Labor Law August 28, 2014

THIRD DIVISION
[G.R. No. 94825. September 4, 1992.]
PHILIPPINE FISHERIES DEVELOPMENT
AUTHORITY, Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION, and ODIN SECURITY AGENCY, as
representative of its Security Guards, Respondents.
Franklin J. Andrada for Petitioner.
Ramon Encarnacion and Reynato V. Siozon for Private
Respondents.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATIONS; PRINCIPAL AND

CONTRACTOR; JOINTLY AND SEVERALLY LIABLE FOR
PAYMENT OF UNPAID WAGES; TERM EMPLOYER
CONSTRUED. Notwithstanding that the petitioner is a
government agency, its liabilities, which are joint and solidary
with that of the contractor, are provided in Articles 106, 107
and 109 of the Labor Code. This places the petitioners
liabilities under the scope of the NLRC. Moreover, Book Three,
Title II on Wages specifically provides that the term "employer"
includes any person acting directly or indirectly in the interest
of an employer in relation to an employee and shall include the
Government and all its branches, subdivisions and
instrumentalities, all government-owned or controlled
corporation and institutions as well as non-profit private
institutions, or organizations (Art. 97 [b], Labor Code; Eagle
Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago
v. NLRC, 200 SCRA 158 [1991]). Settled is the rule that in job
contracting, the petitioner as principal is jointly and severally
liable with the contractor for the payment of unpaid wages. The
statutory basis for the joint and several liability is set forth in
Articles 107, and 109 in relation to Article 106 of the Labor
Code.

March 16, 1988, 158 SCRA 556]. . . . The Wage Orders are
statutory and mandatory and can not be waived. The petitioner
can not escape liability since the law provides the joint and
solidary liability of the principal and the contractor for the
protection
of
the
laborers.
3. ID.; ID.; ID.; DUE PROCESS OBSERVED IN CASE AT
BAR. The contention that it was deprived due process
because no hearing was conducted does not deserve merit. A
decision on the merits is proper where the issues raised by the
parties did not involve intricate questions of law. (See Blue Bar
Coconut Phils. Inc. v. Minister of Labor, 174 SCRA 25 [1989])
There can be no question that the security guards are entitled
to wage adjustments. The computation of the amount due to
each individual guard can be made during the execution of the
decision where hearings can be held. (See Section 3, Rule VIII
of the New Rules of Procedure of the NLRC).
4. ID.; INDIRECT EMPLOYER; ESTOPPED FROM
ASSAILING CONTRACT. Petitioner assail the contract for
security services for being void ab initio on the ground that it
did not comply with the bidding requirements set by law.
Undeniably, services were rendered already and the petitioner
benefitted from said contract for two (2) years now. The
petitioner is therefore estopped from assailing the contract.

5. ID.; PHIL. ASSOCIATION OF DETECTIVE AND

PROTECTIVE
AGENCY
OPERATORS
(PADPAO);
PURPOSE FOR ITS CREATION. In the complaint filed, the
private respondent alleged that it requested the Regional
Director, NCR Region of the Department of Labor and
Employment for their intercession in connection with the illegal
bidding and award made by the petitioner in favor of Triad
Security Agency which was below the minimum wage law.
Undeniably, the private respondent is equally guilty when it
entered into the contract with the petitioner without considering
Wage Order No. 6. The private respondent tries to explain that
the Philippine Association of Detective and Protective Agency
Operators (PADPAO) which fixes the contract rate of the
security agencies was unable to fix the new contract rate until
May 12, 1986. We, however, agree with the posture that the
2. ID.; ID.; ID.; WAGE ORDERS, MANDATORY AND setting of wages under PADPAO is of no moment. The
CANNOT BE WAIVED. In the case at bar, the action PADPAO memorandum was not necessary to make Wage
instituted by the private respondent was for the payment of Order No. 6 effective. The PADPAO memo was merely an
unpaid wage differentials under Wage Order No. 6. The internal agreement among the operators to set the ceiling of
liabilities of the parties were very well explained in the case of the contract rates. It was aimed to curb the practice of security
Eagle Security v. NLRC, supra where the court held: . . . "The agencies which were in cutthroat competition to request for
solidary liability of PTSI and EAGLE, however, does not wage adjustments after proposals were accepted in good faith
preclude the right of reimbursement from his co-debtor by the to
the
prejudice
of
the
parties.
one who paid [See Article 1217, Civil Code]. It is with respect
to this right of reimbursement that petitioners can find support 6. ID.; SECURITY AGENCY; CANNOT ESCAPE LIABILITY
in the aforecited contractual stipulation and Wage Order FOR PAYMENT OF UNPAID WAGES; PAYMENT OF
provision. "That Wage Orders are explicit that payment of the WAGES TO EMPLOYEES GUARANTEED UNDER THE
increases are `to be borne by the principal or client.To be CONSTITUTION. it bears emphasis that it was the private
borne, however, does not mean that the principal, PTSI in this respondent which first deprived the security personnel of their
case, would directly pay the security guards the wage and rightful wage under Wage Order No. 6. The private respondent
allowance increases because there is no privity of contract is the employer of the security guards and as the employer, it
between them. The security guards contractual relationship is is charged with knowledge of labor laws and the adequacy of
with their immediate employer, EAGLE. As an employer, the compensation that it demands for contractual services is its
EAGLE is tasked, among others, with the payment of their principal concern and not any others (Del Rosario & Sons
wages [See Article VII Sec. 3 of the Contract for Security Logging Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]).
Services, supra and Bautista v. Inciong, G.R. No. 52824, Given this peculiar circumstance, the private respondent

1|Page

Labor Law August 28, 2014

should also be faulted for the unpaid wage differentials of the
security guards. By filing the complaint in its own behalf and in
behalf of the security guards, the private respondent wishes to
exculpate itself from liability on the strength of the ruling in the
Eagle case that the ultimate liability rests with the principal.
Nonetheless, the inescapable fact is that the employees must
be guaranteed payment of the wages due them for the
performance of any work, task, job or project. They must be
given ample protection as mandated by the Constitution (See
Article II, Section 18 and Article XIII, Section 3). Thus, to
assure compliance with the provisions of the Labor Code
including the statutory minimum wage, the joint and several
liability of the contractor and the principal is mandated.
7. ID.; SOLIDARY LIABILITY OF PRINCIPAL AND
CONTRACTOR; WITHOUT PREJUDICE TO THE RIGHT OF
REIMBURSEMENT TO EITHER PRINCIPAL OR DIRECT
EMPLOYER AS WARRANTED. We hold the petitioner and
the private respondent jointly and severally liable to the
security guards for the unpaid wage differentials under Wage
Order No. 6. As held in the Eagle case, the security guards
immediate recourse is with their direct employer, private
respondent Odin Security Agency. The solidary liability is,
however, without prejudice to a claim for reimbursement by the
private respondent against the petitioner for only one-half of
the amount due considering that the private respondent is also
at fault for entering into the contract without taking into
consideration the minimum wage rates under Wage Order No.
6.

Security Guard P1,990.00

Security Supervisor 2,090.00
Det. Commander 2,190.00.
The Security Group of the AGENCY will be headed by a
detachment commander whose main function shall consist of
the administration and supervision control of the AGENCYs
personnel in the FISHING PORT COMPLEX. There shall be
one supervisor per shift who shall supervise the guards on duty
during a particular shift.
The above schedule of compensation includes among others,
the following:chanrob1es virtual 1aw library
(a) Minimum wage (Wage Order No. 5)
(b) Rest Day Pay
(c) Night Differential Pay
(d) Incentive Leave Pay
(e) 13th Month Pay
(f) Emergency Cost of Living Allowance (up to Wage Order No.
5)
(g) 4% Contractors Tax

DECISION
(h) Operational Expenses
GUTIERREZ, JR., J.:

The petitioner questions the resolution of the National Labor

Relations Commission (NLRC) dated January 17, 1983 setting
aside the order of dismissal issued by the Labor Arbiter and
the resolution dated June 25, 1990 denying petitioners motion
for reconsideration.
The facts are as follows:chanrob1es virtual 1aw library
The petitioner is a government-owned or controlled corporation
created by P.D. No. 977.
On November 11, 1985, it entered into a contract with the Odin
Security Agency for security services of its Iloilo Fishing Port
Complex in Iloilo City. The pertinent provision of the contract
provides:chanrobles.com : virtual law library
OBLIGATION OF THE FISHING PORT
COMPLEX:chanrob1es virtual 1aw library
1. For and in consideration of the services to be rendered by
the AGENCY to the FISHING PORT COMPLEX, the latter
shall pay to the former per month for eight (8) hours work daily
as follows:chanrob1es virtual 1aw library
OUTSIDE METRO MANILA

(i) Overhead (Rollo, pp. 197-198)

The contract for security services also provided for a one year
renewable period unless terminated by either of the parties. It
reads:chanrob1es virtual 1aw library
9. This agreement shall take effect upon approval for a period
of one (1) year unless sooner terminated upon notice of one
party to the other provided, that should there be no notice of
renewal within thirty (30) days before the expiry date, the same
shall be deemed renewed, and provided further, that the party
desiring to terminate the contract before the expiry date shall
give thirty (30) days written advance notice to the other party.
(Rollo, p. 198)
On October 24, 1987, and during the effectivity of the said
Security Agreement, the private respondent requested the
petitioner to adjust the contract rate in view of the
implementation of Wage Order No. 6 which took effect on
November 1, 1984.chanroblesvirtualawlibrary
The private respondents request for adjustment was anchored
on the provision of Wage Order No. 6 which states:chanrob1es
virtual 1aw library
SECTION 9. In the case of contracts for construction projects
and for security, janitorial and similar services, the increases in
the minimum wage and allowance rates of the workers shall be

2|Page

Labor Law August 28, 2014

borne by the principal or client of the construction/service
contractor and the contracts shall be deemed amended
accordingly, subject to the provisions of Section 3(c) of this
Order. (Rollo, p. 49)

(3) Granting arguendo that there is legal basis for the award,
the stipulation under the contract allowing an increase of wage
rate is void ab initio. (Rollo, p. 86)
On June 25, 1990, the motion for reconsideration was denied.

Section 7, par. c of the Security Services Contract which calls

for an automatic escalation of the rate per guard in case of
wage increase also reads:chanrob1es virtual 1aw library
The terms and conditions herein set forth shall be modified by
the applicable provisions of subsequent laws or decrees,
especially as they pertain to increases in the minimum wage
and occupational benefits to workers. (Rollo, p. 46)
Requests for adjustment of the contract price were reiterated
on January 14, 1988 and February 19, 1988 but were ignored
by the petitioner.
Thus on June 7, 1988, the private respondent filed with the
Office of the Sub-Regional Arbitrator in Region VI, Iloilo City a
complaint for unpaid amount of re-adjustment rate under Wage
Order No. 6 together with wage salary differentials arising from
the integration of the cost of living allowance under Wage
Order No. 1, 2, 3 and 5 pursuant to Executive Order No. 178
plus the amount of P25,000.00 as attorneys fees and cost of
litigation.
On July 29, 1988, the petitioner filed a Motion to Dismiss on
the following grounds:chanrob1es virtual 1aw library
(1) The Commission has no jurisdiction to hear and try the
case;
(2) Assuming it has jurisdiction, the security guards of Odin
Security Agency have no legal personality to sue or be sued;
and
(3) Assuming the individual guards have legal personality the
action involves interpretation of contract over which it has no
authority. (Rollo, p. 75)
On August 19, 1988, the Labor Arbiter issued an Order
dismissing the complaint stating that the petitioners being a
government-owned or controlled corporation would place it
under the scope and jurisdiction of the Civil Service
Commission and not within the ambit of the NLRC.
This Order of dismissal was raised on Appeal to the NLRC and
on January 17, 1989 the NLRC issued the questioned
resolution setting aside the order and entered a decision
granting reliefs to the privateRespondent.
A motion for reconsideration was subsequently filed raising
among others that the resolution is:chanroblesvirtualawlibrary
(1) In violation of the right of the respondent to due process
under the Constitution;
(2) Granting arguendo that the due process clause was
observed, the resolution granting relief is without any legal
basis; and

The petitioner now comes to this Court reiterating substantially

the same grounds it raised in its motion for reconsideration, to
wit:chanrob1es virtual 1aw library
(1) The National Labor Relations Commission failed to observe
due process.
(2) Granting the award of the National Labor Relations
Commission is valid, reliefs granted are not legal.
(3) Assuming the award complies with the requirements of due
process, the National Labor Relations Commission erred when
it failed to declare the contract for security services void.
(Rollo, pp. 201-202)
The petitioner is a government-owned or controlled corporation
with a special charter. This places it under the scope of the civil
service (Art. XI [B] [1] and [2], 1987 Constitution); Boy Scouts
of the Philippines v. NLRC, 196 SCRA 176 [1991]; PNOCEnergy Development Corp. v. NLRC, 201 SCRA 487 [1991]).
However, the guards are not employees of the petitioner. The
contract of services explicitly states that the security guards
are not considered employees of the petitioner (Rollo, p. 45).
There being no employer-employee relationship between the
petitioner and the security guards, the jurisdiction of the Civil
Service Commission may not be invoked in this case.
The contract entered into by the petitioner which is merely job
contracting makes the petitioner an indirect employer. The
issue, therefore, is whether or not an indirect employer is
bound by the rulings of the NLRC.
Notwithstanding that the petitioner is a government agency, its
liabilities, which are joint and solidary with that of the
contractor, are provided in Articles 106, 107 and 109 of the
Labor Code. This places the petitioners liabilities under the
scope of the NLRC. Moreover, Book Three, Title II on Wages
specifically provides that the term "employer" includes any
person acting directly or indirectly in the interest of an
employer in relation to an employee and shall include the
Government and all its branches, subdivisions and
instrumentalities, all government-owned or controlled
corporation and institutions as well as non-profit private
institutions, or organizations (Art. 97 [b], Labor Code; Eagle
Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago
v. NLRC, 200 SCRA 158 [1991]). The NLRC, therefore, did not
commit grave abuse of discretion in assuming jurisdiction to
set aside the Order of dismissal by the Labor
Arbiter.chanrobles virtual lawlibrary
The underlying issue in this case is who should carry the
burden of the wage increases.
Settled is the rule that in job contracting, the petitioner as
principal is jointly and severally liable with the contractor for the
payment of unpaid wages. The statutory basis for the joint and

3|Page

Labor Law August 28, 2014

several liability is set forth in Articles 107, and 109 in relation to
Article 106 of the Labor Code. (Del Rosario and Sons Logging
Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]; Baguio v.
NLRC, 202 SCRA 465 [1991]; Ecal v. NLRC, 195 SCRA 224
[1991]). In the case at bar, the action instituted by the private
respondent was for the payment of unpaid wage differentials
under Wage Order No. 6. The liabilities of the parties were very
well explained in the case of Eagle Security v. NLRC, supra
where the court held:chanrob1es virtual 1aw library
x

"The solidary liability of PTSI and EAGLE, however, does not

preclude the right of reimbursement from his co-debtor by the
one who paid [See Article 1217, Civil Code]. It is with respect
to this right of reimbursement that petitioners can find support
in the aforecited contractual stipulation and Wage Order
provision.
"The Wage Orders are explicit that payment of the increases
are `to be borne by the principal or client.To be borne,
however, does not mean that the principal, PTSI in this case,
would directly pay the security guards the wage and allowance
increases because there is no privity of contract between them.
The security guards contractual relationship is with their
immediate employer, EAGLE. As an employer, EAGLE is
tasked, among others, with the payment of their wages [See
Article VII Sec. 3 of the Contract for Security Services, supra
and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158
SCRA
556].
"Premises considered, the security guards immediate recourse
for the payment of the increases is with their direct employer,
EAGLE. However, in order for the security agency to comply
with the new wage and allowance rates it has to pay the
security guards, the Wage Order made specific provision to
amend existing contracts for security services by allowing the
adjustment of the consideration paid by the principal to the
security agency concerned. What the Wage Orders require,
therefore, is the amendment of the contract as to the
consideration to cover the service contractors payment of the
increases mandated. In the end, therefore, ultimate liability for
the payment of the increases rests with the principal."cralaw
virtua1aw
library
The Wage Orders are statutory and mandatory and can not be
waived. The petitioner can not escape liability since the law
provides the joint and solidary liability of the principal and the
contractor for the protection of the laborers. The contention
that it was deprived due process because no hearing was
conducted does not deserve merit. A decision on the merits is
proper where the issues raised by the parties did not involve
intricate questions of law. (See Blue Bar Coconut Phils. Inc. v.
Minister of Labor, 174 SCRA 25 [1989]) There can be no
question that the security guards are entitled to wage
adjustments. The computation of the amount due to each
individual guard can be made during the execution of the
decision where hearings can be held. (See Section 3, Rule VIII
of the New Rules of Procedure of the NLRC) Neither can the
petitioner assail the contract for security services for being void
ab initio on the ground that it did not comply with the bidding

requirements set by law. Undeniably, services were rendered

already and the petitioner benefitted from said contract for two
(2) years now. The petitioner is therefore estopped from
assailing the contract.chanrobles law library : red
Quite noteworthy is the fact that the private respondent entered
into the contract when Wage Order No. 6 had already been in
force. The contract was entered into in November 11, 1985
one year after the effectivity of Wage Order No. 6 which was
on November 1, 1984. The rates of the security guards as
stipulated in the contract did not consider the increases in the
minimum wage mandated by Wage Order No. 6. Two years
after, the private respondent is now asking for an adjustment in
the contract price pursuant to the wage order provision.
Such action of the private respondent is rather disturbing and
must not remain unchecked. In the complaint filed, the private
respondent alleged that it requested the Regional Director,
NCR Region of the Department of Labor and Employment for
their intercession in connection with the illegal bidding and
award made by the petitioner in favor of Triad Security Agency
which was below the minimum wage law. Undeniably, the
private respondent is equally guilty when it entered into the
contract with the petitioner without considering Wage Order
No.
6.
The private respondent tries to explain that the Philippine
Association of Detective and Protective Agency Operators
(PADPAO) which fixes the contract rate of the security
agencies was unable to fix the new contract rate until May 12,
1986.
We, however, agree with the posture that the setting of wages
under PADPAO is of no moment. The PADPAO memorandum
was not necessary to make Wage Order No. 6 effective. The
PADPAO memo was merely an internal agreement among the
operators to set the ceiling of the contract rates. It was aimed
to curb the practice of security agencies which were in
cutthroat competition to request for wage adjustments after
proposals were accepted in good faith to the prejudice of the
parties.chanrobles.com.ph
:
virtual
law
library
While it is true that security personnel should not be deprived
of what is lawfully due them, it bears emphasis that it was the
private respondent which first deprived the security personnel
of their rightful wage under Wage Order No. 6. The private
respondent is the employer of the security guards and as the
employer, it is charged with knowledge of labor laws and the
adequacy of the compensation that it demands for contractual
services is its principal concern and not any others (Del
Rosario & Sons Logging Enterprises, Inc. v. NLRC, 136 SCRA
669
[1985]).
Given this peculiar circumstance, the private respondent
should also be faulted for the unpaid wage differentials of the
security guards. By filing the complaint in its own behalf and in
behalf of the security guards, the private respondent wishes to
exculpate itself from liability on the strength of the ruling in the
Eagle case that the ultimate liability rests with the principal.
Nonetheless, the inescapable fact is that the employees must
be guaranteed payment of the wages due them for the
performance of any work, task, job or project. They must be

4|Page

Labor Law August 28, 2014

given ample protection as mandated by the Constitution (See
Article II, Section 18 and Article XIII, Section 3). Thus, to
assure compliance with the provisions of the Labor Code
including the statutory minimum wage, the joint and several
liability of the contractor and the principal is mandated.
We, therefore, hold the petitioner and the private respondent
jointly and severally liable to the security guards for the unpaid
wage differentials under Wage Order No. 6. As held in the
Eagle case, the security guards immediate recourse is with
their direct employer, private respondent Odin Security
Agency. The solidary liability is, however, without prejudice to a
claim for reimbursement by the private respondent against the
petitioner for only one-half of the amount due considering that
the private respondent is also at fault for entering into the
contract without taking into consideration the minimum wage
rates under Wage Order No. 6.chanrobles lawlibrary : rednad
WHEREFORE, the questioned resolutions of the National
Labor Relations Commission are hereby AFFIRMED with the
modification that both the petitioner and the private respondent
are ORDERED to pay jointly and severally the unpaid wage
differentials under Wage Order No. 6 without prejudice to the
right of reimbursement for one-half of the amount which either
the petitioner or the private respondent may have to pay to the
security
guards.
Costs
against
the
petitioner.
SO
Bidin,

ORDERED.
Davide,

Jr.

and

Romero, JJ.,

concur.

THIRD DIVISION
[G.R. No. 121439. January 25, 2000]
AKLAN ELECTRIC COOPERATIVE INCORPORATED
(AKELCO), petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (Fourth Division), RODOLFO M. RETISO and
[1]
165 OTHERS, respondents.
DECISION
GONZAGA-REYES, J.:
In his petition for certiorari and prohibition with prayer for writ of
preliminary injunction and/or temporary restraining order,
petitioner assails (a) the decision dated April 20, 1995, of
public respondent National Labor Relations Commission
(NLRC), Fourth (4th) Division, Cebu City, in NLRC Case No. V0143-94 reversing the February 25, 1994 decision of Labor
Arbiter Dennis D. Juanon and ordering petitioner to pay wages
in the aggregate amount of P6,485,767.90 to private
respondents, and (b) the resolution dated July 28, 1995
denying petitioners motion for reconsideration, for having been
issued with grave abuse of discretion.
A temporary restraining order was issued by this Court on
October 9, 1995 enjoining public respondent from executing
the questioned decision upon a surety bond posted by
[2]
petitioner in the amount of P6,400,000.00.

Felciano, J., is on leave.

The facts as found by the Labor Arbiter are as follows:

[3]

"These are consolidated cases/claims for non-payment

of salaries and wages, 13th month pay, ECOLA and
other fringe benefits as rice, medical and clothing
allowances, submitted by complainant Rodolfo M.
Retiso and 163 others, Lyn E. Banilla and Wilson B.
Sallador
against
respondents
Aklan
Electric
Cooperative, Inc. (AKELCO), Atty. Leovigildo Mationg in
his capacity as General Manager; Manuel Calizo, in his
capacity as Acting Board President, Board of Directors,
AKELCO.
Complainants alleged that prior to the temporary
transfer of the office of AKELCO from Lezo Aklan to
Amon Theater, Kalibo, Aklan, complainants were
continuously performing their task and were duly paid of
their salaries at their main office located at Lezo, Aklan.
That on January 22, 1992, by way of resolution of the
Board of Directors of AKELCO allowed the temporary
transfer holding of office at Amon Theater, Kalibo, Aklan
per information by their Project Supervisor, Atty.
Leovigildo Mationg, that their head office is closed and
that it is dangerous to hold office thereat;

5|Page

Labor Law August 28, 2014

Nevertheless, majority of the employees including
herein complainants continued to report for work at Lezo
Aklan and were paid of their salaries.
That on February 6, 1992, the administrator of NEA,
Rodrigo Cabrera, wrote a letter addressed to the Board
of AKELCO, that he is not interposing any objections to
the action taken by respondent Mationg
That on February 11, 1992, unnumbered resolution was
passed by the Board of AKELCO withdrawing the
temporary designation of office at Kalibo, Aklan, and
that the daily operations must be held again at the main
[4]
office of Lezo, Aklan;
That complainants who were then reporting at the Lezo
office from January 1992 up to May 1992 were duly paid
of their salaries, while in the meantime some of the
employees through the instigation of respondent
Mationg continued to remain and work at Kalibo, Aklan;
That from June 1992 up to March 18, 1993,
complainants who continuously reported for work at
Lezo, Aklan in compliance with the aforementioned
resolution were not paid their salaries;
That on March 19, 1993 up to the present, complainants
were again allowed to draw their salaries; with the
exception of a few complainants who were not paid their
salaries for the months of April and May 1993;
Per allegations of the respondents, the following are the
facts:
1.
That these complainants voluntarily abandoned
their respective work/job assignments, without any
justifiable reason and without notifying the management
of the Aklan Electric Cooperative, Inc. (AKELCO), hence
the cooperative suffered damages and systems loss;
2.
That the complainants herein defied the lawful
orders and other issuances by the General Manager
and the Board of Directors of the AKELCO. These
complainants were requested to report to work at the
Kalibo office x x x but despite these lawful orders of the
General Manager, the complainants did not follow and
wilfully and maliciously defied said orders and issuance
of the General Manager; that the Board of Directors
passed a Resolution resisting and denying the claims of
these complainants, x x x under the principle of "no work
no pay" which is legally justified; That these
complainants have "mass leave" from their customary
work on June 1992 up to March 18, 1993 and had a "sitdown" stance for these periods of time in their alleged
protest of the appointment of respondent Atty.
Leovigildo Mationg as the new General Manager of the
Aklan Electric Cooperative, Inc. (AKELCO) by the Board
of Directors and confirmed by the Administrator of the
National Electrification Administration (NEA), Quezon

City; That they engaged in " . . . slowdown mass leaves,

sit downs, attempts to damage, destroy or sabotage
plant equipment and facilities of the Aklan Electric
Cooperative, Inc. (AKELCO)."
On February 25, 1994, a decision was rendered by Labor
[5]
Arbiter Dennis D. Juanon dismissing the complaints.
Dissatisfied with the decision, private respondents appealed to
the respondent Commission.
[6]

On appeal, the NLRCs Fourth Division, Cebu City, reversed

and set aside the Labor Arbiters decision and held that private
respondents are entitled to unpaid wages from June 16, 1992
[7]
to March 18, 1993, thus:
"The evidence on records, more specifically the
evidence submitted by the complainants, which are: the
letter dated April 7, 1993 of Pedrito L. Leyson, Office
Manager of AKELCO (Annex "C"; complainants position
paper; Rollo, p.102) addressed to respondent Atty.
Leovigildo T. Mationg; respondent AKELCO General
Manager; the memorandum of said Atty. Mationg dated
14 April 1993, in answer to the letter of Pedrito Leyson
(Annex "D" complainants position paper); as well as the
computation of the unpaid wages due to complainants
(Annexes "E" to "E-3"; complainants position paper,
Rollo, pages 1024 to 1027) clearly show that
complainants had rendered services during the period June 16, 1992 to March 18, 1993. The record is bereft
of any showing that the respondents had submitted any
evidence, documentary or otherwise, to controvert this
asseveration of the complainants that services were
rendered during this period. Subjecting these evidences
submitted by the complainants to the crucible of
scrutiny, We find that respondent Atty. Mationg
responded to the request of the Office Manager, Mr.
Leyson, which We quote, to wit:
"Rest assured that We shall recommend your
aforesaid request to our Board of Directors for their
consideration and appropriate action. This
payment, however, shall be subject, among others,
to the availability of funds."
This assurance is an admission that complainants are
entitled to payment for services rendered from June 16,
1992 to March 18, 1993, specially so that the
recommendation and request comes from the office
manager himself who has direct knowledge regarding
the services and performance of employees under him.
For how could one office manager recommend payment
of wages, if no services were rendered by employees
under him. An office manager is the most qualified
person to know the performance of personnel under
him. And therefore, any request coming from him for
payment of wages addressed to his superior as in the
instant case shall be given weight.

6|Page

Labor Law August 28, 2014

Furthermore, the record is clear that complainants were
paid of their wages and other fringe benefits from
January, 1992 to May, 1992 and from March 19, 1993
up to the time complainants filed the instant cases. In
the interegnum, from June 16, 1992 to March 18, 1993,
complainants were not paid of their salaries, hence
these claims. We could see no rhyme nor reason in
respondents refusal to pay complainants salaries during
this period when complainants had worked and actually
rendered service to AKELCO.
While the respondents maintain that complainants were
not paid during this interim period under the principle of
"no work, no pay", however, no proof was submitted by
the respondents to substantiate this allegation. The
labor arbiter, therefore, erred in dismissing the claims of
the complainants, when he adopted the "no work, no
pay" principle advanced by the respondents.
WHEREFORE, in view of the foregoing, the appealed
decision dated February 25, 1994 is hereby Reversed
and Set Aside and a new one entered ordering
respondent AKELCO to pay complainants their claims
amounting to P6,485,767.90 as shown in the
computation (Annexes "E" to "E-3")."
A motion for reconsideration was filed by petitioner but the
same was denied by public respondent in a resolution dated
[8]
July 28, 1995.
Petitioner brought the case to this Court alleging that
respondent NLRC committed grave abuse of discretion citing
[9]
the following grounds:
1. PUBLIC RESPONDENT COMMITTED GRAVE
ABUSE OF DISCRETION IN REVERSING THE
FACTUAL FINDINGS AND CONCLUSIONS OF THE
LABOR ARBITER, AND DISREGARDING THE
EXPRESS ADMISSION OF PRIVATE RESPONDENTS
THAT THEY DEFIED PETITIONERS ORDER
TRANSFERRING THE PETITIONERS OFFICIAL
BUSINESS OFFICE FROM LEZO TO KALIBO AND
FOR THEM TO REPORT THEREAT.

OR A RECOGNITION THAT COMPENSABLE

SERVICES WERE ACTUALLY RENDERED.
4. GRANTING THAT PRIVATE RESPONDENTS
CONTINUED TO REPORT AT THE LEZO OFFICE, IT
IS STILL GRAVE ABUSE OF DISCRETION FOR
PUBLIC RESPONDENT TO CONSIDER THAT
PETITIONER
IS
LEGALLY
OBLIGATED
TO
RECOGNIZE
SAID
CIRCUMSTANCE
AS
COMPENSABLE SERVICE AND PAY WAGES TO
PRIVATE RESPONDENTS FOR DEFYING THE
ORDER FOR THEM TO REPORT FOR WORK AT THE
KALIBO OFFICE WHERE THE OFFICIAL BUSINESS
AND OPERATIONS WERE CONDUCTED.
5. PUBLIC RESPONDENT COMMITTED GRAVE
ABUSE OF DISCRETION AND SERIOUS, PATENT
AND PALPABLE ERROR IN RULING THAT THE "NO
WORK, NO PAY" PRINCIPLE DOES NOT APPLY FOR
LACK OF EVIDENTIARY SUPPORT WHEN PRIVATE
REPONDENTS ALREADY ADMITTED THAT THEY
DID NOT REPORT FOR WORK AT THE KALIBO
OFFICE.
6. PUBLIC RESPONDENT COMMITTED GRAVE
ABUSE OF DISCRETION IN ACCORDING WEIGHT
AND CREDIBILITY TO THE SELF-SERVING AND
BIASED
ALLEGATIONS
OF
PRIVATE
RESPONDENTS, AND ACCEPTING THEM AS
PROOF, DESPITE THE ESTABLISHED FACT AND
ADMISSION THAT PRIVATE RESPONDENTS DID
NOT REPORT FOR WORK AT THE KALIBO OFFICE,
OR THAT THEY WERE NEVER PAID FOR ANY
WAGES
FROM
THE
TIME
THEY
DEFIED
PETITIONERS ORDERS.

