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-20855-78-T
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.
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 labor-saving 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.
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):
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.
Upon the other hand, the provisions of Section 10, Rule 1, Book
VI of the implementing rules in conjunction with Articles 273 and
274 (sic) of the Code specifically states that the basis of the
termination pay due to one who is sought to be legally separated
from the service is 'his latest salary rates.
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.
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 holding that the words
"wages" and "salary" are in essence synonymous (Words and Phrases, Vol.
38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.
839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which
is the Latin word "salarium," is often used interchangeably with "wage", the
etymology of which is the Middle English word "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 aforequoted provisions are not the only consideration for deciding the
petition in favor of the petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that
the commissions were in the form of incentives or encouragement, so that
the petitioners would be inspired to put a little more industry on the jobs
particularly assigned to them, still these commissions are direct
remuneration services rendered which contributed to the increase of income
of Zuellig . Commission is the recompense, compensation or reward of an
agent, salesman, executor, trustees, receiver, factor, broker or bailee, when
the same is calculated as a percentage on the amount of his transactions or
on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v.
Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a
salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that commission are 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
alone, are part of petitioners' wage or salary. We take judicial notice of the
fact that some salesman do not received any basic salary but depend on
commissions and allowances or commissions alone, although an employeremployee 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 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 provisions of
the Labor Code including its implementing rules and regulations shall be
resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152
SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July
12,1989), and Article 1702 of the Civil Code which provides 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.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the
respondent National Labor Relations Commission is MODIFIED by including
allowances and commissions in the separation pay of petitioners Jose Songco
and Amancio Manuel. The case is remanded to the Labor Arbiter for the
proper computation of said separation pay.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ., concur.

Republic of the Philippines

SUPREME COURT
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.

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 petitioner's
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 filed on November 7, 1991, a complaint for
estafa against private respondents.
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, 13th month pay, allowances, separation pay,
recovery of cash bond, damages and attorney's fees. Said complaints were
consolidated and docketed as Rab VII-12-1791-91, RAB VII-12-1825-91 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 latter's dismissal. Nevertheless,
he also ruled that petitioner had not complied with minimum wage
requirements in compensating private respondents, and had failed to pay
private respondents their 13th 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

Attorney's Fees (10%) 74,116.63

of the gross award 7,411.66

GRAND TOTAL AWARD P81,528.29

========
The other claims are dismissed for lack of merit.
SO ORDERED.

Both parties seasonably appealed to the NLRC, with petitioner contesting the
labor arbiter's refusal to include the commissions he paid to private
respondents in determining compliance with the minimum wage
requirement. He also presented, for the first time on appeal, vouchers
denominated as 13th month pay signed by private respondents, as proof
that petitioner had already paid the latter their 13th month pay. Private
respondents, on the other hand, contested the findings of the labor arbiter
holding that they had not been illegally dismissed, as well as mathematical
errors in computing Jesus Bandilao's wage differentials. The NLRC, in its
decision of December 21, 1994, affirmed the validity of private respondent's
dismissal, but found that said dismissal did not comply with the procedural
requirements for dismissing employees. Furthermore, it corrected the labor
arbiter's award of wage differentials to Jesus Bandilao. The dispositive
portion of said decision reads:
WHEREFORE, premises considered, the decision is hereby
MODIFIED in that complainant Jesus Bandilao's 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
Petitioner's 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
QUOEXCLUDING 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 PART OF THEIR 13TH MONTH PAY.
The petition is impressed with merit.
The NLRC, in denying petitioner's claim that commissions be included in
determining compliance with the minimum wage ratiocinated thus:
Respondent (petitioner herein) insist assiduously that the
commission should be included in the computation of actual
wages per agreement. We will not fall prey to this fallacious
argument. An employee should receive the minimum wage as
mandated by law and that the attainment of the minimum wage
should not be dependent on the commission earned by an
employee. A commission is an incentive for an employee to work
harder for a better production that will benefit both the employer
and the employee. To include the commission in the computation
of wage in order to comply with labor standard laws is to negate
the practice that a commission is granted after an employee has
already earned the minimum wage or even beyond it. 3

This holding is unsupported by law and jurisprudence. Article 97(f) of the

Labor Code defines wage as follows:
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.
xxx xxx xxx (Emphasis supplied)
This definition explicitly includes commissions as part of wages. While
commissions are, indeed, incentives or forms of encouragement to inspire
employees to put a little more industry on the jobs particularly assigned to
them, still these commissions are direct remunerations for services rendered.
In fact, commissions have been defined as the recompense, compensation or
reward of an agent, salesman, executor, trustee, receiver, factor, broker or
bailee, when the same is calculated as a percentage on the amount of his
transactions or on the profit to the principal. The nature of the work of a
salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that commissions are part of a salesman's wage or
salary. 4
Thus, the commissions earned by private respondents in selling softdrinks
constitute part of the compensation or remuneration paid to
drivers/salesmen and truck helpers for serving as such, and hence, must be
considered part of the wages paid them.
The NLRC asserts that the inclusion of commissions in the computation of
wages would negate the practice of 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 at
best. In truth, this Court has taken judicial notice of the fact that some
salesmen do not receive any basic salary but depend entirely on
commissions and allowances or commissions alone, although an employeremployee relationship exists. 5 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 salesmen
for rendering services to the corporation. 6
Likewise, there is no law mandating that commissions be paid only after the
minimum wage has been paid to the employee. Verily, the establishment of a
minimum wage only sets a floor below which an employee's remuneration
cannot fall, not that commissions are excluded from wages in determining
compliance with the minimum wage law. This conclusion is bolstered
by Philippine Agricultural Commercial and Industrial Workers Union
vs. NLRC, 7 where this Court acknowledged that drivers and conductors who
are compensated purely on a commission basis are automatically 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 particular acts or omissions for which his dismissal is sought, and (b) the
subsequent notice which informs the employee of the employer's decision to
dismiss him. 8 (Emphasis ours) Petitioner asseverates that no procedural
lapses were committed by him in terminating private respondents. In his own
words:
. . . when irregularities were discovered, that is, when the
misappropriation of several thousands of pesos was found out,
the petitioner instructed private respondents to report back for
work and settle their accountabilities but the latter never
reported for work. This instruction by the petitioner to report
back for work and settle their accountabilities served as notices
to private respondents for the latter to explain or account for the
missing funds held in trust by them before they disappeared. 9
Petitioner considers this return-to-work order as equivalent to the first notice
apprising the employee of the particular acts or omissions for which his
dismissal is sought. But by petitioner's own admission, private respondents
were never told in said notice that their dismissal was being sought, only

that they should settle their accountabilities. In petitioner's incriminating

words:
It should be emphasized here that at the time the
misappropriation was discovered and subsequently thereafter,
the petitioner's first concern was not effecting the dismissal of
private respondents but the recovery of the misappropriated
funds thus the latter were advised to report back to work. 10
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 non-compliance with the requirements of or for failure to
observe due process. 11 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 the constitutional
guarantee. Not being mere technicalities but the very essence of due
process, to which every employee is entitled so as to ensure that the
employer's prerogative to dismiss is not exercised arbitrarily, 12 these
requisites must be complied with strictly.
Petitioner makes much capital of private respondents' failure to report to
work, construing the same as abandonment which thus authorized the
latter's dismissal. As correctly pointed out by the NLRC, to which the Solicitor
General agreed, Section 2 of Book V, Rule XIV of the Omnibus Rules
Implementing the Labor Code requires that in cases of abandonment of work,
notice should be sent to the worker's 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 P5,000.00 each, in
accordance with recent jurisprudence, 13 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 proof of his payment of 13th 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 13th month pay,
Section 3(e) of the Rules and Regulations Implementing P.D. No. 851
providing that the employer shall pay the difference when he pays less than
1/12th of the employee's basic salary.14

While it is true that the vouchers evidencing payments of 13th month pay
were submitted only on appeal, it would have been more in keeping with the
directive of Article 221 15 of the Labor Code for the NLRC to have taken the
same into account. 16Time and again, we have allowed evidence to be
submitted on appeal, emphasizing that, in labor cases, technical rules of
evidence are not binding. 17 Labor officials should use every and all
reasonable means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law or procedure. 18
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 13th month pay to employees not as yet
receiving the same and not that a double burden should be imposed on the
employer who is already paying his employees a 13th month pay or its
equivalent. 19 An employer who pays less than 1/12th of the employees basic
salary as their 13th month pay is only required to pay the difference. 20
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 petitioner's compliance with the
minimum wage law, as well as its exclusion of the particular amounts
received by private respondents as part of their 13th 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., Kapunan and Purisima, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-44169 December 3, 1985
ROSARIO A. GAA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES
CORPORATION, and CESAR R. ROXAS, Deputy Sheriff of
Manila, respondents.
Federico C. Alikpala and Federico Y. Alikpala, Jr. for petitioner.
Borbe and Palma for private respondent.

PATAJO, J.:

This is a petition for review on certiorari of the decision of the Court of

Appeals promulgated on March 30, 1976, affirming the decision of the Court
of First Instance of Manila.
It appears that respondent Europhil Industries Corporation was formerly one
of the tenants in Trinity Building at T.M. Kalaw Street, Manila, while petitioner
Rosario A. Gaa was then the building administrator. On December 12, 1973,
Europhil Industries commenced an action (Civil Case No. 92744) in the Court
of First Instance of Manila for damages against petitioner "for having
perpetrated certain acts that Europhil Industries considered a trespass upon
its rights, namely, cutting of its electricity, and removing its name from the
building directory and gate passes of its officials and employees" (p. 87
Rollo). On June 28, 1974, said court rendered judgment in favor of
respondent Europhil Industries, ordering petitioner to pay the former the sum
of P10,000.00 as actual damages, P5,000.00 as moral damages, P5,000.00
as exemplary damages and to pay the costs.
The said decision having become final and executory, a writ of garnishment
was issued pursuant to which Deputy Sheriff Cesar A. Roxas on August 1,
1975 served a Notice of Garnishment upon El Grande Hotel, where petitioner
was then employed, garnishing her "salary, commission and/or
remuneration." Petitioner then filed with the Court of First Instance of Manila
a motion to lift said garnishment on the ground that her "salaries,
commission and, or remuneration are exempted from execution under Article
1708 of the New Civil Code. Said motion was denied by the lower Court in an
order dated November 7, 1975. A motion for reconsideration of said order
was likewise denied, and on January 26, 1976 petitioner filed with the Court
of Appeals a petition for certiorari against filed with the Court of Appeals a
petition for certiorari against said order of November 7, 1975.
On March 30, 1976, the Court of Appeals dismissed the petition
for certiorari. In dismissing the petition, the Court of Appeals held that
petitioner is not a mere laborer as contemplated under Article 1708 as the
term laborer does not apply to one who holds a managerial or supervisory
position like that of petitioner, but only to those "laborers occupying the
lower strata." It also held that the term "wages" means the pay given" as
hire or reward to artisans, mechanics, domestics or menial servants, and
laborers employed in manufactories, agriculture, mines, and other manual
occupation and usually employed to distinguish the sums paid to persons
hired to perform manual labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season," citing 67 C.J. 285, which is
the ordinary acceptation of the said term, and that "wages" in Spanish is
"jornal" and one who receives a wage is a "jornalero."

In the present petition for review on certiorari of the aforesaid decision of the
Court of Appeals, petitioner questions the correctness of the interpretation of
the then Court of Appeals of Article 1708 of the New Civil Code which reads
as follows:
ART. 1708. The laborer's wage shall not be subject to execution
or attachment, except for debts incurred for food, shelter,
clothing and medical attendance.
It is beyond dispute that petitioner is not an ordinary or rank and file laborer
but "a responsibly place employee," of El Grande Hotel, "responsible for
planning, directing, controlling, and coordinating the activities of all
housekeeping personnel" (p. 95, Rollo) so as to ensure the cleanliness,
maintenance and orderliness of all guest rooms, function rooms, public
areas, and the surroundings of the hotel. Considering the importance of
petitioner's function in El Grande Hotel, it is undeniable that petitioner is
occupying a position equivalent to that of a managerial or supervisory
position.
In its broadest sense, the word "laborer" includes everyone who performs
any kind of mental or physical labor, but as commonly and customarily used
and understood, it only applies to one engaged in some form of manual or
physical labor. That is the sense in which the courts generally apply the term
as applied in exemption acts, since persons of that class usually look to the
reward of a day's labor for immediate or present support and so are more in
need of the exemption than are other. (22 Am. Jur. 22 citing Briscoe vs.
Montgomery, 93 Ga 602, 20 SE 40;Miller vs. Dugas, 77 Ga 4 Am St Rep
192; State ex rel I.X.L. Grocery vs. Land, 108 La 512, 32 So 433; Wildner vs.
Ferguson, 42 Minn 112, 43 NW 793; 6 LRA 338; Anno 102 Am St Rep. 84.
In Oliver vs. Macon Hardware Co., 98 Ga 249 SE 403, it was held that in
determining whether a particular laborer or employee is really a "laborer,"
the character of the word he does must be taken into consideration. He must
be classified not according to the arbitrary designation given to his calling,
but with reference to the character of the service required of him by his
employer.
In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that all
men who earn compensation by labor or work of any kind, whether of the
head or hands, including judges, laywers, bankers, merchants, officers of
corporations, and the like, are in some sense "laboring men." But they are
not "laboring men" in the popular sense of the term, when used to refer to a

must presume, the legislature used the term. The Court further held in said
case:
There are many cases holding that contractors, consulting or
assistant engineers, agents, superintendents, secretaries of
corporations and livery stable keepers, do not come within the
meaning of the term. (Powell v. Eldred, 39 Mich, 554, Atkin v.
Wasson, 25 N.Y. 482; Short v. Medberry, 29 Hun. 39; Dean v. De
Wolf, 16 Hun. 186; Krausen v. Buckel, 17 Hun. 463; Ericson v.
Brown, 39 Barb. 390; Coffin v. Reynolds, 37 N.Y. 640; Brusie v.
Griffith, 34 Cal. 306; Dave v. Nunan,62 Cal. 400).
Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that a
traveling salesman, selling by sample, did not come within the meaning of a
constitutional provision making stockholders of a corporation liable for "labor
debts" of the corporation.
In Kline vs. Russell 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon
Hardware Co., supra, it was held that a laborer, within the statute exempting
from garnishment the wages of a "laborer," is one whose work depends on
mere physical power to perform ordinary manual labor, and not one engaged
in services consisting mainly of work requiring mental skill or business
capacity, and involving the exercise of intellectual faculties.
So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act
making stockholders in a corporation liable for debts due "laborers, servants
and apprentices" for services performed for the corporation, held that a
"laborer" is one who performs menial or manual services and usually looks to
the reward of a day's labor or services for immediate or present support. And
in Weymouth vs. Sanborn, 43 N.H. 173, 80 Am. Dec. 144, it was held that
"laborer" is a term ordinarily employed to denote one who subsists by
physical toil in contradistinction to those who subsists by professional skill.
And in Consolidated Tank Line Co. vs. Hunt, 83 Iowa, 6, 32 Am. St. Rep. 285,
43 N.W. 1057, 12 L.R.A. 476, it was stated that "laborers" are those persons
who earn a livelihood by their own manual labor.
Article 1708 used the word "wages" and not "salary" in relation to "laborer"
when it declared what are to be exempted from attachment and execution.
The term "wages" as distinguished from "salary", applies to the
compensation for manual labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season, while "salary" denotes a
higher degree of employment, or a superior grade of services, and implies a
position of office: by contrast, the term wages " indicates considerable pay

for a lower and less responsible character of employment, while "salary" is

suggestive of a larger and more important service (35 Am. Jur. 496).
The distinction between wages and salary was adverted to in Bell vs. Indian
Livestock Co. (Tex. Sup.), 11 S.W. 344, wherein it was said: "'Wages' are the
compensation given to a hired person for service, and the same is true of
'salary'. The words seem to be synonymous, convertible terms, though we
believe that use and general acceptation have given to the word 'salary' a
significance somewhat different from the word 'wages' in this: that the
former is understood to relate to position of office, to be the compensation
given for official or other service, as distinguished from 'wages', the
compensation for labor." Annotation 102 Am. St. Rep. 81, 95.
We do not think that the legislature intended the exemption in Article 1708
of the New Civil Code to operate in favor of any but those who are laboring
men or women in the sense that their work is manual. Persons belonging to
this class usually look to the reward of a day's labor for immediate or present
support, and such persons are more in need of the exemption than any
others. Petitioner Rosario A. Gaa is definitely not within that class.
We find, therefore, and so hold that the Trial Court did not err in denying in
its order of November 7, 1975 the motion of petitioner to lift the notice of
garnishment against her salaries, commission and other remuneration from
El Grande Hotel since said salaries, Commission and other remuneration due
her from the El Grande Hotel do not constitute wages due a laborer which,
under Article 1708 of the Civil Code, are not subject to execution or
attachment.
IN VIEW OF THE FOREGOING, We find the present petition to be without merit
and hereby AFFIRM the decision of the Court of Appeals, with costs against
petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 164772

June 8, 2006

EQUITABLE BANKING CORPORATION (now known as EQUITABLE-PCI

BANK), petitioner,
vs.
RICARDO SADAC, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari with Motion to Refer the
Petition to the Court En Banc filed by Equitable Banking Corporation (now
known as Equitable-PCI Bank), seeking to reverse the Decision1 and
Resolution2 of the Court of Appeals, dated 6 April 2004 and 28 July 2004,
respectively, as amended by the Supplemental Decision3 dated 26 October
2004 in CA-G.R. SP No. 75013, which reversed and set aside the Resolutions
of the National Labor Relations Commission (NLRC), dated 28 March 2001
and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89.
The Antecedents
As culled from the records, respondent Sadac was appointed Vice President
of the Legal Department of petitioner Bank effective 1 August 1981, and
subsequently General Counsel thereof on 8 December 1981. On 26 June
1989, nine lawyers of petitioner Banks Legal Department, in a letter-petition
to the Chairman of the Board of Directors, accused respondent Sadac of
abusive conduct, inter alia, and ultimately, petitioned for a change in

leadership of the department. On the ground of lack of confidence in

respondent Sadac, under the rules of client and lawyer relationship,
petitioner Bank instructed respondent Sadac to deliver all materials in his
custody in all cases in which the latter was appearing as its counsel of
record. In reaction thereto, respondent Sadac requested for a full hearing and
formal investigation but the same remained unheeded. On 9 November
1989, respondent Sadac filed a complaint for illegal dismissal with damages
against petitioner Bank and individual members of the Board of Directors
thereof. After learning of the filing of the complaint, petitioner Bank
terminated the services of respondent Sadac. Finally, on 10 August 1989,
respondent Sadac was removed from his office and ordered disentitled to
any compensation and other benefits.4
In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr.,
dismissed the complaint for lack of merit. On appeal, the NLRC in its
Resolution6 of 24 September 1991 reversed the Labor Arbiter and declared
respondent Sadacs dismissal as illegal. The decretal portion thereof reads,
thus:
WHEREFORE, in view of all the foregoing considerations, let the Decision of
October 2, 1990 be, as it is hereby, SET ASIDE, and a new one ENTERED
declaring the dismissal of the complainant as illegal, and consequently
ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of seniority
rights and other privileges, and to pay him full backwages and other benefits
from the time his compensation was withheld to his actual reinstatement, as
well as moral damages of P100,000.00, exemplary damages of P50,000.00,
and attorneys fees equivalent to Ten Percent (10%) of the monetary award.
Should reinstatement be no longer possible due to strained relations, the
respondents are ordered likewise jointly and severally to grant separation
pay at one (1) month per year of service in the total sum of P293,650.00 with
backwages and other benefits from November 16, 1989 to September 15,
1991 (cut off date, subject to adjustment) computed at P1,055,740.48, plus
damages of P100,000.00 (moral damages), P50,000.00 (exemplary
damages) and attorneys fees equal to Ten Percent (10%) of all the monetary
award, or a grand total of P1,649,329.53.7
Petitioner Bank came to us for the first time via a Special Civil Action for
Certiorari assailing the NLRC Resolution of 24 September 1991 in Equitable
Banking Corporation v. National Labor Relations Commission, docketed as
G.R. No. 102467.8

In our Decision9 of 13 June 1997, we held respondent Sadacs dismissal

illegal. We said that the existence of the employer-employee relationship
between petitioner Bank and respondent Sadac had been duly established
bringing the case within the coverage of the Labor Code, hence, we did not
permit petitioner Bank to rely on Sec. 26, Rule 13810 of the Rules of Court,
claiming that the association between the parties was one of a client-lawyer
relationship, and, thus, it could terminate at any time the services of
respondent Sadac. Moreover, we did not find that respondent Sadacs
dismissal was grounded on any of the causes stated in Article 282 of the
Labor Code. We similarly found that petitioner Bank disregarded the
procedural requirements in terminating respondent Sadacs employment as
so required by Section 2 and Section 5, Rule XIV, Book V of the Implementing
Rules of the Labor Code. We decreed:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with
the following MODIFICATIONS: That private respondent shall be entitled to
backwages from termination of employment until turning sixty (60) years of
age (in 1995) and, thereupon, to retirement benefits in accordance with law;
that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the
liability herein pronounced shall be due from petitioner bank alone, the other
petitioners being absolved from solidary liability. No costs.11
On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997
became final and executory.12
Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for
Execution13 thereof. Likewise, petitioner Bank filed a Manifestation and
Motion14 praying that the award in favor of respondent Sadac be computed
and that after payment is made, petitioner Bank be ordered forever released
from liability under said judgment.
Per respondent Sadacs computation, the total amount of the monetary
award is P6,030,456.59, representing his backwages and other benefits,
including the general increases which he should have earned during the
period of his illegal termination. Respondent Sadac theorized that he started
with a monthly compensation of P12,500.00 in August 1981, when he was
appointed as Vice President of petitioner Banks Legal Department and later
as its General Counsel in December 1981. As of November 1989, when he
was dismissed illegally, his monthly compensation amounted to P29,365.00
or more than twice his original compensation. The difference, he posited, can
be attributed to the annual salary increases which he received equivalent to
15 percent (15%) of his monthly salary.

