Tan vs. Lagrama 3.
Lagrama is not an independent contractor because he did
G.R. No. 151228, August 15, 2002
Facts:
• Lagrama works for Tan as painter of billboards and murals for the motion
pictures shown at the theaters managed by Tan for more than 10years
• Lagrama was dismissed for having urinated in his working area
• Lagrama filed a complaint for illegal dismissal and nonpayment of benefits
• Tan asserted that Lagrama was an independent contractor as he was paid
in piece-work basis
Issue:
W/N Lagrama is an independent contractor or an employee of Tan?
Ruling:
Lagrama is an employee not an independent contractor
Applying Four-Fold Test
A. Power of Control - Evidence shows that the Lagrama performed his work as
painter and under the supervision and control of Tan.
1. Lagrama worked in a designated work area inside the
theater of Tan for the use of which petitioner prescribed
rules, which rules included the observance of cleanliness
and hygeine and prohibition against urinating in the work
area and any other place other than rest rooms and
2. Tan's control over Lagrama's work extended not only the
use of work area but also the result of Lagrama;s work
and the manner and means by which the work was to be
accomplished
not enjoy independence and freedom from the control
and supervision of Tan and he was subjected to Tan's
control over the means and methods by which his work is
to be performed and accomplished
B. Payment of Wages
1. Lagrama worked for Tan on a fixed piece work basis is of no moment.
Payment by result is a method of compensation and does not define the
essence of the relation.
2. Tat Lagrama was not reported as an employee to the SSS is not
conclusive, on the question whether he was an employee, otherwise Tan
would be rewarded for his failure or even neglect to perform his
obligation.
C. Power of Dismissal – by Tan stating that he had the right to fire Lagrama,
Tan in effect acknowledged Lagrama to be his employee
D. Power of Selection and Engagement of Employees – Tan engaged the
services of Lagrama without the intervention of third party
Philippine Spring Water v CA
Petitioner Philippine Spring Water Resources, Inc. (PSWRI), engaged in the
business of manufacturing, selling and distributing bottled mineral water, hired
Mahilum as Vice-President for Sales and Marketing for the Bulacan-South Luzon
Area.
In an inaugural speech supposedly headed by Mahilum. Mahilum was required to
explain why
Lua, President and Chief Executive Officer (CEO), to Bulacan plant, was not
recognized and made to deliver his speech. At the same time, he was placed
under preventive suspension for thirty (30) days.
When his 30-day suspension ended, Mahilum reported for work but was prevented
from entering the workplace. Sometime in the first week of March 2005, he
received a copy of the Memorandum, dated January 31, 2005, terminating his
services effective the next day or on February 1, 2005. On February 9, 2005, a
clearance certificate was issued to Mahilum.
Mahilum filed a complaint for illegal dismissal with prayer for reinstatement,
payment of back wages and damages. He argued that he was illegally suspended
and, thereafter, dismissed constructively from the service. He also claimed that he
was forced to sign the waiver.
ISSUE:
Mahilum is a contractual employee and the period of probation depended on the
stipulation of the Memorandum of Agreement entered into by the parties.
HELD:
Mahilum was a regular employee
Having been hired in June 2004, he must be considered to have already served
the company for eight (8) months at the time of his dismissal on February 1, 2005.
This fact calls for the application of Article 281 of the Labor Code:
Probationary employment shall not exceed six (6) months from the date the
employee started working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been engaged
on a probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employee in accordance with reasonable standards made
known by the employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall be considered a
regular employee.
A probationary employee, like a regular employee, enjoys security of tenure. In
cases of probationary employment, however, aside from just or authorized causes
of termination, an additional ground is provided under Article 281 of the Labor
Code, that is, the probationary employee may also be terminated for failure to
qualify as a regular employee in accordance with reasonable standards made
known by the employer to the employee at the time of the engagement. Thus, the
services of an employee who has been engaged on probationary basis may be
terminated for any of the following: (1) a just or (2) an authorized cause and (3)
when he fails to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer
As applied to the petitioner’s arguments, it would seem that PSWRI and Lua now
invoke the first and third ground for Mahilum’s termination. The Court, however,
cannot subscribe to the premise that Mahilum failed to qualify as a regular
employee when he failed to perform at par with the standards made known by the
company to him. In this case, it is clear that the primary cause of Mahilum’s
dismissal from his employment was borne out of his alleged lapses as chairman for
the inauguration of the Bulacan plant company’s Christmas party. In fact, the
termination letter to him cited "loss of trust and confidence" as a ground for his
dismissal. Under the circumstances, the petitioners may not be permitted to
belatedly harp on its choice not to extend his alleged probationary status to
regular employment as a ground for his dismissal. Besides, having been allowed to
work after the lapse of the probationary period, Mahilum became a regular
employee. He was hired in June 2004 and was dismissed on February
5,2005. Thus, he served the company for eight (8) months.
Mabeza vs. NLRC [G.R. No. 118506 April 18, 1997]
Facts:
Petitioner Norma Mabeza and her co-employees at the Hotel Supreme in Baguio
City were asked by the hotel’s management to sign an instrument attesting to the
latter’s compliance with minimum wage and other labor standard provision. The
instrument provides that they have no complaints against the management of the
Hotel Supreme as they are paid accordingly and that they are treated well. The
petitioner signed the affidavit but refused to go to the City’s Prosecutor’s Office to
confirm the veracity and contents of the affidavit as instructed by management.
That same day, as she refused to go to the City Prosecutor’s Office, she was
ordered by the hotel management to turn over the keys to her living quarters and
to remove her belongings to the hotel’s premises. She then filed a leave of
absence which was denied by her employer. She attempted to return to work, but
the hotel’s cashier told her that she should not report to work and instead
continue with her unofficial leave of absence. Three days after her attempt to
return to work, she filed a complaint against the management for illegal dismissal
before the Arbitration Branch of the NLRC in Baguio City. In addition to that,
she alleged underpayment of wages, non-payment of holiday pay, service
incentive leave pay, 13th month pay, night differential and other benefits.
Peter Ng, in their Answer, argued that her unauthorized leave of absence from
work is the ground for her dismissal. He even maintained that her alleged of
underpayment and non- payment of benefits had no legal basis. He raises a new
ground of loss of confidence, which was supported by his filing of criminal case for
the alleged qualified theft of the petitioner. The Labor Arbiter ruled in favor of the
hotel management on the ground of loss of confidence. She appealed to the NLRC
which affirmed the Labor Arbiter’s decision. hence, this petition.
the employer is not a facility. The criterion in making a distinction between the two
not so much lies in the kind but the purpose. Considering, therefore, that
hotel workers are required to work on different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter in the
operations of a small hotel, such as the private respondent’s hotel.

Issue:
ARIEL L. DAVID vs. JOHN G. MACASIO G.R. No. 195466
Whether or not the dismissal by the private respondent of petitioner constitutes an
unfair labor practice. JULY 2, 2014

For: overtime pay, holiday pay, 13th month pay and payment for service
incentive leave.
Held:

The NLRC’s decision is reversed. The pivotal question in any case where unfair
labor practice on the part of the employer is alleged is whether or not the Facts:
employer has exerted pressure, in the form of restraint, interference or
In January 2009, Macasio filed before the LA a complaint against petitioner Ariel L.
coercion, against his employee’s right to institute concerted action for
better terms and conditions of employment. Without doubt, the act of David, doing business under the name and style “Yiels Hog Dealer,” for non-
payment of overtime pay, holiday pay and 13th month pay. He also claimed
compelling employees to sign an instrument indicating that the employer
payment for moral and exemplary damages and attorney’s fees. Macasio also
observed labor standard provisions of the law when he might not have,
together with the act of terminating or coercing those who refuse to claimed payment for service incentive leave (SIL) David claimed that he started
his hog dealer business in 2005 and that he only has ten employees. The
cooperate with the employees’ scheme constitutes unfair labor practice. The labor
LA concluded that as Macasio was engaged on “pakyaw” or task basis, he is not
arbiter’s contention that the reason for the monetary benefits received by the
petitioner between 1981 to 1987 were less than the minimum wage was entitled to overtime, holiday, SIL and 13th month pay. The NLRC affirmed the LA
decision, thus this case reach the CA which says that Macasio is entitled to his
because petitioner did not factor in the meals, lodging, electric consumption and
monetary claims following the doctrine laid down in Serrano v. Severino Santos
water she received during the period of computations. Granting that meals and
lodging were provided and indeed constituted facilities, such facilities could not Transit. The CA explained that as a task basis employee, Macasio is excluded from
be deducted without the employer complying first with certain legal requirements. the coverage of holiday, SIL and
Without satisfying these requirements, the employer simply cannot deduct the 13th month pay only if he is likewise a “field personnel.” Thus this case
value from the employee’s ages. First, proof must be shown that such facilities are reached the SC.
customarily furnished by the trade. Second, the provision of deductible facilities
must be voluntary accepted in writing by the employee. Finally, facilities
must be charged at fair and reasonable value. These requirements were not
Issue: Whether or not Macasio is entitled of overtime pay, holiday pay, 13th
met in the instant case. Private respondent failed to present
month pay and payment for service incentive leave.
any company policy to show that the meal and lodging are part of the salary. He
also failed to provide proof of the employee’s written authorization and he failed to
show how he arrived at the valuations. More significantly, the food and
lodging, or electricity and water consumed by the petitioner were not facilities but Ruling:
supplements. A benefit or privilege granted to an employee for the convenience of
Yes, in so far as the Holiday and SIL pay is concern. To determine whether
workers engaged on “pakyaw” or task basis” is entitled to holiday and SIL
pay, the presence (or absence) of employer supervision as regards the worker’s
time and performance is the key: if the worker is simply engaged on
pakyaw or task basis, then the general rule is that he is entitled to a holiday
pay and SIL pay unless exempted from the exceptions specifically
provided under Article 94 (holiday pay) and Article 95 (SIL pay) of the Labor
Code. However, if the worker engaged on pakyaw or task basis also falls
within the meaning of “field personnel” under the law, then he is not entitled to
these monetary benefits. CA that Macasio does not fall under the definition of
“field personnel.” The CA’s finding in this regard is supported by the
established facts of this case: first, Macasio regularly performed his duties
at David’s principal place of business; second, his actual hours of work
could be determined with reasonable certainty; and, third, David supervised
his time and performance of duties. Since Macasio cannot be considered a
“field personnel,” then he is not exempted from the grant of holiday, SIL pay even
as he was engaged on “pakyaw” or task basis.
However, the governing law on 13th month pay is PD No. 851. As with
holiday and SIL pay, 13th month pay benefits generally cover all employees; an
employee must be one of those expressly enumerated to be exempted. Section 3
of the Rules and Regulations Implementing P.D. No. 851 enumerates
the exemptions from the coverage of 13th month pay benefits. Under Section
3(e), “employers of those who are paid on task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the
time consumed in the performance thereof are exempted. Note that unlike the IRR
of the Labor Code on holiday and SIL pay, Section
3(e) of the Rules and Regulations Implementing PD No. 851exempts
employees "paid on task basis" without any reference to "field personnel."
This could only mean that insofar as payment of the 13th month pay is
concerned, the law did not intend to qualify the exemption from its coverage with
the requirement that the task worker be a "field personnel" at the same time.
Thus Macasio is not entitled to 13th month pay.
Wherefore, the petition was partially granted the petition insofar as the
payment of 13th month pay to respondent is concerned. But all other aspect of
the CA’s decision was affirmed.
Nasipit Lumber Company, Inc. and PhiIippine Wallboard Corp. vs.
National Wages and Productivity Commission, G.R.. No. 113097, April
27, 1998
FACTS:
The Region X Tripartite Wages and Productivity Board issued Wage Order No. RX-
01 and RX-01-A increasing the minimum wage rates in Northern Mindanao.
Thereafter, petitioner applied for exemption from the said wage orders as
distressed establishments. The RTWPB, on the basis of Guidelines No. 3 granted
the ‘application for exemption. Private respondents-unions lodged an appeal with
the NWPC [National Wages and Productivity Commission] which reversed the
decision of grant for
exemption. In this petition, the petitioners contended that the NWPC gravely
abused its discretion in overturning the RTWPB’s approval of their application for
exemption from Wage Orders RX-01 and RX-01-A.
They argued that under Art. 122[c] of the Labor Code, RTWPB has power “to
receive, process and act” on application for exemption from prescribed wage rates
as may be provided by law or any wage order. They also maintained that no law
expressly requires the approval of the NWPC for the effectivity of RTWPB’s
Guideline No. 3.
ISSUE:
Whether the NWPC gravely abused its discretion when it overturned the
exemption granted to the petitioners by RTWPB.
HELD:
It is clear under Art. 121 of the Labor Code, powers of NWPC and Art. 122, powers
of RTWPB, that the NWPC, not the RTWPB, has the power to prescribe rules and
guidelines for the determination of minimum wage and productivity measures.
While the RTWPB has the power to issue wage orders under Art. 122 [b] of the
Labor Code, such orders are subject to the guidelines prescribed by the NWPC.
It is important to note that Guideline No. 3, the basis upbn which the grant for
exemption was issued was never assented to by NWPC. The guideline therefore is
inoperative and cannot be used by the RTWPB in deciding a petitioner’s application
for exemption. Under the NWPC’s Rules of Procedure on Minimum Wage Fixing
issued on June 4,1990—which was prior to the effectivity of RTWPB Guideline No.
3, an application for exemption from wage orders should be processed by the
RTWPB, subject specifically to the guidelines issued by the NWPC.
Art. 122 [c] of the Labor Code cannot be construed to enable the RTWPB to
decide applications for exemption on the basis of its own guidelines which were
not reviewed and approved by the NWPC, for the simple reason that a statutory
grant of ‘power” should not be extended by implication beyond what may be
necessary for their just and reasonable execution. Official powers cannot be
merely assumed by administrative officers, nor can they be created by the court in
the exercise of their judicial functions.
EMPLOYERS CONFEDERATION OF THE PHILIPPINES vs. NATIONAL
WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL
TRIPARTITE WAGES AND PRODUCTIVITY BOARD-NCR, TRADE UNION
CONGRESS OF THE PHILIPPINES
FACTS:
ECOP questioned the validity of the wage order issued by the RTWPB,
increasing the minimum wage by P17.00/day in NCR. The Board issued Wage
Order No. NCR-01-A amending Wage Order No. NCR-01, as follows:
Section 1. Upon the effectivity of this Wage Order, all workers and
employees in the private sector in the National Capital Region already receiving
wages above the statutory minimum wage rates up to one hundred and twenty-
five pesos (P125.00) per day shall also receive an increase of seventeen pesos
(P17.00) per day.
The wage order was made applicable to all workers and employees in the private
sector, including those who are paid above the statutory wage rate. The NWPC
dismissed ECOP’s petition. Hence the matter was elevated to the Supreme
Court. ECOP assails the board's grant of an "across-the-board" wage
increase to workers already being paid more than existing minimum wage rates
(up to P125. 00 a day) as an alleged excess of authority, and alleges that under
the Republic Act No. 6727, the boards may only prescribe "minimum wages," not
determine "salary ceilings." ECOP likewise claims that Republic Act No.
6727 is meant to promote collective bargaining as the primary mode of settling
wages, and in its opinion, the boards can not preempt collective bargaining
agreements by establishing ceilings. ECOP prays for the nullification of Wage
Order No. NCR 01-A and for the "reinstatement" of Wage Order No. NCR-01.
The Solicitor General commented that the RTWPB may fix minimum wages
according to the salary method, while ECOP insisted that the RTWPB may do so
only by adjusting floor wages. ECOP insists, in its reply, that wage is a legislative
function, and Republic Act No. 6727 delegated to the regional boards no more
"than the power to grant minimum wage adjustments" 7 and "in the absence of
clear statutory authority," 8 the boards may no more than adjust "floor wages."
ISSUE:
Whether or not the wage order is valid.
RULING:
The Court is inclined to agree with the Government. In the National Wages and
Productivity Commission's Order of November 6, 1990, the Commission noted that
the determination of wages has generally involved two methods, the "floor-wage"
method and the "salary-ceiling" method. As quoted by the Supreme Court,
“Historically, legislation involving the adjustment of the minimum wage made use
of two methods. The first method involves the fixing of determinate
amount that would be added to the prevailing statutory minimum wage.
The other involves "the salary-ceiling method" whereby the wage adjustment
is applied to employees receiving a certain denominated salary ceiling.”
The Court is not convinced that the Regional Board of the National Capital
Region, in decreeing an across-the-board hike, performed an unlawful act of
legislation. It is true that wage-fixing, like rate constitutes an act Congress;
13 it is also true, however, that Congress may delegate the power to fix
rates 14 provided that, as in all delegations cases, Congress leaves sufficient
standards. As this Court has indicated, it is impressed that the above-quoted
standards are sufficient, and in the light of the floor-wage method's failure, the
Court believes that the Commission correctly upheld the Regional Board of
the National Capital Region.
It is the Court's thinking, reached after the Court's own study of the Act, that the
Act is meant to rationalize wages, that is, by having permanent boards to decide
wages rather than leaving wage determination to Congress year after year and law
after law. The Court is not of course saying that the Act is an effort of Congress to
pass the buck, or worse, to abdicate its duty, but simply, to leave the question of
wages to the expertise of experts. As Justice Cruz observed, "[w]ith the
proliferation of specialized activities and their attendant peculiar problems, the
national legislature has found it more necessary to entrust to administrative
agencies the power of subordinate legislation' as it is caned." 23
The concept of "minimum wage" is, however, a different thing, and certainly, it
means more than setting a floor wage to upgrade existing wages, as ECOP takes it
to mean. "Minimum wages" underlies the effort of the State, as Republic Act No.