Petitioner contends that public respondent committed grave

abuse of discretion in finding that private respondents are
entitled to their wages from June 16, 1992 to March 18, 1993,
thus disregarding the principle of "no work, no pay". It alleges
that private respondents stated in their pleadings that they not
only objected to the transfer of petitioners business office to
Kalibo but they also defied the directive to report thereat
because they considered the transfer illegal. It further claims
that private respondents refused to recognize the authority of
2. PUBLIC RESPONDENT COMMITTED GRAVE petitioners lawful officers and agents resulting in the disruption
ABUSE OF DISCRETION IN CONCLUDING THAT of petitioners business operations in its official business office
PRIVATE RESPONDENTS WERE REALLY WORKING in Lezo, AKlan, forcing petitioner to transfer its office from Lezo
OR RENDERING SERVICE ON THE BASIS OF THE to Kalibo transferring all its equipments, records and facilities;
COMPUTATION OF WAGES AND THE BIASED that private respondents cannot choose where to work, thus,
RECOMMENDATION SUBMITTED BY LEYSON WHO when they defied the lawful orders of petitioner to report at
IS ONE OF THE PRIVATE RESPONDENTS WHO Kalibo, private respondents were considered dismissed as far
DEFIED THE LAWFUL ORDERS OF PETITIONER.
as petitioner was concerned. Petitioner also disputes private
respondents allegation that they were paid their salaries from
3. PUBLIC RESPONDENT COMMITTED GRAVE January to May 1992 and again from March 19, 1993 up to the
ABUSE OF DISCRETION IN CONSIDERING THE present but not for the period from June 1992 to March 18,
ASSURANCE
BY
PETITIONERS
GENERAL 1993 saying that private respondents illegally collected fees
MANAGER MATIONG TO RECOMMEND THE and charges due petitioner and appropriated the collections
PAYMENT OF THE CLAIMS OF PRIVATE among themselves for which reason they are claiming salaries
RESPONDENTS AS AN ADMISSION OF LIABILITY only for the period from June 1992 to March 1993 and that
private respondents were paid their salaries starting only in

7|Page

Labor Law August 28, 2014

April 1993 when petitioners Board agreed to accept private
respondents back to work at Kalibo office out of compassion
and not for the reason that they rendered service at the Lezo
office. Petitioner also adds that compensable service is best
shown by timecards, payslips and other similar documents and
it was an error for public respondent to consider the
computation of the claims for wages and benefits submitted
merely by private respondents as substantial evidence.

refused to work under the lawful orders of the petitioner

AKELCO management; hence they are covered by the "no
work, no pay" principle and are thus not entitled to the claim for
unpaid wages from June 16, 1992 to March 18, 1993.
We find merit in the petition.

At the outset, we reiterate the rule that in certiorari proceedings

under Rule 65, this Court does not assess and weigh the
The Solicitor General filed its Manifestation in lieu of Comment sufficiency of evidence upon which the labor arbiter and public
praying that the decision of respondent NLRC be set aside and respondent NLRC based their resolutions. Our query is limited
payment of wages claimed by private respondents be denied to the determination of whether or not public respondent NLRC
for lack of merit alleging that private respondents could not acted without or in excess of its jurisdiction or with grave abuse
have worked for petitioner's office in Lezo during the stated of discretion in rendering the assailed resolutions. [10] While
period since petitioner transferred its business operation in administrative findings of fact are accorded great respect, and
Kalibo where all its records and equipments were brought; that even finality when supported by substantial evidence,
computations of the claims for wages and benefits submitted nevertheless, when it can be shown that administrative bodies
by private respondents to petitioner is not proof of rendition of grossly misappreciated evidence of such nature as to compel a
work. Filing its own Comment, public respondent NLRC claims contrary conclusion, this court had not hesitated to reverse
that the original and exclusive jurisdiction of this Court to their factual findings.[11] Factual findings of administrative
review decisions or resolutions of respondent NLRC does not agencies are not infallible and will be set aside when they fail
include a correction of its evaluation of evidence as factual the test of arbitrariness.[12] Moreover, where the findings of
issues are not fit subject forcertiorari.
NLRC contradict those of the labor arbiter, this Court, in the
exercise of its equity jurisdiction, may look into the records of
Private respondents, in their Comment, allege that review of a the case and reexamine the questioned findings.[13]
decision of NLRC in a petition for certiorari under Rule 65 does
not include the correctness of its evaluation of the evidence but We find cogent reason, as shown by the petitioner and the
is confined to issues of jurisdiction or grave abuse of discretion Solicitor General, not to affirm the factual findings of public
and that factual findings of administrative bodies are entitled to respondent NLRC.
great weight, and accorded not only respect but even finality
when supported by substantial evidence. They claim that
petitioner's Board of Directors passed an unnumbered We do not agree with the finding that private respondents had
resolution on February 11, 1992 returning back the office to rendered services from June 16, 1992 to March 18, 1993 so as
Lezo from Kalibo Aklan with a directive for all employees to to entitle them to payment of wages. Public respondent based
immediately report at Lezo; that the letter-reply of Atty. Mationg its conclusion on the following: (a) the letter dated April 7, 1993
to the letter of office manager Leyson that he will recommend of Pedrito L. Leyson, Office Manager of AKELCO addressed to
the payment of the private respondents' salary from June 16, AKELCOs General Manager, Atty. Leovigildo T. Mationg,
1992 to March 18, 1993 to the Board of Directors was an requesting for the payment of private respondents unpaid
admission that private respondents are entitled to such wages from June 16, 1992 to March 18, 1993; (b) the
payment for services rendered. Private respondents state that memorandum of said Atty. Mationg dated 14 April 1993, in
in appreciating the evidence in their favor, public respondent answer to the letter request of Pedrito Leyson where Atty.
NLRC at most may be liable for errors of judgment which, as Mationg made an assurance that he will recommend such
differentiated from errors of jurisdiction, are not within the request; (c) the private respondents own computation of their
unpaid wages. We find that the foregoing does not constitute
province of the special civil action of certiorari.
substantial evidence to support the conclusion that private
respondents are entitled to the payment of wages from June
Petitioner filed its Reply alleging that review of the decision of 16, 1992 to March 18, 1993. Substantial evidence is that
public respondent is proper if there is a conflict in the factual amount of relevant evidence which a reasonable mind might
findings of the labor arbiter and the NLRC and when the accept as adequate to justify a conclusion.[14] These evidences
evidence is insufficient and insubstantial to support NLRCs relied upon by public respondent did not establish the fact that
factual findings; that public respondents findings that private private respondents actually rendered services in the Kalibo
respondents rendered compensable services were merely office during the stated period.
based on private respondents computation of claims which is
self-serving; that the alleged unnumbered board resolution
dated February 11, 1992, directing all employees to report to The letter of Pedrito Leyson to Atty. Mationg was considered
Lezo Office was never implemented because it was not a valid by public respondent as evidence that services were rendered
by private respondents during the stated period, as the
action of AKELCOs legitimate board.
recommendation and request came from the office manager
who has direct knowledge regarding the services and
The sole issue for determination is whether or not public performance of employees under him. We are not convinced.
respondent NLRC committed grave abuse of discretion Pedrito Leyson is one of the herein private respondents who
amounting to excess or want of jurisdiction when it reversed are claiming for unpaid wages and we find his actuation of
the findings of the Labor Arbiter that private respondents

8|Page

Labor Law August 28, 2014

requesting in behalf of the other private respondents for the
payment of their backwages to be biased and self-serving, thus
not credible.
On the other hand, petitioner was able to show that private
respondents did not render services during the stated period.
Petitioners evidences show that on January 22, 1992,
petitioners Board of Directors passed a resolution temporarily
transferring the Office from Lezo, Aklan to Amon Theater,
Kalibo, Aklan upon the recommendation of Atty. Leovigildo
Mationg, then project supervisor, on the ground that the office
at Lezo was dangerous and unsafe. Such transfer was
approved by then NEA Administrator, Rodrigo E. Cabrera, in a
letter dated February 6, 1992 addressed to petitioners Board
[15]
of Directors. Thus, the NEA Administrator, in the exercise of
supervision and control over all electric cooperatives, including
petitioner, wrote a letter dated February 6, 1992 addressed to
the Provincial Director PC/INP Kalibo Aklan requesting for
military assistance for the petitioners team in retrieving the
electric cooperatives equipments and other removable
facilities and/or fixtures consequential to the transfer of its
principal business address from Lezo to Kalibo and in
maintaining peace and order in the cooperatives coverage
[16]
area. The foregoing establishes the fact that the continuous
operation of the petitioners business office in Lezo Aklan
would pose a serious and imminent threat to petitioners
officials and other employees, hence the necessity of
temporarily transferring the operation of its business office from
Lezo to Kalibo. Such transfer was done in the exercise of a
management prerogative and in the absence of contrary
evidence is not unjustified. With the transfer of petitioners
business office from its former office, Lezo, to Kalibo, Aklan, its
equipments, records and facilities were also removed from
Lezo and brought to the Kalibo office where petitioners official
business was being conducted; thus private respondents
allegations that they continued to report for work at Lezo to
support their claim for wages has no basis.
Moreover, private respondents in their position paper admitted
that they did not report at the Kalibo office, as Lezo remained
[17]
to be their office where they continuously reported, to wit:
"On January 22, 1991 by way of a resolution of the
Board of Directors of AKELCO it allowed the temporary
holding of office at Amon Theater, Kalibo, Aklan, per
information by their project supervisor, Atty. Leovigildo
Mationg that their head office is closed and that it is
dangerous to hold office thereat.
Nevertheless, majority of the employees including the
herein complainants, continued to report for work at
Lezo, Aklan and were paid of their salaries.
xxx
The transfer of office from Lezo, Aklan to Kalibo, Aklan
being illegal for failure to comply with the legal
requirements under P.D. 269, the complainants
remained and continued to work at the Lezo Office until
they were illegally locked out therefrom by the

respondents. Despite the illegal lock out however,

complainants continued to report daily to the location of
the Lezo Office, prepared to continue in the
performance of their regular duties.
Complainants thus could not be considered to have
abandoned their work as Lezo remained to be their
office and not Kalibo despite the temporary transfer
thereto. Further the fact that they were allowed to draw
their salaries up to May, 1992 is an acknowledgment by
the management that they are working during the
period.
xxx
It must be pointed out that complainants worked and
continuously reported at Lezo office despite the
management holding office at Kalibo. In fact, they were
paid their wages before it was withheld and then were
allowed to draw their salaries again on March 1993
while reporting at Lezo up to the present.
Respondents acts and payment of complainants
salaries and again from March 1993 is an unequivocal
recognition on the part of respondents that the work of
complainants is continuing and uninterrupted and they
are therefore entitled to their unpaid wages for the
period from June 1992 to March 1993."
The admission is detrimental to private respondents cause.
Their excuse is that the transfer to Kalibo was illegal but we
agree with the Labor Arbiter that it was not for private
respondents to declare the managements act of temporarily
transferring the AKELCO office to Kalibo as an illegal act.
There is no allegation nor proof that the transfer was made in
bad faith or with malice. The Labor Arbiter correctly
[18]
rationalized in its decision as follows:
"We do not subscribe to complainants theory and
assertions. They, by their own allegations, have
unilaterally
committed
acts
in
violation
of
managements/respondents directives purely classified
as management prerogative. They have taken amongst
themselves
declaring
managements
acts
of temporarily transferring the holding of the AKELCO
office from Lezo to Kalibo, Aklan as illegal. It is never
incumbent upon themselves to declare the same as
such. It is lodged in another forum or body legally
mantled to do the same. What they should have done
was
first
to
follow
managements
orders temporarily transferring office for it has the first
presumption of legality. Further, the transfer was
only temporary. For:
"The employer as owner of the business, also has
inherent rights, among which are the right to select
the persons to be hired and discharge them for just
and valid cause; to promulgate and enforce
reasonable employment rules and regulations and
to modify, amend or revoke the same; to designate

9|Page

Labor Law August 28, 2014

the work as well as the employee or employees to
perform it; to transfer or promote employees; to
schedule, direct, curtail or control company
operations; to introduce or install new or improved
labor or money savings methods, facilities or
devices; to create, merge, divide, reclassify and
abolish departments or positions in the company
and to sell or close the business.

directing the COOP Legal Counsel to file criminal cases

against employees who misappropriated collections and
officers who authorized disbursements of funds without legal
[21]
authority from the NEA and the AKELCO Board. If indeed
there was a valid board resolution transferring back petitioners
office to Lezo from its temporary office in Kalibo, there was no
need for the Board to pass the above-cited resolutions.

We are also unable to agree with public respondent NLRC

when it held that the assurance made by Atty. Mationg to the
letter-request of office manager Leyson for the payment of
Even as the law is solicitous of the welfare of private respondents wages from June 1992 to March 1993
the employees it must also protect the right of was an admission on the part of general manager Mationg that
an employer to exercise what are clearly private respondents are indeed entitled to the same. The letter
management prerogatives. The free will of reply of Atty. Mationg to Leyson merely stated that he will
management to conduct its own business recommend the request for payment of backwages to the
affairs to achieve its purpose can not be Board of Directors for their consideration and appropriate
denied. The transfer of assignment of a action and nothing else, thus, the ultimate approval will come
the argument
medical representative from Manila to the from the Board of Directors. We find well-taken
[22]
advanced
by
the
Solicitor
General
as
follows:
province has therefore been held lawful where
this was demanded by the requirements of the
The allegation of private respondents that petitioner had
drug companys marketing operations and the
former had at the time of his employment
already approved payment of their wages is without
undertaken to accept assignment anywhere in
basis. Mationgs offer to recommend the payment of
the Philippines. (Abbot Laboratories (Phils.),
private respondents' wages is hardly approval of their
Inc., et al. vs. NLRC, et al., G.R. No. L-76959,
claim for wages. It is just an undertaking to recommend
Oct. 12, 1987).
payment. Moreover, the offer is conditional. It is subject
to the condition that petitioners Board of Directors will
give its approval and that funds were available.
It is the employers prerogative to abolish a position
Mationgs reply to Leysons letter for payment of wages
which it deems no longer necessary, and the
did not constitute approval or assurance of payment.
courts, absent any findings of malice on the part of
The fact is that, the Board of Directors of petitioner
the management, cannot erase that initiative simply
rejected private respondents demand for payment
to protect the person holding office (Great Pacific
(Board Resolution No. 496, s. 1993).
Life Assurance Corporation vs. NLRC, et al., G.R.
xxx

No. 88011, July 30, 1990)."

Private respondents claim that petitioners Board of Directors
passed an unnumbered resolution dated February 11, 1992
returning back the office from its temporary office in Kalibo to
Lezo. Thus, they did not defy any lawful order of petitioner and
were justified in continuing to remain at Lezo office. This
allegation was controverted by petitioner in its Reply saying
that such unnumbered resolution was never implemented as it
was not a valid act of petitioners Board. We are convinced by
petitioners argument that such unnumbered resolution was not
a valid act of petitioners legitimate Board considering the
subsequent actions taken by the petitioners Board of Directors
decrying private respondents inimical act and defiance, to wit
(1) Resolution No. 411, s. of 1992 on September 9, 1992,
dismissing all AKELCO employees who were on illegal strike
and who refused to return to work effective January 31, 1992
despite the directive of the NEA project supervisor and
[19]
petitioners acting general manager; (2) Resolution No. 477,
s. of 1993 dated March 10, 1993 accepting back private
respondents who staged illegal strike, defied legal orders and
issuances, out of compassion, reconciliation, Christian values
and humanitarian reason subject to the condition of "no work,
[20]
no pay" (3) Resolution No. 496, s. of 1993 dated June 4,
1993, rejecting the demands of private respondents for
backwages from June 16, 1992 to March 1993 adopting the
policy of "no work, no pay" as such demand has no basis, and

We are accordingly constrained to overturn public respondents

findings that petitioner is not justified in its refusal to pay
private respondents wages and other fringe benefits from June
16, 1992 to March 18, 1993; public respondents stated that
private respondents were paid their salaries from January to
May 1992 and again from March 19, 1993 up to the present.
As cited earlier, petitioners Board in a Resolution No. 411
dated September 9, 1992 dismissed private respondents who
were on illegal strike and who refused to report for work at
Kalibo office effective January 31, 1992; since no services
were rendered by private respondents they were not paid their
salaries. Private respondents never questioned nor
controverted the Resolution dismissing them and nowhere in
their Comment is it stated that they questioned such dismissal.
Private respondents also have not rebutted petitioners claim
that private respondents illegally collected fees and charges
due petitioner and appropriated the collections among
themselves to satisfy their salaries from January to May 1992,
for which reason, private respondents are merely claiming
salaries only for the period from June 16, 1992 to March 1993.
Private respondents were dismissed by petitioner effective
January 31, 1992 and were accepted back by petitioner, as an
act of compassion, subject to the condition of "no work, no
pay" effective March 1993 which explains why private
respondents were allowed to draw their salaries again.

10 | P a g e

Labor Law August 28, 2014

Notably, the letter-request of Mr. Leyson for the payment of
backwages and other fringe benefits in behalf of private
respondents was made only in April 1993, after a Board
Resolution accepting them back to work out of compassion
and humanitarian reason. It took private respondents about ten
months before they requested for the payment of their
backwages, and the long inaction of private respondents to file
their claim for unpaid wages cast doubts as to the veracity of
their claim.
The age-old rule governing the relation between labor and
capital, or management and employee of a "fair days wage for
a fair days labor" remains as the basic factor in determining
employees wages. If there is no work performed by the
employee there can be no wage or pay unless, of course, the
laborer was able, willing and ready to work but was illegally
[23]
locked out, suspended or dismissed, or otherwise illegally
[24]
prevented from working, a situation which we find is not
present in the instant case. It would neither be fair nor just to
allow private respondents to recover something they have not
earned and could not have earned because they did not render
services at the Kalibo office during the stated period.
Finally, we hold that public respondent erred in merely relying
on the computations of compensable services submitted by
private respondents. There must be competent proof such as
time cards or office records to show that they actually rendered
compensable service during the stated period to entitle them to
wages. It has been established that the petitioners business
office was transferred to Kalibo and all its equipments, records
and facilities were transferred thereat and that it conducted its
official business in Kalibo during the period in question. It was
incumbent upon private respondents to prove that they indeed
rendered services for petitioner, which they failed to do. It is a
basic rule in evidence that each party must prove his
affirmative allegation. Since the burden of evidence lies with
the party who asserts the affirmative allegation, the plaintiff or
complainant has to prove his affirmative allegations in the
complaint and the defendant or the respondent has to prove
the affirmative allegation in his affirmative defenses and
[25]
counterclaim.
WHEREFORE, in view of the foregoing, the petition
for CERTIORARI is GRANTED. Consequently the decision of
public respondent NLRC dated April 20, 1995 and the
Resolution dated July 28, 1995 in NLRC Case No. V-0143-94
are hereby REVERSED and SET ASIDE for having been
rendered with grave abuse of discretion amounting to lack or
excess of jurisdiction. Private respondents complaint for
payment of unpaid wages before the Labor Arbiter is
DISMISSED.
SO ORDERED.

Bonifacio Quimpo, Villamarte P. Villanueva, Elizabeth M. David, Rudy A. Irada,

Bebina B. Fulgencio, Rolando Gerardo, Alejandro M. Arcenio, Emerita C. Mainit,
Pedro Nalangan IV, Reynaldo P. Irac, Rodolfo M. Taran, Victorio Rowan,
Gervacio V.Rapiz, Jossie S. Lacorte, Joselito I. Lauron, Gabriel B. Casibu,
Reynaldo F. Autencio, Hernany R. Pamatian, Perfecto I. Cahilig, Antonio S.
Baldo, Bonifacio A. Arboleda, Jesus L. Bandiola, Alma M. Lumio, Teody L.
Iradon, Alberto F. Icasas, Pancho A. Beltran, Napoleon B. Jorque, Oscar R.
Isidro, Eduardo B. Alcober, Librado J. Belarmino, Jr., Teodisia E. Cirriano,
Florencia S. Laurdaus, Jolito C. Abello, Leovigildo I. Lumio, Jose P. Dalisay,
Emelio F. Cuatriz, Antonio R. Fulgencio, Tomas Dela Rosa, Marcelino R. Celis,
Noel T. Macawili, Arnaldo C. DeLa Cruz, Saine T. Cuenco, Alfredo I. Ilete,
Benedict M. Ureta, Editha I. Roldan, Reginato I. Reyes, Florencio S. Sevilla,
Rosine F. DeLa Cruz, Antonio R. Luces, Jay Lloyd S. Beltran, Ludrigo S.
Fuentes, Rogelio M. Flores, Leonardo J. Delgado, Manolito E. Canlas, Allan G.
Iguban, Salvador S. Maagma, Bernardo B. Aguirre, Jr. Ariel G. Ingeniero, Nabel
S. Casidsid, Leoncito T. Legaspi, Paulino B. Castillo, Jose Y. Navarro, Danilo M.
Taran, Paul F. Paras, Ramon M. Flores, Ricardo I. Ileto, Ellen A. De La Rosa,
Telesforo N. Retuba, Arturo R. Roldan, Nestor U. Salido, Antonio T. Nicolas, Jr.,
Wilfredo S. Mique, Roger A. Pamatian, Raul S. Paraz, Luis I. De Jose, Jimuel S.
Mopia, Diego A. Inocenciso, Godofredo J. Pelayo, Merilyn C. Javier, Melvin T.
Prado, Willie D. Pamatian, Asisculo M. Maaya, Jo Arlu L. Sabar, Edito V. Mapiza,
Crispin I. Fernandez, Jose O. Pelayo, Jr. Rexel S. Briones, Rey A. Inson,
Norberto S. Ponce, Alixes M. Regalado, Rey P. Autencio, Godofredo I.
Nepomuceno, Filmore R. Ibabao, Arnel A. Gonzales, Felix E. Aguirre, Dionito M.
DeLa Cruz, Nancy B. Pamatian, Teddy J. Belarmino, Roger Q. Serrano, Luciano
P. Oquindo, Roy S. Paraz, Rolando P. Nemez, Juan M. Tabas, Joselito M.
Gerardo, Rafael M. Silverio, Agustin J. Gonzales, Jose I. Geronimo, Jr., Remegio
C. Fernandez, Ramon R. Fernandez, Renato B. De Guzman, Rosebello T.
Masigon, Cesar I. Ileto, Ronnie De La Cruz, Teddy T. Nicolas, Zaldy M. Semira,
Emelio P. Trinidad, Magdaleno O. Tagle, Archimedes C. Beltran, Jessie S. Sta.
Maria, Nilo S. Solidum, Michael P. Roba, Jeaneflor L. Samar, Rosel M. Milloroso,
Archimedes C. Retiro, Evelyn R. Nepomuceno, Eduardo I. Nepomuceno, Benny
S. Sallador, Constantino A. Romaquin, Rolando D. Marte, Bonifacio R. Nino,
Prudencio B. Malimban, Rodrigo C. Revesencio, Elizabeth T. Nalangan, Nilda F.
Legaspi, Virgilio M. Moribus, Alberto I. Revester, Concordio I.Yambing, Jr. Esther
C. Taplac, Leoncito P. Dalisay, Oscar V. Tasoy, Asahel M. Tranco, Melvin U.
Torres, Hilton B. Yasa, Flordelisa I. Coching, Julius I. Villanueva, Nemis N
Bernaldo, Pedrito L.Leyson, Wilson C. Sallador and Lyn B. Abanilla.
[2]
Rollo, p. 124.
[3]
Rollo, pp. 55-59.
[4]
Petitioner in its Reply alleged that this unnumbered resolution was never
implemented because it was not a valid action of the legitimate board of
petitioner AKELCO.
[5]
Rollo, pp. 32-66.
[6]
Ibid, pp. 22-29; Through Commissioner Bernabe S. Batuhan, ponente,
Presiding Commissioner Irenea E. Ceniza and Commissioner Amorito V. Caete.
[7]
Ibid, pp. 26-28.
[8]
Rollo, pp. 30-31, Annex "B".
[9]
Rollo, pp. 10-11.
[10]
Building Care Corporation vs. NLRC, et al., Feb. 26, 1997; Flores vs. NLRC,
253 SCRA 494; Ilocos Sur Electric Cooperative, Inc. vs. NLRC, 241 SCRA 36.
[11]
Philippine Airlines, Inc. vs. NLRC, 279 SCRA 445.
[12]
Zarate, Jr. vs. Olegario, et. al, 263 SCRA 1.
[13]
Hilario Magcalas, et al. vs. NLRC, et al., March 13, 1997; Raycor Aircontrol
Systems, Inc. vs. NLRC, et al., September 9, 1996.
[14]
Rule 133, Section 5 of the Revised Rules of Court.
[15]
Rollo, p. 71.
[16]
Rollo, p. 72.
[17]
Rollo, p. 80, Annex "M".
[18]
Rollo, p. 63-64.
[19]
Rollo, p. 73.
[20]
Ibid, p. 75, Annex "J".
[21]
Ibid, p. 78, Annex "L".
[22]
Rollo, pp. 181-182.
[23]
Caltex Refinery Employees Association (CREA) vs. Brillantes, 279 SCRA 218;
Durabuilt Recapping Plant and Co. vs. NLRC, 152 SCRA 328; Social Security
System vs. SSS Supervisors Union, 117 SCRA 746 citing J.P. Heilbronn
Co. vs. National Labor Union, 92 Phil. 577.
[24]
Caltex Refinery Employees Association (CREA) vs. Brillantes, 279 SCRA
218.
[25]
Jimenez vs. NLRC, 256 SCRA 84.

Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.

[1]

Myrna A. Ileto, Leopoldo Casibu, Jr., Vincent Fulgencio, Aradam R. De

Manuel, Philip John B. Buenaflor, Cecilia A. Laudaus, Alton O. Flores, Delly A.
Yerro, Rowena A. Isidro, John I. Selorio, Nilo I. Tribo, Melenita G. Quimpo,
Andres V. Isturis, Rafael Reyes, Manuel M. Laurdaus, Jr., Nicasio Nepomuceno,

11 | P a g e

Labor Law August 28, 2014

FIRST DIVISION
VIRGINIA A. SUGUE and THE HEIRS OF
RENATO S. VALDERRAMA,
Petitioners,

G.R. No. 164804

- versus -

TRIUMPH INTERNATIONAL (PHILS.), INC.,

Respondent.

TRIUMPH INTERNATIONAL (PHILS.), INC.,

Petitioner,

- versus -

VIRGINIA A. SUGUE and THE HEIRS OF

RENATO S. VALDERRAMA,
Respondents.

G.R. No. 164784

Present:
PUNO, C.J.,*
CARPIO,** Acting
Chairperson,
AUSTRIAMARTINEZ,***
CORONA,
CARPIO
MORALES,*** and
LEONARDO-DE
CASTRO, JJ.

Promulgated:
January 30, 2009

x-------------------------------------------------------------------------x

Valderrama was hired in April 1993 as Direct Sales Manager

with a monthly salary of P121,000.00. Their main
function/responsibility was to ensure that the companys sales
targets and objectives were met.
Beginning sometime in October 1999, Triumphs top
management began to notice a sharp decline in the sales of
the company. Moreover, in the following months, the actual
sales figures continued to be significantly below the sales
targets set by Valderrama himself. This persistent below target
sales performance was the subject of correspondence
between Valderrama and his superiors from November 1999 to
[4]
July 2000.
On June 1, 2000, Sugue and Valderrama filed a
complaint with the NLRC against Triumph for payment of
money claims arising from allegedly unpaid vacation and sick
th
leave credits, birthday leave and 14 month pay for the period
1999-2000. Said complaint was docketed as NLRC-NCR-Case
[5]
No. 00-06-03008-2000.
On June 19, 2000, Sugue and Valderrama personally
attended the preliminary conference of the said case. The
following day, a memorandum was issued by Triumphs
Managing Director/General Manager, Alfredo Escueta,
reminding all department heads of existing company policy that
requires department heads to notify him (Escueta) before
[6]
leaving the office during work hours. That same day,
Triumphs Personnel Manager, Ralph Funtila, issued separate
memoranda to Sugue and Valderrama requiring them to inform
the office of the General Manager of their whereabouts on
June 19, 2000 from 9:06 a.m. to 11:15 a.m. They replied that
[7]
they attended the aforementioned preliminary conference.

DECISION

On June 23, 2000, Valderrama and Sugue were directed

to submit a written explanation as to why they used company
time and the company vehicle and driver in attending the
LEONARDO-DE CASTRO, J.:
preliminary conference at the NLRC and why they left the
office without advising the Managing Director. They explained
that they believed they may use company time and the
Before us are consolidated petitions for review on
company vehicle since the hearing they attended was pursuant
certiorari under Rule 45 of the 1997 Rules of Civil Procedure
to a complaint that they filed as employees of the company.
filed
by
both
contending
parties
assailing
the
[1]
[2]
Decision dated April 23, 2004 and the Resolution dated July
On June 28, 2000, Triumph charged the one-half day
21, 2004 rendered by the Court of Appeals (CA) in CA-G.R. SP
utilized
by Sugue and Valderrama in attending the NLRC
No. 68591.
hearing on June 19, 2000 to their vacation leave credits.
In G.R. No. 164804, petitioners Virginia Sugue (Sugue)
and the Heirs of Renato Valderrama (Valderrama) question the
CA decision which partly granted their appeal but deleted the
attorneys fees and reduced the moral and exemplary
damages awarded to them.