Respondent Sadac anchored his claim on Article 279 of the Labor Code of the
Philippines, and cited as authority the cases of East Asiatic Company, Ltd. v.
Court of Industrial Relations,15 St. Louis College of Tuguegarao v. National
Labor Relations Commission,16 and Sigma Personnel Services v. National
Labor Relations Commission.17 According to respondent Sadac, the catena of
cases uniformly holds that it is the obligation of the employer to pay an
illegally dismissed employee the whole amount of the salaries or wages, plus
all other benefits and bonuses and general increases to which he would have
been normally entitled had he not been dismissed; and therefore, salary
increases should be deemed a component in the computation of backwages.
Moreover, respondent Sadac contended that his check-up benefit, clothing
allowance, and cash conversion of vacation leaves must be included in the
computation of his backwages.
Petitioner Bank disputed respondent Sadacs computation. Per its
computation, the amount of monetary award due respondent Sadac is
P2,981,442.98 only, to the exclusion of the latters general salary increases
and other claimed benefits which, it maintained, were unsubstantiated. The
jurisprudential precedent relied upon by petitioner Bank in assailing
respondent Sadacs computation is Evangelista v. National Labor Relations
Commission,18 citing Paramount Vinyl Products Corp. v. National Labor
Relations Commission,19 holding that an unqualified award of backwages
means that the employee is paid at the wage rate at the time of his
dismissal. Furthermore, petitioner Bank argued before the Labor Arbiter that
the award of salary differentials is not allowed, the established rule being
that upon reinstatement, illegally dismissed employees are to be paid their
backwages without deduction and qualification as to any wage increases or
other benefits that may have been received by their co-workers who were
not dismissed or did not go on strike.
On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an
Order20 adopting respondent Sadacs computation. In the main, the Labor
Arbiter relying on Millares v. National Labor Relations Commission21concluded
that respondent Sadac is entitled to the general increases as a component in
the computation of his backwages. Accordingly, he awarded respondent
Sadac the amount of P6,030,456.59 representing his backwages inclusive of
allowances and other claimed benefits, namely check-up benefit, clothing
allowance, and cash conversion of vacation leave plus 12 percent (12%)
interest per annum equivalent to P1,367,590.89 as of 30 June 1999, or a
total of P7,398,047.48. However, considering that respondent Sadac had
already received the amount of P1,055,740.48 by virtue of a Writ of
Execution22 earlier issued on 18 January 1999, the Labor Arbiter directed
petitioner Bank to pay respondent Sadac the amount of P6,342,307.00. The

Labor Arbiter also granted an award of attorneys fees equivalent to ten

percent (10%) of all monetary awards, and imposed a 12 percent (12%)
interest per annum reckoned from the finality of the judgment until the
satisfaction thereof.
The Labor Arbiter decreed, thus:
WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of Execution
be issued commanding the Sheriff, this Branch, to collect from respondent
Bank the amount of Ph6,342,307.00 representing the backwages with 12%
interest per annum due complainant.23
Petitioner Bank interposed an appeal with the NLRC, which reversed the
Labor Arbiter in a Resolution,24promulgated on 28 March 2001. It ratiocinated
that the doctrine on general increases as component in computing
backwages in Sigma Personnel Services and St. Louis was merely obiter
dictum. The NLRC found East Asiatic Co., Ltd. inapplicable on the ground that
the original circumstances therein are not only peculiar to the said case but
also completely strange to the case of respondent Sadac. Further, the NLRC
disallowed respondent Sadacs claim to check-up benefit ratiocinating that
there was no clear and substantial proof that the same was being granted
and enjoyed by other employees of petitioner Bank. The award of attorneys
fees was similarly deleted.
The dispositive portion of the Resolution states:
WHEREFORE, the instant appeal is considered meritorious and accordingly,
the computation prepared by respondent Equitable Banking Corporation on
the award of backwages in favor of complainant Ricardo Sadac under the
decision promulgated by the Supreme Court on June 13, 1997 in G.R. No.
102476 in the aggregate amount of P2,981,442.98 is hereby ordered.25
Respondent Sadacs Motion for Reconsideration thereon was denied by the
NLRC in its Resolution,26promulgated on 24 September 2002.
Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for
Certiorari seeking nullification of the twin resolutions of the NLRC, dated 28
March 2001 and 24 September 2002, as well as praying for the
reinstatement of the 2 August 1999 Order of the Labor Arbiter.
For the resolution of the Court of Appeals were the following issues, viz.:

(1) Whether periodic general increases in basic salary, check-up

benefit, clothing allowance, and cash conversion of vacation leave are
included in the computation of full backwages for illegally dismissed
employees;
(2) Whether respondent is entitled to attorneys fees; and
(3) Whether respondent is entitled to twelve percent (12%) per annum
as interest on all accounts outstanding until full payment thereof.
Finding for respondent Sadac (therein petitioner), the Court of Appeals
rendered a Decision on 6 April 2004, the dispositive portion of which is
quoted hereunder:
WHEREFORE, premises considered, the March 28, 2001 and the September
24, 2002 Resolutions of the National Labor Relations Commissions (sic) are
REVERSED and SET ASIDE and the August 2, 1999 Order of the Labor Arbiter
is REVIVED to the effect that private respondent is DIRECTED TO PAY
petitioner the sum of PhP6,342,307.00, representing full back wages (sic)
which sum includes annual general increases in basic salary, check-up
benefit, clothing allowance, cash conversion of vacation leave and other
sundry benefits plus 12% per annum interest on outstanding balance from
July 28, 1997 until full payment.
Costs against private respondent.27
The Court of Appeals, citing East Asiatic held that respondent Sadacs
general increases should be added as part of his backwages. According to
the appellate court, respondent Sadacs entitlement to the annual general
increases has been duly proven by substantial evidence that the latter, in
fact, enjoyed an annual increase of more or less 15 percent (15%).
Respondent Sadacs check-up benefit, clothing allowance, and cash
conversion of vacation leave were similarly ordered added in the
computation of respondent Sadacs basic wage.
Anent the matter of attorneys fees, the Court of Appeals sustained the
NLRC. It ruled that our Decision28 of 13 June 1997 did not award attorneys
fees in respondent Sadacs favor as there was nothing in the aforesaid
Decision, either in the dispositive portion or the body thereof that supported
the grant of attorneys fees. Resolving the final issue, the Court of Appeals
imposed a 12 percent (12%) interest per annum on the total monetary award
to be computed from 28 July 1997 or the date our judgment in G.R. No.
102467 became final and executory until fully paid at which time the

quantification of the amount may be deemed to have been reasonably

ascertained.
On 7 May 2004, respondent Sadac filed a Partial Motion for
Reconsideration29 of the 6 April 2004 Court of Appeals Decision insofar as the
appellate court did not award him attorneys fees. Similarly, petitioner Bank
filed a Motion for Partial Reconsideration thereon. Following an exchange of
pleadings between the parties, the Court of Appeals rendered a
Resolution,30 dated 28 July 2004, denying petitioner Banks Motion for Partial
Reconsideration for lack of merit.
Assignment of Errors
Hence, the instant Petition for Review by petitioner Bank on the following
assignment of errors, to wit:
(a) The Hon. Court of Appeals erred in ruling that general salary
increases should be included in the computation of full backwages.
(b) The Hon. Court of Appeals erred in ruling that the applicable
authorities in this case are: (i) East Asiatic, Ltd. v. CIR, 40 SCRA 521
(1971); (ii) St. Louis College of Tuguegarao v. NLRC, 177 SCRA 151
(1989); (iii) Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993);
and (iv) Millares v. NLRC, 305 SCRA 500 (1999) and not (i) Art. 279 of
the Labor Code; (ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525
(1990); (iii) Evangelista v. NLRC, 249 SCRA 194 (1995); and (iv) Espejo
v. NLRC, 255 SCRA 430 (1996).
(c) The Hon. Court of Appeals erred in ruling that respondent is entitled
to check-up benefit, clothing allowance and cash conversion of
vacation leaves notwithstanding that respondent did not present any
evidence to prove entitlement to these claims.
(d) The Hon. Court of Appeals erred in ruling that respondent is entitled
to be paid legal interest even if the principal amount due him has not
yet been correctly and finally determined.31
Meanwhile, on 26 October 2004, the Court of Appeals rendered a
Supplemental Decision granting respondent Sadacs Partial Motion for
Reconsideration and amending the dispositive portion of the 6 April 2004
Decision in this wise, viz.:

WHEREFORE, premises considered, the March 24 (sic), 2001 and the

September 24, 2002 Resolutions of the National Labor Relations Commission
are hereby REVERSED and SET ASIDE and the August 2, 1999 Order of the
Labor Arbiter is hereby REVIVED to the effect that private respondent is
hereby DIRECTED TO PAY petitioner the sum of P6,342,307.00, representing
full backwages which sum includes annual general increases in basic salary,
check-up benefit, clothing allowance, cash conversion of vacation leave and
other sundry benefits "and attorneys fees equal to TEN PERCENT (10%) of all
the monetary award" plus 12% per annum interest on all outstanding
balance from July 28, 1997 until full payment.
Costs against private respondent.32
On 22 November 2004, petitioner Bank filed a Supplement to Petition for
Review33 contending in the main that the Court of Appeals erred in issuing
the Supplemental Decision by directing petitioner Bank to pay an additional
amount to respondent Sadac representing attorneys fees equal to ten
percent (10%) of all the monetary award.
The Courts Ruling
I.
We are called to write finis to a controversy that comes to us for the second
time. At the core of the instant case are the divergent contentions of the
parties on the manner of computation of backwages.
Petitioner Bank asseverates that Article 279 of the Labor Code of the
Philippines does not contemplate the inclusion of salary increases in the
definition of "full backwages." It controverts the reliance by the appellate
court on the cases of (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and
(iv) Millares. While it is in accord with the pronouncement of the Court of
Appeals that Republic Act No. 6715, in amending Article 279, intends to give
more benefits to workers, petitioner Bank submits that the Court of Appeals
was in error in relying on East Asiatic to support its finding that salary
increases should be included in the computation of backwages as nowhere in
Article 279, as amended, are salary increases spoken of. The prevailing rule
in the milieu of the East Asiatic doctrine was to deduct earnings earned
elsewhere from the amount of backwages payable to an illegally dismissed
employee.
Petitioner Bank posits that even granting that East Asiatic allowed general
salary increases in the computation of backwages, it was because the

inclusion was purposely to cushion the blow of the deduction of earnings

derived elsewhere; with the amendment of Article 279 and the consequent
elimination of the rule on the deduction of earnings derived elsewhere, the
rationale for including salary increases in the computation of backwages no
longer exists. On the references of salary increases in the aforementioned
cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares, petitioner Bank
contends that the same were merely obiter dicta. In fine, petitioner Bank
anchors its claim on the cases of (i) Paramount Vinyl Products Corp. v.
National Labor Relations Commission;34 (ii) Evangelista v. National Labor
Relations Commission;35 and (iii) Espejo v. National Labor Relations
Commission,36 which ruled that an unqualified award of backwages is
exclusive of general salary increases and the employee is paid at the wage
rate at the time of the dismissal.
For his part, respondent Sadac submits that the Court of Appeals was correct
when it ruled that his backwages should include the general increases on the
basis of the following cases, to wit: (i) East Asiatic; (ii) St. Louis; (iii) Sigma
Personnel; and (iv) Millares.
Resolving the protracted litigation between the parties necessitates us to
revisit our pronouncements on the interpretation of the term backwages. We
said that backwages in general are granted on grounds of equity for earnings
which a worker or employee has lost due to his illegal dismissal.37 It is not
private compensation or damages but is awarded in furtherance and
effectuation of the public objective of the Labor Code. Nor is it a redress of a
private right but rather in the nature of a command to the employer to make
public reparation for dismissing an employee either due to the formers
unlawful act or bad faith.38 The Court, in the landmark case of Bustamante v.
National Labor Relations Commission,39 had the occasion to explicate on the
meaning of full backwages as contemplated by Article 27940 of the Labor
Code of the Philippines, as amended by Section 34 of Rep. Act No. 6715. The
Court in Bustamante said, thus:
The Court deems it appropriate, however, to reconsider such earlier ruling on
the computation of backwages as enunciated in said Pines City Educational
Center case, by now holding that conformably with the evident legislative
intent as expressed in Rep. Act No. 6715, above-quoted, backwages to be
awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived by him elsewhere during the
period of his illegal dismissal. The underlying reason for this ruling is that the
employee, while litigating the legality (illegality) of his dismissal, must still
earn a living to support himself and family, while full backwages have to be
paid by the employer as part of the price or penalty he has to pay for illegally

dismissing his employee. The clear legislative intent of the amendment in

Rep. Act No. 6715 is to give more benefits to workers than was previously
given them under the Mercury Drug rule or the "deduction of earnings
elsewhere" rule. Thus, a closer adherence to the legislative policy behind
Rep. Act No. 6715 points to "full backwages" as meaning exactly that, i.e.,
without deducting from backwages the earnings derived elsewhere by the
concerned employee during the period of his illegal dismissal. In other words,
the provision calling for "full backwages" to illegally dismissed employees is
clear, plain and free from ambiguity and, therefore, must be applied without
attempted or strained interpretation. Index animi sermo est.41
Verily, jurisprudence has shown that the definition of full backwages has
forcefully evolved. In Mercury Drug Co., Inc. v. Court of Industrial
Relations,42 the rule was that backwages were granted for a period of three
years without qualification and without deduction, meaning, the award of
backwages was not reduced by earnings actually earned by the dismissed
employee during the interim period of the separation. This came to be known
as the Mercury Drug rule.43 Prior to the Mercury Drug ruling in 1974, the total
amount of backwages was reduced by earnings obtained by the employee
elsewhere from the time of the dismissal to his reinstatement. The Mercury
Drug rule was subsequently modified in Ferrer v. National Labor Relations
Commission44 and Pines City Educational Center v. National Labor Relations
Commission,45 where we allowed the recovery of backwages for the duration
of the illegal dismissal minus the total amount of earnings which the
employee derived elsewhere from the date of dismissal up to the date of
reinstatement, if any. In Ferrer and in Pines, the three-year period was
deleted, and instead, the dismissed employee was paid backwages for the
entire period that he was without work subject to the deductions, as
mentioned. Finally came our ruling in Bustamante which superseded Pines
City Educational Center and allowed full recovery of backwages without
deduction and without qualification pursuant to the express provisions of
Article 279 of the Labor Code, as amended by Rep. Act No. 6715, i.e., without
any deduction of income the employee may have derived from employment
elsewhere from the date of his dismissal up to his reinstatement, that is,
covering the entirety of the period of the dismissal.
The first issue for our resolution involves another aspect in the computation
of full backwages, mainly, the basis of the computation thereof. Otherwise
stated, whether general salary increases should be included in the base
figure to be used in the computation of backwages.
In so concluding that general salary increases should be made a component
in the computation of backwages, the Court of Appeals ratiocinated, thus:

The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations,
40 SCRA 521 (1971) that "general increases" should be added as a part of
full backwages, to wit:
In other words, the just and equitable rule regarding the point under
discussion is this: It is the obligation of the employer to pay an illegally
dismissed employee or worker the whole amount of the salaries or wages,
plus all other benefits and bonuses and general increases, to which he would
have been normally entitled had he not been dismissed and had not stopped
working, but it is the right, on the other hand of the employer to deduct from
the total of these, the amount equivalent to the salaries or wages the
employee or worker would have earned in his old employment on the
corresponding days he was actually gainfully employed elsewhere with an
equal or higher salary or wage, such that if his salary or wage in his other
employment was less, the employer may deduct only what has been actually
earned.
The doctrine in East Asiatic was subsequently reiterated, in the cases of St.
Louis College of Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma
Personnel Services v. NLRC, 224 SCRA 181 (1993) and Millares v. National
Labor Relations Commission, 305 SCRA 500 (1999).
Private respondent, in opposing the petitioners contention, alleged in his
Memorandum that only the wage rate at the time of the employees illegal
dismissal should be considered private respondent citing the following
decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA
525 (1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC, 255
SCRA 430 (1996) which rendered obsolete the ruling in East Asiatic, Ltd. v.
Court of Industrial Relations, 40 SCRA 521 (1971).
We are not convinced.
The Supreme Court had consistently held that payment of full backwages is
the price or penalty that the employer must pay for having illegally
dismissed an employee.
In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v.
NLRC and Evergreen Farms, Inc. 265 SCRA 61 (1996) the Supreme Court held
that the clear legislative intent in the amendment in Republic Act 6715 was
to give more benefits to workers than was previously given them under the
Mercury Drug rule or the "deductions of earnings elsewhere" rule.

The Paramount Vinyl, Evangelista, and Espejo cases cited by private

respondent are inapplicable to the case at bar. The doctrines therein came
about as a result of the old Mercury Drug rule, which was repealed with the
passage of Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255 SCRA
430 (1993) when the Supreme Court returned to the doctrine in East Asiatic,
which was soon supplanted by the case of Bustamante v. NLRC and
Evergreen Farms, Inc., which held that the backwages to be awarded to an
illegally dismissed employee, should not, as a general rule, be diminished or
reduced by the earnings derived from him during the period of his illegal
dismissal. Furthermore, the Mercury Drug rule was never meant to prejudice
the workers, but merely to speed the recovery of their backwages.
Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the
intent of the Supreme Court to increase the backwages due an illegally
dismissed employee. In the Mercury Drug case, full backwages was to be
recovered even though a three-year limitation on recovery of full backwages
was imposed in the name of equity. Then in Bustamante, full backwages was
interpreted to mean absolutely no deductions regardless of the duration of
the illegal dismissal. In Bustamante, the Supreme Court no longer regarded
equity as a basis when dealing with illegal dismissal cases because it is not
equity at play in illegal dismissals but rather, it is employers obligation to
pay full back wages (sic). It is an obligation of the employer because it is "the
price or penalty the employer has to pay for illegally dismissing his
employee."
The applicable modern definition of full backwages is now found in Millares v.
National Labor Relations Commission 305 SCRA 500 (1999), where although
the issue in Millares concerned separation pay separation pay and
backwages both have employees wage rate at their foundation.
x x x The rationale is not difficult to discern. It is the obligation of the
employer to pay an illegally dismissed employee the whole amount of his
salaries plus all other benefits, bonuses and general increases to which he
would have been normally entitled had he not been dismissed and had not
stopped working. The same holds true in case of retrenched employees. x x x
xxxx
x x x Annual general increases are akin to "allowances" or "other
benefits." 46 (Italics ours.)
We do not agree.

Attention must be called to Article 279 of the Labor Code of the Philippines,
as amended by Section 34 of Rep. Act No. 6715. The law provides as follows:
ART. 279. Security of Tenure. In cases of regular employment, the employer
shall not terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement. (Emphasis supplied.)
Article 279 mandates that an employees full backwages shall be inclusive of
allowances and other benefits or their monetary equivalent. Contrary to the
ruling of the Court of Appeals, we do not see that a salary increase can be
interpreted as either an allowance or a benefit. Salary increases are not akin
to allowances or benefits, and cannot be confused with either. The term
"allowances" is sometimes used synonymously with "emoluments," as
indirect or contingent remuneration, which may or may not be earned, but
which is sometimes in the nature of compensation, and sometimes in the
nature of reimbursement.47 Allowances and benefits are granted to the
employee apart or separate from, and in addition to the wage or salary. In
contrast, salary increases are amounts which are added to the employees
salary as an increment thereto for varied reasons deemed appropriate by the
employer. Salary increases are not separate grants by themselves but once
granted, they are deemed part of the employees salary. To extend the
coverage of an allowance or a benefit to include salary increases would be to
strain both the imagination of the Court and the language of law. As aptly
observed by the NLRC, "to otherwise give the meaning other than what the
law speaks for by itself, will open the floodgates to various
interpretations."48Indeed, if the intent were to include salary increases as
basis in the computation of backwages, the same should have been explicitly
stated in the same manner that the law used clear and unambiguous terms
in expressly providing for the inclusion of allowances and other benefits.
Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic,
therein petitioner East Asiatic Company, Ltd. was found guilty of unfair labor
practices against therein respondent, Soledad A. Dizon, and the Court
ordered her reinstatement with back pay. On the question of the amount of
backwages, the Court granted the dismissed employee the whole amount of
the salaries plus all general increases and bonuses she would have received
during the period of her lay-off with the corresponding right of the employer
to deduct from the total amounts, all the earnings earned by the employee

during her lay-off. The emphasis in East Asiatic is the duty of both the
employer and the employee to disclose the material facts and competent
evidence within their peculiar knowledge relative to the proper determination
of backwages, especially as the earnings derived by the employee elsewhere
are deductions to which the employer are entitled. However, East Asiatic
does not find relevance in the resolution of the issue before us. First, the
material date to consider is 21 March 1989, when the law amending Article
279 of the Labor Code, Rep. Act No. 6715, otherwise known as the HerreraVeloso Law, took effect. It is obvious that the backdrop of East Asiatic,
decided by this Court on 31 August 1971 was prior to the current state of the
law on the definition of full backwages. Second, it bears stressing that East
Asiatic was decided at a time when even as an illegally dismissed employee
is entitled to the whole amount of the salaries or wages, it was the
recognized right of the employer to deduct from the total of these, the
amount equivalent to the salaries or wages the employee or worker would
have earned in his old employment on the corresponding days that he was
actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the
employer may deduct only what has been actually earned.49 It is for this
reason the Court centered its discussion on the duty of both parties to be
candid and open about facts within their knowledge to establish the amount
of the deductions, and not leave the burden on the employee alone to
establish his claim, as well as on the duty of the court to compel the parties
to cooperate in disclosing such material facts. The inapplicability of East
Asiatic to respondent Sadac was sufficiently elucidated upon by the NLRC,
viz.:
A full discernment of the pertinent portion of the judgment sought to be
executed in East Asiatic Co., Ltd. would reveal as follows:
"x x x to reinstate Soledad A. Dizon immediately to her former position with
backwages from September 1, 1958 until actually reinstated with all the
rights and privileges acquired and due her, including seniority and such other
terms and conditions of employment AT THE TIME OF HER LAY-OFF"
The basis on which this doctrine was laid out was summed up by the
Supreme Court which ratiocinated in this light. To quote:
"x x x on the other hand, of the employer to deduct from the total of these,
the amount equivalent to these salaries or wages the employee or worker
would have earned in his old employment on the corresponding days that he
was actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the

employer may deduct only what has been actually earned x x x" (Ibid, pp.
547-548).
But the Supreme Court, in the instant case, pronounced a clear but different
judgment from that of East Asiatic Co. decretal portion, in this wise:
"WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED
with the following MODIFICATIONS: that private respondent shall be entitled
to backwages from termination of employment until turning sixty (60) years
of age (in 1995) and, thereupon, to retirement benefits in accordance with
law; xxx"
Undisputably (sic), it was decreed in plain and unambiguous language that
complainant Sadac "shall be entitled to backwages." No more, no less.
Thus, this decree for Sadac cannot be considered in any way, substantially in
essence, with the award of backwages as pronounced for Ms. Dizon in the
case of East Asiatic Co. Ltd.50
In the same vein, we cannot accept the Court of Appeals reliance on the
doctrine as espoused in Millares. It is evident that Millares concerns itself
with the computation of the salary base used in computing the separation
pay of petitioners therein. The distinction between backwages and
separation pay is elementary. Separation pay is granted where reinstatement
is no longer advisable because of strained relations between the employee
and the employer. Backwages represent compensation that should have
been earned but were not collected because of the unjust dismissal. The
bases for computing the two are different, the first being usually the length
of the employees service and the second the actual period when he was
unlawfully prevented from working.51
The issue that confronted the Court in Millares was whether petitioners
housing and transportation allowances therein which they allegedly received
on a monthly basis during their employment should have been included in
the computation of their separation pay. It is plain to see that the reference
to general increases in Millares citing East Asiatic was a mere obiter. The
crux in Millares was our pronouncement that the receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming part
of salary because the nature of the grant is a factor worth considering.
Whether salary increases are deemed part of the salary base in the
computation of backwages was not the issue in Millares.