6727 expresses it, "to promote productivity-improvement and gain-sharing
measures to ensure a decent standard of living for the workers and their families;
to guarantee the rights of labor to its just share in the fruits of production; to
enhance employment generation in the countryside through industry dispersal;
and to allow business and industry reasonable returns on investment,
expansion and growth," 25 and as the Constitution expresses it, to affirm
"labor as a primary social economic force." 26 As the Court indicated, the
statute would have no need for a board if the question were simply "how
much". The State is concerned, in addition, that wages are not distributed
unevenly, and more important, that social justice is subserved.
Metropolitan Bank and Trust Company vs. NWPC and RTWPB
G.R. No.144322
Facts:
On October 17, 1995, the Regional Tripartite Wages and Productivity Board,
Region II, Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. 6727
(R.A. No. 6727), otherwise known as the Wage Rationalization Act, issued Wage
Order No. R02-03 (Wage Order), as follows: Section 1. Upon effectivity of this
Wage Order, all employees/workers in the private sector throughout Region II,
regardless of the status of employment are granted an across-the-board increase
of P15.00 daily.
The Wage Order was published in a newspaper of general circulation on December
2, 1995 and took effect on January 1, 1996. Its Implementing Rules were
approved on February 14, 1996. Per Section 13 of the Wage Order, any party
aggrieved by the Wage Order may file an appeal with the National Wages and
Productivity Commission (NWPC) through the RTWPB within 10 calendar days
from the publication of the Wage Order.
Banker’s Council in a letter inquiry to NWPC requested for ruling to seek
exemption from coverage of the wage order since the members bank are paying
more than the regular wage. NWPC replied that the member banks are covered by
the wage order and does not fall with the exemptible categories.
In another letter inquiry, Metrobank asked for the interpretation of the applicability
of the wage order. NWPC referred it to RTWPB. RTWPB in return clarified that
establishments in Region 2 are covered by the wage order. Petitioner filed a
petition with the CA and denied the petition.
Issue:
Whether or not the wage order is void thus it has no legal effect and the RTWPB
acted in excess of its jurisdiction.
Ruling:
The Court finds that Section 1, Wage Order No. R02-03 is void insofar as it grants
a wage increase to employees earning more than the minimum wage rate; and
pursuant to the separability clause of the Wage Order, Section 1 is declared valid
with respect to employees earning the prevailing minimum wage rate.
The powers of NWPC are enumerated in ART. 121. Powers and Functions of the
Commission. - The Commission shall have the following powers and functions: (d)
To review regional wage levels set by the Regional Tripartite Wages and
Productivity Boards to determine if these are in accordance with prescribed
guidelines and national development plans; (f) To review plans and programs of
the Regional Tripartite Wages and Productivity Boards to determine whether these
are consistent with national development plans; (g) To exercise technical and
administrative supervision over the Regional Tripartite Wages and Productivity
Boards.
R.A. No. 6727 declared it a policy of the State to rationalize the fixing of minimum
wages and to promote productivity-improvement and gain-sharing measures to
ensure a decent standard of living for the workers and their families; to guarantee
the rights of labor to its just share in the fruits of production; to enhance
employment generation in the countryside through industrial dispersal; and to
allow business and industry reasonable returns on investment, expansion and
growth.
In line with its declared policy, R.A. No. 6727 created the NWPC, vested with the
power to prescribe rules and guidelines for the determination of appropriate
minimum wage and productivity measures at the regional, provincial or industry
levels; and authorized the RTWPB to determine and fix the minimum wage rates
applicable in their respective regions, provinces, or industries therein and issue the
corresponding wage orders, subject to the guidelines issued by the NWPC.
Pursuant to its wage fixing authority, the RTWPB may issue wage orders which set
the daily minimum wage rates, based on the standards or criteria set by Article
124 of the Labor Code.
The Court declared that there are two ways of fixing the minimum wage: the
"floor-wage" method and the "salary-ceiling" method. The "floor-wage" method
involves the fixing of a determinate amount to be added to the prevailing statutory
minimum wage rates. On the other hand, in the "salary-ceiling" method, the wage
adjustment was to be applied to employees receiving a certain denominated salary
ceiling. In other words, workers already being paid more than the existing
minimum wage (up to a certain amount stated in the Wage Order) are also to be
given a wage increase.
In the present case, the RTWPB did not determine or fix the minimum wage rate
by the "floor-wage method" or the "salary-ceiling method" in issuing the Wage
Order. The RTWPB did not set a wage level nor a range to which a wage
adjustment or increase shall be added. Instead, it granted an across-the-board
wage increase of P15.00 to all employees and workers of Region 2. In doing so,
the RTWPB exceeded its authority by extending the coverage of the Wage Order
to wage earners receiving more than the prevailing minimum wage rate, without a
denominated salary ceiling. As correctly pointed out by the OSG, the Wage Order
granted additional benefits not contemplated by R.A. No. 6727.
THE NATIONAL WAGES AND PRODUCTIVITY COMMISSION (NWPC) and
THE REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARD
(RTWPB)- NCR, Petitioners,
vs.
THE ALLIANCE OF PROGRESSIVE LABOR (APL) and THE TUNAY NA
NAGKAKAISANG MANGGAGAwA SA ROYAL (TNMR-APL), Respondents.
Facts:
On June 9, 1989, Republic Act No. 6727 was enacted into law. In order to
rationalize wages throughout the Philippines, Republic Act No. 6727 created the
NWPC and the RTWPBs of the different regions. Section 3 of Republic Act No.
6727, empowered the NWPC to formulate policies and guidelines on wages,
incomes and productivity improvement at the enterprise, industry and national
levels; to prescribe rules and guidelines for the determination of appropriate
minimum wage and productivity measures at the regional, provincial or industry
levels; and to review regional wage levels set by the RTWPBs to determine
whether the levels were in accordance with the prescribed guidelines and national
development plans, among others. Further, Section 3 of Republic Act No. 6727,
tasked the RTWPBs to determine and fix minimum wage rates applicable in their
region, provinces or industries therein; and to issue the corresponding wage
orders, subject to the guidelines issued by the NWPC. The RTWPBs were also
mandated to receive, process and act on applications for exemption from the
prescribed wage rates as may be provided by law or any wage order.
On October 14 1999, RTWPB – NCR issued Wage Order No. NCR – 07 imposing an
increase of P25.50/day on the wages of all private sector workers and employees
in the NCR and pegging the minimum wage rate in the NCR at P223.50/day.
However, Section 2 and Section 9 of Wage Order No. NCR-07 exempted certain
sectors and industries from its coverage ( Agricultural Workers, Workers in Small
Establishments employing less than 10 workers, Distressed Establishments,
Exporters including indirect exporters with at least 50% export sales and with
forward contracts with their foreign buyers/principals).
Feeling aggrieved by their non-coverage by the wage adjustment, the Alliance of
Progressive Labor (APL) and the Tunay na Nagkakaisang Manggagawa sa Royal
(TNMR) filed an appeal with the NWPC assailing Section 2(A) and Section 9(2) of
Wage Order No. NCR-07. They contended that neither the NWPC nor the RTWPB-
NCR had the authority to expand the noncoverage and exemptible categories
under the wage order; hence, the assailed sections of the wage order should be
voided. The appeal was docketed as NWPC Case No. W.O.- 99-001. (NWPC upheld
the validity of Sec 2 and Sec 9 of the Wage Order. CA Reversed the decision of
NWPC)
Issue:
WON NWPC AND RTWPB has authority to expand the non-coverage and
exemptible categories under the wage order
Held:
The petition for review on certiorari is meritorious. Indisputably, the NWPC had
the authority to prescribe the rules and guidelines for the determination of the
minimum wage and productivity measures, and the RTWPB-NCR had the power to
issue wage orders.
METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-
TUCP and ANTONIO V. BALINANG, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and
METROPOLITAN BANK and TRUST COMPANY, respondents.
Facts:
On 25 May 1989, the Metropolitan Bank & Trust Company entered into a collective
bargaining agreement with the Metropolitan Bank & Trust Company Employees
Union MBTCEU, granting a monthly P900 wage increase effective 01 January
1989. With the exclusion of the probationary employees.
Republic Act 6727 was enacted "an act to rationalize wage policy determination be
establishing the mechanism and proper standards thereof, . . . fixing new wage
rates, providing wage incentives for industrial dispersal to the countryside, and for
other purposes," took effect which provides for the agricultural or non-agricultural
employees salary, be increased by twenty-five pesos (P25) per day, . . .: Provided,
That those already receiving above the minimum wage rates up to one hundred
pesos(P100.00) shall shall also receive an increase of twenty-five pesos (P25.00)
per day, . . .
Pursuant to the above provisions, the bank gave the P25 increase per day, or P750
a month, to its probationary employees and to those who had been promoted to
regular or permanent status before 01 July 1989 but whose daily rate was P100
and below. The bank refused to give the same increase to its regular employees
who were receiving more than P100 per day and recipients of the P900 CBA
increase.
Contending that the bank's implementation of Republic Act 6727 resulted in the
categorization of the employees into (a) the probationary employees as of 30 June
1989 and regular employees receiving P100 or less a day who had been promoted
to permanent or regular status before 01 July 1989, and (b) the regular employees
as of 01 July 1989, whose pay was over P100 a day, and that, between the two
groups, there emerged a substantially reduced salary gap.
The Union sought from the bank the correction of the alleged distortion in pay by
granting 750 increase in regular employees with above 100 pay and reciepient of
900 CBA increase. To avoid strike the bank petitioned the secretary of Labor to
assume jurisdiction, then assigned to Labor Arbiter for arbitration.
The Labor arbiter sided with the Union, that such salary increase resulted in the
severe contraction of an intentional quantitative difference in wage between
employee groups. The bank appealed to the NLRC, and the NLRC reversed the
decision of the Labor Arbiter in favour of Metrobank and Trust Company.
Issue:
Whether there has been a wage distortion, and a need to grant the increase 750
to regular employees receiving above 100 peso per day.
Ruling:
There has been a wage distortion. However it is not conductive to grant the
increase of P750 to regular employees receiving above 100 peso per day.
The term "wage distortion", under the Rules Implementing Republic Act 6727, is
defined, thus:
(p) Wage Distortion means a situation where an increase in prescribed wage rates
results in the elimination or severe contradiction of intentional quantitative
differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of differentiation.
The definition of "wage distortion," 10 aforequoted, shows that such distortion can
so exist when, as a result of an increase in the prescribed wage rate, an
"elimination or severe contraction of intentional quantitative differences in wage or
salary rates" would occur "between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of
differentiation." In mandating an adjustment, the law did not require that there be
an elimination or total abrogation of quantitative wage or salary differences; a
severe contraction thereof is enough.
We find the formula suggested then by Commissioner Bonto-Perez, which has also
been the standard considered by the regional Tripartite Wages and Productivity
Commission for the correction of pay scale structures in cases of wage
distortion, 15 to well be the appropriate measure to balance the respective
contentions of the parties in this instance. We also view it as being just and
equitable.
Minimum Wage = % x Prescribed = Distortion
—————— Increased Adjustment
Actual Salary
PRUBANKERS ASSOCIATION, petitioner, vs.PRUDENTIAL BANK & TRUST
COMPANY, respondent
FACTS:
The Regional Tripartite Wages and Productivity Board (RTWPB) Region V issued
Wage Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to
workers in the private sector who had rendered service for at least three (3)
months before its effectivity, and for the same period thereafter. RTWPB Region
VII however followed suit but the COLA amounts in other cities nationwide were
different from that issued by RTWPN region V. This caused Prubankers Association
to write the petitioner requesting that the Labor Management Committee be
immediately convened to discuss and resolve the alleged wage distortion created
in the salary structure upon the implementation of the said wage orders. As the
grievance could not be settled in the meetings, the parties agreed to submit the
matter to voluntary arbitration.
Respondent brought the case to appeal and was favored by CA, petitioner then
sought the review by SC. It argued that a wage distortion exists, because the
implementation of the two Wage Orders has resulted in the discrepancy in the
compensation of employees of similar pay classification in different regions.
ISSUE:
WON two wage orders resulting in the discrepancy of employees’ compensation in
different regions also results to a wage distortion.
HELD:
No.
There is no wage distortion since the wage order implementation covers all the
branches of the bank. The hierarchy of positions was still preserved.
Also, petitioner’s claim of wage distortion must also be denied for one other
reason. The difference in wages between employees in the same pay scale in
different regions is not the mischief sought to be banished by the law. Republic
Act No. 6727 (the Wage Rationalization Act), recognizes “existing regional
disparities in the cost of living” as provided in Section 2 of said law.
***Notes: The levels of different pay classes was not eliminated. The statutory
definition of wage distortion is found in Article 124 of the Labor Code, as amended
by Republic Act No. 6727, which reads: Standards/Criteria for Minimum Wage
Fixing. ―As used herein, a wage distortion shall mean a situation where an
increase in prescribed wage results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among
employee groups in an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of service, or other logical
bases of differentiation. Wage distortion involves four elements: (1) An existing
hierarchy of positions with corresponding salary rates; (2) A significant change in
the salary rate of a lower pay class without a concomitant increase in the salary
rate of a higher one; (3)The elimination of the distinction between the two levels
and (4) The existence of the distortion in the same region of the country.
A disparity in wages between employees holding similar positions but in different
regions does not constitute wage distortion as contemplated by law. As stated, it is
the hierarchy of positions and the disparity of their corresponding wages and other
emoluments that are sought to be preserved by the concept of wage distortion.
 Bankard Employees Union vs. NLRC
G.R. No.140689
Facts:
Bankard, Inc. classifies its employees by levels: Level I, Level II, Level III, Level
IV, and Level V. On May 1993, its Board of Directors approved a New Salary Scale,
made retroactive to April 1, 1993, for the purpose of making its hiring rate
competitive in the industry’s labor market. The New Salary Scale increased the
hiring rates of new employees, to wit: Levels I and V by one thousand pesos
(P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00).
Accordingly, the salaries of employees who fell below the new minimum rates
were also adjusted to reach such rates under their levels.
This made Bankard Employees Union-WATU (petitioner), the duly certified
exclusive bargaining agent of the regular rank and file employees of Bankard, to
request for the increase in the salary of its old, regular employees. Bankard
insisted that there was no obligation on the part of the management to grant to all
its employees the same increase in an across-the-board manner.
Petioner filed a notice of strike. The strike was averted when the dispute was
certified by the Secretary of Labor and Employment for compulsory arbitration.
NLRC finding no wage distortion dismissed the case for lack of merit. Petitioner’s
motion for reconsideration of the dismissal of the case was denied.
Issue:
Whether the unilateral adoption by an employer of an upgraded salary scale that
increased the hiring rates of new employees without increasing the salary rates of
old employees resulted in wage distortion within the contemplation of Article 124
of the Labor Code.
Ruling:
The Court will not interfere in the management prerogative of the petitioner. The
employees are not precluded to negotiate through the provisions of the CBA.
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending,
among others, Article 124 of the Labor Code), the term "wage distortion" was
explicitly defined as... a situation where an increase in prescribed wage rates
results in the elimination or severe contraction of intentional quantitative
differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of
differentiation.
In the case of Prubankers Association v. Prudential Bank and Trust Company, it
laid down the four elements of wage distortion, to wit: (1.) An existing hierarchy
of positions with corresponding salary rates; (2) A significant change in the salary
rate of a lower pay class without a concomitant increase in the salary rate of a
higher one; (3) The elimination of the distinction between the two levels; and (4)
The existence of the distortion in the same region of the country.
Normally, a company has a wage structure or method of determining the wages of
its employees. In a problem dealing with "wage distortion," the basic assumption
is that there exists a grouping or classification of employees that establishes
distinctions among them on some relevant or legitimate bases. Involved in the
classification of employees are various factors such as the degrees of
responsibility, the skills and knowledge required, the complexity of the job, or
other logical basis of differentiation. The differing wage rate for each of the
existing classes of employees reflects this classification.
Put differently, the entry of new employees to the company ipso facto places them
under any of the levels mentioned in the new salary scale which private
respondent adopted retroactive to April 1, 1993. While seniority may be a factor in
determining the wages of employees, it cannot be made the sole basis in cases
where the nature of their work differs.
Moreover, for purposes of determining the existence of wage distortion,
employees cannot create their own independent classification and use it as a basis
to demand an across-the-board increase in salary.
The wordings of Article 124 are clear. If it was the intention of the legislators to
cover all kinds of wage adjustments, then the language of the law should have
been broad, not restrictive as it is currently phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing. Where the application of
any prescribed wage increase by virtue of a law or Wage Order issued by any
Regional Board results in distortions of the wage structure within an
establishment, the employer and the union shall negotiate to correct the
distortions. Any dispute arising from the wage distortions shall be resolved through
the grievance procedure under their collective bargaining agreement and, if it
remains unresolved, through voluntary arbitration.
Article 124 is entitled "Standards/Criteria for Minimum Wage Fixing." It is found in
CHAPTER V on "WAGE STUDIES, WAGE AGREEMENTS AND WAGE
DETERMINATION" which principally deals with the fixing of minimum wage. Article
124 should thus be construed and correlated in relation to minimum wage fixing,
the intention of the law being that in the event of an increase in minimum wage,
the distinctions embodied in the wage structure based on skills, length of service,
or other logical bases of differentiation will be preserved.
