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G.R. No. L-52824 March 16, 88
REYNALDO BAUTISTA, petitioner,
vs.
HON. AMADO C. INCIONG, in his capacity as Deputy
Minister of Labor and ASSOCIATED LABOR UNIONS
(ALU), respondents.
GUTIERREZ, JR., J.:
This is an illegal dismissal case. The respondent Deputy
Minister dismissed the complaint of herein petitioner
principally on the ground that no employer-employee
relationship existed between the petitioner and
respondent Associated Labor Unions (ALU).
The facts as found by the National Capital Region
Director of the then ministry of Labor (MOL) Region IV
are as follows:
Complainant (petitioner) was employed
by ALU as 'Organizer' in 1972 with a
starting salary of P250.00 a month. As
such he paid his monthly SSS
contributions, with the respondent as
his employer. On March 15, 1979, He
was left in the office of ALU while his
other co-organizers were in Cainta,
Rizal attending a certification election
at Chrysler Philippines, as he was not
the organizer assigned in said
company. On March 16, 1979, he went
on sick leave for ten (10) days. His SSS
sickness benefit application form
signed by ALU's physician was given to
ALU for submission to the SSS. On
March 16, 1979, complainant reported
back for work upon expiration of his
leave but was informed by ALU's Area
Vice-President for Luzon of his
termination effective March 15, 1979.
Hence, this complaint filed on March
28, 1979. On April 18, 1979, however,
ALU filed a clearance application to
terminate complainant's services
effective March 16, 1979 on the ground
of abandonment of work. (p. 48, Rollo)
Based on these findings, the Director ruled in favor of
the petitioner and ordered the respondent Union to
reinstate the petitioner to his former position with full
backwages and to pay him emergency allowance, 13th
month pay and to refund his Mutual Aid Fund Deposit
in the amount of P 370.00
Respondent ALU appealed to the Ministry of Labor. On
October 23,1979, the respondent Deputy Minister set
aside the order of the Director and dismissed the
petitioner's complaint for lack of merit. In his order, the
Deputy Minister found that the petitioner was merely
accomodated by the respondent union after he was
dismissed by his former employer sometime in 1972 and
that his membership coverage with the SSS which shows
that respondent ALU is the one paying the employer's
share in the premiums is not conclusive proof that
respondent is the petitioner's employer because such
payments were performed by the respondent as a favor
for all those who were performing full time union
activities with it to entitle them to SSS benefits. The
Deputy Minister further ruled that the non-existence of
an employer-employee relationship between the parties
is bolstered by the fact that respondent ALU is not an
entity for profit but a duly registered labor union whose
sole purpose is the representation of its bona fide
organization units where it is certified as such.
In this petition, the petitioner contends that the
respondent Deputy minister committed grave abuse of
discretion in holding that there was no employer-
employee relationship between him and the respondent
union so much so that he is not entitled to the benefits
that he is praying for.
We agree with the petitioner.
There is nothing in the records which support the
Deputy minister's conclusion that the petitioner is not
an employee of respondent ALU. The mere fact that the
respondent is a labor union does not mean that it cannot
be considered an employer of the persons who work for
it. Much less should it be exempted from the very labor
laws which it espouses as labor organization. In case of
es v. Brotherhood Labor Unity Movement in the Phillipines
Zamora, , (147 SCRA 49, 54), we outlined the factors in
ascertaining an employer-employee realtionship:
In determining the existence of an
employer-employee relationship, the
elements that are generally considered
are the following : (a) the selection and
engagement of the employee; (b) the
payment of wages; (c) the power of
dismissal; and (d) the employer's power
to control the employee with respect to
the means and methods by which the
work is to be accomplished. It is the so-
called 'control test' that is the most
important element (Investment
Planning Corp. of the Phils. v. The
Social Security System, 21 SCRA 492;
Mafinco Trading Corp. v.
Ople, supra, and Rosario Brothers, Inc.
v. Ople, 131 SCRA 72)
In the case at bar, the Regional director correctly found
that the petitioner was an employee of the respondent
union as reflected in the latter's individual payroll sheets
and shown by the petitioner's membership with the
Social Security System (SSS) and the respondent union's
share of remittances in the petitioner's favor. Even more
significant, is the respondent union's act of filing a
clearance application with the MOL to terminate the
petitioner's services. Bautista was selected and hired by
the Union. He was paid wages by the Union. ALU had
the power to dismiss him as indeed it dismissed him.
And definitely, the Union tightly controlled the work of
Bautista as one of its organizers. There is absolutely no
factual or legal basis got deputy Minister Inciong's
decision.
We are, thus, constrained to reverse the findings of the
respondent Deputy Minister. However, the records show
that antipathy and antagonism between the petitioner
and the respondent union militate against the former's
reinstatement. ALU would not want to have a union
organizer whom it does not trust and who could
sabotage its efforts to unionize commercial and
industrial establishments. Severance pay, therefore, is
more proper in order. As we have ruled in the case
of Asiaworld Publishing House, Inc. v. Hon. Blas Ople, et
al., (G.R. No. 56398, July 23, 1987) quoting the cast
of Balaquezon EWTU v. Zamora, (97 SCRA 5,8):
It should be underscored that the
backwages are being awarded on the
basis of equity or in the nature of
severance pay. This means that a
monetary award is to be paid to the
employees as an alternative to
reinstatement which can no longer be
effected in view of the long passage of
time or because of the realities of the
situation. (Emphasis supplied)

WHEREFORE, the petition is hereby GRANTED and the
decision of the respondent Deputy Minister is
ANNULLED and SET ASIDE. The Order of Regional
Director Francisco L. Estrella is REINSTATED and
ordered executed but instead of returning the petitioner
to his former position, the private respondent is ordered
to pay him an amount equal to his backwages for only
three years and the separation pay to which he may be
entitled as of the end of the three year period under the
applicable law or collective bargaining agreement.
SO ORDERED.
G.R. No. 101761. March 24, 1993.
NATIONAL SUGAR REFINERIES CORPORATION,
petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and NBSR SUPERVISORY UNION,
(PACIWU) TUCP, respondents.
Jose Mario C. Bunag for petitioner.
The Solicitor General and the Chief Legal Officer, NLRC,
for public respondent.
Zoilo V. de la Cruz for private respondent.
DECISION
REGALADO, J p:
The main issue presented for resolution in this original
petition for certiorari is whether supervisory employees,
as defined in Article 212 (m), Book V of the Labor Code,
should be considered as officers or members of the
managerial staff under Article 82, Book III of the same
Code, and hence are not entitled to overtime rest day
and holiday pay.
Petitioner National Sugar Refineries Corporation
(NASUREFCO), a corporation which is fully owned and
controlled by the Government, operates three (3) sugar
refineries located at Bukidnon, Iloilo and Batangas. The
Batangas refinery was privatized on April 11, 1992
pursuant to Proclamation No. 50. 1 Private respondent
union represents the former supervisors of the
NASUREFCO Batangas Sugar Refinery, namely, the
Technical Assistant to the Refinery Operations Manager,
Shift Sugar Warehouse Supervisor, Senior
Financial/Budget Analyst, General Accountant, Cost
Accountant, Sugar Accountant, Junior Financial/Budget
Analyst, Shift Boiler Supervisor,, Shift Operations
Chemist, Shift Electrical Supervisor, General Services
Supervisor, Instrumentation Supervisor, Community
Development Officer, Employment and Training
Supervisor, Assistant Safety and Security Officer, Head
and Personnel Services, Head Nurse, Property
Warehouse Supervisor, Head of Inventory Control
Section, Shift Process Supervisor, Day Maintenance
Supervisor and Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job
Evaluation (JE) Program affecting all employees, from
rank-and-file to department heads. The JE Program was
designed to rationalized the duties and functions of all
positions, reestablish levels of responsibility, and
recognize both wage and operational structures. Jobs
were ranked according to effort, responsibility, training
and working conditions and relative worth of the job. As
a result, all positions were re-evaluated, and all
employees including the members of respondent union
were granted salary adjustments and increases in
benefits commensurate to their actual duties and
functions.
We glean from the records that for about ten years prior
to the JE Program, the members of respondent union
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were treated in the same manner as rank-and file
employees. As such, they used to be paid overtime, rest
day and holiday pay pursuant to the provisions of
Articles 87, 93 and 94 of the Labor Code as amended.
With the implementation of the JE Program, the
following adjustments were made: (1) the members of
respondent union were re-classified under levels S-5 to
S-8 which are considered managerial staff for purposes
of compensation and benefits; (2) there was an increase
in basic pay of the average of 50% of their basic pay prior
to the JE Program, with the union members now
enjoying a wide gap (P1,269.00 per month) in basic pay
compared to the highest paid rank-and-file employee; (3)
longevity pay was increased on top of alignment
adjustments; (4) they were entitled to increased company
COLA of P225.00 per month; (5) there was a grant of
P100.00 allowance for rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized
herein respondent union, which was organized pursuant
to Republic Act NO. 6715 allowing supervisory
employees to form their own unions, as the bargaining
representative of all the supervisory employees at the
NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program,
specifically on June 20, 1990, the members of herein
respondent union filed a complainant with the executive
labor arbiter for non-payment of overtime, rest day and
holiday pay allegedly in violation of Article 100 of the
Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C.
Pido rendered a decision 2 disposing as follows:
"WHEREFORE, premises considered, respondent
National Sugar refineries Corporation is hereby directed
to —
1. pay the individual members of complainant union the
usual overtime pay, rest day pay and holiday pay
enjoyed by them instead of the P100.00 special
allowance which was implemented on June 11, 1988;
and
2. pay the individual members of complainant union the
difference in money value between the P100.00 special
allowance and the overtime pay, rest day pay and
holiday pay that they ought to have received from June
1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union,
the labor ruled that the along span of time during which
the benefits were being paid to the supervisors has
accused the payment thereof to ripen into contractual
obligation; at the complainants cannot be estopped from
questioning the validity of the new compensation
package despite the fact that they have been receiving
the benefits therefrom, considering that respondent
union was formed only a year after the implementation
of the Job Evaluation Program, hence there was no way
for the individual supervisors to express their collective
response thereto prior to the formation of the union; and
the comparative computations presented by the private
respondent union showed that the P100.00 special
allowance given NASUREFCO fell short of what the
supervisors ought to receive had the overtime pay rest
day pay and holiday pay not been discontinued, which
arrangement, therefore, amounted to a diminution of
benefits.
On appeal, in a decision promulgated on July 19, 1991
by its Third Division, respondent National Labor
Relations Commission (NLRC) affirmed the decision of

