the whereas clauses
cannot prevail over the specific or particular statements in the law
itself which define or limit the purposes of the legislation or proscribe
certain acts. True, the whereas clauses of PD 451 provide for salary
and or wage increase and other benefits, however, the same do not
delineate the source of such funds and it is only in Section 3 which
provides for the limitations wherein the intention of the framers of the
law is clearly outlined. The law is clear. The sixty (60%) percent
incremental proceeds from the tuition increase are to be devoted
entirely to wage or salary increases which means increases in basic
salary. The law cannot be construed to include allowances which are
benefits over and above the basic salaries of the employees. To
charge such benefits to the 60% incremental proceeds would be to
reduce the increase in basic salary provided by law, an increase
intended also to help the teachers and other workers tide themselves
and their families over these difficult economic times.chanrobles
virtual lawlibrary
This Court is not guilty of usurpation of legislative functions as claimed
by the respondents. We expressed the opinion in the University of the
East case that benefits mandated by law and collective bargaining
may be charged to the 12% return on investments within the 40%
incremental proceeds of tuition increase. As admitted by respondent,
we merely made this statement as a suggestion in answer to the
respondents query as to where then, under the law, can such benefits
be charged. We were merely interpreting the meaning of the law
within the confines of its provisions. The law provides that 60% should
assistance, extension services, and return on investments (ROI).
Under the law, the last item ROI has flexibility sufficient to
accommodate other purposes of the law and the needs of the
university. ROI is not set aside for any one purpose of the university
such as profits or returns on investments. The amount may be used
to comply with other duties and obligations imposed by law which the
university exercising managerial prerogatives finds cannot under
present circumstances, be funded by other revenue sources. It may
be applied to any other collateral purpose of the university or invested
elsewhere. Hence, the framers of the law intended this portion of the
increases in tuition fees to be a general fund to cover up for the
universitys miscellaneous expenses and, precisely, for this reason, it
was not so delimited. Besides, ROI is a return or profit over and above
the operating expenditures of the university, and still, over and above
the profits it may have had prior to the tuition increase. The earning
capacities of private educational institutions are not dependent on the
increases in tuition fees allowed by P.D. 451. Accommodation of the
allowances required by law require wise and prudent management of
all the university resources together with the incremental proceeds of
tuition increases. Cognizance should be taken of the fact that the
private respondent had, before PD 451, managed to grant all
allowances required by law. It cannot now claim that it could not afford
the same, considering that additional funds are even granted them by
the law in question. We find no compelling reason, therefore, to
deviate from our previous ruling in the University of the East case
even as we take the second hard look at the decision requested by
the private Respondent. This case was decided in 1982 when PDs
1614, 1634, 1678, and 1713 which are also the various Presidential
Decrees on ECOLA were already in force. PD 451 was interpreted in
the light of these subsequent legislations which bear upon but do not
modify nor amend, the same. We need not go beyond the ruling in the

University of the East case.
Coming now to the third issue, the respondents are of the considered
view that as evidenced by the payrolls submitted by them during the
period September 16 to September 30, 1981, the faculty members
have been paid for the extra loads. We agree with the respondents
that this issue involves a question of fact properly within the
competence of the respondent NLRC to pass upon. The findings of
fact of the respondent Commission are binding on this Court there
being no indication of their being unsubstantiated by evidence. We
find no grave abuse in the findings of respondent NLRC on this matter
to warrant reversal. Assuming arguendo, however, that the petitioners
have not been paid for these extra loads, they are not entitled to
payment following the principles of "No work, no pay." This time, the
rule applies. Involved herein is a matter different from the payment of
ECOLA under the first issue. We are now concerned with extra, not
regular loads for which the petitioners are paid regular salaries every
month regardless of the number of working days or hours in such a
month. Extra loads should be paid for only when actually performed
by the employee. Compensation is based, therefore, on actual work
done and on the number of hours and days spent over and beyond
their regular hours of duty. Since there was no work on September
21, 1981, it would now be unfair to grant petitioners demand for extra
wages on that day.chanrobles law library : red
Finally, disposing of the respondents charge of petitioners lack of
legal capacity to sue, suffice it to say that this question can no longer
be raised initially on appeal or certiorari. It is quite belated for the
private respondent to question the personality of the petitioner after it
had dealt with it as a party in the proceedings below. Furthermore, it
was not disputed that the petitioner is a duly registered labor
organization and as such has the legal capacity to sue and be sued.
Registration grants it the rights of a legitimate labor organization and
recognition by the respondent University is not necessary for it to
institute this action in behalf of its members to protect their interests
and obtain relief from grievances. The issues raised by the petitioner
do not involve pure money claims but are more intricately intertwined
with conditions of employment.
WHEREFORE the petition for certiorari is hereby GRANTED. The
private respondent is ordered to pay its regular fulltime
teachers/employees emergency cost of living allowances for the
semestral break from November 7 to December 5, 1981 and the
undistributed balance of the sixty (60%) percent incremental proceeds
from tuition increases for the same schoolyear as outlined above. The
respondent Commission is sustained insofar as it DENIED the
payment of salaries for the suspended extra loads on September 21,
1981.
SO ORDERED.
Travel Time
Rada vs. NLRC
The facts, as stated in the Comment of private respondent Philnor
Consultants and Planners, Inc. (Philnor), are as follows:
Petitioner's initial employment with this Respondent was under a
"Contract of Employment for a Definite Period" dated July 7, 1977,
copy of which is hereto attached and made an integral part hereof as
Annex A whereby Petitioner was hired as "Driver" for the construction
supervision phase of the Manila North Expressway Extension,
Second Stage (hereinafter referred to as MNEE Stage 2) for a term of
"about 24 months effective July 1, 1977.
xxx xxx xxx
Highlighting the nature of Petitioner's employment, Annex A
specifically provides as follows:
It is hereby understood that the Employer does not have a continuing
need for the services of the Employee beyond the termination date of
this contract and that the Employee's services shall automatically, and
without notice, terminate upon the completion of the above specified
phase of the project; and that it is further understood that the
engagement of his/her services is coterminus with the same and not
with the whole project or other phases thereof wherein other
employees of similar position as he/she have been hired. (Par. 7,
emphasis supplied)
Petitioner's first contract of employment expired on June 30, 1979.
Meanwhile, the main project, MNEE Stage 2, was not finished on
account of various constraints, not the least of which was inadequate
funding, and the same was extended and remained in progress
beyond the original period of 2.3 years. Fortunately for the Petitioner,
at the time the first contract of employment expired, Respondent was
in need of Driver for the extended project. Since Petitioner had the
necessary experience and his performance under the first contract of
employment was found satisfactory, the position of Driver was offered
to Petitioner, which he accepted. Hence a second Contract of
Employment for a Definite Period of 10 months, that is, from July 1,
1979 to April 30, 1980 was executed between Petitioner and
Respondent on July 7, 1979. . . .
In March 1980 some of the areas or phases of the project were
completed, but the bulk of the project was yet to be finished. By that
time some of those project employees whose contracts of
employment expired or were about to expire because of the
completion of portions of the project were offered another employment
in the remaining portion of the project. Petitioner was among those
whose contract was about to expire, and since his service
performance was satisfactory, respondent renewed his contract of
employment in April 1980, after Petitioner agreed to the offer.
Accordingly, a third contract of employment for a definite period was
executed by and between the Petitioner and the Respondent whereby
the Petitioner was again employed as Driver for 19 months, from May
1, 1980 to November 30, 1981, . . .
This third contract of employment was subsequently extended for a
number of times, the last extension being for a period of 3 months,
that is, from October 1, 1985 to December 31, 1985, . . .
The last extension, from October 1, 1985 to December 31, 1985
(Annex E) covered by an "Amendment to the Contract of Employment
with a Definite Period," was not extended any further because
Petitioner had no more work to do in the project. This last extension
was confirmed by a notice on November 28, 1985 duly acknowledged
by the Petitioner the very next day, . . .
Sometime in the 2nd week of December 1985, Petitioner applied for
"Personnel Clearance" with Respondent dated December 9, 1985 and
acknowledged having received the amount of P3,796.20 representing
conversion to cash of unused leave credits and financial assistance.
Petitioner also released Respondent from all obligations and/or
claims, etc. in a "Release, Waiver and Quitclaim" . . . 2
Culled from the records, it appears that on May 20, 1987, petitioner
filed before the NLRC, National Capital Region, Department of Labor
and Employment, a Complaint for non-payment of separation pay and
overtime pay. On June 3, 1987, Philnor filed its Position Paper
alleging, inter alia, that petitioner was not illegally terminated since the
project for which he was hired was completed; that he was hired under
three distinct contracts of employment, each of which was for a
definite period, all within the estimated period of MNEE Stage 2
Project, covering different phases or areas of the said project; that his
work was strictly confined to the MNEE Stage 2 Project and that he
was never assigned to any other project of Philnor; that he did not
render overtime services and that there was no demand or claim for
him for such overtime pay; that he signed a "Release, Waiver and
Quitclaim" releasing Philnor from all obligations and claims; and that
Philnor's business is to provide engineering consultancy services,
including supervision of construction services, such that it hires
employees according to the requirements of the project manning
schedule of a particular contract. 3
On July 2, 1987, petitioner filed an Amended Complaint alleging that
he was illegally dismissed and that he was not paid overtime pay
although he was made to render three hours overtime work form
Monday to Saturday for a period of three years.
On July 7, 1987, petitioner filed his Position Paper claiming that he
was illegally dismissed since he was a regular employee entitled to
security of tenure; that he was not a project employee since Philnor is
not engaged in the construction business as to be covered by Policy
Instructions No. 20; that the contract of employment for a definite
period executed between him and Philnor is against public policy and
a clear circumvention of the law designed merely to evade any
benefits or liabilities under the statute; that his position as driver was
essential, necessary and desirable to the conduct of the business of

