LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2.

Excluded employees)
Cases
G.R. No. L-52824 March 16, 1988 In determining the existence of an employer-employee relationship, the
elements that are generally considered are the following : (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power
REYNALDO BAUTISTA, petitioner,
of dismissal; and (d) the employer's power to control the employee with
vs.
respect to the means and methods by which the work is to be
HON. AMADO C. INCIONG, in his capacity as Deputy Minister of Labor
accomplished. It is the so-called 'control test' that is the most important
and ASSOCIATED LABOR UNIONS (ALU), respondents.
element (Investment Planning Corp. of the Phils. v. The Social Security
System, 21 SCRA 492; Mafinco Trading Corp. v. Ople, supra, and Rosario
GUTIERREZ, JR., J.: Brothers, Inc. v. Ople, 131 SCRA 72)

This is an illegal dismissal case. The respondent Deputy Minister
dismissed the complaint of herein petitioner principally on the ground that
no employer-employee relationship existed between the petitioner and
respondent Associated Labor Unions (ALU).
The facts as found by the National Capital Region Director of the then
ministry of Labor (MOL) Region IV are as follows:
Complainant (petitioner) was employed by ALU as 'Organizer' in 1972 with
a starting salary of P250.00 a month. As such he paid his monthly SSS
contributions, with the respondent as his employer. On March 15, 1979, He
was left in the office of ALU while his other co-organizers were in Cainta,
Rizal attending a certification election at Chrysler Philippines, as he was
not the organizer assigned in said company. On March 16, 1979, he went
on sick leave for ten (10) days. His SSS sickness benefit application form
signed by ALU's physician was given to ALU for submission to the SSS.
On March 16, 1979, complainant reported back for work upon expiration of
his leave but was informed by ALU's Area Vice-President for Luzon of his
termination effective March 15, 1979. Hence, this complaint filed on March
28, 1979. On April 18, 1979, however, ALU filed a clearance application to
terminate complainant's services effective March 16, 1979 on the ground of
abandonment of work. (p. 48, Rollo)
Based on these findings, the Director ruled in favor of the petitioner and
ordered the respondent Union to reinstate the petitioner to his former
position with full backwages and to pay him emergency allowance, 13th
month pay and to refund his Mutual Aid Fund Deposit in the amount of P
370.00
In the case at bar, the Regional director correctly found that the petitioner
was an employee of the respondent union as reflected in the latter's
individual payroll sheets and shown by the petitioner's membership with the
Social Security System (SSS) and the respondent union's share of
remittances in the petitioner's favor. Even more significant, is the
respondent union's act of filing a clearance application with the MOL to
terminate the petitioner's services. Bautista was selected and hired by the
Union. He was paid wages by the Union. ALU had the power to dismiss
him as indeed it dismissed him. And definitely, the Union tightly controlled
the work of Bautista as one of its organizers. There is absolutely no factual
or legal basis got deputy Minister Inciong's decision.
We are, thus, constrained to reverse the findings of the respondent Deputy
Minister. However, the records show that antipathy and antagonism
between the petitioner and the respondent union militate against the
former's reinstatement. ALU would not want to have a union organizer
whom it does not trust and who could sabotage its efforts to unionize
commercial and industrial establishments. Severance pay, therefore, is
more proper in order. As we have ruled in the case of Asiaworld Publishing
House, Inc. v. Hon. Blas Ople, et al., (G.R. No. 56398, July 23, 1987)
quoting the cast of Balaquezon EWTU v. Zamora, (97 SCRA 5,8):
It should be underscored that the backwages are
being awarded on the basis of equity or in the nature
of severance pay. This means that a monetary award
is to be paid to the employees as an alternative to
reinstatement which can no longer be effected in view
of the long passage of time or because of the realities
of the situation. (Emphasis supplied)

Respondent ALU appealed to the Ministry of Labor. On October 23,1979, WHEREFORE, the petition is hereby GRANTED and the decision of the
the respondent Deputy Minister set aside the order of the Director and
respondent Deputy Minister is ANNULLED and SET ASIDE. The Order of
dismissed the petitioner's complaint for lack of merit. In his order, the Regional Director Francisco L. Estrella is REINSTATED and ordered
Deputy Minister found that the petitioner was merely accomodated by the executed but instead of returning the petitioner to his former position, the
respondent union after he was dismissed by his former employer sometime private respondent is ordered to pay him an amount equal to his
in 1972 and that his membership coverage with the SSS which shows that backwages for only three years and the separation pay to which he may be
respondent ALU is the one paying the employer's share in the premiums is entitled as of the end of the three year period under the applicable law or
not conclusive proof that respondent is the petitioner's employer because collective bargaining agreement.
such payments were performed by the respondent as a favor for all those
who were performing full time union activities with it to entitle them to SSS
benefits. The Deputy Minister further ruled that the non-existence of an SO ORDERED.
employer-employee relationship between the parties is bolstered by the
fact that respondent ALU is not an entity for profit but a duly registered
labor union whose sole purpose is the representation of its bona fide
organization units where it is certified as such.

In this petition, the petitioner contends that the respondent Deputy minister
committed grave abuse of discretion in holding that there was no employer-
employee relationship between him and the respondent union so much so
that he is not entitled to the benefits that he is praying for.

We agree with the petitioner.

There is nothing in the records which support the Deputy minister's

conclusion that the petitioner is not an employee of respondent ALU. The
mere fact that the respondent is a labor union does not mean that it cannot
be considered an employer of the persons who work for it. Much less
should it be exempted from the very labor laws which it espouses as labor
organization. In case of es v. Brotherhood Labor Unity Movement in the
Phillipines Zamora, ,(147 SCRA 49, 54), we outlined the factors in
ascertaining an employer-employee realtionship:

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LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
.R. No. L-53515 February 8, 1989 WHEREFORE, premises considered, the notice of strike filed by the
petitioner, San Miguel Brewery Sales Force Union-PTGWO is hereby
dismissed. Management however is hereby ordered to pay an additional
SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,
three (3) months back adjustment commissions over and above the
vs.
adjusted commission under the complementary distribution system. (p. 26,
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL
Rollo.)
CORPORATION, respondents.

The petition has no merit.

GRIÑO-AQUINO, J.:

This is a petition for review of the Order dated February 28, 1980 of the
Minister of Labor in Labor Case No. AJML-069-79, approving the private
respondent's marketing scheme, known as the "Complementary
Distribution System" (CDS) and dismissing the petitioner labor union's
complaint for unfair labor practice.
On April 17, 1978, a collective bargaining agreement (effective on May 1,
1978 until January 31, 1981) was entered into by petitioner San Miguel
Corporation Sales Force Union (PTGWO), and the private respondent, San
Miguel Corporation, Section 1, of Article IV of which provided as follows:
Art. IV, Section 1. Employees within the appropriate
bargaining unit shall be entitled to a basic monthly
compensation plus commission based on their
respective sales. (p. 6, Annex A; p. 113, Rollo.)
In September 1979, the company introduced a marketing scheme known
as the "Complementary Distribution System" (CDS) whereby its beer
products were offered for sale directly to wholesalers through San Miguel's
sales offices.
The labor union (herein petitioner) filed a complaint for unfair labor practice
in the Ministry of Labor, with a notice of strike on the ground that the CDS
was contrary to the existing marketing scheme whereby the Route
Salesmen were assigned specific territories within which to sell their stocks
of beer, and wholesalers had to buy beer products from them, not from the
company. It was alleged that the new marketing scheme violates Section 1,
Article IV of the collective bargaining agreement because the introduction
of the CDS would reduce the take-home pay of the salesmen and their
truck helpers for the company would be unfairly competing with them.
The complaint filed by the petitioner against the respondent company
raised two issues: (1) whether the CDS violates the collective bargaining
agreement, and (2) whether it is an indirect way of busting the union.
In its order of February 28, 1980, the Minister of Labor found:
... We see nothing in the record as to suggest that the unilateral action of
the employer in inaugurating the new sales scheme was designed to
discourage union organization or diminish its influence, but rather it is
undisputable that the establishment of such scheme was part of its overall
plan to improve efficiency and economy and at the same time gain profit to
the highest. While it may be admitted that the introduction of new sales
plan somewhat disturbed the present set-up, the change however was too
insignificant as to convince this Office to interpret that the innovation
interferred with the worker's right to self-organization.
Public respondent was correct in holding that the CDS is a valid exercise of
management prerogatives:
Except as limited by special laws, an employer is free
to regulate, according to his own discretion and
judgment, all aspects of employment, including hiring,
work assignments, working methods, time, place and
manner of work, tools to be used, processes to be
followed, supervision of workers, working regulations,
transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of
work. ... (NLU vs. Insular La Yebana Co., 2 SCRA 924;
Republic Savings Bank vs. CIR 21 SCRA 226, 235.)
(Perfecto V. Hernandez, Labor Relations Law, 1985
Ed., p. 44.) (Emphasis ours.)
Every business enterprise endeavors to increase its profits. In the process,
it may adopt or devise means designed towards that goal. In Abbott
Laboratories vs. NLRC, 154 SCRA 713, We ruled:
... Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an
employer to exercise what are clearly management
prerogatives. The free will of management to conduct
its own business affairs to achieve its purpose cannot
be denied.
So long as a company's management prerogatives are exercised in good
faith for the advancement of the employer's interest and not for the purpose
of defeating or circumventing the rights of the employees under special
laws or under valid agreements, this Court will uphold them (LVN Pictures
Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs.
Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs.
Garcia, 18 SCRA 110). San Miguel Corporation's offer to compensate the
members of its sales force who will be adversely affected by the
implementation of the CDS by paying them a so-called "back adjustment
commission" to make up for the commissions they might lose as a result of
the CDS proves the company's good faith and lack of intention to bust their
union.
WHEREFORE, the petition for certiorari is dismissed for lack of merit.
SO ORDERED.