In the pleadings, Valderrama likewise complained that

his request for an executive check-up on June 19, 2000 was
disapproved by Triumph. Thereafter, Valderrama did not report
for work on July 3 to 5, 2000 due allegedly to persistent cough
and vertigo, but his request for sick leave on those dates was
On the other hand, in G.R. No. 164784, petitioner disapproved by Triumph because he failed to submit a medical
certificate as required by the companys rules and policies.
Triumph International (Phils.), Inc. (Triumph hereafter) assails
[3]
the CA decision for setting aside an earlier decision of the
Subsequently, on July 10, 2000, Triumph issued a show
National Labor Relations Commission (NLRC) dated June 13,
cause memo to Valderrama requiring him to explain, among
2001 which ruled in its favor.
others, his departments dismal performance since October
[8]
1999, within 48 hours from receipt. On July 11, 2000,
The antecedents of the case show that Triumph hired
[9]
Valderrama replied to the show cause memo.
Sugue in May 1990 as its Assistant Manager for Marketing and
was subsequently promoted to Marketing Services Manager
with a monthly salary of P82,500.00. On the other hand,

12 | P a g e

Labor Law August 28, 2014

On July 17, 2000, Valderrama wrote the company a
letter stating that he considered himself constructively
dismissed due to the unreasonable pressures and
harassments he suffered the past months which prevented him
from effectively exercising his tasks as Direct Sales
[10]
Manager.
Subsequently, on July 28, 2000, Triumph issued a
memorandum requiring Valderrama to explain, under pain of
dismissal, his continued absences without official leave.
Valderrama failed to respond, thus, on August 11, 2000,
Triumph decided to terminate Valderramas employment for
[11]
abandonment of work.
Meanwhile, on July 25, 2000, Sugue also wrote the
company stating that she considers herself constructively
[12]
dismissed. From the pleadings, Sugues charge of
constructive dismissal was based on the fact that her request
for vacation leave from July 14 to 15, 2000 was subject to the
condition that she first submit a report on the companys 2001
Marketing Plan. Also, the approval of her request for executive
check-up was deferred. Then, on July 18, 2000, she received a
memorandum instructing her to report to Mr. Efren Temblique,
who was appointed OIC for Marketing as a result of a
reorganization prompted by Valderramas continued absences.
Sugue claimed that such act by Triumph was an outright
demotion considering that Mr. Temblique was her former
assistant.
On August 11, 2000, Triumph required Sugue to explain
why she should not be terminated for continued absences
[13]
without official leave. Sugue failed to comply, thus,
on September 1, 2000, her employment was terminated for
[14]
abandonment of work.
Prior to the actual termination of their employment by
Triumph, Sugue and Valderrama filed on July 31, 2000 a
complaint for constructive dismissal against Triumph, docketed
[15]
as NLRC NCR Case No. 00-07-03965-2000.
The following day, on August 1, 2000, Valderrama
commenced his employment as Sales Director of Fila Phils.,
Inc., a competitior of Triumph.
On March 15, 2001, Labor Arbiter Salimathar Nambi
rendered a decision, declaring that Sugue and Valderrama
were constructively dismissed. The dispositive portion of the
Labor Arbiters decision follows:
WHEREFORE, premises considered,
judgment is hereby rendered ordering
respondent Triumph International (Phils.),
Inc. to:
1)

Pay, since reinstatement is

not feasible, complainants
Virginia A. Sugue and Renato
Valderrama their separation
pay computed at one month
salary for every year of service
from their initial engagement

on May 1990 and April 1993,

respectively.
2)

Pay both complainants full

backwages from the time that
they
were
constructively
dismissed, i.e. from 17 July
2000 in the case of Valderrama
and from 25 July 2000 in the
case of Sugue until finality of
judgment.

3)

Pay P2,000,000.00 as moral

damages to each of the
complainants

4)

Pay
P1,000,000.00
as
exemplary damages to each of
the complainants.

5)

Reimburse the complainants

the 20% of the amounts
claimed as attorneys fees.

SO ORDERED.

[16]

Aggrieved, Triumph filed an appeal with the

[17]
NLRC, and in a decision dated June 13, 2001, the First
Division of the NLRC granted the appeal and reversed the
ruling of Labor Arbiter Nambi.
Not satisfied with the NLRC decision, Sugue and
Valderrama elevated the matter to the CA by way of a petition
for certiorari. While the matter was pending with the CA,
Valderrama passed away (on July 3, 2003) and notice of his
[18]
death was filed by his counsel.
On April 23, 2004, the CA rendered its assailed
decision, the dispositive portion of which reads:
WHEREFORE, the petition is partly
granted. The Decision dated June 13,
2001 of public respondent NLRC is hereby
set aside, and the Decision dated March 15,
2001 of the labor arbiter is reinstated,
subject to the deletion of the award of
attorneys fees and the reduction of the
award of moral damages to P500,000.00
and exemplary damages to 250,000.00, for
each of the petitioners.
SO ORDERED.

[19]

Triumphs subsequent motion for reconsideration as

well as the motion for partial reconsideration filed by Sugue
and the heirs of Valderrama were both denied by the appellate
court in its resolution dated July 21, 2004.

13 | P a g e

Labor Law August 28, 2014

Hence, the parties filed the present petitions which and the appellee; (7) when the findings are contrary to those of
were consolidated by this Court in a Resolution the trial court; (8) when the findings are conclusions without
[20]
dated September 27, 2004.
citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioners
In G.R. No. 164804, petitioners therein Sugue and the main and reply briefs are not disputed by the respondent; and
heirs of Valderrama allege that the Court of Appeals gravely (10) when the findings of fact are premised on the supposed
[21]
erred in deleting the labor arbiters award of attorneys fees.
evidence and contradicted by the evidence on record.
In G.R. No. 164784, petitioner therein Triumph cites
In the instant case, it appears that there is a
the following reasons why the Court should rule in its favor:
divergence between the findings of facts of the NLRC and that
of the CA. Hence, we are constrained to review the factual
I
findings made by the NLRC and the appellate court.
The Court of Appeals gravely erred
and contravened prevailing jurisprudence in
After a thorough review of the evidence on record, we
abandoning the NLRCs findings of fact and
find sufficient reasons to uphold Triumphs position.
making its own findings. The rule is basic
that the factual findings of the NLRC are
Constructive dismissal is defined as an involuntary
accorded respect, if not finality, considering
resignation resorted to when continued employment becomes
that the same were based on evidence on
impossible, unreasonable or unlikely; when there is a demotion
record. Reassessment of evidence is beyond
in rank or a diminution in pay; or when a clear discrimination,
the province of a writ of certiorari.
insensibility or disdain by an employer becomes unbearable to
[26]
an employee.
II
The Court of Appeals gravely erred
On a preliminary point, we note that Sugue and
and contravened the law and jurisprudence
Valderrama discuss extensively in their pleadings alleged
in ruling that Valderama and Sugue were
denial of leave applications and unpaid cash conversion of
constructively dismissed, and are entitled to
unused leaves and other monetary benefits which moved them
[27]
separation pay, backwages and damages.
to file a complaint for monetary claims on June 1, 2000. We
The facts of the case, as correctly found by
find no need to pass upon these matters here precisely
the NLRC based on evidence on record,
because they are the subject matters of a separate case and
clearly belie their contention that they were
properly threshed out therein. In any event, it is Sugue and
[22]
constructively dismissed.
Valderramas theory that Triumphs acts of harassment, upon
which they base their charge of constructive dismissal, were in
retaliation for their filing of the aforementioned complaint for
[28]
From the allegations of the respective parties in their unpaid benefits. The acts which purportedly show
pleadings, it is clear that the controversies involved in the two discrimination and bad faith on the part of Triumph are
consolidated cases center on the question of whether summarized below:
Valderrama and Sugue were constructively dismissed by
In the case of Valderrama:
Triumph.
At the outset, it should be stated that the main issue
in this case involves a question of fact. It is an established rule
that the jurisdiction of the Supreme Court in cases brought
before it from the CA via Rule 45 of the 1997 Rules of Civil
Procedure is generally limited to reviewing errors of
[23]
law. This Court is not a trier of facts. In the exercise of its
power of review, the findings of fact of the CA are conclusive
and binding and consequently, it is not our function to analyze
[24]
or weigh evidence all over again.

The above rule, however, is not without exceptions.

[25]
In Sta. Maria v. Court of Appeals, we enumerated the
instances when the factual findings of the CA are not deemed
conclusive, to wit: (1) when the conclusion is a finding
grounded entirely on speculations, surmises or conjecture; (2)
when the inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5)
when the findings of facts are conflicting; (6) when the CA, in
making its findings, went beyond the issues of the case and
the same are contrary to the admission of both the appellant

1.

2.
3.

The half-day he spent in attending the NLRC

hearing on June 19, 2000 was charged to his
vacation leave credit;
His application for sick leave for July 3 to 5,
2000 was disapproved; and
His request for executive check-up was
denied.

In the case of Sugue:

1. The half-day she spent in attending the NLRC
hearing on June 19, 2000 was charged to her
vacation leave credit;
2. The approval of her application for leave of
absence for July 14 and 15, 2000 was made subject
to the condition that she should
first submit a
report on the 2001 Marketing Plan;
3. The approval of her request for executive
check-up was deferred until after the visit of the
companys regional marketing manager; and
4. A memorandum was issued instructing her to
report to her
former assistant, Mr. Temblique,

14 | P a g e

Labor Law August 28, 2014

which
was
demotion.

allegedly

tantamount

to

According to Sugue and Valderrama, this series of

discriminatory acts committed by Triumph created an adverse
working environment rendering it impossible for them to
continue working for Triumph. Hence, their severance from the
company was not of their own making and therefore amounted
to constructive dismissal which is tantamount to an illegal
termination of employment.
With respect to the first alleged discriminatory act, we
can conceive of no reason to ascribe bad faith or malice to
Triumph for charging to the leave credits of Sugue and
Valderrama the half-day that they spent in attending the
preliminary conference of the case they instituted against
Triumph. It is fair and reasonable for Triumph to do so
considering that Sugue and Valderrama did not perform work
for one-half day on June 19, 2000.
Indeed, we find it surprising that Sugue and
Valderrama would even have the temerity to contend that the
hours they spent in attending the hearing were compensable
time. As the NLRC correctly pointed out, as early as the case
[29]
of J.B. Heilbronn Co. v. National Labor Union, this Court
held that:
When the case of strikes, and
according to the CIR even if the strike is
legal, strikers may not collect their wages
during the days they did not go to work, for
the same reasons if not more, laborers who
voluntarily absent themselves from work
to attend the hearing of a case in which
they seek to prove and establish their
demands against the company, the
legality and propriety of which demands
is not yet known, should lose their pay
during the period of such absence from
work. The age-old rule governing the
relation between labor and capital or
management and employee is that a "fair
day's wage for a fair day's labor." If there
is no work performed by the employee there
can be no wage or pay, unless of course, the
laborer was able, willing and ready to work
but was illegally locked out, dismissed or
suspended. It is hardly fair or just for an
employee or laborer to fight or litigate
against his employer on the employer's
time.
In a case where a laborer absents
himself from work because of a strike or
to attend a conference or hearing in a
case or incident between him and his
employer, he might seek reimbursement of
his wages from his union which had declared
the strike or filed the case in the industrial
court. Or, in the present case, he might
have his absence from his work charged

against his vacation leave. xxx (Emphasis

ours)
This doctrine in Heilbronn was reiterated in Manila
Trading & Supply Co. v. Manila Trading Labor
[30]
[31]
Association and quoted favorably in later cases.
Triumph
is, thus, justified in charging Sugue and Valderramas half-day
absence to their vacation leave credits.
Corollarily, we cannot uphold the CAs approval of the
Labor Arbiters finding that the memoranda issued by Triumph
in connection with the June 19, 2000 hearing constitute undue
harassment.
To begin with, the complained of Memorandum
dated June 20, 2000 issued by Mr. Escueta, regarding the
company policy that required department heads to give prior
notice to the General Manager if they will be away from the
office during office hours, did not single out Sugue and
Valderrama but was addressed to all department heads.
Contrary to Sugue and Valderramas assertion that said policy
was being retroactively applied to them, it is plain on the face
of the same memorandum (a copy of which was even attached
[32]
to their Position Paper filed with the Labor Arbiter) that the
policy of requiring department heads to give notice to the
Office of the Managing Director/General Manager should they
leave the office during regular work hours had been in force
since 1997. The memoranda of Mr. Funtila, requiring Sugue
and Valderrama to inform the office of the General Manager of
their whereabouts on the morning of June 19, 2000, could not
be deemed a form of harassment but rather it was in keeping
with due process. Notwithstanding the fact that the company
had received summons for the same hearing, the company
could not simply assume that the hearing was the reason for
Valderrama and Sugues absence. When an employer believes
that there has been a possible violation of company rules or
policies, the law, in fact, requires the employer to give the
employee ample opportunity to explain. Finally, the
memoranda informing Valderrama and Sugue that they cannot
use company time and the company vehicle when attending
hearings for the case they filed against the company and that
their absence would be charged against their vacation leaves
were, as discussed above, in accordance with existing
jurisprudence and principles of fair play. Verily, this is not a
case of ordinary workers with limited resources who were
being unlawfully pressured or prevented by their employer from
pursuing their claims. Sugue and Valderrama are highly
educated managers who were ably represented by counsel
and were then being paid handsome compensation packages
by Triumph. Even assuming that Sugue and Valderrama in
good faith believed that they are merely exercising their legal
right to prosecute their monetary claims when they chose to
absent themselves from work to attend the June 19, 2000, it
would have imposed little burden on them to have the courtesy
to inform their employer beforehand of their intention to
personally attend the hearing and the decency to do so on their
own time and at their own expense.
Anent Sugue and Valderramas claim that they were
unjustly denied availment of their leaves as part of a scheme
on the part of Triumph to harass them, we find the same
patently without merit.

15 | P a g e

Labor Law August 28, 2014

[36]

In the case of Valderrama, he applied for sick leave

for the period July 3 to 5, 2000 allegedly because of persistent
cough and vertigo, but this was disapproved by Triumph. The
record, however, reveals that he failed to comply with the
companys requirement that an application for sick leave for
two or more days must be supported by a medical certificate
which must be verified by the company physician. He was
even given twenty-four (24) hours to submit the same but he
totally ignored it. That his sick leave application was denied
was mainly due to his own fault and must not be unduly
blamed on his employer.

on June 26 to 29, 2000. As Valderrama was the Direct Sales

Manager and Sugue was the Marketing Services Manager,
their presence on those dates was undoubtedly needed. Thus,
their contention that the approval of their request was
indefinitely withheld is apocryphal. In fact, there is nothing that
prevented them from scheduling their executive check-up after
the visit of the regional marketing manager.

It is worth stressing that in the grant of vacation and

sick leave privileges to an employee, the employer is given
leeway to impose conditions on the entitlement to the same as
the grant of vacation and sick leave is not a standard of law,
For her part, Sugue condemns Triumph for putting a but a prerogative of management. It is a mere concession or
condition on the approval of her two days vacation leave for act of grace of the employer and not a matter of right on the
July 14 and 15, 2000, when she was required to first submit a part of the employee.[37] Thus, it is well within the power and
report on the 2001 Marketing Plan. To be very accurate, Mr. authority of an employer to deny an employees application for
Escuetas memorandum dated July 13, 2000 advised Sugue leave and the same cannot be perceived as discriminatory or
that her application for leave will be approved if she will commit harassment.
to submit her reports in connection with the 2001 Marketing
Plan by July 17, 2000, which was two days after her leave.
Again, we find nothing discriminatory in such a condition
Sugue next asserts that she was demoted when she
considering that she was unable to show that she was the only was directed to report to Mr. Efren Temblique who was her
employee whose leave application has been subjected to a subordinate and when she was stripped of her usual functions.
condition. Discrimination is the failure to treat all persons We are far from convinced. Demotion involves a situation
equally when no reasonable distinction can be found between where an employee is relegated to a subordinate or less
[33]
those favored and those not favored. Sugue obviously failed important position constituting a reduction to a lower grade or
to substantiate her claim of discrimination. To be sure, he who rank, with a corresponding decrease in salaries, benefits and
[34]
asserts must prove.
On the contrary, the record shows that privileges.[38]
as early as October 12, 1999, a memorandum was issued by
Triumph addressed to all department heads that leave
The evidence on hand belies Sugues assertion, the
applications may be approved, disapproved or postponed truth being that prior to the reorganization, Mr. Temblique
depending on the (1) business status due to CBA; (2) occupied the position of Assistant Manager for Direct
companys urgent need for their presence; and (3) CBA Sales,[39] and as such was Valderramas subordinate and not
[35]
negotiations status. Evidently, this directive applies not just of Sugue. Sugue likewise failed to adequately prove her
to Sugue but to all department heads. Although this assertion that she reported directly to the General Manager,
memorandum was supposedly in force only until December Mr. Escueta, when she was Marketing Services Manager or
1999, it establishes a precedent for the company imposing that she was not subordinate to Valderrama. To show that she
conditions on the approval of leave applications of department was reporting directly to Mr. Escueta, Sugue adverts to
heads.
Annexes U and V of her Position Paper. However, Annexes U
and V were merely memoranda addressed to Mr. Escueta
As for the nature of the condition itself, we do not see involving Sugues application for leave and did not relate to the
how it can be deemed unreasonable or in bad faith for the discharge of her functions.[40] On the other hand, there is on
employer to require its employee to complete her assignments record memoranda issued by Sugue concerning work matters
on time or before taking a vacation leave. Being the Marketing which were addressed to Valderrama, not Mr. Escueta.[41]
Services Manager, Sugues reports were indispensable in the
preparation of the 2001 Marketing Plan plus the fact that the
The evidence on record suggests that the Marketing
company had been experiencing a significant decline in sales Services Department was part of the Direct Sales Department.
at that time which all the more emphasizes the need for her to As Direct Sales Manager, Valderramas responsibilities not
submit an updated report relative to the 2001 Initial Marketing only included sales but also marketing for which he was tasked
Plan. For sure, she failed to show that the company prevented to closely coordinate with the regional sales/marketing head
her from availing of her vacation leave afterwards or at some office in Hongkong.[42] The record would also show that Sugue
other time. Clearly then, there was no discrimination nor considered herself as belonging to the Direct Sales
[43]
harassment to speak of.
Department. It is unsurprising then that when the Direct
Sales Department was reorganized due to Valderramas
Third, both Sugue and Valderrama question the unexpected departure on July 17, 2000, Sugues Marketing
denial by Triumph of their request for executive check-up. It Services Department was included in the reorganization. It
should be noted that Triumph did not completely turn down would appear from Mr. Escuetas Memorandum dated July 18,
their request. Based on Sugue and Valderramas own 2000 (Re: Direct Sales Reorganization) the sales and
evidence, their request was merely deferred because the 2001 marketing responsibilities of Mr. Valderrama were taken over
Initial Marketing Plan was due on June 26, 2000 and Triumphs by Mr. Edilberto S. Rivera and Temblique, as OIC for Direct
regional product manager was scheduled to visit the country Sales and Marketing, respectively.

16 | P a g e

Labor Law August 28, 2014

In view of Valderramas sudden severance of his
employment coupled with the substantially low sales Triumph
had been experiencing for the past nine months, the company
saw an imperative need to effect a reorganization in its sales
department, and this included the temporary designation of
Temblique as OIC for Marketing concurrently with his position
[44]
as Assistant Manager for Direct Sales-SMSD. When Sugue
was directed to report to Temblique, she was not being made
to report to Temblique as Assistant Manager for Direct SalesSMSD but as the newly designated OIC for Marketing, i.e., the
officer chiefly responsible for all marketing matters.
Furthermore, we find no merit in Sugues contention that she
was in any way stripped of her usual functions. A careful
perusal of Annexes EE and FF of her Position Position shows
that she continued to be the head of Marketing Services, under
the supervision of Temblique as OIC for Marketing.
As we see it, Triumphs directive for Sugue to report
to Temblique was not unreasonable, inconvenient or prejudicial
to her considering that it did not entail a demotion in rank or
diminution of salaries, benefits and other privileges. Even
assuming there was a change in the personalities to whom
Sugue is required to report, she continued to assume her
position as Marketing Services Manager and to exercise the
same functions. Neither did she assert, much less prove, that
there was any diminution in her salary or other benefits. We
[45]
ruled in Philippine Wireless, Inc. v. NLRC that there is no
demotion where there is no reduction in position, rank or
salary.
In fine, we find that Triumphs reorganization was
intended to improve management operations especially in the
light of the poor sales performance of the company during that
period. The act of management in reorganizing the sales
department in order to achieve its objectives is a legitimate
exercise of its management prerogatives, barring any showing
of bad faith which is absent in the instant case. Indeed, labor
laws discourage interference in employers judgments
concerning the conduct of their business. The law must protect
not only the welfare of employees, but also the right of
[46]
employers.
All told, Triumph did not act with discrimination,
insensibility or disdain towards Sugue and Valderrama, which
foreclosed any choice on their part except to forego their
continued employment. Purely conjectural are their assertions
that the disapproval of their leave applications, the denial of
their request for executive check-up and the alleged demotion,
were carried out by Triumph in retaliation to their filing of a
complaint for unpaid money claims against the company.
Sugue and Valderrama offered insufficient proof to
substantiate their allegations. For this reason, their bare and
self-serving charges of constructive dismissal, when
unsupported by the evidence on record, cannot be given
credence.

employment deal with Fila while he was still employed with

Triumph as shown by Filas inter-office memo datedJune 21,
2000 announcing to its employees Valderramas appointment
[47]
effective August 1, 2000. Unlike the Labor Arbiter and the
CA, we do not view this circumstance as insignificant. It is
evident that Valderrama already had a firm understanding with
Fila as ofJune 21, 2000 so much so that his arrival was highly
anticipated and even formally announced by his new employer
on said date. This undeniably demonstrated that Valderrama
intended to leave his employment with Triumph even before
the company issued a show cause memo (on July 10, 2000)
for him to explain, among others, his below target sales
performance and before he informed the company that he
considered himself constructively dismissed on July 17,
2001. It may be inferred therefrom that he filed the
constructive dismissal case merely as a subterfuge to evade
liability for breach of his employment contract with Triumph
which requires 60-day notice prior to resignation. The
circumstance that he did not pray for reinstatement in his
complaint bolsters the theory that the constructive dismissal
case was a tool designed to conceal his impending transfer to
Fila.
Having failed to substantiate their claim of
constructive dismissal, Sugue and Valderrama should be
deemed to have abandoned their work, thus, their dismissal is
warranted. Abandonment is the deliberate and unjustified
refusal of an employee to resume his employment, without any
intention of returning. It is a form of neglect of duty, hence, a
just cause for termination of employment by the employer. For
abandonment to be a valid ground for dismissal, two elements
must then be satisfied: (1) the failure to report for work or
absence without valid or justifiable reason; and (2) a clear
intention to sever the employer-employee relationship. The
second element is the more determinative factor and must be
[48]
evinced by overt acts.
The abovementioned elements are present in the
instant case. First, Sugue and Valderramas failure to report
for work was without justifiable reason. As earlier discussed,
their allegation of discrimination and harassment lacks factual
basis, thus, under the circumstances, we find their absences to
be unjustified and without any valid reason. Second, their
overt act of writing letters informing Triumph that they
considered themselves constructively dismissed was a clear
manifestation of their intention to desist from their
employment. Too, their defiance and disregard of the
memorandum sent by Triumph requiring them to explain their
unauthorized absences demonstrated a clear intention on their
part to sever their employer-employee relationship. This is
particularly true with Valderrama who, even before unilaterally
terminating his employment with Triumph, had already sought
regular employment elsewhere and in fact was set to join a
competitor, Fila Phils., Inc.

Further, they filed a complaint for constructive

dismissal without praying for reinstatement. By analogy, we
Worth noting at this point is that as early as June 21, point to the doctrine that abandonment of work is inconsistent
2000, Valderrama had accepted employment with Fila with the filing of a complaint for illegal dismissal is not
Philippines, Inc. as its Sales Director. Although his applicable where the complainant does not pray for
[49]
appointment was to take effect only on August 1, 2000, it reinstatement and just asks for separation pay instead.
In
cannot be denied that he had finalized or was finalizing his this case, Sugue and Valderrama opted not to ask for

17 | P a g e

Labor Law August 28, 2014

reinstatement and even for separation pay, which clearly
contradicts their stance that they did not abandon their work,
for it appears they have no intention of ever returning to their
positions in Triumph. In addition, we cannot subscribe to the
CAs view that Triumphs issuance of show cause memos and
notices of termination for abandonment were mere afterthought
since they were preceded by Sugues and Valderramas letters
informing the company that they considered themselves
constructively dismissed. Logically, Triumph could not have
issued show cause memos or termination notices for
abandonment before Sugue and Valderrama unilaterally
declared themselves constructively dismissed and stopped
reporting for work without justifiable reason.
Indeed, the law imposes many obligations on the
employer such as providing just compensation to workers, and
observance of the procedural requirements of notice and
hearing in the termination of employment. On the other hand,
the law also recognizes the right of the employer to expect
from its workers not only good performance, adequate work
and diligence, but also good conduct and loyalty. The employer
may not be compelled to continue to employ such persons
whose continuance in the service will patently be inimical to his
[50]
interests. Triumph has adequately shown the existence of a
just and valid cause in terminating the employment of Sugue
and Valderrama, and has faithfully complied with the
procedural requirements of due process for valid termination of
employment.
Anent Sugue and the heirs of Valderramas petition
regarding the CAs deletion of the award of attorneys fees, a
discussion on the propriety of the award of damages and
attorneys fees is rendered unnecessary in view of their failure
to prove constructive dismissal.
WHEREFORE, the petition for review filed by Virginia
Sugue and the Heirs of Renato Valderrama in G.R. No.
164804 isDENIED while the petition for review filed by Triumph
International (Phils.), Inc. in G.R. No. 164784 is GRANTED.
Accordingly, the assailed decision and resolution of the Court
of Appeals are hereby REVERSED and SET ASIDE. The
National Labor Relations Commissions Decision dated June
13, 2001 is REINSTATED.
SO ORDERED.
TERESITA J. LEONARDODE CASTRO
Associate Justice

WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Acting Chairperson

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

RENATO C. CORONA
Associate Justice

CONCHITA CARPIO MORALES

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division

ANTONIO T. CARPIO
Associate Justice
Acting Chairperson, First Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Acting
Division Chairpersons Attestation, I certify that the conclusions in the above
decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.
LEONARDO A. QUISUMBING
Acting Chief Justice
*
**

On Official Leave.
Acting Chairperson in lieu of Chief Justice Reynato S. Puno as per Special Order No.

552-A.
***

Additional Members in lieu of Chief Justice Reynato S. Puno and Justice Adolfo S.
Azcuna as per Special Order No. 553.
[1]
Penned by Associate Justice Fernanda Lampas-Peralta, with Associate Justices
Salvador J. Valdez, Jr. (ret.) and Rebecca De Guia-Salvador, concurring; Rollo, Vol. II, at 6676.
[2]
Id. at 78.
[3]
Id. at 50-62.
[4]
Rollo, Vol. I, at 94-114, 121-135, 141-143.
[5]
Sugue and Valderramas Position Paper, p. 6; CA Rollo, at 44.
[6]
Id. at 70.
[7]
Id. at 71-74.
[8]
Id. at 84-85.
[9]
Id. at 86-88.
[10]
Id. at 90.
[11]
Id. at 92.
[12]
Id. at 95.
[13]
Id. at 96.
[14]
Id. at 97.
[15]
Id. at 38.
[16]
Rollo, Vol. II, at 48-49.
[17]
Docketed as NLRC NCR CA No. 028290-01.
[18]
Rollo, Vol. II, at 23.
[19]
Id. at 76.
[20]
Id. at 87.
[21]
Id. at 12.
[22]
Rollo, Vol. I, p. 14.
[23]
Rizal Commercial Banking Corporation v. Alfa RTW Manufacturing Corporation, et
al., G.R. No. 133877, November 14, 2001, 368 SCRA 611, 617.
[24]
Gabriel v. Mabanta, G.R. No. 142403, March 26, 2003, 399 SCRA 573, 579-580.
[25]
G.R. No. 127549, January 28, 1998, 285 SCRA 351, 357-358.
[26]
Francisco v. NLRC, G.R. No. 170087, August 31, 2006, 500 SCRA 690, 702-703.
[27]
Docketed as NLRC-NCR-Case No. 00-06-03008-2000 and raffled to Labor Arbiter
Daisy G. Cauton Barcelona.
[28]
Sugue and Valderramas Position Paper; CA Rollo, at 39.
[29]
92 Phil. 575, 577-578 (1953).
[30]
92 Phil. 997, 1000 (1953).
[31]
Social Security System v. SSS Supervisors Union-CUGCO, G.R. No. L-31832
October 23, 1982, 117 SCRA 746, 749; Philippine Diamond Hotel and Resort v. Manila
Diamond Hotel, G.R. No. 158075, June 30, 2006, 494 SCRA 195, 214.
[32]
Annex K of Valderrama and Sugues Position Paper; CA Rollo, at 70.
[33]
Blacks Law Dictionary, 6th Edition, p. 467.
[34]
Go v. Court of Appeals, G.R. No. 158922, May 28, 2004, 430 SCRA 358, 367.
[35]
CA Rollo, at 61.
[36]
Id. at 79.
[37]
Sobrepea v. Court of Appeals, G.R. No. 111148, October 10, 1997, 280 SCRA
476, 489-490.
[38]
Tinio v. Court of Appeals, G.R. No. 171764, June 8, 2007, 524 SCRA 533, 541.
[39]
CA Rollo, p. 222.
[40]
Id. at 80-81.
[41]
Id. at 200-201.
[42]
Id. at 243.
[43]
Id. at 249.
[44]
Id. at 93-94.
[45]
G.R. No. 112963, July 20, 1999, 310 SCRA 653, 656.
[46]
Mendoza v. Rural Bank of Lucban, G.R. No. 155421, July 7, 2004, 433 SCRA 756,
765.
[47]
CA Rollo, p. 192.
[48]
Sta. Catalina College v. National Labor Relations Commission, G.R. No. 144483,
November 2003, 416 SCRA 233, 239-240.
[49]
Jo v. National Labor Relations Commission, G.R. No. 121605, February 2, 2000,
324 SCRA 437, 446.
[50]
Agabon v. National Labor Relations Commission, G.R. No. 158693, November 17,
2004, 442 SCRA 573, 606-607.

18 | P a g e

Labor Law August 28, 2014

FIRST DIVISION
[G.R. No. 128845. June 1, 2000]

Should the answer to any of these queries point to the

Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS

(ISAE), petitioner, vs. HON. LEONARDO A. QUISUMBING
in his capacity as the Secretary of Labor and Employment;
HON. CRESENCIANO B. TRAJANO in his capacity as the
Acting Secretary of Labor and Employment; DR. BRIAN
MACCAULEY in his capacity as the Superintendent of
International School-Manila; and INTERNATIONAL
SCHOOL, INC., respondents.