Neither can we look at St. Louis of Tuguegarao to resolve the instant

controversy. What was mainly contentious therein was the inclusion of fringe
benefits in the computation of the award of backwages, in particular
additional vacation and sick leaves granted to therein concerned employees,
it evidently appearing that the reference to East Asiatic in a footnote was a
mere obiter dictum. Salary increases are not akin to fringe benefits52 and
neither is it logical to conceive of both as belonging to the same taxonomy.
We must also resolve against the applicability of Sigma Personnel Services to
the case at bar. The basic issue before the Court therein was whether the
employee, Susan Sumatre, a domestic helper in Abu Dhabi, United Arab
Emirates, had been illegally dismissed, in light of the contention of Sigma
Personnel Services, a duly licensed recruitment agency, that the former was
a mere probationary employee who was, on top of this status, mentally
unsound.53 Even a cursory reading of Sigma Personnel Services citing St.
Louis College of Tuguegarao would readily show that inclusion of salary
increases in the computation of backwages was not at issue. The same was
not on all fours with the instant petition.
What, then, is the basis of computation of backwages? Are annual general
increases in basic salary deemed component in the computation of full
backwages? The weight of authority leans in petitioner Banks favor and
against respondent Sadacs claim for the inclusion of general increases in the
computation of his backwages.
We stressed in Paramount that an unqualified award of backwages means
that the employee is paid at the wage rate at the time of his dismissal, thus:
The determination of the salary base for the computation of backwages
requires simply an application of judicial precedents defining the term
"backwages". Unfortunately, the Labor Arbiter erred in this regard. An
unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal [Davao Free Worker Front v. Court of
Industrial Relations, G.R. No. L-29356, October 27, 1975, 67 SCRA 418;
Capital Garments Corporation v. Ople, G.R. No. 53627, September 30, 1982,
117 SCRA 473; Durabilt Recapping Plant & Company v. NLRC, G.R. No. 76746,
July 27, 1987, 152 SCRA 328]. And the Court has declared that the base
figure to be used in the computation of backwages due to the employee
should include not just the basic salary, but also the regular allowances that
he had been receiving, such as the emergency living allowances and the
13th month pay mandated under the law [See Pan-Philippine Life Insurance
Corporation v. NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA 866; Santos v.
NLRC, G.R. No. 76721, September 21, 1987, 154 SCRA 166; Soriano v. NLRC,

G.R. No. 75510, October 27, 1987, 155 SCRA 124; Insular Life Assurance Co.,
Ltd. v. NLRC, supra.]54(Emphasis supplied.)
There is no ambivalence in Paramount, that the base figure to be used in the
computation of backwages is pegged at the wage rate at the time of the
employees dismissal, inclusive of regular allowances that the employee had
been receiving such as the emergency living allowances and the 13th month
pay mandated under the law.
In Evangelista v. National Labor Relations Commission,55 we addressed the
sole issue of whether the computation of the award of backwages should be
based on current wage level or the wage levels at the time of the dismissal.
We resolved that an unqualified award of backwages means that the
employee is paid at the wage rate at the time of his dismissal, thus:
As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the
determination of the salary base for the computation of backwages requires
simply an application of judicial precedents defining the term "backwages."
An unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal. Furthermore, the award of salary
differentials is not allowed, the established rule being that upon
reinstatement, illegally dismissed employees are to be paid their backwages
without deduction and qualification as to any wage increases or other
benefits that may have been received by their co-workers who were not
dismissed or did not go on strike.56
The case of Paramount was relied upon by the Court in the latter case of
Espejo v. National Labor Relations Commission,57 where we reiterated that
the computation of backwages should be based on the basic salary at the
time of the employees dismissal plus the regular allowances that he had
been receiving. Further, the clarification made by the Court in General
Baptist Bible College v. National Labor Relations Commission,58 settles the
issue, thus:
We also want to clarify that when there is an award of backwages this
actually refers to backwages without qualifications and deductions. Thus, We
held that:
"The term backwages without qualification and deduction means that the
workers are to be paid their backwages fixed as of the time of the dismissal
or strike without deduction for their earnings elsewhere during their layoff
and without qualification of their wages as thus fixed; i.e., unqualified by any
wage increases or other benefits that may have been received by their co-

workers who are not dismissed or did not go on strike. Awards including
salary differentials are not allowed. The salary base properly used should,
however, include not only the basic salary but also the emergency cost of
living allowances and also transportation allowances if the workers are
entitled thereto."59 (Italics supplied.)
Indeed, even a cursory reading of the dispositive portion of the Courts
Decision of 13 June 1997 in G.R. No. 102467, awarding backwages to
respondent Sadac, readily shows that the award of backwages therein is
unqualified, ergo, without qualification of the wage as thus fixed at the time
of the dismissal and without deduction.
A demarcation line between salary increases and backwages was drawn by
the Court in Paguio v. Philippine Long Distance Telephone Co., Inc.,60 where
therein petitioner Paguio, on account of his illegal transfer sought
backwages, including an amount equal to 16 percent (16%) of his monthly
salary representing his salary increases during the period of his demotion,
contending that he had been consistently granted salary increases because
of his above average or outstanding performance. We said:
In several cases, the Court had the opportunity to elucidate on the reason for
the grant of backwages. Backwages are granted on grounds of equity to
workers for earnings lost due to their illegal dismissal from work. They are a
reparation for the illegal dismissal of an employee based on earnings which
the employee would have obtained, either by virtue of a lawful decree or
order, as in the case of a wage increase under a wage order, or by rightful
expectation, as in the case of ones salary or wage. The outstanding feature
of backwages is thus the degree of assuredness to an employee that he
would have had them as earnings had he not been illegally terminated from
his employment.
Petitioners claim, however, is based simply on expectancy or his assumption
that, because in the past he had been consistently rated for his outstanding
performance and his salary correspondingly increased, it is probable that he
would similarly have been given high ratings and salary increases but for his
transfer to another position in the company.
In contrast to a grant of backwages or an award of lucrum cessans in the civil
law, this contention is based merely on speculation. Furthermore, it assumes
that in the other position to which he had been transferred petitioner had not
been given any performance evaluation. As held by the Court of Appeals,
however, the mere fact that petitioner had been previously granted salary
increases by reason of his excellent performance does not necessarily

guarantee that he would have performed in the same manner and, therefore,
qualify for the said increase later. What is more, his claim is tantamount to
saying that he had a vested right to remain as Head of the Garnet Exchange
and given salary increases simply because he had performed well in such
position, and thus he should not be moved to any other position where
management would require his services.61
Applying Paguio to the case at bar, we are not prepared to accept that this
degree of assuredness applies to respondent Sadacs salary increases. There
was no lawful decree or order supporting his claim, such that his salary
increases can be made a component in the computation of backwages. What
is evident is that salary increases are a mere expectancy. They are, by its
nature volatile and are dependent on numerous variables, including the
companys fiscal situation and even the employees future performance on
the job, or the employees continued stay in a position subject to
management prerogative to transfer him to another position where his
services are needed. In short, there is no vested right to salary increases.
That respondent Sadac may have received salary increases in the past only
proves fact of receipt but does not establish a degree of assuredness that is
inherent in backwages. From the foregoing, the plain conclusion is that
respondent Sadacs computation of his full backwages which includes his
prospective salary increases cannot be permitted.
Respondent Sadac cannot take exception by arguing that jurisprudence
speaks only of wage and not salary, and therefore, the rule is inapplicable to
him. It is respondent Sadacs stance that he was not paid at the wage rate
nor was he engaged in some form of manual or physical labor as he was
hired as Vice President of petitioner Bank. He cites Gaa v. Court of
Appeals62 where the Court distinguished between wage and salary.
The reliance is misplaced. The distinction between salary and wage in Gaa
was for the purpose of Article 1708 of the Civil Code which mandates that,
"[t]he laborers wage shall not be subject to execution or attachment, except
for debts incurred for food, shelter, clothing and medical attendance." In
labor law, however, the distinction appears to be merely semantics.
Paramount and Evangelista may have involved wage earners, but the
petitioner in Espejo was a General Manager with a monthly salary of
P9,000.00 plus privileges. That wage and salary are synonymous has been
settled in Songco v. National Labor Relations Commission.63 We said:
Broadly, the word "salary" means a recompense or consideration made to a
person for his pains or industry in another mans 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 holding that the words
"wages" and "salary" are in essence synonymous (Words and Phrases, Vol.
38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.839, 841,
89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the
Latin word "salarium," is often used interchangeably with "wage", the
etymology of which is the Middle English word "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" (Blacks Law Dictionary, 5th Ed). x x x64 (Italics
supplied.)
II.
Petitioner Bank ascribes as its second assignment of error the Court of
Appeals ruling that respondent Sadac is entitled to check-up benefit,
clothing allowance and cash conversion of vacation leaves notwithstanding
that respondent Sadac did not present any evidence to prove entitlement to
these claims.65
The determination of respondent Sadacs entitlement to check-up benefit,
clothing allowance, and cash conversion of vacation leaves involves a
question of fact. The well-entrenched rule is that only errors of law not of
facts are reviewable by this Court in a petition for review.66 The jurisdiction of
this Court in a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, is limited to reviewing only errors of
law, not of fact, unless the factual findings being assailed are not supported
by evidence on record or the impugned judgment is based on a
misapprehension of facts.67 This Court is also not precluded from delving into
and resolving issues of facts, particularly if the findings of the Labor Arbiter
are inconsistent with those of the NLRC and the Court of Appeals.68 Such is
the case in the instant petition. The Labor Arbiter and the Court of Appeals
are in agreement anent the entitlement of respondent Sadac to check-up
benefit, clothing allowance, and cash conversion of vacation leaves, but the
findings of the NLRC were to the contrary. The Labor Arbiter sustained
respondent Sadacs entitlement to check-up benefit, clothing allowance and
cash conversion of vacation leaves. He gave weight to petitioner Banks
acknowledgment in its computation that respondent Sadac is entitled to
certain benefits, namely, rice subsidy, tuition fee allowance, and medicine
allowance, thus, there exists no reason to deprive respondent Sadac of his
other benefits. The Labor Arbiter also reasoned that the petitioner Bank did
not adduce evidence to support its claim that the benefits sought by
respondent Sadac are not granted to its employees and officers. Similarly,

the Court of Appeals ratiocinated that if ordinary employees are entitled to

receive these benefits, so it is with more reason for a Vice President, like
herein respondent Sadac to receive the same.
We find in the records that, per petitioner Banks computation, the benefits
to be received by respondent are monthly rice subsidy, tuition fee allowance
per year, and medicine allowance per year.69 Contained nowhere is an
acknowledgment of herein claimed benefits, namely, check-up benefit,
clothing allowance, and cash conversion of vacation leaves. We cannot
sustain the rationalization that the acknowledgment by petitioner Bank in its
computation of certain benefits granted to respondent Sadac means that the
latter is also entitled to the other benefits as claimed by him but not
acknowledged by petitioner Bank. The rule is, he who alleges, not he who
denies, must prove. Mere allegations by respondent Sadac does not suffice in
the absence of proof supporting the same.
III.
We come to the third assignment of error raised by petitioner Bank in its
Supplement to Petition for Review, assailing the 26 October 2004
Supplemental Decision of the Court of Appeals which amended the fallo of its
6 April 2004 Decision to include "attorneys fees equal to TEN PERCENT
(10%) of all the monetary award" granted to respondent Sadac. Petitioner
Bank posits that neither the dispositive portion of our 13 June 1997 Decision
in G.R. No. 102467 nor the body thereof awards attorneys fees to
respondent Sadac. It is postulated that the body of the 13 June 1997 Decision
does not contain any findings of facts or conclusions of law relating to
attorneys fees, thus, this Court did not intend to grant to respondent Sadac
the same, especially in the light of its finding that the petitioner Bank was
not motivated by malice or bad faith and that it did not act in a wanton,
oppressive, or malevolent manner in terminating the services of respondent
Sadac.70
We do not agree.
At the outset it must be emphasized that when a final judgment becomes
executory, it thereby becomes immutable and unalterable. The judgment
may no longer be modified in any respect, even if the modification is meant
to correct what is perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the Court
rendering it or by the highest Court of the land. The only recognized
exceptions are the correction of clerical errors or the making of so-called
nunc pro tunc entries which cause no prejudice to any party, and, of course,

where the judgment is void.71 The Courts 13 June 1997 Decision in G.R. No.
102467 became final and executory on 28 July 1997. This renders moot
whatever argument petitioner Bank raised against the grant of attorneys
fees to respondent Sadac. Of even greater import is the settled rule that it is
the dispositive part of the judgment that actually settles and declares the
rights and obligations of the parties, finally, definitively, and authoritatively,
notwithstanding the existence of inconsistent statements in the body that
may tend to confuse.72
Proceeding therefrom, we make a determination of whether the Court in
Equitable Banking Corporation v. National Labor Relations Commission,73 G.R.
No. 102467, dated 13 June 1997, awarded attorneys fees to respondent
Sadac. In recapitulation, the dispositive portion of the aforesaid Decision is
hereunder quoted:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with
the following MODIFICATIONS: That private respondent shall be entitled to
backwages from termination of employment until turning sixty (60) years of
age (in 1995) and, thereupon, to retirement benefits in accordance with law;
that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the
liability herein pronounced shall be due from petitioner bank alone, the other
petitioners being absolved from solidary liability. No costs.74
The dispositive portion of the 24 September 1991 Decision of the NLRC
awards respondent Sadac attorneys fees equivalent to ten percent (10%) of
the monetary award, viz:
WHEREFORE, in view of all the foregoing considerations, let the Decision of
October 2, 1990 be, as it is hereby, SET ASIDE and a new one ENTERED
declaring the dismissal of the complainant as illegal, and consequently
ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of seniority
rights and other privileges, and to pay him full backwages and other benefits
from the time his compensation was withheld to his actual reinstatement, as
well as moral damages of P100,000.00, exemplary damages of P50,000.00,
and attorneys fees equivalent to Ten Percent (10%) of the monetary award.
Should reinstatement be no longer possible due to strained relations, the
respondents are ordered likewise jointly and severally to grant separation
pay at one (1) month per year of service in the total sum of P293,650.00 with
backwages and other benefits from November 16, 1989 to September 15,
1991 (cut off date, subject to adjustment) computed at P1,055,740.48, plus
damages of P100,000.00 (moral damages), P50,000.00 (exemplary

damages) and attorneys fees equal to Ten Percent (10%) of all the monetary
award, or a grand total of P1,649,329.53.75 (Italics Ours.)
As can be gleaned from the foregoing, the Courts Decision of 13 June 1997
AFFIRMED with MODIFICATION the NLRC Decision of 24 September 1991,
which modification did not touch upon the award of attorneys fees as
granted, hence, the award stands. Juxtaposing the decretal portions of the
NLRC Decision of 24 September 1991 with that of the Courts Decision of 13
June 1997, we find that what was deleted by the Court was "the award of
moral and exemplary damages," but not the award of "attorneys fees
equivalent to Ten Percent (10%) of the monetary award." The issue on the
grant of attorneys fees to respondent Sadac has been adequately and
definitively threshed out and settled with finality when petitioner Bank came
to us for the first time on a Petition for Certiorari in Equitable Banking
Corporation v. National Labor Relations Commission, docketed as G.R. No.
102467. The Court had spoken in its Decision of 13 June 1997 in the said
case which attained finality on 28 July 1997. It is now immutable.
IV.
We proceed with the penultimate issue on the entitlement of respondent
Sadac to twelve percent (12%) interest per annum on the outstanding
balance as of 28 July 1997, the date when our Decision in G.R. No. 102467
became final and executory.
In Eastern Shipping Lines, Inc. v. Court of Appeals,76 the Court, speaking
through the Honorable Justice Jose C. Vitug, laid down the following rules of
thumb:
I. When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is breached, the contravenor
can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of
recoverable damages.
II. With regard particularly to an award of interest in the concept of
actual or compensatory damages, the rate of interest, as well as the
accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself

earn legal interest from the time it is judicially demanded. In the

absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the
rate of 6% per annum. No interest, however, shall be adjudged
on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim
is made judicially or extrajudicially (Article 1169, Civil Code) but
when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time
the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally
adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2 above, shall be
12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a
forbearance of credit.77
It is obvious that the legal interest of twelve percent (12%) per annum shall
be imposed from the time judgment becomes final and executory, until full
satisfaction thereof. Therefore, petitioner Bank is liable to pay interest from
28 July 1997, the finality of our Decision in G.R. No. 102467.78 The Court of
Appeals was not in error in imposing the same notwithstanding that the
parties were at variance in the computation of respondent Sadacs
backwages. What is significant is that the Decision of 13 June 1997 which
awarded backwages to respondent Sadac became final and executory on 28
July 1997.
V.

Finally, petitioner Banks Motion to Refer the Petition En Banc must

necessarily be denied as established in our foregoing discussion. We are not
herein modifying or reversing a doctrine or principle laid down by the Court
en banc or in a division. The instant case is not one that should be heard by
the Court en banc.791avvphil.net
Fallo
WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the
computation of the backwages, respondent Sadacs claimed prospective
salary increases, check-up benefit, clothing allowance, and cash conversion
of vacation leaves are excluded. The petition is PARTIALLY DENIED insofar as
we AFFIRMED the grant of attorneys fees equal to ten percent (10%) of all
the monetary award and the imposition of twelve percent (12%) interest per
annum on the outstanding balance as of 28 July 1997. Hence, the Decision
and Resolution of the Court of Appeals in CA-G.R. SP No. 75013, dated 6 April
2004 and 28 July 2004, respectively, and the Supplemental Decision dated
26 October 2004 are MODIFIED in the following manner, to wit:
Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:
(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in
G.R. No. 102467 with a clarification that the award of backwages
EXCLUDES respondent Sadacs claimed prospective salary increases,
check-up benefit, clothing allowance, and cash conversion of vacation
leaves;
(2) ATTORNEYS FEES equal to TEN PERCENT (10%) of the total sum of
all monetary award; and
(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed
on the total sum of all monetary award from 28 July 1997, the date of
finality of Our Decision in G.R. No. 102467 until full payment of the said
monetary award.
The Motion to Refer the Petition to the Court En Banc is DENIED.
No costs.
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION

G.R. No. 118506 April 18, 1997

NORMA MABEZA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL
SUPREME, respondents.

KAPUNAN, J.:
This petition seeking the nullification of a resolution of public respondent
National Labor Relations Commission dated April 28, 1994 vividly illustrates
why courts should be ever vigilant in the preservation of the constitutionally
enshrined rights of the working class. Without the protection accorded by our
laws and the tempering of courts, the natural and historical inclination of
capital to ride roughshod over the rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of petitioner
and private respondent, are illustrative.
Petitioner Norma Mabeza contends that around the first week of May, 1991,
she and her co-employees at the Hotel Supreme in Baguio City were asked
by the hotel's management to sign an instrument attesting to the latter's
compliance with minimum wage and other labor standard provisions of
law. 1 The instrument provides: 2
JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY,
MACARIA JUGUETA, ADELAIDA NONOG, NORMA MABEZA,
JONATHAN PICART and JOSE DIZON, all of legal ages (sic),
Filipinos and residents of Baguio City, under oath, depose and
say:
1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme
situated at No. 416 Magsaysay Ave., Baguio City.
2. That the said Hotel is separately operated from the Ivy's Grill
and Restaurant;

3. That we are all (8) employees in the hotel and assigned in

each respective shifts;
4. That we have no complaints against the management of the
Hotel Supreme as we are paid accordingly and that we are
treated well.
5. That we are executing this affidavit voluntarily without any
force or intimidation and for the purpose of informing the
authorities concerned and to dispute the alleged report of the
Labor Inspector of the Department of Labor and Employment
conducted on the said establishment on February 2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands this 7th
day of May, 1991 at Baguio City, Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY
(Sgd.) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA.
(Sgd.) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio
City, Philippines.
Asst. City Prosecutor
Petitioner signed the affidavit but refused to go to the City Prosecutor's Office
to swear to the veracity and contents of the affidavit as instructed by
management. The affidavit was nevertheless submitted on the same day to
the Regional Office of the Department of Labor and Employment in Baguio
City.
As gleaned from the affidavit, the same was drawn by management for the
sole purpose of refuting findings of the Labor Inspector of DOLE (in an
inspection of respondent's establishment on February 2, 1991) apparently
adverse to the private respondent. 3
After she refused to proceed to the City Prosecutor's Office on the same
day the affidavit was submitted to the Cordillera Regional Office of DOLE
petitioner avers that she was ordered by the hotel management to turn over

the keys to her living quarters and to remove her belongings from the hotel
premises. 4 According to her, respondent strongly chided her for refusing to
proceed to the City Prosecutor's Office to attest to the affidavit. 5 She
thereafter reluctantly filed a leave of absence from her job which was denied
by management. When she attempted to return to work on May 10, 1991,
the hotel's cashier, Margarita Choy, informed her that she should not report
to work and, instead, continue with her unofficial leave of absence.
Consequently, on May 13, 1991, three days after her attempt to return to
work, petitioner filed a complaint for illegal dismissal before the Arbitration
Branch of the National Labor Relations Commission CAR Baguio City. In
addition to her complaint for illegal dismissal, she alleged underpayment of
wages, non-payment of holiday pay, service incentive leave pay, 13th month
pay, night differential and other benefits. The complaint was docketed as
NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P.
Pati.
Responding to the allegations made in support of petitioner's complaint for
illegal dismissal, private respondent Peter Ng alleged before Labor Arbiter
Pati that petitioner "surreptitiously left (her job) without notice to the
management" 6 and that she actually abandoned her work. He maintained
that there was no basis for the money claims for underpayment and other
benefits as these were paid in the form of facilities to petitioner and the
hotel's other employee. 7Pointing to the Affidavit of May 7, 1991, the private
respondent asserted that his employees actually have no problems with
management. In a supplemental answer submitted eleven (11) months after
the original complaint for illegal dismissal was filed, private respondent
raised a new ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's office of the City
of Baguio against petitioner on July 4, 1991. 8
On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing
petitioner's complaint on the ground of loss of confidence. His disquisitions in
support of his conclusion read as follows:
It appears from the evidence of respondent that complainant
carted away or stole one (1) blanket, 1 piece bedsheet, 1 piece
thermos, 2 pieces towel (Exhibits "9", "9-A," "9-B," "9-C" and "10"
pages 12-14 TSN, December 1, 1992).
In fact, this was the reason why respondent Peter Ng lodged a
criminal complaint against complainant for qualified theft and
perjury. The fiscal's office finding a prima facie evidence that
complainant committed the crime of qualified theft issued a

resolution for its filing in court but dismissing the charge of

perjury (Exhibit "4" for respondent and Exhibit "B-7" for
complainant). As a consequence, complainant was charged in
court for the said crime (Exhibit "5" for respondent and Exhibit
"B-6" for the complainant).
With these pieces of evidence, complainant committed serious
misconduct against her employer which is one of the just and
valid grounds for an employer to terminate an employee (Article
282 of the Labor Code as amended). 9
On April 28, 1994, respondent NLRC promulgated its assailed
Resolution 10 affirming the Labor Arbiter's decision. The resolution
substantially incorporated the findings of the Labor Arbiter. 11 Unsatisfied,
petitioner instituted the instant special civil action for certiorari under Rule
65 of the Rules of Court on the following grounds: 12
1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED A PATENT AND PALPABLE
ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS
FAILURE TO CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE
IS A FALSE CAUSE AND AN AFTERTHOUGHT ON THE PART OF THE
RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE
DISMISSAL OF THE COMPLAINANT FROM HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED A PATENT AND PALPABLE
ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
ADOPTING THE RULING OF THE LABOR ARBITER THAT THERE
WAS NO UNDERPAYMENT OF WAGES AND BENEFITS ON THE
BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION
PREPARED BY ALLEGEDLY BY RESPONDENT'S EXTERNAL
ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN
EVIDENCE TO PROVE PAYMENT OF WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED A PATENT AND PALPABLE
ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN FAILING
TO CONSIDER THE EVIDENCE ADDUCED BEFORE THE LABOR
ARBITER AS CONSTITUTING UNFAIR LABOR PRACTICE
COMMITTED BY THE RESPONDENT.