If the compulsory mandate under Article 124 to correct "wage distortion" is
applied to voluntary and unilateral increases by the employer in fixing hiring rates
which is inherently a business judgment prerogative, then the hands of the
employer would be completely tied even in cases where an increase in wages of a
particular group is justified due to a re-evaluation of the high productivity of a
particular group, or as in the present case, the need to increase the
competitiveness of Bankard’s hiring rate. An employer would be discouraged from
adjusting the salary rates of a particular group of employees for fear that it would
result to a demand by all employees for a similar increase, especially if the
financial conditions of the business cannot address an across-the-board increase.
Wage distortion is a factual and economic condition that may be brought about by
different causes. The mere factual existence of wage distortion does not, however,
ipso facto result to an obligation to rectify it, absent a law or other source of
obligation which requires its rectification.
SHS Perforated Materials, Inc. vs. Diaz
G.R. No. 185814 October 13, 2010
Mendoza, J.
FACTS:
SHS is a start-up corporation organized and existing under the Philippines and
registered with the PEZA. Petitioner Hartmannshenn, a German national, is its
president, in which capacity he determines the administration and direction of the
day-to-day business affairs of SHS. Petitioner Schumacher, also a German
national, is the treasurer and one of the board directors. As such, he is authorized
to pay all bills, payrolls, and other just debts of SHS of whatever nature upon
maturity. Schumacher is also the EVP of the European Chamber of Commerce of
the Philippines (ECCP) which is a separate entity from SHS. Both entities have an
arrangement where ECCP handles the payroll requirements of SHS to simplify
business operations and minimize operational expenses. Thus, the wages of SHS
employees are paid out by ECCP, through its Accounting Services Department
headed by Taguiang.
Respondent Diaz was hired by petitioner SHS as Manager for Business
Development on probationary status from July 18, 2005 to January 18, 2006, with
a monthly salary of P100,000.00. He was tasked to perform sales/marketing
functions, represent the company in its events, perform all functions, duties and
responsibilities to be assigned by the employer in due course, among others. In
addition to the above-mentioned responsibilities, respondent was also instructed
by Hartmannshenn to report to the SHS office and plant at least two (2) days
every work week to observe technical processes involved in the manufacturing of
perforated materials, and to learn about the products of the company, which
respondent was hired to market and sell.
During respondentʼs employment, Hartmannshenn was often abroad and, because
of business exigencies, his instructions to respondent were either sent by
electronic mail or relayed through telephone or mobile phone. When he would be
in the Philippines, he and the respondent held meetings. As to respondentʼs work,
there was no close supervision by him. However, during meetings with the
respondent, Hartmannshenn expressed his dissatisfaction over respondentʼs poor
performance. Respondent allegedly failed to make any concrete business proposal
or implement any specific measure to improve the productivity of the SHS office.
In addition, respondent was said not to have returned Hartmannshenn's calls and
e-mails, to which Diaz denied.
Hartmannshenn instructed Taguiang not to release respondentʼs salary. Later that
afternoon, respondent called and inquired about his salary. Taguiang informed him
that it was being withheld and that he had to immediately communicate with
Hartmannshenn. The next day, respondent served on SHS a demand letter and a
resignation letter, citing illegal and unfair labor practices.
ISSUES:
• WON the temporary withholding of respondentʼs salary/wages by petitioners was
a valid exercise of management prerogative
• WON respondent voluntarily resigned
HELD:
FIRST ISSUE- NO. Management prerogative refers “to the right of an employer to
regulate all aspects of employment, such as the freedom to prescribe work
assignments, working methods, processes to be followed, regulation regarding
transfer of employees, supervision of their work, lay-off and discipline, and
dismissal and recall of work.” Although management prerogative refers to “the
right to regulate all aspects of employment,” it cannot be understood to include
the right to temporarily withhold salary/wages without the consent of the
employee. To sanction such an interpretation would be contrary to Article 116 of
the Labor Code.
Any withholding of an employeeʼs wages by an employer may only be allowed in
the form of wage deductions under the circumstances provided in Article 113 of
the Labor Code, as set forth below:
ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and
the deduction is to recompense the employer for the amount paid by him as
premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-
off has been recognized by the employer or authorized in writing by the individual
worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.
As correctly pointed out by the LA, “absent a showing that the withholding of
complainant’s wages falls under the exceptions provided in Article 113, the
withholding thereof is thus unlawful.”
The Court finds petitionersʼ evidence insufficient to prove that respondent did not
work from November 16 to November 30, 2005. As can be gleaned from
respondentʼs Contract of Probationary Employment and the exchanges of
electronic mail messages between Hartmannshenn and respondent, the latterʼs
duties as manager for business development entailed cultivating business
ties, connections, and clients in order to make sales. Such duties called for
meetings with prospective clients outside the office rather than reporting for work
on a regular schedule.
In other words, the nature of respondentʼs job did not allow close supervision and
monitoring by petitioners. Neither was there any prescribed daily monitoring
procedure established by petitioners to ensure that respondent was doing his job.
Therefore, granting that respondent failed to answer Hartmannshennʼs mobile
calls and to reply to two electronic mail messages and given the fact that he
admittedly failed to report to work at the SHS plant twice each week during the
subject period, such cannot be taken to signify that he did not work from
November 16 to November 30, 2005.
SECOND ISSUE
The Court, however, agrees with the LA and the CA that respondent was forced to
resign and was, thus, constructively dismissed. In Duldulao v. Court of Appeals, it
was written: "There is constructive dismissal if an act of clear discrimination,
insensibility, or disdain by an employer becomes so unbearable on the part of the
employee that it would foreclose any choice by him except to forego his continued
employment. It exists where there is cessation of work because continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving
a demotion in rank and a diminution in pay."
What made it impossible, unreasonable or unlikely for respondent to continue
working for SHS was the unlawful withholding of his salary. For said reason, he
was forced to resign.
 MILAN v. NLRC
G.R. No. 202961
February 04, 2015
FACTS:
1. Milan et.al are Solid Mills, Inc.’s (Solid Mills) employees. They are
represented by the National Federation of Labor Unions (NAFLU), their
collective bargaining agent.
2. As Solid Mills’ employees, Milan et.al. and their families were allowed to
occupy SMI Village, a property owned by Solid Mills. According to Solid
Mills, this was “[o]ut of liberality and for the convenience of its employees
. . . [and] on the condition that the employees would vacate the premises
anytime the Company deems fit.”
3. In September 2003, Milan et.al were informed that effective October 10,
2003, Solid Mills would cease its operations due to serious business losses.
NAFLU recognized Solid Mills’ closure due to serious business losses in the
memorandum of agreement dated September 1, 2003. The memorandum
of agreement provided for Solid Mills’ grant of separation pay less
accountabilities, accrued sick leave benefits, vacation leave benefits, and
13th month pay to the employees. The agreement was entered into with
full knowledge by the parties of their rights under the law and they bound
themselves not to conduct any concerted action of whatsoever kind,
otherwise the grant of financial assistance as discussed above will be
withheld.
4. Solid Mills filed its Department of Labor and Employment termination
report on September 2, 2003.
5. Later, Solid Mills, through Alfredo Jingco, sent to Milan et.al individual
notices to vacate SMI Village.
6. Milan et.al. were no longer allowed to report for work by October 10,
2003. They were required to sign a memorandum of agreement with
release and quitclaim before their vacation and sick leave benefits, 13th
month pay, and separation pay would be released. Employees who signed
the memorandum of agreement were considered to have agreed to vacate
SMI Village, and to the demolition of the constructed houses inside as
condition for the release of their termination benefits and separation pay.
Milan et.al. refused to sign the documents and demanded to be paid their
benefits and separation pay.
7. Hence, they filed complaints before the Labor Arbiter for alleged non-
payment of separation pay, accrued sick and vacation leaves, and 13th
month pay. They argued that their accrued benefits and separation pay
should not be withheld because their payment is based on company policy
and practice. Moreover, the 13th month pay is based on law, specifically,
Presidential Decree No. 851. Their possession of Solid Mills property is not
an accountability that is subject to clearance procedures. They had already
turned over to Solid Mills their uniforms and equipment when Solid Mills
ceased operations.
8. On the other hand, Solid Mills argued that Milan et.al.’s complaint was
premature because they had not vacated its property.
9. The Labor Arbiter ruled in favor of Milan et.al. According to the Labor
Arbiter, Solid Mills illegally withheld petitioners’ benefits and separation
pay. The memorandum of agreement dated September 1, 2003 stated no
condition to the effect that petitioners must vacate Solid Mills’ property
before their benefits could be given to them. Milan et.al.’s possession
should not be construed as their“accountabilities” that must be cleared
first before the release of benefits. er.
10. Silodd Mills appealed to the National Labor Relations Commission. The
National Labor Relations Commission affirmed part of the decision but
reversed and set aside another part and decided that Milan et.al.’s
monetary claims in the form of separation pay, accrued 13th month pay
for 2003, accrued vacation and sick leave pays are held in abeyance
pending compliance of their accountabilities to respondent company by
turning over the subject lots they respectively occupy at SMI Village Sucat
Muntinlupa City, Metro Manila to Solid Mills. Linga and four other were
already paid their respective separation pays and benefits. Meanwhile,
Teodora Mahilom already retired long before Solid Mills’ closure. She was
already given her retirement benefits.
11. The National Labor Relations Commission ruled that because of
petitioners’ failure to vacate Solid Mills’ property, Solid Mills was justified in
withholding their benefits and separation pay.35 Solid Mills granted the
petitioners the privilege to occupy its property on account of petitioners’
employment.36 It had the prerogative to terminate such privilege.37 The
termination of Solid Mills and petitioners’ employer-employee relationship
made it incumbent upon petitioners to turn over the property to Solid
Mills.
12. The Court of Appeals ruled that Solid Mills’ act of allowing its employees
to make temporary dwellings in its property was a liberality on its part. It
may be revoked any time at its discretion.
ISSUE:
Whether or not an employer is allowed to withhold terminal pay and benefits
pending the employee’s return of its properties

RULING/RATIO:
Yes. The fact that majority of NAFLU’s members were not occupants of
respondent Solid Mills’ property is evidence that possession of the property was
not contemplated in the agreement. “Accountabilities” should be interpreted to
refer only to accountabilities that were incurred by petitioners while they were
performing their duties as employees at the worksite. Moreover, applicable laws,
company practice, or policies do not provide that 13th month pay, and sick and
vacation leave pay benefits, may be withheld pending satisfaction of liabilities by
the employee.
Requiring clearance before the release of last payments to the employee is a
standard procedure among employers, whether public or private. Clearance
procedures are instituted to ensure that the properties, real or personal, belonging
to the employer but are in the possession of the separated employee, are returned
to the employer before the employee’s departure.
As a general rule, employers are prohibited from withholding wages from
employees (Art. 116, Labor Code). The Labor Code also prohibits the elimination
or diminution of benefits (Art. 100, Labor Code).
However, our law supports the employers’ institution of clearance procedures
before the release of wages. As an exception to the general rule that wages may
not be withheld and benefits may not be diminished, the Labor Code provides: Art.
113. Wage deduction. No employer, in his own behalf or in behalf of any person,
shall make any deduction from the wages of his employees, except:
1. In cases where the worker is insured with his consent by the employer,
and the deduction is to recompense the employer for the amount paid by
him as premium on the insurance;
2. For union dues, in cases where the right of the worker or his union to
check-off has been recognized by the employer or authorized in writing by
the individual worker concerned; and
3. In cases where the employer is authorized by law or regulations issued by
the Secretary of Labor and Employment.
The Civil Code provides that the employer is authorized to withhold wages for
debts due: Article 1706. Withholding of the wages, except for a debt due, shall not
be made by the employer. “Debt” in this case refers to any obligation due from the
employee to the employer. It includes any accountability that the employee may
have to the employer. There is no reason to limit its scope to uniforms and
equipment, as petitioners would argue.
More importantly, respondent Solid Mills and NAFLU, the union representing
petitioners, agreed that the release of petitioners’ benefits shall be “less
accountabilities.” Accountabilities of employees are personal. They need not be
uniform among all employees in order to be included in accountabilities incurred
by virtue of an employer-employee relationship. Milan et.al. do not categorically
deny Solid Mills’ ownership of the property, and they do not claim superior right to
it. What can be gathered from the findings of the Labor Arbiter, National Labor
Relations Commission, and the Court of Appeals is that Solid Mills allowed the use
of its property for the benefit of Milan et.al. as its employees. Milan et.al were
merely allowed to possess and use it out of Solid Mills’ liberality. The employer
may, therefore, demand the property at will.
DISPOSITIVE: Solid Mills won.
DOCTRINE: An employer is allowed to withhold terminal pay and benefits
pending the employee’s return of its properties. As a general rule, No employer, in
his own behalf or in behalf of any person, shall make any deduction from the
wages of his employees. The following cases are considered exceptions:
1. In cases where the worker is insured with his consent by the employer,
and the deduction is to recompense the employer for the amount paid by
him as premium on the insurance;
2. For union dues, in cases where the right of the worker or his union to
check-off has been recognized by the employer or authorized in writing by
the individual worker concerned; and
3. In cases where the employer is authorized by law or regulations issued by
the Secretary of Labor and Employment.
COMMANDO SECURITY AGENCY v. NATIONAL LABOR RELATIONS
COMMISSION and NEMESIO DECIERDO
G.R. No. 95844
Facts:
Private respondent Nemesio Decierdo was a security guard of the petitioner.
Petitioner entered into a contract to provide guarding services to the Alsons
Development and Investment Corporation (ALSONS) for a period of one year,
unless renewed under such terms and conditions as may be mutually acceptable.
The number of guards to be assigned by the petitioner would depend on ALSON's
demand, sometimes two (2) guards on a daily shift, and sometimes four (4)
guards. Decierdo was one of the guards assigned to the Aldevinco Building by the
petitioner.
On February 9, 1988, Maria Mila D. Samonte, Properties Administration Head of
ALSONS, requested the petitioner for a "periodic reshuffling" of guards. Pursuant
to that reasonable request of its client, petitioner on February 10, 1988 served
recall order on Decierdo.
Detail Order 02-016 was issued to Decierdo assigning him to the Pacific Oil
Company in Bunawan, Davao City, with instruction to report to the manager, but
Decierdo refused to accept the assignment as he is going to rest for a while.
On February 11, 1988, which was the effective date of the detail order, Decierdo
filed a complaint for illegal dismissal, unfair labor practice, underpayment of
wages, overtime pay, night premium, 13th month pay, holiday pay, rest day pay
and incentive leave pay.
On June 28, 1988, the Executive Labor Arbiter rendered a decision ordering
respondent Commando Security Agency to pay complainant Nemesio Decierdo
salary, holiday and rest day pay differentials, 13th month pay differentials and
service incentive leave pay; and dismissing the complaint for illegal dismissal,
unfair labor practice, overtime pay and night premium for lack of merit.
Petitioner appealed to the NLRC which on May 26, 1989, affirmed with
modification the decision of the Labor Arbiter. Hence, this petition
for certiorari alleging that the NLRC gravely abused its discretion. The petition
for certiorari is without merit.
Issue:
Whether or not NLRC gravely abused its discretion in not holding that petitioner is
entitled to a 25% share of his monthly salary as agreed between them.
Decision:
Petitioner's contention that Decierdo is estopped from complaining about the 25%
deduction from his salary representing petitioner's share in procuring job
placement for him, is not well taken. That provision of the employment contract
was illegal and inequitous, hence, null and void.
The constitutional provisions on social justice (Sections 9 and 10, Article II) and
protection to labor (Sec. 18, Article II) in the declaration of Principles and State
Policies, impose upon the courts the duty to be ever vigilant in protecting the
rights of workers who are placed in a contractually disadvantaged position and
who sign waivers or provisions contrary to law and public policy. We affirm the
NLRC's ruling that: It goes without saying that respondent may not deduct its so-
called "share" from the salaries of its guards without the latter's express consent
and if such deductions are not allowed by law. This is notwithstanding any
previous agreement or understanding between them. Any such agreement or
contract is void ab initio being contrary to law and public policy.
Mabeza vs. NLRC
[G.R. No. 118506 April 18, 1997]
Facts:
Petitioner Norma Mabeza and her co-employees at the Hotel Supreme in Baguio
City were asked by the hotel’s management to sign an instrument attesting to the
latter’s compliance with minimum wage and other labor standard provision. The
instrument provides that they have no complaints against the management of the
Hotel Supreme as they are paid accordingly and that they are treated well. The
petitioner signed the affidavit but refused to go to the City’s Prosecutor’s Office to
confirm the veracity and contents of the affidavit as instructed by management.
That same day, as she refused to go to the City Prosecutor’s Office, she was
ordered by the hotel management to turn over the keys to her living quarters and
to remove her belongings to the hotel’s premises. She then filed a leave of
absence which was denied by her employer. She attempted to return to work but
the hotel’s cashier told her that she should not report to work and instead
continue with her unofficial leave of absence.
Three days after her attempt to return to work, she filed a complaint against the
management for illegal dismissal before the Arbitration Branch of the NLRC
in Baguio City. In addition to that, she alleged underpayment of wages,
non-payment of holiday pay, service incentive leave pay, 13th month pay,
night differential and other benefits. Peter Ng, in their Answer, argued that
her unauthorized leave of absence from work is the ground for her
dismissal. He even maintained that her alleged of underpayment and non-
payment of benefits had no legal basis. He raises a new ground of loss of
confidence, which was supported by his filing of criminal case for the alleged
qualified theft of the petitioner. The Labor Arbiter ruled in favor of the hotel
management on the ground of loss of confidence. She appealed to the NLRC
which affirmed the Labor Arbiter’s decision. hence, this petition.
