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RepublicofthePhilippines
SUPREMECOURT
BaguioCity

THIRDDIVISION

G.R.No.100701March28,2001

PRODUCERSBANKOFTHEPHILIPPINES,petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PRODUCERS BANK EMPLOYEES ASSOCIATION,1
respondents.

GONZAGAREYES,J.:

Before us is a special civil action for certiorari with prayer for preliminary injunction and/or restraining order
seeking the nullification of (1) the decision of public respondent in NLRCNCR Case No. 020075388, entitled
"Producers Bank Employees Association v. Producers Bank of the Philippines," promulgated on 30 April 1991,
reversing the Labor Arbiter's dismissal of private respondent's complaint and (2) public respondent's resolution
dated18June1991denyingpetitioner'smotionforpartialreconsideration. 1 w p h i1 .n t

The present petition originated from a complaint filed by private respondent on 11 February 1988 with the
Arbitration Branch, National Capital Region, National Labor Relations Commission (NLRC), charging petitioner
withdiminutionofbenefits,noncompliancewithWageOrderNo.6andnonpaymentofholidaypay.Inaddition,
privaterespondentprayedfordamages.2

On31March1989,LaborArbiterNievesV.deCastrofoundprivaterespondent'sclaimstobeunmeritoriousand
dismisseditscomplaint.3Inacompletereversal,however,theNLRC4grantedallofprivaterespondent'sclaims,
exceptfordamages.5ThedispositiveportionoftheNLRC'sdecisionprovides

WHEREFORE,premisesconsidered,theappealedDecisionis,asitishereby,SETASIDEandanotherone
issuedorderingrespondentappelleetopaycomplainantappellant:

1.Theunpaidbonus(midyearandChristmasbonus)and13thmonthpay

2. Wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding adjustment
thereofand

3.HolidaypayunderArticle94oftheLaborCode,butnottoexceedthree(3)years.

Therestoftheclaimsaredismissedforlackofmerit.

SOORDERED.

Petition filed a Motion for Partial Reconsideration, which was denied by the NLRC in a Resolution issued on 18
June1991.Hence,recoursetothisCourt.

Petitioner contends that the NLRC gravely abused its discretion in ruling as it did for the succeeding reasons
statedinitsPetition

1. On the alleged diminution of benefits, the NLRC gravely abused its discretion when (1) it contravened the
SupremeCourtdecisioninTradersRoyalBankv.NLRC,etal.,G.R.No.88168,promulgatedonAugust30,1990,
(2)itsrulingisnotjustifiedbylawandArt.100oftheLaborCode,(3)itsrulingiscontrarytotheCBA,and(4)the
socalled"companypracticeinvokedbyithasnolegalandmoralbases"(p.2,MotionforPartialReconsideration,
Annex"H")

2.OntheallegednoncompliancewithWageOrderNo.6,theNLRCagaingravelyabuseditsdiscretionwhenit
patentlyandpalpablyerredinholdingthatitis"moreinclinedtoadoptthestanceofappellant(privaterespondent
UNION)inthisissuesinceitismoreinkeepingwiththelawanditsimplementingprovisionsandtheintendmentof
thepartiesasrevealedintheirCBA"withoutgivinganyreasonorjustificationforsuchconclusionsasthestance
of appellant (private respondent UNION) does not traverse the clear and correct finding and conclusion of the
LaborArbiter.

Furthermore,thepetitioner,underconservatorshipanddistressed,isexemptedunderWageOrderNo.6.

Finally,the"wagedifferentialsunderWageOrderNo.6forNovember1,1984andthecorrespondingadjustment
thereof" (par. 2, dispositive portion, NLRC Decision), has prescribed (p. 12, Motion for Partial Reconsideration,
Annex"H").