Petitioner's conjecture that the new plan will sow dissatisfaction from its
ranks is already a prejudgment of the plan's viability and effectiveness. It is
like saying that the plan will not work out to the workers' [benefit] and
therefore management must adopt a new system of marketing. But what
the petitioner failed to consider is the fact that corollary to the adoption of
the assailed marketing technique is the effort of the company to
compensate whatever loss the workers may suffer because of the new
plan over and above than what has been provided in the collective
bargaining agreement. To us, this is one indication that the action of the
management is devoid of any anti-union hues. (pp. 24-25, Rollo.)

The dispositive part of the Minister's Order reads:

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LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
G.R. No. 101761. March 24, 1993. On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a
decision 2 disposing as follows:
NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION and NBSR "WHEREFORE, premises considered, respondent National Sugar
SUPERVISORY UNION, (PACIWU) TUCP, respondents. refineries Corporation is hereby directed to —

DECISION 1. pay the individual members of complainant union the usual overtime
pay, rest day pay and holiday pay enjoyed by them instead of the P100.00
special allowance which was implemented on June 11, 1988; and
REGALADO, J p:

2. pay the individual members of complainant union the difference in

The main issue presented for resolution in this original petition for certiorari
money value between the P100.00 special allowance and the overtime
is whether supervisory employees, as defined in Article 212 (m), Book V of
pay, rest day pay and holiday pay that they ought to have received from
the Labor Code, should be considered as officers or members of the
June 1, 1988.
managerial staff under Article 82, Book III of the same Code, and hence
are not entitled to overtime rest day and holiday pay.
All other claims are hereby dismissed for lack of merit.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a
corporation which is fully owned and controlled by the Government, SO ORDERED."
operates three (3) sugar refineries located at Bukidnon, Iloilo and
Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant
In finding for the members therein respondent union, the labor ruled that
to Proclamation No. 50. 1 Private respondent union represents the former
the along span of time during which the benefits were being paid to the
supervisors of the NASUREFCO Batangas Sugar Refinery, namely, the
supervisors has accused the payment thereof to ripen into contractual
Technical Assistant to the Refinery Operations Manager, Shift Sugar
obligation; at the complainants cannot be estopped from questioning the
Warehouse Supervisor, Senior Financial/Budget Analyst, General
validity of the new compensation package despite the fact that they have
Accountant, Cost Accountant, Sugar Accountant, Junior Financial/Budget
been receiving the benefits therefrom, considering that respondent union
Analyst, Shift Boiler Supervisor,, Shift Operations Chemist, Shift Electrical
was formed only a year after the implementation of the Job Evaluation
Supervisor, General Services Supervisor, Instrumentation Supervisor,
Program, hence there was no way for the individual supervisors to express
Community Development Officer, Employment and Training Supervisor,
their collective response thereto prior to the formation of the union; and the
Assistant Safety and Security Officer, Head and Personnel Services, Head
comparative computations presented by the private respondent union
Nurse, Property Warehouse Supervisor, Head of Inventory Control Section,
showed that the P100.00 special allowance given NASUREFCO fell short
Shift Process Supervisor, Day Maintenance Supervisor and Motorpool
of what the supervisors ought to receive had the overtime pay rest day pay
Supervisor.
and holiday pay not been discontinued, which arrangement, therefore,
amounted to a diminution of benefits.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program
affecting all employees, from rank-and-file to department heads. The JE
On appeal, in a decision promulgated on July 19, 1991 by its Third
Program was designed to rationalized the duties and functions of all
Division, respondent National Labor Relations Commission (NLRC)
positions, reestablish levels of responsibility, and recognize both wage and
affirmed the decision of the labor arbiter on the ground that the members of
operational structures. Jobs were ranked according to effort, responsibility,
respondent union are not managerial employees, as defined under Article
training and working conditions and relative worth of the job. As a result, all
212 (m) of the Labor Code and, therefore, they are entitled to overtime,
positions were re-evaluated, and all employees including the members of
rest day and holiday pay. Respondent NLRC declared that these
respondent union were granted salary adjustments and increases in
supervisory employees are merely exercising recommendatory powers
benefits commensurate to their actual duties and functions.
subject to the evaluation, review and final action by their department
heads; their responsibilities do not require the exercise of discretion and
We glean from the records that for about ten years prior to the JE Program, independent judgment; they do not participate in the formulation of
the members of respondent union were treated in the same manner as management policies nor in the hiring or firing of employees; and their
rank-and file employees. As such, they used to be paid overtime, rest day main function is to carry out the ready policies and plans of the corporation.
and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of the 3 Reconsideration of said decision was denied in a resolution of public
Labor Code as amended. With the implementation of the JE Program, the respondent dated August 30, 1991. 4
following adjustments were made: (1) the members of respondent union
were re-classified under levels S-5 to S-8 which are considered managerial
Hence this petition for certiorari, with petitioner NASUREFCO asseverating
staff for purposes of compensation and benefits; (2) there was an increase
that public respondent commission committed a grave abuse of discretion
in basic pay of the average of 50% of their basic pay prior to the JE
in refusing to recognized the fact that the members of respondent union
Program, with the union members now enjoying a wide gap (P1,269.00 per
are members of the managerial staff who are not entitled to overtime, rest
month) in basic pay compared to the highest paid rank-and-file employee;
day and holiday pay; and in making petitioner assume the "double burden"
(3) longevity pay was increased on top of alignment adjustments; (4) they
of giving the benefits due to rank-and-file employees together with those
were entitled to increased company COLA of P225.00 per month; (5) there
due to supervisors under the JE Program.
was a grant of P100.00 allowance for rest day/holiday work.

We find creditable merit in the petition and that the extraordinary writ of
On May 11, 1990, petitioner NASUREFCO recognized herein respondent
certiorari shall accordingly issue.
union, which was organized pursuant to Republic Act NO. 6715 allowing
supervisory employees to form their own unions, as the bargaining
representative of all the supervisory employees at the NASUREFCO The primordial issue to be resolved herein is whether the members of
Batangas Sugar Refinery. respondent union are entitled to overtime, rest day and holiday pay. Before
this can be resolved, however it must of necessity be ascertained first
whether or not the union members, as supervisory employees, are to be
Two years after the implementation of the JE Program, specifically on June
considered as officers or members of the managerial staff who are exempt
20, 1990, the members of herein respondent union filed a complainant with
from the coverage of Article 82 of the Labor Code.
the executive labor arbiter for non-payment of overtime, rest day and
holiday pay allegedly in violation of Article 100 of the Labor Code.

Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman 3

LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
It is not disputed that the members of respondent union are supervisory
employees, as defined employees, as defined under Article 212(m), Book
V of the Labor Code on Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharged, assign or discipline
employees. Supervisory employees are those who, in the interest of the
employer effectively recommend such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the
use of independent judgment. All employees not falling within any of those
above definitions are considered rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are entitled to
overtime, rest day and holiday pay, and in ruling that the latter are not
managerial employees, adopted the definition stated in the aforequoted
statutory provision.
Petitioner, however, avers that for purposes of determining whether or not
the members of respondent union are entitled to overtime, rest day and
holiday pay, said employees should be considered as "officers or members
of the managerial staff" as defined under Article 82, Book III of the Labor
Code on "Working Conditions and Rest Periods" and amplified in Section
2, Rule I, Book III of the Rules to Implement the Labor Code, to wit:
"Art. 82 Coverage. — The provisions of this title shall apply to employees in
all establishments and undertakings whether for profit or not, but not to
government employees, managerial employees, field personnel, members
of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers
who are paid by results as determined by the Secretary of Labor in
Appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty
consists of the management of the establishment in which they are
employed or of a department or subdivision thereof, and to other officers or
members of the managerial staff." (Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. — The provisions of this rule shall not apply to the
following persons if they qualify for exemption under the condition set forth
herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions,
namely:
(1) Their primary duty consists of the management of the establishment in
which they are employed or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more
employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or
their suggestions and recommendations as to the hiring and firing and as
to the promotion or any other change of status of other employees are
given particular weight.
(c) Officers or members of a managerial staff if they perform the following
duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to
management policies of their employer;
Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman
(2) Customarily and regularly exercise discretion and independent
judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee
whose primary duty consists of the management of the establishment in
which he is employed or subdivision thereof; or (ii) execute under general
supervision work along specialized or technical lines requiring special
training, experience, or knowledge; or (iii) execute under general
supervision special assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-
week to activities which are not directly and closely related to the
performance of the work described in paragraphs (1), (2), and above."
It is the submission of petitioner that while the members of respondent
union, as supervisors, may not be occupying managerial positions, they
are clearly officers or members of the managerial staff because they meet
all the conditions prescribed by law and, hence, they are not entitled to
overtime, rest day and supervisory employees under Article 212 (m) should
be made to apply only to the provisions on Labor Relations, while the right
of said employees to the questioned benefits should be considered in the
light of the meaning of a managerial employee and of the officers or
members of the managerial staff, as contemplated under Article 82 of the
Code and Section 2, Rule I Book III of the implementing rules. In other
words, for purposes of forming and joining unions, certification elections,
collective bargaining, and so forth, the union members are supervisory
employees. In terms of working conditions and rest periods and entitlement
to the questioned benefits, however, they are officers or members of the
managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every labor
dispute will be automatically decided in favor of labor. Management also
has its own rights which, as such, are entitled to respect and enforcement
in the interest of simple fair play. Out of its concern for those with less
privileges in life, this Court has inclined more often than not toward the
worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that justice is in every
case for the deserving, to be dispensed in the light of the established facts
and the applicable law and doctrine. 5
This is one such case where we are inclined to tip the scales of justice in
favor of the employer.
The question whether a given employee is exempt from the benefits of the
law is a factual one dependent on the circumstances of the particular case,
In determining whether an employee is within the terms of the statutes, the
criterion is the character of the work performed, rather than the title of the
employee's position. 6
Consequently, while generally this Court is not supposed to review the
factual findings of respondent commission, substantial justice and the
peculiar circumstances obtaining herein mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements 7 of the union
members will readily show that these supervisory employees are under the
direct supervision of their respective department superintendents and that
generally they assist the latter in planning, organizing, staffing, directing,
controlling communicating and in making decisions in attaining the
company's set goals and objectives. These supervisory employees are
likewise responsible for the effective and efficient operation of their
respective departments. More specifically, their duties and functions
include, among others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
4
LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
b) organizing and scheduling of work activities of the department, which
includes employee shifting scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full
support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and
recommends disciplinary action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and
become more productive;
4) conducts semi-annual performance evaluation of his subordinates and
recommends necessary action for their development/advancement;
5) represents the superintendent or the department when appointed and
authorized by the former;
6) coordinates and communicates with other inter and intra department
supervisors when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment
performance, quality of service and working conditions;
9) sees to it that safety rules and regulations and procedure and are
implemented and followed by all NASUREFCO employees, recommends
revisions or modifications to said rules when deemed necessary, and
initiates and prepares reports for any observed abnormality within the
refinery;
10) supervises the activities of all personnel under him and goes to it that
instructions to subordinates are properly implemented; and
11) performs other related tasks as may be assigned by his immediate
superior.
From the foregoing, it is apparent that the members of respondent union
discharge duties and responsibilities which ineluctably qualify them as
officers or members of the managerial staff, as defined in Section 2, Rule I
Book III of the aforestated Rules to Implement the Labor Code, viz.: (1)
their primary duty consists of the performance of work directly related to
management policies of their employer; (2) they customarily and regularly
exercise discretion and independent judgment; (3) they regularly and
directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are
employed (4) they execute, under general supervision, work along
specialized or technical lines requiring special training, experience, or
knowledge; (5) they execute, under general supervision, special
assignments and tasks; and (6) they do not devote more than 20% of their
hours worked in a work-week to activities which are not directly and clearly
related to the performance of their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with
petitioner that the union members should be considered as officers and
members of the managerial staff and are, therefore, exempt from the
coverage of Article 82. Perforce, they are not entitled to overtime, rest day
and holiday.
Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman
The distinction made by respondent NLRC on the basis of whether or not
the union members are managerial employees, to determine the latter's
entitlement to the questioned benefits, is misplaced and inappropriate. It is
admitted that these union members are supervisory employees and this is
one instance where the nomenclatures or titles of their jobs conform with
the nature of their functions. Hence, to distinguish them from a managerial
employee, as defined either under Articles 82 or 212 (m) of the Labor
Code, is puerile and in efficacious. The controversy actually involved here
seeks a determination of whether or not these supervisory employees
ought to be considered as officers or members of the managerial staff. The
distinction, therefore, should have been made along that line and its
corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the labor arbiter that the
payment of the questioned benefits to the union members has ripened into
a contractual obligation.
A. Prior to the JE Program, the union members, while being supervisors,
received benefits similar to the rank-and-file employees such as overtime,
rest day and holiday pay, simply because they were treated in the same
manner as rank-and-file employees, and their basic pay was nearly on the
same level as those of the latter, aside from the fact that their specific
functions and duties then as supervisors had not been properly defined
and delineated from those of the rank-and-file. Such fact is apparent from
the clarification made by petitioner in its motion for reconsideration 8 filed
with respondent commission in NLRC Case No. CA No. I-000058, dated
August 16, 1991, wherein, it lucidly explained:
"But, complainants no longer occupy the same positions they held before
the JE Program. Those positions formerly classified as 'supervisory' and
found after the JE Program to be rank-and-file were classified correctly and
continue to receive overtime, holiday and restday pay. As to them, the
practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-
evaluated, their duties re-defined and in most cases their organizational
positions re-designated to confirm their superior rank and duties. Thus,
after the JE program, complainants cannot be said to occupy the same
positions." 9
It bears mention that this positional submission was never refuted nor
controverted by respondent union in any of its pleadings filed before herein
public respondent or with this Court. Hence, it can be safely concluded
therefrom that the members of respondent union were paid the questioned
benefits for the reason that, at that time, they were rightfully entitled
thereto. Prior to the JE Program, they could not be categorically classified
as members or officers of the managerial staff considering that they were
then treated merely on the same level as rank-and-file. Consequently, the
payment thereof could not be construed as constitutive of voluntary
employer practice, which cannot be now be unilaterally withdrawn by
petitioner. To be considered as such, it should have been practiced over a
long period of time, and must be shown to have been consistent and
deliberate. 10
The test or rationale of this rule on long practice requires an indubitable
showing that the employer agreed to continue giving the benefits knowingly
fully well that said employees are not covered by the law requiring payment
thereof. 11 In the case at bar, respondent union failed to sufficiently
establish that petitioner has been motivated or is wont to give these
benefits out of pure generosity.
B. It remains undisputed that the implementation of the JE Program, the
members of private respondent union were re-classified under levels S-5
S-8 which were considered under the program as managerial staff
purposes of compensation and benefits, that they occupied re-evaluated
positions, and that their basic pay was increased by an average of 50% of
their basic salary prior to the JE Program. In other words, after the JE
Program there was an ascent in position, rank and salary. This in essence
is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by
law, and usually accompanied by an increase in salary. 12
5
LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
Quintessentially, with the promotion of the union members, they are no
longer entitled to the benefits which attach and pertain exclusively to their
positions. Entitlement to the benefits provided for by law requires prior
compliance with the conditions set forth therein. With the promotion of the
members of respondent union, they occupied positions which no longer
met the requirements imposed by law. Their assumption of these positions
removed them from the coverage of the law, ergo, their exemption
therefrom.

As correctly pointed out by petitioner, if the union members really wanted

to continue receiving the benefits which attach to their former positions,
there was nothing to prevent them from refusing to accept their promotions
and their corresponding benefits. As the sating goes by, they cannot have
their cake and eat it too or, as petitioner suggests, they could not, as a
simple matter of law and fairness, get the best of both worlds at the
expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized

exclusive prerogatives of management, provided it is done in good faith. In
the case at bar, private respondent union has miserably failed to convince
this Court that the petitioner acted implementing the JE Program. There is
no showing that the JE Program was intended to circumvent the law and
deprive the members of respondent union of the benefits they used to
receive.

Not so long ago, on this particular score, we had the occasion to hold that:

". . . it is the prerogative of the management to regulate, according to its

discretion and judgment, all aspects of employment. This flows from the
established rule that labor law does not authorize the substitution of the
judgment of the employer in the conduct of its business. Such
management prerogative may be availed of without fear of any liability so
long as it is exercised in good faith for the advancement of the employer's
interest and not for the purpose of defeating on circumventing the rights of
employees under special laws or valid agreement and are not exercised in
a malicious, harsh, oppressive, vindictive or wanton manner or out of
malice or spite." 13

WHEREFORE, the impugned decision and resolution of respondent

National Labor Relations Commission promulgated on July 19, 1991 and
August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE for
having been rendered and adopted with grave abuse of discretion, and the
basic complaint of private respondent union is DISMISSED.

Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman 6

LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
G.R. No. 79255 January 20, 1992
UNION OF FILIPRO EMPLOYEES (UFE), petitioner,
vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION
and NESTLÉ PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents.
GUTIERREZ, JR., J.:
This labor dispute stems from the exclusion of sales personnel from the
holiday pay award and the change of the divisor in the computation of
benefits from 251 to 261 days.
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines,
Inc.) filed with the National Labor Relations Commission (NLRC) a petition
for declaratory relief seeking a ruling on its rights and obligations
respecting claims of its monthly paid employees for holiday pay in the light
of the Court's decision in Chartered Bank Employees Association
v. Ople (138 SCRA 273 [1985]).
Both Filipro and the Union of Filipino Employees (UFE) agreed to submit
the case for voluntary arbitration and appointed respondent Benigno Vivar,
Jr. as voluntary arbitrator.
On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro
to:
pay its monthly paid employees holiday pay pursuant
to Article 94 of the Code, subject only to the exclusions
and limitations specified in Article 82 and such other
legal restrictions as are provided for in the Code.
(Rollo,
p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the award
to three years, (2) the exclusion of salesmen, sales representatives, truck
drivers, merchandisers and medical representatives (hereinafter referred to
as sales personnel) from the award of the holiday pay, and (3) deduction
from the holiday pay award of overpayment for overtime, night differential,
vacation and sick leave benefits due to the use of 251 divisor. (Rollo, pp.
138-145)
Petitioner UFE answered that the award should be made effective from the
date of effectivity of the Labor Code, that their sales personnel are not field
personnel and are therefore entitled to holiday pay, and that the use of 251
as divisor is an established employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring
that the effectivity of the holiday pay award shall retroact to November 1,
1974, the date of effectivity of the Labor Code. He adjudged, however, that
the company's sales personnel are field personnel and, as such, are not
entitled to holiday pay. He likewise ruled that with the grant of 10 days'
holiday pay, the divisor should be changed from 251 to 261 and ordered
the reimbursement of overpayment for overtime, night differential, vacation
and sick leave pay due to the use of 251 days as divisor.
Both Nestle and UFE filed their respective motions for partial
reconsideration. Respondent Arbitrator treated the two motions as appeals
and forwarded the case to the NLRC which issued a resolution dated May
25, 1987 remanding the case to the respondent arbitrator on the ground
that it has no jurisdiction to review decisions in voluntary arbitration cases
pursuant to Article 263 of the Labor Code as amended by Section 10,
Batas Pambansa Blg. 130 and as implemented by Section 5 of the rules
implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent arbitrator refused to
take cognizance of the case reasoning that he had no more jurisdiction to
Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman
continue as arbitrator because he had resigned from service effective May
1, 1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to holiday pay; and
2) Whether or not, concomitant with the award of holiday pay, the divisor
should be changed from 251 to 261 days and whether or not the previous
use of 251 as divisor resulted in overpayment for overtime, night
differential, vacation and sick leave pay.
The petitioner insists that respondent's sales personnel are not field
personnel under Article 82 of the Labor Code. The respondent company
controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay. Said article
defines field personnel as "non-agritultural employees who regularly
perform their duties away from the principal place of business or branch
office of the employer and whose actual hours of work in the field cannot
be determined with reasonable certainty."
The controversy centers on the interpretation of the clause "whose actual
hours of work in the field cannot be determined with reasonable certainty."
It is undisputed that these sales personnel start their field work at 8:00 a.m.
after having reported to the office and come back to the office at 4:00 p.m.
or 4:30 p.m. if they are Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30
p.m. comprises the sales personnel's working hours which can be
determined with reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in
the field be reasonably ascertained. The company has no way of
determining whether or not these sales personnel, even if they report to the
office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really
spend the hours in between in actual field work.
We concur with the following disquisition by the respondent arbitrator:
The requirement for the salesmen and other similarly
situated employees to report for work at the office at
8:00 a.m. and return at 4:00 or 4:30 p.m. is not within
the realm of work in the field as defined in the Code
but an exercise of purely management prerogative of
providing administrative control over such personnel.
This does not in any manner provide a reasonable
level of determination on the actual field work of the
employees which can be reasonably ascertained. The
theoretical analysis that salesmen and other similarly-
situated workers regularly report for work at 8:00 a.m.
and return to their home station at 4:00 or 4:30 p.m.,
creating the assumption that their field work is
supervised, is surface projection. Actual field work
begins after 8:00 a.m., when the sales personnel
follow their field itinerary, and ends immediately before
4:00 or 4:30 p.m. when they report back to their office.
The period between 8:00 a.m. and 4:00 or 4:30 p.m.
comprises their hours of work in the field, the extent or
scope and result of which are subject to their individual
capacity and industry and which "cannot be
determined with reasonable certainty." This is the
reason why effective supervision over field work of
salesmen and medical representatives, truck drivers
and merchandisers is practically a physical
7
LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
impossibility. Consequently, they are excluded from
the ten holidays with pay award. (Rollo, pp. 36-37)
Moreover, the requirement that "actual hours of work in the field cannot be
determined with reasonable certainty" must be read in conjunction with
Rule IV, Book III of the Implementing Rules which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage — This rule shall apply to all
employees except:
xxx xxx xxx
(e) Field personnel and other employees whose time
and performance is unsupervised by the employer . . .
(Emphasis supplied)
While contending that such rule added another element not found in the
law (Rollo, p. 13), the petitioner nevertheless attempted to show that its
affected members are not covered by the abovementioned rule. The
petitioner asserts that the company's sales personnel are strictly
supervised as shown by the SOD (Supervisor of the Day) schedule and the
company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-
55).
Contrary to the contention of the petitioner, the Court finds that the
aforementioned rule did not add another element to the Labor Code
definition of field personnel. The clause "whose time and performance is
unsupervised by the employer" did not amplify but merely interpreted and
expounded the clause "whose actual hours of work in the field cannot be
determined with reasonable certainty." The former clause is still within the
scope and purview of Article 82 which defines field personnel. Hence, in
deciding whether or not an employee's actual working hours in the field can
be determined with reasonable certainty, query must be made as to
whether or not such employee's time and performance is constantly
supervised by the employer.
The SOD schedule adverted to by the petitioner does not in the least
signify that these sales personnel's time and performance are supervised.
The purpose of this schedule is merely to ensure that the sales personnel
are out of the office not later than 8:00 a.m. and are back in the office not
earlier than 4:00 p.m.
Likewise, the Court fails to see how the company can monitor the number
of actual hours spent in field work by an employee through the imposition
of sanctions on absenteeism contained in the company circular of March
15, 1984.
The petitioner claims that the fact that these sales personnel are given
incentive bonus every quarter based on their performance is proof that
their actual hours of work in the field can be determined with reasonable
certainty.
The Court thinks otherwise.
The criteria for granting incentive bonus are: (1) attaining or exceeding
sales volume based on sales target; (2) good collection performance; (3)
proper compliance with good market hygiene; (4) good merchandising
work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo,
p. 190).
The above criteria indicate that these sales personnel are given incentive
bonuses precisely because of the difficulty in measuring their actual hours
of field work. These employees are evaluated by the result of their work
and not by the actual hours of field work which are hardly susceptible to
determination.
Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA
613 [1963]), the Court had occasion to discuss the nature of the job of a
salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118
F. 2d 202, the Court stated:
The reasons for excluding an outside salesman are
fairly apparent. Such a salesman, to a greater extent,
works individually. There are no restrictions respecting
the time he shall work and he can earn as much or as
little, within the range of his ability, as his ambition
dictates. In lieu of overtime he ordinarily receives
commissions as extra compensation. He works away
from his employer's place of business, is not subject to
the personal supervision of his employer, and his
employer has no way of knowing the number of hours
he works per day.
While in that case the issue was whether or not salesmen were entitled to
overtime pay, the same rationale for their exclusion as field personnel from
holiday pay benefits also applies.
The petitioner union also assails the respondent arbitrator's ruling that,
concomitant with the award of holiday pay, the divisor should be changed
from 251 to 261 days to include the additional 10 holidays and the
employees should reimburse the amounts overpaid by Filipro due to the
use of 251 days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:
. . . The new doctrinal policy established which ordered
payment of ten holidays certainly adds to or
accelerates the basis of conversion and computation
by ten days. With the inclusion of ten holidays as paid
days, the divisor is no longer 251 but 261 or 262 if
election day is counted. This is indeed an extremely
difficult legal question of interpretation which accounts
for what is claimed as falling within the concept of
"solutio indebti."
When the claim of the Union for payment of ten
holidays was granted, there was a consequent need to
abandon that 251 divisor. To maintain it would create
an impossible situation where the employees would
benefit with additional ten days with pay but would
simultaneously enjoy higher benefits by discarding the
same ten days for purposes of computing overtime
and night time services and considering sick and
vacation leave credits. Therefore, reimbursement of
such overpayment with the use of 251 as divisor arises
concomitant with the award of ten holidays with pay.
(Rollo, p. 34)
The divisor assumes an important role in determining whether or not
holiday pay is already included in the monthly paid employee's salary and
in the computation of his daily rate. This is the thrust of our pronouncement
in Chartered Bank Employees Association v. Ople (supra). In that case,
We held:
It is argued that even without the presumption found in
the rules and in the policy instruction, the company
practice indicates that the monthly salaries of the
employees are so computed as to include the holiday
pay provided by law. The petitioner contends
otherwise.
One strong argument in favor of the petitioner's stand
is the fact that the Chartered Bank, in computing
overtime compensation for its employees, employs a
"divisor" of 251 days. The 251 working days divisor is
the result of subtracting all Saturdays, Sundays and
8
LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
the ten (10) legal holidays from the total number of
calendar days in a year. If the employees are already
paid for all non-working days, the divisor should be
365 and not 251.
In the petitioner's case, its computation of daily ratio since September 1,
1980, is as follows:
monthly rate x 12 months
———————————
251 days
Following the criterion laid down in the Chartered Bank case, the use of
251 days' divisor by respondent Filipro indicates that holiday pay is not yet
included in the employee's salary, otherwise the divisor should have been
261.
It must be stressed that the daily rate, assuming there are no intervening
salary increases, is a constant figure for the purpose of computing overtime
and night differential pay and commutation of sick and vacation leave
credits. Necessarily, the daily rate should also be the same basis for
computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261
days would result in a lower daily rate which is violative of the prohibition
on non-diminution of benefits found in Article 100 of the Labor Code. To
maintain the same daily rate if the divisor is adjusted to 261 days, then the
dividend, which represents the employee's annual salary, should
correspondingly be increased to incorporate the holiday pay. To illustrate, if
prior to the grant of holiday pay, the employee's annual salary is P25,100,
then dividing such figure by 251 days, his daily rate is P100.00 After the
payment of 10 days' holiday pay, his annual salary already includes holiday
pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days,
the daily rate is still P100.00. There is thus no merit in respondent Nestle's
claim of overpayment of overtime and night differential pay and sick and
vacation leave benefits, the computation of which are all based on the daily
rate, since the daily rate is still the same before and after the grant of
holiday pay.
Respondent Nestle's invocation of solutio indebiti, or payment by mistake,
due to its use of 251 days as divisor must fail in light of the Labor Code
mandate that "all doubts in the implementation and interpretation of this
Code, including its implementing rules and regulations, shall be resolved in
favor of labor." (Article 4). Moreover, prior to September 1, 1980, when the
company was on a 6-day working schedule, the divisor used by the
company was 303, indicating that the 10 holidays were likewise not paid.
When Filipro shifted to a 5-day working schebule on September 1, 1980, it
had the chance to rectify its error, if ever there was one but did not do so. It
is now too late to allege payment by mistake.
Nestle also questions the voluntary arbitrator's ruling that holiday pay
should be computed from November 1, 1974. This ruling was not
questioned by the petitioner union as obviously said decision was favorable
to it. Technically, therefore, respondent Nestle should have filed a separate
petition raising the issue of effectivity of the holiday pay award. This Court
has ruled that an appellee who is not an appellant may assign errors in his
brief where his purpose is to maintain the judgment on other grounds, but
he cannot seek modification or reversal of the judgment or affirmative relief
unless he has also appealed. (Franco v. Intermediate Appellate Court, 178
SCRA 331 [1989], citing La Campana Food Products, Inc. v. Philippine
Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in
order to fully settle the issues so that the execution of the Court's decision
in this case may not be needlessly delayed by another petition, the Court
resolved to take up the matter of effectivity of the holiday pay award raised
by Nestle.
Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman
Nestle insists that the reckoning period for the application of the holiday
pay award is 1985 when the Chartered Bank decision, promulgated on
August 28, 1985, became final and executory, and not from the date of
effectivity of the Labor Code. Although the Court does not entirely agree
with Nestle, we find its claim meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU)
v. Inciong, 132 SCRA 663 [1984], hereinafter referred to as the IBAA case,
the Court declared that Section 2, Rule IV, Book III of the implementing
rules and Policy Instruction No. 9, issued by the then Secretary of Labor on
February 16, 1976 and April 23, 1976, respectively, and which excluded
monthly paid employees from holiday pay benefits, are null and void. The
Court therein reasoned that, in the guise of clarifying the Labor Code's
provisions on holiday pay, the aforementioned implementing rule and
policy instruction amended them by enlarging the scope of their exclusion.
The Chartered Bank case reiterated the above ruling and added the
"divisor" test.
However, prior to their being declared null and void, the implementing rule
and policy instruction enjoyed the presumption of validity and hence,
Nestle's non-payment of the holiday benefit up to the promulgation of the
IBAA case on October 23, 1984 was in compliance with these presumably
valid rule and policy instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429
[1971], the Court discussed the effect to be given to a legislative or
executive act subsequently declared invalid:
xxx xxx xxx
. . . It does not admit of doubt that prior to the
declaration of nullity such challenged legislative or
executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in
an appropriate case, declares its invalidity, it is entitled
to obedience and respect. Parties may have acted
under it and may have changed their positions. What
could be more fitting than that in a subsequent
litigation regard be had to what has been done while
such legislative or executive act was in operation and
presumed to be valid in all respects. It is now accepted
as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is
merely to reflect awareness that precisely because the
judiciary is the government organ which has the final
say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed
before it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice
then, if there be no recognition of what had transpired
prior to such adjudication.
In the language of an American Supreme Court
decision: "The actual existence of a statute, prior to
such a determination of [unconstitutionality], is an
operative fact and may have consequences which
cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be
considered in various aspects, — with respect to
particular relations, individual and corporate, and
particular conduct, private and official." (Chicot County
Drainage Dist. v. Baxter States Bank, 308 US 371, 374
[1940]). This language has been quoted with approval
in a resolution in Araneta v. Hill (93 Phil. 1002 [1952])
and the decision in Manila Motor Co., Inc. v. Flores (99
Phil. 738 [1956]). An even more recent instance is the
opinion of Justice Zaldivar speaking for the Court
in Fernandez v. Cuerva and Co. (21 SCRA 1095
[1967]. (At pp. 434-435)
9
LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
The "operative fact" doctrine realizes that in declaring a law or rule null and
void, undue harshness and resulting unfairness must be avoided. It is now
almost the end of 1991. To require various companies to reach back to
1975 now and nullify acts done in good faith is unduly harsh. 1984 is a
fairer reckoning period under the facts of this case.