The Solicitor General, in a Manifestation in lieu of Comment dated August 8,

1995 rejects private respondent's principal claims and defenses and urges
this Court to set aside the public respondent's assailed resolution. 13
We agree.
It is settled that in termination cases the employer bears the burden of proof
to show that the dismissal is for just cause, the failure of which would mean
that the dismissal is not justified and the employee is entitled to
reinstatement. 14
In the case at bar, the private respondent initially claimed that petitioner
abandoned her job when she failed to return to work on May 8, 1991.
Additionally, in order to strengthen his contention that there existed
sufficient cause for the termination of petitioner, he belatedly included a
complaint for loss of confidence, supporting this with charges that petitioner
had stolen a blanket, a bedsheet and two towels from the hotel. 15 Appended
to his last complaint was a suit for qualified theft filed with the Baguio City
prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances upon
which private respondent anchored his claim that petitioner "abandoned" her
job were not enough to constitute just cause to sanction the termination of
her services under Article 283 of the Labor Code. For abandonment to arise,
there must be concurrence of two things: 1) lack of intention to work; 16 and
2) the presence of overt acts signifying the employee's intention not to
work. 17
In the instant case, respondent does not dispute the fact that petitioner tried
to file a leave of absence when she learned that the hotel management was
displeased with her refusal to attest to the affidavit. The fact that she made
this attempt clearly indicates not an intention to abandon but an intention to
return to work after the period of her leave of absence, had it been granted,
shall have expired.
Furthermore, while absence from work for a prolonged period may suggest
abandonment in certain instances, mere absence of one or two days would
not be enough to sustain such a claim. The overt act (absence) ought
to unerringly point to the fact that the employee has no intention to return to
work, 18 which is patently not the case here. In fact, several days after she
had been advised to take an informal leave, petitioner tried to resume
working with the hotel, to no avail. It was only after she had been repeatedly
rebuffed that she filed a case for illegal dismissal. These acts militate against

the private respondent's claim that petitioner abandoned her job. As the
Solicitor General in his manifestation observed:
Petitioner's absence on that day should not be construed as
abandonment of her job. She did not report because the cashier
told her not to report anymore, and that private respondent Ng
did not want to see her in the hotel premises. But two days later
or on the 10th of May, after realizing that she had to clarify her
employment status, she again reported for work. However, she
was prevented from working by private respondents. 19
We now come to the second cause raised by private respondent to support
his contention that petitioner was validly dismissed from her job.
Loss of confidence as a just cause for dismissal was never intended to
provide employers with a blank check for terminating their employees. Such
a vague, all-encompassing pretext as loss of confidence, if unqualifiedly
given the seal of approval by this Court, could readily reduce to barren form
the words of the constitutional guarantee of security of tenure. Having this in
mind, loss of confidence should ideally apply only to cases involving
employees occupying positions of trust and confidence or to those situations
where the employee is routinely charged with the care and custody of the
employer's money or property. To the first class belong managerial
employees, i.e., those vested with the powers or prerogatives to lay down
management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such
managerial actions; and to the second class belong cashiers, auditors,
property custodians, etc., or those who, in the normal and routine exercise of
their functions, regularly handle significant amounts of money or property.
Evidently, an ordinary chambermaid who has to sign out for linen and other
hotel property from the property custodian each day and who has to account
for each and every towel or bedsheet utilized by the hotel's guests at the
end of her shift would not fall under any of these two classes of employees
for which loss of confidence, if ably supported by evidence, would normally
apply. Illustrating this distinction, this Court in Marina Port Services,
Inc. vs. NLRC, 20 has stated that:
To be sure, every employee must enjoy some degree of trust and
confidence from the employer as that is one reason why he was
employed in the first place. One certainly does not employ a
person he distrusts. Indeed, even the lowly janitor must enjoy
that trust and confidence in some measure if only because he is
the one who opens the office in the morning and closes it at

night and in this sense is entrusted with the care or protection of

the employer's property. The keys he holds are the symbol of
that trust and confidence.
By the same token, the security guard must also be considered
as enjoying the trust and confidence of his employer, whose
property he is safeguarding. Like the janitor, he has access to
this property. He too, is charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted only
with the physical task of protecting that property. The employer's
trust and confidence in him is limited to that ministerial function.
He is not entrusted, in the Labor Arbiter's words, with the duties
of safekeeping and safeguarding company policies, management
instructions, and company secrets such as operation devices. He
is not privy to these confidential matters, which are shared only
in the higher echelons of management. It is the persons on such
levels who, because they discharge these sensitive duties, may
be considered holding positions of trust and confidence. The
security guard does not belong in such category. 21
More importantly, we have repeatedly held that loss of confidence should not
be simulated in order to justify what would otherwise be, under the
provisions of law, an illegal dismissal. "It should not be used as a subterfuge
for causes which are illegal, improper and unjustified. It must be genuine, not
a mere afterthought to justify an earlier action taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent's filing of
qualified theft charges against petitioner long after the latter exposed the
hotel's scheme (to avoid its obligations as employer under the Labor Code)
by her act of filing illegal dismissal charges against the private respondent
would hardly warrant serious consideration of loss of confidence as a valid
ground for dismissal. Notably, the Solicitor General has himself taken a
position opposite the public respondent and has observed that:
If petitioner had really committed the acts charged against her
by private respondents (stealing supplies of respondent hotel),
private respondents should have confronted her before
dismissing her on that ground. Private respondents did not do so.
In fact, private respondent Ng did not raise the matter when
petitioner went to see him on May 9, 1991, and handed him her
application for leave. It took private respondents 52 days or up to
July 4, 1991 before finally deciding to file a criminal complaint

against petitioner, in an obvious attempt to build a case against

her.
The manipulations of private respondents should not be
countenanced. 23
Clearly, the efforts to justify petitioner's dismissal on top of the private
respondent's scheme of inducing his employees to sign an affidavit absolving
him from possible violations of the Labor Code taints with evident bad
faith and deliberate malice petitioner's summary termination from
employment.
Having said this, we turn to the important question of whether or not the
dismissal by the private respondent of petitioner constitutes an unfair labor
practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part of
the employer is alleged is whether or not the employer has exerted pressure,
in the form of restraint, interference or coercion, against his employee's right
to institute concerted action for better terms and conditions of employment.
Without doubt, the act of compelling employees to sign an instrument
indicating that the employer observed labor standards provisions of law
when he might have not, together with the act of terminating or coercing
those who refuse to cooperate with the employer's scheme constitutes unfair
labor practice. The first act clearly preempts the right of the hotel's workers
to seek better terms and conditions of employment through concerted
action.
We agree with the Solicitor General's observation in his manifestation that
"[t]his actuation . . . is analogous to the situation envisaged in paragraph (f)
of Article 248 of the Labor Code" 24 which distinctly makes it an unfair labor
practice "to dismiss, discharge or otherwise prejudice or discriminate against
an employee for having given or being about to give testimony" 25 under the
Labor Code. For in not giving positive testimony in favor of her employer,
petitioner had reserved not only her right to dispute the claim and proffer
evidence in support thereof but also to work for better terms and conditions
of employment.
For refusing to cooperate with the private respondent's scheme, petitioner
was obviously held up as an example to all of the hotel's employees, that
they could only cause trouble to management at great personal

inconvenience. Implicit in the act of petitioner's termination and the

subsequent filing of charges against her was the warning that they would not
only be deprived of their means of livelihood, but also possibly, their
personal liberty.
This Court does not normally overturn findings and conclusions of quasijudicial agencies when the same are ably supported by the evidence on
record. However, where such conclusions are based on a misperception of
facts or where they patently fly in the face of reason and logic, we will not
hesitate to set aside those conclusions. Going into the issue of petitioner's
money claims, we find one more salient reason in this case to set things
right: the labor arbiter's evaluation of the money claims in this case
incredibly ignores existing law and jurisprudence on the matter. Its blatant
one-sidedness simply raises the suspicion that something more than the
facts, the law and jurisprudence may have influenced the decision at the
level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private respondent's
bare claim that the reason the monetary benefits received by petitioner
between 1981 to 1987 were less than minimum wage was because petitioner
did not factor in the meals, lodging, electric consumption and water she
received during the period in her computations. 26 Granting that meals and
lodging were provided and indeed constituted facilities, such facilities could
not be deducted without the employer complying first with certain legal
requirements. Without satisfying these requirements, the employer simply
cannot deduct the value from the employee's ages. First, proof must be
shown that such facilities are customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily accepted in writing by
the employee. Finally, facilities must be charged at fair and reasonable
value. 27
These requirements were not met in the instant case. Private respondent
"failed to present any company policy or guideline to show that the meal and
lodging . . . (are) part of the salary;" 28 he failed to provide proof of the
employee's written authorization; and, he failed to show how he arrived at
the valuations. 29
Curiously, in the case at bench, the only valuations relied upon by the labor
arbiter in his decision were figures furnished by the private respondent's own
accountant, without corroborative evidence. On the pretext that records prior
to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he
could have, as has been pointed out in the Solicitor General's manifestation,

"secured certified copies thereof from the nearest regional office of the
Department of Labor, the SSS or the BIR." 30
More significantly, the food and lodging, or the electricity and water
consumed by the petitioner were not facilities but supplements. A benefit or
privilege granted to an employee for the convenience of the employer is not
a facility. The criterion in making a distinction between the two not so much
lies in the kind (food, lodging) but the purpose. 31 Considering, therefore, that
hotel workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter
in the operations of a small hotel, such as the private respondent's hotel.
It is therefore evident that petitioner is entitled to the payment of the
deficiency in her wages equivalent to the fullwage applicable from May 13,
1988 up to the date of her illegal dismissal.
Additionally, petitioner is entitled to payment of service incentive leave pay,
emergency cost of living allowance, night differential pay, and 13th month
pay for the periods alleged by the petitioner as the private respondent has
never been able to adduce proof that petitioner was paid the aforestated
benefits.
However, the claims covering the period of October 1987 up to the time of
filing the case on May 13, 1988 are barred by prescription as P.D. 442 (as
amended) and its implementing rules limit all money claims arising out of
employer-employee relationship to three (3) years from the time the cause of
action accrues. 32
We depart from the settled rule that an employee who is unjustly dismissed
from work normally should be reinstated without loss of seniority rights and
other privileges. Owing to the strained relations between petitioner and
private respondent, allowing the former to return to her job would only
subject her to possible harassment and future embarrassment. In the instant
case, separation pay equivalent to one month's salary for every year of
continuous service with the private respondent would be proper, starting
with her job at the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant to R.A. 6715
and our decision in Osmalik Bustamante, et al. vs. National Labor Relations
Commission, 33 petitioner is entitled to full backwages from the time of her
illegal dismissal up to the date of promulgation of this decision without
qualification or deduction.

Finally, in dismissal cases, the law requires that the employer must furnish
the employee sought to be terminated from employment with two written
notices before the same may be legally effected. The first is a written notice
containing a statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to terminate him stating
the basis of the dismissal. During the process leading to the second notice,
the employer must give the employee ample opportunity to be heard and
defend himself, with the assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of the petitioner's
dismissal, it is noteworthy that the private respondent never even bothered
to inform petitioner of the charges against her. Neither was petitioner given
the opportunity to explain the loss of the articles. It was only almost two
months after petitioner had filed a complaint for illegal dismissal, as an
afterthought, that the loss was reported to the police and added as a
supplemental answer to petitioner's complaint. Clearly, the dismissal of
petitioner without the benefit of notice and hearing prior to her termination
violated her constitutional right to due process. Under the circumstance an
award of One Thousand Pesos (P1,000.00) on top of payment of the
deficiency in wages and benefits for the period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the National Labor
Relations Commission dated April 24, 1994 is REVERSED and SET ASIDE, with
costs. For clarity, the economic benefits due the petitioner are hereby
summarized as follows:
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the
date of petitioner's illegal dismissal;
2) Service incentive leave pay; night differential pay and 13th month pay for
the same period;
3) Separation pay equal to one month's salary for every year of petitioner's
continuous service with the private respondent starting with her job at the
Belfront Hotel;
4) Full backwages, without qualification or deduction, from the date of
petitioner's illegal dismissal up to the date of promulgation of this decision
pursuant to our ruling in Bustamante vs. NLRC. 34
5) P1,000.00.
ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SPECIAL FIRST DIVISION
G.R. No. 110524

July 29, 2002

DOUGLAS MILLARES and ROGELIO LAGDA, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, TRANS-GLOBAL

MARITIME AGENCY, INC. and ESSO INTERNATIONAL SHIPPING CO.,

LTD. respondents.
RESOLUTION
KAPUNAN, J.:
On March 14, 2000, the Court promulgated its decision in the above-entitled
case, ruling in favor of the petitioners. The dispositive portion reads, as
follows:
WHEREFORE, premises considered, the assailed Decision, dated June
1, 1993, of the National Labor Relations Commission is
hereby REVERSED and SET ASIDE and a new judgment is hereby
rendered ordering the private respondents to:
(1) Reinstate petitioners Millares and Lagda to their former positions
without loss of seniority rights, and to pay full backwages computed
from the time of illegal dismissal to the time of actual reinstatement;
(2) Alternatively, if reinstatement is not possible, pay petitioners
Millares and Lagda separation pay equivalent to one month's salary for
every year of service; and,
(3) Jointly and severally pay petitioners One Hundred Percent (100%) of
their total credited contributions as provided under the Consecutive
Enlistment Incentive Plan.
SO ORDERED.1
A motion for reconsideration was consequently filed2 by the private
respondents to which petitioners filed an Opposition thereto.3
In a Minute Resolution dated June 28, 2000, the Court resolved to deny the
motion for reconsideration with finality.4
Subsequently, the Filipino Association for Mariners Employment, Inc. (FAME)
filed a Motion for Leave to Intervene and to Admit a Motion for
Reconsideration in Intervention.
Private respondents, meanwhile, also filed a Motion for Leave to File a
Second Motion for Reconsideration of our decision.
In both motions, the private respondents and FAME respectively pray in the
main that the Court reconsider its ruling that "Filipino seafarers are
considered regular employees within the context of Article 280 of the Labor

Code." They claim that the decision may establish a precedent that will
adversely affect the maritime industry.
The Court resolved to set the case for oral arguments to enable the parties to
present their sides.
To recall, the facts of the case are, as follows:
Petitioner Douglas Millares was employed by private respondent ESSO
International Shipping Company LTD. (Esso International, for brevity)
through its local manning agency, private respondent Trans-Global
Maritime Agency, Inc. (Trans-Global, for brevity) on November 16, 1968
as a machinist. In 1975, he was promoted as Chief Engineer which
position he occupied until he opted to retire in 1989. He was then
receiving a monthly salary of US $1,939.00.
On June 13, 1989, petitioner Millares applied for a leave of absence for
the period July 9 to August 7, 1989. In a letter dated June 14, 1989,
Michael J. Estaniel, President of private respondent Trans-Global,
approved the request for leave of absence. On June 21, 1989,
petitioner Millares wrote G.S. Hanly, Operations Manager of Exxon
International Co., (now Esso International) through Michael J. Estaniel,
informing him of his intention to avail of the optional retirement plan
under the Consecutive Enlistment Incentive Plan (CEIP) considering
that he had already rendered more than twenty (20) years of
continuous service. On July 13, 1989 respondent Esso International,
through W.J. Vrints, Employee Relations Manager, denied petitioner
Millares' request for optional retirement on the following grounds, to
wit: (1) he was employed on a contractual basis; (2) his contract of
enlistment (COE) did not provide for retirement before the age of sixty
(60) years; and (3) he did not comply with the requirement for claiming
benefits under the CEIP, i.e., to submit a written advice to the company
of his intention to terminate his employment within thirty (30) days
from his last disembarkation date.
On August 9, 1989, petitioner Millares requested for an extension of his
leave of absence from August 9 to 24, 1989. On August 19, 1989, Roy
C. Palomar, Crewing Manager, Ship Group A, Trans-global, wrote
petitioner Millares advising him that respondent Esso International "has
corrected the deficiency in its manpower requirement specifically in
the Chief Engineer rank by promoting a First Assistant Engineer to this
position as a result of (his) previous leave of absence which expired
last August 8, 1989. The adjustment in said rank was required in order
to meet manpower schedules as a result of (his) inability."

On September 26, 1989, respondent Esso International, through H.

Regenboog, Personnel Administrator, advised petitioner Millares that in
view of his absence without leave, which is equivalent to abandonment
of his position, he had been dropped from the roster of crew members
effective September 1, 1989.
On the other hand, petitioner Lagda was employed by private
respondent Esso International as wiper/oiler in June 1969. He was
promoted as Chief Engineer in 1980, a position he continued to occupy
until his last COE expired on April 10, 1989. He was then receiving a
monthly salary of US$1,939.00.
On May 16, 1989, petitioner Lagda applied for a leave of absence from
June 19, 1989 up to the whole month of August 1989. On June 14,
1989, respondent Trans-Global's President, Michael J. Estaniel,
approved petitioner Lagda's leave of absence from June 22, 1989 to
July 20, 1989 and advised him to report for re-assignment on July 21,
1989.
On June 26, 1989, petitioner Lagda wrote a letter to G.S. Stanley,
Operations Manager of respondent Esso International, through
respondent Trans-Global's President Michael J. Estaniel, informing him
of his intention to avail of the optional early retirement plan in view of
his twenty (20) years continuous service in the complaint.
On July 13, 1989, respondent Trans-global denied petitioner Lagda's
request for availment of the optional early retirement scheme on the
same grounds upon which petitioner Millares request was denied.
On August 3, 1989, he requested for an extension of his leave of
absence up to August 26, 1989 and the same was approved. However,
on September 27, 1989, respondent Esso International, through H.
Regenboog, Personnel Administrator, advised petitioner Lagda that in
view of his "unavailability for contractual sea service," he had been
dropped from the roster of crew members effective September 1,
1989.
On October 5, 1989, petitioners Millares and Lagda filed a complaintaffidavit, docketed as POEA (M) 89-10-9671, for illegal dismissal and
non-payment of employee benefits against private respondents Esso
International and Trans-Global, before the POEA.5
On July 17, 1991, the POEA rendered a decision dismissing the complaint for
lack of merit.

On appeal to the NLRC, the decision of the POEA was affirmed on June 1,
1993 with the following disquisition:
The first issue must be decided in the negative. Complainantsappellants, as seamen and overseas contract workers are not covered
by the term "regular employment" as defined under Article 280 of the
Labor Code. The POEA, which is tasked with protecting the rights of the
Filipino workers for overseas employment to fair and equitable
recruitment and employment practices and to ensure their welfare,
prescribes a standard employment contract for seamen on board
ocean-going vessels for a fixed period but in no case to exceed twelve
(12) months (Part 1, Sec. C). This POEA policy appears to be in
consonance with the international maritime practice. Moreover, the
Supreme Court in Brent School, Inc. vs. Zamora, 181 SCRA 702, had
held that a fixed term is essential and natural appurtenance of
overseas employment contracts to which the concept of regular
employment with all that it implies is not applicable, Article 280 of the
Labor Code notwithstanding. There is, therefore, no reason to disturb
the POEA Administrator's finding that complainants-appellants were
hired on a contractual basis and for a definite period. Their
employment is thus governed by the contracts they sign each time
they are re-hired and is terminated at the expiration of the contract
period.6
Undaunted, the petitioners elevated their case to this Court7 and successfully
obtained the favorable action, which is now vehemently being assailed.
At the hearing on November 15, 2000, the Court defined the issues for
resolution in this case, namely:
I. ARE PETITIONERS REGULAR OR CONTRACTUAL EMPLOYEES WHOSE
EMPLOYMENTS ARE TERMINATED EVERYTIME THEIR CONTRACTS OF
EMPLOYMENT EXPIRE?
II. ASSUMING THAT PETITIONERS ARE REGULAR EMPLOYEES, WERE
THEY DISMISSED WITHOUT JUST CAUSE SO AS TO BE ENTITLED TO
REINSTATEMENT AND BACKWAGES, INCLUDING PAYMENT OF 100% OF
THEIR TOTAL CREDITED CONTRIBUTIONS TO THE CONSECUTIVE
ENLISTMENT INCENTIVE PLAN (CEIP)?
III. DOES THE PROVISION OF THE POEA STANDARD CONTRACT FOR
SEAFARERS ON BOARD FOREIGN VESSELS (SEC. C., DURATION OF
CONTRACT) PRECLUDE THE ATTAINMENT BY SEAMEN OF THE STATUS
OF REGULAR EMPLOYEES?