Philnor; that he rendered overtime work until 6:00 p.m. daily except
Sundays and holidays and, therefore, he was entitled to overtime pay.
4
In his Reply to Respondent's Position Paper, petitioner claimed that
he was a regular employee pursuant to Article 278(c) of the Labor
Code and, thus, he cannot be terminated except for a just cause under
Article 280 of the Code; and that the public respondent's ruling in
Quiwa vs. Philnor Consultants and Planners, Inc. 5 is not applicable
to his case since he was an administrative employee working as a
company driver, which position still exists and is essential to the
conduct of the business of Philnor even after the completion of his
contract of employment. 6 Petitioner likewise avers that the contract
of employment for a definite period entered into between him and
Philnor was a ploy to defeat the intent of Article 280 of the Labor Code.
On July 28, 1987, Philnor filed its Respondent's Supplemental
Position Paper, alleging therein that petitioner was not a company
driver since his job was to drive the employees hired to work at the
MNEE Stage 2 Project to and from the filed office at Sto. Domingo
Interchange, Pampanga; that the office hours observed in the project
were from 7:00 a.m. to 4:00 p.m. Mondays through Saturdays; that
Philnor adopted the policy of allowing certain employees, not
necessarily the project driver, to bring home project vehicles to afford
fast and free transportation to and from the project field office
considering the distance between the project site and the employees'
residence, to avoid project delays and inefficiency due to employee
tardiness caused by transportation problem; that petitioner was
allowed to use a project vehicle which he used to pick up and drop off
some ten employees along Epifanio de los Santos Avenue (EDSA),
on his way home to Marikina, Metro Manila; that when he was absent
or on leave, another employee living in Metro Manila used the same
vehicle in transporting the same employees; that the time used by
petitioner to and from his residence to the project site from 5:30 a.m.
to 7:00 a.m. and from 4:00 p.m. to 6:00 p.m., or about three hours
daily, was not overtime work as he was merely enjoying the benefit
and convenience of free transportation provided by Philnor, otherwise
without such vehicle he would have used at least four hours by using
public transportation and spent P12.00 daily fare; that in the case of
Quiwa vs. Philnor Consultants and Planners, Inc., supra, the NLRC
upheld Philnor's position that Quiwa was a project employee and he
was not entitled to termination pay under Policy Instructions No. 20
since his employment was coterminous with the completion of the
project.
On August 25, 1987, Philnor filed its Respondent's Reply/Comments
to Complainant's Rejoinder and Reply, submitting therewith two
letters dated January 5, 1985 and February 6, 1985, signed by MNEE
Stage 2 Project employees, including herein petitioner, where they
asked what termination benefits could be given to them as the MNEE
Stage 2 Project was nearing completion, and Philnor's letter-reply
dated February 22, 1985 informing them that they are not entitled to
termination benefits as they are contractual/project employees.
On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a
decision 7 with the following dispositive portion:
WHEREFORE, in view of all the foregoing considerations, judgment
is hereby rendered:
(1) Ordering the respondent company to reinstate the complainant to
his former position without loss of seniority rights and other privileges
with full backwages from the time of his dismissal to his actual
reinstatement;
(2) Directing the respondent company to pay the complainant
overtime pay for the three excess hours of work performed during
working days from January 1983 to December 1985; and
(3) Dismissing all other claims for lack of merit.
SO ORDERED.
Acting on Philnor's appeal, the NLRC rendered its assailed decision
dated November 19, 1990, setting aside the labor arbiter's
aforequoted decision and dismissing petitioner's complaint.
Hence this petition wherein petitioner charges respondent NLRC with
grave abuse of discretion amounting to lack of jurisdiction for the
following reasons:
1. The decision of the labor arbiter, dated August 31, 1989, has
already become final and executory;
2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not
binding nor is it applicable to this case;
3. The petitioner is a regular employee with eight years and five
months of continuous services for his employer, private respondent
Philnor;
4. The claims for overtime services, reinstatement and full backwages
are valid and meritorious and should have been sustained; and
5. The decision of the labor arbiter should be reinstated as it is more
in accord with the facts, the law and evidence.
The petition is devoid of merit.
1. Petitioner questions the jurisdiction of respondent NLRC in taking
cognizance of the appeal filed by Philnor in spite of the latter's failure
to file a supersedeas bond within ten days from receipt of the labor
arbiter's decision, by reason of which the appeal should be deemed
to have been filed out of time. It will be noted, however, that Philnor
was able to file a bond although it was made beyond the 10-day
reglementary period.
While it is true that the payment of the supersedeas bond is an
essential requirement in the perfection of an appeal, however, where
the fee had been paid although payment was delayed, the broader
interests of justice and the desired objective of resolving controversies
on the merits demands that the appeal be given due course. Besides,
it was within the inherent power of the NLRC to have allowed late
payment of the bond, considering that the aforesaid decision of the
labor arbiter was received by private respondent on October 3, 1989
and its appeal was duly filed on October 13, 1989. However, said
decision did not state the amount awarded as backwages and
overtime pay, hence the amount of the supersedeas bond could not
be determined. It was only in the order of the NLRC of February 16,
1990 that the amount of the supersedeas bond was specified and
which bond, after an extension granted by the NLRC, was timely filed
by private respondent.
Moreover, as provided by Article 221 of the Labor Code, "in any
proceeding before the Commission or any of the Labor Arbiters, the
rules of evidence prevailing in Courts of law or equity shall not be
controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every
and all reasonable means to ascertain the facts in each case speedily
and objectively without regard to technicalities of law or procedure, all
in the interest of due process. 8 Finally, the issue of timeliness of the
appeal being an entirely new and unpleaded matter in the
proceedings below it may not now be raised for the first time before
this Court. 9
2. Petitioner postulates that as a regular employee, he is entitled to
security of tenure, hence he cannot be terminated without cause.
Private respondent Philnor believes otherwise and asserts that
petitioner is merely a project employee who was terminated upon the
completion of the project for which he was employed.
In holding that petitioner is a regular employee, the labor arbiter found
that:
. . . There is no question that the complainant was employed as driver
in the respondent company continuously from July 1, 1977 to
December 31, 1985 under various contracts of employment. Similarly,
there is no dispute that respondent Philnor Consultant & Planner, Inc.,
as its business name connotes, has been engaged in providing to its
client(e)le engineering consultancy services. The record shows that
while the different labor contracts executed by the parties stipulated
definite periods of engaging the services of the complainant, yet the
latter was suffered to continue performing his job upon the expiration
of one contract and the renewal of another. Under these
 nature of the business the corporation is engaged into is one which
will not allow it to employ workers for an indefinite period.
circumstances, the complaint has obtained the status of regular
employee, it appearing that he has worked without fail for almost eight
It is significant to note that the corporation does not construct vessels
years, a fraction of six months considered as one whole year, and that
for sale or otherwise which will demand continuous productions of
his assigned task as driver was necessary and desirable in the usual
ships and will need permanent or regular workers. It merely accepts
trade/business of the respondent employer. Assuming to be true, as
contracts for shipbuilding or for repair of vessels form third parties
spelled out in the employment contract, that the Employer has no
and, only, on occasion when it has work contract of this nature that it
"continuing need for the services of the Employe(e) beyond the
hires workers to do the job which, needless to say, lasts only for less
termination date of this contract and that the Employee's services
than a year or longer.
shall automatically, and without notice, terminate upon completion of
the above specified phase of the project," still we cannot see our way
The completion of their work or project automatically terminates their
clear why the complainant was hired and his services engaged
employment, in which case, the employer is, under the law, only
contract after contract straight from 1977 to 1985 which, to our
obliged to render a report on the termination of the employment. (139-
considered view, lends credence to the contention that he worked as
140, Rollo of G.R. No. 65689) (Emphasis supplied)
regular driver ferrying early in the morning office personnel to the
In Cartagenas, et al. vs. Romago Electric Company, Inc., et al., 13 we
company main office in Pampanga and bringing back late in the
likewise held that:
afternoon to Manila, and driving company executives for inspection of
construction workers to the jobsites. All told, we believe that the
As an electrical contractor, the private respondent depends for its
complainant, under the environmental facts obtaining in the case at
business on the contracts it is able to obtain from real estate
bar, is a regular employee, the provisions of written agreement to the
developers and builders of buildings. Since its work depends on the
contrary notwithstanding and regardless of the oral understanding of
availability of such contracts or "projects," necessarily the duration of
the parties . . . 10
the employment's of this work force is not permanent but co-terminus
with the projects to which they are assigned and from whose payrolls
On the other hand, respondent NLRC declared that, as between the
they are paid. It would be extremely burdensome for their employer
uncorroborated and unsupported assertions of petitioners and those
who, like them, depends on the availability of projects, if it would have
of private respondent which are supported by documents, greater
to carry them as permanent employees and pay them wages even if
credence should be given the latter. It further held that:
there are no projects for them to work on. (Emphasis supplied.)
Complainant was hired in a specific project or undertaking as driver.
It must be stressed herein that although petitioner worked with Philnor
While such project was still on-going he was hired several times with
as a driver for eight years, the fact that his services were rendered
his employment period fixed every time his contract was renewed. At
only for a particular project which took that same period of time to
the completion of the specific project or undertaking his employment
complete categorizes him as a project employee. Petitioner was
contract was not renewed.
employed for one specific project.
We reiterate our ruling in the case of (Quiwa) vs. Philnor Consultants
A non-project employee is different in that the employee is hired for
and Planners, Inc., NLRC RAB III 5-1738-84, it is being applicable in
more than one project. A non-project employee, vis-a-vis a project
this case, viz.:
employee, is best exemplified in the case of Fegurin, et al. vs. National
Labor Relations Commission, et al. 14 wherein four of the petitioners
. . . While it is true that the activities performed by him were necessary
had been working with the company for nine years, one for eight
or desirable in the usual business or trade of the respondent as
years, another for six years, the shortest term being three years. In
consultants, planners, contractor and while it is also true that the
holding that petitioners are regular employees, this Court therein
duration of his employment was for a period of about seven years,
explained:
these circumstances did not make him a
regular employee in contemplation of Article 281 of (the) Labor Code.
Considering the nature of the work of petitioners, that of carpenter,
. . . 11
laborer or mason, their respective jobs would actually be continuous
and on-going. When a project to which they are individually assigned
Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations
is completed, they would be assigned to the next project or a phase
Commission, et al. 12 is applicable to the case at bar. Thus:
thereof. In other words, they belonged to a "work pool" from which the
company would draw workers for assignment to other projects at its
We hold that private respondents were project employees whose work
discretion. They are, therefore, actually "non-project employees."
was coterminous with the project or which they were hired. Project
employees, as distinguished from regular or non-project employees,
From the foregoing, it is clear that petitioner is a project employee
are mentioned in section 281 of the Labor Code as those "where the
considering that he does not belong to a "work pool" from which the
employment has been fixed for a specific project or undertaking the
company would draw workers for assignment to other projects at its
completion or termination of which has been determined at the time
discretion. It is likewise apparent from the facts obtaining herein that
of the engagement of the employee."
petitioner was utilized only for one particular project, the MNEE Stage
2 Project of respondent company. Hence, the termination of herein
Policy Instructions No. 20 of the Secretary of Labor, which was issued
petitioner is valid by reason of the completion of the project and the
to stabilize employer-employee relations in the construction industry,
expiration of his employment contract.
provides:
Project employees are those employed in connection with a particular
3. Anent the claim for overtime compensation, we hold that petitioner
construction project. Non-project (regular) employees are those
is entitled to the same. The fact that he picks up employees of Philnor
employed by a construction company without reference to any
at certain specified points along EDSA in going to the project site and
particular project.
drops them off at the same points on his way back from the field office
Project employees are not entitled to termination pay if they are
going home to Marikina, Metro Manila is not merely incidental to
terminated as a result of the completion of the project or any phase
petitioner's job as a driver. On the contrary, said transportation
thereof in which they are employed, regardless of the number of
arrangement had been adopted, not so much for the convenience of
projects in which they have been employed by a particular
the employees, but primarily for the benefit of the employer, herein
construction company. Moreover, the company is not required to
private respondent. This fact is inevitably deducible from the
obtain clearance from the Secretary of Labor in connection with such
Memorandum of respondent company:
termination.
The herein Respondent resorted to the above transport arrangement
The petitioner cited three of its own cases wherein the National Labor
because from its previous project construction supervision
Relations Commission, Deputy Minister of Labor and Employment
experiences, Respondent found out that project delays and
Inciong and the Director of the National Capital Region held that the
inefficiencies resulted from employees' tardiness; and that the
layoff of its project employees was lawful. Deputy Minister Inciong in
problem of tardiness, in turn, was aggravated by transportation
TFU Case No. 1530, In Re Sandoval Shipyards, Inc. Application for
problems, which varied in degrees in proportion to the distance
Clearance to Terminate Employees, rendered the following ruling on
between the project site and the employees' residence. In view of this
February 26, 1979;
lesson from experience, and as a practical, if expensive, solution to
employees' tardiness and its concomitant problems, Respondent
We feel that there is merit in the contention of the applicant
adopted the policy of allowing certain employees not necessarily
corporation. To our mind, the employment of the employees
project drivers to bring home project vehicles, so that employees
concerned were fixed for a specific project or undertaking. For the

could be afforded fast, convenient and free transportation to and from
the project field office. . . . 15
Private respondent does not hesitate to admit that it is usually the
project driver who is tasked with picking up or dropping off his fellow
employees. Proof thereof is the undisputed fact that when petitioner
is absent, another driver is supposed to replace him and drive the
vehicle and likewise pick up and/or drop off the other employees at
the designated points on EDSA. If driving these employees to and
from the project site is not really part of petitioner's job, then there
would have been no need to find a replacement driver to fetch these
employees. But since the assigned task of fetching and delivering
employees is indispensable and consequently mandatory, then the
time required of and used by petitioner in going from his residence to
the field office and back, that is, from 5:30 a.m. to 7:00 a.m. and from
4:00 p.m. to around 6:00 p.m., which the labor arbiter rounded off as
averaging three hours each working day, should be paid as overtime
work. Quintessentially, petitioner should be given overtime pay for the
three excess hours of work performed during working days from
January, 1983 to December, 1985.
WHEREFORE, subject to the modification regarding the award of
overtime pay to herein petitioner, the decision appealed from is
AFFIRMED in all other respects.
SO ORDERED.
Overtime Work Pay
Article 87. Overtime work. Work may be performed beyond eight (8)
hours a day provided that the employee is paid for the overtime work
An additional compensation equivalent to his regular wage plus at
least twenty-five percent (25%) thereof.
Work performed beyond eight hours on a holiday or rest day shall be
paid an additional compensation equivalent to the rate of the first eight
hours on a holiday or rest day plus at least thirty percent (30%)
thereof.
Article 88. Undertime not offset by overtime. Undertime work on any
particular day shall not be offset by overtime work on any other day.
Permission given to the employee to go on leave on some other day
of the week shall not exempt the employer from paying the additional
compensation required in this Chapter.
Article 89. Emergency overtime work. Any employee may be required
by the employer to perform overtime work in any of the following
cases:
When the country is at war or when any other national or local
emergency has been declared by the National Assembly or the Chief
Executive;
When it is necessary to prevent loss of life or property or in case of
imminent danger to public safety due to an actual or impending
emergency in the locality caused by serious accidents, fire, flood,
typhoon, earthquake, epidemic, or other disaster or calamity;
When there is urgent work to be performed on machines, installations,
or equipment, in order to avoid serious loss or damage to the
employer or some other cause of similar nature;
When the work is necessary to prevent loss or damage to perishable
goods; and
Where the completion or continuation of the work started before the
eighth hour is necessary to prevent serious obstruction or prejudice to
the business or operations of the employer.
Any employee required to render overtime work under this Article shall
be paid the additional compensation required in this Chapter.
Article 90. Computation of additional compensation. For purposes of
computing overtime and other additional remuneration as required by
this Chapter, the "regular wage" of an employee shall include the cash
wage only, without deduction on account of facilities provided by the
employer.
Proof of Work/Employer Obligation
SSS vs. CA
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 (known as Hda. No.
Audit B-70 located in Pontevedra, La Carlota City) and leased from
the University of the Philippines (known as Hda. Audit B-15-M situated
in La Granja, La Carlota City). 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 Tanas 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 Social Security System (SSS).
Consequently, she was deprived of the burial grant and pension
benefits accruing to the heirs of Tana had he been reported for
coverage.
Hence, she prayed that the Commission issue an order directing:
1. 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
2. the SSS to grant petitioner Margarita Tana the funeral
and pension benefits due her.viii
The SSS, in a petition-in-intervention, 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. Being the agency charged with the
implementation and enforcement of the provisions of the Social
Security Law, as amended, the SSS asked the Commissions leave to
intervene in the case.viii
In his answer, 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. Hence, he prayed that the case
against him be dismissed for lack of cause of action.viii
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. No. Audit B-70. She also prayed for the
dismissal of the case considering that Ignacio Tana, Sr. was never
her employee.viii
After hearing both parties, the Social Security Commission issued a
Resolution on January 28, 1988, the dispositive portion of which
reads:
After a careful evaluation of the testimonies of the petitioner and her
witnesses, as well as the testimony of the respondent together with
her documentary evidences, this Commission finds that the late
Ignacio Tana was employed by respondent Conchita Ayalde from
January 1961 to March 1979. The testimony of the petitioner which
was corroborated by Agaton Libawas and Aurelio Tana, co-workers