the labor arbiter on the ground that the members of
respondent union are not managerial employees, as
defined under Article 212 (m) of the Labor Code and,
therefore, they are entitled to overtime, rest day and
holiday pay. Respondent NLRC declared that these
supervisory employees are merely exercising
recommendatory powers subject to the evaluation,
review and final action by their department heads; their
responsibilities do not require the exercise of discretion
and independent judgment; they do not participate in
the formulation of management policies nor in the hiring
or firing of employees; and their main function is to carry
out the ready policies and plans of the corporation. 3
Reconsideration of said decision was denied in a
resolution of public respondent dated August 30, 1991.
4 not apply to the following persons if they qualify for
Hence this petition for certiorari, with petitioner
NASUREFCO asseverating that public respondent
commission committed a grave abuse of discretion in
refusing to recognized the fact that the members of
respondent union are members of the managerial staff
who are not entitled to overtime, rest day and holiday
pay; and in making petitioner assume the "double
burden" of giving the benefits due to rank-and-file
employees together with those due to supervisors under
the JE Program.
We find creditable merit in the petition and that the
extraordinary writ of certiorari shall accordingly issue.
The primordial issue to be resolved herein is whether the
members of respondent union are entitled to overtime,
rest day and holiday pay. Before this can be resolved,
however it must of necessity be ascertained first whether
or not the union members, as supervisory employees,
are to be considered as officers or members of the
managerial staff who are exempt from the coverage of
Article 82 of the Labor Code.
It is not disputed that the members of respondent union
are supervisory employees, as defined employees, as
defined under Article 212(m), Book V of the Labor Code
on Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with
powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend,
lay-off, recall, discharged, assign or discipline employees.
Supervisory employees are those who, in the interest of
the employer effectively recommend such managerial
actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within
any of those above definitions are considered rank-and-
file employees of this Book."
Respondent NLRC, in holding that the union members
are entitled to overtime, rest day and holiday pay, and in
ruling that the latter are not managerial employees,
adopted the definition stated in the aforequoted
statutory provision.
Petitioner, however, avers that for purposes of
determining whether or not the members of respondent
union are entitled to overtime, rest day and holiday pay,
said employees should be considered as "officers or
members of the managerial staff" as defined under
Article 82, Book III of the Labor Code on "Working
Conditions and Rest Periods" and amplified in Section 2,
Rule I, Book III of the Rules to Implement the Labor
Code, to wit:
"Art. 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,
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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." (Emphasis
supplied.)
xxx xxx xxx
'Sec. 2. Exemption. — The provisions of this rule shall
exemption under the condition set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following
conditions, namely:
(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.
(c) Officers or members of a managerial staff if they
perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work
directly related to management policies of their employer;
(2) Customarily and regularly exercise discretion and
independent judgment;
(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 20 percent of their hours
worked in a work-week to activities which are not
directly and closely related to the performance of the
work described in paragraphs (1), (2), and above."
It is the submission of petitioner that while the members
of respondent union, as supervisors, may not be
occupying managerial positions, they are clearly officers
or members of the managerial staff because they meet all
the conditions prescribed by law and, hence, they are
not entitled to overtime, rest day and supervisory
employees under Article 212 (m) should be made to
apply only to the provisions on Labor Relations, while
the right of said employees to the questioned benefits
should be considered in the light of the meaning of a
managerial employee and of the officers or members of
the managerial staff, as contemplated under Article 82 of
the Code and Section 2, Rule I Book III of the
implementing rules. In other words, for purposes of
forming and joining unions, certification elections,
collective bargaining, and so forth, the union members
are supervisory employees. In terms of working
conditions and rest periods and entitlement to the

questioned benefits, however, they are officers or
members of the managerial staff, hence they are not
entitled thereto.
While the Constitution is committed to the policy of
social justice and the protection of the working class, it
should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also
has its own rights which, as such, are entitled to respect
and enforcement in the interest of simple fair play. Out
of its concern for those with less privileges in life, this
Court has inclined more often than not toward the
worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded us
to the rule that justice is in every case for the deserving,
to be dispensed in the light of the established facts and
the applicable law and doctrine. 5
This is one such case where we are inclined to tip the
scales of justice in favor of the employer.
The question whether a given employee is exempt from
the benefits of the law is a factual one dependent on the
circumstances of the particular case, In determining
whether an employee is within the terms of the statutes,
the criterion is the character of the work performed,
rather than the title of the employee's position. 6
Consequently, while generally this Court is not supposed
to review the factual findings of respondent commission,
substantial justice and the peculiar circumstances
obtaining herein mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution
Statements 7 of the union members will readily show
that these supervisory employees are under the direct
supervision of their respective department
superintendents and that generally they assist the latter
in planning, organizing, staffing, directing, controlling
communicating and in making decisions in attaining the
company's set goals and objectives. These supervisory
employees are likewise responsible for the effective and
efficient operation of their respective departments. More
specifically, their duties and functions include, among
others, the following operations whereby the employee:
1) assists the department superintendent in the
following:
a) planning of systems and procedures relative to
department activities;
b) organizing and scheduling of work activities of the
department, which includes employee shifting scheduled
and manning complement;
c) decision making by providing relevant information
data and other inputs;
d) attaining the company's set goals and objectives by
giving his full support;
e) selecting the appropriate man to handle the job in the
department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at
all times and recommends disciplinary action on erring
subordinates;
3) trains and guides subordinates on how to assume
responsibilities and become more productive;
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4) conducts semi-annual performance evaluation of his
subordinates and recommends necessary action for their
development/advancement;
5) represents the superintendent or the department
when appointed and authorized by the former;
6) coordinates and communicates with other inter and
intra department supervisors when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods,
equipment performance, quality of service and working
conditions;
9) sees to it that safety rules and regulations and
procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or
modifications to said rules when deemed necessary, and
initiates and prepares reports for any observed
abnormality within the refinery;
10) supervises the activities of all personnel under him
and goes to it that instructions to subordinates are
properly implemented; and
11) performs other related tasks as may be assigned by
his immediate superior.
From the foregoing, it is apparent that the members of
respondent union discharge duties and responsibilities
which ineluctably qualify them as officers or members of
the managerial staff, as defined in Section 2, Rule I Book
III of the aforestated Rules to Implement the Labor Code,
viz.: (1) their primary duty consists of the performance of
work directly related to management policies of their
employer; (2) they customarily and regularly exercise
discretion and independent judgment; (3) they regularly
and directly assist the managerial employee whose
primary duty consist of the management of a department
of the establishment in which they are employed (4) they
execute, under general supervision, work along
specialized or technical lines requiring special training,
experience, or knowledge; (5) they execute, under general
supervision, special assignments and tasks; and (6) they
do not devote more than 20% of their hours worked in a
work-week to activities which are not directly and clearly
related to the performance of their work hereinbefore
described.
Under the facts obtaining in this case, we are
constrained to agree with petitioner that the union
members should be considered as officers and members
of the managerial staff and are, therefore, exempt from
the coverage of Article 82. Perforce, they are not entitled
to overtime, rest day and holiday.
The distinction made by respondent NLRC on the basis
of whether or not the union members are managerial
employees, to determine the latter's entitlement to the
questioned benefits, is misplaced and inappropriate. It is
admitted that these union members are supervisory
employees and this is one instance where the
nomenclatures or titles of their jobs conform with the
nature of their functions. Hence, to distinguish them
from a managerial employee, as defined either under
Articles 82 or 212 (m) of the Labor Code, is puerile and
in efficacious. The controversy actually involved here
seeks a determination of whether or not these
supervisory employees ought to be considered as officers
or members of the managerial staff. The distinction,
therefore, should have been made along that line and its
corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the
labor arbiter that the payment of the questioned benefits