IV. DOES THE DECISION OF THE COURT IN G.R. NO. 110524

CONTRAVENE INTERNATIONAL MARITIME LAW, ALLEGEDLY PART OF THE
LAW OF THE LAND UNDER SECTION 2, ARTICLE II OF THE
CONSTITUTION?
V. DOES THE SAME DECISION OF THE COURT CONSTITUTE A
DEPARTURE FROM ITS RULING INCOYOCA VS. NLRC (G.R. NO. 113658,
March 31, 1995)?8
In answer to the private respondents' Second Motion for Reconsideration and
to FAME's Motion for Reconsideration in Intervention, petitioners maintain
that they are regular employees as found by the Court in the March 14, 2000
Decision. Considering that petitioners performed activities which are usually
necessary or desirable in the usual business or trade of private respondents,
they should be considered as regular employees pursuant to Article 280, Par.
1 of the Labor Code.9 Other justifications for this ruling include the fact that
petitioners have rendered over twenty (20) years of service, as admitted by
the private respondents;10 that they were recipients of Merit Pay which is an
express acknowledgment by the private respondents that petitioners are
regular and not just contractual employees;11 that petitioners were registered
under the Social Security System (SSS).
The petitioners further state that the case of Coyoca v. NLRC12 which the
private respondents invoke is not applicable to the case at bar as the factual
milieu in that case is not the same. Furthermore, private respondents' fear
that our judicial pronouncement will spell the death of the manning industry
is far from real. Instead, with the valuable contribution of the manning
industry to our economy, these seafarers are supposed to be considered as
"Heroes of the Republic" whose rights must be protected.13 Finally, the first
motion for reconsideration has already been denied with finality by this Court
and it is about time that the Court should write finis to this case.
The private respondents, on the other hand, contend that: (a) the ruling
holding petitioners as regular employees was not in accord with the decision
in Coyoca v. NLRC, 243 SCRA 190; (b) Art. 280 is not applicable as what
applies is the POEA Rules and Regulations Governing Overseas Employment;
(c) seafarers are not regular employees based on international maritime
practice; (d) grave consequences would result on the future of seafarers and
manning agencies if the ruling is not reconsidered; (e) there was no dismissal
committed; (f) a dismissed seafarer is not entitled to back wages and
reinstatement, that being not allowed under the POEA rules and the Migrant
Workers Act; and, (g) petitioners are not entitled to claim the total amount
credited to their account under the CEIP.14
Meanwhile, Intervenor Filipino Association of Mariners Employment (FAME)
avers that our decision, if not reconsidered, will have negative consequences

in the employment of Filipino Seafarers overseas which, in turn, might lead to

the demise of the manning industry in the Philippines. As intervenor FAME
puts it:
xxx
7.1 Foreign principals will start looking for alternative sources for
seafarers to man their ships. AS reported by the BIMCO/ISF study,
"there is an expectancy that there will be an increasing demand for
(and supply of) Chinese seafarers, with some commentators
suggesting that this may be a long-term alternative to the Philippines."
Moreover, "the political changes within the former Eastern Bloc have
made new sources of supply available to the international market."
Intervenor's recent survey among its members shows that 50
Philippine manning companies had already lost some 6,300 slots to
other Asian, East Europe and Chinese competition for the last two
years;
7.2 The Philippine stands to lose an annual foreign income estimated
at U.S. DOLLARS TWO HUNDRED SEVENTY FOUR MILLION FIVE
HUNDRED FORTY NINE THOUSAND (US$ 274,549,000.00) from the
manning industry and another US DOLLARS FOUR BILLION SIX
HUNDRED FIFTY MILLION SEVEN HUNDRED SIX THOUSAND (US$
4,650,760,000.00) from the land-based sector if seafarers and equally
situated land-based contract workers will be declared regular
employees;
7.3 Some 195,917 (as of 1998) deployed overseas Filipino seafarers
will be rendered jobless should we lose the market;
7.4 Some 360 manning agencies (as of 30 June 2000) whose principals
may no longer be doing business with them will close their shops;
7.5 The contribution to the Overseas Worker's Welfare Administration
by the sector, which is USD 25.00 per contract and translates to US
DOLLARS FOUR MILLION (US$ 4,000,000.00)annually, will be drastically
reduced. This is not to mention the processing fees paid to POEA,
Philippine Regulatory Commission (PRC), Department of Foreign Affairs
(DFA) and Maritime Industry Authority (MARINA) for the documentation
of these seafarers;
7.6 Worst, some 195,917 (as of 1998) families will suffer socially and
economically, as their breadwinners will be rendered jobless; and
7.7 It will considerably slow down the government's program of
employment generation, considering that, as expected foreign

employers will now avoid hiring Filipino overseas contract workers as

they will become regular employees with all its concomitant effects. 15
Significantly, the Office of the Solicitor General, in a departure from its
original position in this case, has now taken the opposite view. It has
expressed its apprehension in sustaining our decision and has called for a reexamination of our ruling.16
Considering all the arguments presented by the private respondents, the
Intervenor FAME and the OSG, we agree that there is a need to reconsider
our position with respect to the status of seafarers which we considered as
regular employees under Article 280 of the Labor Code. We, therefore,
partially grant the second motion for reconsideration.
In Brent School Inc. v. Zamora,17 the Supreme Court stated that Article 280 of
the Labor Code does not apply to overseas employment.
In the light of the foregoing description of the development of the
provisions of the Labor Code bearing on term or fixed-period
employment that the question posed in the opening paragraph of this
opinion should now be addressed. Is it then the legislative intention to
outlaw stipulations in employment contracts laying down a definite
period therefor? Are such stipulations in essence contrary to public
policy and should not on this account be accorded legitimacy?
On the other hand, there is the gradual and progressive elimination of
references to term or fixed-period employment in the Labor Code, and
the specific statement of the rule that:
Regular and Casual Employment The provisions of written
agreement to the contrary notwithstanding and regardless of the
oral agreement of the parties, an employment shall be deemed
to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual
business or trade of the employer except where the employment
has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the
time of the engagement of the employee or where the work or
service to be employee 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.
There is, on the other hand, the Civil Code, which has always
recognized, and continues to recognize, the validity and propriety of
contracts and obligations with a fixed or definite period, and imposes
no restraints on the freedom of the parties to fix the duration of a
contract, whatever its object, be it specific, goods or services, except
the general admonition against stipulations contrary to law, morals,
good customs, public order or public policy. Under the Civil code,
therefore, and as a general proposition, fixed-term employment
contracts are not limited, as they are under the present Labor Code, to
those by natural seasonal or for specific projects with predetermined
dates of completion; they also include those to which the parties by
free choice have assigned a specific date of termination.
Some familiar examples may be cited of employment contract
which may be neither for seasonal work nor for specific
projects, but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to
which, whatever the nature of the engagement, the concept of
regular employment with all that it implies does not appear
ever to have been applied. Article 280 of the Labor Code
notwithstanding also appointments to the positions of dean, assistant
dean, college secretary, principal, and other administrative offices in
educational institutions, which are by practice or tradition rotated
among the faculty members, and where fixed terms are a necessity
without which no reasonable rotation would be possible. Similarly,
despite the provisions of Article 280, Policy Instructions. No. 8 of the
Minister of Labor implicitly recognize that certain company officials
may be elected for what would amount to fix periods, at the expiration
of which they would have to stand down, in providing that these
officials, xxx may lose their jobs as president, executive vice-president
or vice-president, etc. because the stockholders or the board of
directors for one reason or another did not reelect them.
There can of course be no quarrel with the proposition that where from
the circumstances it is apparent that periods have been imposed to
preclude acquisition of tenurial security by the employee, they should
be struck down or disregard as contrary to public policy, morals, etc.
But where no such intent to circumvent the law is shown, or stated
otherwise, where the reason for the law does not exists, e.g., where it
is indeed the employee himself who insists upon a period or where the
nature of the engagement is such that, without being seasonal or for a
specific project, a definite date of termination is a sine qua non, would
an agreement fixing a period be essentially evil or illicit, therefore

anathema? Would such an agreement come within the scope of Article

280 which admittedly was enacted "to prevent the circumvention of
the right of the employee to be secured in xxx his employment
As it is evident from even only the three examples already given that
Article 280 of the Labor Code, under a narrow and literal interpretation,
not only fails to exhaust the gamut of employment contracts to which
the lack of a fixed period would be an anomaly, but would also appear
to restrict, without reasonable distinctions, the right of an employee to
freely stipulate within his employer the duration of his engagement, it
logically follows that such a literal interpretation should be eschewed
or avoided. The law must be given a reasonable interpretation, to
preclude absurdity in its application. Outlawing the whole concept of
term employment and subverting to boot the principle of freedom of
contract to remedy the evil of employer's using it as a means to
prevent their employees from obtaining security of tenure is like
cutting off the nose to spite the face or, more relevantly, curing a
headache by lopping of the head.
It is a salutary principle in statutory construction that there exists
a valid presumption that undesirable consequences were never
intended by a legislative measure, and that a construction of
which the statute is fairly susceptible is favored, which will avoid
all objectionable, mischievous, indefensible, wrongful, evil, and
injurious consequences."
Nothing is better settled than that courts are not to give words a
meaning which would lead to absurd or unreasonable
consequences. That is a principle that goes back to In re Allen
decided on October 27, 1902, where it was held that a literal
interpretation is to be rejected if it would be unjust or lead to
absurd results. That is a strong argument against its adoption.
The words of Justice Laurel are particularly apt. Thus: "the
appellants would lead to an absurdity is another argument for
rejecting it."
xxx We have, here, then a case where the true intent of the law
is clear that calls for the application of the cardinal rule of
statutory construction that such intent of spirit must prevail over
the letter thereof, for whatever is within the spirit of a statute is
within the statute, since adherence to the letter would result in
absurdity, injustice and contradictions and would defeat the plain
and vital purpose of the statute.
Accordingly, and since the entire purpose behind the
development of legislation culminating in the present Article

280 of the Labor code clearly appears to have been, as already

observed, to prevent circumvention of the employee's right to
be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral
agreements conflicting with the concept of regular
employment as defined therein should be construed to refer to
the substantive evil that the Code itself has singled out;
agreements entered into precisely to circumvent security of
tenure. It should have no application to instances where a
fixed period of employment was agreed upon knowingly and
voluntarily by the parties, without any force, duress or
improper pressure being brought to bear upon the employee
and absent any other circumstances vitiating his consent, or
where it satisfactorily appears that the employer and
employee dealt with each other on more or less equal terms
with no moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its purview, the law
would be made to apply to purposes other than those explicitly stated
by its framers; it thus becomes pointless and arbitrary, unjust in its
effects and apt to lead to absurd and unintended consequences.
Again, in Pablo Coyoca v. NLRC,18 the Court also held that a seafarer is not a
regular employee and is not entitled to separation pay. His employment is
governed by the POEA Standard Employment Contract for Filipino Seamen.
x x x. In this connection, it is important to note that neither does the
POEA standard employment contract for Filipino seamen provide for
such benefits.
As a Filipino seaman, petitioner is governed by the Rules and
Regulations Governing Overseas Employment and the said
Rules do not provide for separation or termination pay. What is
embodied in petitioner's contract is the payment of compensation
arising from permanent partial disability during the period of
employment. We find that private respondent complied with the terms
of contract when it paid petitioner P42,315.00 which, in our opinion, is
a reasonable amount, as compensation for his illness.
Lastly, petitioner claims that he eventually became a regular employee
of private respondent and thus falls within the purview of Articles 284
and 95 of the Labor Code. In support of this contention, petitioner cites
the case of Worth Shipping Service, Inc., et al. v. NLRC, et al., wherein
we held that the crew members of the shipping company had attained
regular status and thus, were entitled to separation pay. However, the
facts of said case differ from the present. In Worth, we held that the
principal and agent had "operational control and management" over

the MV Orient Carrier and thus, were the actual employers of their crew
members.
From the foregoing cases, it is clear that seafarers are considered contractual
employees. They can not be considered as regular employees under Article
280 of the Labor Code. Their employment is governed by the contracts they
sign everytime they are rehired and their employment is terminated when
the contract expires. Their employment is contractually fixed for a certain
period of time. They fall under the exception of Article 280 whose
employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of
engagement of the employee or where the work or services to be performed
is seasonal in nature and the employment is for the duration of the
season.19 We need not depart from the rulings of the Court in the two
aforementioned cases which indeed constitute stare decisis with respect to
the employment status of seafarers.
Petitioners insist that they should be considered regular employees, since
they have rendered services which are usually necessary and desirable to
the business of their employer, and that they have rendered more than
twenty(20) years of service. While this may be true, the Brent case has,
however, held that there are certain forms of employment which also require
the performance of usual and desirable functions and which exceed one year
but do not necessarily attain regular employment status under Article
280.20 Overseas workers including seafarers fall under this type of
employment which are governed by the mutual agreements of the parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen
are governed by the Rules and Regulations of the POEA. The Standard
Employment Contract governing the employment of All Filipino seamen on
Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C
specifically provides that the contract of seamen shall be for a fixed period.
And in no case should the contract of seamen be longer than 12 months. It
reads:
Section C. Duration of Contract
The period of employment shall be for a fixed period but in no case to
exceed 12 months and shall be stated in the Crew Contract. Any
extension of the Contract period shall be subject to the mutual consent
of the parties.
Moreover, it is an accepted maritime industry practice that employment of
seafarers are for a fixed period only. Constrained by the nature of their
employment which is quite peculiar and unique in itself, it is for the mutual
interest of both the seafarer and the employer why the employment status

must be contractual only or for a certain period of time. Seafarers spend

most of their time at sea and understandably, they can not stay for a long
and an indefinite period of time at sea.21 Limited access to shore society
during the employment will have an adverse impact on the seafarer. The
national, cultural and lingual diversity among the crew during the COE is a
reality that necessitates the limitation of its period.22
Petitioners make much of the fact that they have been continually re-hired or
their contracts renewed before the contracts expired (which has admittedly
been going on for twenty (20) years). By such circumstance they claim to
have acquired regular status with all the rights and benefits appurtenant to
it.
Such contention is untenable. Undeniably, this circumstance of continuous
re-hiring was dictated by practical considerations that experienced crew
members are more preferred. Petitioners were only given priority or
preference because of their experience and qualifications but this does not
detract the fact that herein petitioners are contractual employees. They can
not be considered regular employees. We quote with favor the explanation of
the NLRC in this wise:
xxx The reference to "permanent" and "probationary" masters and
employees in these papers is a misnomer and does not alter the fact
that the contracts for enlistment between complainants-appellants and
respondent-appellee Esso International were for a definite periods of
time, ranging from 8 to 12 months. Although the use of the terms
"permanent" and "probationary" is unfortunate, what is really meant is
"eligible for-re-hire". This is the only logical conclusion possible
because the parties cannot and should not violate POEA's requirement
that a contract of enlistment shall be for a limited period only; not
exceeding twelve (12)months.23
From all the foregoing, we hereby state that petitioners are not considered
regular or permanent employees under Article 280 of the Labor Code.
Petitioners' employment have automatically ceased upon the expiration of
their contracts of enlistment (COE). Since there was no dismissal to speak of,
it follows that petitioners are not entitled to reinstatement or payment of
separation pay or backwages, as provided by law.
With respect to the benefits under the Consecutive Enlistment Incentive Plan
(CEIP), we hold that the petitioners are still entitled to receive 100% of the
total amount credited to him under the CEIP. Considering that we have
declared that petitioners are contractual employees, their compensation and
benefits are covered by the contracts they signed and the CEIP is part and
parcel of the contract.

The CEIP was formulated to entice seamen to stay long in the company. As
the name implies, the program serves as an incentive for the employees to
renew their contracts with the same company for as long as their services
were needed. For those who remained loyal to them, they were duly
rewarded with this additional remuneration under the CEIP, if eligible. While
this is an act of benevolence on the part of the employer, it can not,
however, be denied that this is part of the benefits accorded to the
employees for services rendered. Such right to the benefits is vested upon
them upon their eligibility to the program.
The CEIP provides that an employee becomes covered under the Plan when
he completes thirty-six (36) months or an equivalent of three (3) years of
credited service with respect to employment after June 30, 1973.24 Upon
eligibility, an amount shall be credited to his account as it provides, among
others:
III. Distribution of Benefits
A. Retirement, Death and Disability
When the employment of an employee terminates because of his
retirement, death or permanent and total disability, a percentage of
the total amount credited to his account will be distributed to him (or
his eligible survivor(s) in accordance with the following:

Reason for Termination

Percentage

a) Attainment of mandatory
retirement age of 60.

100%

b) Permanent and total disability,

while under contract, that is not due
to accident or misconduct.

100%

c) Permanent and total disability,

while under contract, that is due to
accident, and not due to misconduct.

100%

xxx

B. Voluntary Termination
When an employee voluntary terminates his employment with at least
36 months of credited service without any misconduct on his part, 18
percent of the total amount credited to his account, plus an additional
of one percent for each month (up to a maximum of 164 months of
credited service in excess of 36, will be distributed to him provided (1)
the employee has completed his last Contract of Enlistment and (2)
employee advises the company in writing, within 30 days, from his last
disembarkation date, of his intention to terminate his employment. (To
advise the Company in writing means that the original letter must be
sent to the Company's agent in the Philippines, a copy sent to the
Company in New York).
xxx
C. Other Terminations
When the employment of an employee is terminated by the Company
for a reason other than one in A and B above, without any misconduct
on his part, a percentage of the total amount credited to his account
will be distributed to him in accordance with the following.

Credited Service

Percentage

36 months

50%

48 "

75%

60 "

100%

When the employment of an employee is terminated due to his poorperformance, misconduct, unavailability, etc., or if employee is not
offered re-engagement for similar reasons, no distribution of any
portion of employee's account will ever be made to him (or his eligible
survivor[s]).
It must be recalled that on June 21, 1989, Millares wrote a letter to his
employer informing his intention to avail of the optional retirement plan
under the CEIP considering that he has rendered more than twenty (20)

years of continuous service. Lagda, likewise, manifested the same intention

in a letter dated June 26, 1989. Private respondent, however, denied their
requests for benefits under the CEIP since: (1) the contract of enlistment
(COE) did not provide for retirement before 60 years of age; and that (2)
petitioners failed to submit a written notice of their intention to terminate
their employment within thirty (30) days from the last disembarkation date
pursuant to the provision on Voluntary Termination of the CEIP. Petitioners
were eventually dropped from the roster of crew members and on grounds of
"abandonment" and "unavailability for contractual sea service", respectively,
they were disqualified from receiving any benefits under the CEIP.25
In our March 14, 2000 Decision, we, however, found that petitioners Millares
and Lagda were not guilty of "abandonment" or "unavailability for
contractual sea service," as we have stated:
The absence of petitioners was justified by the fact that they secured
the approval of private respondents to take a leave of absence after
the termination of their last contracts of enlistment. Subsequently,
petitioners sought for extensions of their respective leaves of absence.
Granting arguendo that their subsequent requests for extensions were
not approved, it cannot be said that petitioners were unavailable or
had abandoned their work when they failed to report back for
assignment as they were still questioning the denial of private
respondents of their desire to avail of the optional early retirement
policy, which they believed in good faith to exist.26
Neither can we consider petitioners guilty of poor performance or misconduct
since they were recipients of Merit Pay Awards for their exemplary
performances in the company.
Anent the letters dated June 21, 1989 (for Millares) and June 26, 1989 (for
Lagda) which private respondent considered as belated written notices of
termination, we find such assertion specious. Notwithstanding, we could
conveniently consider the petitioners eligible under Section III-B of the CEIP
(Voluntary Termination), but this would, however, award them only a measly
amount of benefits which to our mind, the petitioners do not rightfully
deserve under the facts and circumstances of the case. As the CEIP provides:
III. Distribution of Benefits
xxx
E. Distribution of Accounts

When an employee terminates under conditions that would qualify for

a distribution of more than one specified in A, B or C above, the largest
single amount, only, will be distributed.
Since petitioners' termination of employment under the CEIP do not fall
under Section III-A (Retirement, Death and Disability) or Section III-B
(Voluntary Termination), nor could they be they be considered under the
second paragraph of Section III-C, as earlier discussed; it follows that their
termination falls under the first paragraph of Section III-C for which they are
entitled to 100% of the total amount credited to their accounts. The private
respondents can not now renege on their commitment under the CEIP to
reward deserving and loyal employees as the petitioners in this case.
In taking cognizance of private respondent's Second Motion for
Reconsideration, the Court hereby suspends the rules to make them
comformable to law and justice and to subserve an overriding public interest.
IN VIEW OF THE FOREGOING, the Court Resolved to Partially
GRANT Private Respondent's Second Motion for Reconsideration and
Intervenor FAMES' Motion for Reconsideration in Intervention. The Decision of
the National Labor Relations Commission dated June 1, 1993 is
hereby REINSTATED with MODIFICATION. The Private Respondents, TransGlobal Maritime Agency, Inc. and Esso International Shipping Co., Ltd. are
hereby jointly and severally ORDERED to pay petitioners One Hundred
Percent (100%) of their total credited contributions as provided under the
Consecutive Enlistment Incentive Plan(CEIP).
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 192473

October 11, 2010

S.I.P. FOOD HOUSE and MR. and MRS. ALEJANDRO PABLO, Petitioners,
vs.
RESTITUTO BATOLINA, ALMER CALUMPISAN, ARIES MALGAPO,
ARMANDO MALGAPO, FLORDELIZA MATIAS, PERCIVAL MATIAS,
ARWIN MIRANDA, LOPE MATIAS, RAMIL MATIAS, ALLAN STA.
INES,Respondents.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 which seeks to nullify
the decision2 and resolution3 of the Court of Appeals (CA), promulgated on
November 27, 2009 and May 31, 2010, respectively, in CA-G.R. SP No.
101651.4
The Antecedents
The facts are laid out in the assailed CA Decision and are summarized below.
The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by the
employees of the Government Service Insurance System (GSIS). Incidental to
its purpose, GMPC wanted to operate a canteen in the new GSIS Building, but
had no capability and expertise in this area. Thus, it engaged the services of
the petitioner S.I.P. Food House (SIP), owned by the spouses Alejandro and
Esther Pablo, as concessionaire. The respondents Restituto Batolina and nine
(9) others (the respondents) worked as waiters and waitresses in the
canteen.
In February 2004, GMPC terminated SIPs "contract as GMPC concessionaire,"
because of GMPCs decision "to take direct investment in and management
of the GMPC canteen;" SIPs continued refusal to heed GMPCs directives for
service improvement; and the alleged interference of the Pablos two sons
with the operation of the canteen.5 The termination of the concession

contract caused the termination of the respondents employment, prompting

them to file a complaint for illegal dismissal, with money claims, against SIP
and the spouses Pablo.
The Compulsory Arbitration Proceedings
The Parties Positions
The respondents alleged before the labor arbiter that they were SIP
employees, who were illegally dismissed sometime in February and March
2004. SIP did not implement Wage Order Nos. 5 to 11 for the years 1997 to
2004. They did not receive overtime pay although they worked from 6:30 in
the morning until 5:30 in the afternoon, or other employee benefits such as
service incentive leave, and maternity benefit (for their co-employee
Flordeliza Matias). Their employee contributions were also not remitted to
the Social Security System.
To avoid liability, SIP argued that it operated the canteen in behalf of GMPC
since it had no authority by itself to do so. The respondents were not its
employees, but GMPCs, as shown by their identification cards. It claimed
that GMPC terminated its concession and prevented it from having access to
the canteen premises as GSIS personnel locked the place; GMPC then
operated the canteen on its own, absorbing the respondents for the purpose
and assigning them to the same positions they held with SIP. It maintained
that the respondents were not dismissed, but were merely prevented by
GMPC from performing their functions. For this reason, SIP posited that the
legal obligations that would arise under the circumstances have to be
shouldered by GMPC.
The Labor Arbiters Decision
Labor Arbiter Francisco A. Robles rendered a Decision on June 30, 2005
dismissing the complaint for lack of merit.6 He found that the respondents
were GMPCs employees, and not SIPs, as there existed a labor-only
contracting relationship between the two entities. The labor arbiter, however,
opined that even if respondents were considered as SIPs employees, their
dismissal would still not be illegal because the termination of its contract to
operate the canteen came as a surprise and was against its will, rendering
the canteens closure involuntary.
Arbiter Robles likewise denied the employees money claims. He ruled that
SIP is not liable for unpaid salaries because it had complied with the
minimum statutory requirement and had extended better benefits than