of the deceased Ignacio Tana, sufficienty established the latters
employment with the respondent.
As regards respondent Antero Maghari, he is absolved from liability
because he is a mere employee of Conchita Ayalde.
PREMISES CONSIDERED, this Commission finds and so holds that
the late Ignacio Tana had been employed continuously from January
1961 to March 1979 in Hda. B-70 and Hda. B-15-M which are owned
and leased, respectively, by respondent Conchita (Concepcion)
Ayalde with a salary based on the Minimum Wage prevailing during
his employment.
Not having reported the petitioners husband for coverage with the
SSS, respondent Conchita (Concepcion) Ayalde is, therefore, liable
for the payment of damages equivalent to the death benefits in the
amount of P7,067.40 plus the amount of P750.00 representing funeral
benefit or a total of P7,817.40.
Further, the SSS is ordered to pay to the petitioner her accrued
pension covering the period after the 5-year guaranteed period
corresponding to the employers liability.
SO ORDERED.viii
Respondent Ayalde filed a motion for reconsiderationviiiwhich
the Commission denied for lack of merit in an Order dated November
3, 1988.viii
Not satisfied with the Commissions ruling, Ayalde appealed to
the Court of Appeals, docketed as CA-G.R. SP No. 16427, raising the
following assignment of errors:
I
The Social Security Commission erred in not finding that there is
sufficient evidence to show that:
(a) The deceased Ignacio Tana, Sr. never worked in the
farmland of respondent-appellant situated in Pontevedra, La Carlota
City, otherwise known as Hacienda No. Audit B-70, (Pontevedra B-70
Farm for short), in any capacity, whether as a daily or monthly laborer
or as independent contractor;
(b) During the time that respondent-appellant was leasing a
portion of the land of the University of the Philippines, otherwise
known as Hacienda Audit No. B-15-M, (La Granja B-15 Farm for
short), the deceased Ignacio Tana, Sr. was hired thereat on a pakyaw
basis, or as an independent contractor, performing the services of an
arador (Plower), for which he was proficient, using his own carabao
and farming implements on his own time and discretion within the
period demanded by the nature of the job contracted.
II
The Social Security Commission erred in holding that there is no
evidence whatsoever to show that respondent-appellant was no
longer leasing La Granja B-15 Farm.
III
The Social Security Commission erred in not holding that the
deceased Ignacio Tana, having been hired as an independent
contractor on pakyaw basis, did not fall within the coverage of the
Social Security Law.viii
The Court of Appeals rendered judgment in favor of respondent-
appellant Conchita Ayalde and dismissed the claim of petitioner
Margarita Tan.
The SSS, as intervenor-appellee, filed a Motion for Reconsideration,
which was denied on the ground that the arguments advanced are
mere reiterations of issues and arguments already considered and
passed upon in the decision in question which are utterly insufficient
to justify a modification or reversal of said decision.viii
Hence, this petition for review on certiorari on the following assigned
errors:
1) The Court of Appeals was in error in ruling that an
employee working under the pakyaw system is
considered under the law to be an independent
contractor.
2) The Court of Appeals was in error in not giving due
consideration to the fundamental tenet that doubts in
the interpretation and implementation of labor and
social welfare laws should be resolved in favor of
labor.
3) The Court of Appeals was in error in disregarding the
settled rule that the factual findings of administrative
bodies on matters within their competence shall not
be disturbed by the courts.
4) The Court of Appeals was in error in ruling that even
granting arguendo that Ignacio Tana was employed
by Conchita Ayalde, such employment did not entitle
him to compulsory coverage since he was not paid
any regular daily wage or basic pay and he did not
work for an uninterrupted period of at least six months
in a year in accordance with Section 8(j) (1) of the SS
Law.
The pivotal issue to be resolved in this petition is whether or not 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.
Petitioner, Social Security System (or SSS), argues that the deceased
Ignacio Tana, Sr., who was hired by Conchita Ayalde on pakyaw basis
to perform specific tasks in her sugarcane plantations, should be
considered an employee; and as such, his heirs are entitled to
pension and burial benefits.
The Court of Appeals, however, ruled otherwise, reversing the ruling
of the Social Security Commission and declaring that the late Ignacio
Tana, Sr. was an independent contractor, and in the absence of an
employer-employee relationship between Tana and Ayalde, the latter
cannot be compelled to pay to his heirs the burial and pension benefits
under the SS Law.
At the outset, we reiterate the well-settled doctrine that the existence
of an employer-employee relationship is ultimately a question of fact.viii
And while it is the general rule that factual issues are not within the
province of the Supreme Court, said rule is not without exception. In
cases, such as this one, where there are conflicting and contradictory
findings of fact, this Court has not hesitated to scrutinize the records
to determine the facts for itself.viii Our disquisition of the facts shall be
our guide as to whose findings are supported by substantial evidence.
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 the work is to be accomplished, with the power of control being
the most determinative factor.viii
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
Tanas 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;viii
and November of 1978 to May of 1979.viii
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 Ayaldes
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.viii
To our mind, these documents are not only sadly lacking, they are
also unworthy of credence. The fact that Tanas 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.viii In light of
her incomplete documentary evidence, Ayaldes denial that Tana was
her employee in Hda. B-70 or Hda. B-15-M must fail.
In contrast to Ayaldes evidence, or lack thereof, is Margarita Tanas
positive testimony, corroborated by two (2) other witnesses. On the
matter of wages, they testified as follows: (omitted)
These 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 Ayaldes 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, Agaton Libawas and
Aurelio Tana prevail over the incomplete and inconsistent
documentary evidence of Ayalde.
In the parallel case of Opulencia Ice Plant and Storage v. NLRC, the
petitioners argued that since Manuel P. Esitas name does not appear
in the payrolls of the company it necessarily means that he was not
an employee. This Court held:
Petitioners further argue that complainant miserably failed to present
any documentary evidence to prove his employment. There was no
timesheet, pay slip and/or payroll/cash voucher to speak of. Absence
of these material documents are necessarily fatal to complainants
cause.
We do not agree. No particular form of evidence is required to prove
the existence of an employer-employee 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. Thus, as in this case
where the employer-employee relationship between petitioners and
Esita was sufficiently proved by testimonial evidence, the absence of
time sheet, time record or payroll has become inconsequential.viii
(Underscoring ours)
Clearly, then, 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. And yet, the documents presented have been
selective, few and incomplete in substance and content.
Consequently, Ayalde has failed to convince us that, indeed, Tana
was not her employee.
The argument is raised that Tana is an independenent contractor
because he was hired and paid wages on pakyaw basis. We find this
assertion to be specious for several reasons.
First, while Tana was sometimes hired as an arador or plower for
intermittent periods, he was hired to do other tasks in Ayaldes
plantations. Ayalde herself admitted as much, although she minimized
the extent of Tanas labors. On the other hand, the claimant and her
witnesses were direct and firm in their testimonies, to wit: (omitted)
It is indubitable, therefore, that Tana worked continuously for Ayalde,
not only as arador on pakyaw basis, but as a regular farmhand, doing
backbreaking jobs for Ayaldes 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.
The Court of Appeals, in finding for Ayalde, relied on the claimants
and her witnesses admission that her husband was hired as an arador
on pakyaw basis, but it failed to appreciate the rest of their
testimonies. Just because he was, for short periods of time, hired on
pakyaw basis does not necessarily mean that he was not employed
to do other tasks for the remainder of the year. Even Ayalde admitted
that Tana did other jobs when he was not hired to plow. Consequently,
the conclusion culled from their testimonies to the effect that Tana was
mainly and solely an arador was at best a selective appreciation of
portions of the entire evidence. It was the Social Security Commission
that took into consideration all the documentary and testimonial
evidence on record.
Secondly, 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. It is also an admitted
fact that Tana, Jr. used his own carabao and tools. Thus, she
contends that, applying the control test, Tana was not an employee
but an independent contractor.
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.
Be that as it may, the power of control refers merely to the existence
of the power. It is not essential for the employer to actually supervise
the performance of duties of the employee; it is sufficient that the
former has a right to wield the power.viii Certainly, Ayalde, on her own
or through her overseer, wielded the power to hire or dismiss, to check
on the work, be it in progress or quality, of the laborers. As the
owner/lessee of the plantations, she possessed the power to control
everyone working therein and everything taking place therein.
Jurisprudence provides other equally important considerations which
support the conclusion that Tana was not an independent contractor.
First, Tana cannot be said to be engaged in a distinct occupation or
business. His carabao and plow may be useful in his livelihood, but
he is not independently engaged in the business of farming or
plowing. Second, he had been working exclusively for Ayalde for
eighteen (18) years prior to his demise. Third, there is no dispute that
Ayalde was in the business of growing sugarcane in the two
plantations for commercial purposes. There is also no question that
plowing or preparing the soil for planting is a major part of the regular
business of Ayalde.
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. In the case
of Dy Keh Beng v. International Labor,viii we cited our long-standing
ruling in Sunripe Coconut Products Co. v. Court of Industrial
Relations, to wit:
When a worker possesses some attributes of an employee and others
of an independent contractor, which make him fall within an
intermediate area, he may be classified under the category of an
employee when the economic facts of the relations make it more
nearly one of employment than one of independent business
enterprise with respect to the ends sought to be accomplished.
(Underscoring Ours)viii
We find the above-quoted ruling to be applicable in the case of Tana.
There is preponderance of evidence to support the conclusion that he
was an employee rather than an independent contractor.
The Court of Appeals also erred when it ruled, on the alternative, that
if ever Tana was an employee, he was still ineligible for compulsory
coverage because he was not paid any regular daily wage and he did
not work for an uninterrupted period of at least six months in a year in
accordance with Section 8(j) (I) of the Social Security Law. There is
substantial testimonial evidence to prove that Tana was paid a daily
wage, and he worked continuously for most part of the year, even
while he was also occasionally called on to plow the soil on a pakyaw
basis. 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.
Margarita Tana alleged that SSS premiums were deducted from
Tanas salary, testifying, thus: (omitted)
Ayalde failed to counter these positive assertions. Even on the
assumption that there were no deductions, the fact remains that Tana
was and should have been covered under the Social Security Law.
The circumstances of his employment place him outside the ambit of
the exception provided in Section 8(j) of Republic Act No. 1611, as
amended by Section 4 of R.A. 2658.
WHEREFORE, in view of all the foregoing, the Decision of the
Court of Appeals in C.A.-G.R. SP No. 16427 and the Resolution dated

June 14, 1991 are hereby REVERSED and SET ASIDE. The
Resolution of the Social Security Commission in SSC Case No. 8851
is REINSTATED.
No costs.
SO ORDERED.
Nightwork
Article 86. Night shift differential. Every employee shall be paid a
night shift differential of not less than ten percent (10%) of his regular
wage for each hour of work performed between ten oclock in the
evening and six oclock in the morning.
Weekly Rest Period
Article 91. Right to weekly rest day.
It shall be the duty of every employer, whether operating for profit or
not, to provide each of his employees a rest period of not less than
twenty-four (24) consecutive hours after every six (6) consecutive
normal work days.
(Determination)
The employer shall determine and schedule the weekly rest day of his
employees subject to collective bargaining agreement and to such
rules and regulations as the Secretary of Labor and Employment may
provide. However, the employer shall respect the preference of
employees as to their weekly rest day when such preference is based
on religious grounds.
Article 92. When employer may require work on a rest day. The
employer may require his employees to work on any day:
In case of actual or impending emergencies caused by serious
accident, fire, flood, typhoon, earthquake, epidemic or other disaster
or calamity to prevent loss of life and property, or imminent danger to
public safety;
In cases of urgent work to be performed on the machinery, equipment,
or installation, to avoid serious loss which the employer would
otherwise suffer;
In the event of abnormal pressure of work due to special
circumstances, where the employer cannot ordinarily be expected to
resort to other measures;
To prevent loss or damage to perishable goods;
Where the nature of the work requires continuous operations and the
stoppage of work may result in irreparable injury or loss to the
employer; and
Under other circumstances analogous or similar to the foregoing as
determined by the Secretary of Labor and Employment.
Article 93. Compensation for rest day, Sunday or holiday work.
Where an employee is made or permitted to work on his scheduled
rest day, he shall be paid an additional compensation of at least thirty
percent (30%) of his regular wage. An employee shall be entitled to
such additional compensation for work performed on Sunday only
when it is his established rest day.
When the nature of the work of the employee is such that he has no
regular workdays and no regular rest days can be scheduled, he shall
be paid an additional compensation of at least thirty percent (30%) of
his regular wage for work performed on Sundays and holidays.
Work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of
the employee. Where such holiday work falls on the employees
scheduled rest day, he shall be entitled to an additional compensation
of at least fifty per cent (50%) of his regular wage.
Where the collective bargaining agreement or other applicable
employment contract stipulates the payment of a higher premium pay
than that prescribed under this Article, the employer shall pay such
higher rate.
Holiday
Article 94. Right to holiday pay.
Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly
employing less than ten (10) workers;
The employer may require an employee to work on any holiday but
such employee shall be paid a compensation equivalent to twice his
regular rate; and
As used in this Article, "holiday" includes: New Years Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth
of June, the fourth of July, the thirtieth of November, the twenty-fifth
and thirtieth of December and the day designated by law for holding
a general election.
Retail and Service Establishments *see
Manual.
Coverage/Exclusion
Mantrade Division Employees and Workers
Union v. Bacungan
1. LABOR AND SOCIAL LEGISLATION; LABOR CODE;
VOLUNTARY ARBITRATORS; DECISIONS SUBJECT TO JUDICIAL
REVIEW. The contentions of respondent corporation have been
ruled against in the decision of this court in the case of Oceanic Bic
Division (FFW) v. Romero, promulgated on July 16, 1984, wherein it
stated: . . . "A voluntary arbitrator by the nature of her functions acts
in a quasijudicial capacity. There is no reason why her decisions
involving interpretation of law should be beyond this courts review.
Administrative officials are presumed to act in accordance with law
and yet we do not hesitate to pass upon their work where a question
of law is involved or where a showing of abuse of discretion in their
officials acts is properly raised in petitions for certiorari." (130 SCRA
392, 399, 400-401)
2. ID.; ID.; GRANT FOR HOLIDAY PAY MONTHLY PAID
EMPLOYEES; ISSUE SETTLED IN THE CASES OF INSULAR BANK
OF ASIA AND AMERICA EMPLOYEES UNION VS. INCIONG, [132
SCRA 633], AND CHARTERED BANK EMPLOYEES UNION VS.
OPLE [141 SCRA 9]. Respondent arbitrator opined that respondent
corporation does not have any legal obligation to grant its monthly
salaried employees holiday pay, unless it is argued that the pertinent
section of the Rule and Regulations implementing Section 94 of the
Labor Code is not in conformity with the law, and thus, without force
and effect. This issue was subsequently decided on October 24, 1984
by a division of this court in the case of Insular Bank of Asia and
American Employees Union (IBAAEU) v. Inciong, wherein it held as
follows: "We agree with petitioners contention that Section 2, Rule IV,
Book III of the implementing rules and Policy Instruction No. 9 issued
by the then Secretary of Labor are null and void since in the guise of
clarifying the Labor Codes provisions on holiday pay, they in effect
amended them enlarging the scope of their exclusion (p. 11, rec.). . .
. "From the above-cited provisions, it is clear that monthly paid
employees are not excluded from the benefits of holiday pay.