to the union members has ripened into a contractual
obligation.
A. Prior to the JE Program, the union members, while
being supervisors, received benefits similar to the rank-
and-file employees such as overtime, rest day and
holiday pay, simply because they were treated in the
same manner as rank-and-file employees, and their
basic pay was nearly on the same level as those of the
latter, aside from the fact that their specific functions
and duties then as supervisors had not been properly
defined and delineated from those of the rank-and-file.
Such fact is apparent from the clarification made by
petitioner in its motion for reconsideration 8 filed with
respondent commission in NLRC Case No. CA No. I-
000058, dated August 16, 1991, wherein, it lucidly
explained:
"But, complainants no longer occupy the same positions
they held before the JE Program. Those positions
formerly classified as 'supervisory' and found after the
JE Program to be rank-and-file were classified correctly
and continue to receive overtime, holiday and restday
pay. As to them, the practice subsists.
"However, those whose duties confirmed them to be
supervisory, were re-evaluated, their duties re-defined
and in most cases their organizational positions re-
designated to confirm their superior rank and duties.
Thus, after the JE program, complainants cannot be
said to occupy the same positions." 9
It bears mention that this positional submission was
never refuted nor controverted by respondent union in
any of its pleadings filed before herein public respondent
or with this Court. Hence, it can be safely concluded
therefrom that the members of respondent union were
paid the questioned benefits for the reason that, at that
time, they were rightfully entitled thereto. Prior to the JE
Program, they could not be categorically classified as
members or officers of the managerial staff considering
that they were then treated merely on the same level as
rank-and-file. Consequently, the payment thereof could
not be construed as constitutive of voluntary employer
practice, which cannot be now be unilaterally withdrawn
by petitioner. To be considered as such, it should have
been practiced over a long period of time, and must be
shown to have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires
an indubitable showing that the employer agreed to
continue giving the benefits knowingly fully well that
said employees are not covered by the law requiring
payment thereof. 11 In the case at bar, respondent
union failed to sufficiently establish that petitioner has
been motivated or is wont to give these benefits out of
pure generosity.
B. It remains undisputed that the implementation of the
JE Program, the members of private respondent union
were re-classified under levels S-5 S-8 which were
considered under the program as managerial staff
purposes of compensation and benefits, that they
occupied re-evaluated positions, and that their basic pay
was increased by an average of 50% of their basic salary
prior to the JE Program. In other words, after the JE
Program there was an ascent in position, rank and
salary. This in essence is a promotion which is defined
as the advancement from one position to another with an
increase in duties and responsibilities as authorized by
law, and usually accompanied by an increase in salary.
12
Quintessentially, with the promotion of the union
members, they are no longer entitled to the benefits
which attach and pertain exclusively to their positions.
Entitlement to the benefits provided for by law requires
prior compliance with the conditions set forth therein.
With the promotion of the members of respondent union,
Page 5 of 16
they occupied positions which no longer met the
requirements imposed by law. Their assumption of these
positions removed them from the coverage of the law,
ergo, their exemption therefrom.
As correctly pointed out by petitioner, if the union
members really wanted to continue receiving the benefits
which attach to their former positions, there was nothing
to prevent them from refusing to accept their promotions
and their corresponding benefits. As the sating goes by,
they cannot have their cake and eat it too or, as
petitioner suggests, they could not, as a simple matter of
law and fairness, get the best of both worlds at the
expense of NASUREFCO.
Promotion of its employees is one of the
jurisprudentially-recognized exclusive prerogatives of
management, provided it is done in good faith. In the
case at bar, private respondent union has miserably
failed to convince this Court that the petitioner acted
implementing the JE Program. There is no showing that
the JE Program was intended to circumvent the law and
deprive the members of respondent union of the benefits
they used to receive.
Not so long ago, on this particular score, we had the
occasion to hold that:
". . . it is the prerogative of the management to regulate,
according to its discretion and judgment, all aspects of
employment. This flows from the established rule that
labor law does not authorize the substitution of the
judgment of the employer in the conduct of its business.
Such management prerogative may be availed of without
fear of any liability so long as it is exercised in good faith
for the advancement of the employer's interest and not
for the purpose of defeating on circumventing the rights
of employees under special laws or valid agreement and
are not exercised in a malicious, harsh, oppressive,
vindictive or wanton manner or out of malice or spite."
13
WHEREFORE, the impugned decision and resolution of
respondent National Labor Relations Commission
promulgated on July 19, 1991 and August 30, 1991,
respectively, are hereby ANNULLED and SET ASIDE for
having been rendered and adopted with grave abuse of
discretion, and the basic complaint of private respondent
union is DISMISSED.
Narvasa, C . J ., Padilla, Nocon and Campos, Jr., JJ.,
concur.
G.R. No. 79255 January 20, 1992
UNION OF FILIPRO EMPLOYEES (UFE), petitioner,
vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS
COMMISSION and NESTLÉ PHILIPPINES, INC.
(formerly FILIPRO, INC.), respondents.
Jose C. Espinas for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private
respondent.
GUTIERREZ, JR., J.:
This labor dispute stems from the exclusion of sales
personnel from the holiday pay award and the change of
the divisor in the computation of benefits from 251 to
261 days.

On November 8, 1985, respondent Filipro, Inc. (now
Nestle Philippines, Inc.) filed with the National Labor
Relations Commission (NLRC) a petition for declaratory
relief seeking a ruling on its rights and obligations
respecting claims of its monthly paid employees for
holiday pay in the light of the Court's decision
in Chartered Bank Employees Association v. Ople (138
SCRA 273 [1985]).
Both Filipro and the Union of Filipino Employees (UFE)
agreed to submit the case for voluntary arbitration and
appointed respondent Benigno Vivar, Jr. as voluntary
arbitrator.
On January 2, 1980, Arbitrator Vivar rendered a
decision directing Filipro to:
pay its monthly paid employees holiday
pay pursuant to Article 94 of the Code,
subject only to the exclusions and
limitations specified in Article 82 and
such other legal restrictions as are
provided for in the Code. (Rollo,
p. 31)
Filipro filed a motion for clarification seeking (1) the
limitation of the award to three years, (2) the exclusion of
salesmen, sales representatives, truck drivers,
merchandisers and medical representatives (hereinafter
referred to as sales personnel) from the award of the
holiday pay, and (3) deduction from the holiday pay
award of overpayment for overtime, night differential,
vacation and sick leave benefits due to the use of 251
divisor. (Rollo, pp. 138-145)
Petitioner UFE answered that the award should be made
effective from the date of effectivity of the Labor Code,
that their sales personnel are not field personnel and are
therefore entitled to holiday pay, and that the use of 251
as divisor is an established employee benefit
which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued
an order declaring that the effectivity of the holiday pay
award shall retroact to November 1, 1974, the date of
effectivity of the Labor Code. He adjudged, however, that
the company's sales personnel are field personnel and,
as such, are not entitled to holiday pay. He likewise
ruled that with the grant of 10 days' holiday pay, the
divisor should be changed from 251 to 261 and ordered
the reimbursement of overpayment for overtime, night
differential, vacation and sick leave pay due to the use of
251 days as divisor.
Both Nestle and UFE filed their respective motions for
partial reconsideration. Respondent Arbitrator treated
the two motions as appeals and forwarded the case to
the NLRC which issued a resolution dated May 25, 1987
remanding the case to the respondent arbitrator on the
ground that it has no jurisdiction to review decisions in
voluntary arbitration cases pursuant to Article 263 of
the Labor Code as amended by Section 10, Batas
Pambansa Blg. 130 and as implemented by Section 5 of
the rules implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent
arbitrator refused to take cognizance of the case
reasoning that he had no more jurisdiction to continue
as arbitrator because he had resigned from service
effective May 1, 1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to
holiday pay; and
Page 6 of 16
2) Whether or not, concomitant with the award of holiday
pay, the divisor should be changed from 251 to 261 days
and whether or not the previous use of 251 as divisor
resulted in overpayment for overtime, night differential,
vacation and sick leave pay.
The petitioner insists that respondent's sales personnel
are not field personnel under Article 82 of the Labor
Code. The respondent company controverts this
assertion.
Under Article 82, field personnel are not entitled to
holiday pay. Said article defines field personnel as "non-
agritultural 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."
The controversy centers on the interpretation of the
clause "whose actual hours of work in the field cannot be
determined with reasonable certainty."
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 personnel's
working hours which can be determined with reasonable
certainty.
The Court does not agree. The law requires that the
actual hours of work in the field be reasonably
ascertained. The company has no way of determining
whether or not these sales personnel, even if they report
to the office before 8:00 a.m. prior to field work and come
back at 4:30 p.m, really spend the hours in between in
actual field work.
We concur with the following disquisition by the
respondent arbitrator:
The requirement for the salesmen and
other similarly situated employees to
report for work at the office at 8:00
a.m. and return at 4:00 or 4:30 p.m. is
not within the realm of work in the field
as defined in the Code but an exercise
of purely management prerogative of
providing administrative control over
such personnel. This does not in any
manner provide a reasonable level of
determination on the actual field work
of the employees which can be
reasonably ascertained. The theoretical
analysis that salesmen and other
similarly-situated workers regularly
report for work at 8:00 a.m. and return
to their home station at 4:00 or 4:30
p.m., creating the assumption that
their field work is supervised, is surface
projection. Actual field work begins
after 8:00 a.m., when the sales
personnel follow their field itinerary,
and ends immediately before 4:00 or
4:30 p.m. when they report back to
their office. The period between 8:00
a.m. and 4:00 or 4:30 p.m. comprises
their hours of work in the field, the
extent or scope and result of which are
subject to their individual capacity and
industry and which "cannot be
determined with reasonable certainty."
This is the reason why effective
supervision over field work of salesmen
and medical representatives, truck
drivers and merchandisers is