The School grants foreign-hires certain benefits not accorded

local-hires. These include housing, transportation, shipping
costs, taxes, and home leave travel allowance. Foreign-hires
are also paid a salary rate twenty-five percent (25%) more than
local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to
endure, namely: (a) the "dislocation factor" and (b) limited
tenure. The School explains:

DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad,
the local-hires of private respondent School, mostly Filipinos,
cry discrimination. We agree. That the local-hires are paid
more than their colleagues in other schools is, of course,
beside the point. The point is that employees should be given
equal pay for work of equal value. That is a principle long
honored in this jurisdiction. That is a principle that rests on
fundamental notions of justice. That is the principle we uphold
today.
Private respondent International School, Inc. (the School, for
short), pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for dependents of
foreign
diplomatic
personnel
and
other
temporary
[1]
residents. To enable the School to continue carrying out its
educational program and improve its standard of instruction,
Section 2(c) of the same decree authorizes the School to
employ its own teaching and management personnel
selected by it either locally or abroad, from Philippine or
other nationalities, such personnel being exempt from
otherwise applicable laws and regulations attending
their employment, except laws that have been or will be
enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers
as members of its faculty, classifying the same into two: (1)
foreign-hires and (2) local-hires. The School employs four tests
to determine whether a faculty member should be classified as
a foreign-hire or a local hire:
a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which
allegiance?

country

does

one

owe

economic

A foreign-hire would necessarily have to uproot himself

from his home country, leave his family and friends, and
take the risk of deviating from a promising career pathall for the purpose of pursuing his profession as an
educator, but this time in a foreign land. The new foreign
hire is faced with economic realities: decent abode for
oneself and/or for one's family, effective means of
transportation, allowance for the education of one's
children, adequate insurance against illness and death,
and of course the primary benefit of a basic
salary/retirement compensation.
Because of a limited tenure, the foreign hire is
confronted again with the same economic reality
after his term: that he will eventually and inevitably
return to his home country where he will have to
confront the uncertainty of obtaining suitable
employment after a long period in a foreign land.
The compensation scheme is simply the School's
adaptive measure to remain competitive on an
international level in terms of attracting competent
[3]
professionals in the field of international education.
When negotiations for a new collective bargaining agreement
were held on June 1995, petitioner International School
Alliance of Educators, "a legitimate labor union and the
[4]
collective bargaining representative of all faculty members" of
the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of
whether foreign-hires should be included in the appropriate
bargaining unit, eventually caused a deadlock between the
parties.
On September 7, 1995, petitioner filed a notice of strike. The
failure of the National Conciliation and Mediation Board to
bring the parties to a compromise prompted the Department of
Labor and Employment (DOLE) to assume jurisdiction over the
dispute. On June 10, 1996, the DOLE Acting Secretary,
Crescenciano B. Trajano, issued an Order resolving the parity
and representation issues in favor of the School. Then DOLE
Secretary Leonardo A. Quisumbing subsequently denied
petitioner's motion for reconsideration in an Order dated March
19, 1997. Petitioner now seeks relief in this Court.

d.....Was the individual hired abroad specifically to work

in the School and was the School responsible for
[2]
bringing that individual to the Philippines?

19 | P a g e

Labor Law August 28, 2014

Petitioner claims that the point-of-hire classification employed
by the School is discriminatory to Filipinos and that the grant of
higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its
faculty members, numbering 38 in all, with nationalities other
than Filipino, who have been hired locally and classified as
[5]
local hires. The Acting Secretary of Labor found that these
non-Filipino local-hires received the same benefits as the
Filipino local-hires:
The compensation package given to local-hires has been
shown to apply to all, regardless of race. Truth to tell, there are
foreigners who have been hired locally and who are paid
[6]
equally as Filipino local hires.
The Acting Secretary upheld the point-of-hire classification for
the distinction in salary rates:
The principle "equal pay for equal work" does not find
application in the present case. The international
character of the School requires the hiring of foreign
personnel to deal with different nationalities and
different cultures, among the student population.
We also take cognizance of the existence of a system of
salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We
agree that certain amenities have to be provided to
these people in order to entice them to render their
services in the Philippines and in the process remain
competitive in the international market.

from the tenured status of Locally Recruited Staff

(LRS).
To our mind, these provisions demonstrate the parties'
recognition of the difference in the status of two types of
employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection
clause to justify its claim of parity. It is an established
principle of constitutional law that the guarantee of equal
protection of the laws is not violated by legislation or
private covenants based on reasonable classification. A
classification is reasonable if it is based on substantial
distinctions and apply to all members of the same class.
Verily, there is a substantial distinction between foreign
hires and local hires, the former enjoying only a limited
tenure, having no amenities of their own in the
Philippines and have to be given a good compensation
package in order to attract them to join the teaching
[7]
faculty of the School.
We cannot agree.
That public policy abhors inequality and discrimination is
beyond contention. Our Constitution and laws reflect the policy
[8]
against these evils. The Constitution in the Article on Social
Justice and Human Rights exhorts Congress to "give highest
priority to the enactment of measures that protect and enhance
the right of all people to human dignity, reduce social,
economic, and political inequalities." The very broad Article 19
of the Civil Code requires every person, "in the exercise of his
rights and in the performance of his duties, [to] act with justice,
give everyone his due, and observe honesty and good faith."

Furthermore, we took note of the fact that foreign hires

have limited contract of employment unlike the local
hires who enjoy security of tenure. To apply parity
therefore, in wages and other benefits would also
require parity in other terms and conditions of
employment which include the employment contract.

International law, which springs from general principles of

[9]
law, likewise proscribes discrimination. General principles of
[10]
law include principles of equity, i.e., the general principles of
fairness and justice, based on the test of what is
[11]
reasonable. The
Universal
Declaration
of
Human
[12]
Rights, the International Covenant on Economic, Social, and
[13]
Cultural Rights, the International Convention on the
A perusal of the parties' 1992-1995 CBA points us to the Elimination of All Forms of Racial Discrimination, [14] the
conditions and provisions for salary and professional Convention against Discrimination in Education,[15] the
compensation wherein the parties agree as follows:
Convention (No. 111) Concerning Discrimination in Respect of
[16]
Employment and Occupation - all embody the general
All members of the bargaining unit shall be principle against discrimination, the very antithesis of fairness
compensated only in accordance with Appendix and justice. The Philippines, through its Constitution, has
C hereof provided that the Superintendent of the incorporated this principle as part of its national laws.
School has the discretion to recruit and hire
expatriate teachers from abroad, under terms In the workplace, where the relations between capital and labor
and conditions that are consistent with accepted are often skewed in favor of capital, inequality and
international practice.
discrimination by the employer are all the more reprehensible.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity
with the Overseas Recruited Staff (OSRS) salary
schedule. The 25% differential is reflective of the
agreed value of system displacement and
contracted status of the OSRS as differentiated

[17]

The Constitution specifically provides that labor is entitled to

"humane conditions of work." These conditions are not
restricted to the physical workplace - the factory, the office or
the field - but include as well the manner by which employers
treat their employees.

20 | P a g e

Labor Law August 28, 2014

[18]

The Constitution also directs the State to promote "equality

of employment opportunities for all." Similarly, the Labor
[19]
Code provides that the State shall "ensure equal work
opportunities regardless of sex, race or creed." It would be an
affront to both the spirit and letter of these provisions if the
State, in spite of its primordial obligation to promote and
ensure equal employment opportunities, closes its eyes to
unequal and discriminatory terms and conditions of
[20]
employment.
Discrimination, particularly in terms of wages, is frowned upon
by the Labor Code. Article 135, for example, prohibits and
[21]
penalizes the payment of lesser compensation to a female
employee as against a male employee for work of equal value.
Article 248 declares it an unfair labor practice for an employer
to discriminate in regard to wages in order to encourage or
discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and
Cultural Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize
the right of everyone to the enjoyment of just and
favourable conditions of work, which ensure, in
particular:
a.....Remuneration which provides all workers, as a
minimum, with:
i.....Fair wages and equal remuneration for
work of equal value without distinction of any
kind, in particular women being guaranteed
conditions of work not inferior to those enjoyed
by men, with equal pay for equal work;
x x x.
The foregoing provisions impregnably institutionalize in this
jurisdiction the long honored legal truism of "equal pay for
equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar
[22]
conditions, should be paid similar salaries. This rule applies
to the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence
that local-hires perform work equal to that of foreign[23]
hires. The Court finds this argument a little cavalier. If an
employer accords employees the same position and rank, the
presumption is that these employees perform equal work. This
presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for
that employee to explain why he receives less or why the
others receive more. That would be adding insult to injury. The
employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden.
There is no evidence here that foreign-hires perform 25% more
efficiently or effectively than the local-hires. Both groups have

similar functions and responsibilities, which they perform under

similar working conditions.
The School cannot invoke the need to entice foreign-hires to
leave their domicile to rationalize the distinction in salary rates
without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a
reward or recompense for services performed." Similarly, the
Philippine Legal Encyclopedia states that "salary" is the
"[c]onsideration paid at regular intervals for the rendering of
services."
In Songco
v.
National
Labor
Relations
[24]
Commission, we said that:
"salary" means a recompense or consideration made to
a person for his pains or industry in another man's
business. Whether it be derived from "salarium," or
more fancifully from "sal," the pay of the Roman soldier,
it carries with it the fundamental idea of
compensation for
services
rendered. (Emphasis
supplied.)
While we recognize the need of the School to attract foreignhires, salaries should not be used as an enticement to the
prejudice of local-hires. The local-hires perform the same
services as foreign-hires and they ought to be paid the same
salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve
as valid bases for the distinction in salary rates. The dislocation
factor and limited tenure affecting foreign-hires are adequately
compensated by certain benefits accorded them which are not
enjoyed by local-hires, such as housing, transportation,
shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of
[25]
workers and promote their welfare," "to afford labor full
[26]
protection." The State, therefore, has the right and duty to
[27]
regulate the relations between labor and capital. These
relations are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining
agreements included, must yield to the common
[28]
good. Should such contracts contain stipulations that are
contrary to public policy, courts will not hesitate to strike down
these stipulations.
In this case, we find the point-of-hire classification employed by
respondent School to justify the distinction in the salary rates of
foreign-hires and local hires to be an invalid classification.
There is no reasonable distinction between the services
rendered by foreign-hires and local-hires. The practice of the
School of according higher salaries to foreign-hires
contravenes public policy and, certainly, does not deserve the
sympathy of this Court.
We agree, however, that foreign-hires do not belong to the
same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given
employer, comprised of all or less than all of the entire body of

21 | P a g e

Labor Law August 28, 2014

employees, consistent with equity to the employer indicate to
be the best suited to serve the reciprocal rights and duties of
the parties under the collective bargaining provisions of the
[29]
law." The factors in determining the appropriate collective
bargaining unit are (1) the will of the employees (Globe
Doctrine); (2) affinity and unity of the employees' interest, such
as substantial similarity of work and duties, or similarity of
compensation and working conditions (Substantial Mutual
Interests Rule); (3) prior collective bargaining history; and (4)
[30]
similarity of employment status. The basic test of an
asserted bargaining unit's acceptability is whether or not it is
fundamentally the combination which will best assure to all
[31]
employees the exercise of their collective bargaining rights.
It does not appear that foreign-hires have indicated their
intention to be grouped together with local-hires for purposes
of collective bargaining. The collective bargaining history in the
School also shows that these groups were always treated
separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires,
foreign-hires are accorded certain benefits not granted to localhires. These benefits, such as housing, transportation,
shipping costs, taxes, and home leave travel allowance, are
reasonably related to their status as foreign-hires, and justify
the exclusion of the former from the latter. To include foreignhires in a bargaining unit with local-hires would not assure
either group the exercise of their respective collective
bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The
petition is hereby GRANTED IN PART. The Orders of the
Secretary of Labor and Employment dated June 10, 1996 and
March 19, 1997, are hereby REVERSED and SET ASIDE
insofar as they uphold the practice of respondent School of
according foreign-hires higher salaries than local-hires.
SO ORDERED.
Puno, and Pardo, JJ., concur.
Davide, Jr., C.J., (Chairman), on official leave.
Ynares-Santiago, J., on leave.
[1]

Issued on June 19, 1975 (authorizing International School, Inc. to Donate Its
Real Properties to the Government of the Republic of the Philippines and
Granting It Certain Rights.)
[2]
Rollo, p. 328.
[3]
Id., at 324.
[4]
Id., at 8.
[5]

Id., at 325. The breakdown is as follows:

Americans
Australian
Belgian
British
Burmese
Canadian
Chinese
French
German
Indian
Japanese
Malaysian
New
Zealander
Spanish

- 17
-2
-1
-2
-1
-2
-2
-1
-1
-5
-1
-1
-1
-1

[6]

Id., at 39.
Id., at 38-39.
In Section 1, Article XIII thereof.
[9]
Statute of the International Court of Justice, art. 38.
[10]
M. DEFENSOR-SANTIAGO, International Law 75 (1999), citing Judge
Hudson in River Meuse Case, (1937) Ser. A/B No. 70.
[11]
Ibid., citing Rann of Kutch Arbitration (India vs. Pakistan), 50 ILR 2 (1968)
[12]
Adopted by the General Assembly of the United Nations on December 10,
1948. Article 1 thereof states: "All human beings are born free and equal in
dignity and rights." Article 2 provides, "1. Everyone is entitled to all the rights and
freedoms set forth in this Declaration, without distinction of any kind, such as
race, colour, sex, language, religion, political or other opinion, national or social
origin, property, birth or other status."
[13]
Adopted by the General of the United Nations in Resolution 2200 (XXI) of 16
December 1966. Article 2 provides: "2. The States Parties to the present
Covenant undertake to guarantee that the rights enunciated in the present
Covenant will be exercised without discrimination of any kind as to race, colour,
sex, language, religion, political or other opinion, national or social origin,
property, birth or other status."
[14]
Adopted by the General assembly of the United Nations in Resolution 2106
(XX) 21 December 1965. Article 2 of the Convention states: "States Parties
condemn racial discrimination and undertake to pursue by all appropriate means
and without delay a policy of eliminating racial discrimination in all its forms and
promoting understanding among all races xxx."
[15]
Adopted at Paris, December 14, 1960. Under Article 3, the States Parties
undertake, among others, "to abrogate any statutory provisions and any
administrative instructions and to discontinue any administrative practices which
involve discrimination in education." Under Article 4, "The States Parties to this
Convention undertake further more to formulate, develop and apply a national
policy which, by methods appropriate to the circumstances and to national
usage, will tend to promote equality of opportunity and of treatment in the matter
of education xxx."
[16]
Adopted by the General Conference of the International Labor Organization at
Geneva, June 25, 1958. Article 2 provides that, "Each Member for which this
Convention is in force undertakes to declare and pursue a national policy
designed to promote, by methods appropriate to national condition and practice,
equality of opportunity and treatment in respect of employment and occupation,
with a view to eliminating any discrimination in respect thereof."
[17]
In Article XIII, Section 3 thereof.
[18]
Id.
[19]
In Article 3 thereof.
[20]
E.g., Article 135 of the Labor Code declares it unlawful for the employer to
require, not only as a condition of employment, but also as a condition for
the continuation of employment, that a woman shall not get married.
[21]
In relation to Articles 288 and 289 of the same Code.
[22]
Indeed, the government employs this rule in fixing the compensation of
government employees. Thus, Republic Act No. 6758 (An Act Prescribing a
Revised Compensation and Position Classification System in the Government
and for Other Purposes) declares it "the policy of the State to provide equal pay
for substantially equal work and to base differences in pay upon substantive
differences in duties and responsibilities, and qualification requirements of the
positions. See also the Preamble of Presidential Decree No. 985 (A Decree
Revising the Position Classification and Compensation Systems in the National
Government, and Integrating the same)
[23]
Rollo, p. 491.
[24]
183 SCRA 610 (1990)
[25]
In Section 18, Article II thereof.
[26]
In Section 3, Article XIII thereof. See also Article 3 of the Labor Code.
[27]
See Sec. 3, Article XIII, Constitution. Article 3 of the Labor Code.
[28]
Article 1700, Civil Code.
[29]
Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Federation
Labor Union and the Secretary of Labor and Employment, 268 SCRA 573
(1997); San Miguel Corporation vs. Laguesma, 236 SCRA 595 (1994)
[30]
San Miguel Corporation vs. Laguesma, supra.
[31]
Belyca Corporation vs. Ferrer-Calleja, 168 SCRA 184 (1988)
[7]
[8]

22 | P a g e

Labor Law August 28, 2014

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
R. No. 104523. March 8, 1993.
ARMS TAXI AND/OR DOROTHEA TANONGON, petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION AND
LUDIVICO C. CULLA, respondents.
[G.R. No. 104526. March 8, 1993.]
LUDIVICO C. CULLA, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, HON. LABOR ARBITER,
SPOUSES NORBERTO TANONGON AND DOROTHEA
TANONGON and/or ARMS TAXI and AIDA DELA CRUZ,
respondents.
Alfonso A. Osias for petitioner.
The Solicitor General for public respondents.
Sisenando Villaluz, Jr. for Arms Taxi and/or Spouses
Tanongon.
Narciso Ramirez for Aida dela Cruz.
SYLLABUS
1. CIVIL LAW; CONTRACTS; STATUTES OF FRAUD; DOES
NOT INCLUDE AGREEMENT FOR COMPENSATION OF
SERVICES RENDERED. An agreement for compensation
of services rendered is not one of the contracts mentioned in
Art. 1403 which must be in writing to be enforceable by action.
2.
LABOR
AND
SOCIAL
LEGISLATION;
LABOR
STANDARDS;
SALARY;
DISTINGUISHED
FROM
COMMISSION; CASE AT BAR. The payment of a
P5,000.00 monthly salary to the petitioner for his services may
not be considered as partial compliance by his employers with
the alleged agreement to pay him a commission or percentage
of the daily earnings of their taxi business because, as
correctly pointed out by the Solicitor General, a salary is
different from a commission. While a salary is a fixed
compensation for regular work or for continuous service
rendered over a period of time (Moreno's Philippine Law
Dictionary, 3rd Ed., p. 852 citing Lee Tee vs. Ching Chiong,
17518-R, January 13, 1959), a commission is a percentage or
allowance made to a factor or agent for transacting business
for another (Supra, p. 171 citing People vs. Sua Bok, 1 O.G.
689). Thus, before invoking the exception to the Statue of
Frauds, petitioner should have proven that he has received a
commission, or part of it, in the past.
3. ID.; NATIONAL LABOR RELATIONS COMMISSION;
FACTUAL FINDINGS THEREOF; RULE. Regarding the

Tanongon spouses' allegation in G.R. No. 104523, that the

petitioner was never their employee, hence, the NLRC gravely
abused its discretion in granting his monetary claims, that
allegation raises a factual issue. The finding thereon of the
NLRC, in the absence of abuse of discretion, is not only
invested with respect, but even with finality, since it is
supported by substantial evidence (Great Pacific Life
Assurance Corporation vs. National Labor Relations
Commission, 187 SCRA 694).
4. ID.; REGULAR EMPLOYEES; RIGHTS THEREOF IN CASE
OF ILLEGAL DISMISSAL; CASE AT BAR. Petitioner was
not a project employee. He was a garage supervisor, liaison
man, dispatcher, mechanic and driver, a jack of all trades,
doing work that was necessary and desirable in the taxi
business of the Tanongon spouses. As such, he was a regular
employee entitled to security of tenure (Tucor Industries Inc.
vs. National Labor Relations Commission, 197 SCRA 296). His
employment may be terminated only in accordance with law.
Because he was summarily dismissed from his job, he is
entitled to reinstatement without loss of seniority and other
privileges and to receive three (3) years backwages. In view,
however, of the strained relations between the petitioner and
the Tanongon spouses, making his reinstatement no longer
advisable nor feasible, petitioner should receive separation pay
in addition to three years backwages (Torillo vs. Leogardo, Jr.,
197 SCRA 471).
5. ID.; BACKWAGES; RULE PROVIDED UNDER REPUBLIC
ACT NO. 6715; MAY NOT BE APPLIED RETROACTIVELY.
The full backwages claimed by Culla and provided in Section
34 of Republic Act No. 6715, which took effect on March 21,
1989, cannot be granted to him for his summary dismissal
occurred on June 11, 1986, three (3) years before R.A. No.
6715 took effect. The new law may not be applied retroactively
(Sealand Service, Inc. vs. NLRC, 190 SCRA 347; Lantion vs.
NLRC, 181 SCRA 513).
6. ID.; DISMISSAL; LIABILITY OF EMPLOYER IN CASE OF
NON-OBSERVANCE OF DUE PROCESS. As petitioner's
dismissal was effected without prior notice and investigation of
the charges against him, in violation of his right to due process,
his employers should indemnify him for damages in the sum of
One Thousand pesos (P1,000.00) pursuant to Rule XIV, Secs.
2, 5 and 6 of the rules implementing Batas Pambansa Blg. 130
and the rulings of this Court in Great Pacific Life Assurance
Corporation vs. NLRC, 187 SCRA 694, 700, Shoemart, Inc. vs.
NLRC, 176 SCRA 385, and Wenphil vs. NLRC, 170 SCRA 69.
DECISION
GRIO-AQUINO, J p:
In this petition for certiorari 1 the petitioner, Ludivico C. Culla,
seeks the annulment of the decision dated March 5, 1992 of
the National Labor Relations Commission (NLRC) ordering the
Spouses Norberto and Dorothea Tanongon and/or Arms Taxi
and Aida dela Cruz jointly and severally to pay him (Culla) the
total sum of one hundred ninety-five thousand pesos
(P195,000.00) as backwages for three (3) years and

23 | P a g e

Labor Law August 28, 2014

separation pay computed at one-half month for every year of
service (NLRC NCR Case No. 7-2572-86).
The spouses Tanongon own and operate taxicabs under the
names of "Arms Taxi" and "Lin-lin Taxi." However, the taxicabs
are registered under the "kabit" system in the name of Aida
dela Cruz who holds a certificate of public convenience to
operate a taxicab service.
In the early part of 1980, Culla was hired by the Tanongon
spouses to work as mechanic, shop manager, garage
caretaker, dispatcher, and liaison man in their taxi business, at
a monthly salary of P5,000.00 plus commission on the daily or
monthly gross income of the business in addition to the
payment of his Social Security System (SSS) premiums.

Culla was illegally dismissed from employment and that Aida

dela Cruz should be considered an indirect employer of Culla
pursuant to Arts. 106, 107 and 109 of the Labor Code.
However, he denied Culla's claim for 15% commission on the
gross earnings of the taxi business as Culla failed "to
substantially prove the same by some precise, concrete and
convincing evidence" (p. 185, Rollo). The agreement on the
commission "should have been in writing, note or
memorandum, and subscribed by the parties, to be
enforceable" (Ibid). Further holding that Culla was not entitled
to the 13th month pay under P.D. No. 851 and to overtime pay,
for time was not of the essence in his kind of employment, the
Labor Arbiter disposed of the case thus:

"WHEREFORE, respondents Dorothea and Norberto

Tanongon and Aida dela Cruz are hereby ordered to pay jointly
and severally complainant the aggregate sum of ONE
On June 11, 1986, without Culla's consent, the Tanongon HUNDRED NINETY-FIVE THOUSAND (P195,000.00) PESOS
spouses asked one of their taxi drivers to force open his representing complainant's backwages for three (3) years
quarters in the Tanongon compound at the St. Francis (P5,000.00/mo. x 36 mos. plus P2,500.00/mo. [1/2 mo/yr. of
Subdivision in Cainta, Rizal. They removed his personal service x 6 years) and separation pay computed at one-half
belongings and brought them to his residence in Sta. Ana, (1/2) for every year of service within ten (10) days from receipt
Manila (p. 2, Affidavit of Complainant, p. 24, Rollo).
of this decision.
Culla filed with the Arbitration Branch of the then Ministry of
Labor and Employment, a complaint alleging that his ejectment
from his living quarters and dismissal from employment were
illegal because there was no prior investigation or written
notice of the charges against him. His dismissal was allegedly
due to his demands "for the payment of the benefits,
percentage and privileges and premiums to the SSS" (p. 3,
Amended Complaint; p. 115, Rollo). He prayed for
reinstatement with backwages, plus his commission of fifteen
percent (15%) of the gross income of the taxi business, in the
amount of P480,000.00 with legal interest, plus moral, nominal
and exemplary damages in the total sum of P300,000.00 and
actual or compensatory damages and litigation expenses.
In their position paper, the Tanongon spouses denied that they
were the operators of the Arms Taxi and Lin-lin Taxi. They
denied the existence of an employer-employee relationship
between them and Culla. They averred that Arms Taxi is
owned and operated by Aida dela Cruz; that on April 25, 1986,
they bought Lin-lin Taxi from one Jose Lim, but its ownership
has not yet been transferred to them as their application with
the Land Transportation Office is still pending.
For her part, Aida dela Cruz admitted ownership and operation
of a fleet of taxicabs under the name Arms Taxi and that she
had entered into an agreement with Dorothea Tanongon for
the latter to manage for a fee the operation of several of her
taxi units. Denying that she hired Culla, Dela Cruz averred that
at most, Culla could be considered as an independent
contractor paid on a piece-work basis and therefore, he was
not entitled to regular benefits, much less to the alleged 15%
commission.
In a decision dated February 14, 1990, Labor Arbiter Ricardo
C. Nora found for Culla. He declared that Culla was an
employee of the Tanongon spouses who operate some units of
the Arms Taxi and Lin-lin Taxi under the "kabit" system; that

"All other issues are hereby DISMISSED for lack of merit" (pp.
111-112, Rollo)
The parties appealed to the NLRC. Culla was disastified with
the monetary awards, because he was not given full
backwages nor the 15% commission, incentive leave pay,
damages, and attorney's fees.
On the other hand, the Tanongon spouses assailed the Labor
Arbiter's finding that Culla was their employee. They alleged
that Culla was an independent contractor doing mainly the
work of a mechanic who was paid on a piece-work basis; that
he was free to accept repair jobs from other customers, that he
had no regular hours of work and they had no control over his
work except to indicate what part of a taxicab needed to be
repaired.
As earlier mentioned, the First Division 2 of the NLRC affirmed
on March 5, 1991 the decision of the Labor Arbiter. It
dismissed the appeal of the Tanongon spouses for having
been filed late and for lack of the required supersedeas bond.
It denied Culla's claim for the 15% commission on the ground
that:
"There is nothing on record to substantiate this claim. If, as
complainant claims, he is entitled to a commission as part of
his wage and/or in addition to his basic pay, we cannot
understand why he never made any claims therefor during his
six years of service." (Emphasis supplied; p. 23, Rollo)
Separate petitions for certiorari were filed by Culla (G.R. No.
104526) and Tanongon or Arms Taxi (G.R. No. 104523) which
were later consolidated.

24 | P a g e

Labor Law August 28, 2014

Culla argues in his petition that the payment to him of
P5,000.00 a month for his services was in partial fulfillment of
Tanongon's promise to pay him a 15% commission, removing
said agreement from coverage of the Statute of Frauds.
Culla's reference to the Statute of Frauds under Art. 1403, par.
2 of the Civil Code is misplaced. An agreement for
compensation of services rendered is not one of the contracts
mentioned in Art. 1403 which must be in writing to be
enforceable by action. 3
The payment of a P5,000.00 monthly salary to the petitioner for
his services may not be considered as partial compliance by
his employers with the alleged agreement 4 to pay him a
commission or percentage of the daily earnings of their taxi
business because, as correctly pointed out by the Solicitor
General, a salary is different from a commission (Ibid., p. 222).
While a salary is a fixed compensation for regular work or for
continuous service rendered over a period of time (Moreno's
Philippine Law Dictionary, 3rd Ed., p. 852 citing Lee Tee vs.
Ching Chiong, 17518-R, January 13, 1959), a commission is a
percentage or allowance made to a factor or agent for
transacting business for another (Supra, p. 171 citing People
vs. Sua Bok, 1 O.G. 689). Thus, before invoking the exception
to the Statute of Frauds, petitioner should have proven that he
had received a commission, or part of it, in the past.
Furthermore, as aptly noted by the NLRC, if it were true that
there had been an agreement regarding the payment of a 15%
commission to him, the petitioner would not have waited
almost six (6) years to claim it. Considerable delay in asserting
one's right is strongly persuasive of the lack of merit of one's
claim (Quinsay vs. Intermediate Appellate Court, 195 SCRA
268).
Regarding the Tanongon spouses' allegation in G.R. No.
104523, that the petitioner was never their employee, hence,
the NLRC gravely abused its discretion in granting his
monetary claims, that allegation raises a factual issue. The
finding thereon of the NLRC, in the absence of abuse of
discretion, is not only invested with respect, but even with
finality, since it is supported by substantial evidence (Great
Pacific Life Assurance Corporation vs. National Labor
Relations Commission, 187 SCRA 694).

is seasonal in nature and the employment is for the duration of

the season.
"An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while
such actually exists," (Emphasis supplied.).
Petitioner was not a project employee. He was a garage
supervisor, liaison man, dispatcher, mechanic and driver, a
jack of all trades, doing work that was necessary and desirable
in the taxi business of the Tanongon spouses. As such, he was
a regular employee entitled to security of tenure (Tucor
Industries Inc. vs. National Labor Relations Commission, 197
SCRA 296). His employment may be terminated only in
accordance with law. Because he was summarily dismissed
from his job, he is entitled to reinstatement without loss of
seniority and other privileges and to receive three (3) years
backwages. In view, however, of the strained relations
between the petitioner and the Tanongon spouses (p. 11,
Labor Arbiter's Decision, p. 184, Rollo), making his
reinstatement no longer advisable nor feasible, petitioner
should receive separation pay in addition to three years
backwages (Torillo vs. Leogardo, Jr., 197 SCRA 471).
The full backwages claimed by Culla and provided in Section
34 of Republic Act No. 6715, which took effect on March 21,
1989, cannot be granted to him for his summary dismissal
occurred on June 11, 1986, three (3) years before R.A. No.
6715 took effect. The new law may not be applied retroactively
(Sealand Service, Inc., vs. NLRC, 190 SCRA 347; Lantion vs.
NLRC, 181 SCRA 513).
As petitioner's dismissal was effected without prior notice and
investigation of the charges against him, in violation of his right
to due process, his employers should indemnify him for
damages in the sum of One Thousand Pesos (P1,000.00)
pursuant to Rule XIV, Secs. 2, 5 and 6 of the rules
implementing Batas Pambansa Blg. 130 and the rulings of this
Court in Great Pacific Life Assurance Corporation vs. NLRC,
187 SCRA 694, 700, Shoemart, Inc. vs. NLRC, 176 SCRA
385, and Wenphil vs. NLRC, 170 SCRA 69.

As an employee of the Tanongon spouses, was the petitioner

entitled to security of tenure? He was. Art. 280 of the Labor
Code provides:

WHEREFORE, the assailed decision of the National Labor

Relations Commission is MODIFIED by ordering the private
respondents, Norberto and Dorothea Tanongon, in G.R. No.
"ARTICLE 280. Regular and Casual Employment. The 104526 to pay petitioner Ludivico C. Culla damages in the sum
provisions of written agreement to the contrary notwithstanding of One Thousand Pesos (P1,000.00), in addition to the
and regardless of the oral agreement of the parties, an monetary awards made by the NLRC in his favor, which are
employment shall be deemed to be regular where the hereby AFFIRMED. The petition for certiorari of Arms Taxi
employee has been engaged to perform activities which are and/or Dorothea Tanongon in G.R. No. 104523 is DISMISSED
usually necessary or desirable in the usual business or trade of for lack of merit. Costs against Norberto and Dorothea
the employer, except where the employment has been fixed for Tanongon.
a specific project or undertaking the completion or termination
of which has been determined at the time of the engagement SO ORDERED.
of the employee or where the work or services to be performed
Cruz, Bellosillo and Quiason, JJ ., concur.

25 | P a g e

Labor Law August 28, 2014

Footnotes
1. Atty. Alfonso A. Osias for the petitioner; The Solicitor
General for public respondents, and Atty. Sisenando R.
Villaluz, Jr. and Atty. Narciso Ramirez for private respondents.
2. Bartolome S. Carale, Presiding Commissioner. He was
concurred in by Commissioners Vicente S.E. Veloso III and
Romeo B. Putong.
3. Art. 1403. The following contracts are unenforceable unless
they are ratified.