However, the implementing rules on holiday pay promulgated by the
then Secretary of Labor excludes monthly paid employees from the
said benefits by inserting under Rule IV, Book III of the implementing
rules, section 2, which provides that: employees who are uniformly
paid by the month, irrespective of the number of working days therein
, with the salary of not less than the statutory or established minimum
wage shall be presumed to be paid for all days in the month whether
worked or not." (132 SCRA 663, 672-673) This ruling was reiterated
by the court en banc on August 28, 1985 in the case of Chartered
Bank Employees Association v. Ople, wherein it added that: "The
questioned Sec. 2, Rule IV, Book III of the Integrated Rules and the
Secretarys Policy Instruction No. 9 add another excluded group,
namely employees who are uniformly paid by the month. While
additional exclusion is only in the form of a presumption that all
monthly paid employees have already been paid holiday paid, it
constitutes a taking away or a deprivation which must be in the law if
it is to be valid. An administrative interpretation which diminishes the
benefits of labor more than what the statute delimits or withholds is
obviously ultra vires." (138 SCRA 273, 282. See also CBTC
Employees Union v. Clave, January 7, 1986, 141 SCRA 9.)
3. REMEDIAL LAW; SPECIAL CIVIL ACTION; MANDAMUS;
APPROPRIATE EQUITABLE REMEDY IN CASE AT BAR.
Respondent corporation contends that mandamus does not lie to
compel the performance of an act which the law does not clearly
enjoin as a duty. True it is also that mandamus is not proper to enforce
a contractual obligation, the remedy being an action for specific
performance (Province of Pangasinan v. Reparations Commission,
November 29, 1977, 80 SCRA 376). In the case at bar, however, 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 (Dionisio
v. Paterno, July 23, 1980, 98 SCRA 677; Gonzales v. Government
Service Insurance System, September 10, 1981, 107 SCRA 492).
DECISION
FERIA, J.:
This is a petition for Certiorari and Mandamus filed by petitioner
against arbitrator Froilan M. Bacungan and Mantrade Development
Corporation arising from the decision of respondent arbitrator, the
dispositive part of which reads as follows:jgc:chanrobles.com.ph
"CONSIDERING ALL THE ABOVE, We rule that Mantrade
Development Corporation is not under legal obligation to pay holiday
pay (as provided for in Article 94 of the Labor Code in the third official
Department of Labor edition) 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 this rule is applicable not only as of March 2,
1976 but as of November 1, 1974."cralaw virtua1aw library
Petitioner questions the validity of the pertinent section of the Rules
and Regulations Implementing the Labor Code as amended on which
respondent arbitrator based his decision.
On the other hand, respondent corporation has raised procedural and
substantive objections. It contends that petitioner is barred from
pursuing the present action in view of Article 263 of the Labor Code,
which provides in part that "voluntary arbitration awards or decisions
shall be final, inappealable, and executory," as well as the rules
implementing the same; the pertinent provision of the Collective
Bargaining Agreement between petitioner and respondent
corporation; and Article 2044 of the Civil Code which provides that
"any stipulation that the arbitrators award or decision shall be final, is
valid, without prejudice to Articles 2038, 2039, and 2040."
Respondent corporation further contends 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 Department of Labor, 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.chanrobles law library :
red
These contentions have been ruled against in the decision of this
Court in the case of Oceanic Bic Division (FFW) v. Romero,
promulgated on July 16, 1984, wherein it
stated:jgc:chanrobles.com.ph
"We agree with the petitioner that the decisions of voluntary arbitrators
must be given the highest respect and as a general rule must be
accorded a certain measure of finality. This is especially true where
the arbitrator chosen by the parties enjoys the first rate credentials of
Professor Flerida Ruth Pineda Romero, Director of the U.P. Law
Center and an academician of unquestioned expertise in the field of
Labor Law. 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.
"In spite of statutory provisions making final the decisions of certain
administrative agencies, we have taken cognizance of petitions
questioning these decisions where want of jurisdiction, grave abuse
of discretion, violation of due process, denial of substantial justice, or
erroneous interpretation of the Law were brought to our attention. . . .
x x x
"A voluntary arbitrator by the nature of her functions acts in a quasi-
judicial capacity. There is no reason why her decisions involving
interpretation of law should be beyond this Courts review.
Administrative officials are presumed to act in accordance with law
and yet we do not hesitate to pass upon their work where a question
of law is involved or where a showing of abuse of discretion in their
official acts is properly raised in petitions for certiorari." (130 SCRA
392, 399, 400-401)
In denying petitioners claim for holiday pay, respondent arbitrator
stated that although monthly salaried employees are not among those
excluded from receiving such additional pay under Article 94 of the
Labor Code of the Philippines, to wit:chanrobles virtual lawlibrary
ART. 94. Right to holiday pay. (a) Every worker shall be paid his
regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday
but such employee shall be paid compensation equivalent to twice his
regular rate; and
(c) As used in this Article, "holiday" includes: New Years Day,
Maundy Thursday, Good Friday, the ninth of April, the first of May, the
twelfth of June, the fourth of July, the thirtieth of November, the
twenty-fifth and the thirtieth of December, and the day designated by
law for holding a general election.
they appear to be excluded under Sec. 2, Rule IV, Book III of the Rules
and Regulations implementing said provision which reads
thus:chanrob1es virtual 1aw library
SEC. 2. Status of employees paid by the month. Employees who
are uniformly paid by the month, irrespective of the number of working
days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month
whether worked or not.
Respondent arbitrator further opined that respondent corporation
does not have any legal obligation to grant its monthly salaried
employees holiday pay, unless it is argued that the pertinent section
of the Rules and Regulations implementing Section 94 of the Labor
Code is not in conformity with the law, and thus, without force and
effect.
This issue was subsequently decided on October 24, 1984 by a
division of this Court in the case of Insular Bank of Asia and America
Employees Union (IBAAEU) v. Inciong, wherein it held as
follows:jgc:chanrobles.com.ph
"WE agree with the petitioners contention that Section 2, Rule IV,
Book III of the implementing rules and Policy Instruction No. 9, issued
by the then Secretary of Labor are null and void since in the guise of
clarifying the Labor Codes provisions on holiday pay, they in effect

amended them by enlarging the scope of their exclusion (p. 11, rec.)
"Article 94 of the Labor Code, as amended by P.D. 850,
provides:chanrob1es virtual 1aw library
Art. 94. Right to holiday pay. (a) Every worker shall be paid his
regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers . . .
"The coverage and scope of exclusion of the Labor Codes holiday
pay provisions is spelled out under Article 82 thereof which
reads:chanrob1es virtual 1aw library
Art. 82. Coverage. The provision of this Title shall apply to
employees in all establishments and undertakings, whether for profit
or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent
on him for support, domestic helpers, persons, in the personal service
of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
x x x 18 August 1988, for the payment of their holiday pay in arrears. On
"From the above-cited provisions, it is clear that monthly paid
employees are not excluded from the benefits of holiday pay.
However, the implementing rules on holiday pay promulgated by the
then Secretary of Labor excludes monthly paid employees from the
said benefits by inserting under Rule IV, Book III of the implementing
rules, Section 2, which provides that: employees who are uniformly
paid by the month, irrespective of the number of working days therein,
with a salary of not less than the statutory or established minimum
wage shall be presumed to be paid for all days in the month whether
worked or not." (132 SCRA 663, 672-673).
This ruling was reiterated by the Court en banc on August 28, 1985 in
the case of Chartered Bank Employees Association v. Ople, wherein
it added that:chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
"The questioned Sec. 2, Rule IV, Book III of the Integrated Rules and
the Secretarys Policy Instruction No. 9 add another excluded group,
namely employees who are uniformly paid by the month. While the
additional exclusion is only in the form of a presumption that all
monthly paid employees have already been paid holiday pay, it
constitutes a taking away or a deprivation which must be in the law if
it is to be valid. An administrative interpretation which diminishes the
benefits of labor more than what the statute delimits or withholds is
obviously ultra vires." (138 SCRA 273, 282. See also CBTC
Employees Union v. , Clave, January 7, 1986, 141 SCRA 9.)
Lastly, respondent corporation contends that mandamus does not lie
to compel the performance of an act which the law does not clearly
enjoin as a duty. True it is also that mandamus is not proper to enforce
a contractual obligation, the remedy being an action for specific
performance (Province of Pangasinan v. Reparations Commission,
November 29, 1977, 80 SCRA 376). In the case at bar, however, 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 (Dionisio
v. Paterno, July 23, 1980, 98 SCRA 677; Gonzales v. Government
Service Insurance System, September 10, 1981, 107 SCRA 492).
WHEREFORE, the questioned decision of respondent arbitrator is
SET ASIDE and respondent corporation is ordered to GRANT holiday
pay to its monthly salaried employees. No costs.
SO ORDERED.
Holiday Pay
Article 94 (b). Right to holiday pay.
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;
Trans-Asia Phil. Express Employees Association vs. NLRC
The antecedents of this case are as follows:
On 7 July 1988, Trans-Asia Philippines Employees Association
(TAPEA), the duly-recognized collective bargaining agent of the
monthly-paid rank-and-file employees of Trans-Asia (Phils.), entered
into a Collective Bargaining Agreement (CBA) with their employer.
The CBA, which was to be effective from 1 April 1988 up to 31 March
1991, provided for, among others, the payment of holiday pay with a
stipulation that if an employee is permitted to work on a legal holiday,
the said employee will receive a salary equivalent to 200% of the
regular daily wage plus a 60% premium pay.
Despite the conclusion of the CBA, however, an issue was still left
unresolved with regard to the claim of TAPEA for payment of holiday
pay covering the period from January of 1985 up to December of
1987. Thus, the parties underwent preventive mediation meetings
with a representative from the National Mediation and Conciliation
Board in order to settle their disagreement on this particular issue.
Since the parties were not able to arrive at an amicable settlement
despite the conciliation meetings, TAPEA, led by its President,
petitioner Arnie Galvez, filed a complaint before the labor arbiter, on
18 September 1988, petitioners amended their complaint to include
the payment of holiday pay for the duration of the recently concluded
CBA (from 1988 to 1991), unfair labor practice, damages and
attorneys fees.
In their Position Paper, petitioners contended that their claim for
holiday pay in arrears is based on the non-inclusion of the same in
their monthly pay. In this regard, petitioners cited certain
circumstances which, according to them, would support their claim for
past due holiday pay. First, petitioners presented Trans-Asias
Employees Manual which requires, as a pre-condition for the payment
of holiday pay, that the employee should have worked or was on
authorized leave with pay on the day immediately preceding the legal
holiday. Petitioners argued that if the intention [of Trans-Asia] was not
to pay holiday pay in addition to the employees monthly pay, then
there would be no need to impose or specify the pre-condition for the
payment.viii Second, petitioners proffered as evidence their
appointment papers which do not contain any stipulation on the
inclusion of holiday pay in their monthly salary. According to
petitioners, the absence of such stipulation is an indication that the
mandated holiday pay is not incorporated in the monthly salary. Third,
petitioners noted the inclusion of a provision in the CBA for the
payment of an amount equivalent to 200% of the regular daily wage
plus 60% premium pay to employees who are permitted to work on a
regular holiday. Petitioners claimed that this very generous provision
was the remedy availed of by Trans-Asia to allow its employees to
recoup the holiday pay in arrears and, as such, is a tacit admission of
the non-payment of the same during the period prior to the current
CBA.
Finally, petitioners cited the current CBA provision which obligates
Trans-Asia to give holiday pay. Petitioners asserted that this provision
is an acknowledgment by Trans-Asia of its failure to pay the same in
the past since, if it was already giving holiday pay prior to the CBA,
there was no need to stipulate on the said obligation in the current
CBA.
With regard to the claim for the payment of holiday pay for the duration
of the CBA, the accusation of unfair labor practice and the claim for
damages and attorneys fees, petitioners asserted that Trans-Asia is
guilty of bad faith in negotiating and executing the current CBA since,
after it recognized the right of the employees to receive holiday pay,
Trans-Asia allegedly refused to honor the CBA provision on the same.
In response to petitioners contentions, Trans-Asia refuted the same
in seriatim. With regard to the pre-condition for the payment of holiday
pay stated in the Employees Manual and the absence of a stipulation
on holiday pay in the employees appointment papers, Trans-Asia
asserted that the above circumstances are not indicative of its non-
payment of holiday pay since it has always honored the labor law
provisions on holiday pay by incorporating the same in the payment
of the monthly salaries of its employees. In support of this claim,
Trans-Asia pointed out that it has long been the standing practice of
the company to use the divisor of 286 days in computing for its
employees overtime pay and daily rate deductions for absences.
Trans-Asia explained that this divisor is arrived at through the
following formula:
52 x 44
---------- = 286 days
8