practically a physical impossibility.
Consequently, they are excluded from
the ten holidays with pay award. (Rollo,
pp. 36-37)
Moreover, the requirement that "actual hours of work in
the field cannot be determined with reasonable certainty"
must be read in conjunction with Rule IV, Book III of the
Implementing Rules which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage — This rule shall
apply to all employees except:
xxx xxx xxx
(e) Field personnel and other
employees whose time and performance
is unsupervised by the employer . . .
(Emphasis supplied)
While contending that such rule added another element
not found in the law (Rollo, p. 13), the petitioner
nevertheless attempted to show that its affected
members are not covered by the abovementioned rule.
The petitioner asserts that the company's sales
personnel are strictly supervised as shown by the SOD
(Supervisor of the Day) schedule and the company
circular dated March 15, 1984 (Annexes 2 and 3, Rollo,
pp. 53-55).
Contrary to the contention of the petitioner, the Court
finds that the aforementioned rule did not add another
element to the Labor Code definition of field personnel.
The clause "whose time and performance is
unsupervised by the employer" did not amplify but
merely interpreted and expounded the clause "whose
actual hours of work in the field cannot be determined
with reasonable certainty." The former clause is still
within the scope and purview of Article 82 which defines
field personnel. Hence, in deciding whether or not an
employee's actual working hours in the field can be
determined with reasonable certainty, query must be
made as to whether or not such employee's time and
performance is constantly supervised by the employer.
The SOD schedule adverted to by the petitioner does not
in the least signify that these sales personnel's time and
performance are supervised. The purpose of this
schedule is merely to ensure that the sales personnel are
out of the office not later than 8:00 a.m. and are back in
the office not earlier than 4:00 p.m.
Likewise, the Court fails to see how the company can
monitor the number of actual hours spent in field work
by an employee through the imposition of sanctions on
absenteeism contained in the company circular of March
15, 1984.
The petitioner claims that the fact that these sales
personnel are given incentive bonus every quarter based
on their performance is proof that their actual hours of
work in the field can be determined with reasonable
certainty.
The Court thinks otherwise.
The criteria for granting incentive bonus are: (1)
attaining or exceeding sales volume based on sales
target; (2) good collection performance; (3) proper
compliance with good market hygiene; (4) good
merchandising work; (5) minimal market returns; and (6)
proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are
given incentive bonuses precisely because of the
Page 7 of 16
difficulty in measuring their actual hours of field work.
These employees are evaluated by the result of their
work and not by the actual hours of field work which are
hardly susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor
Organization (8 SCRA 613 [1963]), the Court had
occasion to discuss the nature of the job of a salesman.
Citing the case of Jewel Tea Co. v. Williams, C.C.A.
Okla., 118 F. 2d 202, the Court stated:
The reasons for excluding an outside
salesman are fairly apparent. Such a
salesman, to a greater extent, works
individually. There are no restrictions
respecting the time he shall work and
he can earn as much or as little, within
the range of his ability, as his ambition
dictates. In lieu of overtime he
ordinarily receives commissions as
extra compensation. He works away
from his employer's place of business,
is not subject to the personal
supervision of his employer, and his
employer has no way of knowing the
number of hours he works per day.
While in that case the issue was whether or not
salesmen were entitled to overtime pay, the same
rationale for their exclusion as field personnel from
holiday pay benefits also applies.
The petitioner union also assails the respondent
arbitrator's ruling that, concomitant with the award of
holiday pay, the divisor should be changed from 251 to
261 days to include the additional 10 holidays and the
employees should reimburse the amounts overpaid by
Filipro due to the use of 251 days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:
. . . The new doctrinal policy
established which ordered payment of
ten holidays certainly adds to or
accelerates the basis of conversion and
computation by ten days. With the
inclusion of ten holidays as paid days,
the divisor is no longer 251 but 261 or
262 if election day is counted. This is
indeed an extremely difficult legal
question of interpretation which
accounts for what is claimed as falling
within the concept of "solutio indebti."
When the claim of the Union for
payment of ten holidays was granted,
there was a consequent need to
abandon that 251 divisor. To maintain
it would create an impossible situation
where the employees would benefit with
additional ten days with pay but would
simultaneously enjoy higher benefits by
discarding the same ten days for
purposes of computing overtime and
night time services and considering
sick and vacation leave credits.
Therefore, reimbursement of such
overpayment with the use of 251 as
divisor arises concomitant with the
award of ten holidays with pay. (Rollo,
p. 34)
The divisor assumes an important role in determining
whether or not holiday pay is already included in the
monthly paid employee's salary and in the computation
of his daily rate. This is the thrust of our pronouncement
in Chartered Bank Employees Association v. Ople (supra).
In that case, We held:

It is argued that even without the
presumption found in the rules and in
the policy instruction, the company
practice indicates that the monthly
salaries of the employees are so
computed as to include the holiday pay
provided by law. The petitioner
contends otherwise.
One strong argument in favor of the
petitioner's stand is the fact that the
Chartered Bank, in computing overtime
compensation for its employees,
employs a "divisor" of 251 days. The
251 working days divisor is the result
of subtracting all Saturdays, Sundays
and the ten (10) legal holidays from the
total number of calendar days in a
year. If the employees are already paid
for all non-working days, the divisor
should be 365 and not 251.
In the petitioner's case, its computation of daily ratio
since September 1, 1980, is as follows:
monthly rate x 12 months
———————————
251 days
Following the criterion laid down in the Chartered
Bank case, the use of 251 days' divisor by respondent
Filipro indicates that holiday pay is not yet included in
the employee's salary, otherwise the divisor should have
been 261.
It must be stressed that the daily rate, assuming there
are no intervening salary increases, is a constant figure
for the purpose of computing overtime and night
differential pay and commutation of sick and vacation
leave credits. Necessarily, the daily rate should also be
the same basis for computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor
from 251 to 261 days would result in a lower daily rate
which is violative of the prohibition on non-diminution of
benefits found in Article 100 of the Labor Code. To
maintain the same daily rate if the divisor is adjusted to
261 days, then the dividend, which represents the
employee's annual salary, should correspondingly be
increased to incorporate the holiday pay. To illustrate, if
prior to the grant of holiday pay, the employee's annual
salary is P25,100, then dividing such figure by 251 days,
his daily rate is P100.00 After the payment of 10 days'
holiday pay, his annual salary already includes holiday
pay and totals P26,100 (P25,100 + 1,000). Dividing this
by 261 days, the daily rate is still P100.00. There is thus
no merit in respondent Nestle's claim of overpayment of
overtime and night differential pay and sick and vacation
leave benefits, the computation of which are all based on
the daily rate, since the daily rate is still the same before
and after the grant of holiday pay.
Respondent Nestle's invocation of solutio indebiti, or
payment by mistake, due to its use of 251 days as
divisor must fail in light of the Labor Code mandate that
"all doubts in the implementation and interpretation of
this Code, including its implementing rules and
regulations, shall be resolved in favor of labor." (Article
4). Moreover, prior to September 1, 1980, when the
company was on a 6-day working schedule, the divisor
used by the company was 303, indicating that the 10
holidays were likewise not paid. When Filipro shifted to a
5-day working schebule on September 1, 1980, it had
the chance to rectify its error, if ever there was one but
did not do so. It is now too late to allege payment by
mistake.
Page 8 of 16
Nestle also questions the voluntary arbitrator's ruling
that holiday pay should be computed from November 1,
1974. This ruling was not questioned by the petitioner
union as obviously said decision was favorable to it.
Technically, therefore, respondent Nestle should have
filed a separate petition raising the issue of effectivity of
the holiday pay award. This Court has ruled that an
appellee who is not an appellant may assign errors in his
brief where his purpose is to maintain the judgment on
other grounds, but he cannot seek modification or
reversal of the judgment or affirmative relief unless he
has also appealed. (Franco v. Intermediate Appellate
Court, 178 SCRA 331 [1989], citing La Campana Food
Products, Inc. v. Philippine Commercial and Industrial
Bank, 142 SCRA 394 [1986]). Nevertheless, in order to
fully settle the issues so that the execution of the Court's
decision in this case may not be needlessly delayed by
another petition, the Court resolved to take up the
matter of effectivity of the holiday pay award raised by
Nestle.
Nestle insists that the reckoning period for the
application of the holiday pay award is 1985 when
the Chartered Bank decision, promulgated on August 28,
1985, became final and executory, and not from the date
of effectivity of the Labor Code. Although the Court does
not entirely agree with Nestle, we find its claim
meritorious.
In Insular Bank of Asia and America Employees' Union
(IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter
referred to as the IBAA case, the Court declared that
Section 2, Rule IV, Book III of the implementing rules
and Policy Instruction No. 9, issued by the then
Secretary of Labor on February 16, 1976 and April 23,
1976, respectively, and which excluded monthly paid
employees from holiday pay benefits, are null and void.
The Court therein reasoned that, in the guise of
clarifying the Labor Code's provisions on holiday pay, the
aforementioned implementing rule and policy instruction
amended them by enlarging the scope of their exclusion.
The Chartered Bank case reiterated the above ruling and
added the "divisor" test.
However, prior to their being declared null and void, the
implementing rule and policy instruction enjoyed the
presumption of validity and hence, Nestle's non-payment
of the holiday benefit up to the promulgation of the IBAA
case on October 23, 1984 was in compliance with these
presumably valid rule and policy instruction.
In the case of De Agbayani v. Philippine National Bank,
38 SCRA 429 [1971], the Court discussed the effect to be
given to a legislative or executive act subsequently
declared invalid:
xxx xxx xxx
. . . It does not admit of doubt that
prior to the declaration of nullity such
challenged legislative or executive act
must have been in force and had to be
complied with. This is so as until after
the judiciary, in an appropriate case,
declares its invalidity, it is entitled to
obedience and respect. Parties may
have acted under it and may have
changed their positions. What could be
more fitting than that in a subsequent
litigation regard be had to what has
been done while such legislative or
executive act was in operation and
presumed to be valid in all respects. It
is now accepted as a doctrine that prior
to its being nullified, its existence as a
fact must be reckoned with. This is
merely to reflect awareness that
precisely because the judiciary is the
government organ which has the final
say on whether or not a legislative or