Issue: Whether or not the dismissal by the private respondent of petitioner
constitutes an unfair labor practice.
Held: The NLRC’s decision is reversed. The pivotal question in any case where
unfair labor practice on the part of the employer is alleged is whether or not
the employer has exerted pressure, in the form of restraint, interference or
coercion, against his employee’s right to institute concerted action for
better terms and conditions of employment. Without doubt, the act of
compelling employees to sign an instrument indicating that the employer
observed labor standard provisions of the law when he might not have,
together with the act of terminating or coercing those who refuse to
cooperate with the employees’ scheme constitutes unfair labor practice. The labor
arbiter’s contention that the reason for the monetary benefits received by the
petitioner between 1981 to 1987 were less than the minimum wage was
because petitioner did not factor in the meals, lodging, electric consumption and
water she received during the period of computations. Granting that meals
and lodging were provided and indeed constituted facilities, such facilities
could not be deducted without the employer complying first with certain legal
requirements. Without satisfying these requirements, the employer simply cannot
deduct the value from the employee’s ages. First, proof must be shown that such
facilities are customarily furnished by the trade.
Second, the provision of deductible facilities must be voluntary accepted in
writing by the employee.
Finally, facilities must be charged at fair and reasonable value. These
requirements were not met in the instant case. Private
respondent failed to present any company policy to show that the meal
and lodging are part of the salary. He also failed to provide proof of the
employee’s written authorization and he failed to show how he arrived at the
valuations. More significantly, the food and lodging, or electricity and water
consumed by the petitioner were not facilities but supplements. A benefit or
privilege granted to an employee for the convenience of the employer is not a
facility. The criterion in making a distinction between the two not so much lies
in the kind but the purpose. Considering, therefore, that hotel workers are
required to work on different shifts and are expected to be available at various
odd hours, their ready availability is a necessary matter in the operations of a
small hotel, such as the private respondent’s hotel.
NATIONAL FEDERATION OF SUGAR WORKERS (NFSW), petitioner,
vs.
ETHELWOLDO R. OVEJERA et. al., respondents
FACTS:
NFSW struck against private respondent Central Azucarera de la Carlota (CAC) to
compel the latter for the payment of the 13th month pay under PD 851 (13th
Month Pay Law) in addition to the Christmas, milling and amelioration bonuses
being enjoyed by CAC workers which amount to 1-½ months’ salary.
Labor Arbiter Ovejera declared the strike as illegal and no pronouncement was
made as to the demand on the 13th month pay. This caused petitioner to file an
instant petition with SC.
ISSUE:
WON under PD 851, an employer is obliged to give its workers a 13th month
salary in addition to Christmas, milling and amelioration bonuses, the aggregate of
which exceeds the 13th month pay.
HELD:
No.
The intention was to grant some relief — not to all workers — but only to the
unfortunate ones not actually paid a 13th month salary or what amounts to it, by
whatever name called; but it was not envisioned that a double burden would be
imposed on the employer already paying his employees a 13th month pay or its
equivalent — whether out of pure generosity or on the basis of a binding
agreement and, in the latter ease, regardless of the conditional character of the
grant, so long as there is actual payment. Otherwise, what was conceived to be a
13th month salary would in effect become a 14th or possibly 15th month pay.
 Dole Philippines, Inc. vs Leogardo, Jr., G. R. No. 60018, October 23,
1982; 117 SCRA 938
(Labor Standards – Employer paying a year-end bonus less than 1/12th of the
basic pay required under the law, can pay its difference)
Facts:
STANFILCO, a company merged with petitioner Dole Philippines, inc entered into a
collective bargaining agreement with the Associated Labor Union. The CBA
provided among others, the grant of a year-end productivity bonus to all workers
within the collective bargaining unit. The company agrees to grant each worker
within the bargaining unit a year-end productivity bonus equivalent to ten days of
his basic daily wage if eighty percent or more of the average total production for
the two preceding calendar years together with the current year’s estimate is
attained.
Thereafter, PD 851 took effect. Section 1 thereof required all employers to pay
their employees receiving a basic salary of not more than P1,000 a month,
regardless of the nature of their employment, a 13th month pay not later than
December 24 of every year. Section 2, however exempted from its coverage those
employers already paying their employees a 13th month pay or its equivalent.
Sec. 3 of The Rules and regulations Implementing PD 851 provides that the term
“its equivalent” shall include Christmas bonus, mid-year bonus, profit sharing
payments and other cash bonuses amounting to not less than 1/12th of the basic
salary but shall not include cash and stock dividends, cost of living allowances and
other allowances regularly enjoyed by the employees as well as non-monetary
benefits. The rules further added that where an employer pays less than 1/12th of
the employee’s basic salary, the employer shall pay the difference.
Complying with the provision of PD 851 and relying on the interpretation of section
2 by the MOLE’s implementing rules, STANFILCO paid its workers the difference
between 1/12th of their yearly basic salary and their year-end productivity bonus.
Respondent ALU, joined by petitioner’s employees filed a complaint for the non-
implementation of the CBA provision on the year-end productivity bonus.
Issue:
WON productivity bonus agreed in the CBA is demandable aside from the
13th month pay provided for in the PD 851.
Held:
No. Year-end productivity bonus granted by petitioner to private respondents
pursuant to their CBA is, in legal contemplation, an integral part of their
13th month pay, notwithstanding its conditional nature. In complying with PD 851,
petitioner credited the year-end productivity bonus as part of the 13thmonth pay
and adopted the procedure of paying only the difference between said bonus and
1/12th of the worker’s yearly basic salary, it acted well within the letter and spirit
of the law and its implementing rules. For in the event that an employer pays less
than 1/12th of the employees’ basic salary, all that the said employer is required to
do under the law is to pay the difference.
Universal Corn Products vs NLRC
SARMIENTO, J.:
The petitioner invokes National Federation of Sugar Workers (NFSW) v.
Ovejera, 1 in which we held that Presidential Decree No. 851, 2 the 13th-month
pay law, does not cover employers already paying their employees an "equivalent"
to the 13th month pay.
There is no dispute as to the facts.
Sometime in May, 1972, the petitioner and the Universal Corn Products Workers
Union entered into a collective bargaining agreement in which it was provided,
among other things, that:
xxx xxx xxx
The COMPANY agrees to grant all regular workers within the bargaining unit with
at least one (1) year of continuous service, a Christmas bonus equivalent to the
regular wages for seven (7) working days, effective December, 1972. The bonus
shall be given to the workers on the second week of December.
In the event that the service of a worker is not continuous due to factory
shutdown, machine breakdown or prolonged absences or leaves, the Christmas
bonus shall be prorated in accordance with the length of services that worker
concerned has served during the year . 3
xxx xxx xxx
The agreement had a duration of three years, effective June 1, 1971, or until June
1, 1974.
On account however of differences between the parties with respect to certain
economic issues, the collective bargaining agreement in question expired without
being renewed. On June 1, 1979, the parties entered into an "addendum"
stipulating certain wage increases covering the years from 1974 to 1977.
Simultaneously, they entered into a collective bargaining agreement for the years
from 1979 to 1981. Like the "addendum," the new collective bargaining agreement
did not refer to the "Christmas bonus" theretofore paid but dealt only with salary
adjustments. According to the petitioner, the new agreements deliberately
excluded the grant of Christmas bonus with the enactment of Presidential Decree
No. 851 4 on December 16, 1975. It further claims that since 1975, it had been
paying its employees 13th-month pay pursuant to the Decree. 5
For failure of the petitioner to pay the seven-day Christmas bonus for 1975 to
1978 inclusive, in accordance with the 1972 CBA, the union went to the labor
arbiter for relief. In his decision, 6 the labor arbiter ruled that the payment of the
13th month pay precluded the payment of further Christmas bonus. The union
appealed to the National Labor Relations Commission (NLRC). The NLRC set aside
the decision of the labor arbiter appealed from and entered another one,
"directing respondent company [now the petitioner] to pay the members
concerned of complainants [sic] union their 7-day wage bonus in accordance with
the 1972 CBA from 1975 to 1978." Justifying its reversal of the arbiter's decision,
the NLRC held:
It is clear that the company implemented the aforequoted provision of the CBA in
1972, 1973 and 1974. In view thereof it is our considered opinion that the
crediting of said benefit to the 13th month pay cannot be sanctioned on the
ground that it is contrary to Section 10 of the Rules and Regulations Implementing
Presidential Decree No. 85 1, which provides, to wit;
Section 10. Prohibition against reduction or elimination of benefits. — Nothing
herein shall be construed to authorize any employer to eliminate, or diminish in
any way, supplements, or other employee benefits or favorable practice being
enjoyed by the employee at the time of promulgation of this issuance.
More so because the benefit involved was not magnanimously extended by the
company to its employees but was obtained by the latter thru bargaining
negotiations. The aforementioned CBA was the law between the parties and the
provisions thereof must be faithfully observed by them during its effectivity. In this
connection, it should be noted that the same parties entered into another 3-year
CBA on June 11, 1979, which no longer provides for a 7-day wage Christmas
bonus. In effect, therefore, the parties agreed to discontinue the privilege, which
agreement should also be respected. 7
We hold that in the case at bar, Ovejera (La Carlota) case does not apply.
We apply instead, United CMC Textile Workers Union v. Valenzuela 8 a recent
decision. In that case this Court, speaking through Mr. Justice Edgardo Paras,
held:
... If the Christmas bonus was included in the 13th month pay, then there would
be no need for having a specific provision on Christmas bonus in the CBA. But it
did not provide for a bonus in graduated amounts depending on the length of
service of the employee. The intention is clear therefore that the bonus provided
in the CBA was meant to be in addition to the legal requirement. Moreover, why
exclude the payment of the 1978 Christmas bonus and pay only the 1979-1980
bonus. The classification of the company's workers in the CBA according to their
years of service supports the allegation that the reason for the payment of bonus
was to give bigger award to the senior employees-a purpose which is not found by
P.D. 851. A bonus under the CBA is an obligation created by the contract between
the management and workers while the 13th month pay is mandated by the law
(P. D. 851). 9
In the same vein, we consider the seven-day bonus here demanded "to be in
addition to the legal requirement." Although unlike the Valenzuela CBA, which took
effect after the promulgation of Presidential Decree No. 851 in 1975, the subject
agreement was entered into as early as 1972, that is no bar to our application
of Valenzuela. What is significant for us is the fact that, like
the Valenzuela, agreement, the Christmas bonus provided in the collective
bargaining agreement accords a reward, in this case, for loyalty, to certain
employees. This is evident from the stipulation granting the bonus in question to
workers "with at least one (1) year of continuous service." As we said in
Valenzuela" this is "a purpose not found in P.D. 851." 10
It is claimed, however, that as a consequence of the impasse between the parties
beginning 1974 through 1979, no collective bargaining agreement was in force
during those intervening years. Hence, there is allegedly no basis for the money
award granted by the respondent labor body. But it is not disputed that under the
1972 collective bargaining agreement, [i]f no agreement and negotiations are
continued, all the provisions of this Agreement shall remain in full force up to the
time a new agreement is executed." 11 The fact, therefore, that the new
agreements are silent on the seven-day bonus demanded should not preclude the
private respondents' claims thereon. The 1972 agreement is basis enough for such
claims for the whole writing is " "instinct with an obligation," imperfectly
express." 12
WHEREFORE, premises considered, the petition is hereby DISMISSED. The
Decision of the public respondent NLRC promulgated on February 11, 1982, and
its Resolution dated March 23, 1982, are hereby AFFIRMED. The temporary
restraining order issued on May 19, 1982 is LIFTED.
This Decision is IMMEDIATELY EXECUTORY.
No pronouncement as to costs.
SO ORDERED.
Yap (Chairman), Paras and Padilla, JJ., concur.
 G.R. No. L-49774 February 24, 1981
SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner,
vs.
Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCA-
COLA FREE WORKERS UNION, respondents.
DE CASTRO, J.:
FACTS:
This is a complaint on January 3, 1977 by Cagayan Coca-Cola Free Workers Union
against San Miguel Corporation (Cagayan Coca-cola Plant) for the alleged failure or
refusal of the latter to include in the computation of 13-month pay such items as
sick, vacation, or maternity leaves, premium for work done on rest days and
special holidays, including pay for regular holidays and night differentials.
ISSUE:
- WoN PD 851 includes payments for sick, vacation, or maternity
leaves, premium of work done on rest days and special holidays,
including pay for regular holidays, and night differentials should
be considered in the computation for the 13-month pay?
a.) NO. Additional compensation shall not be considered in the computation of the
13-month pay.
Citing certain provisions of the Labor Code of the Philippines specifically Art. 87 on
overtime work performed beyond 8 hours a days is paid as additional
compensation equivalent to a regular wage plus 25% hereof and Art 93 on work
performed on any special holidays as an additional compensation of atleast 30%
of the regular wage of the employee, clearly, additional compensation is
categorically excluded from the definition of basic salary under the Supplementary
Rules and Regulations Implementing Presidential Decree 851.
The Orders of the Deputy Labor Minister dated June 7, 1978 and December 19,
1978 are hereby set aside and a new one entered as above indicated. The
Temporary Restraining Order issued by this Court on February 14, 1979 is hereby
made permanent. No pronouncement as to cost.
Philippine Duplicators vs. NLRC
GR 110068 February 15, 1995
Facts:
Private respondent union, for and on behalf of its member-salesmen, asked
petitioner corporation for payment of 13th month pay computed on the basis of
the salesmen’s fixed or guaranteed wages plus commissions.
Petitioner corporation refused the union’s request, but stated it would respect an
opinion from the MOLE. On 17 November 1987, acting upon a request for opinion
submitted by respondent union, Director Augusto G. Sanchez of the Bureau of
Working Conditions, MOLE, rendered an opinion to respondent union declaring
applicable the provisions of Explanatory Bulletin No. 86-12, Item No. 5 (a):
. . . . Since the salesmen of Philippine Duplicators are receiving a fixed basic wage
plus commission on sales and not purely on commission basis, they are entitled to
receive 13th month pay provided they worked at least one (1) month during the
calendar year. May we add at this point that in computing such 13th month pay,
the total commissions of said salesmen for the calendar year shall be divided by
twelve (12). (Emphasis supplied)
Notwithstanding Director Sanchez’ opinion or ruling, petitioner refused to pay the
claims of its salesmen for 13th month pay computed on the basis of both fixed
wage plus sales commissions.
Issue: WON sales commission is included in the coverage of basic salary for
purposes of computing 13th month pay.
Held:
1. Decision (1993)
In the first place, Article 97 (f) of the Labor Code defines the term “wage”
(which is equivalent to “salary,” as used in P.D. No. 851 and Memorandum
Order No. 28) in the following terms:
(f) “Wage“ paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to
be rendered, and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee. “Fair and reasonable value”
 shall not include any profit to the employer or to any person affiliated with
the employer. (Emphasis supplied)
In the instant case, there is no question that the sales commissions
earned by salesmen who make or close a sale of duplicating machines
distributed by petitioner corporation constitute part of the compensation
or remuneration paid to salesmen for serving as salesmen, and hence as
part of the “wage” or “salary” of petitioner’s salesmen. Indeed, it appears
that petitioner pays its salesmen a small fixed or guaranteed wage; the
greater part of the salesmen’s wages or salaries being composed of the
sales or incentive commissions earned on actual sales closed by them. No
doubt this particular salary structure was intended for the benefit of
petitioner corporation, on the apparent assumption that thereby its
salesmen would be moved to greater enterprise and diligence and close
more sales in the expectation of increasing their sales commissions. This,
however, does not detract from the character of such commissions as part
of the salary or wage paid to each of its salesmen for rendering services to
petitioner corporation.
Petition and MR dismissed
2. Resolution (1995)
In Boie-Takeda the so-called commissions “paid to or received by medical
representatives of Boie-Takeda Chemicals or by the rank and file employees of
Philippine Fuji Xerox Co.,” were excluded from the term “basic salary” because
these were paid to the medical representatives and rank-and-file employees as
“productivity bonuses.” The Second Division characterized these payments as
additional monetary benefits not properly included in the term “basic salary” in
computing their 13th month pay. As a rule a bonus is an amount granted and
paid to an employee for his industry loyalty which contributed to the success
of the employer’s business and made possible the realization of profits. It is
an act of generosityof the employer for which the employee ought to be
thankful and grateful. It is also granted by an enlightened employer to spur
the employee to greater efforts for the success of the business and realization
of bigger profits. From the legal point of view a bonus is not and mandable
and enforceable obligation. It is so when It is made part of the wage or salary
or compensation.
2nd MR dismissed.