Where: 52 = number of weeks in a year
44 = number of work hours per week
8 = number of work hours per day
Trans-Asia further clarified that the 286 days divisor already takes into
account the ten (10) regular holidays in a year since it only subtracts
from the 365 calendar days the unworked and unpaid 52 Sundays and
26 Saturdays (employees are required to work half-day during
Saturdays). Trans-Asia claimed that if the ten (10) regular holidays
were not included in the computation of their employees monthly
salary, the divisor which they would have used would only be 277
days which is arrived at by subtracting 52 Sundays, 26 Saturdays and
the 10 Legal holidays from 365 calendar days. Furthermore, Trans-
Asia explained that the 286 days divisor is based on Republic Act No.
6640,viii wherein the divisor of 262 days (composed of the 252 working
days and the 10 legal holidays) is used in computing for the monthly
rate of workers who do not work and are not considered paid on
Saturdays and Sundays or rest days. According to Trans-Asia, if the
additional 26 working Saturdays in a year is factored-in to the divisor
provided by Republic Act No. 6640, the resulting divisor would be 286
days.
On petitioners contention with regard to the CBA provision on the
allegedly generous holiday pay rate of 260%, Trans-Asia explained
that this holiday pay rate was included in the CBA in order to comply
with Section 4, Rule IV, Book III of the Omnibus Rules Implementing
the Labor Code. The aforesaid provision reads:
Sec. 4. Compensation for holiday work. Any employee who is
permitted or suffered to work on any regular holiday, not exceeding
eight (8) hours, shall be paid at least two hundred percent (200%) of
his regular daily wage. If the holiday falls on the scheduled rest day of
the employee, he shall be entitled to an additional premium pay of at
least 30% of his regular holiday rate of 200% based on his regular
wage rate.
On the contention that Trans-Asias acquiescence to the inclusion of a
holiday pay provision in the CBA is an admission of non-payment of
the same in the past, Trans-Asia reiterated that it is simply a
recognition of the mandate of the Labor Code that employees are
entitled to holiday pay. It clarified that the companys firm belief in the
payment of holiday pay to employees led it to agree to the inclusion
of the holiday pay provision in the CBA.
With regard to the accusation of unfair labor practice because of
Trans-Asias act of allegedly bargaining in bad faith and refusal to give
holiday pay in accordance with the CBA, Trans-Asia explained that
what petitioners would like the company to do is to give double holiday
pay since, as previously stated, the company has already included the
same in its employees monthly salary and, yet, petitioners want it to
pay a second set of holiday pay.
On 13 February 1989, the labor arbiter rendered a decision dismissing
the complaint, to wit:
After considering closely the arguments of the parties in support of
their respective claims and defenses, this Branch upholds a different
view from that espoused by the complainants.
Just like in the Chartered Bank Case (L-44717), August 28, 1985, 138
SCRA 273, which is cited by the complainants in their Position Paper,
there appears to be no clear agreement between the parties in the
instant case, whether verbal or in writing, that the monthly salary of
the employees included the mandated holiday pay. In the absence of
such agreement, the Supreme Court in said Chartered Bank Case
took into consideration existing practices in the bank in resolving the
issue, such as employment by the bank of a divisor of 251 days which
is the result of subtracting all Saturdays, Sundays and the ten (10)
legal holidays from the total number of calendar days in a year.
Further, the Court took note of the fact that the bank used conflicting
or different divisors in computing salary-related benefits as well as the
employees absence from work. In the case at bar, not only did the
CBA between the complainants and respondents herein provides (sic)
that the ten (10) legal holidays are recognized by the Company as full
holiday with pay. What is more, there can be no doubt that since 1977
up to the execution of the CBA, the Trans-Asia, unlike that obtaining
in the Chartered Bank Case, never used conflicting or different
divisors but consistently employed the divisor of 286 days, which as
earlier pointed out, was arrived at by subtracting only the unworked
52 Sundays and the 26 half-day-worked Saturdays from the total
number of days in a year. The consistency in the established practice
of the Trans-Asia, which incidentally is not disputed by complainants,
did not give rise to any doubt which could have been resolved in favor
of complainants.
Besides, the respondents unlike the respondent bank in the Chartered
Bank Employees Association vs. Hon. Blas F. Ople, et al. (supra)
citing also the case of IBAAEU vs. Hon,. Amado Inciong (132 SCRA
663) which case have (sic) invalidated Section 2, Rule IV, Book III of
the Implementing Rules of the Labor Code and Policy Instruction No.
9, have never relied on the said invalidated rule and Policy Instruction.
The complainants arguments and juxtapositions in claiming that they
were denied payment of their holiday pay paled in the face of the
prevailing company practices and circumstances abovestated.
Also, for the reasons adverted to above, the complainants charge of
unfair labor practice claiming that respondents in bad faith refused to
comply with their contractual obligation under the CBA by not paying
the complainants holiday pay, must fail. Since respondents have
nothing more to pay by way of legal holiday pay as it has already been
included in their monthly salaries, the provision in the CBA relative to
holiday pay is just but a recognition of the complainants right to
payment of legal holiday pay as mandated by the Labor Code.
WHEREFORE, all the foregoing premises being considered,
judgment is hereby rendered dismissing the complaint for lack of
merit.
SO ORDERED.viii
Petitioners appealed to the National Labor Relations Commission. In
its Resolution, dated 23 November 1993, the NLRC dismissed the
appeal and affirmed the decision of the labor arbiter, to wit:
We find no cogent reason to change or disturb the decision appealed
from, the same being substantially supported by the facts and
evidence on record. "It is a well-settled rule that findings of facts of
administrative bodies, if based on substantial evidence are controlling
on the reviewing authority. (Planters Products, Inc. vs. NLRC, G. R.
No. 78524 & 78739, January 20, 1989; 169 SCRA 328).
We find no abuse of discretion and/or error in the assailed decision.
WHEREFORE, the appeal are (sic) hereby DISMISSED for lack of
merit and the decision appealed from is AFFIRMED.
SO ORDERED.viii
Petitioners motion for reconsideration was, likewise, denied by the
NLRC in its Resolution, dated 13 September 1994.
Petitioners are now before us faulting the NLRC with the
following assignment of errors:
I
PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF
DISCRETION IN UPHOLDING THE LABOR ARBITERS
DECISION DESPITE THE LACK OF SUBSTANTIAL
EVIDENCE TO SUPPORT IT
II
IN UPHOLDING THE LABOR ARBITERS DECISION
DESPITE THE LACK OF SUBSTANTIAL EVIDENCE TO
SUPPORT IT, PUBLIC RESPONDENT NLRC VIOLATED THE
CONSTITUTIONAL AND LEGAL MANDATE TO RESOLVE
ALL DOUBTS IN SOCIAL LEGISLATION IN FAVOR OF
LABOR.viii
Petitioners, in furtherance of their first assignment of error,
assert that the NLRC blatantly an unshamedly disregarded the
numerous evidence in support of their claim and relied merely on the
sole evidence presented by Trans-Asia, the 286 days divisor, in
dismissing their appeal and, in so doing, is guilty of grave abuse of
discretion.viii
We do not agree.
Trans-Asias inclusion of holiday pay in petitioners monthly salary is
clearly established by its consistent use of the divisor of 286 days in
the computation of its employees benefits and deductions. The use
by Trans-Asia of the 286 days divisor was never disputed by
petitioners. A simple application of mathematics would reveal that the
ten (10) legal holidays in a year are already accounted for with the
use of the said divisor. As explained by Trans-Asia, if one is to deduct
the unworked 52 Sundays and 26 Saturdays (derived by dividing 52
Saturdays in half since petitioners are required to work half-day on
Saturdays) from the 365 calendar days in a year, the resulting divisor
 Araw ng Kagitingan - April 9
(Bataan and Corregidor Day)
would be 286 days (should actually be 287 days). Since the ten (10)
legal holidays were never included in subtracting the unworked and Labor Day - May 1
unpaid days in a calendar year, the only logical conclusion would be
that the payment for holiday pay is already incorporated into the said Independence Day - June 12
divisor. Thus, when viewed against this very convincing piece of
evidence, the arguments put forward by petitioners to support their National Heroes Day - Last
claim of non-payment of holiday pay, i.e., the pre-condition stated in Sunday of August
the Employees Manual for entitlement to holiday pay, the absence of
a stipulation in the employees appointment papers for the inclusion of Bonifacio Day - November
holiday pay in their monthly salary, the stipulation in the CBA 30
recognizing the entitlement of the petitioners to holiday pay with a
Christmas Day - December 25
concomitant provision for the granting of an allegedly very generous
holiday pay rate, would appear to be merely inferences and Rizal Day - December
suppositions which, in the apropos words of the labor arbiter, paled in 30
the face of the prevailing company practices and circumstances
abovestated. B. Nationwide Special Days

Hence, it is on account of the convincing and legally sound arguments
and evidence of Trans-Asia that the labor arbiter rendered a decision
adverse to petitioners. Acknowledging that the decision of the labor
arbiter was based on substantial evidence, the NLRC affirmed the
formers disposition. It is also with this acknowledgment that the Court
affirms the questioned resolutions of the NLRC. As aptly put by the
Solicitor General, citing Sunset View Condominium Corporation vs.
NLRC,viii findings of fact of administrative bodies should not be
disturbed in the absence of grave abuse of discretion or unless the
findings are not supported by substantial evidence.viii In this regard,
the Solicitor General observed: As said above, public respondent
acted on the basis of substantial evidence, hence, grave abuse of
discretion is ruled out.viii
However, petitioners insist that the agreement of Trans-Asia in the
CBA to give a generous 260% holiday pay rate to employees who
work on a holiday is conclusive proof that the monthly pay of
petitioners does not include holiday pay.viii Petitioners cite as basis the
case of Chartered Bank Employees Association vs. Ople,viii which
reads:
Any remaining doubts which may arise from the conflicting or different
divisors used in the computation of overtime pay and employees
absences are resolved by the manner in which work actually rendered
on holidays is paid. Thus, whenever monthly paid employees work on
a holiday, they are given an additional 100% base pay on top of a
premium pay of 50%. If the employees monthly pay already includes
their salaries for holidays, they should be paid only premium pay but
not both base pay and premium pay.viii
We are not convinced. The cited case cannot be relied upon by
petitioners since the facts obtaining in the Chartered Bank case are
very different from those in the present case. In the Chartered Bank
case, the bank used different divisors in computing for its employees
benefits and deductions. For computing overtime compensation, the
bank used 251 days as its divisor. On the other hand, for computing
deductions due to absences, the bank used 365 days as divisor. Due
to this confusing situation, the Court declared that there existed a
doubt as to whether holiday pay is already incorporated in the
employees monthly salary. Since doubts should be resolved in favor
of labor, the Court in the Chartered Bank case ruled in favor of the
employees and further stated that its conclusion is fortified by the
manner in which the employees are remunerated for work rendered
on holidays. In the present case, however, there is no confusion with
regard to the divisor used by Trans-Asia in computing for petitioners
benefits and deductions. Trans-Asia consistently used a 286 days
divisor for all its computations.
Nevertheless, petitioners cause is not entirely lost. The Court notes
that there is a need to adjust the divisor used by Trans-Asia to 287
days, instead of only 286 days, in order to properly account for the
entirety of regular holidays and special days in a year as prescribed
by Executive Order No. 203viii in relation to Section 6 of the Rules
Implementing Republic Act 6727.viii
All Saints Day - November
1
Last Day of the Year - December
31
On the other hand, Section 6 of the Implementing Rules and
Regulations of Republic Act No. 6727 provides:
Section 6. Suggested Formula in Determining the Equivalent
Monthly Statutory Minimum Wage Rates.- Without prejudice from
existing company practices, agreements or policies, the following
formulas may be used as guides in determining the equivalent
monthly statutory minimum wage rates:
xxx xxx xxx
d) For those who do not work and are not considered paid on
Saturdays and Sundays or rest days:
Equivalent Monthly = Average Daily Wage Rate x 262 days
Rate (EMR) 12
Where 262 days =
250 days Ordinary working days
10 days Regular holidays
2 days Special days (If considered paid; if actually worked, this
is equivalent to 2.6 days)
-----------
262 days Total equivalent number of days
Based on the above, the proper divisor that should be used for a
situation wherein the employees do not work and are not considered
paid on Saturdays and Sundays or rest days is 262 days. In the
present case, since the employees of Trans-Asia are required to work
half-day on Saturdays, 26 days should be added to the divisor of 262
days, thus, resulting to 288 days. However, due to the fact that the
rest days of petitioners fall on a Sunday, the number of unworked but
paid legal holidays should be reduced to nine (9), instead of ten (10),
since one legal holiday under E.O. No. 203 always falls on the last
Sunday of August, National Heroes Day. Thus, the divisor that should
be used in the present case should be 287 days.
However, the Court notes that if the divisor is increased to 287 days,
the resulting daily rate for purposes of overtime pay, holiday pay and
conversions of accumulated leaves would be diminished. To illustrate,
if an employee receives P8,000.00 as his monthly salary, his daily rate
would be P334.49, computed as follows:
P8,000.00 x 12 months
------------------------- = P334.49/day
287 days