executive measure is valid, a period of
time may have elapsed before it can
exercise the power of judicial review
that may lead to a declaration of
nullity. It would be to deprive the law of
its quality of fairness and justice then,
if there be no recognition of what had
transpired prior to such adjudication.
In the language of an American
Supreme Court decision: "The actual
existence of a statute, prior to such a
determination of [unconstitutionality],
is an operative fact and may have
consequences which cannot justly be
ignored. The past cannot always be
erased by a new judicial declaration.
The effect of the subsequent ruling as
to invalidity may have to be considered
in various aspects, — with respect to
particular relations, individual and
corporate, and particular conduct,
private and official." (Chicot County
Drainage Dist. v. Baxter States Bank,
308 US 371, 374 [1940]). This language
has been quoted with approval in a
resolution in Araneta v. Hill (93 Phil.
1002 [1952]) and the decision in Manila
Motor Co., Inc. v. Flores (99 Phil. 738
[1956]). An even more recent instance
is the opinion of Justice Zaldivar
speaking for the Court in Fernandez
v. Cuerva and Co. (21 SCRA 1095
[1967]. (At pp. 434-435)
The "operative fact" doctrine realizes that in declaring a
law or rule null and void, undue harshness and resulting
unfairness must be avoided. It is now almost the end of
1991. To require various companies to reach back to
1975 now and nullify acts done in good faith is unduly
harsh. 1984 is a fairer reckoning period under the facts
of this case.
Applying the aforementioned doctrine to the case at
bar, it is not far-fetched that Nestle, relying on the
implicit validity of the implementing rule and policy
instruction before this Court nullified them, and
thinking that it was not obliged to give holiday pay
benefits to its monthly paid employees, may have been
moved to grant other concessions to its employees,
especially in the collective bargaining agreement. This
possibility is bolstered by the fact that respondent
Nestle's employees are among the highest paid in the
industry. With this consideration, it would be unfair to
impose additional burdens on Nestle when the non-
payment of the holiday benefits up to 1984 was not in
any way attributed to Nestle's fault.
The Court thereby resolves that the grant of holiday pay
be effective, not from the date of promulgation of the
Chartered Bank case nor from the date of effectivity of
the Labor Code, but from October 23, 1984, the date of
promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in
hereby MODIFIED. The divisor to be used in computing
holiday pay shall be 251 days. The holiday pay as above
directed shall be computed from October 23, 1984. In all
other respects, the order of the respondent arbitrator is
hereby AFFIRMED.
SO ORDERED.
G.R. No. L-52824 March 16, 88
REYNALDO BAUTISTA, petitioner,
vs.
HON. AMADO C. INCIONG, in his capacity as Deputy
Page 9 of 16
Minister of Labor and ASSOCIATED LABOR UNIONS
(ALU), respondents.
GUTIERREZ, JR., J.:
This is an illegal dismissal case. The respondent Deputy
Minister dismissed the complaint of herein petitioner
principally on the ground that no employer-employee
relationship existed between the petitioner and
respondent Associated Labor Unions (ALU).
The facts as found by the National Capital Region
Director of the then ministry of Labor (MOL) Region IV
are as follows:
Complainant (petitioner) was employed
by ALU as 'Organizer' in 1972 with a
starting salary of P250.00 a month. As
such he paid his monthly SSS
contributions, with the respondent as
his employer. On March 15, 1979, He
was left in the office of ALU while his
other co-organizers were in Cainta,
Rizal attending a certification election
at Chrysler Philippines, as he was not
the organizer assigned in said
company. On March 16, 1979, he went
on sick leave for ten (10) days. His SSS
sickness benefit application form
signed by ALU's physician was given to
ALU for submission to the SSS. On
March 16, 1979, complainant reported
back for work upon expiration of his
leave but was informed by ALU's Area
Vice-President for Luzon of his
termination effective March 15, 1979.
Hence, this complaint filed on March
28, 1979. On April 18, 1979, however,
ALU filed a clearance application to
terminate complainant's services
effective March 16, 1979 on the ground
of abandonment of work. (p. 48, Rollo)
Based on these findings, the Director ruled in favor of
the petitioner and ordered the respondent Union to
reinstate the petitioner to his former position with full
backwages and to pay him emergency allowance, 13th
month pay and to refund his Mutual Aid Fund Deposit
in the amount of P 370.00
Respondent ALU appealed to the Ministry of Labor. On
October 23,1979, the respondent Deputy Minister set
aside the order of the Director and dismissed the
petitioner's complaint for lack of merit. In his order, the
Deputy Minister found that the petitioner was merely
accomodated by the respondent union after he was
dismissed by his former employer sometime in 1972 and
that his membership coverage with the SSS which shows
that respondent ALU is the one paying the employer's
share in the premiums is not conclusive proof that
respondent is the petitioner's employer because such
payments were performed by the respondent as a favor
for all those who were performing full time union
activities with it to entitle them to SSS benefits. The
Deputy Minister further ruled that the non-existence of
an employer-employee relationship between the parties
is bolstered by the fact that respondent ALU is not an
entity for profit but a duly registered labor union whose
sole purpose is the representation of its bona fide
organization units where it is certified as such.
In this petition, the petitioner contends that the
respondent Deputy minister committed grave abuse of
discretion in holding that there was no employer-
employee relationship between him and the respondent
union so much so that he is not entitled to the benefits
that he is praying for.

We agree with the petitioner.
There is nothing in the records which support the
Deputy minister's conclusion that the petitioner is not
an employee of respondent ALU. The mere fact that the
respondent is a labor union does not mean that it cannot
be considered an employer of the persons who work for
it. Much less should it be exempted from the very labor
laws which it espouses as labor organization. In case of
es v. Brotherhood Labor Unity Movement in the Phillipines
Zamora, , (147 SCRA 49, 54), we outlined the factors in
ascertaining an employer-employee realtionship:
In determining the existence of an
employer-employee relationship, the
elements that are generally considered
are the following : (a) the selection and
engagement of the employee; (b) the
payment of wages; (c) the power of
dismissal; and (d) the employer's power
to control the employee with respect to
the means and methods by which the
work is to be accomplished. It is the so-
called 'control test' that is the most
important element (Investment
Planning Corp. of the Phils. v. The
Social Security System, 21 SCRA 492;
Mafinco Trading Corp. v.
Ople, supra, and Rosario Brothers, Inc.
v. Ople, 131 SCRA 72)
In the case at bar, the Regional director correctly found
that the petitioner was an employee of the respondent
union as reflected in the latter's individual payroll sheets
and shown by the petitioner's membership with the
Social Security System (SSS) and the respondent union's
share of remittances in the petitioner's favor. Even more
significant, is the respondent union's act of filing a
clearance application with the MOL to terminate the
petitioner's services. Bautista was selected and hired by
the Union. He was paid wages by the Union. ALU had
the power to dismiss him as indeed it dismissed him.
And definitely, the Union tightly controlled the work of
Bautista as one of its organizers. There is absolutely no
factual or legal basis got deputy Minister Inciong's
decision.
We are, thus, constrained to reverse the findings of the
respondent Deputy Minister. However, the records show
that antipathy and antagonism between the petitioner
and the respondent union militate against the former's
reinstatement. ALU would not want to have a union
organizer whom it does not trust and who could
sabotage its efforts to unionize commercial and
industrial establishments. Severance pay, therefore, is
more proper in order. As we have ruled in the case
of Asiaworld Publishing House, Inc. v. Hon. Blas Ople, et
al., (G.R. No. 56398, July 23, 1987) quoting the cast
of Balaquezon EWTU v. Zamora, (97 SCRA 5,8):
It should be underscored that the
backwages are being awarded on the
basis of equity or in the nature of
severance pay. This means that a
monetary award is to be paid to the
employees as an alternative to
reinstatement which can no longer be
effected in view of the long passage of
time or because of the realities of the
situation. (Emphasis supplied)
WHEREFORE, the petition is hereby GRANTED and the
decision of the respondent Deputy Minister is
ANNULLED and SET ASIDE. The Order of Regional
Director Francisco L. Estrella is REINSTATED and
ordered executed but instead of returning the petitioner
to his former position, the private respondent is ordered
to pay him an amount equal to his backwages for only
three years and the separation pay to which he may be
Page 10 of 16
entitled as of the end of the three year period under the
applicable law or collective bargaining agreement.
G.R. No. L-31832 October 23, 1982
SOCIAL SECURITY SYSTEM, petitioner,
vs.
SSS SUPERVISORS' UNION-CUGCO and COURT OF
INDUSTRIAL RELATIONS, respondents.
Benjamin C. Pineda for respondent Union.
Filemon Q. Almazan for petitioners.
MELENCIO-HERRERA, J.:
This Petition seeks to review on certiorari the Orders of
respondent Court of Industrial Relations (CIR) on the
issue of whether or not petitioner Social Security System
(SSS) may be held liable for the payment of wages of
members of respondent Union who admittedly did not
work during the 17-day strike declared in 1968 by the
rank and file Union (the Philippine Association of Free
Labor Unions [PAFLU]).
For a brief factual background, it should be stated that
the instant case is an offshoot of Case No. 46-IPA (49)
certified to the CIR by the President of the Philippines for
compulsory arbitration of labor dispute between the SSS
and the PAFLU concerning the interpretation of certain
provisions of their Collective Bargaining Agreement. The
PAFLU had staged a strike in defiance of the CIR Order
of August 29, 1968 "enjoining the parties, for the sake of
industrial peace . . . to maintain the status quo-the Union
not to declare any strike and the Management not to
dismiss nor suspend any of its employees nor to declare
any lockout." On 3 September 1968, in that same case,
the SSS filed an Urgent Petition to declare the strike
illegal.
On 26 September 1968, respondent Union (the SSS
Supervisors' Union) filed a Motion for Intervention in the
said case averring, inter alia, that it had not participated
in the strike: that its members wanted to report for work
but were prevented by the picketers from entering the
work premises; that under the circumstances, they were
entitled to their salaries corresponding to the duration of
the strike, which could be deducted from the accrued
leave credits of their members.
The SSS had no objection to the intervention sought but
opposed the demand for the payment of salaries
pertaining to the entire period of the strike.
In its Order of 12 March 1969, intervention was allowed
by respondent Court, and pending resolution of the
claim for salaries, the SSS was directed to pay the same,
chargeable in the meantime to the accrued leave credits
of the members 1 pending the determination of the
question of the illegality of the strike. Reconsideration of
that Order sought by the SSS was denied on 6 November
1969.
On 24 November 1969, respondent Court issued an
Order 2 directing the CIR Examining Division to compute
immediately the money equivalent of the salaries of the
members of respondent Union as well as the salaries of
those employees who were not members of the striking
Union (PAFLU) and to deposit the amount computed, for
further disposition.
The SSS challenged on certiorari the said Orders before
this Court (G.R. No. L-31234), particularly the order to
deposit, grounded on the overlapping membership in the
two Unions and the impossibility of compliance. We