Boie-Takeda Chemicals, Inc. vs. de la Serna
228 SCRA 329, Dec. 10, 1993
Facts:
P.D. No. 851 provides for the Thirteen-Month Pay Law. Under Sec. 1 of said law,
“all employers are required to pay all their employees receiving basic salary of not
more than P 1,000.00 a month, regardless of the nature of the employment, and
such should be paid on December 24 of every year.” The Rules and Regulations
Implementing P.D. 851 contained provisions defining “13-month pay” and “basic
salary” and the employers exempted from giving it and to whom it is made
applicable. Supplementary Rules and Regulations Implementing P.D. 851 were
subsequently issued by Minister Ople which inter alia set items of compensation
not included in the computation of 13-month pay. (overtime pay, earnings and
other remunerations which are not part of basic salary shall not be included in the
computation of 13-month pay). Pres. Corazon Aquino promulgated on August 13,
1985 M.O. No. 28, containing a single provision that modifies P.D. 851 by
removing the salary ceiling of P 1,000.00 a month. More than a year later, Revised
Guidelines on the Implementation of the 13-month pay law was promulgated by
the then Labor Secretary Franklin Drilon, among other things, defined particularly
what remunerative items were and were not included in the concept of 13-month
pay, and specifically dealt with employees who are paid a fixed or guaranteed
wage plus commission or commissions were included in the computation of 13th
month pay)
A routine inspection was conducted in the premises of petitioner. Finding that
petitioner had not been including the commissions earned by its medical
representatives in the computation of their 1-month pay, a Notice of Inspection
Result was served on petitioner to effect restitution or correction of “the
underpayment of 13-month pay for the years, 1986 to 1988 of Medical
representatives. Petitioner wrote the Labor Department contesting the Notice of
Inspection Results, and expressing the view that the commission paid to its
medical representatives are not to be included in the computation of the 13-moth
pay since the law and its implementing rules speak of REGULAR or BASIC salary
and therefore exclude all remunerations which are not part of the REGULAR salary.
Regional Dir. Luna Piezas issued an order for the payment of underpaid 13-month
pay for the years 1986, 1987 and 1988. A motion for reconsideration was filed and
the then Acting labor Secretary Dionisio de la Serna affirmed the order with
modification that the sales commission earned of medical representatives before
August 13, 1989 (effectivity date of MO 28 and its implementing guidelines) shall
be excluded in the computation of the 13-month pay.
Similar routine inspection was conducted in the premises of Phil. Fuji Xerox where
it was found there was underpayment of 13th month pay since commissions were
not included. In their almost identically-worded petitioner, petitioners, through
common counsel, attribute grave abuse of discretion to respondent labor officials
Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano.
ISSUE:
Whether or not commissions are included in the computation of 13-month pay
HELD:
NO. Contrary to respondent’s contention, M.O No. 28 did not repeal, supersede or
abrogate P.D. 851. As may be gleaned from the language of MO No. 28, it merely
“modified” Section 1 of the decree by removing the P 1,000.00 salary ceiling. The
concept of 13th Month pay as envisioned, defined and implemented under P.D.
851 remained unaltered, and while entitlement to said benefit was no longer
limited to employees receiving a monthly basic salary of not more than P 1,000.00
said benefit was, and still is, to be computed on the basic salary of the employee-
recipient as provided under P.D. 851. Thus, the interpretation given to the term
“basic salary” was defined in PD 851 applies equally to “basic salary” under M.O.
No. 28. The term “basic salary” is to be understood in its common, generally
accepted meaning, i.e., as a rate of pay for a standard work period exclusive of
such additional payments as bonuses and overtime. In remunerative schemes
consists of a fixed or guaranteed wage plus commission, the fixed or guaranteed
wage is patently the “basic salary” for this is what the employee receives for a
standard work period. Commissions are given for extra efforts exerted in
consummating sales of other related transactions. They are, as such, additional
pay, which the SC has made clear do not from part of the “basic salary.”
Moreover, the Supreme Court said that, including commissions in the computation
of the 13th month pay, the second paragraph of Section 5(a) of the Revised
Guidelines on the Implementation of the 13th Month Pay Law unduly expanded
the concept of "basic salary" as defined in P.D. 851. It is a fundamental rule that
implementing rules cannot add to or detract from the provisions of the law it is
designed to implement. Administrative regulations adopted under legislative
authority by a particular department must be in harmony with the provisions of
the law they are intended to carry into effect. They cannot widen its scope. An
administrative agency cannot amend an act of Congress.
Philippine Agricultural Commercial and Industrial Workers Union v.
NLRC, August 14,
1995
PACIWU vs NLRC, 247 SCRA 256
(Labor Standards – Bus drivers and conductors on a purely commission basis are
entitled to 13thmonth pay)
Facts: Petitioner union complaint for payment of 13th month pay to the drivers
and conductors of respondent company, on the ground that although said drivers
and conductors are compensated on a purely commission basis as described in
their CBA, they are automatically entitled to the basic minimum pay mandated by
law should said commission be less than their basic minimum for eight (8) hours
work.
Respondent Vallacar Transit, Inc. contended that since said drivers are
compensated on a purely commission basis, they are not entitled to 13th month
pay pursuant to the exempting provisions enumerated in paragraph 2 of the
Revised Guidelines on the Implementation of the 13th Month Pay Law. Section of
Article XIV of the CBA expressly provides that drivers and conductors paid on a
purely commission are not legally entitled to 13th month pay. Said CBA, being the
law between the parties, must be respected.
Issue:
WON the bus drivers and conductors of respondent Vallacar Transit, Inc. are
entitled to 13thmonth pay.
Held:
Yes. For purposes of entitling rank and file employees a 13th month pay, it is
immaterial whether the employees concerned are paid a guaranteed wage plus
commission or a commission with guaranteed wage inasmuch as the bottom line is
that they receive a guaranteed wage. Thus is correctly construed in the MOLE
Explanatory Bulletin No. 86-12.
The 13th month pay of bus drivers and conductors must be one-twelfth (1/12) of
their total earnings during the calendar year.
 SEVILLA TRADING COMPANY, Petitioner, vs. A.V.A. TOMAS E. SEMANA,
SEVILLA TRADING WORKERS UNIONSUPER, Respondents.
G.R. No. 152456 : April 28, 2004
FACTS:
On appeal is the Decision of the Court of Appeals (CA) sustaining the sustaining
the Decision of Accredited Voluntary Arbitrator Tomas E. Semana.
For two to three years prior to 1999, petitioner Sevilla Trading Company
(Petitioner), a domestic corporation engaged in trading business, organized and
existing under Philippine laws, added to the base figure, in its computation of the
13th-month pay of its employees, the amount of other benefits received by the
employees which are beyond the basic pay.
Petitioner claimed that it entrusted the preparation of the payroll to its office staff,
including the computation and payment of the 13th-month pay and other benefits.
When it changed its person in charge of the payroll in the process of
computerizing its payroll, and after audit was conducted, it allegedly discovered
the error of including non-basic pay or other benefits in the base figure used in the
computation of the 13th-month pay of its employees. It cited the Rules and
Regulations Implementing P.D. No. 851 which stated:
“Basic salary shall include all remunerations or earnings paid by an employer to an
employee for services rendered but may not include cost-of-living allowances
granted pursuant to P.D. No. 525 or Letter of Instruction No. 174, profit-sharing
payments, and all allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.”
Petitioner then effected a change in the computation of the thirteenth month pay,
as follows:
13th-month pay = net basic pay
Hence, the new computation reduced the employees thirteenth month pay. The
daily piece-rate workers represented by private respondent Sevilla Trading
Workers Union SUPER (Union, for short), a duly organized and registered union,
through the Grievance Machinery in their Collective Bargaining Agreement,
contested the new computation and reduction of their thirteenth month pay. The
parties failed to resolve the issue.
The Union alleged that petitioner violated the rule prohibiting the elimination or
diminution of employees benefits as provided for in Art. 100 of the Labor Code, as
amended. They claimed that paid leaves, like sick leave, vacation leave, paternity
leave, union leave, bereavement leave, holiday pay and other leaves with pay in
the CBA should be included in the base figure in the computation of their 13th-
month pay.
ISSUE:
WON a voluntary act of the employer which was favorable to the employees
though not conforming to law, has ripened into a practice and therefore can be
withdrawn, reduced, diminished, discontinued or eliminated?
HELD:
NO. As such the SC affirms the decision of the Accredited Voluntary Arbitrator
Tomas E. Semana granting to pay corresponding back wages to all covered and
entitled employees arising from the exclusion of said benefits in the computation
of 13th-month pay.
RATIO DECIDENDI:
With regard to the length of time the company practice should have been
exercised to constitute voluntary employer practice which cannot be unilaterally
withdrawn by the employer, we hold that jurisprudence has not laid down any rule
requiring a specific minimum number of years. In the above quoted case of
Davao Fruits Corporation vs. Associated Labor Unions, the company practice lasted
for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs.
Abarquez, the employer, for three (3) years and nine (9) months, approved the
commutation to cash of the unenjoyed portion of the sick leave with pay benefits
of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer
carried on the practice of giving a fixed monthly emergency allowance from
November 1976 to February 1980, or three (3) years and four (4) months.
In all these cases, this Court held that the grant of these benefits has
ripened into company practice or policy which cannot be peremptorily
withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of
including non-basic benefits such as paid leaves for unused sick leave and vacation
leave in the computation of their 13th-month pay for at least two (2) years.
This, we rule likewise constitutes voluntary employer practice which
cannot be unilaterally withdrawn by the employer without violating Art.
100 of the Labor Code.
 Arco Metal Products Co., Inc., et al., vs. Samahan ng Mga Manggagawa
sa Arco-Metal-NAFLU
Facts:
Petitioner is a company engaged in the manufacture of metal products, whereas
respondent is the labor union of petitioner’s rank and file employees. Sometime in
December 2003, petitioner paid the 13th month pay, bonus, and leave
encashment of three union members in amounts proportional to the service they
actually rendered in a year, which is less than a full twelve (12) months.
Respondent protested the prorated scheme, claiming that on several occasions
petitioner did not prorate the payment of the same benefits to seven (7)
employees who had not served for the full 12 months. According to respondent,
the prorated payment violates the rule against diminution of benefits under Article
100 of the Labor Code.
Thus, they filed a complaint before the National Conciliation and Mediation Board
(NCMB).
Issue:
Whether or not the grant of 13th month pay, bonus, and leave encashment in full
regardless of actual service rendered constitutes voluntary employer practice and,
consequently, whether or not the prorated payment of the said benefits constitute
diminution of benefits under Article 100 of the Labor Code.
Ruling:
Any benefit and supplement being enjoyed by employees cannot be reduced,
diminished, discontinued or eliminated by the employer. The principle of non-
diminution of benefits is founded on the Constitutional mandate to "protect the
rights of workers and promote their welfare and to afford labor full protection.
Said mandate in turn is the basis of Article 4 of the Labor Code which states that
all doubts in the implementation and interpretation of this Code, including its
implementing rules and regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the right of employees to
benefits which were voluntarily given by the employer and which ripened into
company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et
al. where an employer had freely and continuously included in the computation of
the 13th month pay those items that were expressly excluded by the law, we held
that the act which was favorable to the employees though not conforming to law
had thus ripened into a practice and could not be withdrawn, reduced, diminished,
discontinued or eliminated. In Sevilla Trading Company v. Semana, we ruled that
the employer’s act of including non-basic benefits in the computation of the 13th
month pay was a voluntary act and had ripened into a company practice which
cannot be peremptorily withdrawn.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a
policy of freely, voluntarily and consistently granting full benefits to its employees
regardless of the length of service rendered. True, there were only a total of seven
employees who benefited from such a practice, but it was an established practice
nonetheless. Jurisprudence has not laid down any rule specifying a minimum
number of years within which a company practice must be exercised in order to
constitute voluntary company practice. Thus, it can be six (6) years, three (3)
years, or even as short as two (2) years. Petitioner cannot shirk away from its
responsibility by merely claiming that it was a mistake or an error, supported only
by an affidavit of its manufacturing group head. Hence, petition was denied.
Globe Mackay Cable and Radio Corp. vs NLRC, 163 SCRA 71; G.R. No. L-
74156
(Labor Standards – COLA, payment of wage in unworked days)
Facts:
Wage Order No. 6 increased the cost-of-living allowance (COLA) of non-
agricultural workers in the private sector.
Petitioner Corporation complied with said Order by paying its monthly-paid
employees the mandated P3.00 per day COLA. In its computation, Petitioner
Corporation multiplied the P3.00 daily COLA by 22 days, which is the number of
working days in the company.
Respondent Union disagreed with the computation alleging that prior to the
effectivity of the Wage Order, Petitioner Corporation had been computing and
paying the COLA on the basis of 30 days per month and that this constituted an
employer practice, which should not be unilaterally withdrawn.
The Labor Arbiter sustained the position of Petitioner Corporation by holding that
the monthly COLA should be computed on the basis of 22 days, since the evidence
showed that there are only 22 days in a month for monthly-paid employees in the
company.
The NLRC reversed the Labor Arbiter on appeal, holding that Petitioner
Corporation was guilty of illegal deductions considering that COLA should be paid
and computed on the basis of 30 days since workers paid on a monthly basis are
entitled to COLA on days “unworked”; and the full allowance enjoyed by Petitioner
Corporation’s monthly-paid employees before the CBA executed between the
parties constituted voluntary employer practice, which cannot be unilaterally
withdrawn.
Issue: WON the computation and payment of COLA on the basis of 30 days per
month constitute an employer practice which should not be unilaterally withdrawn.
Held: No. Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6
provides that “all covered employees shall be entitled to their daily living allowance
during the days that they are paid their basic wage, even if unworked.” The
primordial consideration for entitlement of COLA is that basic wage is being paid.
The payment of COLA is mandated only for the days that the employees are paid
their basic wage, even if said days are unworked. On the days that employees are
not paid their basic wage, the payment of COLA is not mandated.
Moreover, Petitioner Corporation cannot be faulted for erroneous application of a
doubtful or difficult question of law. Since it is a past error that is being corrected,
no vested right may be said to have arisen nor any diminution of benefit under
Article 100 of the Labor Code may be said to have resulted by virtue of the
correction.
INSULAR HOTEL EMPLOYEES UNION-NF vs. WATERFRONT INSULAR
HOTEL DAVAO
FACTS:
Respondent Waterfront Insular Hotel Davao (respondent) sent the Department of
Labor and Employment (DOLE), Region XI, Davao City, a Notice of Suspension of
Operations notifying the same that it will suspend its operations for a period of six
months due to severe and serious business losses. In said notice, respondent
assured the DOLE that if the company could not resume its operations within the
six-month period, the company would pay the affected employees all the benefits
legally due to them.
During the period of the suspension, Domy R. Rojas (Rojas), the President of
Davao Insular Hotel Free Employees Union (DIHFEU-NFL), the recognized labor
organization in Waterfront Davao, sent respondent a number of letters asking
management to reconsider its decision.
In a letter dated November 8, 2000, Rojas intimated that the members of the
Union were determined to keep their jobs and that they believed they too had to
help respondent.
In another letter dated November 20, 2000, Rojas sent respondent more proposals
as a form of the Union's gesture of their intention to help the company.
It is understood that with the suspension of the CBA renegotiations, the same
existing CBA shall be adopted and that all provisions therein shall remain enforced
except for those mentioned in this proposal.
These proposals shall automatically supersede the affected provisions of the CBA.
In a handwritten letter dated November 25, 2000, Rojas once again appealed to
respondent for it to consider their proposals and to re-open the hotel. In said
letter, Rojas stated that manpower for fixed manning shall be one hundred (100)
rank-and-file Union members instead of the one hundred forty-five (145) originally
proposed.
Finally, sometime in January 2001, DIHFEU-NFL, through Rojas, submitted to
respondent a Manifesto concretizing their earlier proposals.
After series of negotiations, respondent and DIHFEU-NFL, represented by its
President, Rojas, and Vice-Presidents, Exequiel J. Varela Jr. and Avelino C. Bation,
Jr., signed a Memorandum of Agreement (MOA) wherein respondent agreed to
re-open the hotel subject to certain concessions offered by DIHFEU-NFL in its
Manifesto.
Accordingly, respondent downsized its manpower structure to 100 rank-and-file
employees as set forth in the terms of the MOA. Moreover, as agreed upon in the
MOA, a new pay scale was also prepared by respondent.
The retained employees individually signed a "Reconfirmation of
Employment" which embodied the new terms and conditions of their continued
employment. Each employee was assisted by Rojas who also signed the
document.
On June 15, 2001, respondent resumed its business operations.
On August 22, 2002, Darius Joves (Joves) and Debbie Planas, claiming to be local
officers of the National Federation of Labor (NFL), filed a Notice of
Mediation before the National Conciliation and Mediation Board (NCMB), Region
XI, Davao City. In said Notice, it was stated that the Union involved was "DARIUS
JOVES/DEBBIE PLANAS ET AL., National Federation of Labor." The issue raised in
said Notice was the "Diminution of wages and other benefits through unlawful
Memorandum of Agreement."
On August 29, 2002, the NCMB called Joves and respondent to a conference to
explore the possibility of settling the conflict. In the said conference, respondent
and petitioner Insular Hotel Employees Union-NFL (IHEU-NFL), represented by
Joves, signed a Submission Agreement wherein they chose AVA Alfredo C. Olvida
(AVA Olvida) to act as voluntary arbitrator. Submitted for the resolution of AVA
Olvida was the determination of whether or not there was a diminution of wages
and other benefits through an unlawful MOA. In support of his authority to file the
complaint, Joves, assisted by Atty. Danilo Cullo (Cullo), presented several Special
Powers of Attorney (SPA) which were, however, undated and unnotarized.
On September 16, 2002, a second preliminary conference was conducted in the
NCMB, where Cullo denied any existence of an intra-union dispute among the
members of the union. Cullo, however, confirmed that the case was filed not by
the IHEU-NFL but by the NFL. When asked to present his authority from NFL, Cullo
admitted that the case was, in fact, filed by individual employees named in the
SPAs. The hearing officer directed both parties to elevate the aforementioned
issues to AVA Olvida.
The case was docketed as Case No. AC-220-RB-11-09-022-02 and referred to AVA
Olvida. Respondent again raised its objections, specifically arguing that the
persons who signed the complaint were not the authorized representatives of the
Union indicated in the Submission Agreement nor were they parties to the MOA.
AVA Olvida directed respondent to file a formal motion to withdraw its submission
to voluntary arbitration.