3.Ontheallegednonpaymentoflegalholidaypay,theNLRCagaingravelyabuseditsdiscretionwhenitpatently
and palpably erred in approving and adopting "the position of appellant (private respondent UNION)" without
givinganyreasonorjustificationthereforwhichpositiondoesnotsquarelytraverseorrefutetheLaborArbiter's
correctfindingandruling(p.18,MotionforPartialReconsideration,Annex"H").6

On 29 July 1991, the Court granted petitioner's prayer for a temporary restraining order enjoining respondents
fromexecutingthe30April1991Decisionand18June1991ResolutionoftheNLRC.7

Comingnowtothemeritsofthepetition,theCourtshalldiscusstheissuesadseriatim.

Bonuses

Astothebonuses,privaterespondentdeclaredinitspositionpapersfiledwiththeNLRCthat

1.ProducersBankofthePhilippines,abankinginstitution,hasbeenprovidingseveralbenefitstoitsemployees
since 1971 when it started its operation. Among the benefits it had been regularly giving is a midyear bonus
equivalenttoanemployee'sonemonthbasicpayandaChristmasbonusequivalenttoanemployee'sonewhole
monthsalary(basicpayplusallowance)

2.WhenP.D.851,thelawgrantinga13thmonthpay,tookeffect,thebasicpaypreviouslybeinggivenaspartof
theChristmasbonuswasappliedascompliancetoit(P.D.851),theallowancesremainedasChristmasbonus

3.From1981upto1983,thebankcontinuedgivingonemonthbasicpayasmidyearbonus,onemonthbasic
payas13thmonthpaybuttheChristmasbonuswasnolongerbasedontheallowancebutonthebasicpayof
theemployeeswhichishigher

4.Intheearlypartof1984,thebankwasplacedunderconservatorshipbutitstillprovidedthetraditionalmidyear
bonus

5.ByvirtueofanallegedMonetaryBoardResolutionNo.1566,bankonlygaveaonehalf(1/2)monthbasicpay
ascomplianceofthe13thmonthpayandnonefortheChristmasbonus.Inatabularform,herearethebank's
violations:

YEAR MIDYEARBONUS CHRISTMASBONUS 13THMO.PAY

previousyears onemo.basic onemo.basic onemo.Basic

1984 [onemo.basic] none onehalfmo.Basic

1985 onehalfmo.basic none onehalfmo.Basic

1986 onehalfmo.basic onehalfmo.basic onemo.Basic

1987 onehalfmo.basic onehalfmo.basic onemo.basic

Private respondent argues that the midyear and Christmas bonuses, by reason of their having been given for
thirteenconsecutiveyears,haveripenedintoavestedrightand,assuch,cannolongerbeunilaterallywithdrawn
by petitioner without violating Article 100 of Presidential Decree No. 4429 which prohibits the diminution or
eliminationofbenefitsalreadybeingenjoyedbytheemployees.Althoughprivaterespondentconcedesthatthe
grant of a bonus is discretionary on the part of the employer, it argues that, by reason of its long and regular
concession,itmaybecomepartoftheemployee'sregularcompensation.10

Ontheotherhand,petitionerassertsthatitcannotbecompelledtopaytheallegedbonusdifferentialsduetoits
depressedfinancialcondition,asevidencedbythefactthatin1984itwasplacedunderconservatorshipbythe
Monetary Board. According to petitioner, it sustained losses in the millions of pesos from 1984 to 1988, an
assertion which was affirmed by the labor arbiter. Moreover, petitioner points out that the collective bargaining
agreementofthepartiesdoesnotprovideforthepaymentofanymidyearorChristmasbonus.Onthecontrary,
section4ofthecollectivebargainingagreementstatesthat

ActsofGrace.AnyotherbenefitsorprivilegeswhicharenotexpresslyprovidedinthisAgreement,evenif
now accorded or hereafter accorded to the employees, shall be deemed purely acts of grace dependent
uponthesolejudgmentanddiscretionoftheBANKtogrant,modifyorwithdraw.11

A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the
successoftheemployer'sbusinessandmadepossibletherealizationofprofits.Itisanactofgenerositygranted
by an enlightened employer to spur the employee to greater efforts for the success of the business and
realizationofbiggerprofits.12Thegrantingofabonusisamanagementprerogative,somethinggiveninaddition
to what is ordinarily received by or strictly due the recipient.13 Thus, a bonus is not a demandable and
enforceableobligation,14exceptwhenitismadepartofthewage,salaryorcompensationoftheemployee.15