Section 1 of Executive Order No. 203 provides: Whereas if the divisor used is only 286 days, the employees daily rate
would be P335.66, computed as follows:
SECTION 1. Unless otherwise modified by law, order or proclamation,
the following regular holidays and special days shall be observed in P8,000.00 x 12 months
the country: ------------------------ = P335.66/day
286 days
A. Regular Holidays
Clearly, this muddled situation would be violative of the proscription
New Years Day - January 1 on the non-diminution of benefits under Section 100 of the Labor
Code. On the other hand, the use of the divisor of 287 days would be
Maundy Thursday - Movable Date to the advantage of petitioners if it is used for purposes of computing
for deductions due to the employees absences. In view of this
Good Friday - Movable
Date

situation, the Court rules that the adjusted divisor of 287 days should
only be used by Trans-Asia for computations which would be
advantageous to petitioners, i.e., deductions for absences, and not for
computations which would diminish the existing benefits of the
employees, i.e., overtime pay, holiday and leave conversions.
For their second assignment of error, petitioners argue that, since they
provided the NLRC with overwhelming proof of their claim against
Trans-Asia, the least that the NLRC could have done was to declare
that there existed an ambiguity with regard to Trans-Asias payment of
holiday pay. Petitioners then posits that if the NLRC had only done so,
this ambiguity would have been resolved in their favor because of the
constitutional mandate to resolve doubts in favor of labor.
We are not persuaded. As previously stated, the decision of the labor
arbiter and the resolutions of the NLRC were based on substantial
evidence and, as such, no ambiguity or doubt exists which could be
resoled in petitioners favor.
WHEREFORE, premises considered, the Resolutions of the
NLRC, dated 23 November 1993 and 13 September 1994, are hereby
AFFIRMED with the MODIFICATION that Trans-Asia is hereby
ordered to adjust its divisor to 287 days and pay the resulting holiday
pay in arrears brought about by this adjustment starting from 30 June
1987, the date of effectivity of E.O. No. 203.
SO ORDERED.
Sunday
Article 93. Compensation for rest day, Sunday or holiday work.
Where an employee is made or permitted to work on his scheduled
rest day, he shall be paid an additional compensation of at least thirty
percent (30%) of his regular wage. An employee shall be entitled to
such additional compensation for work performed on Sunday only
when it is his established rest day.
Wellington Investment. Inc. vs. Trajano
The case arose from a routine inspection conducted by a Labor
Enforcement Officer on August 6, 1991 of the Wellington Flour Mills,
an establishment owned and operated by petitioner Wellington
Investment and Manufacturing Corporation (hereafter, simply
Wellington). The officer thereafter drew up a report, a copy of which
was "explained to and received by" Wellington's personnel manager,
in which he set forth his finding of "(n)on-payment of regular holidays
falling on a Sunday for monthly-paid employees." 1
Wellington sought reconsideration of the Labor Inspector's report, by
letter dated August 10, 1991. It argued that "the monthly salary of the
company's monthly-salaried employees already includes holiday pay
for all regular holidays . . . (and hence) there is no legal basis for the
finding of alleged non-payment of regular holidays falling on a
Sunday." 2 It expounded on this thesis in a position paper
subsequently submitted to the Regional Director, asserting that it pays
its monthly-paid employees a fixed monthly compensation "using the
314 factor which undeniably covers and already includes payment for
all the working days in a month as well as all the 10 unworked regular
holidays within a year." 3
Wellington's arguments failed to persuade the Regional Director who,
in an Order issued on July 28, 1992, ruled that "when a regular holiday
falls on a Sunday, an extra or additional working day is created and
the employer has the obligation to pay the employees for the extra
day except the last Sunday of August since the payment for the said
holiday is already included in the 314 factor," and accordingly directed
Wellington to pay its employees compensation corresponding to four
(4) extra working days. 4
Wellington timely filed a motion for reconsideration of this Order of
August 10, 1992, pointing out that it was in effect being compelled to
"shell out an additional pay for an alleged extra working day" despite
its complete payment of all compensation lawfully due its workers,
using the 314 factor. 5 Its motion was treated as an appeal and was
acted on by respondent Undersecretary. By Order dated September
22, the latter affirmed the challenged order of the Regional Director,
holding that "the divisor being used by the respondent (Wellington)
does not reliably reflect the actual working days in a year, " and
consequently commanded Wellington to pay its employees the "six
additional working days resulting from regular holidays falling on
Sundays in 1988, 1989 and 1990." 6 Again, Wellington moved for
reconsideration, 7 and again was rebuffed. 8
Wellington then instituted the special civil action of certiorari at bar in
an attempt to nullify the orders above mentioned. By Resolution dated
July 4, 1994, this Court authorized the issuance of a temporary
restraining order enjoining the respondents from enforcing the
questioned orders. 9
Every worker should, according to the Labor Code, 10 "be paid his
regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;" this,
of course, even if the worker does no work on these holidays. The
regular holidays include: "New Year's Day, Maundy Thursday, Good
Friday, the ninth of April, the first of May, the twelfth of June, the fourth
of July, the thirtieth of November, the twenty-fifth of December, and
the day designated by law for holding a general election (or national
referendum or plebiscite). 11
Particularly as regards employees "who are uniformly paid by the
month, "the monthly minimum wage shall not be less than the
statutory minimum wage multiplied by 365 days divided by twelve." 12
This monthly salary shall serve as compensation "for all days in the
month whether worked or not," and "irrespective of the number of
working days therein." 13 In other words, whether the month is of thirty
(30) or thirty-one (31) days' duration, or twenty-eight (28) or twenty-
nine (29) (as in February), the employee is entitled to receive the
entire monthly salary. So, too, in the event of the declaration of any
special holiday, or any fortuitous cause precluding work on any
particular day or days (such as transportation strikes, riots, or
typhoons or other natural calamities), the employee is entitled to the
salary for the entire month and the employer has no right to deduct
the proportionate amount corresponding to the days when no work
was done. The monthly compensation is evidently intended precisely
to avoid computations and adjustments resulting from the
contingencies just mentioned which are routinely made in the case of
workers paid on daily basis.
In Wellington's case, there seems to be no question that at the time
of the inspection conducted by the Labor Enforcement Officer on
August 6, 1991, it was and had been paying its employees "a salary
of not less than the statutory or established minimum wage," and that
the monthly salary thus paid was "not . . . less than the statutory
minimum wage multiplied by 365 days divided by twelve," supra.
There is, in other words, no issue that to this extent, Wellington
complied with the minimum norm laid down by law.
Apparently the monthly salary was fixed by Wellington to provide for
compensation for every working day of the year including the holidays
specified by law and excluding only Sundays. In fixing the salary,
Wellington used what it calls the "314 factor;" that is to say, it simply
deducted 51 Sundays from the 365 days normally comprising a year
and used the difference, 314, as basis for determining the monthly
salary. The monthly salary thus fixed actually covers payment for 314
days of the year, including regular and special holidays, as well as
days when no work is done by reason of fortuitous cause, as above
specified, or causes not attributable to the employees.
The Labor Officer who conducted the routine inspection of Wellington
discovered that in certain years, two or three regular holidays had
fallen on Sundays. He reasoned that this had precluded the
enjoyment by the employees of a non-working day, and the
employees had consequently had to work an additional day for that
month. This ratiocination received the approval of his Regional
Director who opined 14 that "when a regular holiday falls on a Sunday,
an extra or additional working day is created and the employer has
the obligation to pay its employees for the extra day except the last
Sunday of August since the payment for the said holiday is already
included in the 314 factor." 15
This ingenuous theory was adopted and further explained by
respondent Labor Undersecretary, to whom the matter was appealed,
as follows: 16
. . . By using said (314) factor, the respondent (Wellington) assumes
that all the regular holidays fell on ordinary days and never on a
Sunday. Thus, the respondent failed to consider the circumstance that

whenever a regular holiday coincides with a Sunday, an additional
working day is created and left unpaid. In other words, while the said
divisor may be utilized as proof evidencing payment of 302 working
days, 2 special days and the ten regular holidays in a calendar year,
the same does not cover or include payment of additional working
days created as a result of some regular holidays falling on Sundays.
He pointed out that in 1988 there was "an increase of three (3) working
days resulting from regular holidays falling on Sundays;" hence
Wellington "should pay for 317 days, instead of 314 days." By the
same process of ratiocination, respondent Undersecretary theorized
that there should be additional payment by Wellington to its monthly-
paid employees for "an increment of three (3) working days" for 1989
and again, for 1990. What he is saying is that in those years,
Wellington should have used the "317 factor," not the "314 factor."
The theory loses sight of the fact that the monthly salary in Wellington
which is based on the so-called "314 factor" accounts for all 365
days of a year; i.e., Wellington's "314 factor" leaves no day
unaccounted for; it is paying for all the days of a year with the
exception only of 51 Sundays.
The respondents' theory would make each of the years in question
(1988, 1989, 1990), a year of 368 days. Pursuant to this theory, no
employer opting to pay his employees by the month would have any
definite basis to determine the number of days in a year for which
compensation should be given to his work force. He would have to
ascertain the number of times legal holidays would fall on Sundays in
all the years of the expected or extrapolated lifetime of his business.
Alternatively, he would be compelled to make adjustments in his
employees' monthly salaries every year, depending on the number of
times that a legal holiday fell on a Sunday.
There is no provision of law requiring any employer to make such
adjustments in the monthly salary rate set by him to take account of
legal holidays falling on Sundays in a given year, or, contrary to the
legal provisions bearing on the point, otherwise to reckon a year at
more than 365 days. As earlier mentioned, what the law requires of
employers opting to pay by the month is to assure that "the monthly
minimum wage shall not be less than the statutory minimum wage
multiplied by 365 days divided by twelve," 17 and to pay that salary "for
all days in the month whether worked or not," and "irrespective of the
number of working days therein." 18 That salary is due and payable
regardless of the declaration of any special holiday in the entire
country or a particular place therein, or any fortuitous cause
precluding work on any particular day or days (such as transportation
strikes, riots, or typhoons or other natural calamities), or cause not
imputable to the worker. And as also earlier pointed out, the legal
provisions governing monthly compensation are evidently intended
precisely to avoid re-computations and alterations in salary on
account of the contingencies just mentioned, which, by the way, are
routinely made between employer and employees when the wages
are paid on daily basis.
The public respondents argue that their challenged conclusions and
dispositions may be justified by Section 2, Rule X, Book III of the
Implementing Rules, giving the Regional Director power 19
. . . to order and administer (in cases where employer-employee
relations still exist), after due notice and hearing, compliance with the
labor standards provisions of the Code and the other labor legislations
based on the findings of their Regulations Officers or Industrial Safety
Engineers (Labor Standard and Welfare Officers) and made in the
course of inspection, and to issue writs of execution to the appropriate
authority for the enforcement of his order, in line with the provisions
of Article 128 in relation to Articles 289 and 290 of the Labor Code, as
amended. . . .
The respondents beg the question. Their argument assumes that
there are some "labor standards provisions of the Code and the other
labor legislations" imposing on employers the obligation to give
additional compensation to their monthly-paid employees in the event
that a legal holiday should fall on a Sunday in a particular month
with which compliance may be commanded by the Regional Director
when the existence of said provisions is precisely the matter to be
established.
In promulgating the orders complained of the public respondents have
attempted to legislate, or interpret legal provisions in such a manner
as to create obligations where none are intended. They have acted
without authority, or at the very least, with grave abuse of their
discretion. Their acts must be nullified and set aside.
WHEREFORE, the orders complained of, namely: that of the
respondent Undersecretary dated September 22, 1993, and that of
the Regional Director dated July 30, 1992, are NULLIFIED AND SET
ASIDE, and the proceeding against petitioner DISMISSED.
SO ORDERED.
Service Incentive Leave
Article 95. Right to service incentive leave.
(Coverage) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days
with pay.
(Exclusion) This provision shall not apply to those who are already
enjoying the benefit herein provided, those enjoying vacation leave
with pay of at least five days and those employed in establishments
regularly employing less than ten employees or in establishments
exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of
such establishment.
The grant of benefit in excess of that provided herein shall not be
made a subject of arbitration or any court or administrative action.
Makati Haberdashery Inc., vs. NLRC
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been
working for petitioner Makati Haberdashery, Inc. as tailors,
seamstress, sewers, basters (manlililip) and "plantsadoras". They are
paid on a piece-rate basis except Maria Angeles and Leonila Serafina
who are paid on a monthly basis. In addition to their piece-rate, they
are given a daily allowance of three (P 3.00) pesos provided they
report for work before 9:30 a.m. everyday.
Private respondents are required to work from or before 9:30 a.m. up
to 6:00 or 7:00 p.m. from Monday to Saturday and during peak periods
even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor
organization of the respondent workers, filed a complaint docketed as
NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic
wage; (b) underpayment of living allowance; (c) non-payment of
overtime work; (d) non-payment of holiday pay; (e) non-payment of
service incentive pay; (f) 13th month pay; and (g) benefits provided
for under Wage Orders Nos. 1, 2, 3, 4 and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84, private
respondent Dioscoro Pelobello left with Salvador Rivera, a salesman
of petitioner Haberdashery, an open package which was discovered
to contain a "jusi" barong tagalog. When confronted, Pelobello replied
that the same was ordered by respondent Casimiro Zapata for his
customer. Zapata allegedly admitted that he copied the design of
petitioner Haberdashery. But in the afternoon, when again questioned
about said barong, Pelobello and Zapata denied ownership of the
same. Consequently a memorandum was issued to each of them to
explain on or before February 4, 1985 why no action should be taken
against them for accepting a job order which is prejudicial and in direct
competition with the business of the company. 2 Both respondents
allegedly did not submit their explanation and did not report for work.
3
Hence, they were dismissed by petitioners on February 4, 1985.
They countered by filing a complaint for illegal dismissal docketed as
NLRC NCR Case No. 2-428-85 on February 5, 1985. 4