GMPC; although they were paid only P160.00 to PP220.00 daily, the
employees were provided with free board and lodging seven (7) days a week.
Neither were the respondents entitled to overtime pay as it was highly
improbable that they regularly worked beyond eight (8) hours every day for a
canteen that closes after 5:30 p.m.
The respondents brought their case, on appeal, to the National Labor
Relations Commission (NLRC).
The NLRC Ruling
In its Decision of August 30, 2007,7 the NLRC found that SIP was the
respondents employer, but it sustained the labor arbiters ruling that the
employees were not illegally dismissed as the termination of SIPs concession
to operate the canteen constituted an authorized cause for the severance of
employer-employee relations. Furthermore, the respondents admission that
they applied with GMPC when it terminated SIPs concession is an indication
that they were employees of SIP and that they were terminating their
employment relationship with it. As the labor arbiter did, the NLRC regarded
the closure of SIPs canteen operations involuntary, thus, negating the
employees entitlement to separation pay.8
For failure of SIP to present proof of compliance with the law on the minimum
wage, 13th month pay, and service incentive leave, the NLRC awarded the
respondents a total of P952,865.53 in salary and 13th month pay
differentials and service incentive leave pay.9 The NLRC, however, denied the
employees claim for overtime pay, holding that the respondents failed to
present evidence that they rendered two hours overtime work every day of
their employment with SIP.
SIP moved for, but failed to secure, a reconsideration of the NLRC decision. It
then elevated the case to the CA through a petition for certiorari charging
the NLRC with grave abuse of discretion in rendering the assailed decision.
Essentially, SIP argued that the NLRC erred in declaring that it was the
respondents employer who is liable for their money claims despite its being
a labor-only contractor of GMPC.
The CA Decision
In its Decision promulgated on November 27, 2009,10 the CA granted the
petition in part. While it affirmed the award, it found merit in SIPs objection
to the NLRC computation and assumption that a month had twenty-six (26)
working days, instead of twenty (20) working days. The CA recognized that in

a government agency such as the GSIS, there are only 20 official business
days in a month. It noted that the respondents presented no evidence that
the employees worked even outside official business days and hours. It
accordingly remanded the case for a recomputation of the award.
Finding substantial evidence in the records supporting the NLRC conclusions,
the CA brushed aside SIPs argument that it could not have been the
employer of the respondents because it was a mere labor-only contractor of
GMPC. It sustained the NLRCs findings that SIP was the respondents
employer.
SIP moved for reconsideration, but the CA denied the motion on May 31,
2010.11 Hence, the present petition.
The Petition
SIP seeks a reversal of the appellate courts ruling that it was the employer
of the respondents, claiming that it was merely a labor-only contractor of
GMPC.
It insists that it could not be the respondents employer as it was not allowed
to operate a canteen in the GSIS building. It was the GMPC who had the
authority to undertake the operation. GMPC only engaged SIPs services
because GMPC had no capability or competence in the area. SIP points out
that GMPC assumed responsibility for its acts in operating the canteen; all
businesses it transacted were under GMPCs name, as well as the business
registration and other permits of the canteen, sales receipts and vouchers for
food purchased from the canteen; the employees were issued individual ID
cards by GMPC. In sum, SIP contends that its arrangement with GMPC was
one of contractor/subcontractor governed by Article 106 of the Labor Code.
Lastly, it submits that it was not registered with the Department of Labor and
Employment as an independent contractor and, therefore, it is presumed to
be a labor-only contractor.
The Respondents Comment
Without being required by the Court, the respondents filed their
comment to SIPs petition on August 3, 2010.12 They question the
propriety of the petition for review on certiorari raising only questions of fact
and not of law as required by Rule 45 of the Rules of Court. This
notwithstanding, they submit that the CA committed no error in upholding
the NLRCs findings of facts which established that SIP was the real employer
of Batolina and the other complainants. Thus, SIP was liable to them for their

statutory benefits, although it was not made to answer for their lost
employment due to the involuntary nature of the canteens closure.
The respondents pray that the petition be dismissed for lack of merit.
The Courts Ruling
We first resolve the alleged impropriety of the petition.13 While it is the
general rule that the Court may not review factual findings of the CA, we
deem it proper to depart from the rule and examine the facts of the case in
view of the conflicting factual findings of the labor arbiter, on one hand, and
the NLRC and the CA, on the other.14 We, therefore, hold the respondents
position on this point unmeritorious.
We now consider the merits of the case.
The employer-employee relationship issue
We affirm the CA ruling that SIP was the respondents employer. The NLRC
decision, which the CA affirmed, states:
Respondents have been the concessionaire of GMPC canteen for nine (9)
years (Annex "A" of Complainants Sur-Rejoinder., Records, 302). During
this period, complainants were employed at the said canteen (Sinumpaang
Salaysay of complainants, Records, p. 156). On February 29, 2004,
respondents concession with GMPC was terminated (Annex "C" of
Respondents Answer and Position Paper, Records, p. 77). When respondents
were prevented from entering the premises as a result of the termination of
their concession, they sent a protest letter dated April 14, 2004 to GMPC thru
their counsel. Pertinent portion of the letter:
We write this letter in behalf of our client Mr. & Mrs. Alejandro C. Pablo, the
concessionaires who used to occupy and/or rent the area for a
cafeteria/canteen at the 2nd Floor of the GSIS Building for the past several
years.
Last March 12, 2004, without any court writ or order, and with the aid of your
armed agents, you physically barredour clients & their
employees/helpers from entering the said premises and from performing
their usual duties of serving the food requirements of GSIS personnel and
others.
Clearly, no less than respondents, thru their counsel, admitted that
complainants herein were their employees.

That complainants were employees of respondents is further bolstered by

the fact that respondents do not deny that they were the ones who paid
complainants salary. When complainants charged them of underpayment,
respondents even interposed the defense of file (sic) board and lodging given
to complainants.
Furthermore, these IDs issued to complainants bear the signature of
respondent Alejandro C. Pablo (Annexes "J", "K", "M" to "M-2" of
complainants Reply. . ., Records, pp. 285 to 290). Likewise, the memoranda
issued to complainants regarding their absences without leave were signed
by respondent Alejandro C. Pablo (Annexes A, C, E, & G, Ibid., Records, pp.
274, 276, 279, 282). All these pieces of evidence clearly show that
respondents are the employer of complainants. (Rollo, pp. 87-88.)
xxxx
The CA ruled out SIPs claim that it was a labor-only contractor or a mere
agent of GMPC. We agree with the CA; SIP and its proprietors could not be
considered as mere agents of GMPC because they exercised the essential
elements of an employment relationship with the respondents such as hiring,
payment of wages and the power of control, not to mention that SIP operated
the canteen on its own account as it paid a fee for the use of the building
and for the privilege of running the canteen. The fact that the respondents
applied with GMPC in February 2004 when it terminated its contract with SIP,
is another clear indication that the two entities were separate and distinct
from each other. We thus see no reason to disturb the CAs findings.
The respondentss money claims
We likewise affirm the CA ruling on the monetary award to Batolina and the
other complainants.1avvp++i1 The free board and lodging SIP furnished the
employees cannot operate as a set-off for the underpayment of their wages.
We held in Mabeza v. National Labor Relations Commission15 that the
employer cannot simply deduct from the employees wages the value of the
board and lodging without satisfying the following requirements: (1) proof
that such facilities are customarily furnished by the trade; (2) voluntary
acceptance in writing by the employees of the deductible facilities; and (3)
proof of the fair and reasonable value of the facilities charged. As the CA
aptly noted, it is clear from the records that SIP failed to comply with these
requirements.
On the collateral issue of the proper computation of the monetary award, we
also find the CA ruling to be in order. Indeed, in the absence of evidence that

the employees worked for 26 days a month, no need exists to recompute the
award for the respondents who were "explicitly claiming for their salaries and
benefits for the services rendered from Monday to Friday or 5 days a week or
a total of 20 days a month."16
In light of the foregoing, we find no merit in the petition.
WHEREFORE, premises considered, we hereby DISMISS the petition for
lack of merit. The assailed decision and resolution of the Court of Appeals in
CA-G.R. SP No. 101651, are AFFIRMED.
SO ORDERED.

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.
DECISION
MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006
Decision1 and the March 31, 2006 Resolution2 of the Court of Appeals (CA), in
CA-G.R. SP No. 00598 which affirmed with modification the March 31, 2004
Decision3 and December 15, 2004 Resolution4 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:
Sometime in 1996, and January 1997, private respondents Roldan Lopez
(Lopez for brevity) and Danilo Caete (Caete for brevity), and Edgardo
Zuiga (Zuiga for brevity) respectively, were hired by petitioner Lagon as
apprentice or trainee cable/lineman. The three were paid the full minimum
wage and other benefits but since they were only trainees, they did not
report for work regularly but came in as substitutes to the regular workers or
in undertakings that needed extra workers to expedite completion of work.
After their training, Zuiga, Caete and Lopez were engaged as project
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 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 re-applied in the
Racitelcom project of Lagon in Bulacan. Zuiga and Caete were reemployed. 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, nonpayment 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.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his
decision5 declaring that his office had jurisdiction to hear and decide the
complaint filed by private respondents. Referring to Rule IV, Sec. 1 (a) of the
NLRC Rules of Procedure prevailing at that time,6 the LA ruled that it had
jurisdiction because the "workplace," as defined in 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 to prohibit overtime work.7
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) Department Order No.
19, Series of 1993.8 The NLRC later denied9 the motion for
reconsideration10 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 dismissal. The CA
opined that it was the petitioners prerogative to grant or deny any request
for overtime work and that the private respondents act of leaving the
workplace after their request was denied was an act of abandonment.
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 March 31, 2006 Resolution.11
In this petition for review on certiorari,12 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
INSTANT CASE BY ANALOGY.13

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. They argued that the rulings in Agabon v.
NLRC14and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng
Wellcome-DFA15 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 re-examination 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 tribunals and
the CA concur. 16
As a general rule, on payment of wages, a party who alleges payment as a
defense has the burden of proving it.17Specifically 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 control of the employer.18
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 Code19 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 reasonable
value.20 Mere availment is not sufficient to allow deductions from employees
wages.21
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 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 Co.,22 the two terms were distinguished from one another in this wise:
"Supplements," therefore, constitute extra remuneration or special privileges
or benefits given to or received by the laborers over and above their ordinary
earnings or wages. "Facilities," on the other hand, are items of expense
necessary for the laborer's and his family's existence and subsistence so that
by express provision of law (Sec. 2[g]), they form part of the wage and when

furnished by the employer are deductible therefrom, since if they are not so
furnished, the laborer would 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 for which
it is given.23 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.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 157775

October 19, 2007

LEYTE IV ELECTRIC COOPERATIVE, INC., Petitioner,

vs.
LEYECO IV Employees Union-ALU, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the Resolution1 dated September 4, 2002 of the
Court of Appeals (CA) in CA-G.R. SP No. 72336 which dismissed outright
petitioner's Petition for Certiorari for adopting a wrong mode of appeal and
the CA Resolution2 dated February 28, 2003 which denied petitioner's Motion
for Reconsideration.
The facts:
On April 6, 1998, Leyte IV Electric Cooperative, Inc. (petitioner) and Leyeco IV
Employees Union-ALU (respondent) entered into a Collective Bargaining
Agreement (CBA)3 covering petitioner rank-and-file employees, for a period
of five (5) years effective January 1, 1998.
On June 7, 2000, respondent, through its Regional Vice-President, Vicente P.
Casilan, sent a letter to petitioner demanding holiday pay for all employees,
as provided for in the CBA.4
On June 20, 2000, petitioner, through its legal counsel, sent a letter-reply to
Casilan, explaining that after perusing all available pay slips, it found that it
had paid all employees all the holiday pays enumerated in the CBA.5
After exhausting the procedures of the grievance machinery, the parties
agreed to submit the issues of the interpretation and implementation of
Section 2, Article VIII of the CBA on the payment of holiday pay, for
arbitration of the National Conciliation and Mediation Board (NCMB), Regional
Office No. VIII in Tacloban City.6 The parties were required to submit their

respective position papers, after which the dispute was submitted for
decision.
While admitting in its Position Paper7 that the employees were paid all of the
days of the month even if there was no work, respondent alleged that it is
not prevented from making separate demands for the payment of regular
holidays concomitant with the provisions of the CBA, with its supporting
documents consisting of a letter demanding payment of holiday pay,
petitioner's reply thereto and respondent's rejoinder, a computation in the
amount of P1,054,393.07 for the unpaid legal holidays, and several pay slips.
Petitioner, on the other hand, in its Position Paper,8 insisted payment of the
holiday pay in compliance with the CBA provisions, stating that payment was
presumed since the formula used in determining the daily rate of pay of the
covered employees is Basic Monthly Salary divided by 30 days or Basic
Monthly Salary multiplied by 12 divided by 360 days, thus with said formula,
the employees are already paid their regular and special days, the days
when no work is done, the 51 un-worked Sundays and the 51 un-worked
Saturdays.
On March 1, 2001, Voluntary Arbitrator Antonio C. Lopez, Jr. rendered a
Decision9 in favor of respondent, holding petitioner liable for payment of
unpaid holidays from 1998 to 2000 in the sum of P1,054,393.07. He
reasoned that petitioner miserably failed to show that it complied with the
CBA mandate that holiday pay be "reflected during any payroll period of
occurrence" since the payroll slips did not reflect any payment of the paid
holidays. He found unacceptable not only petitioner's presumption of
payment of holiday pay based on a formula used in determining and
computing the daily rate of each covered employee, but also petitioner's
further submission that the rate of its employees is not less than the
statutory minimum wage multiplied by 365 days and divided by twelve.
On April 11, 2001, petitioner filed a Motion for Reconsideration10 but it was
denied by the Voluntary Arbitrator in a Resolution11 dated June 17, 2002.
Petitioner received said Resolution on June 27, 2002.12
Thirty days later, or on July 27, 2002,13 petitioner filed a Petition
for Certiorari14 in the CA, ascribing grave abuse of discretion amounting to
lack of jurisdiction to the Voluntary Arbitrator: (a) for ignoring that in said
company the divisor for computing the applicable daily rate of rank-and-file
employees is 360 days which already includes payment of 13 un-worked
regular holidays under Section 2, Article VIII of the CBA;15 and (b) for holding

the petitioner liable for the unpaid holidays just because the payroll slips
submitted as evidence did not show any payment for the regular holidays.16
In a Resolution17 dated September 4, 2002, the CA dismissed outright
petitioner's Petition for Certiorari for adopting a wrong mode of appeal. It
reasoned:
Considering that what is assailed in the present recourse is a Decision of a
Voluntary Arbitrator, the proper remedy is a petition for review under Rule 43
of the 1997 Rules of Civil Procedure; hence, the present petition for certiorari
under Rule 65 filed on August 15, 2002, should be rejected, as such a
petition cannot be a substitute for a lost appeal. And in this case, the period
for appeal via a petition for review has already lapsed since the petitioner
received a copy of the Resolution denying its motion for reconsideration on
June 27, 2002, so that its last day to appeal lapsed on July 12, 2002.
x x x x18
Petitioner filed a Motion for Reconsideration19 but it was denied by the CA in
a Resolution20 dated February 28, 2003.
Hence, the present petition anchored on the following grounds:
(1) The Honorable Court of Appeals erred in rejecting the petition for
certiorari under Rule 65 of the Rules of Court filed by herein petitioner
to assail the Decision of the Voluntary Arbitrator.21
(2) Even if decisions of voluntary arbitrator or panel of voluntary
arbitrators are appealable to the Honorable Court of Appeals under
Rule 43, a petition for certiorari under Rule 65 is still available if it is
grounded on grave abuse of discretion. Hence, the Honorable Court of
Appeals erred in rejecting the petition for certiorari under Rule 65 of
the Rules of Court filed by herein petitioner.22
(3) The Honorable Court of Appeals erred in refusing to rule on the
legal issue presented by herein petitioner in the petition for certiorari
that it had filed and in putting emphasis instead on a technicality of
procedure. The legal issues needs a clear-cut ruling by this Honorable
Court for the guidance of herein petitioner and private respondent. 23
Petitioner contends that Rule 65 of the Rules of Court is the applicable mode
of appeal to the CA from judgments issued by a voluntary arbitrator since
Rule 43 only allows appeal from judgments of particular quasi-judicial

agencies and voluntary arbitrators authorized by law and not those

judgments and orders issued under the Labor Code; that the petition before
the CA did not raise issues of fact but was founded on jurisdictional issues
and, therefore, reviewable through a special civil action for certiorari under
Rule 65; that technicalities of law and procedure should not be utilized to
subvert the ends of substantial justice.
In its Comment,24 respondent avers that Luzon Development Bank v.
Association of Luzon Development Bank Employees25 laid down the
prevailing rule that judgments of the Voluntary Arbitrator are appealable to
the CA under Section 1, Rule 43 of the Rules of Court; that having failed to
file the appropriate remedy due to the lapse of the appeal period, petitioner
cannot simply invoke Rule 65 for its own convenience, as an alternative
remedy.
In its Reply,26 petitioner submits that the ruling in Luzon Development
Bank does not expressly exclude the filing of a petition for certiorari under
Rule 65 of the Rules of Court to assail a decision of a voluntary arbitrator. It
reiterates that technicalities of law and procedure should not be utilized to
subvert the ends of substantial justice.
It has long been settled in the landmark case Luzon Development Bank that
a voluntary arbitrator, whether acting solely or in a panel, enjoys in law the
status of a quasi-judicial agency; hence, his decisions and awards are
appealable to the CA. This is so because the awards of voluntary arbitrators
become final and executory upon the lapse of the period to appeal;27 and
since their awards determine the rights of parties, their decisions have the
same effect as judgments of a court. Therefore, the proper remedy from an
award of a voluntary arbitrator is a petition for review to the CA, following
Revised Administrative Circular No. 1-95, which provided for a uniform
procedure for appellate review of all adjudications of quasi-judicial entities,
which is now embodied in Section 1, Rule 43 of the 1997 Rules of Civil
Procedure, which reads:
SECTION 1. Scope. This Rule shall apply to appeals from judgments or final
orders of the Court of Tax Appeals and from awards, judgments, final orders
or resolutions of or authorized by any quasi-judicial agency in the exercise of
its quasi-judicial functions. Among these agencies are the Civil Service
Commission, Central Board of Assessment Appeals, Securities and Exchange
Commission, Office of the President, Land Registration Authority, Social
Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks
and Technology Transfer, National Electrification Administration, Energy
Regulatory Board, National Telecommunications Commission, Department of

Agrarian Reform under Republic Act No. 6657, Government Service Insurance
System, Employees Compensation Commission, Agricultural Inventions
Board, Insurance Commission, Philippine Atomic Energy Commission, Board
of Investments, Construction Industry Arbitration Commission,
and voluntary arbitratorsauthorized by law.28 (Emphasis supplied)
Section 2, Rule 43 of the 1997 Rules of Civil Procedure which provides that:
SEC. 2. Cases not covered. - This Rule shall not apply to judgments or final
orders issued under the Labor Code of the Philippines.
did not alter the Court's ruling in Luzon Development Bank. Section 2, Rule
42 of the 1997 Rules of Civil Procedure, is nothing more than a reiteration of
the exception to the exclusive appellate jurisdiction of the CA,29as provided
for in Section 9, Batas Pambansa Blg. 129,30 as amended by Republic Act No.
7902:31
(3) Exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of Regional Trial Courts and quasi-judicial
agencies, instrumentalities, boards or commissions, including the Securities
and Exchange Commission, the Employees Compensation Commission and
the Civil Service Commission, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the
Labor Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act and of subparagraph (1) of the third
paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the
Judiciary Act of 1948.
The Court took into account this exception in Luzon Development Bank but,
nevertheless, held that the decisions of voluntary arbitrators issued pursuant
to the Labor Code do not come within its ambit, thus:
x x x. The fact that [the voluntary arbitrators] functions and powers are
provided for in the Labor Code does not place him within the exceptions to
said Sec. 9 since he is a quasi-judicial instrumentality as contemplated
therein. It will be noted that, although the Employees Compensation
Commission is also provided for in the Labor Code, Circular No. 1-91, which is
the forerunner of the present Revised Administrative Circular No. 1-95, laid
down the procedure for the appealability of its decisions to the Court of
Appeals under the foregoing rationalization, and this was later adopted by
Republic Act No. 7902 in amending Sec. 9 of B.P. 129.