Applying the aforementioned doctrine to the case at bar, it is not far-

fetched that Nestle, relying on the implicit validity of the implementing rule
and policy instruction before this Court nullified them, and thinking that it
was not obliged to give holiday pay benefits to its monthly paid employees,
may have been moved to grant other concessions to its employees,
especially in the collective bargaining agreement. This possibility is
bolstered by the fact that respondent Nestle's employees are among the
highest paid in the industry. With this consideration, it would be unfair to
impose additional burdens on Nestle when the non-payment of the holiday
benefits up to 1984 was not in any way attributed to Nestle's fault.

The Court thereby resolves that the grant of holiday pay be effective, not
from the date of promulgation of the Chartered Bank case nor from the
date of effectivity of the Labor Code, but from October 23, 1984, the date of
promulgation of the IBAA case.

WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED.

The divisor to be used in computing holiday pay shall be 251 days. The
holiday pay as above directed shall be computed from October 23, 1984. In
all other respects, the order of the respondent arbitrator is hereby
AFFIRMED.

SO ORDERED.

Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman 10

LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
G.R. No. L-18353 July 31, 1963
SAN MIGUEL BREWERY, INC., petitioner,
vs.
DEMOCRATIC LABOR ORGANIZATION, ET AL., respondents.
Paredes, Poblador, Cruz and Nazareno for petitioner.
Delfin N. Mercader for respondents.
BAUTISTA ANGELO, J.:
On January 27, 1955, the Democratic Labor Association filed complaint
against the San Miguel Brewery, Inc. embodying 12 demands for the
betterment of the conditions of employment of its members. The company
filed its answer to the complaint specifically denying its material averments
and answering the demands point by point. The company asked for the
dismissal of the complaint.
At the hearing held sometime in September, 1955, the union manifested its
desire to confine its claim to its demands for overtime, night-shift
differential pay, and attorney's fees, although it was allowed to present
evidence on service rendered during Sundays and holidays, or on its claim
for additional separation pay and sick and vacation leave
compensation.1äwphï1.ñët
After the case had been submitted for decision, Presiding Judge Jose S.
Bautista, who was commissioned to receive the evidence, rendered
decision expressing his disposition with regard to the points embodied in
the complaint on which evidence was presented. Specifically, the
disposition insofar as those points covered by this petition for review are
concerned, is as follows:
1. With regard to overtime compensation, Judge Bautista held
that the provisions of the Eight-Hour Labor Law apply to the
employees concerned for those working in the field or engaged
in the sale of the company's products outside its premises and
consequently they should be paid the extra compensation
accorded them by said law in addition to the monthly salary and
commission earned by them, regardless of the meal allowance
given to employees who work up to late at night.
2. As to employees who work at night, Judge Bautista decreed
that they be paid their corresponding salary differentials for work
done at night prior to January 1, 1949 with the present
qualification: 25% on the basis of their salary to those who work
from 6:00 to 12:00 p.m., and 75% to those who work from 12:01
to 6:00 in the morning.
3. With regard to work done during Sundays and holidays, Judge
Bautista also decreed that the employees concerned be paid an
additional compensation of 25% as provided for in
Commonwealth Act No. 444 even if they had been paid a
compensation on monthly salary basis.
The demands for the application of the Minimum Wage Law to workers
paid on "pakiao" basis, payment of accumulated vacation and sick leave
and attorney's fees, as well as the award of additional separation pay, were
either dismissed, denied, or set aside.
Its motion for reconsideration having been denied by the industrial court en
banc, which affirmed the decision of the court a quo with few exceptions,
the San Miguel Brewery, Inc. interposed the present petition for review.
Anent the finding of the court a quo, as affirmed by the Court of Industrial
Relations, to the effect that outside or field sales personnel are entitled to
the benefits of the Eight-Hour Labor Law, the pertinent facts are as follows:
Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman
After the morning roll call, the employees leave the plant of the company to
go on their respective sales routes either at 7:00 a.m. for soft drinks trucks,
or 8:00 a.m. for beer trucks. They do not have a daily time record. The
company never require them to start their work as outside sales personnel
earlier than the above schedule.
The sales routes are so planned that they can be completed within 8 hours
at most, or that the employees could make their sales on their routes within
such number of hours variable in the sense that sometimes they can be
completed in less than 8 hours, sometimes 6 to 7 hours, or more. The
moment these outside or field employees leave the plant and while in their
sales routes they are on their own, and often times when the sales are
completed, or when making short trip deliveries only, they go back to the
plant, load again, and make another round of sales. These employees
receive monthly salaries and sales commissions in variable amounts. The
amount of compensation they receive is uncertain depending upon their
individual efforts or industry. Besides the monthly salary, they are paid
sales commission that range from P30, P40, sometimes P60, P70, to
sometimes P90, P100 and P109 a month, at the rate of P0.01 to P0.01-½
per case.
It is contended that since the employees concerned are paid a commission
on the sales they make outside of the required 8 hours besides the fixed
salary that is paid to them, the Court of Industrial Relations erred in
ordering that they be paid an overtime compensation as required by the
Eight-Hour Labor Law for the reason that the commission they are paid
already takes the place of such overtime compensation. Indeed, it is
claimed, overtime compensation is an additional pay for work or services
rendered in excess of 8 hours a day by an employee, and if the employee
is already given extra compensation for labor performed in excess of 8
hours a day, he is not covered by the law. His situation, the company
contends, can be likened to an employee who is paid on piece-work,
"pakiao", or commission basis, which is expressly excluded from the
operation of the Eight-Hour Labor Law.1
We are in accord with this view, for in our opinion the Eight-Hour Labor
Law only has application where an employee or laborer is paid on a
monthly or daily basis, or is paid a monthly or daily compensation, in which
case, if he is made to work beyond the requisite period of 8 hours, he
should be paid the additional compensation prescribed by law. This law
has no application when the employee or laborer is paid on a piece-work,
"pakiao", or commission basis, regardless of the time employed. The
philosophy behind this exemption is that his earnings in the form of
commission based on the gross receipts of the day. His participation
depends upon his industry so that the more hours he employs in the work
the greater are his gross returns and the higher his commission. This
philosophy is better explained in Jewel Tea Co. v. Williams, C.C.A. Okla.,
118 F. 2d 202, as follows:
The reasons for excluding an outside salesman are fairly
apparent. Such salesman, to a greater extent, works individually.
There are no restrictions respecting the time he shall work and
he can earn as much or as little, within the range of his ability, as
his ambition dictates. In lieu of overtime he ordinarily receives
commissions as extra compensation. He works away from his
employer's place of business, is not subject to the personal
supervision of his employer, and his employer has no way of
knowing the number of hours he works per day.
True it is that the employees concerned are paid a fixed salary for their
month of service, such as Benjamin Sevilla, a salesman, P215; Mariano
Ruedas, a truck driver, P155; Alberto Alpaza and Alejandro Empleo, truck
helpers, P125 each, and sometimes they work in excess of the required 8-
hour period of work, but for their extra work they are paid a commission
which is in lieu of the extra compensation to which they are entitled. The
record shows that these employees during the period of their employment
were paid sales commission ranging from P30, P40, sometimes P60, P70,
to sometimes P90, P100 and P109 a month depending on the volume of
their sales and their rate of commission per case. And so, insofar is the
extra work they perform, they can be considered as employees paid on
piece work, "pakiao", or commission basis. The Department of Labor,
called upon to implement, the Eight-Hour Labor Law, is of this opinion
11
LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
when on December 9, 1957 it made the ruling on a query submitted to it, Rosales v Tan xxxxx 
thru the Director of the Bureau of Labor Standards, to the effect that field
sales personnel receiving regular monthly salaries, plus commission, are
G.R. No. 121288 November 20, 1998
not subject to the Eight-Hour Labor Law. Thus, on this point, said official
stated:

. . . Moreover, when a fieldman receives a regular monthly salary

plus commission on percentage basis of his sales, it is also the
established policy of the Office to consider his commission as
payment for the extra time he renders in excess of eight hours,
thereby classifying him as if he were on piecework basis, and
therefore, technically speaking, he is not subject to the Eight-
Hour Labor Law.

We are, therefore, of the opinion that the industrial court erred in holding
that the Eight-Hour Labor Law applies to the employees composing the
outside service force and in ordering that they be paid the corresponding
additional compensation.

With regard to the claim for night salary differentials, the industrial court
found that claimants Magno Johnson and Jose Sanchez worked with the
respondent company during the period specified by them in their testimony
and that watchmen Zoilo Illiga, Inocentes Prescillas and Daniel Cayuca
rendered night duties once every three weeks continuously during the
period of the employment and that they were never given any additional
compensation aside from their monthly regular salaries. The court found
that the company started paying night differentials only in January, 1949
but never before that time. And so it ordered that the employees concerned
be paid 25% additional compensation for those who worked from 6:00 to
12:00 p.m. and 75% additional compensation for those who worked from
12:01 to 6: 00 in the morning. It is now contended that this ruling is
erroneous because an award for night shift differentials cannot be given
retroactive effect but can only be entertained from the date of demand
which was on January 27, 1953, citing in support thereof our ruling in
Earnshaws Docks & Honolulu Iron Works v. The Court of Industrial
Relations, et al., L-8896, January 25, 1957.

This ruling, however, has no application here for it appears that before the
filing of the petition concerning this claim a similar one had already been
filed long ago which had been the subject of negotiations between the
union and the company which culminated in a strike in 1952. Unfortunately,
however, the strike fizzled out and the strikers were ordered to return to
work with the understanding that the claim for night salary differentials
should be settled in court. It is perhaps for this reason that the court a
quo granted this claim in spite of the objection of the company to the
contrary.

The remaining point to be determined refers to the claim for pay for
Sundays and holidays for service performed by some claimants who were
watchmen or security guards. It is contended that these employees are not
entitled to extra pay for work done during these days because they are
paid on a monthly basis and are given one day off which may take the
place of the work they may perform either on Sunday or any holiday.

We disagree with this claim because it runs counter to law. Section 4 of

Commonwealth Act No. 444 expressly provides that no person, firm or
corporation may compel an employee or laborer to work during Sundays
and legal holidays unless he is paid an additional sum of 25% of his regular
compensation. This proviso is mandatory, regardless of the nature of
compensation. The only exception is with regard to public utilities who
perform some public service.

WHEREFORE, the decision of the industrial court is hereby modified as

follows: the award with regard to extra work performed by those employed
in the outside or field sales force is set aside. The rest of the decision
insofar as work performed on Sundays and holidays covering watchmen
and security guards, as well as the award for night salary differentials, is
affirmed. No costs.