denied the Petition on 2 December 1969 and the
proceedings below were resumed.
Upon a joint Motion for clarification of its Order of 24
November 1969, respondent Court, through Judge
Joaquin M. Salvador, issued the Order of 3 March 1970,
ordering the payment of salaries of the members of
respondent Union during the strike period, but not to be
chargeable to accrued leave credits. The reasons given
were that this Court had already declared the strike
premature, and that the members of respondent Union
had not participated in the strike and had actually
manifested their desire to work but could not cross the
heavy picket lines during the height of the strike.
The SSS moved to reconsider the Order of 3 March 1970
arguing that since respondent Union members actually
rendered no service at all during the strike, they were
not entitled to the payment of salaries. Respondent
Court, en banc, denied reconsideration on 25 March
1970 for lack of sufficient justification.
Contending that the Industrial Court had no authority to
issue the Order dated 3 March 1970 and its
Resolution en banc dated 25 March 1970, petitioner asks
this Tribunal to have them annulled.
We find for the petitioner based on the equitable tenet of
a "fair day's wage for a fair day's labor."
The age-old rule governing the relation
between labor and capital or
management and employee is that of a
'fair day's wage for a fair day's labor.' If
there is no work performed by the
employee there can be no wage or pay,
unless of course the laborer was able,
willing and ready to work but was
illegally locked out, dismissed or
suspended. It is hardly fair or just for
an employee or laborer to fight or
litigate against his employer on the
employer's time.<äre||anº•1àw> 3
In this case, the failure to work on the part of the
members of respondent Union was due to circumstances
not attributable to themselves. But neither should the
burden of the economic loss suffered by them be shifted
to their employer, the SSS, which was equally faultless,
considering that the situation was not a direct
consequence of the employer's lockout or unfair labor
practice. Under the circumstances, it is but fair that
each party must bear his own loss.
Considering, therefore, that the parties
had no hand or participation in the
situation they were in, and that the
stoppage of the work was not the direct
consequence of the company's lockout
or unfair labor practice, 'the economic
loss should not be shifted to the
employer.' Justice and equity demand
that each must have to bear its own
loss, thus placing the parties in equal
footing where none should profit from
the other there being no fault of
either. 4
WHEREFORE, we hereby set aside respondent Court's
Order dated 3 March 1970 as affirmed by its
Resolution en banc dated 25 March 1970, without
pronouncement as to costs.
SO ORDERED.
G.R. No. 76746 July 27, 1987
Page 11 of 16
DURABUILT RECAPPING PLANT & COMPANY and
EDUARDO LAO, GENERAL MANAGER, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON.
COMM. RICARDO C. CASTRO, HON. ARBITER
AMELIA M. GULOY, KAPISANAN NG MGA
MANGGAGAWA SA DURABUILT and REYNALDO
BODEGAS, respondents.
GUTIERREZ, JR., J.:
This is a petition to review the May 16, 1986 resolution
of respondent National Labor Relations Commission
(NLRC) affirming the Labor Arbiter's order in NLRC Case
No. NCR-73162083. The sole issue raised is the proper
basis for the computation of backwages in favor of an
illegally dismissed employee.
The facts of the case are simple and uncontroverted.
On July 11, 1983, a complaint for illegal dismissal was
filed by respondent Reynaldo Bodegas, against petitioner
Durabuilt, a tire recapping company.
In a decision rendered by the Labor Arbiter on February
13, 1984, the private respondent was ordered reinstated
to his former position with full backwages, from the time
he was terminated up to the time he is actually
reinstated, without loss of seniority rights and benefits
accruing to him.
The petitioners failed to file a seasonable appeal and
entry of final judgment was made on July 8, 1985.
On August 8, 1985, the Acting Chief of Research and
Information and the Corporation Auditing Examiner of
the then Ministry of Labor and Employment submitted a
computation of backwages, ECOLA, 13th month pay,
sick and vacation leave benefits in favor of Reynaldo
Bodegas in the total amount of P24,316.38.
The petitioner filed its opposition to the computation on
the ground that it contemplated a straight computation
of twenty six (26) working days in one month when the
period covered by the computation was intermittently
interrupted due to frequent brownouts and machine
trouble and that respondent Bodegas had only a total of
250.75 days of attendance in 1982 due to absences.
According to the petitioner, Bodegas is entitled only to
the amount of P3,834.05 broken down as follows:
salaries — P1,993.00; ECOLA — P1,433.50, and 13th
month pay — P407.55.
On October 23, 1985, the Labor Arbiter denied the
opposition to the computation. The petitioner appealed
to the NLRC which, in an order dated May 16, 1986,
affirmed the order of the Labor Arbiter and dismissed the
appeal.
Claiming grave abuse of discretion on the part of the
public respondents, Durabuilt filed the instant petition.
Backwages, in general, are granted on grounds of equity
for earnings which a worker or employee has lost due to
his dismissal from work (New Manila Candy Workers
Union (NACONWA-PAFLU v. CIR, 86 SCRA 37).
The general principle is that an employee is entitled to
receive as backwages all the amounts he may have lost
starting from the date of his dismissal up to the time of
his reinstatement (Capital Garment Corporation v. Ople,
117 SCRA 473; New Manila Candy Workers' Union
(NACONWA-PAFLU) v. CIR, supra).
In a line of cases, this Court has established a policy
fixing the amount of backwages to a just and reasonable
level without qualification or deduction (Insular Life

Assurance Co., Ltd. Employees' Association-NATU v.
Insular Life Assurance Co., Ltd., 76 SCRA 501; Feati
University Club v. Feati University, 58 SCRA 395;
Mercury Drug Co., Inc. v. CIR, 56 SCRA 694). The
respondents center their attention on the above
underlined portion of this policy. Hence, their contention
that the deductions cited by the petitioners cannot be
made.
In their bid to recover a greater amount of backwages,
the rationale of the policy has escaped the respondents'
consideration. In Insular Life Assurance Employees
Association-NATU v. Insular Life Assurance Co., Ltd. (76
SCRA 50) we held that to fix the amount of backwages
without qualification or deduction simply means that the
workers are to be paid their backwages fixed as of the
time of their dismissal or strike without deduction for
their earnings elsewhere during their law-off and without
qualification of their backwages as thus fixed; i.e.
unqualified by any wage increases or other benefits that
may have been received by their co-workers who were
not dismissed or did not go on strike. The principle is
justified "as a realistic, reasonable and mutually
beneficial solution for it relieves the employees from
proving their earnings during their law-offs and the
employer from submitting counter proofs. It was meant
to obviate the twin evils of Idleness on the part of the
employees and attrition and undue delay in satisfying
the award on the part of the employer" (New Manila
Candy Workers Union NACONWA-PAFLU v. CIR supra).
The same was not to establish an inflexible rule of
computation of any Backwages due an employee.
The age-old rule governing the relation between labor
and capital, or management and employee of a "fair day's
wage for a fair day's labor" remains as the basic factor in
determining employees' wages, and for that matter
backwages. If there is no work performed by the
employee there can be no wage or pay unless, of course,
the laborer was able, willing and ready to work but was
illegally locked out, or suspended (SSS v. SSS
Supervisors Union-CUGCO, 117 SCRA 746).
The illegal dismissal of the private respondent is
conceded by the petitioner. It is willing to pay
backwages. However, the petitioner argues that for days
where no work was required and could be done by its
employees, no wages could have been earned and,
thereafter, lost by said employees to justify an award of
backwages. We quote with approval the Solicitor
General's comment,* to wit:
From the indubitable facts on record, it appears
that petitioners have valid reasons to claim that
certain days should not be considered days
worked for purposes of computing private
respondent's backwages since their business
was not in actual operation due to brownouts or
power interruption and the retrenchment of
workers they had during the period of private
respondent's dismissal.
It cannot be denied that during the past years
particularly in 1983, there was chronic electrical
power interruption resulting to disruption of
business operations. To alleviate the situation,
the government thru the Ministry of Trade and
Industry called on the industrial sector to resort
to the so-called Voluntary Loan Curtailment
Plan (or VLCP), whereby brownouts or electrical
power interruption was scheduled by area. The
program while it may have been called 1.
voluntary" was not so as electrical power
consumers had no choice then due to the
prevailing energy crisis.
Petitioners heeding the government's call,
participated in the VLCP as indicated in their
statement of conformity dated November 23,
1982. Thus, beginning March 21, 1983 and
Page 12 of 16
every Wednesday thereafter, petitioner's
business (which indicentally is recapping rubber
tires) was not in actual operation. No less than
the former Minister of Trade and Industry
expressed his gratitude to petitioners for
participating in the VLCP. Petitioners
substantiated claim therefore, that the days
during which they were not in operation due to
the VLCP should be excluded in the number of
days worked for purposes of computing private
respondents backwages stands reasonable and
should have been considered by the corporation
auditing examiner.1avvphi1
Moreover, as early as May 1978, the Ministry of
Labor and Employment, thru Policy Instruction
No. 36, has said that —
2. Brownouts running for more than twenty
minutes may not be treated as hours worked
provided that any of the following conditions are
present;
a) The employees can leave their work
place or go elsewhere whether within or
without the work premises; or
b) The employees can use the time
effectively for their own interest.
It is of record that during electrical power
interruptions, petitioners business was not in
operation. This was never disputed by private
respondent.
Petitioners' claim that the period (December
1983) during which they effected retrenchment
of workers owing to economic crisis then
prevailing likewise appears plausible. There is
substantial evidence consisting of reports to
MOLE and Social Security System showing that
petitioners had laid off workers due to lack of
raw materials. The petitioners payrolls
submitted to support their objection to
computation indicate that the number of
working days was reduced from the normal
weekly six working days to four working days for
a great number of petitioners' workers.
Obviously, private respondent could not have
been among those laid off, as at that time he
was already dismissed by petitioner. (Rollo, pp.
31-34).
Thus, we have held that where the failure of workers to
work was not due to the employer's fault, the burden of
economic loss suffered by the employees should not be
shifted to the employer. Each party must bear his own
loss (SSS v. SSS Supervisors' Union-CUGCO, supra;
Pan-American World Airways, Inc. v. CIR, 17 SCRA 813).
As pointed out by the Solicitor General —
... to allow payment of backwages of P24,316.68
as ordered by public respondents instead of
P3,834.16 as petitioners claim and which
appears to be just and reasonable under the
circumstances of this case would not only be
unconscionable but would be grossly unfair to
other employees who were not paid when
petitioners' business was not in operation.
(Rollo, p. 35).
Indeed, it would neither be fair nor just to allow
respondent to recover something he has not earned and
could not have earned and to further penalize the
petitioner company over and above the losses it had
suffered due to lack of raw materials and the energy-
saving programs of the government. The private
respondent cannot be allowed to enrich himself at the