Issues and Ruling:
1. Who may file a notice or declare a strike or lockout or request
preventive mediation?
Section 3, Rule IV of the NCMB Manual of Procedure provides who may file a
notice of preventive mediation, to wit:
Who may file a notice or declare a strike or lockout or request preventive
mediation. —
Any certified or duly recognized bargaining representative may file a notice or
declare a strike or request for preventive mediation in cases of bargaining
deadlocks and unfair labor practices. The employer may file a notice or declare a
lockout or request for preventive mediation in the same cases. In the absence of a
certified or duly recognized bargaining representative, any legitimate labor
organization in the establishment may file a notice, request preventive mediation
or declare a strike, but only on grounds of unfair labor practice.
From the foregoing, it is clear that only a certified or duly recognized bargaining
agent may file a notice or request for preventive mediation. It is curious that even
Cullo himself admitted, in a number of pleadings, that the case was filed not by
the Union but by individual members thereof. Clearly, therefore, the NCMB had no
jurisdiction to entertain the notice filed before it.
2. WON the NCMB and Voluntary Arbitrators had no jurisdiction
over the complaint.
Even though respondent signed a Submission Agreement, it had, however,
immediately manifested its desire to withdraw from the proceedings after it
became apparent that the Union had no part in the complaint. As a matter of fact,
only four days had lapsed after the signing of the Submission Agreement when
respondent called the attention of AVA Olvida in a "Manifestation with Motion for a
Second Preliminary Conference" that the persons who filed the instant complaint in
the name of Insular Hotel Employees Union-NFL had no authority to represent the
Union.
Respecting petitioners' thesis that unsettled grievances should be referred to
voluntary arbitration as called for in the CBA, the same does not lie. The pertinent
portion of the CBA reads:
“In case of any dispute arising from the interpretation or implementation of this
Agreement or any matter affecting the relations of Labor and Management,
the UNION and the COMPANY agree to exhaust all possibilities of conciliation
through the grievance machinery. The committee shall resolve all problems
submitted to it within fifteen (15) days after the problems ha[ve] been discussed
by the members. If the dispute or grievance cannot be settled by the Committee,
or if the committee failed to act on the matter within the period of fifteen (15)
days herein stipulated, the UNIONand the COMPANY agree to submit the issue to
Voluntary Arbitration. Selection of the arbitrator shall be made within seven (7)
days from the date of notification by the aggrieved party. The Arbitrator shall be
selected by lottery from four (4) qualified individuals nominated by in equal
numbers by both parties taken from the list of Arbitrators prepared by the National
Conciliation and Mediation Board (NCMB). If the Company and the Union
representatives within ten (10) days fail to agree on the Arbitrator, the NCMB shall
name the Arbitrator. The decision of the Arbitrator shall be final and binding upon
the parties. However, the Arbitrator shall not have the authority to change any
provisions of the Agreement. The cost of arbitration shall be borne equally by the
parties.”
3. WON the individual members of the Union have the requisite
standing to question the MOA before the NCMB?
Petitioners have not, however, been duly authorized to represent the union.
“Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name or
designate their respective representatives to the grievance machinery and if the
grievance is unsettled in that level, it shall automatically be referred to the
voluntary arbitrators designated in advance by parties to a CBA.
Consequently, only disputes involving the union and the company shall be referred
to the grievance machinery or voluntary arbitrators.
4. If the individual members of the Union have no authority to file
the case, does the federation to which the local union is
affiliated have the standing to do so?
A local union does not owe its existence to the federation with which it is affiliated.
It is a separate and distinct voluntary association owing its creation to the will of
its members. Mere affiliation does not divest the local union of its own personality,
neither does it give the mother federation the license to act independently of the
local union. It only gives rise to a contract of agency, where the former acts in
representation of the latter. Hence, local unions are considered principals while the
federation is deemed to be merely their agent.”
Based on the foregoing, this Court agrees with approval with the disquisition of
the CA when it ruled that NFL had no authority to file the complaint in behalf of
the individual employees
“the voluntary arbitrator had no jurisdiction over the case. Waterfront contents
that the Notice of Mediation does not mention the name of the Union but merely
referred to the National Federation of Labor (NFL) with which the Union is
affiliated. In the subsequent pleadings, NFL's legal counsel even confirmed that
the case was not filed by the union but by NFL and the individual employees
named in the SPAs which were not even dated nor notarized.
Even granting that petitioner Union was affiliated with NFL, still the relationship
between that of the local union and the labor federation or national union with
which the former was affiliated is generally understood to be that of agency,
where the local is the principal and the federation the agency. Being merely an
agent of the local union, NFL should have presented its authority to file the Notice
of Mediation. While We commend NFL's zealousness in protecting the rights of
lowly workers, We cannot, however, allow it to go beyond what it is empowered to
do.”
As provided under the NCMB Manual of Procedures, only a certified or duly
recognized bargaining representative and an employer may file a notice
of mediation, declare a strike or lockout or request preventive
mediation. The Collective Bargaining Agreement (CBA), on the other, recognizes
that DIHFEU-NFL is the exclusive bargaining representative of all permanent
employees. The inclusion of the word "NFL" after the name of the local union
merely stresses that the local union is NFL's affiliate. It does not, however, mean
that the local union cannot stand on its own. The local union owes its creation and
continued existence to the will of its members and not to the federation to which it
belongs. The spring cannot rise higher than its source, so to speak.
5. WON respondent was not really suffering from serious losses as
found by the CA.
No. In its petition before the CA, respondent submitted its audited financial
statements which show that for the years 1998, 1999, until September 30, 2000,
its total operating losses amounted to P48,409,385.00. Based on the foregoing,
the CA was not without basis when it declared that respondent was suffering from
impending financial distress. While the Wage Board denied respondent's petition
for exemption, this Court notes that the denial was partly due to the fact that the
June 2000 financial statements then submitted by respondent were not audited.
Cullo did not question nor discredit the accuracy and authenticity of respondent's
audited financial statements. This Court, therefore, has no reason to question the
veracity of the contents thereof. Moreover, it bears to point out that respondent's
audited financial statements covering the years 2001 to 2005 show that it still
continues to suffer losses.
6. WON Article 100 of the Labor Code applies only to benefits
already enjoyed at the time of the promulgation of the Labor
Code.
No. Article 100 of the Labor Code provides:
PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS — Nothing
in this Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of the promulgation of this
Code.
Clearly, the prohibition against elimination or diminution of benefits set out in
Article 100 of the Labor Code is specifically concerned with benefits already
enjoyed at the time of the promulgation of the Labor Code. Article 100 does not,
in other words, purport to apply to situations arising after the promulgation date
of the Labor Code
7. Does the non-ratification of the MOA in accordance with the
Union's constitution prove fatal to the validity thereof?
No. It must be remembered that after the MOA was signed, the members of the
Union individually signed contracts denominated as "Reconfirmation of
Employment." Cullo did not dispute the fact that of the 87 members of the Union,
who signed and accepted the "Reconfirmation of Employment," 71 are the
respondent employees in the case at bar. Moreover, it bears to stress that all the
employees were assisted by Rojas, DIHFEU-NFL's president, who even co-signed
each contract.
Stipulated in each Reconfirmation of Employment were the new salary and
benefits scheme. In addition, it bears to stress that specific provisions of the new
contract also made reference to the MOA. Thus, the individual members of the
union cannot feign knowledge of the execution of the MOA. Each contract was
freely entered into and there is no indication that the same was attended by fraud,
misrepresentation or duress. To this Court's mind, the signing of the individual
"Reconfirmation of Employment" should, therefore, be deemed an implied
ratification by the Union members of the MOA.
While the terms of the MOA undoubtedly reduced the salaries and certain benefits
previously enjoyed by the members of the Union, it cannot escape this Court's
attention that it was the execution of the MOA which paved the way for the re-
opening of the hotel, notwithstanding its financial distress. More importantly, the
execution of the MOA allowed respondents to keep their jobs. It would certainly be
iniquitous for the members of the Union to sign new contracts prompting the re-
opening of the hotel only to later on renege on their agreement on the fact of the
non-ratification of the MOA.
MAMERTO B. ASIS vs MINISTER OF LABOR AND EMPLOYMENT
G.R. No. 58094-95
Facts:
The petitioner was the appointed Legal Counsel of the Central Azucarera de
Pilar Later on, concurrently with his position as Legal Counsel, he was named
Head of its Manpower and Services Department. In addition to his basic salaries
and other fringe benefits, his employer granted him, and a few other officials of
the company, a monthly ration of 200 liters of gasoline and a small tank of
liquefied petroleum gas (LPG). This monthly ration was temporarily revoked some
five (5) years later as a form of cost reduction measure. He filed a case with the
Ministry of Labor, who in turn rendered a judgment in his favor, however when it
was found that he was responsible for provoking other employees to file actions
against his employer, the Ministry of Labor reversed its decision. The private
respondent points out that they can no longer accept the petitioner for they have
already lost their trust and confidence in him.
Issues:
Whether or not the suspension of the monthly ration of fuel and LPG of the
petitioner as a cost-reduction measure would constitute a diminution of benefits.
Ruling:
No, the suspension of the monthly ration of fuel and LPG of the
petitioner as a cost-reduction measure would not constitute a
diminution of benefits.
The temporary revocation had been occasioned
American Wire & Cable Daily Rated Employees Union vs. Amercan Wire
& Cable Co., Inc., & the Court of Appeals
G.R. No.155059. April 29, 2005
Facts:
American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of
wires and cables. There are two unions in this company, the American Wire and
Cable Monthly-Rated Employees Union and the American Wire and Cable Daily-
Rated Employees Union.
On 16 February 2001, an original action was filed before the NCMB of the
Department of Labor and Employment by the two unions for voluntary arbitration.
They alleged that the private respondent, without valid cause, suddenly and
unilaterally withdrew and denied certain benefits and entitlements which they have
long enjoyed. These are Service Award, 35% premium pay of an employee’s basic
pay for the work rendered during Holy Monday, Holy Tuesday, Holy Wednesday,
December 23, 26, 27, 28 and 29, Christmas Party and Promotional Increase.
Issue:
Whether or not the respondent company violated Article 100 of the Labor Code.
Ruling:
The Court ruled that company is not guilty of violating Art. 100 of the Labor Code.
Article 100 of the Labor Code provides:
PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS. – Nothing
in this Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of this Code.
The certain benefits and entitlements are considered bonuses. A bonus can only
be enforceable and demandable if it has ripened into a company practice. It must
also be expressly agreed by the employer and employee or it must be on a fixed
amount.
The assailed benefits were never subjects of any agreement between the union
and the company. It was never incorporated in the CBA. Since all these benefits
are in the form of bonuses, it is neither enforceable nor demandable.
G.R. No. 198783 April 15, 2013 ROYAL PLANT WORKERS UNION,
Petitioner, vs. COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU PLANT,
FACTS:
Under the employ of CCBPI-Cebu are 20 bottling operators who are male and they
are members of herein respondent Royal Plant Workers Union. Said bottling
operators work for 8 hour shift with 15-30 minutes breaks every after 2 ½ hours.
It has been a practice of the CCBPI to provide the operators with chairs in their
bottling line for more than 30 years. However, when CCBPI implemented its “I
Operate, I Maintain, I Clean" program said chairs were removed but their rest
period was fixed to 30 minutes every after 1 ½ hours to optimize their efficiency
and CCBPI’s machineries and equipment. The bottling operators took issue with
the removal of the chairs. Through the representation of herein respondent, they
initiated the grievance machinery of the Collective Bargaining Agreement (CBA),
but failed to arrive at an amicable settlement. The Arbitration Committee rendered
a decision in favor of the RPWU, but later reversed and set aside by the CA.
ISSUE:
Whether or not the removal of the chairs in the bottling line under the “I Operate,
I Maintain, I Clean" program of the CCBPI is a valid exercise of management
prerogative and does not run contrary to Article 100 of the Labor Code.
HELD:
Yes, it is a valid exercise of management prerogative. The Court has held that
management is free to regulate, according to its own discretion and judgment, all
aspects of employment, including hiring, work assignments, working methods,
time, place, and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay-off of
workers, and discipline, dismissal and recall of workers. The exercise of
management prerogative, however, is not absolute as it must be exercised in good
faith and with due regard to the rights of labor. In the present controversy, it
cannot be denied that CCBPI removed the operators’ chairs pursuant to a national
directive and in line with its "I Operate, I Maintain, I Clean" program, launched to
enable the Union to perform their duties and responsibilities more efficiently. The
chairs were not removed indiscriminately. They were carefully studied with due
regard to the welfare of the members of the Union. The removal of the chairs was
compensated by: a) a reduction of the operating hours of the bottling operators
from a two-and-one-half (2 ½)-hour rotation period to a one-and-a-half (1 ½)
hour rotation period; and b) an increase of the break period from 15 to 30 minutes
between rotations. Apparently, the decision to remove the chairs was done with
good intentions as CCBPI wanted to avoid instances of operators sleeping on the
job while in the performance of their duties and responsibilities and because of the
fact that the chairs were not necessary considering that the operators constantly
move about while working. In short, the removal of the chairs was designed to
increase work efficiency. Hence, CCBPI’s exercise of its management prerogative
was made in good faith without doing any harm to the workers’ rights.
G.R. No. 78261-62 March 8, 1989
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
HON. LABOR ARBITER ARIEL C. SANTOS, PHILIPPINE ASSOCIATION OF
FREE LABOR UNIONS (PAFLU-RMC CHAPTER) and its members,
MICHAEL PENALOSA, ET AL., SAMAHANG DIWANG MANGGAGAWA SA
RMC-FFW CHAPTER, and its members, JAIME ARADA, ET AL., respondents.
This petition calls for the interpretation of Article 110 of the Labor Code which
gives the workers preferences as regards wages in case of liquidation or
bankruptcy of an employer's business. Petitioner Development Bank of the
Philippines (DBP) maintains the Article 110 does not apply where there has been
an extra-judicial foreclosure proceeding while the respondents claim otherwise.
Labor Arbiter Ariel C. Santos sustained the private respondent's position. Petitioner
DBP has now elevated the case to us by way of this petition for certiorari.
On November 29,1984, in NLRC-NCR Case No. 2517-84 entitled "Philippine
Association of Free Labor Unions (PAFLU-RMC Chapter) and its Members v.
Riverside Mills Corporation, et al.", Labor Arbiter Manuel Caday awarded
separation pay, wage and/or living allowance increases and 13th month pay to the
individual complainants who comprise some of the respondents in this case.
On March 18, 1985, Labor Arbiter Teodorico Dogelio likewise awarded separation
pay, vacation and sick leave pay and unpaid increases in the basic wage and
allowances to the other private respondents herein in NLRC Case No. NCR-7-2577-
84 entitled "Michael Penalosa, Jose Garcia and Apolinar Ray, et al., v. Riverside
Mills Corporation, et al., and Samahang Diwang Manggagawa sa RMC-FFW
Chapter, et al., v. Riverside Mills Corporation (RMC)." On March 29, 1985, after the
judgment had become final and executory, Dogelio issued a writ of execution
directing NLRC Deputy Sheriff Juanita Atienza to collect the total sum of Eighty
Five Million Nine Hundred Sixty One thousand Fifty-Eight & 70/100 Pesos
(P85,961,058.70). The Deputy Sheriff, however, failed to collect the amount so he
levied upon personal and real properties of RMC.
On April 25, 1985, a notice of levy on execution of certain real properties was
annotated on the certificate of title filed with the Register of Deeds of Pasig, Metro
Manila, where all the said properties are situated.
Meanwhile in the other development which led to this case, petitioner DBP
obtained a writ of possession on June 7, 1985 from the Regional Trial Court (RTC)
of Pasig of all the properties of RMC after having extra-judicially foreclosed the
same at public auction earlier in 1983. DBP subsequently leased the said
properties to Egret Trading and Manufacturing Corporation, Rosario Textile Mills
and General Textile Mills.
The writ of possession prevented the scheduled auction sale of the RMC properties
which were levied upon by the private respondents. As a result, on June 19, 1985,
the latter filed an incidental petition with the NLRC to declare their preference over
the levied properties. The petition entitled "PAFLU-RMC Chapter and its members,
Michael Penalosa, et al., and the Samahang Diwang Manggagawa sa RMC-FFW
Chapter and its members v. RMC and DBP, et al." was docketed as NLRC Case No.
NCR-7-2577-84. Petitioner DBP filed its position paper and memorandum in
answer to the petition.
On October 31, 1985, Dogelio issued an order recognizing and declaring the
respondents' first preference as regards wages and other benefits due them over
and above all earlier encumbrances on the aforesaid properties/assets of said
company, particulary those being asserted by respondent Development Bank of
the Philippines.' (p. 84, Rollo)
The petitioner appealed the order of Dogelio to the NLRC. The latter in turn, set
aside the order and remanded the case to public respondent Labor Arbiter Santos
for further proceedings.
Meanwhile, another set of complainants (who are also named as respondents
herein) filed, on April 7, 1986, a complaint for separation pay, underpayment,
damages, etc., entitled 'Jaime Arada, et al. v. RMC, DBP, Egret Trading and
Manufacturing Corp., docketed as NLRC Case No. NCR-4-1278-86." This case was
subsequently consolidated with the case pending before respondent Santos.
Accordingly, the latter conducted several hearings where the parties, particulary
DBP, General Textile Mills, Inc., and Rosario Textile Mills, Inc., were given the
opportunity to argue their respective theories of the case. Eventually, all the
parties agreed that the case shall be submitted for decision after their filing of
positions papers and/or memorandums.