Cadiz v Phil Sinter xxxxx 

Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman 12

LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
ROLANDO DELA CRUZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EMMANUEL
LO, respondents.
DAVIDE, JR. J.:
In this special civil action certiorari under Rule 65 of the Rules of Court,
petitioner seeks to set aside, on ground of grave abuse of discretion, the
Decision1 of 17 March 1995 of the National Labor Relations Commission
(NLRC) in NLRC Case No. V-0254-92 (RAB-06-09-50298-91) and its
Resolution 2 of 19 May 1995 denying the motion for reconsideration. The
former affirmed the 15 February 1994 Decision 3 of Labor Arbiter Rodolfo
G. Lagoc ordering private respondent Emmanuel Lo to pay petitioner
separation pay but dismissing all other claims of petitioner.
In a complaint 4 filed on 5 September 1991 before Sub-Regional Arbitration
Branch No. 6 of the NLRC, situated in Iloilo City, petitioner charged private
respondent Emmanuel Lo with unfair labor practice, illegal dismissal,
underpayment of salary, non-payment of overtime pay, legal holiday pay,
premium pay for holiday and rest day, and non-payment of wages or
commission and separation pay. The case was docketed as SRAB Case
No. 06-09-50298-91.
Private respondent filed his Answer 5 on 9 October 1991. Petitioner and
private respondent then filed their position paper 6 on 4 November 1991
and 21 November 1991, respectively.
On 7 August 1992, after appropriate proceedings, Labor Arbiter Dennis D.
Juanon rendered a decision 7dismissing the complaint for lack of merit due
to the absence of an employer-employee relationship between petitioner
and private respondent.
Petitioner seasonably appealed to the NLRC on 9 September 1992. The
appeal was docketed as NLRC Case No. V-0254-92 (RAB-06-09-50298-
91).
In its Resolution 8 of 22 October 1992, the NLRC granted petitioner's
appeal and remanded the case to Labor Arbiter Juanon for appropriate
proceedings. Upon petitioner's motion, Labor Arbiter Juanon inhibited
himself from the case. 9 As such, the case was ultimately reassigned to
Labor Arbiter Rodolfo G. Lagoc.
In his decision 10 of 15 February 1994, Labor Arbiter Lagoc found that
petitioner was an employee of private respondent and was illegally
dismissed from the service, hence entitled to separation pay, but rejected
the charge of unfair labor practice and dismissed, for lack of merit,
petitioner's other monetary claims. The dispositive portion of the decision
read as follows:
WHEREFORE, premises considered judgment is
rendered as follows:
Respondent Emmanuel Lo is hereby ordered to pay
complainant the amount [of] P4,628.00 representing
his separation pay.
All other claims are hereby
dismissed.
SO ORDERED.
Labor Arbiter Lagoc summarized the factual contentions of the parties,
thus:
Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman
Complainant [petitioner herein] alleged in his position paper that he started
working with respondent Emmanuel Lo in June 1988 as ordinary crew and
received wages in cash from the share of the catch of the fishing boat of
said respondent; that on January 1989, the complainant was promoted to
light boat operator and the wages was [sic] increased from one (1) share
as a crew [member] to five (5) shares; that in March 1989 the complainant
was again promoted to "secondo patron" with fixed salary of P200.00 in
addition to five (5) shares of the catch and P1.00/fish box commission; that
in November 1989, complainant because a full-pledged patron (Captain of
respondent's fishing boat known as M/DCA "Sheenly Joy 1"); that as
Captain, the complainant received a monthly salary of P450.00 and ten
(10) shares of the fish catch plus P2.00/fish box commission; that on
December 2, 1990, the undersigned complainant was dismissed by the
respondent Emmanuel Lo illegally and unlawfully without notice and
separation pay; that on December 13, 1990, the complainant came to the
office of the undersigned counsel and the latter wrote respondent a letter of
demand; that in 1988, when the complainant was employed by the
respondent, the latter owned one fishing boat and when the complainant
was dismissed in 1990, the respondent had increased his fishing boat to
three (3) boats out of his profit from his first; that each of the respondent's
fishing boat[s] went fishing for 22-23 days every month and all the fish
catched [sic] on these days were sold everyday and the cash proceeds
were kept by the respondent; that at the end of every 22-23 days of fishing,
the fishing boat was cleaned by the crew, engine, net and light boat were
repaired by the crew, helped and managed by the officers including the
complainant; that these cleaning and repair [sic] were charged to the gross
income of the month; that the monthly income of the crew would not be
given unless these cleaning and repair [sic] were all done; that the system
of sharing of the monthly income of the fishing boat was done by the
respondent in the following manner:
1. From the monthly gross income, the respondent [would] deduct 25% for
maintenance;
2. After deducting the 25%, the respondent and the officers/crew got 10%
each (total 20%) from the remaining 75% of the gross, known as "sideline";
the officers/crew (about 24 men) share[d] the sideline (10%) as follows:
a. Captain 10 shares
b. Engineer 8 shares
c. Secondo Captain 8 shares
d. Encargado 8 shares
e. Light Boat Chief 6 shares
f. Secondo Chief 5 shares
g. Chief Lambatero 6 shares
h. Secondo Lambatero 4 shares
i. Lambatero 3 shares
j. Chief Swimmer 6 shares
k. Winch Operator 4 shares
l. Other crew 2 shares
3. Out of the remaining 55% of the remaining of the gross monthly earning,
the expenses for the repairs of boat, net, engine, and light boat, oil and
fuel, and food and ropes were charged [to the] remaining amount which
expenses usually exceeded 55% of the monthly gross income and left
nothing to the officers and crew like the complainant.
13
LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
4. The Officers and crew, including the complainant received monthly
income on 10% "sideline" aforementioned and commission P8.00/fish box
sold every day which they shared, while the respondent who kept the
record of the income and expenses got 35% of the gross monthly income,
and free maintenance and repair of his fishing boat and equipment. He
also control [sic] the selling price of the daily fish catch and [sic] unknown
to the officers and crew.
The respondent was the one who hired the complainant. He made all the
job promotions, paid the salaries and dismissed the complainant. The
respondent directed personally the fishing operation, where to send the
light boat, where to fish and when to [go] ashore. In other words he had
complete control of his fishing boat, the officers and crew.
Respondent on the other hand, in [his] Answer and Position Paper, states
that he is the owner and operator of three (3) fishing boats operating in the
province of Antique; that complainant used to work as patron of one of the
fishing vessels owned by the respondent; that agreement between the
complainant and respondent was for the former to share with the members
of the crew [sic] and the respondent the catch of the fishing vessels with
the respondent providing for fuel and oil, equipments [sic] and other [sic]
which the complainant and the crew needs [sic] for a particular voyage;
that the fishing vessels go out fishing at the initiative of the complainant
and the crew members; that the respondent has no participation
whatsoever in so far as the decision when to go out is concerned; that the
respondent's only obligation is to provide for fuel and oil and the
equipments [sic] needed by the crew; that the complainant was not paid
any salary and his compensation consist [sic] only of his share in the catch
of the fishing vessel everytime it goes out fishing; that the fishing vessel
does not go out everyday not the whole year round; that it is not true that
the complainant receives [a] monthly salary of P450.00 per month because
his only compensation is his share in the catch of the fishing vessel; that
there is no employer-employee relationship which exist [sic] between the
complainant and the respondent because as alleged patron of the
respondent's fishing boat, the complainant is not under the orders of the
respondent as regards his alleged employment; that the complainant and
the crew go out to sea not upon the direction of the boat owner but upon
their own volition as to when and how long and where to go fishing; that the
letter perform no services for the boat owner but for their benefit; that the
undertaking therefore is a joint venture with the respondent as boat owner,
supplying the boat and its equipment and the patron (the complainant) and
the crew members contributing necessary labor and the parties getting
specific shares for their respective contributions. 11
In determining the existence of an employer-employee relationship, Labor
Arbiter Lagoc meticulously discussed the elements thereof, especially that
of private respondent's power of control over petitioner with respect to the
means and methods by which the work was to be accomplished, thus:
Complainant's evidence that control and supervision is exercised by
respondent, and certain amounts are given to him aside from his fish share
in the catch is his testimony on cross-examination:
Q. As patron you also decide when to set on [sic] to go out fishing and
usually this happen [sic] when the right start [sic]?
A. Yes, it depends upon the order of the owner, we just obey.
(p. 3, TSN 6 August 1993)
xxx xxx xxx
and in the re-direct examination, viz:
Q. What about when you were patron of the fishing boat of Mr. Lo what you
[would] get aside from your share of fish catch monthly or any other
compensations [sic]?
Labor Arbiter:
Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman
Your question is already stated in your Position Paper, paragraph 4
Atty. Pefianco:
Yes, Okey [sic] but I want to reiterate it now.
A. P200.00 every month and two pesos per box and there are 15 of us.
Q. That is in your position paper, you stated here P250.00 so which is