expense of the petitioner company. The computation of
backwages should be based on daily rather than on
monthly pay schedules where, as in the case at bar,
such basis is more realistic and accurate. (Compania
Maritima v. United Seamen's Union of the Philippines,
65 SCRA 393).
In conclusion, we again quote the Solicitor General's
comment:
Finally, what strengthens petitioners claim for
mitigated liability is their evident good faith as
manifested by their reinstatement of private
respondent while the case for illegal dismissal
was still pending and their willingness to pay
backwages. While it is true that as a general
rule order of reinstatement carries with it an
award of backwages (Art. 280, Labor Code) this
Honorable Court did not only mitigate but
absolved employers from liability of backwages
where good faith is evident (Findlay Millar
Timber Co. v. PLASLU, 6 SCRA 26: Cromwell
Com. Employees & Laborers Union v. CIR, 13
SCRA 259, Norton and Harrison Labor Union v.
Harrison Co. Inc. 15 SCRA 310; PAL v. PALEA,
57 SCRA 489; Cruz v. MOLE, 120 SCRA 15).
There is no indication, to paraphrase this
Honorable Court's ruling in Pantranco North
Express Inc. v. NLRC (126 SCRA 526) that
private respondent was a "victim of arbitrary
and high handed action. Rollo, pp. 34-35).
WHEREFORE, in view of the foregoing, the petition is
hereby GRANTED. The order of the Labor Arbiter, Amelia
M. Guloy in NLRC Case No. NCR-7-3162083, dated
October 23, 1985, as affirmed by the NLRC is SET
ASIDE. The petitioner is ordered to pay private
respondent his backwages from the time he was
terminated up to the time he was actually reinstated
computed on the basis of the number of days when
petitioner's business was in actual operation. The
number of days where no work was required and could
be done by petitioner's employees on account of
shutdowns due to electrical power interruptions,
machine repair, and lack of raw materials are not
considered hours worked for purposes of computing the
petitioner's obligation to respondent employee. In no
case shall the award exceed three year's backpay as
above computed.
SO ORDERED.
Millares
Petitioners numbering one hundred sixteen
(116)1 occupied the positions of Technical Staff, Unit
Manager, Section Manager, Department Manager,
Division Manager and Vice President in the mill site of
respondent Paper Industries Corporation of the
Philippines (PICOP) in Bislig, Surigao del Sur. In 1992
PICOP suffered a major financial setback allegedly
brought about by the joint impact of restrictive
government regulations on logging and the economic
crisis. To avert further losses, it undertook a
retrenchment program and terminated the services of
petitioners. Accordingly, petitioners received separation
pay computed at the rate of one (1) month basic pay for
every year of service. Believing however that the
allowances they allegedly regularly received on a monthly
basis during their employment should have been
included in the computation thereof they lodged a
complaint for separation pay differentials.
The allowances in question pertained to the following -
1. Staff/Manager's Allowance -
Page 13 of 16
Respondent PICOP provides free housing facilities to
supervisory and managerial employees assigned in
Bislig. The privilege includes free water and electric
consumption. Owing however to shortage of such
facilities, it was constrained to grant Staff allowance
instead to those who live in rented houses outside but
near the vicinity of the mill site. But the allowance
ceases whenever a vacancy occurs in the company's
housing facilities. The former grantee is then directed to
fill the vacancy. For Unit, Section and Department
Managers, respondent PICOP gives an additional amount
to meet the same kind of expenses called Manager's
allowance.
2. Transportation Allowance -
To relieve respondent PICOP's motor pool in Bislig from a
barrage of requests for company vehicles and to stabilize
company vehicle requirements it grants transportation
allowance to key officers and Managers assigned in the
mill site who use their own vehicles in the performance
of their duties. It is a conditional grant such that when
the conditions no longer obtain, the privilege is
discontinued. The recipients of this kind of allowance are
required to liquidate it by submitting a report with a
detailed enumeration of expenses incurred.
3. Bislig Allowance -
The Bislig Allowance is given to Division Managers and
corporate officers assigned in Bislig on account of the
hostile environment prevailing therein. But once the
recipient is transferred elsewhere outside Bislig, the
allowance ceases.
Applying Art.,97, par. (f), of the Labor Code which
defines if wage," the Executive Labor Arbiter opined that
the subject allowances, being customarily furnished by
respondent PICOP and regularly received by petitioners,
formed part of the latter's wages. Resolving the
controversy from another angle, on the strength of the
ruling in Santos v. NLRC2 and Soriano v. NLRC3 that in
the computation of separation pay account should be
taken not just of the basic salary but also of the regular
allowances that the employee had been receiving, he
concluded that the allowances should be included in
petitioners' base pay. Thus respondent PICOP was
ordered on 28 April 1994 to pay petitioners Four Million
Four Hundred Eighty-One Thousand Pesos
(P4,481,000.00) representing separation pay differentials
plus ten per cent (10%) thereof as attorney's fees.4
The National Labor Relations Commission (NLRC) did not
share the view of the Executive Labor Arbiter. On 7
October 1994 it set aside the assailed decision by
decreeing that the allowances did not form part of the
salary base used in computing separation
pay.5cräläwvirtualibräry
Its ruling was based on the finding that the cases relied
upon by the Executive Labor Arbiter were inapplicable
since they involved illegal dismissal where separation
pay was granted in lieu of reinstatement which was no
longer feasible. Instead, what it considered in point
was Estate of the late Eugene J. Kneebone v.
NLRC6 where the Court held that representation and
transportation allowances were deemed not part of
salary and should therefore be excluded in the
computation of separation benefits. Relating the present
case with Art. 97, par. (f), of the Labor Code, the NLRC
likewise found that petitioners' allowances were
contingency-based and thus not included in their
salaries. On 26 September 1995 reconsideration was
denied.7cräläwvirtualibräry
In this petition for certiorari, petitioners submit that their
allowances are included in the definition of "facilities" in
Art. 97, par. (f), of the Labor Code, being necessary and
indispensable for their existence and subsistence.