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered
judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR Case No.
2-428-85 finding respondents guilty of illegal dismissal and ordering
them to reinstate Dioscoro Pelobello and Casimiro Zapata to their
respective or similar positions without loss of seniority rights, with full
backwages from July 4, 1985 up to actual reinstatement. The charge
of unfair labor practice is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants' claims for
underpayment re violation of the minimum wage law is hereby ordered
dismissed for lack of merit.
Respondents are hereby found to have violated the decrees on the
cost of living allowance, service incentive leave pay and the 13th
Month Pay. In view thereof, the economic analyst of the Commission
is directed to compute the monetary awards due each complainant
based on the available records of the respondents retroactive as of
three years prior to the filing of the instant case.
SO ORDERED. 5
From the foregoing decision, petitioners appealed to the NLRC. The
latter on March 30, 1988 affirmed said decision but limited the
backwages awarded the Dioscoro Pelobello and Casimiro Zapata to
only one (1) year. 6
After their motion for reconsideration was denied, petitioners filed the
instant petition raising the following issues:
I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN
PETITIONER HABERDASHERY AND RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS WORKERS ARE ENTITLED TO MONETARY
CLAIMS DESPITE THE FINDING THAT THEY ARE NOT ENTITLED
TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY
DISMISSED. 7
The first issue which is the pivotal issue in this case is resolved in
favor of private respondents. We have repeatedly held in countless
decisions that the test of employer-employee relationship is four-fold:
(1) the selection and engagement of the employee; (2) the payment
of wages; (3) the power of dismissal; and (4) the power to control the
employee's conduct. It is the so called "control test" that is the most
important element. 8 This simply means the determination of whether
the employer controls or has reserved the right to control the
employee not only as to the result of the work but also as to the means
and method by which the same is to be accomplished. 9
The facts at bar indubitably reveal that the most important requisite of
control is present. As gleaned from the operations of petitioner, when
a customer enters into a contract with the haberdashery or its
proprietor, the latter directs an employee who may be a tailor, pattern
maker, sewer or "plantsadora" to take the customer's measurements,
and to sew the pants, coat or shirt as specified by the customer.
Supervision is actively manifested in all these aspects the manner
and quality of cutting, sewing and ironing.
Furthermore, the presence of control is immediately evident in this
memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr.
dated May 30, 1981 addressed to Topper's Makati Tailors which
reads in part:
4. Effective immediately, new procedures shall be followed:
A. To follow instruction and orders from the undersigned Roger
Valderama, Ruben Delos Reyes and Ofel Bautista. Other than this
person (sic) must ask permission to the above mentioned before
giving orders or instructions to the tailors.
B. Before accepting the job orders tailors must check the materials,
job orders, due dates and other things to maximize the efficiency of
our production. The materials should be checked (sic) if it is matched
(sic) with the sample, together with the number of the job order.
C. Effective immediately all job orders must be finished one day
before the due date. This can be done by proper scheduling of job
order and if you will cooperate with your supervisors. If you have many
due dates for certain day, advise Ruben or Ofel at once so that they
can make necessary adjustment on due dates.
D. Alteration-Before accepting alteration person attending on customs
(sic) must ask first or must advise the tailors regarding the due dates
so that we can eliminate what we call 'Bitin'.
E. If there is any problem regarding supervisors or co-tailor inside our
shop, consult with me at once settle the problem. Fighting inside the
shop is strictly prohibited. Any tailor violating this memorandum will
be subject to disciplinary action.
For strict compliance. 10
From this memorandum alone, it is evident that petitioner has
reserved the right to control its employees not only as to the result but
also the means and methods by which the same are to be
accomplished. That private respondents are regular employees is
further proven by the fact that they have to report for work regularly
from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional
allowance of P 3.00 daily if they report for work before 9:30 a.m. and
which is forfeited when they arrive at or after 9:30 a.m. 11
Since private respondents are regular employees, necessarily the
argument that they are independent contractors must fail. As
established in the preceding paragraphs, private respondents did not
exercise independence in their own methods, but on the contrary were
subject to the control of petitioners from the beginning of their tasks
to their completion. Unlike independent contractors who generally rely
on their own resources, the equipment, tools, accessories, and
paraphernalia used by private respondents are supplied and owned
by petitioners. Private respondents are totally dependent on
petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private
respondents are entitled to the Minimum Wage as mandated by
Section 2(g) of Letter of Instruction No. 829, Rules Implementing
Presidential Decree No. 1614 and reiterated in Section 3(f), Rules
Implementing Presidential Decree 1713 which explicitly states that,
"All employees paid by the result shall receive not less than the
applicable new minimum wage rates for eight (8) hours work a day,
except where a payment by result rate has been established by the
Secretary of Labor. ..." 12 No such rate has been established in this
case.
But all these notwithstanding, the question as to whether or not there
is in fact an underpayment of minimum wages to private respondents
has already been resolved in the decision of the Labor Arbiter where
he stated: "Hence, for lack of sufficient evidence to support the claims
of the complainants for alleged violation of the minimum wage, their
claims for underpayment re violation of the Minimum Wage Law under
Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13
The records show that private respondents did not appeal the above
ruling of the Labor Arbiter to the NLRC; neither did they file any
petition raising that issue in the Supreme Court. Accordingly, insofar
as this case is concerned, that issue has been laid to rest. As to
private respondents, the judgment may be said to have attained
finality. For it is a well-settled rule in this jurisdiction that "an appellee
who has not himself appealed cannot obtain from the appellate court-
, any affirmative relief other than the ones granted in the decision of
the court below. " 14
 The law is protecting the rights of the laborer authorizes neither
oppression nor self-destruction of the employer. 17 More importantly,
As a consequence of their status as regular employees of the
while the Constitution is committed to the policy of social justice and
petitioners, they can claim cost of living allowance. This is apparent
the protection of the working class, it should not be supposed that
from the provision defining the employees entitled to said allowance,
every labor dispute will automatically be decided in favor of labor. 18
thus: "... All workers in the private sector, regardless of their position,
designation or status, and irrespective of the method by which their
wages are paid. " 15 Finally, it has been established that the right to dismiss or otherwise
impose discriplinary sanctions upon an employee for just and valid
cause, pertains in the first place to the employer, as well as the
Private respondents are also entitled to claim their 13th Month Pay
authority to determine the existence of said cause in accordance with
under Section 3(e) of the Rules and Regulations Implementing P.D.
the norms of due process. 19
No. 851 which provides:

There is no evidence that the employer violated said norms. On the

Section 3. Employers covered. The Decree shall apply to all
contrary, private respondents who vigorously insist on the existence
employers except to:
of employer-employee relationship, because of the supervision and
control of their employer over them, were the very ones who exhibited
xxx xxx xxx their lack of respect and regard for their employer's rules.

(e) Employers of those who are paid on purely commission, boundary, Under the foregoing facts, it is evident that petitioner Haberdashery
or task basis, and those who are paid a fixed amount for performing a had valid grounds to terminate the services of private respondents.
specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in
WHEREFORE, the decision of the National Labor Relations
which case the employer shall be covered by this issuance insofar as
Commission dated March 30, 1988 and that of the Labor Arbiter dated
such workers are concerned. (Emphasis supplied.)
June 10, 1986 are hereby modified. The complaint filed by Pelobello
and Zapata for illegal dismissal docketed as NLRC NCR Case No. 2-
On the other hand, while private respondents are entitled to Minimum 428-85 is dismissed for lack of factual and legal bases. Award of
Wage, COLA and 13th Month Pay, they are not entitled to service service incentive leave pay to private respondents is deleted.
incentive leave pay because as piece-rate workers being paid at a
fixed amount for performing work irrespective of time consumed in the
SO ORDERED.
performance thereof, they fall under one of the exceptions stated in
Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code.
For the same reason private respondents cannot also claim holiday
pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor
Code).

With respect to the last issue, it is apparent that public respondents Labor Congress vs. NLRC.
have misread the evidence, for it does show that a violation of the
employer's rules has been committed and the evidence of such See case above*
transgression, the copied barong tagalog, was in the possession of
Pelobello who pointed to Zapata as the owner. When required by their
employer to explain in a memorandum issued to each of them, they Requirement
not only failed to do so but instead went on AWOL (absence without
official leave), waited for the period to explain to expire and for
Article 95. Right to service incentive leave.
petitioner to dismiss them. They thereafter filed an action for illegal
dismissal on the far-fetched ground that they were dismissed because
of union activities. Assuming that such acts do not constitute Every employee who has rendered at least one year of service shall
abandonment of their jobs as insisted by private respondents, their be entitled to a yearly service incentive leave of five days with pay.
blatant disregard of their employer's memorandum is undoubtedly an
open defiance to the lawful orders of the latter, a justifiable ground for
This provision shall not apply to those who are already enjoying the
termination of employment by the employer expressly provided for in
benefit herein provided, those enjoying vacation leave with pay of at
Article 283(a) of the Labor Code as well as a clear indication of guilt
least five days and those employed in establishments regularly
for the commission of acts inimical to the interests of the employer,
employing less than ten employees or in establishments exempted
another justifiable ground for dismissal under the same Article of the
from granting this benefit by the Secretary of Labor and Employment
Labor Code, paragraph (c). Well established in our jurisprudence is
after considering the viability or financial condition of such
the right of an employer to dismiss an employee whose continuance
establishment.
in the service is inimical to the employer's interest. 16

The grant of benefit in excess of that provided herein shall not be

In fact the Labor Arbiter himself to whom the explanation of private
respondents was submitted gave no credence to their version and
found their excuses that said barong tagalog was the one they got
from the embroiderer for the Assistant Manager who was investigating
them, unbelievable.
Under the circumstances, it is evident that there is no illegal dismissal
of said employees. Thus, We have ruled that
No employer may rationally be expected to continue in employment a
person whose lack of morals, respect and loyalty to his employer,
regard for his employer's rules, and appreciation of the dignity and
responsibility of his office, has so plainly and completely been bared.
That there should be concern, sympathy, and solicitude for the rights
and welfare of the working class, is meet and proper. That in
controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and
writings should be resolved in the former's favor, is not an
unreasonable or unfair rule. But that disregard of the employer's own
rights and interests can be justified by that concern and solicitude is
unjust and unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157
SCRA 414-415 [1988] ).
made a subject of arbitration or any court or administrative action.
Computation and Liability
Sentinel Security Agency Inc., vs. NLRC
This is the rationale used by the Court in dismissing the two
consolidated petitions for certiorari before us, seeking the reversal of
the Decision dated August 25, 1995, and the Resolution date October
24, 1995, both promulgated by the National Labor Relations
Commissionxiii in NLRC Case No. V-0317-94 (RAB VII-01-0097-94,
RAB VII-020173-94, and RAB VII-01-0133-94).
In the action for illegal dismissal and payment of salary differential,
service incentive leave pay and separation pay filed by private
respondents, Labor Arbiter Dominador A. Almirante rendered a
Decision, which disposed:xiii
WHEREFORE, premises considered[,] judgment is hereby rendered
ordering xxx Sentinel Security Agency, Inc. jointly and severally with