A fortiori, the decision or award of the voluntary arbitrator or panel of

arbitrators should likewise be appealable to the Court of Appeals, in line with
the procedure outlined in Revised Administrative Circular No. 1-95, just like
those of the quasi-judicial agencies, boards and commissions enumerated
therein.
This would be in furtherance of, and consistent with, the original purpose of
Circular No. 1-91 to provide a uniform procedure for the appellate review of
adjudications of all quasi-judicial entities not expressly excepted from the
coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute.
Nor will it run counter to the legislative intendment that decisions of the
NLRC be reviewable directly by the Supreme Court since, precisely, the cases
within the adjudicative competence of the voluntary arbitrator are excluded
from the jurisdiction of the NLRC or the labor arbiter.32
This ruling has been repeatedly reiterated in subsequent cases33 and
continues to be the controlling doctrine. Thus, the general rule is that the
proper remedy from decisions of voluntary arbitrators is a petition for review
under Rule 43 of the Rules of Court.
Nonetheless, a special civil action for certiorari under Rule 65 of the Rules of
Court is the proper remedy for one who complains that the tribunal, board or
officer exercising judicial or quasi-judicial functions acted in total
disregard of evidence material to or decisive of the controversy.34 As
this Court elucidated in Garcia v. National Labor Relations Commission 35 [I]n Ong v. People, we ruled that certiorari can be properly resorted to where
the factual findings complained of are not supported by the
evidence on record. Earlier, in Gutib v. Court of Appeals, we emphasized
thus:
[I]t has been said that a wide breadth of discretion is granted a court of
justice in certiorari proceedings. The cases in which certiorari will issue
cannot be defined, because to do so would be to destroy its
comprehensiveness and usefulness. So wide is the discretion of the court
that authority is not wanting to show that certiorari is more discretionary
than either prohibition or mandamus. In the exercise of our superintending
control over inferior courts, we are to be guided by all the circumstances of
each particular case "as the ends of justice may require." So it is that the writ
will be granted where necessary to prevent a substantial wrong or to do
substantial justice. 36

In addition, while the settled rule is that an independent action

for certiorari may be availed of only when there is no appeal or any plain,
speedy and adequate remedy in the ordinary course of law37 and certiorari is
not a substitute for the lapsed remedy of appeal,38 there are a few significant
exceptions when the extraordinary remedy of certiorari may be resorted to
despite the availability of an appeal, namely: (a) when public welfare and the
advancement of public policy dictate; (b) when the broader interests of
justice so require; (c) when the writs issued are null; and (d) when the
questioned order amounts to an oppressive exercise of judicial authority.39
In this case, while the petition was filed on July 27, 2002,40 15 days after July
12, 2002, the expiration of the 15-day reglementary period for filing an
appeal under Rule 43, the broader interests of justice warrant relaxation of
the rules on procedure. Besides, petitioner alleges that the Voluntary
Arbitrators conclusions have no basis in fact and in law; hence, the petition
should not be dismissed on procedural grounds.
The Voluntary Arbitrator gravely abused its discretion in giving a strict or
literal interpretation of the CBA provisions that the holiday pay be reflected
in the payroll slips. Such literal interpretation ignores the admission of
respondent in its Position Paper41 that the employees were paid all the
days of the month even if not worked. In light of such admission,
petitioner's submission of its 360 divisor in the computation of employees
salaries gains significance.
In Union of Filipro Employees v. Vivar, Jr.42 the Court held that "[t]he divisor
assumes an important role in determining whether or not holiday pay is
already included in the monthly paid employees salary and in the
computation of his daily rate". This ruling was applied in Wellington
Investment and Manufacturing Corporation v. Trajano,43 Producers Bank of
the Philippines v. National Labor Relations Commission44 and Odango v.
National Labor Relations Commission,45 among others.46
In Wellington,47 the monthly salary was fixed by Wellington to provide for
compensation for every working day of the year including the holidays
specified by law and excluding only Sundays. In fixing the salary,
Wellington used what it called the "314 factor"; that is, it simply deducted 51
Sundays from the 365 days normally comprising a year and used the
difference, 314, as basis for determining the monthly salary. The monthly
salary thus fixed actually covered payment for 314 days of the year,
including regular and special holidays, as well as days when no work was
done by reason of fortuitous cause, such as transportation strike, riot, or

typhoon or other natural calamity, or cause not attributable to the

employees.
In Producers Bank,48 the employer used the divisor 314 in arriving at the
daily wage rate of monthly salaried employees. The divisor 314 was arrived
at by subtracting all Sundays from the total number of calendar days in a
year, since Saturdays are considered paid rest days. The Court held that the
use of 314 as a divisor leads to the inevitable conclusion that the ten legal
holidays are already included therein.
In Odango v. National Labor Relations Commission,49 the Court ruled that the
use of a divisor that was less than 365 days cannot make the employer
automatically liable for underpayment of holiday pay. In said case, the
employees were required to work only from Monday to Friday and half of
Saturday. Thus, the minimum allowable divisor is 287, which is the result of
365 days, less 52 Sundays and less 26 Saturdays (or 52 half Saturdays). Any
divisor below 287 days meant that the employees were deprived of their
holiday pay for some or all of the ten legal holidays. The 304-day divisor
used by the employer was clearly above the minimum of 287 days.
In this case, the employees are required to work only from Monday to
Friday.1wphi1 Thus, the minimum allowable divisor is 263, which is arrived
at by deducting 51 un-worked Sundays and 51 un-worked Saturdays from
365 days. Considering that petitioner used the 360-day divisor, which is
clearly above the minimum, indubitably, petitioner's employees are being
given their holiday pay.
Thus, the Voluntary Arbitrator should not have simply brushed aside
petitioner's divisor formula. In granting respondent's claim of non-payment of
holiday pay, a "double burden" was imposed upon petitioner because it was
being made to pay twice for its employees' holiday pay when payment
thereof had already been included in the computation of their monthly
salaries. Moreover, it is absurd to grant respondent's claim of non-payment
when they in fact admitted that they were being paid all of the days of the
month even if not worked. By granting respondent's claim, the Voluntary
Arbitrator sanctioned unjust enrichment in favor of the respondent and
caused unjust financial burden to the petitioner. Obviously, the Court cannot
allow this.
While the Constitution is committed to the policy of social justice 50 and the
protection of the working class,51 it should not be supposed that every labor
dispute would automatically be decided in favor of labor. Management also
has it own rights which, as such, are entitled to respect and enforcement in

the interest of simple fair play. Out of concern for those with less privileges in
life, this Court has inclined more often than not toward the worker and
upheld his cause in his conflicts with the employer. Such favoritism, however,
has not blinded us to the rule that justice is in every case for the deserving,
to be dispensed in the light of the established facts and the applicable law
and doctrine.52
WHEREFORE, the petition for review is GRANTED. The Resolutions dated
September 4, 2002 and February 28, 2003 of the Court of Appeals in CA-G.R.
SP No. 72336 are REVERSED and SET ASIDE. The Decision dated March 1,
2001 and Resolution dated June 17, 2002 of the Voluntary Arbitrator are
declared NULL and VOID.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 139940

September 19, 2006

ARELLANO UNIVERSITY EMPLOYEES AND WORKERS UNION, CARLOS

C. A. RIVAS, JR., SIMEON B. INOCENCIO, ROMULO D. JACOB, NYMIA
M. PINEDA, BENEDICTO I. NIETO, JR., LUIS JACINTO, MILBERT MORA,
MONICO CALMA, CONSTANCIO BAYHONAN, BERNARDO SABLE,
NESTOR BRINOSA, NANJI MACARAMPAT, EDUARDO FLORAGUE and
DIONY S. LUMANTA, petitioners,
vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, and
ARELLANO UNIVERSITY, INC.,respondents.
DECISION
CARPIO MORALES, J.:

Subject of the present petition for certiorari are the Court of Appeals
Resolution of April 13, 19991 and Resolution of September 3, 19992 which
dismissed petitioners petition for certiorari for having been filed six days
beyond the reglementary period under Section 4, Rule 65 of the 1997 Rules
of Civil Procedure, as amended by Supreme Court En Banc Resolution dated
July 21, 1998 reading:
If the petitioner had filed a motion for new trial or reconsideration in
due time after notice of said judgment, order or resolution, the period
herein fixed shall be interrupted. If the motion is denied, the aggrieved
party may file the petition within the remaining period, but which shall
not be less than five (5) days in any event,reckoned from notice of
such denial. No extension of time to file the petition shall be granted
except for the most compelling reason and in no case to exceed fifteen
(15) days. (Emphasis and underscoring supplied)
Petitioners, in the main, plead for the application of substantial justice over
procedural lapses, conformably to this Courts pronouncements in several
cases, and a liberal construction of the Rules in order to promote its objective
of securing a just disposition of every action or proceeding.3
The record shows that the September 3, 1999 Resolution of the Court of
Appeals denying petitioners motion for reconsideration was received by
them on September 13, 1999. On September 27, 1999, petitioners filed a
motion for 30-day extension of time to file petition which this Court
granted.4 On October 28, 1999, petitioners filed the present petition for
certiorari.5 Doubtless, petitioners could not have availed of such petition as a
mere substitute for lost appeal,6 hence, this Court treats it as one for review
under Rule 45.
Indeed, Section 4 of Rule 65 of the 1997 Rules of Civil Procedure was
amended by the July 21, 1998 Resolution of this Court En Banc by adding to
it as second paragraph the above-quoted amendment.
The same Section was, however, subsequently amended by this Courts En
Banc Resolution in A.M. No. 00-2-03-SC which took effect on September 1,
2000 providing for a 60-day period to file petition under Rule 65 from denial
of a motion for reconsideration or new trial. As thus further amended,
Section 4 of Rule 65 now reads:
SEC. 4. When and where petition filed. The petition shall be filed not
later than sixty (60) days from notice of the judgment, order or
resolution. In case a motion for reconsideration or new trial is timely

filed, whether such motion is required or not, the sixty (60) day
period shall be counted from notice of the denial of said
motion. (Emphasis and underscoring supplied)
The rule is settled that remedial statutes or modes of procedure, which do
not create new rights or take away vested rights but only operate in
furtherance of the remedy or confirmation of rights already existing, do not
come within the purview of the general rule against the retroactive operation
of statutes. They are construed to be applicable to actions pending and
undetermined at the time of their passage, and are deemed retroactive in
that sense and to that extent. Hence, in a long line of cases,7 the new period
under Section 4 of Rule 65 was given retroactive application. Of course at the
time the assailed Resolutions of the appellate court were issued in 1999,
Section 4 of Rule 65 had not yet been amended by this Courts Resolution in
A.M. No. 00-2-03-SC.
There being no reason why Section 4 of Rule 65, as amended in 2000 by this
Court, may not be given retroactive application to petitioners petition, it now
gives said application. While, normally, a remand of the case to the appellate
court for further proceedings is done,8 this Court now opts to decide the
petition on the merits to forestall further delay in its disposition.
On December 12, 1997, the Arellano University Employees and Workers
Union (the Union), the exclusive bargaining representative of about 380 rankand-file employees of Arellano University, Inc. (the University), filed with the
National Conciliation and Mediation Board (NCMB) a Notice of Strike charging
the University with Unfair Labor Practice (ULP) as follows:
1. Interfering in union activities;
2. Union Busting violation of CBAs Article IV, Section 2;9
3. Union Busting disregarding the unions request to deduct penalties
from its members who were absent and without justifiable reasons
during union meetings; and
4. Contracting Workout the management is contracting out services
and functions being performed by Union members.10
The Notice of Strike was docketed as NCMB-NCR-NS-12-520-97.
Subsequently or on December 17, 1997, a majority of the members of the
Union filed a December 15, 1997 petition for audit11 of union funds before

the Office of the National Capital Region Director of the Department of Labor
and Employment (DOLE) against the officers of the Union.
On March 11, 1998, the Regional Director of DOLE-NCR directed the Union
officers to call a general membership meeting to, among other things, render
an accounting of union funds amounting to P481,117.28 which were remitted
per the check-off statement.12
Also on March 11, 1998, then DOLE Secretary Cresenciano B. Trajano
certified the Notice of Strike for compulsory arbitration to the National Labor
Relations Commission (NLRC) which the latter assigned to Labor Arbiter
Cristeta D. Tamayo. The Labor Arbiter set the dispute for hearing/conference
on July 3, 1998, July 17, 1998, and August 11, 1998. No settlement was
reached by the parties, however.13
On July 28, 1998, the University moved for the consolidation with the ULP
charge (NCMB-NCR-NS-12-520-97) the Interpleader14 it filed against the
Union and some of its members, docketed as NLRC NCR Case No. 00-0202036-98 and pending before Labor Arbiter Felipe T. Garduque II, and the
Complaint the Union filed for underpayment of wages arising from the
change in the manner of computation of salary of employees and nonpayment of Sunday pay, docketed as NLRC NCR Case No. 00-02-0142298 and pending before Labor Arbiter Ramon Valentin T. Reyes, both of which
involve the same parties.15
Before the NLRC could act on the Universitys motion for consolidation, DOLE
Secretary Bienvenido E. Laguesma, by Order16 of August 5, 1998, certified for
compulsory arbitration to the NLRC a second Notice of Strike filed by the
Union on July 16, 1998, docketed as NCMB-NCR-NS-07-277-98, charging
the University with the following:
a. Violation of Collective Bargaining Agreement (CBA), Art. V
withholding of union and death benefits;
b. Violation of CBA, Art. VI non-granting of ten (10%) percent salary
increase to some union members;
c. Illegal/unauthorized deductions in the payroll;
d. Union interference circulating letters against the union; and
e. Non-implementation of the retirement plan as approved by the BIR. 17
A strike was in fact staged on August 5, 1998.

By the same Order of August 5, 1998, the DOLE Secretary directed the
strikers to return to work within twenty-four (24) hours. The order was served
upon the Union on August 6, 1998, and the following day, August 7, 1998, at
about 3:00 p.m., the Union lifted its strike.18
The strike staged by the Union on August 5-7, 1998 prompted the University
to file on August 24, 1998 a petition to declare the same illegal, docketed
as NLRC-NCR Case No. 00-08-06897-98, which was also consolidated
with the other cases.
Resolving the consolidated cases, the NLRC, by Decision19 of October 12,
1998, disposed as follows:
WHEREFORE, judgment is hereby rendered declaring:
1. That the Unions two notices of strike docketed as NCMB-NCRNS-12-520-97 and NCMB-NCR-NS-07-277-98 were, to the extent
as they concern the issues herein resolved, without merit;
2. That as a consequence, the University is absolved from the
charges of Unfair Labor Practicecontained in said notices of
strike;
3. The loss of employment status of all the individual
respondents in NLRC-NCR-Case No. 00-08-06897-98; and
4. That there is no diminution of workers benefits in NLRC-NCR
Case No. 00-02-01422-98, because apart from the Unions failure
to prove it, the University, based on existing laws, is correct in
using 314 days as divisor in computing the daily wage of its daily
paid employees.
SO ORDERED.20 (Emphasis and underscoring supplied)
The NLRC found that what triggered the strike was the Unions suspicion that
the petition for audit of union funds was initiated by the University. The
NLRC, citing an Order of March 11, 1998 issued by the DOLE Regional
Director, found the therein petitioners to have initiated, out of their own
volition, the filing of the petition. It thus concluded that there was no factual
basis to hold the University guilty of interference in union activities.21
On the allegation of union busting, the NLRC ruled that the refusal of the
University to deduct penalties from the salaries of members of the Union who
failed to attend meetings was based on Article IV, Section 222 of the CBAvis-

-vis Section 123 of the same Article which requires as condition for a valid
checkoff prior submission to the management of individual checkoff
authorizations, a requirement which was not met by the Union.24 Besides, the
NLRC held, the law mandates that the Union should not be "arbitrary,
excessive or oppressive" in imposing a fine.25
On the claim that the University had been contracting out work, the NLRC
held that the same was never raised during the conciliation meetings at the
NCMB level.26
Respecting the second Notice of Strike, the NLRC found that only the charges
of violation of the CBA for withholding union dues and death benefits, and
the non-implementation of the retirement plan, as approved by the BIR, were
left for resolution as the Union dropped the other issues raised therein after
the NCMB hearings on July 21, 1998 and July 28, 1998.27
Crediting the explanation of the University that its withholding of union dues
and death aid benefits was upon the written request of several union
members themselves, the NLRC held that no ULP was committed.
On the charge of non-implementation of the retirement plan by the
University, the NLRC found that the same was baseless and it was in fact not
ventilated before the NCMB.28
In NLRC NCR Case No. 00-02-02036-98, the NLRC ruled that the University
may not be held guilty of ULP for refusal to heed the demand of the Union
that salaries of its members be deducted for their failure to attend union
meetings: firstly, because the Union itself failed to meet the requirements
provided for in Sections 1 and 2, Article IV of the CBA; and secondly, an
interpleader had been filed by the University for the parties to litigate their
claims before the NLRC.29 The NLRC also ruled that the resolution calling for
such deduction was not valid as it was not even signed by the majority of
Union officers and circulated to the members.30
In NLRC NCR Case No. 00-08-06897-98 (the Universitys petition to declare
the strike staged by the Union on August 5-7, 1998 illegal), the NLRC granted
the petition and declared the loss of employment status of all thestrikers for
knowingly defying the Return-to-Work Order of the DOLE Secretary dated
August 5, 1998, said Order having been served upon the union on August 6,
1998 but it was only on August 7, 1998, at about 3:00 p.m., that the strike
was lifted.31

In NLRC NCR Case No. 00-02-01422-98, the NLRC ruled that the University
was correct in using 314 days as divisor, instead of 365 days, in computing
the "equivalent daily rate"32 of pay of a worker.
The Union et al. (hereafter petitioners) filed a motion for reconsideration of
the NLRC decision which was denied by Resolution33 of January 20, 1999.
Hence, they elevated the decision to the Court of Appeals via petition for
certiorari which was, as stated early on, dismissed.
In the present petition, petitioners insist that the University violated the CBA
by withholding union dues and death benefits. The University counters that
on the request of Union members in light of their gripes against the Union
and its officers, it did withhold said dues and benefits which they deposited
with the DOLE where the parties could settle the issues among themselves.
The then prevailing Rules Implementing the Labor Code, Book V34, Rule XVIII
provided that
Section 1. Right of union to collect dues. The right of the incumbent
bargaining representative to check off and to collect dues resulting
therefrom shall not be affected by the pendency of a representation
case or an intra-union dispute.35 (Emphasis supplied)
To constitute ULP, however, violations of the CBA must be gross. Gross
violation of the CBA, under Article 261 of the Labor Code, means flagrant
and/or malicious refusal to comply with the economic provisions thereof.
Evidently, the University can not be faulted for ULP as it in good faith merely
heeded the above-said request of Union members.
On the NLRCs declaration of loss of employment status of the strikers, the
pertinent provision of Article 264 of the Labor Code provides:
Article 264.
xxxx
Any union officer who knowingly participates in an illegal strike
and any worker or union officer who knowingly participates in
the commission of illegal acts during a strike may be declared to
have lost his employment status (Emphasis and underscoring
supplied)
Under the immediately quoted provision, an ordinary striking worker may not
be declared to have lost his employment status by mere participation in an

illegal strike. There must be proof that he knowingly participated in the

commission of illegal acts during the strike. While the University adduced
photographs36 showing strikers picketing outside the university premises, it
failed to identify who they were. It thus failed to meet the "substantiality of
evidence test"37 applicable in dismissal cases.
Petitioner-union members must thus be reinstated to their former
position, without backwages. If reinstatement is no longer possible, they
should receive separation pay of One (1) Month for every year of service in
accordance with existing jurisprudence.38
With respect to the union officers, as already discussed, their mere
participation in the illegal strike warrants their dismissal.
As for petitioners claim of substantial diminution of their salary on account
of the divisor used by the University in its computation 314 days, instead of
365 days, this Court finds nothing wrong therewith. Sundays being unworked and considered unpaid rest days, while regular holidays as well as
special holidays considered as paid days,39 the factor used by the University
merely complies with the basic rule in this jurisdiction of "no work, no pay."
The right to be paid for un-worked days is generally limited to the ten legal
holidays in a year.40
WHEREFORE, the Court of Appeals Resolution of April 13, 1999 and
Resolution of September 3, 1999 are SET ASIDE.
The NLRC Decision of October 12, 1998 and Resolution of January 20, 1999
are AFFIRMED, with the MODIFICATION that the dismissal of petitionerunion members MONICO CALMA, CONSTANCIO BAYHONAN, BERNARDO
SABLE, NESTOR BRINOSA, NANJI MACARAMPAT, EDUARDO FLORAGUE and
DIONY S. LUMANTA is SET ASIDE, and they are thus ordered REINSTATED
WITHOUT BACKWAGES. If their reinstatement is no longer possible, however,
they should be given SEPARATION PAY at the rate of One (1) Month pay for
every year of service.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 130439 October 26, 1999

PHILIPPINE VETERANS BANK, petitioner,
vs.
HONORABLE NATIONAL LABOR RELATIONS COMMISSION, HON.
POTENCIANO CAIZARES, JR., and DR. TEODORICO V.
MOLINA, respondents.
DAVIDE, JR., C.J.:
In this petition for certiorari under Rule 65 of the Rules of Court, petitioner
seeks to set aside the resolution 1 of the National Labor Relations
Commission (NLRC) in NLRC Case No. 05-02940-91 and its order 2 denying
the motion for reconsideration thereof.

In 1983, petitioner Philippine Veterans Bank was placed under receivership

by the Central Bank (now Bangko Sentral) 3 by virtue of Resolution No. 334
issued by the Monetary Board. Petitioner was subsequently placed under
liquidation on 15 June 1985. Consequently, its employees, including private
respondent Dr. Jose Teodorico V. Molina (MOLINA), were terminated from
work and given their respective separation pay and other benefits. To assist
in the liquidation, some of petitioner's former employees were rehired,
among them MOLINA, whose re-employment commenced on 15 June 1985.
On 11 May 1991, MOLINA filed a complaint 4 against Renan V.
Santos, 5 Pacifico U. Cervantes and Alfredo L. Dizon, members of the
liquidation team. 6 Docketed as NLRC-NCR Case No. 05-02940-91, the
complaint demanded the implementation of Wage Orders Nos. NCR-01 and
NCR-02 (hereafter W.O. 1 and W.O. 2) as well as moral damages and
attorney's fees in the amount of P300,000.1wphi1.nt
In his position paper, MOLINA alleged that he started working for petitioner
as a legal assistant on 17 March 1974. When petitioner was placed under
liquidation in 1985, he was retained as Manager II in the Legal Department,
where he continued to receive a monthly salary of P3,754,60.
Meanwhile, W.O. 1 took effect on 10 November 1990, prescribing a P17increase in the daily wage of employees whose monthly salary did not
exceed P3,802.08. On the other hand, W.O. 2, which became effective on 8
January 1991, mandated a P12-increase in the daily wage of employees
whose monthly salary did not exceed P4,319.16. MOLINA claimed that his
salary should have been adjusted in compliance with said wage orders.
In their position paper, the liquidation team countered that MOLINA was not
entitled to any salary increase because he was already receiving a monthly
salary of P6,654.60 broken down as follows: P3,754.60 as basic
compensation, P2,000 as representation and transportation allowance
(RATA), and a special allowance of P900.
In his decision, 7 Labor Arbiter Potenciano S. Caizares, Jr. rejected
the 26.16 factor used by the liquidators in computing the daily wage of
MOLINA, adopting instead the factor of "365 days." Consequently, they were
ordered to pay MOLINA P4,136.64 and P2,190 representing the wage
differentials due him under W.O. 1 and W.O. 2. They were also required to
pay him P100,000 in moral damages and attorney's fees.
On appeal, the NLRC sustained the labor arbiter's ruling after concluding that
MOLINA was a regular employee of petitioner with a basic monthly salary of

P3,754.60 at the time of his dismissal on 31 January 1992. He was, therefore,

entitled to the wage increases mandated by the aforesaid wage orders.
In its assailed resolution of 7 April 1997, the NLRC decreed thus:
WHEREFORE, the respondents [members of herein petitioner's
liquidation team] are hereby directed to pay the complainant
[MOLINA] the total sum [sic] of P112,501.20 broken down as
follows:
WO# NCR-01 & 01-A P17.00/day Nov. 1990 - Jan. 7, 1991
WO# NCR-02 & 02-A P12.00/day Jan. 8, 1991 - Jan. 31, 1992
(Date of termination)
Wage Differential:
WO# NCR-01 (Nov. 1990 Jan. 31, 1992 - 15 mos.)
P17.00 x 365 12 = P517.08 x 15 mos. - P7,756.20
WO# NCR-02 (Jan. 8, 1991 Jan. 31, 1992 - 13
mos.)
P12.00 x 365 12 = P365.00 x 13 mos. - P4,745.00
Total Wage Differential P12,501.20
Moral Damages & Attorney's Fees P100,000.00
TOTAL AWARD P112,501.20
SO ORDERED.