correct Mr. Witness 250.00 or 500.00 a month?
Atty. Operiano:
I object that is not proper for re-direct.
A. P450.00
(p. 19, TSN 6 August 1993)
Respondent's evidence on the same issue is his testimony, corroborated
by Nismal and Tonding that it is complainant who decides when to sail out
tothe [sic] sea, where to fish, how long they will stay fishing [at] sea and
when to go bank [sic] to the port.
Nismal is the fish dealer of Sheenly Joy 1 owned by respondent while
Tonding work[s] as [a] crew member of respondent's boat Sheenly Joy 3.
No material inconsistencies were show in all the witnesses [sic] testimonies
during cross-examination. We are placed in a quandary since both parties
may be assumed to be aware of the Supreme Court's ruling in [the]
Pajarillo and Ruga cases and adopted their respective positions to conform
with the facts of those two (2) cases.
But be that as it may, although respondent's declaration that he does not
have supervision and control over the work of complainant is corroborated
by witnesses Nismal and Tonding, We nevertheless find the testimonies of
the corroborating witnesses as wanting in probative value since there are
ties between the witnesses and respondent which under the natural course
of things will cause them (witnesses) to take the side of respondent.
There is more probative value in complainant's testimony that respondent
gave orders to set sail and that the patron and crew [would] merely obey.
Respondent ha[s] been in the fishing business for years. He first had only
one boat. He infused hundreds of thousands, if not millions, as capital in
the business and caused the acquisition of two (2) more boats.
This simply means that he is knowledgeable about the deep sea fishing
business. Indeed, it is foolhardy for a businessman to invest this kind of
money in a fishing boat and let somebody operate it without him exercising
at least the right to control the manner its [sic] going to be used in the work
to be done although not actually exercising such right.
Complainant's testimony although uncorroborated is more [within] the
realm of the actual facts surrounding the circumstances of this case.
Moreover, the positive allegations of complainant prevails over the denials
of respondent.
As to the issue concerning illegal dismissal, unfair labor practice and other
money claims, Labor Arbiter Lagoc held:
On the issue of illegal dismissal we find for the complainant. The charges
of illegal dismissal was by invoking no employer-employee relationship, not
refuted by respondent. Thus we find that the severance of [the] employer-
employee relationship was caused by respondent. The dismissal not
14
LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
having been justified, perforce the same is not one for just cause or
authorized under the law. Since complainant seeks separation pay as
relief, then the same must be granted.
Complainant served from 1988 to 1990 or two (2) years. He is thus entitled
to two (2) months separation pay, this being a case of illegal dismissal.
Since complainant failed to state his monthly income, the separation pay is
therefore computed at the minimum basis daily rate provided for my [sic]
law at the time of dismissal multiplied by the number of working days a
month, which according to complainant is 26 working days per month, and
the result multiplied by 2 months. (P89.00/day x 26 working days x 2
months separation pay = P4,628.00)
With respect to complainant's charge of unfair labor practice the so-called
unfair labor practice act was not specified thus the same must perforce fail.
Regarding the issue of money claims, complainant as Patron of the boat is
a managerial employee thus he is excepted from the provision[s] of Book
III, of the Labor Code.
Moreover, it is not disputed that complainant as Patron of the boat shares
in the income of the sale "fish catch", and this sharing of income in the fish
catch is even true when he was still a crew member of the fishing boat
owned by respondent. Persons who are given shares in the fish caught are
not covered by the Labor Standards Law which [complainant] charged
herein [respondent] for violations [sic]. Thus, the herein complainant's
money claims are likewise dismissed for lack of merit.
Both petitioner and private respondent appealed to the NLRC.
In its decision 12 of 17 March 1995, the NLRC dismissed both appeals for
lack of merit. The NLRC rejected petitioner's claim for reinstatement and
back wages because "it appears in the complaint filed on September 5,
1991 he only sought for the payment of his separation pay, among others."
and under Section 3, Rule V of the Rules of the Commission, parties are
not allowed to allege facts or present evidence to prove facts not referred
to and any cause or causes of action not included in the complaint or
position papers, affidavits and other documents.
Petitioner and private respondents separately moved for reconsideration of
the decision, 13 which the NLRC denied in its resolution 14 of 19 May 1995.
Before this Court, petitioner contends that the NLRC committed grave
abuse of discretion in refusing to award his monetary claims, including
back wages and other monetary benefits, in light of his having been
dismissed without just cause.
The Office of the Solicitor General (OSG) filed a Manifestation In Lieu of
Comment wherein it recommends that back wages be awarded to
petitioner, pursuant to Article 279 of the Labor Code and the decisions
in Torillo v. Leogardo, 15 Santos v. NLRC 16 and General Baptist Bible
College v. NLRC.17
In its Comment which we required to be filed, the NLRC failed to address
the issues raised in this petition.
In his comment, private respondent supported the stand of the labor arbiter
in that petitioner was a managerial employee and, therefore, not covered
by Book III of the Labor Code; hence, petitioner was not entitled to back
wages and the other monetary claims he sought.
The sole issue before us is whether the NLRC acted with grave abuse
discretion amounting to lack or excess of jurisdiction when it dismissed
petitioner's claim for separation pay, back wages, allowances and
damages.
The petition is meritorious as to the issue of back wages.
Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman
Grave abuse of discretion attended the refusal of the labor arbiter and the
NLRC to award back wages to petitioner, simply because petitioner did not
ask for such relief in his complaint. In so doing, the NLRC relied solely on
Section 3 of Rule V of the Rules of Procedure of the NLRC.
This is a patently erroneous conclusion.
First, in his complaint, petitioner charged private respondent with, inter alia,
illegal dismissal. He similarly prayed for back wages in his position paper
and claimed back wages once more in his appeal before the NLRC.
We have also observed that the complaint was a pro-forma mimeographed
form and petitioner merely put an "X" mark on the nature or description of
the charge enumerated after the paragraph reading:
Complainant hereby charges respondent of:
Among those marked with an "X" were "illegal dismissal" and "separation
pay and/or retirement/resignation benefit." It must be noted that "back
wages" was not among guided solely by what appeared in the pro-
forma form when he did not specifically pray for "back wages." Therefore, it
was entirely inaccurate for the NLRC to have held that petitioner only
sought separation pay.
Second, and more importantly, both the labor arbiter and the NLRC
concluded that petitioner was illegally dismissed. Conformably then with
Article 279 of the Labor Code, he is entitled to an award of back wages
since the Article expressly mandates that an employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to full back wages, inclusive of
allowances, and to other benefits or their monetary equivalent computed
from the time compensation was withheld up to the time of actual
reinstatement. The provision gives meaning to the laborer's constitutional
guaranty of security of tenure and finds solid basis on the universal
principles of justice and equity. The grant of back wages allows the unjustly
and illegally dismissed employee to recover from the employer that which
the former lost by way of wages as a result of his dismissal from
employment.
It is evident that the award of back wages resulting from the illegal
dismissal of an employee is a substantive right. Thus, the failure to claim
back wages in a complaint for illegal dismissal has been held to be a mere
procedural lapse which cannot defeat a right granted under substantive
law. 18
The present state of jurisprudence allows full recovery of back wages
pursuant to the express provisions of Article 279 of the Labor Code, i.e.,
without any deduction of income the employee may have derived from
employment elsewhere from the date of his dismissal up to his
reinstatement. 19
Petitioner would have, likewise, been entitled to reinstatement as a
consequence of his illegal dismissal from employment. However, by
expressly asking for separation pay, he is deemed to have opted for
separation pay in lieu of reinstatement. This is the tenor of the holding
in Reformist Union v. NLRC 20 to the effect that separation pay is awarded
as an alternative to reinstatement.
Corollary then to the foregoing is the matter of computing both the back
wages and the separation pay due petitioner. To be reckoned for the
former is the period of putative service. This pertains to that period from the
date petitioner was dismissed from employment on 2 December 1990 until
he could have been reinstated which, taking into account the appeals
separately interposed by petitioner and private respondent from the
decision of the labor arbiter, and the filing of this case, could have been
done only after the finality of this decision affirming the finding of the labor
arbiter and the NLRC that petitioner was illegally dismissed from his
employment by private respondent. As regards separation pay, the same
15
LABOR STANDARDS – PART FIVE: Conditions of Employment (Number 2. Excluded employees)
Cases
must be computed from the time petitioner was first employed by private
respondent until the finality of this decision.

As to petitioner's other monetary claims, significant to the resolution of said

issue is Article 82 of the Labor Code, which provides:

Art. 82. Coverage. — The provisions of this Title shall

apply to employees in all establishments and
undertakings whether for profit or not, but not to
government employees, managerial employees, field
personnel, members of the family of the employer who
are dependent on him for supports, domestic helpers,
persons in the personal service of another, and
workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.

As used herein, managerial employees" refer to those

whose primary duty consists of the management of the
establishment in which they are employed or of a
department or subdivision thereof, and to other officers
or members of the managerial staff.

xxx xxx xxx

A managerial employee is therefore excluded from the coverage of the law

as regards conditions of employment which include hours of work, weekly
rest periods, holidays, service incentive leaves and service charges. 21

The labor arbiter classified petitioner as a managerial employee. We have

not been provided with any compelling reason to overturn this factual
finding. As chief patron of the M/DCA "Sheenly Joy 1," albeit an unlicensed
one, 22 petitioner was tasked to take complete charge and command of the
vessel and perform the responsibilities and duties of a ship
captain. 23 Petitioner, an employee who falls squarely within the category of
"officers or members of a managerial staff," is thus exempted from
payment of overtime pay, premium pay for holidays and rest days and
service incentive leave pay. 24 Therefore, the labor arbiter was correct in
holding that petitioner was not entitled to overtime pay, legal holiday pay,
premium pay for holidays and rest days.

WHEREFORE, the instant petition is hereby GRANTED in part. The

Decision of the National Labor Relations Commission of 17 March 1995
and the Decision of the Labor Arbiter of 15 February 1994 in NLRC Case
No. V-0254-92 (RAB-06-09-50298-91) are hereby MODIFIED. As modified,
private respondent EMMANUEL LO is hereby ORDERED, to pay back
wages to petitioner ROLANDO DE LA CRUZ, for the period from the date
the latter was illegally dismissed from service until finality of this decision,
with interest at 6% per annum until this decision becomes final and
executory, after which time, the interest rate shall be 12% per annum until
the amounts due are actually paid or satisfied; and separation pay at the
rate of one (1) month's pay for every year of service computed from the
date he was first employed until the finality of this decision, until actually
paid.

No pronouncement as to costs.

SO ORDERED.

Averell B. Abrasaldo & Praisah Marjorey F. Picot– II-Sanchez Roman 16