xxx Philamlife, Cebu Branch, to pay complainants the total amount of
[s]ixty [t]housand [o]ne [h]undred [t]welve [p]esos and 50/100
(P60,112.50) in the concept of 13th month pay and service incentive
leave benefits as computed by our Labor Arbitration Associate whose
computation is hereto attached and forming part thereof.xiii
On appeal, the NLRC modified the labor arbiters Decision. The
dispositive portion of the NLRC Decisionxiiireads:
WHEREFORE, the assailed Decision is hereby MODIFIED in so far
as the award of 13th month pay for the previous years which is hereby
excluded. Further, xxx Sentinel Security Agency, Inc. is hereby
ORDERED to pay complainants separation pay at the rate of month
pay for every year of service and for both xxx Philippine American Life
Insurance, Inc. and Sentinel Security Agency, Inc. and/or Daniel Iway
to pay to the [complainants] jointly and severally their backwages from
January 16, 1994 to January 15, 1995 and the corresponding 13th
month pay for the said year. The monetary awards hereby granted
are broken down as follows [into separation pay, back wages, 13th
month pay and service incentive leave pay]:
xxx xxx x x x.xiii
The challenged Resolution denied reconsideration for lack of merit.xiii
The Facts
The undisputed factual backdrop is narrated by Respondent
Commission as follows:xiii
The complainants were employees of Sentinel [Security Agency, Inc.
hereafter referred to as the Agency] since March 1, 1966 in the case
of Veronico Zambo; October 27, 1975 in the case of Helcias Arroyo;
September 20, 1985 in the case of Adriano Cabano; February 1, 1990
in the case of Maximo Ortiz; and Ortiz and November 1, 1967 in the
case of Rustico Andoy. They were assigned to render guard duty at
the premises of [Philippine American Life Insurance Company] at
Jones Avenue, Cebu City. On December 16, 1993 Philippine
American Life Insurance Company [the Client, for brevity], through
Carlos De Pano, Jr., sent notice to all concerned that the [Agency]
was again awarded the contract of [s]ecurity [s]ervices together with
a request to replace all the security guards in the companys offices at
the cities of Cebu, Bacolod, Cagayan de Oro, Dipolog and Ilagan. In
compliance therewith, [the Agency] issued on January 12, 1994, a
Relief and Transfer Order replacing the complainants as guards [of
the Client] and for then to be re-assigned [to] other clients effective
January 16, 1994. As ordered, the complainants reported but were
never given new assignments but instead they were told in the
vernacular, gui-ilisa mo kay mga tigulang naman mo which when
translated means, you were replace[d] because you are already old.
Precisely, the complainants lost no time but filed the subject illegal
dismissal cases on January 18, January 26 and February 4, 1994 and
prayed for payment of separation pay and other labor standard
benefits.
[The Client and the Agency] maintained there was no dismissal on the
part of the complainants, constructive or otherwise, as they were
protected by the contract of security services which allows the recall
of security guards from their assigned posts at the will of either party.
It also advanced that the complainants prematurely filed the subject
cases without giving the [Agency] a chance to give them some
assignments.
On the part of [the Client], it averred further that there [was] no
employer-employee relationship between it and the complainants as
the latter were merely assigned to its Cebu Branch under a job
contract; that [the Agency] ha[d] its own separate corporate
personality apart from that of [the Client]. Besides, it pointed out that
the functions of the complainants in providing security services to [the
Clients] property [were] not necessary and desirable to the usual
business or trade of [the Client], as it could still operate and engage
in its life insurance business without the security guards. In fine, [the
Client] maintains that the complainants have no cause of action
against it.
Ruling of Respondent Commission
Respondent Commission ruled that the complainants were
constructively dismissed, as the recall of the complainants from their
long time post[s] at [the premises of the Client] without any good
reason is a scheme to justify or camouflage illegal dismissal.
It ruled Superstar Security Agency, Inc. vs. National Labor Relations
Commissionxiii and A Prime Security Services, Inc. vs. national Labor
Relations Commissionxiii were not applicable to the case at bar. In the
former, the security guard was placed on temporary off-detail due to
his poor performance and lack of elementary courtesy and tact, and
to the cost-cutting program of the agency. In the latter, the relief of the
security guard was due to his sleeping while on duty and his repeated
refusal to resume work despite notice.
In the present case, the complainants case, the complainants were
told by the Agency that they lost their assignment at the Clients
premises because they were already old, and not because they had
committed any infraction or irregularity. The NLRC applied RA 7641,xiii
which gives retirement benefits of one-half month pay per year of
service to retirable employees, viz.:
xxx As stated earlier xxx, the complainants were in the service of [the
Client] for nearly twenty (20) years in the cases of Helcias Arroyo and
for more than twenty (20) years in the cases of Veronico Zambo and
Rustico Andoy, which long years of service [appear] on record to be
unblemished. The complainants were then confronted with an
impending sudden loss of earning for while the order of [the Agency]
to immediately report for reassignment momentarily gave them hope,
there was in fact no immediate reinstatement. While it could have
been prudent for the complainants to wait, they were set unstable and
were actually threatened by the statement of the personnel in charge
of [the Agency] that they were already old, that was why they were
replaced.
Against these glaring facts is the new Retirement Law, R.A. 7641
which took effect on January 7, 1993 giving retirement benefits of
month pay per year of service to an employee upon reaching
retirement age to be paid by the employer, in this case at quiet a
sizeable amount and in not so long due time as some of the
complainants were described as already old.
As complainants were illegally dismissed, the NLRC ruled that they
were entitled to the twin remedies of back wages for one (1) year from
the time of their dismissal on January 15, 1994, payable by both the
Client and the Agency, and separation pay one-half month pay for
every year of service payable only by the Agency. Reinstatement was
not granted due to the resulting antipathy and resentment among the
complainants, the Agency and the Client.
Hence, this petition.xiii
The Issues
In their memoranda, the Agency poses this question:xiii
xxx [W]hether xxx Sentinel is guilty of illegal dismissal[,]
On the other hand, the Client raises the following issues:xiii
Whether xxx [the complainants] were illegally dismissed by their
employer, Sentinel Security Agency, Inc., and in holding petitioner to
be equally liable therefor.
Whether xxx petitioner is jointly and severally liable with Sentinel
Security Agency, Inc., in the latters payment of backwages, 13th month
pay and service incentive leave pay to its employees xxx.
In sum, the resolution of these consolidated petitions hinges on
(1) whether the complainants were illegally dismissed, and (2)
whether the Client is jointly and severally liable for their thirteenth-
month and service incentive leave pays.
The Courts Ruling
The petition is partly meritorious.
First Issue: Illegal Dismissal
The private respondents transfer, according to Respondent
Commission, was affected to circumvent the mandate of Republic Act
7641 (New Retirement Law), which by then had already taken effect,
in view of the fact that the complainants had worked for both the Client
and the Agency for 10 to 20 years and were nearing retirement age.
With this premise, the NLRC concluded that the guards were illegally
dismissed. The complainants add that the findings of the Commission
match the remarks of the personnel manager of the Agency, Feliciano
Marticion; that is, that they were being replaced because they were
already old. They insist that their service records are unblemished;
hence, they could not have been dismissed by reason of any just
cause.

We agree that the security guards were illegally dismissed, but not for
the reasons given by the public respondent. The aforecited
contentions of the NLRC are speculative and unsupported by the
evidence on record. As the solicitor general said in his Manifestation
in Lieu of Comment, the relief and transfer order was akin to placing
private respondents on temporary off-detail.
Being sidelined temporarily is a standard stipulation in employment
contracts, as the availability of assignment for security guards is
primarily dependent on the contracts entered into by the agency with
third parties. Most contracts for security services, as in this case,
stipulate that the client may request the replacement of the guards
assigned to it. In security agency parlance, being placed off detail or
on floating status means waiting to be posted.xiii This circumstance is
not equivalent to dismissal, so long as such status does not continue
beyond reasonable time.xiii
In the case at bar, the relief and transfer order per se did not sever
the employment relationship between the complainants and the
Agency. Thus, despite the fact that complainants were no longer
assigned to the Client, Article 287 of the Labor Code, as amended by
RA 7641, still binds the Agency to provide them upon their reaching
the retirement age of sixty to sixty-five years retirement pay or
whatever else was established in the collective bargaining agreement
or in any other applicable employment contract. On the other hand,
the Client is not liable to the complainants for their retirement pay
because of the absence of an employer-employee relationship
between them.
However, the Agency claims that the complainants, after being placed
off-detail, abandoned their employ. The solicitor general, siding with
the Agency and the labor arbiter, contends that while abandonment
of employment is inconsistent with the filing of a complaint for illegal
dismissal, such rule is not applicable where [the complainant]
expressly rejects this relief and asks for separation pay instead.
The Court disagrees. Abandonment, as a just and valid cause for
termination, requires a deliberate and unjustified refusal of an
employee to resume his work, coupled with a clear absence of any
intention of returning to his or her work.xiii That complainants did not
pray for reinstatement is not sufficient proof of abandonment. A strong
indication of the intention of complainants to resume work is their
allegation that on several dates they reported to the Agency for
reassignment, but were not given any. In fact, the contention of
complainant is that the Agency constructively dismissed them.
Abandonment has recently been ruled to be incompatible with
constructive dismissal. We, thus, rule that complainants did not
abandon their jobs.xiii We will now demonstrate why we believe
complainants were illegally dismissed.
In several cases, the Court has recognized the prerogative of
management to transfer an employee from one office to another within
the same business establishment, as the exigency of the business
may require, provided that the said transfer does not result in a
demotion in rank or a diminution in salary, benefits and other
privileges of the employee;xiii or is not unreasonable, inconvenient or
prejudicial to the latter;xiii or is not used as a subterfuge by the
employer to rid himself of an undesirable worker.xiii
A transfer means a movement (1) from one position to another of
equivalent rank, level or salary, without a break in the service;xiii and
(2) from one office to another within the same business
establishment.xiii It is distinguished from a promotion in the sense that
it involves a lateral change as opposed to a scalar ascent.xiii
In this case, transfer of the complainants implied more than a relief
from duty to give them time to rest a mere changing of the guards.
Rather, their transfer connoted a reshuffling or exchange of their
posts, or their reassignment to other posts, such that no security
guard would be without an assignment.
However, this legally recognized concept of transfer was not
implemented. The agency hired new security guards to replace the
complainants, resulting in a lack of posts to which the complainants
could have been reassigned. Thus, it refused to reassign Complainant
Andoy when he reported for duty on February 2, 4 and 7, 1994; and
merely told the other complainants on various dates from January 25
to 27, 1994 that they were already too old to be posted anywhere.
The Agency now explains that since, under the law, the Agency is
given a period of not more than six months to retain the complainants
on floating status, the complaint for illegal dismissal is premature. This
contention is incorrect.
A floating status requires the dire exigency of the employers bona fide
suspension of operation, business or undertaking. In security
services, this happens when the clients that do not renew their
contracts with a security agency are more than those that do and the
new ones that the agency gets. However, in the case at bar, the
Agency was awarded a new contract by the Client. There was no
surplus of security guards over available assignments. If there were,
it was because the Agency hired new security guards. Thus, there
was no suspension of operation, business or undertaking, bona fide
or not, that would have justified placing the complainants off-detail and
making them wait for a period of six months. If indeed they were
merely transferred, there would have been no need to make them wait
for six months.
The only logical conclusion from the foregoing discussion is that the
Agency illegally dismissed the complainants. Hence, as a necessary
consequence, the complainants are entitled to reinstatement and
back wages.xiii However, reinstatement is no longer feasible in this
case. The Agency cannot reassign them to the Client, as the former
has recruited new security guards; the complainants, on the other
hand, refuse to accept other assignments. Verily, complainants do not
pray for reinstatement; in fact, they refused to be reinstated. Such
refusal is indicative of strained relations.xiii Thus, separation pay is
awarded in lieu of reinstatement.xiii
Second Issue:
Clients Liability
The Client did not, as it could not, illegally dismiss the complainants.
Thus, it should not be held liable for separation pay and back wages.
But even if the Client is not responsible for the illegal dismissal of the
complainants, it is jointly and severally liable with the Agency for the
complainants service incentive leave pay. In Rosewood Processing,
Inc. vs. National Labor Relations Commission,xiii the Court explained
that, notwithstanding the service contract between the client and the
security agency, the two are solidarily liable for the proper wages
prescribed by the Labor Code, pursuant to Article 106, 107 and 109
thereof, which we quote hereunder:
ART. 106. Contractor or subcontractor.Whenever an
employer enters into a contract with another person for the
performance of the former[s] work, the employees of the contractor
and of the latter[s] subcontractor, if any, shall be paid in accordance
with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages
of his employees in accordance with this Code, the employer shall be
jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in
the same manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers
established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting
and determine who among the parties involved shall be considered
the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
xxx In such cases [labor-only contracting], the person or intermediary
shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the
latter were directly employed by him.
ART. 107. Indirect employer.The provisions of the
immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any
work, task, job or project.
ART. 109. Solidary liability.The provisions of existing laws to
the contrary notwithstanding, every employer or indirect employer
shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purpose of determining the
extent of their civil liability under this Chapter, they shall be considered
as direct employers.
Under these provisions, the indirect employer, who is the Client in the
case at bar, is jointly and severally liable with the contractor for the
 The award of the thirteenth-month pay is deleted in view of the
evidence presented by the Agency that such claim has already been
workers wages, in the same manner and extent that it is liable to its
paid to the complainants. Obviously then, the award of such benefit in
direct employees. This liability of the Client covers the payment of the
the dispositive portion of the assailed Decision is merely an oversight,
service incentive leave pay of the complainants during the time they
considering that Respondent Commission itself deleted it from the
were posted at the Cebu branch of the Client. As service had been
main body of the said Decision.
rendered, the liability accrued, even if the complainants were
eventually transferred or reassigned. WHEREFORE, the petition is DISMISSED and the assailed Decision
and Resolution are hereby AFFIRMED, but the award of the
The service incentive leave is expressly granted by these pertinent
thirteenth-month pay is DELETED. Costs against petitioners.
provisions of the Labor Code:
SO ORDERED.
ART. 95. Right to service incentive leave.(a) Every employee
who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
Auto Bus Transport System vs. Bautista
(b) This provision shall not apply to those who are already
enjoying the benefit herein provided, those enjoying vacation leave - See case above*
with pay of at least five days and those employed in establishments
regularly employing less than ten employees or in establishments
exempted from granting this benefit by the Secretary of Labor after
considering the viability or financial condition of such establishment. Paternity Leave

(c) The grant of benefit in excess of that provided herein shall - See Manual
not be made a subject of arbitration or any court [or] admnistrative
Parental Leave
action.
- See Manual
Under the Implementing Rules and Regulations of the Labor Code,
an unused service incentive leave is commutable to its money Service Charges
equivalent, viz.:
- See Manual
Sec. 5. Treatment of Banefit. - The service incentive leave shall be
commutable to its money equivalent if not used or exhausted at the
end of the year.