On March 31, 1987, public respondent Santos rendered the questioned decision,
the dispositive portion of which reads:
WHEREFORE, it is hereby declared that all the complainants in the above- entitled
cases, as former employees of respondent Riverside Mills Corporation, enjoy first
preference as regards separation pay, unpaid wages and other benefits due them
over and above all earlier encumbrances on all of the assets/properties of RMC
specifically those being asserted by respondent DBP.
As a consequence of the above declaration, the decision dated March 18, 1983 of
the then Hon. Arbiter Teodorico Dogelio should be immediately enforced against
DBP who is hereby directed to pay all the monetary claims of complainants who
were former employees of respondent RMC.
Anent the Arada case, DBP is hereby directed to pay all the amounts as indicated
opposite the names of complainants listed from page I to page 5 of Annex "A" of
complainants' complaint provided that their names are not among those listed in
the Penalosa case.
It is hereby also declared that former employees whose names are not listed in
the complainants' position papers but can prove that they were former employees
of RMC prior to its bankruptcy, should also be paid the same monetary benefits
being granted to herein complainants.
Finally, DBP is hereby ordered to deposit with the National Labor Relations
Commission the proceeds of the sale of the assets of RMC between DBP on one
hand and General Textile Mills, Inc. and/ or Rosario Textile Mills, Inc., on the other
hand and that future payment being made by the latter to the former should be
deposited with the National Labor Relations Commission for proper disposition.
(pp. 174-175, Rollo)
Hence, this petition.
Petitioner DBP maintains that the public respondent misinterpreted Article 110 of
the Labor Code and Section 10, Rule VIII, Book III of the Revised Rules and
Regulations Implementing the Labor Code in that the said respondent upheld the
existence of the worker's preference over and above earlier encumbrances on the
properties of RMC despite the absence of any bankruptcy or liquidation proceeding
instituted against the latter. The petitioner argues that there must be a judicial
declaration, or at the very least, a cognizance by an appropriate court or
administrative agency of bankruptcy or inability of the employer to meet its
obligations.
On the other hand, the respondents contend that under both Article 110 and its
implementing rule, the claims of the laborers for unpaid wages and other
monetary benefits due them for services rendered prior to bankruptcy enjoy first
preference in the satisfaction of credits against a bankrupt company; that the
word "bankruptcy" in the Labor Code is used in its generic sense, meaning that
condition of inability to pay one's debt; and that Article 110 of the Labor Code is
not confined to the situation contemplated in Articles 2236-2245 of the Civil Code
where all the preferred creditors must necessarily be convened and the import of
their claims ascertained.
We apply the rule expressed in Republic v. Peralta (150 SCRA 37 [1988] ), where
we stated:
Article 110 of the Labor Code, in determining the reach of its terms, cannot be
viewed in isolation. Rather, Article 110 must be read in relation to the provisions of
the Civil Code concerning the classification, concurrence and preference of credits,
which provisions find particular application in insolvency proceedings where the
claims of all creditors, prefer red or non-preferred, may be adjudicated in a
binding manner. (Barreto v. Villanueva, 1 SCRA 288 [ 1961] ). (pp. 44-45)
In the above quoted case, there was a voluntary insolvency proceeding instituted
by the employer. The respondents, however, contend that since in the case at bar
there is only an extra-judicial proceeding, Article 110 is still the only law applicable
without regard to the provisions of the Civil Code.
We do not agree with this contention.
Article 110 of the Labor Code and Section 10, Rule VIII, Book III of the Revised
Rules and Regulations Implementing the Labor Code provide:
Article 110. Worker preference in case of bankruptcy in the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
Unpaid wages shall be paid in full before other creditors may establish any claim
to a share in the assets of the employer.
Article 10. Payment of wages in case of bankruptcy. Unpaid wages earned by the
employee before the declaration of bankruptcy or judicial liquidation of the
employer's business shall be given first preference and shall be paid in full before
other creditors may establish any claim to the assets of the employer.
It is quite clear from the provisions that a declaration of bankruptcy or a judicial
liquidation must be present before the worker's preference may be enforced.
Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked
by the respondents in this case absent a formal declaration of bankruptcy or a
liquidation order. Following the rule in Republic v. Peralta, supra, to hold that
Article 110 is also applicable in extra-judicial proceedings would be putting the
worker in a better position than the State which could only assert its own prior
preference in case of a judicial proceeding. Therefore, as stated earlier, Article 110
must not be viewed in isolation and must always be reckoned with the provisions
of the Civil Code.
There was no issue of judicial vis-a-vis extra-judicial proceedings in the Republic v.
Peralta interpretation of Article 110 but the necessity of a judicial adjudication was
pointed out when we explained the impact of Article 110 on the concurrence and
preference of credits provided in the Civil Code.
We stated:
We come to the question of what impact Article 110 of the Labor Code has had
upon the complete scheme of classification, concurrence and preference of credits
in insolvency set out in the Civil Code. We believe and so hold that Article 110 of
the Labor Code did not sweep away the overriding preference accorded under the
scheme of the Civil Code to tax claims of the government or any subdivision
thereof which constitute a lien upon properties of the Insolvent. ... It cannot be
assumed simpliciter that the legislative authority, by using Article 110 of the words
'first preference' and any provisions of law to the contrary notwithstanding
intended to disrupt the elaborate and symmetrical structure set up in the Civil
Code. Neither can it be assumed casually that Article 110 intended to subsume the
sovereign itself within the term 'other creditors', in stating that 'unpaid wages shall
be paid in full before other creditors may establish any claim to a share in the
assets of employer.' Insistent considerations of public policy prevent us from
giving to 'other creditors a linguistically unlimited scope that would embrace the
universe of creditors save only unpaid employees.
Moreover, the reason behind the necessity for a judicial proceeding or a
proceeding in rem before the concurrence and preference of credits may be
applied was explained by this Court in the case of Philippine Savings Bank v.
Lantin (124 SCRA 476 [1983] ).

We said:
The proceedings in the court below do not partake of the nature of the insolvency
proceedings or settlement of a decedent's estate. The action filed by Ramos was
only to collect the unpaid cost of the construction of the duplex apartment. It is far
from being a general liquidation of the estate of the Tabligan spouses.
Insolvency proceedings and settlement of a decedent's estate are both
proceedings in rem which are binding against the whole world. All persons having
interest in the subject matter involved, whether they were notified or not, are
equally bound. Consequently, a liquidation of similar import or 'other equivalent
general liquidation must also necessarily be a proceeding in rem so that all
interested persons whether known to the parties or not may be bound by such
proceeding.
In the case at bar, although the lower court found that 'there were no known
creditors other than the plaintiff and the defendant herein', this can not be
conclusive. It will not bar other creditors in the event they show up and present
their claim against the petitioner bank, claiming that they also have preferred liens
against the property involved. Consequently, Transfer Certificate of Title No.
101864 issued in favor of the bank which is supposed to be indefeasible would
remain constantly unstable and questionable. Such could not have been the
intention of Article 2243 of the Civil Code although it considers claims and credits
under Article 2242 as statutory liens. Neither does the De Barreto case ... .
The claims of all creditors whether preferred or non-preferred, the identification of
the preferred ones and the totality of the employer's asset should be brought into
the picture, There can then be an authoritative, fair, and binding adjudication
instead of the piece meal settlement which would result from the questioned
decision in this case.
We, therefore, hold that Labor Arbiter Ariel C. Santos committed grave abuse of
discretion in ruling that the private respondents may enforce their first preference
in the satisfaction of their claims over those of the petitioner in the absence of a
declaration of bankruptcy or judicial liquidation of RMC. There is, of course,
nothing in this decision which prevents the respondents from instituting
involuntary insolvency or any other appropriate proceeding against their employer
RMC where respondents' claims can be asserted with respect to their employer's
assets.
WHEREFORE, the petition is hereby GRANTED. The questioned decision of the
public respondent is ANNULLED and SET ASIDE. The Temporary Restraining Order
we issued on May 20, 1987 enjoining the enforcement of the questioned decision
is made PERMANENT. No costs.
SO ORDERED.
G.R. No. 79351 November 28, 1989
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.THE HON. SECRETARY
OF LABOR, CRESENCIA DIFONTORUM, ET AL., respondents.
Facts of the case:
Private respondents won a case for illegal dismissal, unfair labor practice, illegal
deductions from salaries and violation of the minimum wage law against Riverside
Mills Corporation. Consequently, a writ of execution was issued, on October 22,
1985 , against the goods and chattel of RMC. Said assets however had already
been foreclosed by petitioner Development Bank of the Philippines (DBP) through
an extra-judicial proceedings as early as 1983. Private respondents, in a motion,
moved for the delivery of RMC properties in possession of DBP, relying on the
provisions of Article 110 of the Labor Code giving them first preference over the
mortgaged properties of RMC for the satisfaction of the judgment rendered in their
favor. Which motion was granted. On appeal, the decision was affirmed.
Issue:
Whether or not Article 110 of the Labor Code finds application on the instant case.
Article 110 provides that in case of bankruptcy or liquidation of an employer's
business, his workers enjoy first preference as regards wages due them for
services rendered during the period prior to the bankruptcy or liquidation.
Ruling:
The Supreme Court held that Article 110 cannot be applied in the instant case
because the important requisite that employer's business must be bankrupt is
lacking. The Supreme Court ruled that in the Philippine jurisdiction, bankruptcy,
insolvency and general judicial liquidation proceedings are the only means to
establish that a business is bankrupt or insolvent. Absent of such judicial
declaration, the business cannot be considered bankrupt for the purpose of
applying the provisions of Article 110.
 G.R. Nos. 82763-64 March 19, 1990
DEVELOPMENT BANK OF THE PHILIPPINES, vs. NLRC
FACTS:
LIRAG was a mortgage debtor of DBP. LAND was the bargaining representative of
the more or less 800 former rank and file employees of LIRAG., LIRAG started
terminating the services of its employees on the ground of retrenchment. LIRAG
has since ceased operations presumably due to financial reverses.
Joselito Albay, one of the employees dismissed, filed a complaint before NLRC
against LIRAG for illegal dismissal . LAND also filed a Complaint against LIRAG
seeking separation pay, 13th month pay, gratuity pay, sick leave and vacation
leave pay and emergency allowance . These two cases were consolidated and
jointly heard by the NLRC. Labor Arbiter ordered LIRAG to pay the individual
complainants. The NLRC affirmed . That judgment became final and executory. A
Writ of Execution was issued.
DBP extrajudicially foreclosed the mortgaged properties for failure of LIRAG to pay
its mortgage obligation. DBP acquired said mortgaged properties for
P31,346,462.90. Since DBP was the sole mortgagee, no actual payment was
made, the amount of the bid having been merely credited in partial satisfaction of
LIRAG's indebtedness.
By reason of said foreclosure, the Writ of Execution issued in favor of the
complainants remained unsatisfied. LAND filed a "Motion for Writ of Execution and
Garnishment" of the proceeds of the foreclosure sale. Labor Arbiter granted the
Writ of Garnishment and directed DBP to remit to the NLRC the sum of
P6,292,380.00 out of the proceeds of the foreclosed properties of LIRAG sold at
public auction in order to satisfy the judgment previously rendered.
DBP sought reconsideration which was denied. DBP appealed that denial to the
NLRC which affirmed the appealed Order and dismissed the DBP appeal.
The Asset Privatization Trust (APT) became the transferee of the DBP foreclosed
assets of LIRAG. A partial Compromise Agreement was entered into between APT
and LAND whereby APT paid the complainants-employees, ex gratia, the sum of
P750,000.00 "in full settlement of their claims, past and present, with respect to
all assets of LITEX transferred by DBP to APT”.
However LAND filed its opposition to the Compromise Agreement for being
contrary to law, morals and public policy.
ISSUE:
Whether or not the NLRC gravely abused its discretion in affirming the Order
of the Labor Arbiter granting the Writ of Garnishment out of the proceeds of
LIRAG's properties foreclosed by DBP to satisfy the judgment in these cases.
RULING:
We are constrained to rule in the affirmative.
Article 110 of the Labor Code provides: Worker preference in case of bankruptcy.
— In the event of bankruptcy or liquidation of an employer's business, his workers
shall enjoy first preference as regards wages due them for services rendered
during the period prior to the bankruptcy or liquidation, any provision to the
contrary notwithstanding. Unpaid wages shall be paid in full before other creditors
may establish any claim to a share in the assets of the employer.
Because of its impact on the entire system of credit, Article 110 of the Labor Code
cannot be viewed in isolation but must be read in relation to the Civil Code scheme
on classification and preference of credits.
In the event of insolvency, a principal objective should be to effect an equitable
distribution of the insolvent's property among his creditors. To accomplish this
there must first be some proceeding where notice to all of the insolvents’ creditors
may be given and where the claims of preferred creditors may be bindingly
A distinction should be made between a preference of credit and a lien. A
preference applies only to claims which do not attach to specific properties. A lien
creates a charge on a particular property. The right of first preference as regards
unpaid wages recognized by Article 110 does not constitute a lien on the property
of the insolvent debtor in favor of workers. It is but a preference of credit in their
favor, a preference in application. It is a method adopted to determine and specify
the order in which credits should be paid in the final distribution of the proceeds of
the insolvent's assets. It is a right to a first preference in the discharge of the
funds of the judgment debtor.
The DBP anchors its claim on a mortgage credit. A mortgage directly and
immediately subjects the property upon which it is imposed, whoever the
possessor may be, to the fulfillment of the obligation for whose security it was
constituted (Article 2176, Civil Code). It creates a real right which is enforceable
against the whole world. It is a lien on an identified immovable property, which a
preference is not. A recorded mortgage credit is a special preferred credit under
Article 2242 (5) of the Civil Code on classification of credits. The preference given
by Article 110, when not falling within Article 2241 (6) and Article 2242 (3) of the
Civil Code and not attached to any specific property, is an ordinary preferred credit
although its impact is to move it from second priority to first priority in the order of
preference established by Article 2244 of the Civil Code (Republic vs.
Peralta, supra).
Separate Opinions
CRUZ, J., dissenting:
I was the lone dissenter in Republic v. Peralta, 150 SCRA 37, which is the
mainstay of the present majorityponencia. Even then, I was convinced that it was
the intention of the legislature to give absolute preference to the workers' claims
pursuant to the social justice policy. The amendment of Article 110 of the Labor
Code only strengthens that conviction and, I like to think, vindicates my original
position. I reiterate it now and repeat that:
Social Justice is not a mere catch phrase to be mouthed with sham fervor in Labor
Day celebrations for the delectation and seduction of the working class. It is a
mandate we should pursue with energy and sincerity if we are to truly insure the
dignity and well-being of the laborer.
I am proud to dissent once again on the side of labor.
PADILLA, J., dissenting:
The material facts are riot disputed. Lirag Textile (LIRAG) ceased operations by
early 1982. Pursuant to a final and executory judgment of the NLRC, dated 20
March 1983, LIRAG was adjudged liable to its workers for unpaid wages and
salaries which, as of 12 February 1986, amounted to P6,292,380.00.
LIRAG's only remaining asset was mortgaged to Development Bank of the
Philippines (DBP) which on 15 April 1983 foreclosed the mortgage and acquired
said property at public auction for P31,346.462.90, in partial satisfaction of
LIRAG's indebtedness to DBP. LIRAG's workers through their union (LAND)
thereupon sought to garnish on DBP the proceeds of the foreclosure sale, to the
extent of their adjudged unpaid wages (P6,292,380.00). The NLRC ruled for LAND
over DBP's objection. The issue therefore, in practical terms, is whether
P6,292,380.00 should be deducted from the P31,346,462.90 realized by DBP from
the foreclosure sale of LIRAG's property, to fully satisfy LAND's claim for LIRAG
workers' unpaid wages, thereby leaving a balance of P25,054,082.90 only in
partial satisfaction of LIRAG's debt to DBP.
The majority holds that LAND may not enforce its first preference in the
satisfaction of unpaid monetary claims of its members, viz. LIRAG's workers, over
that of DBP, in the absence of a formal declaration of bankruptcy or judicial
liquidation of LIRAG's business.
I regret that I cannot join the majority ruling in the light of the amendment to
Article 110 of the Labor Code by Republic Act 6715, approved on 2 March 1989,
and the resultant amendment of Section 10, Rule VIII, Book III of the Revised
Rules and Regulations Implementing the Labor Code.
Before its amendment by Republic Act 6715, Article 110 of the Labor Code
provided —
Worker preference in case of bankruptcy. — In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
Unpaid wages shall be paid in full before other creditors may establish any claim
to a share in the assets of the employer.
After Republic Act 6715, Art. 110 now provides:
Worker preference in case of bankruptcy. — In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards their wages and other monetary claims, any provisions of law to the
contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in
full before claims of the government and other creditors may be paid.
Section 10 of the Implementing Rules, before Republic Act 6715 provided:
Payment of wages in case of bankruptcy. — Unpaid wages earned by the
employees before the declaration of bankruptcy or judicial liquidation of the
employer's business shall be given first preference and shall be paid in full before
other creditors may establish any claim to a share in the assets of the employer.
After Republic Act 6715, Section 10 of the Rules now provides:
Payment of wages and other monetary claims in case of bankruptcy. — In case of
bankruptcy or liquidation of the employer's business, the unpaid wages and other
monetary claims of the employees shall be given first preference and shall be paid
in full before the claims of government and other creditors may be paid.
The majority, in my considered opinion, has failed to fully take into account the
radical change introduced by Republic Act 6715 into the system of priorities or
preferences among credits or creditors ordained by the Civil Code.