As MOLINA moved for the execution of the NLRC resolution, petitioner, in

turn, moved for its reconsideration. In its order of 27 June 1997, the NLRC
denied petitioner's motion, prompting the latter to file the instant petition
with a prayer for the issuance of a temporary restraining order and writ of
preliminary injunction.
In this action, petitioner questions the propriety of its substitution as a partyrespondent below on the pretext that it was thereby deprived of its right to
due process. Second, MOLINA was alluding to acts committed by the

representatives of the then Central Bank. Petitioner emphasizes that he

was rehired only to assist in the liquidation process. 9 In fact, all its
employees were dismissed and given their corresponding separation pay
and benefits. At that moment, the employer-employee relationship between
petitioner and MOLINA ceased to exist. Third, petitioner maintains that
MOLINA is estopped from claiming that it continued to be his employer
during the rehabilitation period since the admissions in his pleadings, one of
which is that the liquidators were his employers, are binding and conclusive.
Nonetheless, petitioner reiterates the arguments raised by the original
respondents, particularly that the factor of26.16 should have been applied in
determining MOLINA's daily wage. Doing so would show that MOLINA's daily
pay exceeded the minimum wage and, therefore, was beyond the scope of
the wage orders.
Petitioner also avers that the award of P100,000 in moral damages and
attorney's fees was inappropriate since the complaint did not specify the
same, and it was clearly excessive, considering that the case was decided
based on the pleadings and without the benefit of trial. In fact, MOLINA failed
to prove his claim for both moral damages and attorney's fees. Even if due,
the amount far surpassed any actual damage that MOLINA may have
suffered. In any event, moral damages may only be recovered in labor cases
when the dismissal is attended by bad faith or fraud, or when it constitutes
an act oppressive to labor or committed in a manner contrary to good
morals, good customs or public policy. MOLINA's dismissal was made in the
ordinary course of business.
On the other hand, MOLINA primarily asserts that upon petitioner's
rehabilitation it assumed all the rights and obligations of the liquidator,
including the NLRC's monetary award arising from the labor complaint he
filed against the liquidation team.
The Office of the Solicitor General supports the NLRC's finding that MOLINA
was entitled to the wage increases because it was never disputed that his
salary of P3,754.60 was clearly covered by the wage orders. The liquidators,
however, used the 26.16 instead of the 365 factor in computing his daily
wage. The OSG cites the ruling of the National Wages Council in its
letter 10 to the Philippine Veterans Bank Retained Employees, where the
Council opined that the retained employees were entitled to the wage
increase computed on the basis of 365 days. It also agrees with the NLRC's
conclusion that MOLINA is entitled to moral damages and attorney's fees,
although they must be separately specified. Finally, the OSG opines that
upon the rehabilitation of petitioner, it assumed all the assets, liabilities,

rights and obligations of the liquidation team. This would include the salaries
of the employees hired for liquidation purposes, such as MOLINA.
In its reply, petitioner insists that when it was placed under liquidation, it lost
its juridical personality, such that it could no longer enter into contracts or
transact business. All its assets and liabilities were turned over to the Central
Bank. MOLINA's complaint pertained to acts committed during liquidation
and so was correctly filed against the liquidation team. Its substitution as
party-respondent was clearly erroneous.
Hence, the issues to be resolved are: (1) Are W.O. 1 and W.O. 2 applicable to
MOLINA? (2) Is MOLINA entitled to moral damages and attorney's fees? (3) If
so, who is liable to pay MOLINA's claims?
We see no reason to disturb the factual finding of the labor arbiter, and
affirmed by the NLRC, that MOLINA's salary was within the coverage of the
cited wage orders. Well-settled is the rule that the findings of fact of quasijudicial bodies are generally accorded respect and finality where they are
supported by substantial evidence. 11Indeed, MOLINA's monthly salary of
P3,754.60 was never at issue. What was in dispute was the computation of
his daily wage.
W.O. 1 expressly states that employees having a monthly salary of not more
than P3,802.08 are entitled to receive the mandated wage increase.
Undeniably, MOLINA was receiving a monthly salary of P3,754.60. This fact
alone leaves no doubt that he should benefit from said wage order.
On the other hand, W.O. 2 raised the ceiling for entitlement to the wage
increase. If MOLINA was covered by the earlier wage order, with more reason
should the later wage order apply to him.
Worth mentioning is the opinion 12 rendered by the National Wages Council
on the query of the Philippines Veterans Bank Retained Employees, on
whether they were entitled to a wage increase under Republic Act No.
6640, 13 viz.:
The documents attached to your query show that the Bank has
been consistently using the factor of 365 days in computing your
equivalent monthly salary prior to its being placed under
receivership by the Central Bank. This is evident in the wage and
allowance increases granted under previous Presidential Decrees
and Wage Orders, which were given by the Bank on monthly
basis, i.e., where the rest days are unworked [sic] but paid. This

is also indicated in the appointment and service records of bank

personnel who started out as daily paid employees and were
eventually promoted as permanent employees with fixed
monthly salaries. However, when R.A. 6640 went into force, the
Bank unilaterally reduced the factor to 262 instead of
maintaining factor 365 as was the practice/policy long before the
effectivity of the Act. And when R.A. 6727 took effect, the Bank
reverted to the old practice/policy of using factor 365 days in
computing your equivalent monthly rate salary. . . .
May we add that the old practice of the bank in using factor 365
days in a year in determining your equivalent monthly salary
cannot unilaterally be changed by your employer without the
consent of the employees, such practice being now a part of the
terms and conditions of your employment. An employment
agreement, whether written or unwritten, is a bilateral contract
and, as such other party thereto cannot change or amend the
terms thereof without the consent of the other party thereto.
From the foregoing, it is clear that you are entitled to the wage
increase under R.A. 6440 computed on the basis of 365 paid
days and to the corresponding salary differentials as a result of
the application of this factor. [Emphasis supplied]
Evidently, the use of the 365 factor is binding and conclusive, forming as it
did part of the employment contract. Petitioner can no longer invoke
the 26.16 factor after it voluntarily adopted the 365 factor as a policy even
prior to its receivership. To abandon such policy and revert to its old practice
of using the 26.16 factor would be a diminution of a labor benefit, which is
prohibited by the Labor Code. 14 It cannot be doubted that the 365 factor
favors petitioner's employees, including MOLINA, because it results in a
higher determination of their monthly salary.
As to the second issue, we agree with the NLRC that MOLINA is entitled to
moral damages and attorney's fees. He may have omitted such claims in his
complaint, but he certainly included them in his position paper. We hold that
such allegation is sufficient to enable the complainant to seek an award
thereof. The complaint being pro forma, MOLINA's omission to specify a
claim for damages does not bar recovery thereof especially when, as in this
case, such a claim was prayed for in his position paper. 15
The NLRC, however, did not distinguish between attorney's fees and moral
damages in affirming the award of P100,000 to MOLINA. We hold that

awards for moral damages and attorney's fees cannot be consolidated for
they are different in nature and each must be separately
determined. 16 Since the Labor Code limits attorney's fees to ten percent of
the wages awarded, 17 and the total wage differential due MOLINA was
computed at P12,501.20, only P1,250.12 should have been awarded as
attorney's fees.
Moving on to the issue of moral damages, the records show that MOLINA
based his claim on the alleged failure of the liquidation team to implement
the benefits of the wage orders, without submitting any proof in support
thereof. It is basic, however, that for moral damages to be awarded, the
claimant must satisfactorily prove its factual basis and causal connection
with the respondent's acts. 18 In this, MOLINA failed, for which reason the
award of moral damages must be deleted.
Finally, we rule that the payment of MOLINA's claims devolves upon
petitioner, not the liquidation team. When a bank is declared insolvent and
placed under receivership, the Monetary Board of the Central Bank
determines whether to proceed with the liquidation or reorganization of the
financially distressed bank. 19 A receiver takes control and possession of the
assets of the bank for the benefit of its creditors 20 and concurrently
represents the bank. 21On the other hand, a liquidator assumes the role of
the receiver upon the determination by the Monetary Board that the bank
can no longer resume business. His task is to dispose of all the assets of the
bank and effect partial payments of its obligations in accordance with their
legal priority. 22 In both receivership and liquidation proceedings, the bank
retains its juridical personality notwithstanding the closure of its business; in
fact, the bank may even be sued. 23 Its corporate existence is assumed by
the receiver or liquidator. The latter, however, acts not only for the benefit of
the bank, but for the bank's creditors as well. 24
In the instant case, petitioner was initially closed and put under receivership
and liquidation. Subsequently, its rehabilitation was effected by virtue of
Republic Act No. 7169 25 and Monetary Board Resolution No. 348 dated 10
April 1992. Rehabilitation contemplates a continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its former
position of successful operation and solvency. 26 Upon its rehabilitation,
petitioner assumed the rights and obligations of the receiver and liquidator.
This includes MOLINA's claim for unpaid wages. It must be borne in mind that
all the acts of the receiver and liquidator pertain to petitioner, both having
assumed petitioner's corporate existence. Petitioner cannot disclaim liability
by arguing that the non-payment of MOLINA's just wages was committed by
the liquidators during the liquidation period.

WHEREFORE, this case is DISMISSED. The assailed Resolution of 7 April 1997

and Order of 27 June 1997 of the National Labor Relations in NLRC Case No.
05-02940-91 are AFFIRMED with the MODIFICATION that the award of moral
damages is deleted and the award of attorney's fees is reduced to ONE
THOUSAND TWO HUNDRED FIFTY & 12/100 PESOS (P1,250.12).1wphi1.nt
No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 147420

June 10, 2004

CEZAR ODANGO in his behalf and in behalf of 32

complainants, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ANTIQUE ELECTRIC
COOPERATIVE, INC., respondents.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 assailing the Court of Appeals
Resolutions of 27 September 20002 and 7 February 2001 in CA-G.R. SP No.
51519. The Court of Appeals upheld the Decision3 dated 27 November 1997

and the Resolution dated 30 April 1998 of the National Labor Relations
Commission ("NLRC") in NLRC Case No. V-0048-97. The NLRC reversed the
Labor Arbiters Decision of 29 November 1996, which found respondent
Antique Electric Cooperative ("ANTECO") liable for petitioners wage
differentials amounting to P1,017,507.73 plus attorneys fees of 10%.
Antecedent Facts
Petitioners are monthly-paid employees of ANTECO whose workdays are from
Monday to Friday and half of Saturday. After a routine inspection, the
Regional Branch of the Department of Labor and Employment ("DOLE")
found ANTECO liable for underpayment of the monthly salaries of its
employees. On 10 September 1989, the DOLE directed ANTECO to pay its
employees wage differentials amounting to P1,427,412.75. ANTECO failed to
pay.
Thus, on various dates in 1995, thirty-three (33) monthly-paid employees
filed complaints with the NLRC Sub-Regional Branch VI, Iloilo City, praying for
payment of wage differentials, damages and attorneys fees. Labor Arbiter
Rodolfo G. Lagoc ("Labor Arbiter") heard the consolidated complaints.
On 29 November 1996, the Labor Arbiter rendered a Decision in favor of
petitioners granting them wage differentials amounting to P1,017,507.73 and
attorneys fees of 10%. Florentino Tongson, whose case the Labor Arbiter
dismissed, was the sole exception.
ANTECO appealed the Decision to the NLRC on 24 December 1996. On 27
November 1997, the NLRC reversed the Labor Arbiters Decision. The NLRC
denied petitioners motion for reconsideration in its Resolution dated 30 April
1998. Petitioners then elevated the case to this Court through a petition for
certiorari, which the Court dismissed for petitioners failure to comply with
Section 11, Rule 13 of the Rules of Court. On petitioners motion for
reconsideration, the Court on 13 January 1999 set aside the dismissal.
Following the doctrine in St. Martin Funeral Home v. NLRC,4 the Court
referred the case to the Court of Appeals.
On 27 September 2000, the Court of Appeals issued a Resolution dismissing
the petition for failure to comply with Section 3, Rule 46 of the Rules of
Court. The Court of Appeals explained that petitioners failed to allege the
specific instances where the NLRC abused its discretion. The appellate court
denied petitioners motion for reconsideration on 7 February 2001.
Hence, this petition.

The Labor Arbiters Ruling

The Labor Arbiter reasoned that ANTECO failed to refute petitioners
argument that monthly-paid employees are considered paid for all the days
in a month under Section 2, Rule IV of Book 3 of the Implementing Rules of
the Labor Code ("Section 2").5 Petitioners claim that this includes not only the
10 legal holidays, but also their un-worked half of Saturdays and all of
Sundays.
The Labor Arbiter gave credence to petitioners arguments on the
computation of their wages based on the 304 divisor used by ANTECO in
converting the leave credits of its employees. The Labor Arbiter agreed with
petitioners that ANTECOs use of 304 as divisor is an admission that it is
paying its employees for only 304 days a year instead of the 365 days as
specified in Section 2. The Labor Arbiter concluded that ANTECO owed its
employees the wages for 61 days, the difference between 365 and 304, for
every year.
The NLRCs Ruling
On appeal, the NLRC reversed the Labor Arbiters ruling that ANTECO
underpaid its employees. The NLRC pointed out that the Labor Arbiters own
computation showed that the daily wage rates of ANTECOs employees were
above the minimum daily wage of P124. The lowest paid employee of
ANTECO was then receiving a monthly wage of P3,788. The NLRC applied the
formula in Section 2 [(Daily Wage Rate = (Wage x 12)/365)] to the monthly
wage of P3,788 to arrive at a daily wage rate of P124.54, an amount clearly
above the minimum wage.
The NLRC noted that while the reasoning in the body of the Labor Arbiters
decision supported the view that ANTECO did not underpay, the conclusion
arrived at was the opposite. Finally, the NLRC ruled that the use of 304 as a
divisor in converting leave credits is more favorable to the employees since a
lower divisor yields a higher rate of pay.
The Ruling of the Court of Appeals
The Court of Appeals held that the petition was insufficient in form and
substance since it "does not allege the essential requirements of the extraordinary special action of certiorari." The Court of Appeals faulted petitioners
for failing to recite "where and in what specific instance public respondent
abused its discretion." The appellate court characterized the allegations in

the petition as "sweeping" and clearly falling short of the requirement of

Section 3, Rule 46 of the Rules of Court.
The Issues
Petitioners raise the following issues:
I
WHETHER THE COURT OF APPEALS IS CORRECT IN DISMISSING THE
CASE.
II WHETHER PETITIONERS ARE ENTITLED TO THEIR MONEY CLAIM.6
The Ruling of the Court
The petition has no merit.
On the sufficiency of the petition
Petitioners argue that the Court of Appeals erred in dismissing their petition
because this Court had already ruled that their petition is sufficient in form
and substance. They argue that this precludes any judgment to the contrary
by the Court of Appeals. Petitioners cite this Courts Resolution dated 13
January 1999 as their basis. This Resolution granted petitioners motion for
reconsideration and set aside the dismissal of their petition for review.
Petitioners reliance on our 16 September 1998 Resolution is misplaced. In
our Resolution, we dismissed petitioners case for failure to comply with
Section 11, Rule 13 of the Rules of Court.7 The petition lacked a written
explanation on why service was made through registered mail and not
personally.
The error petitioners committed before the Court of Appeals is different. The
appellate court dismissed their petition for failure to comply with the first
paragraph of Section 3 of Rule 468 in relation to Rule 65 of the Rules of Court,
outlining the necessary contents of a petition for certiorari. This is an entirely
different ground. The previous dismissal was due to petitioners failure to
explain why they resorted to service by registered mail. This time the
content of the petition itself is deficient. Petitioners failed to allege in their
petition the specific instances where the actions of the NLRC amounted to
grave abuse of discretion.

There is nothing in this Courts Resolution dated 13 January 1999 that

remotely supports petitioners argument. What we resolved then was to
reconsider the dismissal of the petition due to a procedural defect and to
refer the case to the Court of Appeals for its proper disposition. We did not in
any way rule that the petition is sufficient in form and substance.
Petitioners also argue that their petition is clear and specific in its allegation
of grave abuse of discretion. They maintain that they have sufficiently
complied with the requirement in Section 3, Rule 46 of the Rules of Court.
Again, petitioners are mistaken.
We quote the relevant part of their petition:
REASONS RELIED UPON FOR ALLOWANCE OF PETITION
12. This Honorable court can readily see from the facts and
circumstances of this case, the petitioners were denied of their rights
to be paid of 4 hours of each Saturday, 51 rest days and 10 legal
holidays of every year since they started working with respondent
ANTECO.
13. The respondent NLRC while with open eyes knew that the
petitioners are entitled to salary differentials consisting of 4 hours pay
on Saturdays, 51 rest days and 10 legal holidays plus 10% attorneys
fees as awarded by the Labor Arbiter in the above-mentioned decision,
still contrary to law, contrary to existing jurisprudence issued arbitrary,
without jurisdiction and in excess of jurisdiction the decision vacating
and setting aside the said decision of the Labor Arbiter, to the
irreparable damage and prejudice of the petitioners.
14. That the respondent NLRC in grave abuse of discretion in the
exercise of its function, by way of evasion of positive duty in
accordance with existing labor laws, illegally refused to reconsider its
decision dismissing the petitioners complaints.
15. That there is no appeal, nor plain, speedy and adequate remedy in
law from the above-mentioned decision and resolution of respondent
NLRC except this petition for certiorari.9
These four paragraphs comprise the petitioners entire argument. In these
four paragraphs petitioners ask that a writ of certiorari be issued in their
favor. We find that the Court of Appeals did not err in dismissing the petition

outright. Section 3, Rule 46 of the Rules of Court requires that a petition for
certiorari must state the grounds relied on for the relief sought. A simple
perusal of the petition readily shows that petitioners failed to meet this
requirement.
The appellate courts jurisdiction to review a decision of the NLRC in a
petition for certiorari is confined to issues of jurisdiction or grave abuse of
discretion.10 An extraordinary remedy, a petition for certiorari is available
only and restrictively in truly exceptional cases. The sole office of the writ of
certiorari is the correction of errors of jurisdiction including the commission
of grave abuse of discretion amounting to lack or excess of jurisdiction.11 It
does not include correction of the NLRCs evaluation of the evidence or of its
factual findings. Such findings are generally accorded not only respect but
also finality.12 A party assailing such findings bears the burden of showing
that the tribunal acted capriciously and whimsically or in total disregard of
evidence material to the controversy, in order that the extraordinary writ of
certiorari will lie.13
We agree with the Court of Appeals that nowhere in the petition is there any
acceptable demonstration that the NLRC acted either with grave abuse of
discretion or without or in excess of its jurisdiction. Petitioners merely stated
generalizations and conclusions of law. Rather than discussing how the NLRC
acted capriciously, petitioners resorted to a litany of generalizations.
Petitions that fail to comply with procedural requisites, or are unintelligible or
clearly without legal basis, deserve scant consideration. Section 6, Rule 65 of
the Rules of Court requires that every petition be sufficient in form and
substance before a court may take further action. Lacking such sufficiency,
the court may dismiss the petition outright.
The insufficiency in substance of this petition provides enough reason to end
our discussion here. However, we shall discuss the issues raised not so much
to address the merit of the petition, for there is none, but to illustrate the
extent by which petitioners have haphazardly pursued their claim.
On the right of the petitioners to wage differentials
Petitioners claim that the Court of Appeals gravely erred in denying their
claim for wage differentials. Petitioners base their claim on Section 2, Rule IV
of Book III of the Omnibus Rules Implementing the Labor Code. Petitioners
argue that under this provision monthly-paid employees are considered paid
for all days of the month including un-worked days. Petitioners assert that
they should be paid for all the 365 days in a year. They argue that since in

the computation of leave credits, ANTECO uses a divisor of 304, ANTECO is

not paying them 61 days every year.
Petitioners claim is without basis
We have long ago declared void Section 2, Rule IV of Book III of the Omnibus
Rules Implementing the Labor Code. In Insular Bank of Asia v.
Inciong,14 we ruled as follows:
Section 2, Rule IV, Book III of the Implementing Rules and Policy
Instructions No. 9 issued by the Secretary (then Minister) of Labor are
null and void since in the guise of clarifying the Labor Codes provisions
on holiday pay, they in effect amended them by enlarging the scope of
their exclusion.
The Labor Code is clear that monthly-paid employees are not excluded
from the benefits of holiday pay. However, the implementing rules on
holiday pay promulgated by the then Secretary of Labor excludes
monthly-paid employees from the said benefits by inserting, under
Rule IV, Book III of the implementing rules, Section 2 which provides
that monthly-paid employees are presumed to be paid for all days in
the month whether worked or not.
Thus, Section 2 cannot serve as basis of any right or claim. Absent any other
legal basis, petitioners claim for wage differentials must fail.
Even assuming that Section 2, Rule IV of Book III is valid, petitioners claim
will still fail. The basic rule in this jurisdiction is "no work, no pay." The right
to be paid for un-worked days is generally limited to the ten legal holidays in
a year.15 Petitioners claim is based on a mistaken notion that Section 2, Rule
IV of Book III gave rise to a right to be paid for un-worked days beyond the
ten legal holidays. In effect, petitioners demand that ANTECO should pay
them on Sundays, the un-worked half of Saturdays and other days that they
do not work at all. Petitioners line of reasoning is not only a violation of the
"no work, no pay" principle, it also gives rise to an invidious classification, a
violation of the equal protection clause. Sustaining petitioners argument will
make monthly-paid employees a privileged class who are paid even if they
do not work.
The use of a divisor less than 365 days cannot make ANTECO automatically
liable for underpayment. The facts show that petitioners are required to work
only from Monday to Friday and half of Saturday. Thus, the minimum
allowable divisor is 287, which is the result of 365 days, less 52 Sundays and

less 26 Saturdays (or 52 half Saturdays). Any divisor below 287 days means
that ANTECOs workers are deprived of their holiday pay for some or all of
the ten legal holidays. The 304 days divisor used by ANTECO is clearly above
the minimum of 287 days.
Finally, petitioners cite Chartered Bank Employees Association v.
Ople16 as an analogous situation. Petitioners have misread this case.
In Chartered Bank, the workers sought payment for un-worked legal holidays
as a right guaranteed by a valid law. In this case, petitioners seek payment
of wages for un-worked non-legal holidays citing as basis a void
implementing rule. The circumstances are also markedly different.
In Chartered Bank, there was a collective bargaining agreement that
prescribed the divisor. No CBA exists in this case. In Chartered Bank, the
employer was liable for underpayment because the divisor it used was 251
days, a figure that clearly fails to account for the ten legal holidays the law
requires to be paid. Here, the divisor ANTECO uses is 304 days. This figure
does not deprive petitioners of their right to be paid on legal holidays.
A final note. ANTECOs defense is likewise based on Section 2, Rule IV of
Book III of the Omnibus Rules Implementing the Labor Code although
ANTECOs interpretation of this provision is opposite that of petitioners. It is
deplorable that both parties premised their arguments on an implementing
rule that the Court had declared void twenty years ago in Insular Bank. This
case is cited prominently in basic commentaries.17 And yet, counsel for both
parties failed to consider this. This does not speak well of the quality of
representation they rendered to their clients. This controversy should have
ended long ago had either counsel first checked the validity of the
implementing rule on which they based their contentions.
WHEREFORE, the petition is DENIED. The Resoution of the Court of
Appeals DISMISSING CA-G.R. SP No. 51519 is AFFIRMED.
SO ORDERED.