THIRD DIVISION
[G.R. No. 121927. April 22, 1998]
ANTONIO W. IRAN (doing business under the name and
style of Tones Iran Enterprises), petitioner, vs.NATIONAL
LABOR RELATIONS COMMISSION (Fourth Division),
GODOFREDO O. PETRALBA, MORENO CADALSO,
PEPITO TECSON, APOLINARIO GOTHONG GEMINA,
JESUS BANDILAO, EDWIN MARTIN, CELSO LABIAGA,
DIOSDADO GONZALGO, FERNANDO M.
COLINA, respondents.
DECISION

xxx xxx xxx

(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable, by action, unless the
same, or some note or memorandum thereof, be in writing, and
subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within
a year from the making thereof;
(b) A special promise to answer for the debt, default, or
miscarriage of another;
(c) An agreement made in consideration of marriage, other
than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or
the evidences, or some of them, of such things in action, or
pay at the time some part of the purchase money; but when a
sale is made by auction and entry is made by the auctioner in
his sales book, at the time of the sale, of the amount and kind
of property sold, terms of sale, price, names of the purchasers
and person on whose account the sale is made, it is a
sufficient memorandum;
(e) An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest therein;
(f) A representation to the credit of a third person.
4. Denied by the Private Respondents.

ROMERO, J.:
Whether or not commissions are included in determining
compliance with the minimum wage requirement is the
principal issue presented in this petition.
Petitioner Antonio Iran is engaged in softdrinks
merchandising and distribution in Mandaue City, Cebu,
employing truck drivers who double as salesmen, truck
helpers, and non-field personnel in pursuit thereof. Petitioner
hired private respondents Godofredo Petralba, Moreno
Cadalso, Celso Labiaga and Fernando Colina as
drivers/salesmen while private respondents Pepito Tecson,
Apolinario Gimena, Jesus Bandilao, Edwin Martin and
Diosdado Gonzalgo were hired as truck helpers.
Drivers/salesmen drove petitioners delivery trucks and
promoted, sold and delivered softdrinks to various outlets in
Mandaue City. The truck helpers assisted in the delivery of
softdrinks to the different outlets covered by the
driver/salesmen.
As part of their compensation, the driver/salesmen and
truck helpers of petitioner received commissions per case of
softdrinks sold at the following rates:
SALESMEN:
Ten Centavos (P0.10) per case of Regular
softdrinks.
Twelve Centavos (P0.12) per case of Family Size
softdrinks.
TRUCK HELPERS:
Eight Centavos (P0.08) per case of Regular softdrinks.
Ten Centavos (P0.10) per case of Family Size softdrinks.
Sometime in June 1991, petitioner, while conducting an
audit of his operations, discovered cash shortages and
irregularities
allegedly
committed
by
private
respondents. Pending the investigation of irregularities and
settlement of the cash shortages, petitioner required private
respondents to report for work everyday. They were not
allowed, however, to go on their respective routes. A few days
thereafter, despite aforesaid order, private respondents
stopped reporting for work, prompting petitioner to conclude
that the former had abandoned their employment.
Consequently, petitioner terminated their services. He also

26 | P a g e

Labor Law August 28, 2014

filed on November 7, 1991, a complaint for estafa against of wage differentials to Jesus Bandilao. The dispositive portion
private respondents.
of said decision reads:
On the other hand, private respondents, on December 5,
1991, filed complaints against petitioner for illegal dismissal,
illegal deduction, underpayment of wages, premium pay for
holiday and rest day, holiday pay, service incentive leave pay,
th
13 month pay, allowances, separation pay, recovery of cash
bond, damages and attorneys fees. Said complaints were
consolidated and docketed as Rab VII-12-1791-91, RAB VII12-1825-91 and RAB VII-12-1826-91, and assigned to Labor
Arbiter Ernesto F. Carreon.
The labor arbiter found that petitioner had validly
terminated private respondents, there being just cause for the
latters dismissal. Nevertheless, he also ruled that petitioner
had not complied with minimum wage requirements in
compensating private respondents, and had failed to pay
th
private respondents their 13 month pay. The labor arbiter,
thus, rendered a decision on February 18, 1993, the dispositive
portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered ordering the respondent Antonio W. Iran to pay the
complainants the following:
1. Celso Labiaga
P10,033.10
2. Godofredo Petralba
1,250.00
3. Fernando Colina
11,753.10
4. Moreno Cadalso
11,753.10
5. Diosdado Gonzalgo
7,159.04
6. Apolinario Gimena
8,312.24
7. Jesus Bandilao
14,729.50
8. Pepito Tecson
9,126.55
--------------74,116.63
Attorneys Fees (10%)
of the gross award

GRAND TOTAL AWARD

7,411.66
------------P81,528.29
========

WHEREFORE, premises considered, the decision is hereby

MODIFIED in that complainant Jesus Bandilaos computation
for wage differential is corrected from P154.00 to P4,550.00. In
addition to all the monetary claim (sic) originally awarded by
the Labor Arbiter a quo, P1,000.00 is hereby granted to each
complainants (sic)as indemnity fee for failure of respondents to
observe procedural due process.
SO ORDERED.

[2]

Petitioners motion for reconsideration of said decision

was denied on July 31, 1995, prompting him to elevate this
case to this Court, raising the following issues:
1. THE HONORABLE COMMISSION ACTED WITH
GRAVE ABUSE OF DISCRETION AND CONTRARY
TO LAW AND JURISPRUDENCE IN AFFIRMING
THE DECISION OF THE LABOR ARBITER A
QUO EXCLUDING THE COMMISSIONS RECEIVED
BY THE PRIVATE RESPONDENTS IN COMPUTING
THEIR WAGES;
2. THE HONORABLE COMMISSION ACTED WITH
GRAVE ABUSE OF DISCRETION IN FINDING
PETITIONER GUILTY OF PROCEDURAL LAPSES
IN TERMINATING PRIVATE RESPONDENTS AND
IN AWARDING EACH OF THE LATTER P1,000.00
AS INDEMNITY FEE;
3. THE HONORABLE COMMISSION GRAVELY ERRED
IN NOT CREDITING THE ADVANCE AMOUNT
RECEIVED BY THE PRIVATE RESPONDENTS AS
TH
PART OF THEIR 13 MONTH PAY.
The petition is impressed with merit.
The NLRC, in denying petitioners claim that commissions
be included in determining compliance with the minimum wage
ratiocinated thus:

The other claims are dismissed for lack of merit.

Respondent (petitioner herein) insist assiduously that the

commission should be included in the computation of actual
SO ORDERED.
wages per agreement. We will not fall prey to this fallacious
Both parties seasonably appealed to the NLRC, with argument. An employee should receive the minimum wage as
petitioner contesting the labor arbiters refusal to include the mandated by law and that the attainment of the minimum wage
commissions he paid to private respondents in determining should not be dependent on the commission earned by an
compliance with the minimum wage requirement. He also employee. A commission is an incentive for an employee to
presented, for the first time on appeal, vouchers denominated work harder for a better production that will benefit both the
th
as 13 month pay signed by private respondents, as proof that employer and the employee. To include the commission in the
th
petitioner had already paid the latter their 13 month computation of wage in order to comply with labor standard
pay. Private respondents, on the other hand, contested the laws is to negate the practice that a commission is granted
has already earned the minimum wage or
findings of the labor arbiter holding that they had not been after an employee
[3]
even
beyond
it.
illegally dismissed, as well as mathematical errors in
computing Jesus Bandilaos wage differentials. The NLRC, in
This
holding
is
unsupported
by
law
and
its decision of December 21, 1994, affirmed the validity of jurisprudence. Article 97(f) of the Labor Code defines wage as
private respondents dismissal, but found that said dismissal follows:
did not comply with the procedural requirements for dismissing
employees. Furthermore, it corrected the labor arbiters award
[1]

27 | P a g e

Labor Law August 28, 2014

Art. 97(f) Wage paid to any employee shall mean the
remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract
of employment for work done or to be done, or for services
rendered or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the
employer to the employee.

entitled to the basic minimum pay mandated by law should

said commissions be less than their basic minimum for eight
hours work. It can, thus, be inferred that were said
commissions equal to or even exceed the minimum wage, the
employer need not pay, in addition, the basic minimum pay
prescribed by law. It follows then that commissions are
included in determining compliance with minimum wage
requirements.

With regard to the second issue, it is settled that in

terminating employees, the employer must furnish the worker
with two written notices before the latter can be legally
terminated: (a) a notice which apprises the employee of the
xxx
xxx
x x x.
particular acts or omissions for which his dismissal is sought,
(Emphasis supplied)
and (b) the subsequent notice which informs the employee of
[8]
This definition explicitly includes commissions as part of the employers decision to dismiss him. (Italics ours)
wages. While commissions are, indeed, incentives or forms of Petitioner asseverates that no procedural lapses were
encouragement to inspire employees to put a little more committed by him in terminating private respondents. In his
industry on the jobs particularly assigned to them, still these own words:
commissions are direct remunerations for services rendered. In
fact, commissions have been defined as the recompense, when irregularities were discovered, that is, when the
compensation or reward of an agent, salesman, executor, misappropriation of several thousands of pesos was found out,
trustee, receiver, factor, broker or bailee, when the same is the petitioner instructed private respondents to report back for
calculated as a percentage on the amount of his transactions work and settle their accountabilities but the latter never
or on the profit to the principal. The nature of the work of a reported for work. This instruction by the petitioner to report
salesman and the reason for such type of remuneration for back for work and settle their accountabilities served as notices
services rendered demonstrate clearly that commissions are to private respondents for the latter to explain or account for
[4]
part of a salesmans wage or salary.
the missing funds held in trust by them before they
[9]
disappeared.
Thus, the commissions earned by private respondents in
selling softdrinks constitute part of the compensation or
Petitioner considers this return-to-work order as
remuneration paid to drivers/salesmen and truck helpers for equivalent to the first notice apprising the employee of the
serving as such, and hence, must be considered part of the particular acts or omissions for which his dismissal is
wages paid them.
sought. But by petitioners own admission, private
respondents were never told in said notice that their dismissal
The NLRC asserts that the inclusion of commissions in was being sought, only that they should settle their
the computation of wages would negate the practice of accountabilities. In petitioners incriminating words:
granting commissions only after an employee has earned the
minimum wage or over. While such a practice does exist, the
universality and prevalence of such a practice is questionable It should be emphasized here that at the time the
at best. In truth, this Court has taken judicial notice of the fact misappropriation was discovered and subsequently thereafter,
that some salesmen do not receive any basic salary but the petitioners first concern was not effecting the dismissal of
depend entirely on commissions and allowances or private respondents but the recovery of the misappropriated
[10]
commissions alone, although an employer-employee funds thus the latter were advised to report back to work.
[5]

relationship exists. Undoubtedly, this salary structure is

intended for the benefit of the corporation establishing such, on
the apparent assumption that thereby its salesmen would be
moved to greater enterprise and diligence and close more
sales in the expectation of increasing their sales commissions.
This, however, does not detract from the character of such
commissions as part of the salary or wage paid to each of its
[6]
salesmen for rendering services to the corporation.

As above-stated, the first notice should inform the

employee that his dismissal is being sought. Its absence in the
present case makes the termination of private respondents
defective, for which petitioner must be sanctioned for his noncompliance with the requirements of or for failure to observe
[11]
due process. The twin requirements of notice and hearing
constitute the essential elements of due process, and neither
of these elements can be disregarded without running afoul of
Likewise, there is no law mandating that commissions be the constitutional guarantee. Not being mere technicalities but
paid only after the minimum wage has been paid to the the very essence of due process, to which every employee is
employee. Verily, the establishment of a minimum wage only entitled so as to ensure that the[12]employers prerogative to
sets a floor below which an employees remuneration cannot dismiss is not exercised arbitrarily, these requisites must be
fall, not that commissions are excluded from wages in complied with strictly.
determining compliance with the minimum wage law. This
Petitioner makes much capital of private respondents
conclusion is bolstered by Philippine Agricultural Commercial failure to report to work, construing the same as abandonment
[7]
and Industrial Workers Union vs. NLRC, where this Court which thus authorized the latters dismissal. As correctly
acknowledged that drivers and conductors who are pointed out by the NLRC, to which the Solicitor General
compensated purely on a commission basis are automatically agreed, Section 2 of Book V, Rule XIV of the Omnibus Rules

28 | P a g e

Labor Law August 28, 2014

Implementing the Labor Code requires that in cases of
abandonment of work, notice should be sent to the workers
last known address. If indeed private respondents had
abandoned their jobs, it was incumbent upon petitioner to
comply with this requirement. This, petitioner failed to do,
entitling respondents to nominal damages in the amount of
[13]
P5,000.00 each, in accordance with recent jurisprudence, to
vindicate or recognize their right to procedural due process
which was violated by petitioner.
Lastly, petitioner argues that the NLRC gravely erred
when it disregarded the vouchers presented by the former as
th
proof of his payment of 13 month pay to private respondents.
While admitting that said vouchers covered only a ten-day
period, petitioner argues that the same should be credited as
amounts received by private respondents as part of their
th
13 month pay, Section 3(e) of the Rules and Regulations
Implementing P.D. No. 851 providing that the employer shall
th
pay the difference when he pays less than 1/12 of the
[14]
employees basic salary.
While it is true that the vouchers evidencing payments of
th
13 month pay were submitted only on appeal, it would have
[15]
been more in keeping with the directive of Article 221 of the
Labor Code for the NLRC to have taken the same into
[16]
account. Time and again, we have allowed evidence to be
submitted on appeal, emphasizing that, in labor cases,
[17]
technical rules of evidence are not binding. Labor officials
should use every and all reasonable means to ascertain the
facts in each case speedily and objectively, without regard to
[18]
technicalities of law or procedure.
It must also be borne in mind that the intent of P.D. No.
851 is the granting of additional income in the form of
th
13 month pay to employees not as yet receiving the same
and not that a double burden should be imposed on the
th
employer who is already paying his employees a 13 month
[19]
pay or its equivalent. An employer who pays less than
th
th
1/12 of the employees basic salary as their 13 month pay is
[20]
only required to pay the difference.

[1]

Rollo, p. 40-41.
Ibid., p. 45.
[3]
Id., p. 32.
[4]
Philippine Duplicators, Inc. vs. NLRC, 227 SCRA 747 (1993).
[5]
Songco vs. NLRC, 183 SCRA 610 (1990).
[6]
Supra, Note 4.
[7]
247 SCRA 256 (1995).
[8]
Malaya Shipping vs. NLRC, G.R. No. 121698, March 26, 1998.
[9]
Rollo, p. 18-19.
[10]
Ibid., p. 19.
[11]
Sebuguero vs. NLRC, 248 SCRA 532 (1995).
[12]
Supra, Note 8.
[13]
Better Buildings, Inc. vs. NLRC, G.R. No. 109714, December 15,
1997; see also Note 8.
[14]
Section 3(e) x x x x x x
xxx
The term its equivalent as used in paragraph (c) hereof shall
include Christmas bonus, mid-year bonus, profit-sharing payments and
other cash bonuses amounting to not less than 1/12th of the basic
salary but shall not include cash and stock dividends, cost of living
allowances and all other allowances regularly enjoyed by the
employee, as well as non-monetray benefits. Where an employer pays
less than 1/12th of the employees basic salary, the employer shall pay
the difference.
[15]
Art. 221. Technical rules not binding and prior resort to amicable
development. In any proceeding before the Commission or any of the
Labor Arbiters, the rules of evidence prevailing in courts of law or
equity shall not be controlling and it is the spirit and intention of this
Code that the Commission and its members and the Labor Arbiters
shall use every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to technicalities of
law and procedure, all in the interest of due process.
xxx
xxx
x x x.
[16]
Columbia Development Corporation vs. Minister of Labor and
Employment, 146 SCRA 421 (1986).
[17]
Bristol Laboratories Employees Association vs. NLRC, 187 SCRA
118 (1990); PT&T vs. NLRC, 183 SCRA 451 (1990); Haverton
Shipping Ltd. vs. NLRC, 135 SCRA 685 (1985).
[18]
De Ocampo vs. NLRC, 213 SCRA 653 (1992).
[19]
NFSW vs. Ovejera, 114 SCRA 354 (1982).
[20]
Dole Philippines vs. Leogardo, Jr., 117 SCRA 938 (1982).
[2]

The foregoing notwithstanding, the vouchers presented

by petitioner covers only a particular year. It does not cover
amounts for other years claimed by private respondents. It
cannot be presumed that the same amounts were given on
said years. Hence, petitioner is entitled to credit only the
amounts paid for the particular year covered by said vouchers.
WHEREFORE, in view of the foregoing, the decision of
the NLRC dated July 31, 1995, insofar as it excludes the
commissions received by private respondents in the
determination of petitioners compliance with the minimum
wage law, as well as its exclusion of the particular amounts
th
received by private respondents as part of their 13 month pay
is REVERSED and SET ASIDE. This case is REMANDED to
the Labor Arbiter for a recomputation of the alleged
deficiencies. For non-observance of procedural due process in
effecting the dismissal of private respondents, said decision
is MODIFIED by increasing the award of nominal damages to
private respondents from P1,000.00 to P5,000.00 each. No
costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Kapunan, and Purisima, JJ., concur.

29 | P a g e

Labor Law August 28, 2014

SECOND DIVISION
[G.R. No. 122827. March 29, 1999]
LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA,
SHIRLEY P. UY, DIONISIO J. REQUINA, GABRIEL
A. DEJERO, NELSON T. GOMONIT, IMELDA
IMPEYNADO
SULPICIO
B.
SUMILE,
MA. CONSUELO AVIEL, SILVINO S. GUEVARRA,
FIDEL DUMANHOG, NELFA T. POLOTAN,
LEMUEL C. RISMA, JUANITO M. GONZALES,
ROGELIO
B.
CABATUAN,
EPIFANCIO
E.
GANANCIAL, DOMINADOR D. ATOK, CONRADO
U. SERRANO, ISIDRO J. BARNAJA, ROMEO
VIRTUDAZO, AVELINO NABLE, EDGAR TAMPOS,
ERNESTO ORIAS, DALMACIO LEGARAY, ROMEO
R . BULA, ROBERTO G. GARCIA, RUDOLFO
SUZON, JERRY S. DANO, AUGUST G.
ESCUDERO, OSCAR B. CATBAGAN, TEOFILO C.
SISON, NARCISO BULASA, ALBERTO CORTEZ,
LILIA C. CABRERA, NESTOR A. ACASO,
BIENVENIDO MOZO, ISIDORO A. ALMENDAREZ,
VICENTE M. PILONGO, ROBERTO N. LUMPOT,
PATRICIO BANDOLA, MANUEL S. ESPINA,
ISIDRO K. BALCITA, JR., EMMANUEL O.
ABRAHAM, OLEGARIO A. EPIS, NESTOR D.
PEREGRINO, RAMON A. USANAGA, PRESTO
BARTOLOME, BRADY EMPEYNADO, PORFERIO
N.
CONDADO,
AQUILLO
V.
CORDOVA,
LEONARDO ESTOSI, PACIFICO B. DACORINA,
PABLITO B. LLUBIT, ANTONIO DOZA, LEONITO
LABADIA, EDGARDO BELLIZA, FEDENCIO P.
GEBERTAS, VIRGILIO D. GULBE, MANUEL A.
LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A.
CASTILLO, EDMUNDO L PLAZA, ROBERTO D.
YAGONIA,
JR.,
PETRONIO
ESTELA,
JR,
CRISOLOGO A. LOGRONIO, ERNESTO T. MORIO,
ROGELIO M. DAVID, BENJAMIN U. ARLIGUE,
APOLONIO MUNDO, JR., NENE M. E NOSA, NILO
B. BALAORO, GERONIMO S. CONVI, VICENTE R.
TARAGOZA, YOLANDO A. SALAZAR, MANUEL A.
NERI, ROGELIO C. TICAR, ROBERTO A.
MACALAM, MIGUEL MACARIOLA, WALTERIO
DAPADAP, SILVERIO CUAMAG, EUPARQUIO
PLANOS, GILBERTO M. MIRA, REYNALDO
BACSARSA, DIOSDADO B. ABING, ARISTARCO
V. SALON, TOMAS N. CATACTE, RODOLFO
MEMORIA, PAPENIANO CURIAS, JOSE S.
CANDIA, DESIDERIO C. NAVARRO, EMMANUEL
O. ABRAHAM, JOSELITO D. ARLAN, FRANCISCO
S. SANCHEZ, MANSUETO B. LINGGO, ISIDRO
BARNAJA, ROMEO S. CABRERA, LEODEGARIO
CAINTIC, NESTOR G. BLANDO, FLORENCIO B.
DELIZO, MILAN M. ETES, GONZALO C. PADILLO,
LEONARDO CAGAKIT, JOSEFINO E. DULGUIME,
PEPITO G. ARREZA, AMADOR G. CAGALAWAN,
GAUDENCIO C. SARMIENTO, FLORENTINO J.
BRACAMONTE, DOMINADOR H. TY, LEOPOLDO
T. SUPIL, JOSE A. DOHINOG, ANIANO T. REYES,
CARLITO G. UY, PLACIDO D. PADILLO, TERESITA
C. ADRIANO, CANDIDO S. ADRIANO, and
AVELINO
G.
VENERACION,petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION,

(FIFTH DIVISION), and

CORPORATION
OF
(PICOP), respondents.

PAPER INDUSTRIES
THE
PHILIPPINES

DECISION
BELLOSILLO, J.:
Petitioners
numbering
one
hundred
sixteen
[1]
(116) occupied the positions of Technical Staff, Unit
Manager, Section Manager, Department Manager, Division
Manager and Vice President in the mill site of respondent
Paper Industries Corporation of the Philippines (PICOP) in
Bislig, Surigao del Sur. In 1992 PICOP suffered a major
financial setback allegedly brought about by the joint impact of
restrictive government regulations on logging and the
economic crisis. To avert further losses, it undertook a
retrenchment program and terminated the services of
petitioners. Accordingly, petitioners received separation pay
computed at the rate of one (1) month basic pay for every year
of service. Believing however that the allowances they
allegedly regularly received on a monthly basis during their
employment should have been included in the computation
thereof they lodged a complaint for separation pay differentials.
The allowances in question pertained to the following 1. Staff/Manager's Allowance Respondent PICOP provides free housing facilities to
supervisory and managerial employees assigned in Bislig. The
privilege includes free water and electric consumption. Owing
however to shortage of such facilities, it was constrained to
grant Staff allowance instead to those who live in rented
houses outside but near the vicinity of the mill site. But the
allowance ceases whenever a vacancy occurs in the
company's housing facilities. The former grantee is then
directed to fill the vacancy. For Unit, Section and Department
Managers, respondent PICOP gives an additional amount to
meet the same kind of expenses called Manager's allowance.
2. Transportation Allowance To relieve respondent PICOP's motor pool in Bislig from a
barrage of requests for company vehicles and to stabilize
company vehicle requirements it grants transportation
allowance to key officers and Managers assigned in the mill
site who use their own vehicles in the performance of their
duties. It is a conditional grant such that when the conditions
no longer obtain, the privilege is discontinued. The recipients
of this kind of allowance are required to liquidate it by
submitting a report with a detailed enumeration of expenses
incurred.
3. Bislig Allowance The Bislig Allowance is given to Division Managers and
corporate officers assigned in Bislig on account of the hostile
environment prevailing therein. But once the recipient is
transferred elsewhere outside Bislig, the allowance ceases.

30 | P a g e

Labor Law August 28, 2014

Applying Art.,97, par. (f), of the Labor Code which defines if
wage," the Executive Labor Arbiter opined that the subject
allowances, being customarily furnished by respondent PICOP
and regularly received by petitioners, formed part of the latter's
wages. Resolving the controversy from another angle, on the
[2]
strength of the ruling in Santos v. NLRC and Soriano v.
[3]
NLRC that in the computation of separation pay account
should be taken not just of the basic salary but also of the
regular allowances that the employee had been receiving, he
concluded that the allowances should be included in
petitioners' base pay. Thus respondent PICOP was ordered
on 28 April 1994 to pay petitioners Four Million Four Hundred
Eighty-One Thousand Pesos (P4,481,000.00) representing
separation pay differentials plus ten per cent (10%) thereof as
[4]
attorney's fees.
The National Labor Relations Commission (NLRC) did
not share the view of the Executive Labor Arbiter. On 7
October 1994 it set aside the assailed decision by decreeing
that the allowances did not form part of the salary base used in
[5]
computing separation pay.
Its ruling was based on the finding that the cases relied
upon by the Executive Labor Arbiter were inapplicable since
they involved illegal dismissal where separation pay was
granted in lieu of reinstatement which was no longer
feasible. Instead, what it considered in point was Estate of the
[6]
late Eugene J. Kneebone v. NLRC where the Court held that
representation and transportation allowances were deemed not
part of salary and should therefore be excluded in the
computation of separation benefits. Relating the present case
with Art. 97, par. (f), of the Labor Code, the NLRC likewise
found that petitioners' allowances were contingency-based and
thus not included in their salaries. On 26 September 1995
[7]
reconsideration was denied.
In this petition for certiorari, petitioners submit that their
allowances are included in the definition of "facilities" in Art. 97,
par. (f), of the Labor Code, being necessary and indispensable
for their existence and subsistence. Furthermore they claim
that their availment of the monetary equivalent of those
"facilities" on a monthly basis was characterized by
permanency, regularity and customariness. And to fortify their
arguments
they
insist
on
the
applicability
[8]
[9]
of Santos, Soriano, The
Insular
Life
[10]
[11]
Assurance Company, Planters
Products,
Inc. and
[12]
Songco which are all against the NLRC holding that the
salary base in computing separation pay includes not just the
basic salary but also the regular allowances.

remuneration or earnings, however designated, capable of

being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by
an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the
employer to the employee.
We
invite
attention
to
the
above-underlined
clause. Stated differently, when an employer customarily
furnishes his employee board, lodging or other facilities, the
fair and reasonable value thereof, as determined by the
Secretary of Labor and Employment, is included in "wage." In
order to ascertain whether the subject allowances form part of
petitioner's "wages," we divide the discussion on the following "customarily furnished;" "board, lodging or other facilities;" and,
"fair and reasonable value as determined by the Secretary of
Labor."
"Customary" is founded on long-established and constant
[13]
[14]
practice connoting regularity. The receipt of an allowance
on a monthly basis does not ipso facto characterize it as
[15]
regular and forming part of salary because the nature of the
grant is a factor worth considering. We agree with the
observation of the Office of the Solicitor General- that the
subject allowances were temporarily, not regularly, received by
petitioners because In the case of the housing allowance, once a vacancy occurs in
the company-provided housing accommodations, the
employee concerned transfers to the company premises and
his housing allowance is discontinued x x x x
On the other hand, the transportation allowance is in the form
of advances for actual transportation expenses subject to
liquidation x x x given only to employees who have personal
cars.
The Bislig allowance is given to Division Managers and
corporate officers assigned in Bislig, Surigao del Norte. Once
[16]
the officer is transferred outside Bislig, the allowance stops.

We add that in the availment of the transportation

allowance, respondent PICOP set another requirement that the
personal cars be used by the employees in the performance of
their duties. When the conditions for availment ceased to
There is no showing of grave abuse of discretion on the exist, the allowance reached the cutoff point. The finding of
part of the NLRC. In case of retrenchment to prevent losses, the NLRC along the same line likewise merits concurrence,
Art. 283 of the the Labor Code imposes on the employer an i.e., petitioners' continuous enjoyment of the disputed
obligation to grant to the affected employees separation pay allowances was based on contingencies the occurrence of
equivalent to one (1) month pay or at least one-half (1/2) which wrote finis to such enjoyment.
month pay for every year of service, whichever is
higher. Since the law speaks of "pay," the question arises,
Although it is quite easy to comprehend "board" and
"What exactly does the term connote?" We correlate Art. 283 "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII,
with Art. 97 of the same Code on definition of terms. "Pay" is Book III, of the Rules Implementing the Labor Code gives
not defined therein but "wage." In Songco the Court explained meaning to the term as including articles or services for the
that both words (as well as salary) generally refer to one and benefit of the employee or his family but excluding tools of the
the same meaning, i.e., a reward or recompense for services trade or articles or service primarily for the benefit of the
performed. Specifically, "wage" is defined in letter (f) as the employer or necessary to the conduct of the

31 | P a g e

Labor Law August 28, 2014

employer's business. The Staff /Manager's allowance may fall
under "lodging" but the transportation and Bislig allowances
are not embraced in "facilities" on the main consideration that
they are granted as well as the Staff/Manager's allowance for
respondent PICOP's benefit and convenience, i.e., to insure
that petitioners render quality performance. In determining
whether a privilege is a facility, the criterion is not so much its
[17]
kind but its purpose. That the assailed allowances were for
the benefit and convenience of respondent company was
supported by the circumstance that they were not subjected to
withholding tax. Revenue Audit Memo Order No. 1-87
pertinently provides 3.2 x x x x transportation, representation or entertainment
expenses shall not constitute taxable compensation if:
(a) It is for necessary travelling and representation or
entertainment expenses paid or incurred by the employee in
the pursuit of the trade or business of the employer, and
(b) The employee is required to, and does, make an
accounting/liquidation for such expense in accordance with the
specific requirements of substantiation for such category or
expense.
Board and lodging allowances furnished to an employee not in
excess of the latter's needs and given free of charge, constitute
income to the latter except if such allowances or benefits are
furnished to the employee for the convenience of the employer
and as necessary incident to proper performance of his duties
in which case such benefits or allowances do not constitute
[18]
taxable income.
The Secretary of Labor and Employment under Sec. 6,
Rule VII, Book III, of the Rules Implementing the Labor
Code may from time to time fix in appropriate issuances the
"fair and reasonable value of board, lodging and other facilities
customarily furnished by an employer to his employees."
Petitioners' allowances do not represent such fair and
reasonable value as determined by the proper authority simply
because the Staff/Manager's allowance and transportation
allowance were amounts given by respondent company in lieu
of actual provisions for housing and transportation needs
whereas the Bislig allowance was given in consideration of
being assigned to the hostile environment then prevailing in
Bislig.
The inevitable conclusion is that, as reached by the
NLRC, subject allowances did not form part of petitioners'
wages.
[19]

In Santos the Court decreed that in the computation of

separation pay awarded in lieu of reinstatement, account must
be taken not only of the basic salary but also of transportation
and emergency living allowances. Later, the Court
in Soriano, citing Santos, was general in its holding that the
salary base properly used in computing separation pay where
reinstatement was no longer feasible should include not just
the basic salary but also the regular allowances that the
employee had been receiving. Insular merely reiterated the
aforementioned rulings. The rationale is not difficult to

discern. It is the obligation of the employer to pay an illegally

dismissed employee the whole amount of his salaries plus all
other benefits, bonuses and general increases to which he
would have been normally entitled had he not been dismissed
[20]
and had not stopped working. The same holds true in case
of retrenched employees. And thus we applied Insular and
Soriano in Planters inthe computation of separation pay of
retrenched
employees. Songco likewise
involved
retrenchment and was relied upon in Planters, Soriano and
Santos in determining the proper amount of separation
pay. As culled from the foregoing jurisprudence, separation
pay when awarded to an illegally dismissed employee in lieu of
reinstatement or to a retrenched employee should be
computed based not only on the basic salary but also on
the regular allowances that the employee had been
receiving. But in view of the previous discussion that the
disputed allowances were not regularly received by petitioners
herein, there was no reason at all for petitioners to resort to the
above cases.
Neither is Kneebone applicable, contrary to the finding of
the NLRC, because of the difference in factual
circumstances. In Kneebone, the Court was tasked to resolve
the issue whether the representation and transportation
allowances formed part of salary as to be considered in the
computation of retirement benefits. The ruling was in the
negative on the main ground that the retirement plan of the
company expressly excluded such allowances from salary.
WHEREFORE, the petition is DISMISSED. The
resolution of public respondent National Labor Relations
Commission dated 7 October 1994 holding that the Staff
/Manager's, transportation and Bislig allowances did not form
part of the salary base used in computing the separation pay of
petitioners, as well as its resolution dated 26 September 1995
denying reconsideration, is AFFIRMED. No costs.
SO ORDERED.
Puno, Mendoza, Quisumbing, and Buena, JJ., concur.

[1]

Liduvino M. Millares, J. Capistrano Cordita, Shirley P. Uy, Dionisio J.

Requina, Gabriel A. Dejero, Nelson T. Gomonit, Imelda Impeynado,
Sulpicio B. Sumile, Ma. Consuelo Aviel, Silvino S. Guevarra, Fidel
Dumanhog, Nelfa T. Polotan, Lemuel C. Risma, Juanito M. Gonzales,
Rogelio B. Cabatuan, Epifancio E. Ganancial, Dominador D. Atok,
Conrado U. Serrano, Isidro J. Barnaja, Romeo Virtudazo, Avelino
Nable, Edgar Tampos, Ernesto Orias, Dalmacio Legaray, Romeo R.
Bula, Roberto G. Garcia, Rudolfo Suzon, Jerry S. Dano, August G.
Escudero, Oscar B. Catbagan, Teofilo C. Sison, Narciso Bulasa,
Alberto Cortez, Lilia C. Cabrera, Nestor A. Acaso, Bienvenido Mozo,
Isidoro A. Almendarez, Vicente M. Pilongo, Roberto N. Lumpot,
Patricio Bandola, Manuel S. Espina, Isidro K. Balcita, Jr., Emmanuel
O. Abraham, Olegario A. Epis, Nestor D. Peregrino, Ramon A.
Usanaga, Presto Bartolome, Brady Empeynado, Porferio N. Condado,
Aquillo V. Cordova, Leonardo Estosi, Pacifico B. Dacorina, Pablito B.
Llubit, Antonio Doza, Leonito Labadia, Edgardo Belliza, Fedencio P.
Gebertas, Virgilio D. Gulbe, Manuel A. Lerio, Jr., Rogelio B. Ocamia,
Rodolfo A. Castillo, Edmundo L. Plaza, Roberto D. Yagonia, Jr.,
Petronio Estela, Jr., Crisologo A. Logronio, Ernesto T. Morio, Rogelio
M. David, Benjamin U. Arligue, Apolonio Mundo, Jr., Nene M.
Espinosa, Nilo B. Balaoro, Geronimo S. Convi, Vicente R. Taragoza,
Yolando A. Salazar, Manuel A. Neri, Rogelio C. Ticar, Roberto A.
Macalam, Miguel Macariola, Walterio Dapadap, Silverio Cuamag,

32 | P a g e

Labor Law August 28, 2014

Euparquio Planos, Gilberto M. Mira, Reynaldo Bacsarsa, Diosdado B.
Abing, Aristarco V. Salon, Tomas N. Catacte, Rodolfo Memoria,
Papeniano Curias, Jose S. Candia, Desiderio C. Navarro, Emmanuel
O. Abraham, Joselito D. Arlan, Francisco S. Sanchez, Mansueto B.
Linggo, Isidro Barnaja, Romeo S. Cabrera, Leodegario Caintic, Nestor
G. Blando, Florencio B. Delizo, Milan M. Etes, Gonzalo C. Padillo,
Leonardo Cagakit, Josefino E. Dulguime, Pepito G. Arreza, Amador G.
Cagalawan, Gaudencio C. Sarmiento, Florentino J. Bracamonte,
Dominador H. Ty, Leopoldo T. Supil, Jose A. Dohinog, Aniano T.
Reyes, Carlito G. Uy, Placido D. Padillo, Teresita C. Adriano, Candido
S. Adriano, and Avelino G. Veneracion.
[2]

G.R. No. 76721, 21 September 1987, 154 SCRA 166.

[3]

G.R. No. 75510, 27 October 1987, 155 SCRA 124.

[4]

Decision penned by
Martinez; Rollo, p. 68.

Executive

Labor

Arbiter

Conchita

J.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 172161

March 2, 2011

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L.

LAGON, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th
DIVISION, ROLDAN LOPEZ, EDGARDO ZUIGA and
DANILO CAETE, Respondents.

[5]

Resolution penned by Commissioner Leon G. Gonzaga Jr. with the

concurrence of Acting Presiding Commissioner Oscar N. Abella; Rollo,
p. 48.
[6]

G.R. No. 77109, 8 November 1988, 167 SCRA 99.

[7]

Rollo, p. 50.

[8]

See Note 2.

[9]

See Note 3.

[10]

G.R. No. 74191, 21 December 1987, 156 SCRA 740.

[11]

G.R. No. 78524, 20 January 1989, 169 SCRA 328.

[12]

G.R. No. 50999-51000, 23 March 1990, 183 SCRA 610.

[13]

Websters Third New International Dictionary, 1993 Ed., p. 559.

[14]

Blacks Law Dictionary, Sixth Ed., p. 385.

[15]

See Note 5.

[16]

Rollo, p. 234.

DECISION
MENDOZA, J.:
Assailed in this petition for review on certiorari are the January
1
2
11, 2006 Decision and the March 31, 2006 Resolution of the
Court of Appeals (CA), in CA-G.R. SP No. 00598 which
3
affirmed with modification the March 31, 2004 Decision and
4
December 15, 2004 Resolution of the National Labor
Relations Commission (NLRC). The NLRC Decision found the
petitioners, SLL International Cables Specialist (SLL) and its
manager, Sonny L. Lagon(petitioners), not liable for the illegal
dismissal of Roldan Lopez, Danilo Caete and Edgardo
Zuiga (private respondents) but held them jointly and
severally liable for payment of certain monetary claims to said
respondents.
A chronicle of the factual antecedents has been succinctly
summarized by the CA as follows:

[17]

States Marine Corporation v. Cebu Seamens Association, Inc., No.

L-12444, 28 February 1963, 7 SCRA 294.

Sometime in 1996, and January 1997, private respondents

Roldan Lopez (Lopez for brevity) and Danilo Caete (Caete
Rollo, pp. 239-240.
for brevity), and Edgardo Zuiga (Zuiga for brevity)
[19]
Citing Pan-Philippine Life Insurance Corporation v. NLRC, G.R. No. respectively, were hired by petitioner Lagon as apprentice or
53721, 29 June 1982, 114 SCRA 866 where transportation allowance trainee cable/lineman. The three were paid the full minimum
was included in the computation of back wages and General Bank and wage and other benefits but since they were only trainees, they
Trust Company v. Court of Appeals, G.R. No. 42724, 9 April 1985, 135 did not report for work regularly but came in as substitutes to
SCRA 569 where housing allowance was included in the computation
the regular workers or in undertakings that needed extra
of separation pay that was granted in lieu of reinstatement.
workers to expedite completion of work. After their training,
[20]
East Asiatic Co., Ltd. v. Court of Industrial Relations, No. L-29068, Zuiga, Caete and Lopez were engaged as project
31 August 1971, 40 SCRA 521.
employees by the petitioners in their Islacom project in Bohol.
Private respondents started on March 15, 1997 until December
1997. Upon the completion of their project, their employment
was also terminated. Private respondents received the amount
of P145.00, the minimum prescribed daily wage for Region VII.
In July 1997, the amount of P145 was increased to P150.00 by
the Regional Wage Board (RWB) and in October of the same
year, the latter was increased to P155.00. Sometime in March
1998, Zuiga and Caete were engaged again by Lagon as
project employees for its PLDT Antipolo, Rizal project, which
ended sometime in (sic) the late September 1998. As a
consequence, Zuiga and Caetes employment was
terminated. For this project, Zuiga and Caete received only
[18]

33 | P a g e

Labor Law August 28, 2014

the wage of P145.00 daily. The minimum prescribed wage for
Rizal at that time was P160.00.
Sometime in late November 1998, private respondents reapplied in the Racitelcom project of Lagon in Bulacan. Zuiga
and Caete were re-employed. Lopez was also hired for the
said specific project. For this, private respondents received the
wage of P145.00. Again, after the completion of their project in
March 1999, private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked
with Lagons project in Camarin, Caloocan City with Furukawa
Corporation as the general contractor. Their contract would
expire on February 28, 2000, the period of completion of the
project. From May 21, 1997-December 1999, private
respondents received the wage ofP145.00. At this time, the
minimum prescribed rate for Manila was P198.00. In January
to February 28, the three received the wage of P165.00. The
existing rate at that time was P213.00.
For reasons of delay on the delivery of imported materials from
Furukawa Corporation, the Camarin project was not completed
on the scheduled date of completion. Face[d] with economic
problem[s], Lagon was constrained to cut down the overtime
work of its worker[s][,] including private respondents. Thus,
when requested by private respondents on February 28, 2000
to work overtime, Lagon refused and told private respondents
that if they insist, they would have to go home at their own
expense and that they would not be given anymore time nor
allowed to stay in the quarters. This prompted private
respondents to leave their work and went home to Cebu. On
March 3, 2000, private respondents filed a complaint for illegal
dismissal, non-payment of wages, holiday pay, 13th month pay
for 1997 and 1998 and service incentive leave pay as well as
damages and attorneys fees.
In their answers, petitioners admit employment of private
respondents but claimed that the latter were only project
employees[,] for their services were merely engaged for a
specific project or undertaking and the same were covered by
contracts duly signed by private respondents. Petitioners
further alleged that the food allowance ofP63.00 per day as
well as private respondents allowance for lodging house,
transportation, electricity, water and snacks allowance should
be added to their basic pay. With these, petitioners claimed
that private respondents received higher wage rate than that
prescribed in Rizal and Manila.
Lastly, petitioners alleged that since the workplaces of private
respondents were all in Manila, the complaint should be filed
there. Thus, petitioners prayed for the dismissal of the
complaint for lack of jurisdiction and utter lack of merit.
(Citations omitted.)

the said rule, included the place where the employee was
supposed to report back after a temporary detail, assignment
or travel, which in this case was Cebu.
As to the status of their employment, the LA opined that private
respondents were regular employees because they were
repeatedly hired by petitioners and they performed activities
which were usual, necessary and desirable in the business or
trade of the employer.
With regard to the underpayment of wages, the LA found that
private respondents were underpaid. It ruled that the free
board and lodging, electricity, water, and food enjoyed by them
could not be included in the computation of their wages
because these were given without their written consent.
The LA, however, found that petitioners were not liable for
illegal dismissal. The LA viewed private respondents act of
going home as an act of indifference when petitioners decided
7
to prohibit overtime work.
In its March 31, 2004 Decision, the NLRC affirmed the findings
of the LA. In addition, the NLRC noted that not a single report
of project completion was filed with the nearest Public
Employment
Office
as
required
by the Department of Labor and Employment (DOLE)
8
Department Order No. 19, Series of 1993. The NLRC later
9
10
denied the motion for reconsideration subsequently filed by
petitioners.
When the matter was elevated to the CA on a petition for
certiorari, it affirmed the findings that the private respondents
were regular employees. It considered the fact that they
performed functions which were the regular and usual
business of petitioners. According to the CA, they were clearly
members of a work pool from which petitioners drew their
project employees.
The CA also stated that the failure of petitioners to comply with
the simple but compulsory requirement to submit a report of
termination to the nearest Public Employment Office every time
private respondents employment was terminated was proof
that the latter were not project employees but regular
employees.
The CA likewise found that the private respondents were
underpaid. It ruled that the board and lodging, electricity, water,
and food enjoyed by the private respondents could not be
included in the computation of their wages because these were
given without their written consent. The CA added that the
private respondents were entitled to 13th month pay.

The CA also agreed with the NLRC that there was no illegal
On
January
18,
2001,
Labor
Arbiter
Reynoso dismissal. The CA opined that it was the petitioners
5
Belarmino (LA) rendered his decision declaring that his office prerogative to grant or deny any request for overtime work and
had jurisdiction to hear and decide the complaint filed by that the private respondents act of leaving the workplace after
private respondents. Referring to Rule IV, Sec. 1 (a) of the their request was denied was an act of abandonment.
6
NLRC Rules of Procedure prevailing at that time, the LA ruled
that it had jurisdiction because the "workplace," as defined in

34 | P a g e

Labor Law August 28, 2014

In modifying the decision of the labor tribunal, however, the CA
noted that respondent Roldan Lopez did not work in the
Antipolo project and, thus, was not entitled to wage
differentials. Also, in computing the differentials for the period
January and February 2000, the CA disagreed in the award of
differentials based on the minimum daily wage of P223.00, as
the prevailing minimum daily wage then was only P213.00.
Petitioners sought reconsideration but the CA denied it in its
11
March 31, 2006 Resolution.
12

In this petition for review on certiorari, petitioners seek the

reversal and setting aside of the CA decision anchored on this
lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A
SERIOUS ERROR IN LAW IN AWARDING WAGE
DIFFERENTIALS TO THE PRIVATE COMPLAINANTS ON
THE BASES OF MERE TECHNICALITIES, THAT IS, FOR
LACK OF WRITTEN CONFORMITY x x x AND LACK OF
NOTICE TO THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE)[,] AND THUS, THE COURT OF
APPEALS GRAVELY ERRED IN AFFIRMING WITH
MODIFICATION THE NLRC DECISION IN THE LIGHT OF
THE RULING IN THE CASE OF JENNY M. AGABON and
VIRGILIO AGABON vs, NLRC, ET AL., GR NO. 158963,
NOVEMBER
17,
2004,
442
SCRA
573,
[AND
SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME
PHILIPPINES, INC. VS. NAGAKAKAISANG EMPLEYADO NG
WELLCOME-DFA (NEW DFA), ET AL., GR NO. 149349, 11
MARCH 2005], WHICH FINDS APPLICATION IN THE
13
INSTANT CASE BY ANALOGY.
Petitioners reiterated their position that the value of the
facilities that the private respondents enjoyed should be
included in the computation of the "wages" received by them.
14
They argued that the rulings in Agabon v. NLRC and Glaxo
Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng
15
Wellcome-DFA should be applied by analogy, in the sense
that the lack of written acceptance of the employees of the
facilities enjoyed by them should not mean that the value of the
facilities could not be included in the computation of the private
respondents "wages."
On November 29, 2006, the Court resolved to issue a
Temporary Restraining Order (TRO) enjoining the public
respondent from enforcing the NLRC and CA decisions until
further orders from the Court.
After a thorough review of the records, however, the Court
finds no merit in the petition.
This petition generally involves factual issues, such as,
whether or not there is evidence on record to support the
findings of the LA, the NLRC and the CA that private
respondents were project or regular employees and that their
salary differentials had been paid. This calls for a reexamination of the evidence, which the Court cannot entertain.
Settled is the rule that factual findings of labor officials, who are

deemed to have acquired expertise in matters within their

respective jurisdiction, are generally accorded not only respect
but even finality, and bind the Court when supported by
substantial evidence. It is not the Courts function to assess
and evaluate the evidence
all over again, particularly where the findings of both the Labor
16
tribunals and the CA concur.
As a general rule, on payment of wages, a party who alleges
payment as a defense has the burden of proving
17
it. Specifically with respect to labor cases, the burden of
proving payment of monetary claims rests on the employer, the
rationale being that the pertinent personnel files, payrolls,
records, remittances and other similar documents which will
show that overtime, differentials, service incentive leave and
other claims of workers have been paid are not in the
possession of the worker but in the custody and absolute
18
control of the employer.
In this case, petitioners, aside from bare allegations that
private respondents received wages higher than the prescribed
minimum, failed to present any evidence, such as payroll or
payslips, to support their defense of payment. Thus, petitioners
utterly failed to discharge the onus probandi.
Private respondents, on the other hand, are entitled to be paid
the minimum wage, whether they are regular or non-regular
employees.
Section 3, Rule VII of the Rules to Implement the Labor
19
Code specifically enumerates those who are not covered by
the payment of minimum wage. Project employees are not
among them.
On whether the value of the facilities should be included in the
computation of the "wages" received by private respondents,
Section 1 of DOLE Memorandum Circular No. 2 provides that
an employer may provide subsidized meals and snacks to his
employees provided that the subsidy shall not be less that 30%
of the fair and reasonable value of such facilities. In such
cases, the employer may deduct from the wages of the
employees not more than 70% of the value of the meals and
snacks enjoyed by the latter, provided that such deduction is
with the written authorization of the employees concerned.
Moreover, before the value of facilities can be deducted from
the employees wages, the following requisites must all be
attendant: first, proof must be shown that such facilities are
customarily furnished by the trade; second, the provision of
deductible facilities must be voluntarily accepted in writing by
the employee; and finally, facilities must be charged at
20
reasonable value. Mere availment is not sufficient to allow
21
deductions from employees wages.
These requirements, however, have not been met in this case.
SLL failed to present any company policy or guideline showing
that provisions for meals and lodging were part of the
employees salaries. It also failed to provide proof of the

35 | P a g e

Labor Law August 28, 2014

employees written authorization, much less show how they
arrived at their valuations. At any rate, it is not even clear
whether private respondents actually enjoyed said facilities.
The Court, at this point, makes a distinction between "facilities"
and "supplements." It is of the view that the food and lodging,
or the electricity and water allegedly consumed by private
respondents in this case were not facilities but supplements. In
the case of Atok-Big Wedge Assn. v. Atok-Big Wedge
22
Co., the two terms were distinguished from one another in
this wise:

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion
of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Chief Justice

"Supplements," therefore, constitute extra remuneration or

Footnotes
special privileges or benefits given to or received by the
*
Designated as additional member in lieu of Associate
laborers over and above their ordinary earnings or wages.
Justice Antonio Eduardo B. Nachura per Special Order No.
"Facilities," on the other hand, are items of expense necessary
933 dated January 24, 2011.
**
for the laborer's and his family's existence and subsistence so
Designated as additional member in lieu of Associate
Justice Diosdado M. Peralta per Special Order No. 954
that by express provision of law (Sec. 2[g]), they form part of
dated February 21, 2011.
the wage and when furnished by the employer are deductible
1
Rollo, pp. 48-60. Penned by Associate Justice Vicente L.
therefrom, since if they are not so furnished, the laborer would
Yap and concurred in by Associate Justice Arsenio J.
spend and pay for them just the same.
In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic or
ordinary earning or wage is supplement; and when said benefit
or privilege is part of the laborers' basic wages, it is a facility.
The distinction lies not so much in the kind of benefit or item
(food, lodging, bonus or sick leave) given, but in the purpose
23
for which it is given. In the case at bench, the items provided
were given freely by SLL for the purpose of maintaining the
efficiency and health of its workers while they were working at
their respective projects.1avvphi1
For said reason, the cases of Agabon and Glaxo are
inapplicable in this case. At any rate, these were cases of
dismissal with just and authorized causes. The present case
involves the matter of the failure of the petitioners to comply
with the payment of the prescribed minimum wage.
The Court sustains the deletion of the award of differentials
with respect to respondent Roldan Lopez. As correctly pointed
out by the CA, he did not work for the project in Antipolo.
WHEREFORE, the petition is DENIED. The temporary
restraining order issued by the Court on November 29, 2006 is
deemed, as it is hereby ordered, DISSOLVED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
PRESBITERO J. VELASCO,
MARIANO C. DEL
JR.*
CASTILLO**
Associate Justice
Associate Justice
ROBERTO A. ABAD
Associate Justice
ATTESTATION

Magpale and Associate Justice Apolinario D. Bruselas, Jr.

2
Id. at 62-63.
3
Id. at 155-164.
4
Id. at 171-172.
5
Id. at 123-134.
6
Section 1. Venue. (a) All cases which Labor Arbiters
have authority to hear and decide may be filed in the
Regional Arbitration Branch having jurisdiction over the
workplace of the complaint/petitioner.
For purposes of venue, workplace shall be
understood as the place or locality where the
employee is regularly assigned when the cause of
action arose. It shall include the place where the
employee is supposed to report back after a
temporary detail, assignment or travel. In the case
of field employees, as well as ambulant or itinerant
workers, their workplace is where they are
regularly assigned, or where they are supposed to
regularly receive their salaries/wages or work
instructions from, and report the results of their
assignment to, their employers.
7
Rollo, p. 130.
8
2.2 Indicators of project employment. Either one or more
of the following circumstances, among other, may be
considered as indicators that an employee is a project
employee.
(a) The duration of the specific/identified
undertaking for which the worker is engaged is
reasonably determinable.
(b) Such duration, as well as the specific
work/service to be performed, is defined in an
employment agreement and is made clear to the
employee at the time of hiring.
(c) The work/service performed by the employee is
in
connection
with
the
particular
project/undertaking for which he is engaged.
(d) The employee, while not employed and
awaiting engagement, is free to offer his services
to any other employer.
(e) The termination of his employment in the
particular project/undertaking is reported to the
Department of Labor and Employment (DOLE)
Regional Office having jurisdiction over the
workplace within 30 days following the date of his
separation from work, using the prescribed form

36 | P a g e

Labor Law August 28, 2014

on
employees
terminations/dismissals/suspensions.
(f) An undertaking in the employment contract by
the employer to pay completion bonus to the
project employee as practiced by most
construction companies.
9
Rollo, pp. 171-172.
10
Id. at 165-170.
11
Id. at 62-63.
12
Id. at 10-172.
13
Id. at 22.
14
485 Phil. 248 (2004).
15
493 Phil.410 (2005).
16
Stamford Marketing Corp. v. Julian, 468 Phil 34 (2004).
17
Far East Bank and Trust Company v. Querimit, 424 Phil.
721 (2002); Sevillana v. I.T. (International) Corp., 408 Phil.
570
(2001); Villar
v.
National
Labor
Relations
Commission, 387 Phil. 706 (2000); Audion Electric Co, Inc.
v. NLRC, 367 Phil. 620 (1999); Ropali Trading Corporation v.
National Labor Relations Commission, 357 Phil. 314
(1998); National Semiconductor (HK) Distribution, Ltd. v.
National Labor Relations Commission (4th Division), 353
Phil. 551 (1998); Pacific Maritime Services, Inc. v. Ranay,
341 Phil. 716 (1997); Jimenez v. National Labor Relations
Commission, 326 Phil. 89 (1996); Philippine National Bank v.
Court of Appeals, 326 Phil. 46 (1996); Good Earth
Emporium, Inc. v. Court of Appeals, G.R. No. 82797,
February 27, 1991, 194 SCRA 544, 552; Villaflor v. Court of
Appeals, G.R. No. 46210, December 26, 1990, 192 SCRA
680, 690; Biala v. Court of Appeals, G.R. No. 43503,
October 31, 1990, 191 SCRA 50, 59;Servicewide
Specialists, Inc. v. Intermediate Appellate Court, 255 Phil.
787 (1989).
18
Dansart Security Force & Allied Services Company v.
Bagoy, G.R. No. 168495, July 2, 2010; G & M Philippines,
Inc. v. Cruz, 496 Phil. 119 (2005); Villar v. National Labor
Relations Commission, 387 Phil. 706.
19
Sec. 3. Coverage. This Rule shall not apply to the
following persons:
(a) Household or domestic helpers, including
family drivers and persons in the personal service
of another;
(b) Homeworkers who are engaged in needlework;
(c) Workers employed in any establishment duly
registered with the National Cottage Industries and
Development Authority in accordance with R.A.
3470, provided that such workers perform the
work in their respective homes;
(d) Workers in any duly registered cooperative
when so recommended by the Bureau of
Cooperative Development and upon approval of
the Secretary of Labor; Provided, however, That
such recommendation shall be given only for the
purpose of making the cooperative viable and
upon finding and certification of said Bureau,
supported by adequate proof, that the cooperative
cannot resort to other remedial measures without
serious loss or prejudice to its operation except
through its exemption from the requirements of
this Rule. The exemption shall be subject to such
terms and conditions and for such period of time
as the Secretary of Labor may prescribe.
20
Mayon Hotel & Restaurant v. Adana, G.R. No. 157634,
492 Phil. 892 (2005); Mabeza v. NLRC, 338 Phil. 386
(1997).
21
Mayon Hotel & Restaurant v. Adana, supra.
22
97 Phil. 294 (1955).
23
States Marine Corporation and Royal Line, Inc. v. Cebu
Seamen's Association, Inc., 117 Phil. 307 (1963).

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-50999 March 23, 1990
JOSE SONGCO, ROMEO CIPRES, and AMANCIO
MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST
DIVISION), LABOR ARBITER FLAVIO AGUAS, and F.E.
ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of
the National Labor Relations Commission in NLRC Case No.
RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee" and NLRC Case No. RN- IV-20855-78T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E.
Zuellig (M), Inc., Respondent-Appellee," which dismissed the
appeal of petitioners herein and in effect affirmed the decision
of the Labor Arbiter ordering private respondent to pay
petitioners separation pay equivalent to their one month salary
(exclusive of commissions, allowances, etc.) for every year of
service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred
to as Zuellig) filed with the Department of Labor (Regional
Office No. 4) an application seeking clearance to terminate the
services of petitioners Jose Songco, Romeo Cipres, and
Amancio Manuel (hereinafter referred to as petitioners)
allegedly on the ground of retrenchment due to financial
losses. This application was seasonably opposed by
petitioners alleging that the company is not suffering from any
losses. They alleged further that they are being dismissed
because of their membership in the union. At the last hearing
of the case, however, petitioners manifested that they are no
longer contesting their dismissal. The parties then agreed that
the sole issue to be resolved is the basis of the separation pay
due to petitioners. Petitioners, who were in the sales force of
Zuellig received monthly salaries of at least P40,000. In
addition, they received commissions for every sale they made.

37 | P a g e

Labor Law August 28, 2014

The collective Bargaining Agreement entered into between
Zuellig and F.E. Zuellig Employees Association, of which
petitioners are members, contains the following provision (p.
71, Rollo):
ARTICLE XIV Retirement Gratuity
Section l(a)-Any employee, who is separated from
employment due to old age, sickness, death or
permanent lay-off not due to the fault of said employee
shall receive from the company a retirement gratuity in
an amount equivalent to one (1) month's salary per year
of service. One month of salary as used in this
paragraph shall be deemed equivalent to the salary at
date of retirement; years of service shall be deemed
equivalent to total service credits, a fraction of at least
six months being considered one year, including
probationary employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then
prevailing provides:
Art. 284. Reduction of personnel. The termination of
employment of any employee due to the installation of
labor saving-devices, redundancy, retrenchment to
prevent losses, and other similar causes, shall entitle
the employee affected thereby to separation pay. In
case of termination due to the installation of laborsaving devices or redundancy, the separation pay shall
be equivalent to one (1) month pay or to at least one (1)
month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and
other similar causes, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules
Implementing the Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is due
to retrechment initiated by the employer to prevent
losses or other similar causes, or where the employee
suffers from a disease and his continued employment is
prohibited by law or is prejudicial to his health or to the
health of his co-employees, the employee shall be
entitled to termination pay equivalent at least to his one
month salary, or to one-half month pay for every year of
service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year.
xxx
Sec. 10. Basis of termination pay. The computation
of the termination pay of an employee as provided
herein shall be based on his latest salary rate, unless

the same was reduced by the employer to defeat the

intention of the Code, in which case the basis of
computation shall be the rate before its deduction.
(Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the
dispositive portion of which reads (p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent
should be as it is hereby, ordered to pay the
complainants separation pay equivalent to their one
month salary (exclusive of commissions, allowances,
etc.) for every year of service that they have worked
with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations
Commission was dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of
Voluntary Abandonment and Withdrawal of Petition dated April
7, 1980 filed by petitioner Romeo Cipres, based on the ground
that he wants "to abide by the decision appealed from" since
he had "received, to his full and complete satisfaction, his
separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and
allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation
pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal
amount of separation pay due them, whether under the Labor
Code or the CBA, their basic salary, earned sales commissions
and allowances should be added together. They cited Article
97(f) of the Labor Code which includes commission as part on
one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the
remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis,
or other method of calculating the same, which is
payable by an employer to an employee under a written
or unwritten contract of employment for work done or to
be done, or for services rendered or to be rendered, and
includes the fair and reasonable value, as determined
by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the
employee. 'Fair reasonable value' shall not include any
profit to the employer or to any person affiliated with the
employer.

38 | P a g e

Labor Law August 28, 2014

Zuellig argues that if it were really the intention of the Labor
Code as well as its implementing rules to include commission
in the computation of separation pay, it could have explicitly
said so in clear and unequivocal terms. Furthermore, in the
definition of the term "wage", "commission" is used only as one
of the features or designations attached to the word
remuneration or earnings.
Insofar as the issue of whether or not allowances should be
included in the monthly salary of petitioners for the purpose of
computation of their separation pay is concerned, this has
been settled in the case of Santos v. NLRC, et al., G.R. No.
76721, September 21, 1987, 154 SCRA 166, where We ruled
that "in the computation of backwages and separation pay,
account must be taken not only of the basic salary of petitioner
but also of her transportation and emergency living
allowances." This ruling was reiterated in Soriano v. NLRC, et
al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and
recently, in Planters Products, Inc. v. NLRC, et al., G.R. No.
78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or
not earned sales commission should be included in the
monthly salary of petitioner for the purpose of computation of
their separation pay.
Article 97(f) by itself is explicit that commission is included in
the definition of the term "wage". It has been repeatedly
declared by the courts that where the law speaks in clear and
categorical language, there is no room for interpretation or
construction; there is only room for application (Cebu Portland
Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17,
August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals,
G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and
unambiguous statute speaks for itself, and any attempt to
make it clearer is vain labor and tends only to obscurity. How
ever, it may be argued that if We correlate Article 97(f) with
Article XIV of the Collective Bargaining Agreement, Article 284
of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, there appears to be an ambiguity. In this
regard, the Labor Arbiter rationalized his decision in this
manner (pp. 74-76, Rollo):

x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly
pay or monthly salary'.
The above terms found in those Articles and the
particular Rules were intentionally used to express the
intent of the framers of the law that for purposes of
separation pay they mean to be specifically referring to
salary only.
.... Each particular benefit provided in the Code and
other Decrees on Labor has its own pecularities and
nuances and should be interpreted in that light. Thus,
for a specific provision, a specific meaning is attached to
simplify matters that may arise there from. The general
guidelines in (sic) the formation of specific rules for
particular purpose. Thus, that what should be controlling
in matters concerning termination pay should be the
specific provisions of both Book VI of the Code and the
Rules. At any rate, settled is the rule that in matters of
conflict between the general provision of law and that of
a particular- or specific provision, the latter should
prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the
implementing rules, it could be deduced that wage is
used in its generic sense and obviously refers to the
basic wage rate to be ascertained on a time, task, piece
or commission basis or other method of calculating the
same. It does not, however, mean that commission,
allowances or analogous income necessarily forms part
of the employee's salary because to do so would lead to
anomalies (sic), if not absurd, construction of the word
"salary." For what will prevent the employee from
insisting that emergency living allowance, 13th month
pay, overtime, and premium pay, and other fringe
benefits should be added to the computation of their
separation pay. This situation, to our mind, is not the
real intent of the Code and its rules.

The definition of 'wage' provided in Article 96 (sic) of the

Code can be correctly be (sic) stated as a general
definition. It is 'wage ' in its generic sense. A careful
perusal of the same does not show any indication that
commission is part of salary. We can say that
commission by itself may be considered a wage. This is
not something novel for it cannot be gainsaid that
certain types of employees like agents, field personnel
and salesmen do not earn any regular daily, weekly or
monthly salaries, but rely mainly on commission earned.

We rule otherwise. The ambiguity between Article 97(f), which

defines the term 'wage' and Article XIV of the Collective
Bargaining Agreement, Article 284 of the Labor Code and
Sections 9(b) and 10 of the Implementing Rules, which
mention the terms "pay" and "salary", is more apparent than
real. Broadly, the word "salary" means a recompense or
consideration made to a person for his pains or industry in
another man's business. Whether it be derived from "salarium,"
or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for
services rendered. Indeed, there is eminent authority for
Upon the other hand, the provisions of Section 10, Rule holding that the words "wages" and "salary" are in essence
1, Book VI of the implementing rules in conjunction with synonymous (Words and Phrases, Vol. 38 Permanent Edition,
Articles 273 and 274 (sic) of the Code specifically states p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App.
that the basis of the termination pay due to one who is Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is
sought to be legally separated from the service is 'his the Latin word "salarium," is often used interchangeably with
latest salary rates.
"wage", the etymology of which is the Middle English word

39 | P a g e

Labor Law August 28, 2014

"wagen". Both words generally refer to one and the same
meaning, that is, a reward or recompense for services
performed. Likewise, "pay" is the synonym of "wages" and
"salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the
words "wages", "pay" and "salary" have the same meaning,
and commission is included in the definition of "wage", the
logical conclusion, therefore, is, in the computation of the
separation pay of petitioners, their salary base should include
also their earned sales commissions.

the average commissions earned during their last year of

employment.

The final consideration is, in carrying out and interpreting the

Labor Code's provisions and its implementing regulations, the
workingman's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and
substance to the liberal and compassionate spirit of the law as
provided for in Article 4 of the Labor Code which states that "all
doubts in the implementation and interpretation of the
The aforequoted provisions are not the only consideration for provisions of the Labor Code including its implementing rules
deciding the petition in favor of the petitioners.
and regulations shall be resolved in favor of labor" (Abella v.
NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140; Manila
We agree with the Solicitor General that granting, in gratia Electric Company v. NLRC, et al., G.R. No. 78763, July
argumenti, that the commissions were in the form of incentives 12,1989), and Article 1702 of the Civil Code which provides
or encouragement, so that the petitioners would be inspired to that "in case of doubt, all labor legislation and all labor
put a little more industry on the jobs particularly assigned to contracts shall be construed in favor of the safety and decent
them, still these commissions are direct remuneration services living for the laborer.
rendered which contributed to the increase of income of Zuellig
. Commission is the recompense, compensation or reward of ACCORDINGLY, the petition is hereby GRANTED. The
an agent, salesman, executor, trustees, receiver, factor, broker decision of the respondent National Labor Relations
or bailee, when the same is calculated as a percentage on the Commission is MODIFIED by including allowances and
amount of his transactions or on the profit to the principal commissions in the separation pay of petitioners Jose Songco
(Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 and Amancio Manuel. The case is remanded to the Labor
Md. 123, 141 A.2d 749, 750). The nature of the work of a Arbiter for the proper computation of said separation pay.
salesman and the reason for such type of remuneration for
services rendered demonstrate clearly that commission are SO ORDERED.
part of petitioners' wage or salary. We take judicial notice of the
fact that some salesmen do not receive any basic salary but
depend on commissions and allowances or commissions Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ.,
alone, are part of petitioners' wage or salary. We take judicial concur.
notice of the fact that some salesman do not received any
basic salary but depend on commissions and allowances or
commissions alone, although an employer-employee
relationship exists. Bearing in mind the preceeding dicussions,
if we adopt the opposite view that commissions, do not form
part of wage or salary, then, in effect, We will be saying that
this kind of salesmen do not receive any salary and therefore,
not entitled to separation pay in the event of discharge from
employment. Will this not be absurd? This narrow
interpretation is not in accord with the liberal spirit of our labor
laws and considering the purpose of separation pay which is,
to alleviate the difficulties which confront a dismissed
employee thrown the the streets to face the harsh necessities
of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the
issue of the salary base that should be used in computing the
separation pay, We held that:
The commissions also claimed by petitioner ('override
commission' plus 'net deposit incentive') are not properly
includible in such base figure since such commissions
must be earned by actual market transactions
attributable to petitioner.
Applying this by analogy, since the commissions in the present
case were earned by actual market transactions attributable to
petitioners, these should be included in their separation pay. In
the computation thereof, what should be taken into account is

40 | P a g e

Labor Law August 28, 2014

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 92174 December 10, 1993
BOIE-TAKEDA CHEMICALS, INC., petitioner,
vs.
HON. DIONISIO DE LA SERNA, Acting Secretary of the
Department of Labor and Employment, respondent.
G.R. No. L-102552 December 10, 1993
PHILIPPINE FUJI XEROX CORP., petitioner,
vs.
CRESENCIANO B. TRAJANO, Undersecretary of the
Department of Labor and Employment, and PHILIPPINE FUJI
XEROX EMPLOYEES UNION, respondents.
Herrera, Laurel, De los Reyes, Roxas & Teehankee for BoieTakeda Chemicals, Inc. and Phil Xerox Corp.
The Solicitor General for public respondents.

Sec. 2. Employers already paying their

employees a 13th month pay or its
equivalent are not covered by this Decree.
The Rules and Regulations Implementing P.D. 851
promulgated by then Labor Minister Blas Ople on December
22, 1975 contained the following relevant provisions relative to
the concept of "thirteenth month pay" and the employers
exempted from giving it, to wit:
Sec. 2. Definition of certain terms. . . .
a) "Thirteenth month pay" shall mean one
twelfth (1/12) of the basic salary of an
employee within a calendar year;
b) "Basic Salary" shall include all
remunerations or earnings paid by an
employer to an employee for services
rendered but may not include cost of living
allowances granted pursuant to Presidential
Decree No. 525 or Letter of Instructions No.
174, profit sharing payments, and all
allowances and monetary benefits which are
not considered or integrated as part of the
regular or basic salary of the employee at
the time of the promulgation of the Decree
on December 16, 1975.
Sec. 3. Employers covered. . . . (The law
applies) to all employers except to:

NARVASA, C.J.:
What items or items of employee remuneration should go into
the computation of thirteenth month pay is the basic issue
presented in these consolidated petitions. Otherwise stated,
the question is whether or not the respondent labor officials in
computing said benefit, committed "grave abuse of discretion
amounting to lack of jurisdiction," by giving effect to Section 5
of the Revised Guidelines on the implementation of the
Thirteenth Month Pay (Presidential Decree No. 851)
promulgated by then Secretary of Labor and Employment,
Hon. Franklin Drilon, and overruling petitioner's contention that
said provision constituted a usurpation of legislative power
because not justified by or within the authority of the law
sought to be implemented besides being violative of the equal
protection of the law clause of the Constitution.
Resolution of the issue entails, first, a review of the pertinent
provisions of the laws and implementing regulations.
Sections 1 and 2 of Presidential Decree No. 851, the
Thirteenth Month Pay Law, read as follows:
Sec 1. All employees are hereby required to
pay all their employees receiving basic
salary of not more than P1,000.00 a month,
regardless of the nature of the employment,
a 13th month pay not later than December
24 of every year.

xxx xxx xxx

c) Employers already paying their employers
a 13-month pay or more in calendar year or
is equivalent at the time of this issuance;
xxx xxx xxx
e) Employers of those who are paid on
purely commission, boundary, or task basis,
and those who are paid a fixed amount for
performing a specific work, irrespective of
the time consumed in the performance
thereof, except where the workers are paid
on piece-rate basis in which case the
employer shall be covered by this issuance
insofar as such workers are concerned.
xxx xxx xxx
The term "its equivalent" as used in
paragraph (c) shall include Christmas bonus,
mid-year bonus, profit-sharing payments and
other cash bonuses amounting to not less
than 1/12th of the basic salary but shall not
include cash and stock dividends, cost of

41 | P a g e

Labor Law August 28, 2014

living allowances and all other allowances
regularly enjoyed by the employee, as well
as non-monetary benefits. Where an
employer pays less than 1/12th of the
employee's basic salary, the employer shall
pay the difference.
Supplementary Rules and Regulations implementing P.D. 851
were subsequently issued by Minister Ople whichinter alia set
out items of compensation not included in the computation of
the 13th month pay, viz.:
Sec. 4. Overtime pay, earnings and other
remunerations which are not part of the
basic salary shall not be included in the
computation of the 13th month pay.
On August 13, 1986,
promulgated Memorandum
single provision modifying
removing the salary ceiling
latter, as follows:

President Corazon C. Aquino

Order No. 28, which contained a
Presidential Decree No. 851 by
of P1,000.00 a month set by the

Section 1 of Presidential Decree No. 851 is

hereby modified to the extent that all
employers are hereby required to pay all
their rank-and-file employees a 13th month
pay not later than December 24, of every
year.
Slightly more than a year later, on November 16, 1987,
Revised Guidelines on the Implementation of the 13th Month
Pay Law were promulgated by then Labor Secretary Franklin
Drilon which, among other things, defined with particularity
what remunerative items were and were not embraced in the
concept of 13th month pay, and specifically dealt with
employees who are paid a fixed or guaranteed wage plus
commission. The relevant provisions read:

treated as part of the basic salary of the

employees.
xxx xxx xxx
5. 13th Month Pay for Certain Types of
Employees.
(a) Employees Paid by Results.
Employees who are paid on piece work
basis are by law entitled to the 13th month
pay.
Employees who are paid a fixed or
guaranteed wage plus commission are also
entitled to the mandated 13th month pay
based on their total earnings during the
calendar year, i.e., on both their fixed or
guaranteed wage and commission.
This was the state of the law when the controversies at bar
arose out of the following antecedents:
(RE G.R. No. 92174) A routine inspection was conducted on
May 2, 1989 in the premises of petitioner Boie-Takeda
Chemicals,
Inc.
by
Labor
and Development Officer Reynaldo B. Ramos under Inspection
Authority
No. 4-209-89. Finding that Boie-Takeda had not been including
the commissions earned by its medical representatives in the
computation of their 13th month pay, Ramos served a Notice
1
of Inspection Results on Boie-Takeda through its president,
Mr. Benito Araneta, requiring Boie-Takeda within ten (10)
calendar days from notice to effect restitution or correction of
"the underpayment of 13th month pay for the year(s) 1986,
1987 and 1988 of Med Rep (Revised Guidelines on the
Implementation of 13th month pay # 5) in the total amount of
P558,810.89."

4. Amount and payment of 13th Month Pay.

Boie-Takeda wrote the Labor Department contesting the

Notice of Inspection Results, and expressing the view "that the
xxx xxx xxx
commission paid to our medical representatives are not to be
included in the computation of the 13th month pay . . . (since
The basic salary of an employee for the the) law and its implementing rules speak of REGULAR or
purpose of computing the 13th month pay BASIC salary and therefore exclude all other remunerations
shall include all remunerations or earnings which are not part of the REGULAR salary." It pointed out that,
paid by the employer for services rendered "if no sales is (sic) made under the effort of a particular
but does not include allowances and representative, there is no commission during the period when
are not and
monetary benefits which are not considered no sale was transacted, so that commissions
2
cannot
be
legally
defined
as
regular
in
nature.
or integrated as part of the regular or basic
salary, such as the cash equivalent of
unused vacation and sick leave credits, Regional Director Luna C. Piezas directed Boie-Takeda to
overtime, premium, night differential and appear before his Office on June 9 and 16, 1989. On the
holiday pay, and cost-of-living allowances. appointed dates, however, and despite due notice, no one
However, these salary-related benefits appeared for Boie-Takeda, and the matter had perforce to be
should be included as part of the basic resolved on the basis of the evidence at hand. On July 24,
3
salary in the computation of the 13th month 1989, Director Piezas issued an Order directing Boie-Takeda:
pay if by individual or collective agreement,
company practice or policy, the same are

42 | P a g e

Labor Law August 28, 2014

. . . to pay . . . (its) medical representatives
and its managers the total amount of FIVE
HUNDRED SIXTY FIVE THOUSAND
SEVEN HUNDRED FORTY SIX AND
FORTY SEVEN CENTAVOS (P565,746.47)
representing underpayment of thirteenth
(13th) month pay for the years 1986, 1987,
1988, inclusive, pursuant to the . . . revised
guidelines within ten (10) days from receipt
of this Order.
4

A motion for reconsideration was seasonably filed by BoieTakeda under date of August 3, 1989. Treated as an appeal, it
was
resolved
on
January 17, 1990 by then Acting Labor Secretary Dionisio de
la Serna, who affirmed the July 24, 1989 Order with
modification that the sales commissions earned by BoieTakeda's medical representatives before August 13, 1989, the
effectivity date of Memorandum Order No. 28 and its
Implementing Guidelines, shall be excluded in the computation
5
of their 13th month pay.

the portion of the 13th month pay which

arose out of the non-implementation of the
said revised guidelines, ten (10) days from
receipt
hereof,
otherwise,
MR. NICANOR TORRES, the SR. LABOR
EMPLOYMENT OFFICER is hereby Ordered
to proceed to the premises of the
Respondent for the purpose of computing
the said deficiency (sic) should respondent
fail to heed his Order.
Philippine Fuji Xerox appealed the aforequoted Order to the
Office of the Secretary of Labor. In an Order dated October
120, 1991, Undersecretary Cresenciano B. Trajano denied the
appeal for lack of merit. Hence, the petition in G.R. No.
102552, which was ordered consolidated with G.R. No. 92174
as involving the same issue.

In their almost identically-worded petitioner, petitioners,

through common counsel, attribute grave abuse of discretion to
respondent
labor
officials
Hon. Dionisio dela Serna and Undersecretary Cresenciano B.
Hence the petition docketed as G.R. No. 92174.
Trajano in issuing the questioned Orders of January 17, 1990
and October 10, 1991, respectively. They maintain that under
(RE G.R. No. 102552) A similar Routine Inspection was P.D. 851, the 13th month pay is based solely on basic salary.
conducted in the premises of Philippine Fuji Xerox Corp. on As defined by the law itself and clarified by the implementing
September 7, 1989 pursuant to Routine Inspection Authority and Supplementary Rules as well as by the Supreme Court in
No. NCR-LSED-RI-494-89. In his Notice of Inspection a long line of decisions, remunerations which do not form part
6
Results, addressed to the Manager, Mr. Nicolas O. Katigbak, of the basic or regular salary of an employee, such as
Senior Labor and Employment Officer Nicanor M. Torres noted commissions, should not be considered in the computation of
the following violation committed by Philippine Fuji Xerox the 13th month pay. This being the case, the Revised
Guidelines on the Implementation of the 13th Month Pay Law
Corp., to wit:
issued by then Secretary Drilon providing for the inclusion of
commissions in the 13th month pay, were issued in excess of
Underpayment of 13th month pay of 62 the statutory authority conferred by P.D. 851. According to
employees, more or less pursuant to petitioners, this conclusion becomes even more evident when
Revised Guidelines on the Implementation of considered in light of the opinion rendered by Labor Secretary
the 13th month pay law for the period Drilon himself in "In Re: Labor Dispute at the Philippine Long
covering 1986, 1987 and 1988.
Distance Telephone Company" which affirmed the
contemporaneous interpretation by then Secretary Ople that
Philippine Fuji Xerox was requested to effect rectification commissions are excluded from the basic salary. Petitioners
and/or restitution of the noted violation within five (5) working further contend that assuming that Secretary Drilon did not
exceed the statutory authority conferred by P.D. 851, still the
days from notice.
Revised Guidelines are null and void as they violate the equal
No action having been taken thereon by Philippine Fuji Xerox, protection of the law clause.
Mr. Eduardo G. Gonzales, President of the Philxerox
Employee Union, wrote then Labor Secretary Franklin Drilon Respondents through the Office of the Solicitor General
requesting a follow-up of the inspection findings. Messrs. question the propriety of petitioners' attack on the
Nicolas and Gonzales were summoned to appear before Labor constitutionality of the Revised Guidelines in a petition
Employment and Development Officer Mario F. Santos, NCR for certiorari which, they contend, should be confined purely to
Office, Department of Labor for a conciliation conference. the correction of errors and/or defects of jurisdiction, including
When no amicable settlement was reached, the parties were matters of grave abuse of discretion amounting to lack or
excess of jurisdiction and not extend to a collateral attack on
required to file their position papers.
the validity and/or constitutionality of a law or statute. They
Subsequently, Regional Director Luna C. Piezas issued an aver that the petitions do not advance any cogent reason or
7
state any valid ground to sustain the allegation of grave abuse
Order dated August 23, 1990, disposing as follows:
of discretion, and that at any rate, P.D. No. 851, otherwise
known as the 13th Month Pay Law has already been amended
WHEREFORE,
premises
considered, by Memorandum Order No. 28 issued by President Corazon C.
Respondent PHILIPPINE FUJI XEROX is Aquino on August 13, 1986 so that commissions are now
hereby ordered to restitute to its salesmen imputed into the computation of the 13th Month Pay. They add

43 | P a g e

Labor Law August 28, 2014

that the Revised Guidelines issued by then Labor Secretary
Drilon merely clarified a gray area occasioned by the silence of
the law as to the nature of commissions; and worked no
violation of the equal protection clause of the Constitution, said
Guidelines being based on reasonable classification.
Respondents point to the case of Songco vs. National Labor
Relations Commission, 183 SCRA 610, wherein the Court
declared that Article 97(f) of the Labor Code is explicit that
commission is included in the definition of the term "wage".

the promulgation of the

Decree on December 16,
1975.

We rule for the petitioners.

Under a later set of Supplementary Rules

and Regulations Implementing Presidential
Decree 851 Presidential Decree 851 issued
by then Labor Secretary Blas Ople, overtime
pay, earnings and other remunerations are
excluded as part of the basic salary and in
the computation of the 13th month pay.

Contrary to respondents' contention, Memorandum Order No.

28 did not repeal, supersede or abrogate P.D. 851. As may be
gleaned from the language of the Memorandum Order No. 28,
it merely "modified" Section 1 of the decree by removing the
P1,000.00 salary ceiling. The concept of 13th Month Pay as
envisioned, defined and implemented under P.D. 851
remained unaltered, and while entitlement to said benefit was
no longer limited to employees receiving a monthly basic
salary of not more than P1,000.00, said benefit was, and still
is, to be computed on the basic salary of the employeerecipient as provided under P.D. 851. Thus, the interpretation
given to the term "basic salary" as defined in P.D. 851 applies
equally to "basic salary" under Memorandum Order No. 28.

The
exclusion
of
the
cost-of-living
allowances under Presidential Decree 525
and Letter of Instructions No. 174, and profitsharing payments indicate the intention to
strip basic salary of other payments which
are properly considered as "fringe" benefits.
Likewise, the catch-all exclusionary phrase
"all allowances and monetary benefits which
are not considered or integrated 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
"fringe" benefits.

In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139,
this Court delineated the coverage of the term "basic salary" as
used in P.D. 851. We said at some length:

Moreover, the Supplementary Rules and

Regulations
Implementing
Presidential
Decree 851 is even more emphatic in
declaring
that
earnings
and
other
remunerations which are not part of the
basic salary shall not be included in the
computation of the 13th-month pay.

Under Presidential Decree 851 and its

implementing rules, the basic salary of an
employee is used as the basis in the
determination of his 13th month pay. Any
compensations or remunerations which are
deemed not part of the basic pay is excluded
as basis in the computation of the mandatory
bonus.

Profit-sharing

While doubt may have been created by the

prior Rules and Regulations Implementing
Presidential Decree 851 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 controlling Supplementary Rules
and Regulations which categorically exclude
from the definitions of basic salary earnings
and other remunerations paid by an
employer to an employee. A cursory perusal
of the two sets of Rules indicates that what
has hitherto been the subject of a broad
inclusion is now a subject of broad exclusion.
The Supplementary Rules and Regulations
cure the seeming tendency of the former
rules to include all remunerations and
earnings within the definition of basic salary.

c) All allowances and

monetary benefits which
are not considered or
integrated as part of the
regular basic salary of the
employee at the time of

The all embracing phrase "earnings and

other remunerations" which are deemed not
part of the basic salary includes within its
meaning payments for sick, vacation, or
maternity leaves, premium for works
performed on rest days and special holidays,
pays for regular holidays and night

Under
the
Rules
and
Regulations
implementing Presidential Decree 851, the
following compensations are deemed not
part of the basic salary:
a)
Cost-of-living
allowances
granted
pursuant to Presidential
Decree 525 and Letter of
Instructions No. 174;
b)
payments;

44 | P a g e

Labor Law August 28, 2014

differentials. As such they are deemed not
part of the basic salary and shall not be
considered in the computation of the 13thmonth pay. If they were not excluded, it is
hard to find any "earnings and other
remunerations" expressly excluded in the
computation of the 13th month pay. Then the
exclusionary provision would prove to be idle
and with no purpose.
This conclusion finds strong support under
the Labor Code of the Philippines. To cite a
few provisions:
Art. 87. Overtime Work. Work may be
performed beyond eight (8) hours a day
provided that the employee is paid for the
overtime work, additional compensation
equivalent to his regular wage plus at least
twenty-five (25%) percent thereof.
It is clear that overtime pay is an additional
compensation other than and added to the
regular wage or basic salary, for reason of
which such is categorically excluded from
the definition of basic salary under the
Supplementary Rules and Regulations
Implementing Presidential Decree 851.
In Article 93 of the same Code, paragraph
c) work performed on any special holiday
shall be paid an additional compensation of
at least thirty percent (30%) of the regular
wage of the employee.

receives for a standard work period. Commissions are given

for extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which this
Court has made clear do not form part of the "basic salary."
Respondents would do well to distinguish this case
from Songco vs. National Labor Relations Commission, supra,
upon which they rely so heavily. What was involved therein
was the term "salary" without the restrictive adjective "basic".
Thus, in said case, we construed the term in its generic sense
to refer to all types of "direct remunerations for services
rendered," including commissions. In the same case, we also
took judicial notice of the fact "that some salesmen do not
receive any basic salary but depend on commissions and
allowances or commissions alone, although an employeremployee relationship exists," which statement is quite
significant in that it speaks of a "basic salary" apart and distinct
from "commissions" and "allowances". Instead of supporting
respondents' stand, it would appear that Songco itself
recognizes that commissions are not part of "basic salary."
In including commissions in the computation of the 13th month
pay, the second paragraph of Section 5(a) of the Revised
Guidelines on the Implementation of the 13th Month Pay Law
unduly expanded the concept of "basic salary" as defined in
P.D. 851. It is a fundamental rule that implementing rules
cannot add to or detract from the provisions of the law it is
designed to implement. Administrative regulations adopted
under legislative authority by a particular department must be
in harmony with the provisions of the law they are intended to
carry into effect. They cannot widen its scope. An
10
administrative agency cannot amend an act of Congress.
Having reached this conclusion, we deem it unnecessary to
discuss the other issues raised in these petitions.

WHEREFORE, the consolidated petitions are hereby

GRANTED. The second paragraph of Section 5 (a) of the
Revised Guidelines on the Implementation of the 13th Month
Pay Law issued on November 126, 1987 by then Labor
Secretary Franklin M. Drilon is declared null and void as being
violative of the law said Guidelines were issued to implement,
hence issued with grave abuse of discretion correctible by the
writ of prohibition andcertiorari. The assailed Orders of January
Quite obvious from the foregoing is that the term "basic salary" 17, 1990 and October 10, 1991 based thereon are SET
is to be understood in its common, generally-accepted ASIDE.
meaning, i.e., as a rate of pay for a standard work period
exclusive of such additional payments as bonuses and SO ORDERED.
8
overtime. This is how the term was also understood in the Padilla, Regalado, Nocon and Puno, JJ., concur.
case of Pless v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn. # Footnotes
1 Annex "A", Petition, Rollo in G.R. No. 92174, p. 44.
630, which held that in statutes providing that pension should
2 Annex "B", Id., Id., p. 46.
not less than 50 percent of "basic salary" at the time of
3 Ibid., pp. 46-50.
4 Annex "C", Petition, Rollo in G.R. No. 92174, pp. 52-59.
retirement, the quoted words meant the salary that an
5 Annex "D", Id., Id., pp. 62-66.
employee (e.g., a policeman) was receiving at the time he
6 Annex "A", Petition, Rollo in G.R. No. 102552, p. 42.
retired without taking into consideration any extra
7 Annex "B", Id., Id., p. 46.
9
8 Webster's Third New International Dictionary
compensation to which he might be entitled for extra work.
It is likewise clear the premiums for special
holiday which is at least 30% of the regular
wage is anadditional pay other than and
added to the regular wage or basic salary.
For similar reason, it shall not be considered
in the computation of the 13th month pay.

In remunerative schemes consisting of a fixed or guaranteed

wage plus commission, the fixed or guaranteed wage is
patently the "basic salary" for this is what the employee

Unabridged, 1971.
9 5 Words and Phrases, Permanent Edition, p. 292.
10 Cebu Oxygen & Acetylene Co., Inc. vs. Drilon, 176
SCRA 24, citing Manuel vs. General Auditing Office, 42
SCRA 660.

45 | P a g e

Labor Law August 28, 2014

Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 110068 February 15, 1995

PHILIPPINE DUPLICATORS, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
PHILIPPINE DUPLICATORS EMPLOYEES UNIONTUPAS,respondents.

Deliberating upon the arguments contained in petitioner's

Second Motion for Reconsideration, as well as its Motion for
Leave to Admit the Second Motion for Reconsideration, and
after review of the doctrines embodied, respectively,
in Duplicators and Boie-Takeda, we consider that these
Motions must fail.
The decision rendered in Boie-Takeda cannot serve as a
precedent under the doctrine of stare decisis. The BoieTakeda decision was promulgated a month after this Court,
(through its Third Division), had rendered the decision in the
instant case. Also, the petitioner's (first) Motion for
Reconsideration of the decision dated 10 November 1993 had
already been denied, with finality, on 15 December
1993, i.e.; before the Boie-Takeda decision became final on 5
January 1994.

Preliminarily, we note that petitioner Duplicators did not put in

issue the validity of the Revised Guidelines on the
Implementary on of the 13th Month Pay Law, issued on
FELICIANO, J.:
November 16, 1987, by then Labor Secretary Franklin M.
Drilon, either in its Petition for Certiorari or in its (First) Motion
On 11 November 1993, this Court, through its Third Division, for Reconsideration. In fact, petitioner's counsel relied upon
rendered a decision dismissing the Petition forCertiorari filed these Guidelines and asserted their validity in opposing the
by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. decision rendered by public respondent NLRC. Any attempted
No. 110068. The Court upheld the decision of public change in petitioner's theory, at this late stage of the
respondent National Labor Relations Commission (NLRC), proceedings, cannot be allowed.
which affirmed the order of Labor Arbiter Felipe T. Garduque II
directing petitioner to pay 13th month pay to private
respondent employees computed on the basis of their fixed More importantly, we do not agree with petitioner that the
wages plus sales commissions. The Third Division also denied decision in Boie-Takeda is "directly opposite or contrary to" the
with finality on 15 December 1993 the Motion for decision in the present (Philippine Duplicators). To the
contrary, the doctrines enunciated in these two (2) cases in
Reconsideration filed (on 12 December 1993) by petitioner.
fact co-exist one with the other. The two (2) cases present
quite different factual situations (although the same word
On 17 January 1994, petitioner Duplicators filed (a) a Motion "commissions"
was
used
or
invoked)
the
legal
for Leave to Admit Second Motion for Reconsideration and (b) characterizations of which must accordingly differ.
a Second Motion for Reconsideration. This time, petitioner
invoked the decision handed down by this Court, through its
Second Division, on 10 December 1993 in the two (2) The Third Division in Durplicators found that:
consolidated
cases
of Boie-Takeda
Chemicals,
In the instant case, there is no question that the sales
Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox
commission earned by the salesmen who make or close
Corp. vs. Hon. Cresenciano B.Trajano, in G.R. Nos. 92174 and
a sale of duplicating machines distributed by petitioner
102552, respectively. In its decision, the Second Division inter
corporation, constitute part of the compensation or
alia declared null and void the second paragraph of Section 5
1
remuneration paid to salesmen for serving as salesmen,
(a) of the Revised Guidelines issued by then Secretary of
and hence as part of the "wage" or salary of petitioner's
Labor Drilon. Petitioner submits that the decision in
salesmen. Indeed, it appears that petitioner pays its
the Duplicators case should now be considered as having
salesmen a small fixed or guaranteed wage; the greater
been abandoned or reversed by the Boie-Takeda decision,
part of the salesmen's wages or salaries being
considering that the latter went "directly opposite and contrary
composed of the sales or incentive commissions earned
to" the conclusion reached in the former. Petitioner prays that
on actual sales closed by them. No doubt this particular
the decision rendered in Duplicators be set aside and another
galary structure was intended for the benefit of the
be entered directing the dismissal of the money claims of
petitioner corporation, on the apparent assumption that
private respondent Philippine Duplicators' Employees' Union.
thereby its salesmen would be moved to greater
enterprise and diligence and close more sales in the
In view of the nature of the issues raised, the Third Division of
expectation of increasing their sales commissions. This,
this Court referred the petitioner's Second Motion for
however, does not detract from the character of such
Reconsideration, and its Motion for Leave to Admit the Second
commissions as part of the salary or wage paid to each
Motion for Reconsideration, to the Court en banc en consulta.
of its salesmen for rendering services to petitioner
The Court en banc, after preliminary deliberation, and inorder
corporation.
to settle the condition of the relevant case law, accepted G.R.
RESOLUTION

No. 110068 as a banc case.

46 | P a g e

Labor Law August 28, 2014

In other words, the sales commissions received for every
duplicating machine sold constituted part of the basic
compensation or remuneration of the salesmen of Philippine
Duplicators for doing their job. The portion of the salary
structure representing commissions simply comprised an
automatic increment to the monetary value initially assigned to
each unit of work rendered by a salesman. Especially
significant here also is the fact that the fixed or guaranteed
portion of the wages paid to the Philippine Duplicators'
salesmen represented only 15%-30% of an employee's total
earnings in a year. We note the following facts on record:
Salesmen's Total Earnings and 13th Month Pay
For the Year 1986 2
Name of Total Amount Paid Montly Fixed
Salesman Earnings as 13th Month Pay Wages x 12 3
Baylon, P76,610.30 P1,350.00 P16,200.00
Benedicto
Bautista 90,780.85 1,182.00 14,184.00
Salvador
Brito, 64,382.75 1,238.00 14,856.00
Tomas
Bunagan, 89,287.75 1,266.00 15,192.00
Jorge
Canilan, 74,678.17 1,350.00 16,200.00
Rogelio
Dasig, 54,625.16 1,378,00 16,536.00
Jeordan
Centeno, 51,854.15 1,266.04 15,192.00
Melecio, Jr.
De los Santos 73,551.39 1,322.00 15,864.00
Ricardo
del Mundo, 108,230.35 1,406.00 16,872.00
Wilfredo
Garcia, 93,753.75 1,294.00 15,528.00
Delfin
Navarro, 98,618.71 1,266.00 15,192.00
Ma. Teresa
Ochosa, 66,275.65 1,406.00 16,872.00
Rolano
Quisumbing, 101,065.75 1,406.00 16,872.00
Teofilo
Rubina, 42,209.73 1,266.00 15,192.00
Emma
Salazar, 64,643.65 1,238.00 14,856.00
Celso
Sopelario, 52,622.27 1,350.00 16,200.00
Ludivico
Tan, 30,127.50 1,238.00 14,856.00
Leynard

Talampas, 146,510.25 1,434.00 17,208.00

Pedro
Villarin, 41,888.10 1,434.00 17,208.00
Constancio
Carrasco, 50,201.20 403.75*
Cicero
Punzalan, 24,351.89 1,266.00 15,192.00
Reynaldo
Poblador, 25,516.75 323.00*
Alberto
Cruz, 32,950.45 323.00*
Danilo
Baltazar, 15,681.35 323.00*
Carlito

Considering the above circumstances, the Third Division held,

correctly, that the sales commissions were an integral part of
the basic salary structure of Philippine Duplicators' employees
salesmen.
These
commissions
are
not
overtime
payments, nor profit-sharing payments nor any other fringe
benefit. Thus, the salesmen's commissions, comprising a predetermined percent of the selling price of the goods sold by
each salesman, were properly included in the term "basic
salary" for purposes of computing their 13th month pay.
In Boie-Takeda the so-called commissions "paid to or received
by medical representatives of Boie-Takeda Chemicals or by
the rank and file employees of Philippine Fuji Xerox Co.," were
excluded from the term "basic salary" because these were paid
to the medical representatives and rank-and-file employees as
4
"productivity bonuses." The Second Division characterized
these payments as additional monetary benefits not properly
included in the term "basic salary" in computing their 13th
month pay. We note that productivity bonuses are generally
tied to the productivity, or capacity for revenue production, of a
corporation; such bonuses closely resemble profit-sharing
payments and have no clear director necessary relation to the
amount of work actually done by each individual employee.
More generally, a bonus is an amount granted and paid ex
gratia to the employee; its payment constitutes an act of
enlightened generosity and self-interest on the part of the
employer, rather than as a demandable or enforceable
obligation. In Philippine Education Co. Inc. (PECO) v. Court of
5
Industrial Relations, the Court explained the nature of a
bonus in the following general terms:
As a rule a bonus is an amount granted and
paid to an employee for his industry loyalty
which contributed to the success of the
employer's business and made possible the
realization of profits. It is an act of
generosity of the employer for which the
employee ought to be thankful and
grateful. It is also granted by an enlightened
employer to spur the employee to greater
efforts for the success of the business and
realization of bigger profits. . . . . From the
legal point of view a bonus is not and

47 | P a g e

Labor Law August 28, 2014

mandable and enforceable obligation. It is so
when It is made part of the wage or salary or
compensation. In such a case the latter
would be a fixed amount and the former
would be a contingent one dependent upon
6
the realization of profits. . . . (Emphasis
supplied)
In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual
7
Benefit Association, the Court amplified:
. . . . Whether or not [a] bonus forms part of
waqes depends upon the circumstances or
conditions for its payment. If it is an
additional compensation which the employer
promised and agreed to give without any
conditions imposed for its payment, such as
success of business or greater production or
output, then it is part of the wage. But if it is
paid only if profits are realized or a certain
amount of productivity achieved, it cannot be
considered part of wages. . . . It is also paid
on the basis of actual or actual work
accomplished. If the desired goal of
production is not obtained, or the amount of
actual work accomplished, the bonus does
8
not accrue. . . . (Emphasis supplied)

commercial practice, in the Philippines and elsewhere, of

which we take judicial notice, medical representatives are
employees engaged in the promotion of pharmaceutical
products or medical devices manufactured by their employer.
They promote such products by visiting identified physicians
and inform much physicians, orally and with the aid of printed
brochures, of the existence and chemical composition and
virtues of particular products of their company. They commonly
leave medical samples with each physician visited; but those
samples are not "sold" to the physician and the physician is, as
a matter of professional ethics, prohibited from selling such
samples to their patients. Thus, the additional payments made
to Boie-Takeda's medical representatives were not in fact sales
commissions but rather partook of the nature of profit-sharing
bonuses.
The doctrine set out in the decision of the Second Division is,
accordingly, that additional payments made to employees, to
the extent they partake of the nature of profit-sharing
payments, are properly excluded from the ambit of the term
"basic salary" for purposes of computing the 13th month pay
due
to
employees.
Such
additional
payments
are not "commissions" within the meaning of the second
paragraph of Section 5 (a) of the Revised Guidelines
Implementing 13th Month Pay.

The Supplementary Rules and Regulations Implementing P.D.

No. 851 subsequently issued by former Labor Minister Ople
More recently, the non-demandable character of a bonus was sought to clarify the scope of items excluded in the
stressed by the Court in Traders Royal Bank v.National Labor computation of the 13th month pay; viz.:
9
Relations Commission:
Sec. 4. Overtime pay, earnings and other
remunerations which are not part of the
A bonus is a "gratuity or act of liberality of
basic salary shall not be included in the
the giver which the recipient has no right to
computation of the 13th month pay.
demand as a matter of right." (Aragon v.
Cebu Portland Cement Co., 61 O.G. 4567).
"It is something given in addition to what is
ordinarily received by or strictly due the
recipient." The granting of a bonus is
basically a management prerogative which
cannot be forced upon the employer "who
may not be obliged to assume the onerous
burden of granting bonuses or other benefits
aside from the employee's basic salaries or
wages . . ." (Kamaya Point Hotel v. NLRC,
10
177
SCRA
160
[1989]). (Emphasis
supplied)
If an employer cannot be compelled to pay a productivity
bonus to his employees, it should follow that such productivity
bonus, when given, should not be deemed to fall within the
"basic salary" of employees when the time comes to compute
their 13th month pay.
It is also important to note that the purported "commissions"
paid by the Boie-Takeda Company to its medical
representatives could not have been "sales commissions" in
the same sense that Philippine Duplicators paid its salesmen
Sales commissions. Medical representatives are not salesmen;
they do not effect any sale of any article at all. In common

We observe that the third item excluded from the term "basic
salary" is cast in open ended and apparently circular terms:
"other remunerations which are not part of the basic salary."
However, what particular types of earnings and remuneration
are or are not properly included or integrated in the basic
salary are questions to be resolved on a case to case basis, in
the light of the specific and detailed facts of each case. In
principle, where these earnings and remuneration are closely
akin to fringe benefits, overtime pay or profit-sharing payments,
they are properlyexcluded in computing the 13th month pay.
However, sales commissions which are effectively an integral
portion of the basic salary structure of an employee, shall
be included in determining his 13th month pay.
We recognize that both productivity bonuses and sales
commissions may have an incentive effect. But there is reason
to distinguish one from the other here. Productivity bonuses
are generally tied to the productivity or profit generation of the
employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts himself.
A productivity bonus is something extra for which no specific
additional services are rendered by any particular employee
and hence not legally demandable, absent a contractual
undertaking to pay it. Sales commissions, on the other hand,

48 | P a g e

Labor Law August 28, 2014

such as those paid in Duplicators, are intimately related to or
directly proportional to the extent or energy of an employee's
endeavors. Commissions are paid upon the specific results
achieved by a salesman-employee. It is a percentage of the
sales closed by a salesman and operates as an integral part of
such salesman's basic pay.
Finally, the statement of the Second Division in BoieTakeda declaring null and void the second paragraph of
Section 5(a) of the Revised Guidelines Implementing the 13th
Month Pay issued by former Labor Secretary Drilon, is properly
understood as holding that that second paragraph provides no
legal basis for including within the term "commission" there
used additional payments to employees which are, as a matter
of fact, in the nature of profit-sharing payments or bonuses. If
and to the extent that such second paragraph is so interpreted
and applied, it must be regarded as invalid as having been
issued in excess of the statutory authority of the Secretary of
Labor. That same second paragraph however, correctly
recognizes that commissions, like those paid in Duplicators,
may constitute part of the basic salary structure of salesmen
and hence should be included in determining the 13th month
pay; to this extent, the second paragraph is and remains valid.

Monthly Fixed Wage x 12

Total Earnings
4 See Rollo of Boie-Takeda v. Trajano, p.
126; Rollo of Fuji Xerox v. Trajano,
p. 27.
5 92 Phil. 381 (1952).
6 92 Phil. at 385; see also Luzon
Stevedoring Corporation v. Court of
Industrial Relations, 15 SCRA 660 (1965).
7 92 Phil. 754 (1953).
8 92 Phil, at 757; see also Claparols v. Court
of Industrial Relations, 65 SCRA 613 (1975).
9 189 SCRA 274 (1990).
10 189 SCRA at 277.

ACCORDINGLY, the Motions for (a) Leave to File a Second

Motion for Reconsideration and the (b) aforesaid Second
Reconsideration are DENIED for lack of merit. No further
pleadings will be entertained.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan, Mendoza and
Francisco, JJ., concur.

Footnotes
1 The second paragraph of Section 5 (a) of
the Revised Guidelines Implementing the
13th Month Pay reads as follows:
Employees who are paid a fixed or
guaranteed wage plus commission are also
entitled to the mandated 13th month pay,
based on their total earnings during the
calendar year, i.e., on both their fixed or
guaranteed wage and commission.
2 See Annex "A", Records of G.R. No.
110068, Philippine Duplicators, Inc. v.
National Labor Relations Commission.
3 This column is added by the Court. We
have assumed that the amount paid as 13th
month pay, as shown in the preceding
column, represented a full month's fixed
wage, without any deductions for,e.g.,
absences, undertime, etc. In the items below
marked with an asterisk, the amount of the
13th month pay is so tiny as to give rise to
the impression that some deduction
therefrom was probably made; the nature of
such deduction is not here pertinent.
The 15%-30% range in the proportion of
fixed wages to total earnings is obtained by
the following fraction:

49 | P a g e

Labor Law August 28, 2014

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 81176 April 19, 1989
PLASTIC TOWN CENTER CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND
NAGKAKAISANG LAKAS NG MANGGAGAWA (NLM)KATIPUNAN, respondents.
Generosa R. Jacinto for petitioner.
The Solicitor General for public respondent.

GUTIERREZ, JR., J.:

An issue in this petition is the interpretation of certain
provisions of the Collective Bargaining Agreement (CBA)
between Plastic Town Center Corporation and the respondent
union.
On September 7,1984, the respondent Nagkakaisang Lakas
ng Manggagawa (NLM)-Katipunan filed a complaint dated
August 30, 1984 charging the petitioner with:
a. Violation of Wage Order No. 5, by crediting the Pl.00 per day
increase in the CBA as part of the compliance with said Wage
Order No. 5, and y instead of thirty (30) days equivalent to one
(1) month as gratuity pay to resigning employees. (p. 3, Rollo)
b. Unfair labor practice thru violation of the CBA by giving only
twenty-six (26) days pay instead of thirty (30) days equivalent
to one (1) month as gratuity pay to resigning employees. (p. 3,
Rollo)
On July 25,1985, Labor Arbiter Ruben Alberto ruled in favor of
Plastic Town Center Corporation. The pertinent portions of the
decision read as follows:

Upon the other hand, respondents understanding of the

controverted provision is pragmatic or practical. Since
the workers are paid on daily basis, it computed the
salary received by the worker in a month as a month
salary. In this case the salary of 26 days is a month
salary.
We agree with the respondent's interpretation. As daily
wage earner, there would be no instance that the worker
would work for 30 days a month since work does not
include Sunday or rest days. In the mind of the daily
worker in a month he could not expect a month salary
exceeding the equivalent of 26 days service. To award
the daily wage earner pay for more than 26 days is pay
for days he does not work. But as regards the monthlypaid workers he expects his monthly salary to be fixed
which is a month salary. Hence, a distinction separates
him with the daily wages.
IN VIEW OF THE FOREGOING, the unfair labor
practice charge should be, as it is hereby dismissed for
lack of legal and factual basis. (pp- 56-57, Rollo)
On August 30, 1987, the respondent labor union appealed to
the National Labor Relations Commission.
On June 30, 1987, the NLRC rendered the questioned decision
with the following dispositive portion:
WHEREFORE, the appealed decision is hereby
reversed and the respondent is ordered to grant Pl.00
increase for July 1, 1984 and the equivalent of thirty
days salary in gratuity pay, as required by its CBA with
the complainants. (p. 39, Rollo)
The motion for reconsideration of said decision was denied on
December 7, 1987. Hence, this petition.
The applicable provisions of the CBA read as follows:
Section 1 -The company agrees to grant permanent
regular rank and file workers covered by this Agreement
who have rendered at least one year of continuous
service, across-the-board wage increases as follows:
a. Effective 1 July, 1983-Pl.00 per worked day;

... In this particular case, the P1.00 increase was ahead

of the implementation of the CBA provision or could be
said was advantageous to complainant members,
chronologically stated. For the above cogent reason we
can not fault respondent for its refusal to grant a second
Pl.00 increase on July 1, 1984.
xxx xxx xxx
Complainant sustains the view that a month salary
pertains to salary for 30 days, citing the provision of the
Civil Code on the matter.

b Effective 1 July, 1984-Pl.00 per worked day;

c. Effective 1 July, 1985-Pl.00 per worked day;
Section 3- It is agreed and understood by the parties
herein that the aforementioned increase in pay shall be
credited against future allowances or wage orders
hereinafter implemented or enforced by virtue of Letters
of Instructions, Decrees and other labor legislation. (pp.
36-37, Rollo)

50 | P a g e

Labor Law August 28, 2014

Wage Order No. 4 provided for the integration of the
mandatory emergency cost of living allowances (ECOLA)
under Presidential Decrees 1614,1634,1678 and 1713 into the
basic pay of all covered workers effective May 1, 1984. It
further provided that after the integration, the applicable
statutory minimum daily wage rate must be complied with,
which in this case is P32.00.
The petitioner incurred a deficiency of P1.00 in the wage rate
after integrating the ECOLA with basic pay. So the petitioner
advanced to May 1, 1984 or two months earlier the
implementation of the one-peso wage increase provided for in
the CBA starting July 1, 1984 for the benefit of the workers.
The petitioner argues that it did not credit the Pl.00 per day
across the board increase under the CBA as compliance with
Wage Order No. 5 implemented on June 16,1984 since it gave
an additional P3.00 per day to the basic salary pursuant to said
order. It, however, credited the Pl.00 a day increase to the
requirement under Wage Order No. 4 to which the private
respondents allegedly did not object.
The other controverted provision of the CBA reads:
Section 2. It is the intention of both the COMPANY and
the UNION, that the grant of gratuity pay by the
COMPANY herein set forth is to reward employees and
laborers, who have rendered satisfactory and efficient
service with the COMPANY. THUS, in case of voluntary
resignation, which is not covered by Section 1 above,
the COMPANY nevertheless agrees to grant a gratuity
pay to the resigning employee or laborer as follows:
1. Two to Five years of service : 1 month salary

constitutes the law between the parties (Fegurin v. National

Labor Relations Commission, 120 SCRA 910 [1983]) and in
interpreting contracts, the rules on contract must govern.
Contracts which are not ambiguous are to be interpreted
according to their literal meaning and should not be interpreted
beyond their obvious intendment (Herrera v. Petrophil Corp.,
146 SCRA 385 [1986]).
In the case at bar, the petitioner alleges that on May 1, 1984, it
granted a Pl.00 increase pursuant to Wage Order No. 4 which
in consonance with Section 3 of the CBA was to be credited to
the July 1, 1984 increase under the CBA. It was, therefore, a
July increase. Section 3 of the CBA, however, clearly states
that
CBA
granted
increases
shall
be
credited
against future allowances or wage orders. Thus, the CBA
increase to be effected on July 1, 1984 can not be retroactively
applied to mean compliance with Wage Order No. 4 which took
effect on May 1, 1984. The words of the contract are plain and
readily understandable so we find no need for any further
construction or interpretation petition (Dihiansan v. Court of
Appeals, 153 SCRA 712 [1987]). Furthermore, we agree with
the NLRC as it held:
It is our finding that the respondent is bound by the CBA
to grant an increase on July 1, 1984.
In this case, between July 1, 1983 and July 1, 1984,
there were actually two increases mandated by Wage
Order No. 4 on May 1, 1984 and by Wage Order No. 5
on June 16,1984. The fact that the respondent had
complied with Wage Order No. 4 and Wage Order No. 5
does not relieve it of its obligation to grant the P1.00
increase under the CBA. (pp. 37-38, Rollo)

2. Six (6) to Ten (10) yrs. of : Two and One-half With regards to the second issue, the petitioner maintains that
under the principle of "fair day's wage for fair day's labor",
(21/2)service months salary
gratuity pay should be computed on the basis of 26 days for
one month salary considering that the employees are daily
3 Eleven (ll) to Fifteen yrs. of service : 4 months salary
paid.
4 Sixteen (16) to twenty yrs. of : 5 months
5 Twenty one yrs. of service and above : Twelve (12)
months salary.

We find no abuse of discretion on the part of the NLRC in

granting gratuity pay equivalent to one month or 30 days salary
.
We quote with favor the NLRC decision which states:

(p. 38, Rollo)

xxx xxx xxx
The petitioner alleges that one month salary for daily paid
workers should be computed on the basis of twenty-six (26)
days and not thirty (30) days since daily wage workers do not
work every day of the month including Sundays and holidays.
The petition is devoid of merit.
The subject for interpretation in this petition for review is not
the Labor Code or its implementing rules and regulations but
the provisions of the collective bargaining agreement entered
into by management and the labor union. As a contract, it

... To say that awarding the daily wage earner salary for
more than 26 days is paying him for days he does not
work misses the point entirely. The issue here is not
payment for days worked but payment of gratuity pay
equivalent to one month or 30 days salary. (p. 29, Rollo)
Looking into the definition of gratuity, we find the following in
Moreno's Philippine Law Dictionary, to wit:

51 | P a g e

Labor Law August 28, 2014

Something given freely, or without recompense; a gift;
something voluntarily given in return for a favor or
services; a bounty; a tip. -Pirovano v. De la Rama
Steamship Co., 96 Phil. 357.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION
That paid to the beneficiary for past services rendered
purely out of the generosity of the giver or grantor.- G.R. No. 85073 August 24, 1993
Peralta v. Auditor General, 100 Phil. 1054.
Salary or compensation. The very term 'gratuity' differs
from the words 'salary' or 'compensation' in leaving the
amount thereof, within the limits of reason, to the
arvitrament of the giver.-Herranz & Garriz v. Barbudo,12
Phil. 9.
From the foregoing, gratuity pay is therefore, not intended to
pay a worker for actual services rendered. It is a money benefit
given to the workers whose purpose is "to reward employees
or laborers, who have rendered satisfactory and efficient
service to the company." (Sec. 2, CBA) While it may be
enforced once it forms part of a contractual undertaking, the
grant of such benefit is not mandatory so as to be considered a
part of labor standard law unlike the salary, cost of living
allowances, holiday pay, leave benefits, etc., which are
covered by the Labor Code. Nowhere has it ever been stated
that gratuity pay should be based on the actual number of days
worked over the period of years forming its basis. We see no
point in counting the number of days worked over a ten-year
period to determine the meaning of "two and one- half months'
gratuity." Moreover any doubts or ambiguity in the contract
between management and the union members should be
resolved in the light of Article 1702 of the Civil Code that:
In case of doubt, all labor legislation and all
labor contracts shall be construed in favor of
the safety and decent living for the laborer.
This is also in consonance with the principle enunciated in the
Labor Code that all doubts should be resolved in favor of the
worker.

DAVAO FRUITS CORPORATION, petitioner,

vs.
ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the
rank-and-file workers/employees of DAVAO FRUITS
CORPORATION and NATIONAL LABOR RELATIONS
COMMISSION, respondents.
Dominguez & Paderna Law Offices for petitioners.
The Solicitor General for public respondents.
QUIASON, J.:
This is a petition for certiorari to set aside the resolution of the
National Labor Relations Commission (NLRC), dismissing for
lack of merit petitioner's appeal from the decision of the Labor
Arbiter in NLRC Case No. 1791-MC-X1-82.
On December 28, 1982 respondent Associated Labor Unions
(ALU), for and in behalf of all the rank-and-file workers and
employees of petitioner, filed a complaint (NLRC Case No.
1791-MC-XI-82) before the Ministry of Labor and Employment,
Regional Arbitration Branch XI, Davao City, against petitioner,
for "Payment of the Thirteenth-Month Pay Differentials."
Respondent ALU sought to recover from petitioner the
thirteenth month pay differential for 1982 of its rank-and-file
employees, equivalent to their sick, vacation and maternity
leaves, premium for work done on rest days and special
holidays, and pay for regular holidays which petitioner,
allegedly in disregard of company practice since 1975,
excluded from the computation of the thirteenth month pay for
1982.

The Civil Code provides that when months are not designated
by name, a month is understood to be thirty (30) days. The In its answer, petitioner claimed that it erroneously included
provision applies under the circumstances of this case.
items subject of the complaint in the computation of the
thirteenth month pay for the years prior to 1982, upon a
In view of the foregoing, the public respondent did not act with doubtful and difficult question of law. According to petitioner,
grave abuse of discretion when it rendered the assailed this mistake was discovered only in 1981 after the
promulgation of the Supreme Court decision in the case of San
decision which is in accordance with law and jurisprudence.
Miguel Corporation v. Inciong (103 SCRA 139).
WHEREFORE, the petition is hereby DISMISSED for lack of
merit.
SO ORDERED.
Fernan, C.J., Feliciano, Bidin and Cortes, JJ., concur.

A decision was rendered on March 7, 1984 by Labor Arbiter

Pedro C. Ramos, in favor of respondent ALU. The dispositive
portion of the decision reads as follows:
WHEREFORE, in view of all the foregoing
considerations, judgment is hereby rendered ordering
respondent to pay the 1982 13th month pay
differential to all its rank-and-file workers/employees
herein represented by complainant Union (Rollo, p. 32).

52 | P a g e

Labor Law August 28, 2014

Petitioner appealed the decision of the Labor Arbiter to the
NLRC, which affirmed the said decision accordingly dismissed
the appeal for lack of merit.
Petitioner elevated the matter to this Court in a petition for
review under Rule 45 of the Revised Rules of Court. This error
notwithstanding and in the interest of justice, this Court
resolved to treat the instant petition as a special civil action
for certiorari under Rule 65 of the Revised Rules of Court (P.D.
No. 1391, Sec. 5; Rules Implementing P.D. No. 1391, Rule II,
Sec. 7; Cando v. National Labor Relations Commission, 189
SCRA 666 [1990]: Pearl S. Buck Foundation, Inc. v. National
Labor Relations Commission, 182 SCRA 446 [1990]).
The crux of the present controversy is whether in the
computation of the thirteenth month pay given by employers to
their
employees
under
P.D.
No. 851, payments for sick, vacation and maternity leaves,
premiums for work done on rest days and special holidays, and
pay for regular holidays may be excluded in the computation
and payment thereof, regardless of long-standing company
practice.
Presidential Decree No. 851, promulgated on December 16,
1975, mandates all employers to pay their employees a
thirteenth month pay. How this pay shall be computed is set
forth in Section 2 of the "Rules and Regulations Implementing
Presidential Decree No. 851," thus:
SECTION 2. . . .

December 16, 1975. The exclusion of cost-of-living allowances

and profit sharing payments shows the intention to strip "basic
salary" of payments which are otherwise considered as "fringe"
benefits. This intention is emphasized in the catch all phrase
"all allowances and monetary benefits which are not
considered or integrated as part of the basic salary." Basic
salary, therefore does not merely exclude the benefits
expressly mentioned but all payments which may be in the
form of "fringe" benefits or allowances (San Miguel Corporation
v. Inciong, supra, at 143-144). In fact, the Supplementary
Rules and Regulations Implementing P.D. No. 851 are very
emphatic in declaring that overtime pay, earnings and other
renumerations shall be excluded in computing the thirteenth
month pay.
In other words, whatever compensation an employee receives
for an eight-hour work daily or the daily wage rate in the basic
salary. Any compensation or remuneration other than the daily
wage rate is excluded. It follows therefore, that payments for
sick, vacation and maternity leaves, premium for work done on
rest days special holidays, as well as pay for regular holidays,
are likewise excluded in computing the basic salary for the
purpose of determining the thirteen month pay.
Petitioner claims that the mistake in the interpretation of "basic
salary" was caused by the opinions, orders and rulings
rendered by then Acting Labor Secretary Amado C. Inciong,
expressly including the subject items in computing the
thirteenth month pay. The inclusion of these items is clearly not
sanctioned under P.D. No. 851, the governing law and its
implementing rules, which speak only of "basis salary" as the
basis for determining the thirteenth month pay.

(a) "Thirteenth month pay" shall mean one twelfth (1/12)

of the basic salary of an employee within a calendar Moreover, whatever doubt arose in the interpretation of P.D.
year.
No. 851 was erased by the Supplementary Rules and
Regulations which clarified the definition of "basic salary."
(b) "Basic Salary" shall include all renumerations or
earnings paid by an employer to an employee for As pointed out in San Miguel Corporation v. Inciong, (supra):
services rendered but may not include cost of living
allowances granted pursuant to Presidential Decree No.
While doubt may have been created by the prior Rules
525 or Letter of Instructions No. 174, profit-sharing
and Regulations and Implementing Presidential Decree
payments, and all allowances and monetary benefits
851 which defines basic salary to include all
which are not considered or integrated as part of the
remunerations or earnings paid by an employer to an
regular or basic salary of the employee at the time of the
employee, this cloud is dissipated in the later and more
promulgation of the Decree on December 16, 1975.
controlling Supplementary Rules and Regulations which
categorically, exclude from the definition of basic salary
The Department of Labor and Employment issued on January
earnings and other remunerations paid by employer to
16, 1976 the "Supplementary Rules and Regulations
an employee. A cursory perusal of the two sets of Rules
Implementing P.D. No. 851" which in paragraph 4 thereof
indicates that what has hitherto been the subject of
further defines the term "basic salary," thus:
broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the
seeming tendency of the former rules to include all
4. Overtime pay, earnings and other renumerations
remunerations and earnings within the definition of basic
which are not part of the basic salary shall not be
salary.
included in the computation of the 13th month pay.
Clearly, the term "basic salary" includes renumerations or
earnings paid by the employer to employee, but excludes costof-living allowances, profit-sharing payments, and all
allowances and monetary benefits which have not been
considered as part of the basic salary of the employee as of

The all-embracing phrase "earnings and other

remunerations which are deemed not part of the basic
salary includes within its meaning payments for sick,
vacation, or maternity leaves, premium for work
performed on rest days and special holidays, pay for

53 | P a g e

Labor Law August 28, 2014

regular holidays and night differentials. As such they are
deemed not part of the basic salary and shall not be
considered in the computation of the 13th-month pay. If
they were not so excluded, it is hard to find any
"earnings and other remunerations" expressly excluded
in computation of the 13th month-pay. Then the
exclusionary provision would prove to be idle and with
purpose.
The "Supplementary Rules and Regulations Implementing P.D.
No. 851," which put to rest all doubts in the computation of the
thirteenth month pay, was issued by the Secretary of Labor as
early as January 16, 1976, barely one month after the
effectivity of P.D. No. 851 and its Implementing Rules. And yet,
petitioner computed and paid the thirteenth month pay, without
excluding the subject items therein until 1981. Petitioner
continued its practice in December 1981, after promulgation of
the afore-quoted San Miguel decision on February 24, 1981,
when petitioner purportedly "discovered" its mistake.
From 1975 to 1981, petitioner had freely, voluntarily and
continuously included in the computation of its employees'
thirteenth month pay, the payments for sick, vacation and
maternity leaves, premiums for work done on rest days and
special holidays, and pay for regular holidays. The
considerable length of time the questioned items had been
included by petitioner indicates a unilateral and voluntary act
on its part, sufficient in itself to negate any claim of mistake.
A company practice favorable to the employees had indeed
been established and the payments made pursuant thereto,
ripened into benefits enjoyed by them. And any benefit and
supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the
employer, by virtue of Section 10 of the Rules and Regulations
Implementing P.D. No. 851, and Article 100 of the labor of the
Philippines, which prohibit the diminution or elimination by the
employer of the employees' existing benefits (Tiangco v.
Leogardo, Jr., 122 SCRA 267, [1983]).
Petitioner cannot invoke the principle of solutio indebiti which
as a civil law concept that is not applicable in Labor Law.
Besides, in solutio indebiti, the obligee is required to return to
the obligor whatever he received from the latter (Civil Code of
the Philippines, Arts. 2154 and 2155). Petitioner in the instant
case, does not demand the return of what it paid respondent
ALU from 1975 until 1981; it merely wants to "rectify" the error
it made over these years by excluding unilaterally from the
thirteenth month pay in 1982 the items subject of
litigation. Solutio indebiti, therefore, is not applicable to the
instant case.
WHEREFORE, finding no grave abuse of discretion on the part
of the NLRC, the petition is hereby DISMISSED, and the
questioned decision of respondent NLRC is AFFIRMED
accordingly.
Cruz, Grio-Aquino, Davide,

Jr. and Bellosillo, JJ.,

concur.
54 | P a g e