Furthermore they claim that their availment of the
monetary equivalent of those "facilities" on a monthly
basis was characterized by permanency, regularity and
customariness. And to fortify their arguments they insist
on the applicability of Santos,8 Soriano,9The Insular Life
Assurance Company,10 Planters Products, Inc.11 and
Songco12 which are all against the NLRC holding that the
salary base in computing separation pay includes not
just the basic salary but also the regular allowances.
There is no showing of grave abuse of discretion on the
part of the NLRC. In case of retrenchment to prevent
losses, Art. 283 of the the Labor Code imposes on the
employer an obligation to grant to the affected employees
separation pay equivalent to one (1) month pay or at least
one-half (1/2) month pay for every year of service,
whichever is higher. Since the law speaks of "pay," the
question arises, "What exactly does the term connote?"
We correlate Art. 283 with Art. 97 of the same Code on
definition of terms. "Pay" is not defined therein but
"wage." In Songco the Court explained that both words
(as well as salary) generally refer to one and the same
meaning, i.e., a reward or recompense for services
performed. Specifically, "wage" is defined in letter (f)
as the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the
same, which is payable by an employer to an employee
under a written or unwritten contract of employment for
work done or to be done, or for services rendered or to
be rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the
employer to the employee.
We invite attention to the above-underlined clause.
Stated differently, when an employer customarily
furnishes his employee board, lodging or other facilities,
the fair and reasonable value thereof, as determined by
the Secretary of Labor and Employment, is included in
"wage." In order to ascertain whether the subject
allowances form part of petitioner's "wages," we divide
the discussion on the following - "customarily furnished;"
"board, lodging or other facilities;" and, "fair and
reasonable value as determined by the Secretary of
Labor."
"Customary" is founded on long-established and
constant practice13 connoting regularity.14 The receipt of
an allowance on a monthly basis does not ipso
facto characterize it as regular and forming part of
salary15 because the nature of the grant is a factor worth
considering. We agree with the observation of the Office
of the Solicitor General- that the subject allowances were
temporarily, not regularly, received by petitioners
because -
In the case of the housing allowance, once a vacancy
occurs in the company-provided housing
accommodations, the employee concerned transfers to
the company premises and his housing allowance is
discontinued x x x x
On the other hand, the transportation allowance is in the
form of advances for actual transportation expenses
subject to liquidation x x x given only to employees who
have personal cars.
The Bislig allowance is given to Division Managers and
corporate officers assigned in Bislig, Surigao del Norte.
Once the officer is transferred outside Bislig, the
allowance stops.16
We add that in the availment of the transportation
allowance, respondent PICOP set another requirement
that the personal cars be used by the employees in the
performance of their duties. When the conditions for
availment ceased to exist, the allowance reached the
Page 14 of 16
cutoff point. The finding of the NLRC along the same line
likewise merits concurrence, i.e., petitioners' continuous
enjoyment of the disputed allowances was based on
contingencies the occurrence of which wrote finis to such
enjoyment.
Although it is quite easy to comprehend "board" and
"lodging," it is not so with "facilities." Thus Sec. 5, Rule
VII, Book III, of the Rules Implementing the Labor
Code gives meaning to the term as including articles or
services for the benefit of the employee or his family but
excluding tools of the trade or articles or service primarily
for the benefit of the employer or necessary to the conduct
of the employer's business. The Staff /Manager's
allowance may fall under "lodging" but the
transportation and Bislig allowances are not embraced in
"facilities" on the main consideration that they are
granted as well as the Staff/Manager's allowance for
respondent PICOP's benefit and convenience, i.e., to
insure that petitioners render quality performance. In
determining whether a privilege is a facility, the criterion
is not so much its kind but its purpose.17 That the
assailed allowances were for the benefit and convenience
of respondent company was supported by the
circumstance that they were not subjected to
withholding tax. Revenue Audit Memo Order No. 1-87
pertinently provides -
3.2 x x x x transportation, representation or
entertainment expenses shall not constitute taxable
compensation if:
(a) It is for necessary travelling and representation or
entertainment expenses paid or incurred by the
employee in the pursuit of the trade or business of the
employer, and
(b) The employee is required to, and does, make an
accounting/liquidation for such expense in accordance
with the specific requirements of substantiation for such
category or expense.
Board and lodging allowances furnished to an employee
not in excess of the latter's needs and given free of
charge, constitute income to the latter except if such
allowances or benefits are furnished to the employee for
the convenience of the employer and as necessary
incident to proper performance of his duties in which
case such benefits or allowances do not constitute
taxable income.18
The Secretary of Labor and Employment under Sec. 6,
Rule VII, Book III, of the Rules Implementing the Labor
Code may from time to time fix in appropriate issuances
the "fair and reasonable value of board, lodging and
other facilities customarily furnished by an employer to
his employees." Petitioners' allowances do not represent
such fair and reasonable value as determined by the
proper authority simply because the Staff/Manager's
allowance and transportation allowance were amounts
given by respondent company in lieu of actual provisions
for housing and transportation needs whereas the Bislig
allowance was given in consideration of being assigned
to the hostile environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the
NLRC, subject allowances did not form part of
petitioners' wages.
In Santos19 the Court decreed that in the computation of
separation pay awarded in lieu of reinstatement, account
must be taken not only of the basic salary but also of
transportation and emergency living allowances. Later,
the Court in Soriano, citing Santos, was general in its
holding that the salary base properly used in computing
separation pay where reinstatement was no longer
feasible should include not just the basic salary but also
the regular allowances that the employee had been
receiving. Insular merely reiterated the aforementioned

rulings. The rationale is not difficult to discern. It is the
obligation of the employer to pay an illegally dismissed
employee the whole amount of his salaries plus all other
benefits, bonuses and general increases to which he
would have been normally entitled had he not been
dismissed and had not stopped working.20 The same
holds true in case of retrenched employees. And thus we
applied Insular and Soriano in Planters in the
computation of separation pay of retrenched
employees. Songco likewise involved retrenchment and
was relied upon in Planters, Soriano and Santos in
determining the proper amount of separation pay. As
culled from the foregoing jurisprudence, separation pay
when awarded to an illegally dismissed employee in lieu
of reinstatement or to a retrenched employee should be
computed based not only on the basic salary but also on
the regular allowances that the employee had been
receiving. But in view of the previous discussion that the
disputed allowances were not regularly received by
petitioners herein, there was no reason at all for
petitioners to resort to the above cases.
Neither is Kneebone applicable, contrary to the finding of
the NLRC, because of the difference in factual
circumstances. In Kneebone, the Court was tasked to
resolve the issue whether the representation and
transportation allowances formed part of salary as to be
considered in the computation of retirement benefits.
The ruling was in the negative on the main ground
that the retirement plan of the company expressly
excluded such allowances from salary.
WHEREFORE, the petition is DISMISSED. The
resolution of public respondent National Labor Relations
Commission dated 7 October 1994 holding that the Staff
/Manager's, transportation and Bislig allowances did not
form part of the salary base used in computing the
separation pay of petitioners, as well as its resolution
dated 26 September 1995 denying reconsideration, is
AFFIRMED. No costs.
SO ORDERED.
G.R. No. L-31832 October 23, 1982
SOCIAL SECURITY SYSTEM, petitioner,
vs.
SSS SUPERVISORS' UNION-CUGCO and COURT OF
INDUSTRIAL RELATIONS, respondents.
Benjamin C. Pineda for respondent Union.
Filemon Q. Almazan for petitioners.
MELENCIO-HERRERA, J.:
This Petition seeks to review on certiorari the Orders of
respondent Court of Industrial Relations (CIR) on the
issue of whether or not petitioner Social Security System
(SSS) may be held liable for the payment of wages of
members of respondent Union who admittedly did not
work during the 17-day strike declared in 1968 by the
rank and file Union (the Philippine Association of Free
Labor Unions [PAFLU]).
For a brief factual background, it should be stated that
the instant case is an offshoot of Case No. 46-IPA (49)
certified to the CIR by the President of the Philippines for
compulsory arbitration of labor dispute between the SSS
and the PAFLU concerning the interpretation of certain
provisions of their Collective Bargaining Agreement. The
PAFLU had staged a strike in defiance of the CIR Order
of August 29, 1968 "enjoining the parties, for the sake of
industrial peace . . . to maintain the status quo-the Union
not to declare any strike and the Management not to
dismiss nor suspend any of its employees nor to declare
Page 15 of 16
any lockout." On 3 September 1968, in that same case,
the SSS filed an Urgent Petition to declare the strike
illegal.
On 26 September 1968, respondent Union (the SSS
Supervisors' Union) filed a Motion for Intervention in the
said case averring, inter alia, that it had not participated
in the strike: that its members wanted to report for work
but were prevented by the picketers from entering the
work premises; that under the circumstances, they were
entitled to their salaries corresponding to the duration of
the strike, which could be deducted from the accrued
leave credits of their members.
The SSS had no objection to the intervention sought but
opposed the demand for the payment of salaries
pertaining to the entire period of the strike.
In its Order of 12 March 1969, intervention was allowed
by respondent Court, and pending resolution of the
claim for salaries, the SSS was directed to pay the same,
chargeable in the meantime to the accrued leave credits
of the members 1 pending the determination of the
question of the illegality of the strike. Reconsideration of
that Order sought by the SSS was denied on 6 November
1969.
On 24 November 1969, respondent Court issued an
Order 2 directing the CIR Examining Division to compute
immediately the money equivalent of the salaries of the
members of respondent Union as well as the salaries of
those employees who were not members of the striking
Union (PAFLU) and to deposit the amount computed, for
further disposition.
The SSS challenged on certiorari the said Orders before
this Court (G.R. No. L-31234), particularly the order to
deposit, grounded on the overlapping membership in the
two Unions and the impossibility of compliance. We
denied the Petition on 2 December 1969 and the
proceedings below were resumed.
Upon a joint Motion for clarification of its Order of 24
November 1969, respondent Court, through Judge
Joaquin M. Salvador, issued the Order of 3 March 1970,
ordering the payment of salaries of the members of
respondent Union during the strike period, but not to be
chargeable to accrued leave credits. The reasons given
were that this Court had already declared the strike
premature, and that the members of respondent Union
had not participated in the strike and had actually
manifested their desire to work but could not cross the
heavy picket lines during the height of the strike.
The SSS moved to reconsider the Order of 3 March 1970
arguing that since respondent Union members actually
rendered no service at all during the strike, they were
not entitled to the payment of salaries. Respondent
Court, en banc, denied reconsideration on 25 March
1970 for lack of sufficient justification.
Contending that the Industrial Court had no authority to
issue the Order dated 3 March 1970 and its
Resolution en banc dated 25 March 1970, petitioner asks
this Tribunal to have them annulled.
We find for the petitioner based on the equitable tenet of
a "fair day's wage for a fair day's labor."
The age-old rule governing the relation
between labor and capital or
management and employee is that of a
'fair day's wage for a fair day's labor.' If
there is no work performed by the
employee there can be no wage or pay,
unless of course the laborer was able,
willing and ready to work but was
illegally locked out, dismissed or
 Page 16 of 16

suspended. It is hardly fair or just for

an employee or laborer to fight or
litigate against his employer on the
employer's time.<äre||anº•1àw> 3

In this case, the failure to work on the part of the

members of respondent Union was due to circumstances
not attributable to themselves. But neither should the
burden of the economic loss suffered by them be shifted
to their employer, the SSS, which was equally faultless,
considering that the situation was not a direct
consequence of the employer's lockout or unfair labor
practice. Under the circumstances, it is but fair that
each party must bear his own loss.

Considering, therefore, that the parties

had no hand or participation in the
situation they were in, and that the
stoppage of the work was not the direct
consequence of the company's lockout
or unfair labor practice, 'the economic
loss should not be shifted to the
employer.' Justice and equity demand
that each must have to bear its own
loss, thus placing the parties in equal
footing where none should profit from
the other there being no fault of
either. 4

WHEREFORE, we hereby set aside respondent Court's

Order dated 3 March 1970 as affirmed by its
Resolution en banc dated 25 March 1970, without
pronouncement as to costs.

SO ORDERED.