Under the provisions of the Civil Code, specifically, Articles 2241 and 2242, jointly
with Articles 2246 to 2249, a two-tier order of preference of credits is established.
The first tier includes only taxes, duties and fees on specific movable or
immovable property. All other special preferred credits stand on a second tier. 1
Under the system of preferences in the Civil Code, only taxes enjoy absolute
preference i.e., they exclude the credits of the lower order until such taxes are
fully satisfied out of the proceeds of the sale of the property subject of the
preference, and taxes can even exhaust such proceeds. All other special preferred
credits enjoy no priority among themselves but must be paid or satisfied pro rata.
To make the prorating fully effective, the preferred creditors enumerated in Nos. 2
to 13 of Article 2241 and Nos. 2 to 10 of Article 2242 must be convened and the
import of their claims ascertained in some proceeding where the claims of all may
be bindingly adjudicated.
With the amendment of Article 110 of the Labor Code by Republic Act 6715, a
three-tier order of preference is established wherein unpaid wages and other
monetary claims of workers enjoy absolute preference over all other claims,
including those of the Government, in cases where a debtor-employer is unable to
pay in full all his obligations. The absolute preference given to monetary claims of
workers, to which claims of the Government, i.e., taxes, are now subordinated,
manifests the clear and deliberate intent of our lawmaker to put flesh and blood
into the expressed Constitutional policy of protecting the rights of workers and
promoting their welfare. 2
I thus take exception to the proposition that a prior formal declaration of
insolvency or bankruptcy or a judicial liquidation of the employer's business is a
condition sine qua non to the operation of the preference accorded to workers
under Article 110 of the Labor Code, for the following specific reasons:
First, the majority reads into the aforesaid law and implementing rule a
qualification that is not there. Nowhere is it stated in the present law and
its new implementing rule that a prior declaration of bankruptcy or judicial
liquidation is a condition sine qua non to the operation of Article 110. In fact, it will
be noted that the phrase declaration of bankruptcy or judicial liquidation of the
employer's business, which formerly appeared in Section 10, Rule VIII, Book III of
the Revised Rules and Regulations Implementing the Labor Code has been deleted
in the new implementing rule. What is to me even more obvious and, therefore,
significant in the present law and implementing new rule is
the unconditional and unqualified grant of priority to workers' monetary claims
over and above all other claims as against all the assets of an employer incapable
of fully paying his obligations.
Second, a proceeding in rem, by its nature, seeks to bar any other person who
claims any interest in the property or right subject of the suit. To my mind, such a
proceeding is not essential or necessary to enforce the workers' preferential right
over the assets of the insolvent debtor as against other creditors of the lower tier,
as Article 110 of the Labor Code itself bars the satisfaction of claims of other
creditors, including the Government, until unpaid wages and monetary claims of
the workers are first satisfied in full. Further, it appears that such a proceeding is
essential only where the credits are concurring and enjoy no preference over one
another, but not when the law accords to one of the credits absolute
priority and undisputed supremacy. This submission finds support, by analogy, in
the case of De Barreto vs. Villanueva, where the Court stated:
Thus it becomes evident that one preferred creditor's third party claim to the
proceeds of the foreclosure (as in the case now before us) is not the proceeding
contemplated by law for the enforcement of preference under Article 2242, unless
the claimant were enforcing credit for taxes that enjoy absolute priority. If none of
the claim is for taxes, a dispute between two creditors will not enable the court to
ascertain the prorata dividend corresponding to each, because the rights of other
creditors likewise enjoying preference under Article 2242 cannot be
ascertained. 3 (Emphasis ours)
In sum, it is to me clear that, whether or not there be a judicial proceeding in rem,
i.e., insolvency, bankruptcy or liquidation proceedings, the fact remains that
Congress intends that the assets of the insolvent debtor be held, first and above
all else, to satisfy in full the unpaid wages and monetary claims of its workers.
Translated into the case at bar, a formal declaration of insolvency or bankruptcy or
judicial liquidation of the employer's business should not be a price imposed upon
the workers to enable them to get their much needed and already adjudicated
unpaid wages. This position, I believe, is only in keeping with a fundamental state
policy enshrined in the Constitutional mandate to accord protection to labor. The
legislative intent being clear and manifest, it is the duty of this Court, I submit, not
to decimate but to give it breath and life.
ACCORDINGLY, I vote to DISMISS the DBP petition and to AFFIRM the resolution
of the NLRC in favor of LAND.
Paras, J., concur.
SARMIENTO, J., dissenting:
I join Mr. Justice Teodoro Padilla in his dissent. It is also my considered opinion
that under Republic Act No. 6715, the payment of unpaid wages and other
benefits to labor enjoys preference over all other indebtedness, including taxes, of
management, with or without a declaration of insolvency.
It is likewise so, because labor enjoys protection not only from statute but from
the very Constitution. Thus:
Sec. 18. The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare. (Article II)
xxx xxx xxx
Sec. 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality or employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the right
to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy
and decision-making processes affecting their rights and benefits as may be
provided by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes,
including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.
The State shall regulate the relations between workers and employers recognizing
the right of labor to its just share in the fruits of production and the right of
enterprises to reasonable returns on investments, and to expansion and growth.
(Article XIII)
On the other hand, under the Labor Code:
Art. 3. Declaration of basic policy — The State shall afford protection to labor,
promote full employment, ensure equal work opportunities regardless of sex, race
or creed and regulate the relations between workers and employers. The State
shall assure the rights of workers to self-organization, collective bargaining
security of tenure, and just and humane conditions of work.
Art. 4. Construction in favor of labor — All doubts in the implementation and
interpretation of the provisions of this code, including its implementing rules and
regulations, shall be resolved in favor of labor.
Under the Civil Code:
Art. 1700. The relations between capital and labor are not merely contractual.
They are so impressed with public interest that labor contracts must yield to the
common good. Therefore, such contracts are subject to the special laws on labor
unions, collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.
xxx xxx xxx
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the laborer.
It is true that under the Charter, "[n]o person shall be deprived," among other
things, "of property without due process of law," however, the basic document
also states, that:
Sec. 6. The use of property bears a social function, and all economic agents shall
contribute to the common good. Individuals and private groups, including
corporations, cooperatives, and similar collective organizations, shall have the right
to own, establish, and operate economic enterprises, subject to the duty of the
State to promote distributive justice and to intervene when the common good so
demands. (Article XII)
Pascual says that in any productive economy, the first factor is labor. [PASCUAL,
LABOR AND TENANCY RELATIONS LAW 2 (1975 ed.)]. I agree with him. For in
any enterprise, it is labor on which management depends to run its business, to till
its land, and to make its money. Yet, labor has been the doormat of the economy
when it should be its hub. And now, we will make them fall in line along with
creditors of management in collecting what it (labor) already owns — its just
wages. I do not think that this is in accord with established State policies.
Separate Opinions
CRUZ, J., dissenting:
I was the lone dissenter in Republic v. Peralta, 150 SCRA 37, which is the
mainstay of the present majorityponencia. Even then, I was convinced that it was
the intention of the legislature to give absolute preference to the workers' claims
pursuant to the social justice policy. The amendment of Article 110 of the Labor
Code only strengthens that conviction and, I like to think, vindicates my original
position. I reiterate it now and repeat that:
Social Justice is not a mere catch phrase to be mouthed with sham fervor in Labor
Day celebrations for the delectation and seduction of the working class. It is a
mandate we should pursue with energy and sincerity if we are to truly insure the
dignity and well-being of the laborer.
I am proud to dissent once again on the side of labor.
PADILLA, J., dissenting:
The material facts are riot disputed. Lirag Textile (LIRAG) ceased operations by
early 1982. Pursuant to a final and executory judgment of the NLRC, dated 20
March 1983, LIRAG was adjudged liable to its workers for unpaid wages and
salaries which, as of 12 February 1986, amounted to P6,292,380.00.
LIRAG's only remaining asset was mortgaged to Development Bank of the
Philippines (DBP) which on 15 April 1983 foreclosed the mortgage and acquired
said property at public auction for P31,346.462.90, in partial satisfaction of
LIRAG's indebtedness to DBP. LIRAG's workers through their union (LAND)
thereupon sought to garnish on DBP the proceeds of the foreclosure sale, to the
extent of their adjudged unpaid wages (P6,292,380.00). The NLRC ruled for LAND
over DBP's objection. The issue therefore, in practical terms, is whether
P6,292,380.00 should be deducted from the P31,346,462.90 realized by DBP from
the foreclosure sale of LIRAG's property, to fully satisfy LAND's claim for LIRAG
workers' unpaid wages, thereby leaving a balance of P25,054,082.90 only in
partial satisfaction of LIRAG's debt to DBP.
The majority holds that LAND may not enforce its first preference in the
satisfaction of unpaid monetary claims of its members, viz. LIRAG's workers, over
that of DBP, in the absence of a formal declaration of bankruptcy or judicial
liquidation of LIRAG's business.
I regret that I cannot join the majority ruling in the light of the amendment to
Article 110 of the Labor Code by Republic Act 6715, approved on 2 March 1989,
and the resultant amendment of Section 10, Rule VIII, Book III of the Revised
Rules and Regulations Implementing the Labor Code.
Before its amendment by Republic Act 6715, Article 110 of the Labor Code
provided —
Worker preference in case of bankruptcy. — In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
Unpaid wages shall be paid in full before other creditors may establish any claim
to a share in the assets of the employer.
After Republic Act 6715, Art. 110 now provides:
Worker preference in case of bankruptcy. — In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards their wages and other monetary claims, any provisions of law to the
contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in
full before claims of the government and other creditors may be paid.
Section 10 of the Implementing Rules, before Republic Act 6715 provided:
Payment of wages in case of bankruptcy. — Unpaid wages earned by the
employees before the declaration of bankruptcy or judicial liquidation of the
employer's business shall be given first preference and shall be paid in full before
other creditors may establish any claim to a share in the assets of the employer.
After Republic Act 6715, Section 10 of the Rules now provides:
Payment of wages and other monetary claims in case of bankruptcy. — In case of
bankruptcy or liquidation of the employer's business, the unpaid wages and other
monetary claims of the employees shall be given first preference and shall be paid
in full before the claims of government and other creditors may be paid.
The majority, in my considered opinion, has failed to fully take into account the
radical change introduced by Republic Act 6715 into the system of priorities or
preferences among credits or creditors ordained by the Civil Code.
Under the provisions of the Civil Code, specifically, Articles 2241 and 2242, jointly
with Articles 2246 to 2249, a two-tier order of preference of credits is established.
The first tier includes only taxes, duties and fees on specific movable or
immovable property. All other special preferred credits stand on a second tier. 1
Under the system of preferences in the Civil Code, only taxes enjoy absolute
preference i.e., they exclude the credits of the lower order until such taxes are
fully satisfied out of the proceeds of the sale of the property subject of the
preference, and taxes can even exhaust such proceeds. All other special preferred
credits enjoy no priority among themselves but must be paid or satisfied pro rata.
To make the prorating fully effective, the preferred creditors enumerated in Nos. 2
to 13 of Article 2241 and Nos. 2 to 10 of Article 2242 must be convened and the
import of their claims ascertained in some proceeding where the claims of all may
be bindingly adjudicated.
With the amendment of Article 110 of the Labor Code by Republic Act 6715, a
three-tier order of preference is established wherein unpaid wages and other
monetary claims of workers enjoy absolute preference over all other claims,
including those of the Government, in cases where a debtor-employer is unable to
pay in full all his obligations. The absolute preference given to monetary claims of
workers, to which claims of the Government, i.e., taxes, are now subordinated,
manifests the clear and deliberate intent of our lawmaker to put flesh and blood
into the expressed Constitutional policy of protecting the rights of workers and
promoting their welfare. 2
I thus take exception to the proposition that a prior formal declaration of
insolvency or bankruptcy or a judicial liquidation of the employer's business is a
condition sine qua non to the operation of the preference accorded to workers
under Article 110 of the Labor Code, for the following specific reasons:
First, the majority reads into the aforesaid law and implementing rule a
qualification that is not there. Nowhere is it stated in the present law and
its new implementing rule that a prior declaration of bankruptcy or judicial
liquidation is a condition sine qua non to the operation of Article 110. In fact, it will
be noted that the phrase declaration of bankruptcy or judicial liquidation of the
employer's business, which formerly appeared in Section 10, Rule VIII, Book III of
the Revised Rules and Regulations Implementing the Labor Code has been deleted
in the new implementing rule. What is to me even more obvious and, therefore,
significant in the present law and implementing new rule is
the unconditional and unqualified grant of priority to workers' monetary claims
over and above all other claims as against all the assets of an employer incapable
of fully paying his obligations.
Second, a proceeding in rem, by its nature, seeks to bar any other person who
claims any interest in the property or right subject of the suit. To my mind, such a
proceeding is not essential or necessary to enforce the workers' preferential right
over the assets of the insolvent debtor as against other creditors of the lower tier,
as Article 110 of the Labor Code itself bars the satisfaction of claims of other
creditors, including the Government, until unpaid wages and monetary claims of
the workers are first satisfied in full. Further, it appears that such a proceeding is
essential only where the credits are concurring and enjoy no preference over one
another, but not when the law accords to one of the credits absolute
priority and undisputed supremacy. This submission finds support, by analogy, in
the case of De Barreto vs. Villanueva, where the Court stated:
Thus it becomes evident that one preferred creditor's third party claim to the
proceeds of the foreclosure (as in the case now before us) is not the proceeding
contemplated by law for the enforcement of preference under Article 2242, unless
the claimant were enforcing credit for taxes that enjoy absolute priority. If none of
the claim is for taxes, a dispute between two creditors will not enable the court to
ascertain the prorata dividend corresponding to each, because the rights of other
creditors likewise enjoying preference under Article 2242 cannot be
ascertained. 3 (Emphasis ours)
In sum, it is to me clear that, whether or not there be a judicial proceeding in rem,
i.e., insolvency, bankruptcy or liquidation proceedings, the fact remains that
Congress intends that the assets of the insolvent debtor be held, first and above
all else, to satisfy in full the unpaid wages and monetary claims of its workers.
Translated into the case at bar, a formal declaration of insolvency or bankruptcy or
judicial liquidation of the employer's business should not be a price imposed upon
the workers to enable them to get their much needed and already adjudicated
unpaid wages. This position, I believe, is only in keeping with a fundamental state
policy enshrined in the Constitutional mandate to accord protection to labor. The
legislative intent being clear and manifest, it is the duty of this Court, I submit, not Art. 1700. The relations between capital and labor are not merely contractual.
to decimate but to give it breath and life. They are so impressed with public interest that labor contracts must yield to the
ACCORDINGLY, I vote to DISMISS the DBP petition and to AFFIRM the resolution common good. Therefore, such contracts are subject to the special laws on labor
of the NLRC in favor of LAND. unions, collective bargaining, strikes and lockouts, closed shop, wages, working
Paras, J., concur. conditions, hours of labor and similar subjects.
xxx xxx xxx
SARMIENTO, J., dissenting: Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be
I join Mr. Justice Teodoro Padilla in his dissent. It is also my considered opinion construed in favor of the safety and decent living for the laborer.
that under Republic Act No. 6715, the payment of unpaid wages and other It is true that under the Charter, "[n]o person shall be deprived," among other
benefits to labor enjoys preference over all other indebtedness, including taxes, of things, "of property without due process of law," however, the basic document
management, with or without a declaration of insolvency. also states, that:
It is likewise so, because labor enjoys protection not only from statute but from Sec. 6. The use of property bears a social function, and all economic agents shall
the very Constitution. Thus: contribute to the common good. Individuals and private groups, including
Sec. 18. The State affirms labor as a primary social economic force. It shall protect corporations, cooperatives, and similar collective organizations, shall have the right
the rights of workers and promote their welfare. (Article II) to own, establish, and operate economic enterprises, subject to the duty of the
xxx xxx xxx State to promote distributive justice and to intervene when the common good so
Sec. 3. The State shall afford full protection to labor, local and overseas, organized demands. (Article XII)
and unorganized, and promote full employment and equality or employment Pascual says that in any productive economy, the first factor is labor. [PASCUAL,
opportunities for all. LABOR AND TENANCY RELATIONS LAW 2 (1975 ed.)]. I agree with him. For in
It shall guarantee the rights of all workers to self-organization, collective any enterprise, it is labor on which management depends to run its business, to till
bargaining and negotiations, and peaceful concerted activities, including the right its land, and to make its money. Yet, labor has been the doormat of the economy
to strike in accordance with law. They shall be entitled to security of tenure, when it should be its hub. And now, we will make them fall in line along with
humane conditions of work, and a living wage. They shall also participate in policy creditors of management in collecting what it (labor) already owns — its just
and decision-making processes affecting their rights and benefits as may be wages. I do not think that this is in accord with established State policies.
provided by law. Footnotes
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes,
including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.
The State shall regulate the relations between workers and employers recognizing
the right of labor to its just share in the fruits of production and the right of
enterprises to reasonable returns on investments, and to expansion and growth.
(Article XIII)
On the other hand, under the Labor Code:
Art. 3. Declaration of basic policy — The State shall afford protection to labor,
promote full employment, ensure equal work opportunities regardless of sex, race
or creed and regulate the relations between workers and employers. The State
shall assure the rights of workers to self-organization, collective bargaining
security of tenure, and just and humane conditions of work.
Art. 4. Construction in favor of labor — All doubts in the implementation and
interpretation of the provisions of this code, including its implementing rules and
regulations, shall be resolved in favor of labor.
Under the Civil Code: