G.R. No.

L-49774 February 24, 1981

SAN MIGUEL CORPORAION !CAGA"AN COCA-COLA PLAN#, petitioner,
vs.
$o%. AMA&O G. INCIONG, &e'u(y M)%)*(er o+ Labor a%, CAGA"AN COCA-COLA FREE
-OR.ERS UNION,respondents.

&E CASRO, J.:
Petition for certiorari and prohibition, with preliminary injunction to review the Order
1
dated
December 19, 1978 rendered by the Deputy inister of !abor in "#$ %O& 'ase (o. ))9*77
doc+eted as ,Cagayan Coca-Cola Free Workers Union vs. Cagayan Coca-Cola Plant, San
Miguel Corporation, , which denied herein petitioner-s motion for reconsideration and ordered
the immediate e.ecution of a prior Order
2
dated /une 7, 1978.
On /anuary 0, 1977, 'a1ayan 'oca*'ola $ree 2or+ers 3nion, private respondent herein, filed
a complaint a1ainst "an i1uel 'orporation 4'a1ayan 'oca*'ola Plant5, petitioner herein,
alle1in1 failure or refusal of the latter to include in the computation of 10th* month pay such
items as sic+, vacation or maternity leaves, premium for wor+ done on rest days and special
holidays, includin1 pay for re1ular holidays and ni1ht differentials.
6n Order
/
dated $ebruary 17, 1977 was issued by %e1ional Office (o. & where the complaint
was filed re8uirin1 herein petitioner "an i1uel 'orporation 4'a1ayan 'oca*'ola Plant5 ,to pay
the difference of whatever earnin1s and the amount actually received as 10th month pay
e.cludin1 overtime premium and emer1ency cost of livin1 allowance. ,
9erein petitioner appealed from that Order to the inister of !abor in whose behalf the Deputy
inister of !abor 6mado :. ;ncion1 issued an Order
4
dated /une 7, 1978 affirmin1 the Order of
%e1ional Office (o. & and dismissin1 the appeal for lac+ of merit. Petitioner-s motion for
reconsideration havin1 been denied, it filed the instant petition.
On $ebruary 1<, 1979, this 'ourt issued a #emporary %estrainin1 Order
0
enjoinin1 respondents
from enforcin1 the Order dated December 19, 1978.
#he cru. of the present controversy is whether or not in the computation of the 10th*month pay
under Presidential Decree 871, payments for sic+, vacation or maternity leaves, premium for
wor+ done on rest days and special holidays, includin1 pay for re1ular holidays and ni1ht
differentials should be considered.
Public respondent-s consistent stand on the matter since the effectivity of Presidential Decree
871 is that ,payments for sic+ leave, vacation leave, and maternity benefits, as well as salaries
paid to employees for wor+ performed on rest days, special and re1ular holidays are included in
the computation of the 10th*month pay.
1
On its part, private respondent cited innumerable past
rulin1s, opinions and decisions rendered by then 6ctin1 !abor "ecretary 6mado :. ;ncion1 to
the effect that, ,in computin1 the mandatory bonus, the basis is the total 1ross basic salary paid
by the employer durin1 the calendar year. "uch 1ross basic salary includes= 415 re1ular salary or
wa1e> 4?5 payments for sic+, vacation and maternity leaves> 405 premium for wor+ performed on
rest days or holidays= 4<5 holiday pay for wor+ed or unwor+ed re1ular holiday> and 475
emer1ency allowance if 1iven in the form of a wa1e adjustment.,
7
Petitioner, on the other hand, assails as erroneous the aforesaid order, rulin1 and opinions,
vi1orously contends that Presidential Decree 871 spea+s only of basic salary as basis for the
determination of the 10th*month pay> submits that payments for sic+, vacation, or maternity
leaves, ni1ht differential pay, as well as premium paid for wor+ performed on rest days, special
and re1ular holidays do not form part of the basic salary> and concludes that the inclusion of
those payments in the computation of the 10th*month pay is clearly not sanctioned by
Presidential Decree 871.
#he 'ourt finds petitioner-s contention meritorious.
#he provision in dispute is "ection 1 of Presidential Decree 871 and provides=
6ll employers are hereby re8uired to pay all their employees receivin1 a basic
salary of not more than Pl,))) a month, re1ardless of the nature of the
employment, a 10th*month pay not later than December ?< of every year.
"ection ? of the %ules and %e1ulations for the implementation of Presidential Decree 871
provides=
a5 #hirteenth*month pay shall mean one twelfth 41@1?5 of the basic salary of an
employee within a calendar year
b5 Aasic salary shall include all remunerations on earnin1s paid by an employer
to an employee for services rendered but may not include cost*of*livin1
allowances 1ranted pursuant to Presidential Decree (o. 7?7 or !etter of
;nstructions (o. 17<, profit sharin1 payments and all allowances and monetary
benefits which are not considered or inte1rated as part of the re1ular or basic
salary of the employee at the time of the promul1ation of the Decree on
December 1B, 1977.
3nder Presidential Decree 871 and its implementin1 rules, the basic salary of an employee is
used as the basis in the determination of his 10th*month pay. 6ny compensations or
remunerations which are deemed not part of the basic pay is e.cluded as basis in the
computation of the mandatory bonus.
3nder the %ules and %e1ulations ;mplementin1 Presidential Decree 871, the followin1
compensations are deemed not part of the basic salary=
a5 'ost*of*livin1 allowances 1ranted pursuant to Presidential Decree 7?7 and
!etter of ;nstructions (o. 17<>
b5 Profit sharin1 payments>
c5 6ll allowances and monetary benefits which are not considered or inte1rated
as part of the re1ular basic salary of tile employee at the time of the promul1ation
of the Decree on December 1B, 1977.
3nder a later set of "upplementary %ules and %e1ulations ;mplementin1 Presidential Decree
871 issued by the then !abor "ecretary Alas Ople, overtime pay, earnings and other
remunerations are e.cluded as part of the basic salary and in the computation of the 10th*
month pay.
#he e.clusion of cost*of*livin1 allowances under Presidential Decree 7?7 and !etter of
;nstructions (o. 17<, and profit sharin1 payments indicate the intention to strip basic salary of
other payments which are properly considered as ,frin1e, benefits. !i+ewise, the catch*all
e.clusionary phrase ,all allowances and monetary benefits which are not considered or
inte1rated as part of the basic salary, shows also the intention to strip basic salary of any and all
additions which may be in the form of allowances or ,frin1e, benefits.
oreover, the "upplementary %ules and %e1ulations ;mplementin1 Presidential Decree 871 is
even more emphatic in declarin1 that earnin1s and other remunerations which are not part of
the basic salary shall not be included in the computation of the 10th*month pay.
2hile doubt may have been created by the prior %ules and %e1ulations ;mplementin1
Presidential Decree 871 which defines basic salary to include all remunerations or earnings paid
by an employer to an employee, this cloud is dissipated in the later and more controllin1
"upplementary %ules and %e1ulations which cate1orically, e.clude from the definition of basic
salary earnin1s and other remunerations paid by employer to an employee. 6 cursory perusal of
the two sets of %ules indicates that what has hitherto been the subject of a broad inclusion is
now a subject of broad e.clusion. #he "upplementary rules and %e1ulations cure the seemin1
tendency of the former rules to include all remunerations and earnin1s within the definition of
basic salary.
#he all*embracin1 phrase ,earnin1s and other renumeration, which are deemed not part of the
basic salary includes within its meanin1 payments for sic+, vacation, or maternity leaves.
aternity premium for wor+s performed on rest days and special holidays pays for re1ular
holidays and ni1ht differentials. 6s such they are deemed not part of the basic salary and shall
not be considered in the computation of the 10th*month they, were not so e.cluded, it is hard to
find any ,earnin1s and other remunerations, e.pressly e.cluded in the computation of the 10th*
month pay. #hen the e.clusionary provision would prove to be ;dle and with no purpose.
#his conclusion finds stron1 support under the !abor 'ode of the Philippines. #o cite a few
provisions=
6rt. 87. C overtime ork. 2or+ may be performed beyond ei1ht hours a day
provided what the employee is paid for the overtime wor+, additional
compensation e8uivalent to his re1ular wa1e plus at least twenty*five 4?7D5
percent thereof.
;t is clear that overtime pay is an additional compensation other than and added to the re1ular
wa1e or basic salary, for reason of which such is cate1orically e.cluded from the definition of
basic salary under the "upplementary %ules and %e1ulations ;mplementin1 Presidential Decree
871.
;n 6rticle 90 of the same 'ode, para1raph
c5 wor+ performed on any special holiday shall be paid an additional
compensation of at least thirty percent 40)D5 of the re1ular wa1e of the
employee.
;t is li+ewise clear that prernium for special holiday which is at least 0)D of the re1ular wa1e is
an additional compensation other than and added to the re1ular wa1e or basic salary. $or
similar reason it shall not be considered in the computation of the 10th* month pay.
29E%E$O%E, the Orders of the Deputy !abor inister dated /une 7, 1978 and December 19,
1978 are hereby set aside and a new one entered as above indicated. #he #emporary
%estrainin1 Order issued by this 'ourt on $ebruary 1<, 1979 is hereby made permanent. (o
pronouncement as to costs.
"O O%DE%ED.
Sa% M)2ue3 4* I%5)o%2, 16/ SCRA 1/9 G.R. No. L-49774, February 24, 1981

FACS
#his is a complaint filed on /anuary 0, 1977 by 'a1ayan 'oca*'ola $ree 2or+ers 3nion a1ainst "an i1uel
'orporation 4'a1ayan 'oca*'ola Plant5 for the alle1ed failure or refusal of the latter to include in the computation
of 10th* month pay such items as sic+, vacation or maternity leaves, premium for wor+ done on rest days and
special holidays, includin1 pay for re1ular holidays and ni1ht differentials.
ISSUE
2hether or not in the computation of the 10th*month pay under Presidential Decree871, payments for sic+,
vacation or maternity leaves, premium for wor+ done on rest days and special holidays, includin1 pay for re1ular
holidays and ni1ht differentials should be considered.
$EL&
'itin1 certain provisions of the !abor 'ode of the Philippines specifically 6rt. 87 on overtime wor+ performed
beyond 8 hours a day is paid as additional compensation e8uivalent to a re1ular wa1e plus ?7D hereof and 6rt
90 on wor+ performed on any special holiday as an additional compensation of at least 0)D of the re1ular wa1e
of the employee, clearly, additional compensation is cate1orically e.cluded from the definition of basic salary under
the "upplementary %ules and %e1ulations ;mplementin1 Presidential Decree 871. #herefore, additional
compensation shall not be considered in the computation of the 10th* month pay
#he Orders of the Deputy !abor inister dated /une 7, 1978 and December 19, 1978 are hereby set aside and a
new one entered as above indicated. #he #emporary %estrainin1 Order issued by this 'ourt on $ebruary 1<, 1979
is hereby made permanent. (o pronouncement as to costs.
Reye* 4* NLRC !2667# G.R. 1162//
Fa5(*7
Petitioner was employed as a salesman at private respondent-s :rocery Division in Davao 'ity
on 6u1ust 1?, 1977. 9e was eventually appointed as unit mana1er of "ales Department*"outh
indanao District, a position he held until his retirement on (ovember 0), 1997. #hereafter, he
received a letter re1ardin1 the computation of his separation pay. ;nsistin1 that his retirement
benefits and 10th month pay must be based on the avera1e monthly salary of P<?,7BB.19,
which consists of P1),919.?? basic salary and P01,8<B.97 avera1e monthly commission,
petitioner refused to accept the chec+ issued by private respondent in the amount of
P?)),0??.?1. ;nstead, he filed a complaint before the arbitration branch of the (!%' for
retirement benefits, 10th month pay, ta. refund, earned sic+ and vacation leaves, financial
assistance, service incentive leave pay, dama1es and attorney-s fees.
Petitioner contends that the commissions form part of the basic salary, citin1 the case of
Philippine Duplicators, ;nc. v. (ational !abor %elations 'ommission, wherein the 'ourt held that
commissions earned by salesmen form part of their basic salary. Private respondent counters
that petitioner +new that the overridin1 commission is not included in the basic salary because it
had not been considered as such for a lon1 time in the computation of the 10th month pay,
leave commissions, absences and tardiness.
I**ue7 2O( the avera1e monthly sales commission should be included in the computation of
his retirement benefits and 10
th
month pay.
$e3,7 6vera1e monthly sales commission should not be included in the computation of his
retirement benefits and 10
th
month pay.
#his 'ourt has held, in Philippine Duplicators that, the salesmen-s commissions, comprisin1 a
pre*determined percenta1e of the sellin1 price of the 1oods sold by each salesman, were
properly included in the term basic salary for purposes of computin1 the 10th month pay. #he
salesmen-s commission are not overtime payments, nor profit*sharin1 payments nor any other
frin1e benefit but a portion of the salary structure which represents an automatic increment to
the monetary value initially assi1ned to each unit of wor+ rendered by a salesman.
'ontrarily, in Aoie*#a+eda, the so*called commissions paid to or received by medical
representatives of Aoie*#a+eda 'hemicals or by the ran+ and file employees of Philippine $uji
&ero. 'o., were e.cluded from the term basic salary because these were paid to the medical
representatives and ran+*and*file employees as productivity bonuses, which are 1enerally tied
to the productivity, or capacity for revenue production, of a corporation and such bonuses
closely resemble profit*sharin1 payments and have no clear direct or necessary relation to the
amount of wor+ actually done by each individual employee. $urther, commissions paid by the
Aoie*#a+eda 'ompany to its medical representatives could not have been sales commissions in
the same sense that Philippine Duplicators paid the salesmen their sales commissions. edical
representatives are not salesmen> they do not effect any sale of any article at all.
;n fine, whether or not a commission forms part of the basic salary depends upon the
circumstances or conditions for its payment, which indubitably are factual in nature for they will
re8uire a re*e.amination and calibration of the evidence on record.
6s to the main issue whether petitioner-s commissions be considered in the computation of his
retirement benefits and 10th month pay, we rule in the ne1ative. 6rticle ?87 of the !abor 'ode,
as amended by %epublic 6ct (o. 7B<1, otherwise +nown as #he (ew %etirement !aw, ??
provides= %etirement. C 6ny employee may be retired upon reachin1 the retirement a1e
established in the collective bar1ainin1 a1reement or other applicable employment contractF ;n
the absence of a retirement plan or a1reement providin1 for retirement benefits of employees in
the establishment, an employee upon reachin1 the a1e of si.ty 4B)5 years or more, but not
beyond si.ty five 4B75 years which is hereby declared the compulsory retirement a1e, who has
served at least five 475 years in the said establishment, may retire and shall be entitled to
retirement pay e8uivalent to at least one half 41@?5 month salary for every year of service, a
fraction of at least si. 4B5 months bein1 considered as one whole year. 3nless the parties
provide for broader inclusions, the term one half 41@?5 month salary shall mean fifteen 4175 days
plus one twelfth 41@1?5 of the 10th month pay and the cash e8uivalent of not more than five 475
days of service incentive leaves.
Petitioner filed for optional retirement upon reachin1 the a1e of B). 9owever, the basis in
computin1 his retirement benefits is his latest salary rate of P1),919.?? as the commissions he
received are in the form of profit*sharin1 payments specifically e.cluded by the fore1oin1 rules.
'ase law has it that when these earnin1s and remuneration are closely a+in to frin1e benefits,
overtime pay or profit*sharin1 statements, they are properly e.cluded in computin1 retirement
pay. 9owever, sales commissions which are effectively an inte1ral portion of the basic salary
structure of an employee, shall be included in determinin1 the retirement pay.
6t bar, petitioner %o1elio /. %eyes was receivin1 a monthly sum of P1),919.?? as salary
correspondin1 to his position as 3nit ana1er. #hus, as correctly ruled by public respondent
(!%', the ,overridin1 commissions, paid to him by 3niversal %obina 'orp. could not have been
-sales commissions- in the same sense that Philippine Duplicators paid its salesmen sales
commissions. 3nit ana1ers are not salesmen> they do not effect any sale of article at all.
#herefore, any commission which they receive is certainly not the basic salary which measures
the standard or amount of wor+ of complainant as 3nit ana1er. 6ccordin1ly, the additional
payments made to petitioner were not in fact sales commissions but rather partoo+ of the nature
of profit*sharin1 business. 'ertainly, from the fore1oin1, the doctrine in Aoie*#a+eda 'hemicals
and Philippine $uji &ero. 'orporation, which pronounced that commissions are additional pay
that does not form part of the basic salary, applies to the present case. 6side from the fact that
as unit mana1er petitioner did not enter into actual sale transactions, but merely supervised the
salesmen under his control, the disputed commissions were not re1ularly received by him. Only
when the salesmen were able to collect from the sale transactions can petitioner receive the
commissions. 'onversely, if no collections were made by the salesmen, then petitioner would
receive no commissions at all. ;n fine, the commissions which petitioner received were not part
of his salary structure but were profit*sharin1 payments and had no clear, direct or necessary
relation to the amount of wor+ he actually performed. #he collection made by the salesmen from
the sale transactions was the profit of private respondent from which petitioner had a share in
the form of a commission.
Peo'3e8* 9roa,5a*()%2 4. Se5. o+ &OLE
G.R. %o. 179102. May 8, 2669
Fa5(*7
/andeleon /ueGan 4respondent5 filed a complaint a1ainst PeopleH s Aroadcastin1 "ervice, ;nc.
4Aombo%adyo Phils., ;nc5 4petitioner5 for ille1al deduction, non*payment of service incentive
leave, 10
th
month pay, premium pay for holiday and rest day and ille1al diminution of benefits,
delayed payment of wa1es and non*covera1e of """, P6:*;A;: and Philhealth before the Department of
!abor and Employment 4DO!E5%e1ional Office (o. I;;, 'ebu 'ity. On the basis of the complaint, the DO!E
conducted a plant level inspection on ?0 "eptember ?))0. ;n the !nspection "eport Form, the !abor
;nspector wrote under the headin1 J$indin1s@%ecommendationsK Jnon*diminution of benefitsK
and J(ote= %espondent deny employer*employee relationship with the complainant* see (otice
of ;nspection results. Petitioner was re8uired to rectify@restitute the violations within five 475
days from receipt. (o rectification was effected by petitioner> thus, summary investi1ations were
conducted, with the parties eventually ordered to submit their respective position papers. ;n his
Order dated ?7 $ebruary ?))<, DO!E %e1ional Director 6tty. %odolfo . "abulao
4%e1ionalDirector5 ruled that respondent is an employee of petitioner, and that the former is
entitled to his money claims amountin1 to P?)0, 7?B.0). Petitioner sou1ht reconsideration of
the Order, claimin1 that the %e1ional Director 1ave credence to the documents offered by
respondent without e.aminin1 the ori1inals, but at the same time he missed or failed to consider
petitionerHs evidence. PetitionerHs motion for reconsideration was denied.
L
On appeal to the DO!E "ecretary, petitioner denied once more the e.istence of employer*
employee relationship. ;n its Order dated ?7 /anuary ?))7, the 6ctin1 DO!E "ecretary
dismissed the appeal on the 1round that petitioner did not post a cash or surety bond and
instead submitted a Deed of 6ssi1nment of Aan+ Deposit. Petitioner maintained that there isno
employer*employee relationship had ever e.isted between it and respondent because it was the
drama directors and producers who paid, supervised and disciplined respondent. ;t also added
that the case was beyond the jurisdiction of the DO!E and should have been considered by the
labor arbiter because respondentHs claim e.ceeded P7,))).)).
I**ue7
Does the "ecretary of !abor have the power to determine the e.istence of an employer*
employee relationshipM
$e3,7
(o. 'learly the law accords a prero1ative to the (!%' over the claim when the employer*
employee relationship has terminated or such relationship has not arisen at all. #he reason is
obvious. ;n the second situation especially, the e.istence of an employer*employee relationship
is a matter which is not easily determinable from an ordinary inspection, necessarily so,
because the elements of such a relationship are not verifiable from a mere ocular e.amination.
#he intricacies and implications of an employer*employee relationship demand that the level
of scrutiny should be far above the cursory and the mechanical. 2hile documents, particularly
documents found in the employerHs office are the primary source materials, what may prove
decisive are factors related to the history of the employerHs business operations, itscurrent state
as well as accepted contemporary practices in the industry. ore often than not, the 8uestion
of employer*employee relationship becomes a battle of evidence, the determination of which
should be comprehensive and intensive and therefore best left to the specialiGed 8uasi*judicial
body that is the (!%'.
;t can be assumed that the DO!E in the e.ercise of its visitorial and enforcement power
somehow has to ma+e a determination of the e.istence of an employer*employee
relationship. "uch prero1atival determination, however, cannot be coe.tensive with the visitorial
and enforcement power itself. ;ndeed, such determination is merely preliminary, incidental and collateral to the
DO!EHs primary function of enforcin1 labor standards provisions. #he determination of the e.istence of
employer*employee relationship is still primarily lod1ed with the (!%'. #his is the meanin1 of the
clause Jin cases where the relationship of employer*employee still e.istsK in 6rt. 1?8 4b5.
Peo'3e8* 9roa,5a*()%2 4. Se5. o+ &OLE
:.%. (o. 179B7?, archB, ?)1?
FACS
#he Public 6ttorneyHs Office 4P6O5 filed a motion for 'larification of the earlier Decision 4with
!eave of 'ourt5 of the "upreme 'ourt on this case. P6O sou1ht to clarify as to when the
visitorial and enforcement power of the DO!E be not considered as co*e.tensive with the power
to determine the e.istence of an employer*employee relationship. ;n its 'omment, the
DO!E sou1ht clarification as well, as to the e.tent of its visitorial and enforcement power under
the !abor 'ode, as amended. #he "upreme 'ourt earlier ruled that there e.ist no employer*
employee relationship between respondent /andeleon /ueGanand petitioner Aombo %adyo
Phils., ;nc.. ;t further ruled on the e.tent of visitorial and enforcement power of the "ecretary of
!abor vis*N*vis his jurisdiction over the cases involvin1 the determination of the e.istence of
employer*employee relationship. ;t was held that while the DO!E may ma+e a determination of
the e.istence of an employer*employee relationship, this function could not be co*e.tensive with
the visitorial and enforcement power provided in 6rt. 1?84b5 of the !abor 'ode, as amended by
%6 770). #he (ational !abor %elations 'ommission 4(!%'5 was held to be the primary a1ency
in determinin1 the e.istence of an employer*employee relationship. #his was the interpretation
of the 'ourt of the clause Oin cases where the relationship of employer *employee still e.istsP in
6rt. 1?84b5.
ISSUE7
2hether or not under the e.panded visitorial and enforcement powers of the "ecretary of !abor
1ranted by %6 770), the "ecretary of !abor has jurisdiction over the cases involvin1 the
determination of the e.istence of employer*employee relationship.
$EL&7
#he 'ourt treated the otion for 'larification as a second motion for reconsideration, 1rantin1
said motion and reinstatin1 the petition. ;t is apparent that there is a need to delineate the
jurisdiction of the DO!E "ecretary vis*N*vis that of the (!%'. 3nder 6rt. 1?84b5 of the !abor
'ode, as amended by %6 770), the DO!E is fully empowered to ma+e a determination as to the
e.istence of an employer*employee relationship in the e.ercise of its visitorial and enforcement
power, subject to judicial review, not review by the (!%'. ;f a complaint is brou1ht before the
DO!E to 1ive effect to the labor standards provisions of the !abor 'ode or other labor
le1islation, and there is a findin1 by the DO!E that there is an e.istin1 employer*employee
relationship, the DO!E e.ercises jurisdiction to the e.clusion of the (!%'. ;f the DO!E finds
that there is no employer*employee relationship, the jurisdiction is properly with the (!%'. ;f a
complaint is filed with the DO!E, and it is accompanied by a claim for reinstatement, the
jurisdiction is properly with the !abor 6rbiter, under 6rt. ?17405 of the !abor 'ode, which
provides that the !abor 6rbiter has ori1inal and e.clusive jurisdiction over those cases involvin1
wa1es, rates of pay, hours of wor+, and other terms and conditions of employment, if
accompanied by a claim for reinstatement. ;f a complaint is filed with the (!%', and there is still
an e.istin1 employer*employee relationship, the jurisdiction is properly with the DO!E. #he
findin1s of the DO!E, however, may still be 8uestioned throu1h a petition for certiorari under
%ule B7 of the %ules of 'ourt
:e(;ro I%(e33)2e%5e < Se5ur)(y Cor'., 4* Se5re(ary o+ &OLE !2669# G.R. 1720/7
$acts=
Petitioner /ethro ;ntelli1ence and "ecurity 'orporation 4/ethro5 is a security service contractor
with a security service contract a1reement with co*petitioner Qa+ult Phils., ;nc. 4Qa+ult5. On the
basis of a complaint filed by respondent $rederic+ :arcia 4:arcia5, one of the security 1uards
deployed by /ethro, for underpayment of wa1es, le1al@special holiday pay, premium pay for rest
day, 10
th
month pay, and ni1ht shift differential, the Department of !abor and Employment
4DO!E5* %e1ional Office (o. ;I conducted an inspection at Qa+ultHs premises in 'alamba,
!a1una in the course of which several labor standards violations were noted, includin1 +eepin1
of payrolls and daily time records in the main office, underpayment of wa1es, overtime pay and
other benefits, and non*re1istration with the DO!E as re8uired under Department Order (o. 18*)?.9
earin1s on :arciaHs complaint and on the subse8uent complaints of his co*respondents :il
'ordero et al. were conducted durin1 which /ethro submitted copies of payrolls coverin1 /une
1B to 0), ?))0, $ebruary to ay 1B*01,?))<, /une 1B*0), ?))0, and $ebruary 1*17, ?))<. /ethro failed
to submit daily time records of the claimants from ?))?to /une ?))<, however, despite the order for it to do so.
Ay Order of "eptember 9, ?))<, the DO!E %e1ional Director, notin1 petitionersH failure to rectify
the violations noted durin1 the above*stated inspection within the period 1iven for the purpose,
found them jointly and severally liable to herein respondents for the a11re1ate amount of E;:9#
93(D%ED (;(E #9O3"6(D #2O 93(D%ED #E(6(D 1B@1)) PE"O" 4P8)9,?1).1B5
representin1 their wa1e differentials, re1ular holiday pay, special day premium pay, 10th
month pay, overtime pay, service incentive leave pay, ni1ht shift differential premium and rest
day premium. Petitioners were also ordered to submit proof of payment to the claimants within
ten calendar days, failin1 which the entire award would be doubled, pursuant to %epublic 6ct
(o. 8188, and the correspondin1 writs of e.ecution and 1arnishment would be issued.
;ssues=
1. 2hether the "O!E has no jurisdiction over the case because, followin1 6rticle 1?9 of the
!abor 'ode, the a11re1ate money claim of each employee e.ceeded P7,))).)).
?. 2hether petitioner /ethro, as the admitted employer of respondents, could not be e.pected to
+eep payrolls and daily time records in Qa+ultHs premises as its office is in RueGon 'ity, hence,
the inspection conducted in Qa+ultHs plant had no basis.
0. 2hether or not the issuance of the 8uestioned writs of e.ecution and 1arnishment by
the DO!E*%e1ional Director was in order.
9eld=
2hile it is true that under 6rticles 1?9 and ?17 of the !abor 'ode, the !abor 6rbiter has
jurisdiction to hear and decide cases where the a11re1ate money claims of each employee
e.ceeds P7,))).)), said provisions do not contemplate nor cover the visitorial and enforcement powers
of the "ecretary of !abor or his duly authoriGed representatives. %ather, said powers are defined and
set forth in 6rticle 1?8 of the !abor 'ode 4as amended by %.6.(o. 770)5.6rt. 1?8 e.plicitly e.cludes
from its covera1e 6rticles 1?9 and ?17 of the !abor 'ode by the phrase=
O 4(5otwithstandin1 the provisions of 6rticles 1?9 and ?17 of this 'ode to the contrary ...SP
thereby retainin1 and further stren1thenin1 the power of the "ecretary of !abor or his duly
authoriGed representative to issue compliance orders to 1ive effect to the labor standards
provisions of said 'ode and other labor le1islation based on the findin1s of labor employment
and enforcement officers or industrial safety en1ineers made in the course of inspection
;n the case at bar, the "ecretary of !abor correctly assumed jurisdiction over the case as it
does not come under the e.ception clause in 6rt. 1?84b5 of the !abor 'ode. 2hile
petitioner /ethro appealed the inspection results and there is a need to e.amine evidentiary
matters to resolve the issues raised, the payrolls presented by it were considered in the ordinary
course of inspection. 2hile the employment records of the employees could not be e.pected to
be found in Qa+ultHs premises in 'alamba, as /ethroHs offices are in RueGon 'ity, the records
show that /ethro was 1iven ample opportunity to present its payrolls and other pertinent
documents durin1 the hearin1s and to rectify the violations noted durin1 the ocular inspection. ;t,
however, failed to do so, more particularly to submit competent proof that it was 1ivin1
its security 1uards the wa1es and benefits mandated by law.
/ethroHs failure to +eep payrolls and daily time records in Qa+ultHs premises was not the only labor
standard violation found to have been committed by it> it li+ewise failed to re1ister as a service
contractor with the DO!E, pursuant to Department Order (o. 18*)? and, as earlier stated, to
pay the wa1es and benefits in accordance with the rates prescribed by law. ;t bears emphasis
that the "O!E, under 6rticle 1)B of the !abor 'ode, as amended, e.ercises 8uasi*judicial
power, atleast to the e.tent necessary to determine violations of labor standards provisions of
the 'ode and other labor le1islation. 9e@she or the %e1ional Directors can issue compliance
orders and writs of e.ecution for the enforcement thereof. #he si1nificance of and bindin1 effect
of the compliance orders of the DO!E "ecretary is enunciated in 6rticle 1?8 of the !abor 'ode. 6nd
"ec. 7, %ule I 4E.ecution5 of the %ules on Disposition of !abor "tandards 'ases in %e1ional
Offices provides that the filin1 of a petition for certiorari shall not stay the e.ecution of the
appealed order or decision, unless the a11rieved party secures a temporary restrainin1 order
4#%O5 from the 'ourt. ;n the case at bar, no #%O or injunction was issued, hence, the issuance
of the 8uestioned writs of e.ecution and 1arnishment by the DO!E*%e1ional Director was in
order.
Me(eoro 4. Crea()4e Crea(ure*
$6'#"= 'reative 'reatures hired Iictor eteoro and the rest of the petitioners on various dates
as artists, carpenters, and welders, tas+ed to desi1n, create, assemble, set*up, and dismantle
props, and provide sound effects to 'reatives various #I pro1rams and movies. ;n 1999,
eteoro and the others filed a complaint a1ainst 'reative for non*payment of labor standards
incentives with the DO!E*('%. 6n inspection was conducted. 'reative claimed that the
petitioners were only contractual wor+ers, and as such, no employer*employee relationship
e.isted. #hus, the DO!E could not have e.ercised jurisdiction over the case, for it had none. ;t
added that the petitioners were free*lance individuals, performin1 special services with s+ills and
e.pertise inherently e.clusive to them li+e actors, actresses, directors, producers, and script
writers, such that they were treated as special types of wor+ers. Petitioners, on the other hand,
aver that they were employees because the elements of an employer*employee relationship
e.isted. "ubse8uently, petitioners filed a complaint for ille1al dismissal a1ainst 'reative, with
prayer for payment of overtime pay, premium pay for holiday and rest day, holiday pay, service
incentive leave pay, 10 th month pay, and attorneyHs fees before the (!%'. 6 few months after,
DO!E %e1ional Director a.imo Aaluyot !im issued an order directin1 'reative to pay
petitioners. On appeal, DO!E "ecretary Patricia "to. #omas upheld the DO!E %e1ional
Directors findin1s. "he stated that the "ecretary of !abor or his duly authoriGed representative
is allowed to use his visitorial and enforcement powers to 1ive effect to labor le1islation
re1ardless of the amount involved. On appeal, the '6 dismissed the case a1ainst 'reative for
lac+ of jurisdiction. Petition for review on certiorari.
;""3E= 2@( the DO!E*('% properly e.ercised its jurisdiction over the case.
(O. #he DO!E "ecretary and her authoriGed representatives, such as the DO!E*('% Director,
have jurisdiction to enforce compliance with labor standards laws under the broad visitorial and
enforcement powers conferred by 6rticle 1?8 of the !abor 'ode, and e.panded by %6 (o.
770). Aut this not withstandin1, the power of the %e1ional Director to hear and decide money
claims is not absolute. #he last sentence of 6rticle 1?8 4b5 of the !abor 'ode, otherwise +nown
as the e.ception clause, provides an instance when the %e1ional Director or his
representatives may be divested of jurisdiction over a labor standards case. 3nder prevailin1
jurisprudence, the so*called e.ception clausehas the followin1 elements, all of which
must concur=4a5

#hat the employer contests the findin1s of the labor re1ulations officer and raises issues
thereon> 4b5 #hat in order to resolve such issues, there is a need to e.amine evidentiary
matters> and4c5

#hat such matters are not verifiable in the normal course of inspection. ;n the instant case,
'reative re1istered its objection to the findin1s of the labor inspector at the earliest opportunity.
;t is clear that 'reative contested and continues to contest the findin1s and conclusions of the
labor inspector. 6lso, the 8uestion of whether or not petitioners were independent
contractors@project employees@free*lance wor+ers is a 8uestion of fact that necessitates the
e.amination of evidentiary matters not verifiable in the course of inspection. Ierily, the %e1ional
Director and the "ecretary of !abor are divested of jurisdiction to decide the case, and
the (!%' is the a1ency clothed with authority to do so. Petition denied for lac+ of merit.
'6 decision affirmed.
#o contest means to raise 8uestions as to the amounts complained of or the absence of
violation of labor standards laws> or, issues as to the complainantsri1ht to labor standards
benefits. %aisin1 lac+ of jurisdiction alone is not the contestcontemplated by the e.ception
clause. ;t is necessary that theemployer contest the findin1s of the labor re1ulations officer
durin1 the hearin1 or after receipt of the notice of inspection results. ore importantly, the +ey
re8uirement for the %e1ional Director and the DO!E "ecretary to be divested of jurisdiction is
that the evidentiary matters be not verifiable inthe course of inspection. 2here the evidence
presented was verifiable in the normal course of inspection, even if presented belatedly by the
employer, the %e1ional Director, and later the DO!E "ecretary, may still e.amine it> and these
officers are not divested of jurisdiction to decide the case
UR9ANES 4*. SEC. OF LA9OR
=GR No. 122791, February 19, 266/
>Fa5(*7
Petitioner Placido O. 3rbanes, /r., doin1 business under the name and style of 'atalina "ecurity
61ency, entered into an a1reement to provide security services to respondent "ocial "ecurity
"ystem 4"""5. Durin1 the effectivity of the a1reement, petitioner, by letter of ay 1B, 199<,
re8uested the """ for the upward adjustment of their contract rate in view of 2a1e Order (o.
('%*)0 which was issued by the %e1ional #ripartite 2a1es and Productivity Aoard*('%
pursuant to %epublic 6ct B7?7 otherwise +nown as the 2a1e %ationaliGation 6ct. On /une ?<,
199<, petitioner pulled out his a1ency-s services from the premises of the """ and another
security a1ency, /a1uar, too+ over. On /une ?9, 199<, petitioner filed a complaint with the
DO!E*('% a1ainst the """ see+in1 the implementation of 2a1e Order (o. ('%*)0.#he
%e1ional Director of the DO!E*('% rendered jud1ment in favor of the petitioner. """ appealed
to the "ecretary of !abor. #he "ecretary of !abor set aside the order of the %e1ional Director
and the "ecretary held petitioner-s security a1ency ,/O;(#!Q 6(D "EIE%6!!Q liable for wa1e
differentials, the amount of which should be paid D;%E'#!Q to the security 1uards concerned.
I**ue7
2hether or not the "ecretary of !abor have jurisdiction to review appeals from decisions of the
%e1ional Directors in complaints filed under 6rticle 1?9 of the !abor 'ode
Ru3)%2
;n the case at bar, even if petitioner filed the complaint on his and also on behalf of the security
1uards, the relief sou1ht has to do with the enforcement of the contract between him and the
""" which was deemed amended by virtue of 2a1e Order (o. ('%*)0. #he controversy
subject of the case at bar is thus a civil dispute, the proper forum for the resolution of which is
the civil courts. Aut even assumin1 arguendo that petitioner-s complaint were filed with the
proper forum, for lac+ of cause of action it must be dismissed. 6rticles 1)B, 1)7 and 1)9 of
the !abor 'ode provide=
6%#. 1)B. 'O(#%6'#O% O% "3A'O(#%6'#O%.
C
2henever an employer enters into contract with another person for the performance of the
former-s wor+, the employees of the contractor and of the latter-s subcontractor, if any, shall be
paid in accordance with the provisions of this 'ode.
!n the event that the contractor or subcontractor #ails to pay the age o# his employees
in accordance ith this Code, the employer shall be $ointly and severally liable ith his
contractor or subcontractor to such employees to the e%tent o# the ork per#ormed under the contract, in
the same manner and e%tent that he is liable to employees directly employed by him.
... ... ... 4Emphasis and underscorin15
6%#. 1)7.;(D;%E'# EP!OQE%.
C
#he provisions of the immediately precedin1 6rticle shall li+ewise apply to any person,
partnership, association or corporation which, not bein1 an employer, contracts with an
independent contractorfor the performance of any wor+, tas+, job or project. 6%#. 1)9.
"O!;D6%Q !;6A;!;#Q.
C
#he provisions of e.istin1 laws to the contrary notwithstandin1, every employer or indirect
employer shall be held responsible with his contractor or subcontractor for any violation of any
provision of this 'ode. $or purposes of determinin1 the e.tent of their civil liability under this
'hapter, they shall be considered as direct employers. ;n fine, the liability of the """ to
reimburse petitioner arises only if and when petitioner pays his employee*security 1uards ,the
increases ,mandated by 2a1e Order (o. ('%*)0. #he records do not show that petitioner has
paid the mandated increases to the security 1uards. #he security 1uards in fact have filed a
complaint with the (!%' a1ainst petitioner relative to, amon1 other thin1s, underpayment
of wa1es