However, an employer cannot be forced to distribute bonuses which it can no longer afford to pay. To hold
otherwisewouldbetopenalizetheemployerforhispastgenerosity.Thus,inTradersRoyalBankv.NLRC,16we
heldthat

Itisclearxxxthatthepetitionermaynotbeobligedtopaybonusestoitsemployees.Thematterofgiving
them bonuses over and above their lawful salaries and allowances is entirely dependent on the profits, if
any,realizedbytheBankfromitsoperationsduringthepastyear.

From 19791985, the bonuses were less because the income of the Bank had decreased. In 1986, the
incomeoftheBankwasonly20.2millionpesos,buttheBankstillgaveouttheusualtwo(2)monthsbasic
midyear and two months gross yearend bonuses. The petitioner pointed out, however, that the Bank
weakenedconsiderablyafter1986onaccountofpoliticaldevelopmentsinthecountry.Suspectedtobea
Marcosownedorcontrolledbank,itwasplacedundersequestrationbythepresentadministrationandis
nowmanagedbythePresidentialCommissiononGoodGovernment(PCGG).

Inlightofthesesubmissionsofthepetitioner,thecontentionoftheUnionthatthegrantingofbonusesto
the employees had ripened into a company practice that may not be adjusted to the prevailing financial
conditionoftheBankhasnolegalandmoralbases.Itsfiscalconditionhavingdeclined,theBankmaynot
beforcedtodistributebonuseswhichitcannolongeraffordtopayand,ineffect,bepenalizedforitspast
generositytoitsemployees.

Private respondent's contention, that the decrease in the midyear and yearend bonuses constituted a
diminution of the employees' salaries, is not correct, for bonuses are not part of labor standards in the
sameclassassalaries,costoflivingallowances,holidaypay,andleavebenefits,whichareprovidedbythe
LaborCode.

ThisdoctrinewasreiteratedinthemorerecentcaseofManilaBankingCorporationv.NLR17whereintheCourt
madethefollowingpronouncements

By definition, a "bonus" is a gratuity or act of liberality of the giver which the recipient has no right to
demandasamatterofright.Itissomethinggiveninadditiontowhatisordinarilyreceivedbyorstrictlydue
therecipient.Thegrantingofabonusisbasicallyamanagementprerogativewhichcannotbeforcedupon
theemployerwhomaynotbeobligedtoassumetheonerousburdenofgrantingbonusesorotherbenefits
asidefromtheemployee'sbasicsalariesorwages,especiallysoifitisincapableofdoingso.

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Clearlythen,abonusisanamountgivenexgratiatoanemployeebyanemployeronaccountofsuccess
inbusinessorrealizationofprofits.Howthencananemployerbemadeliabletopayadditionalbenefitsin
thenatureofbonusestoitsemployeeswhenithasbeenoperatingonconsiderablenetlossesforagiven
periodoftime?

RecordsbearoutthatpetitionerManilabankwasalreadyindirefinancialstraitsinthemid80's.Asearlyas
1984, the Central Bank found that Manila bank had been suffering financial losses. Presumably, the
problemscommencedevenbeforetheirdiscoveryin1984.Asearlierchronicled,theCentralBankplaced
petitioner bank under comptrollership in 1984 because of liquidity problems and excessive interbank
borrowings. In 1987, it was placed under receivership and ordered to close operation. In 1988, it was
orderedliquidated.
 It is evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985 and
1986,thus,resultingtoitseventualclosurein1987andliquidationin1988.Clearly,therewasnosuccessin
businessorrealizationofprofitstospeakofthatwouldwarranttheconfermentofadditionalbenefitssought
by private respondents. No company should be compelled to act liberally and confer upon its employees
additionalbenefitsoverandabovethosemandatedbylawwhenitisplaguedbyeconomicdifficultiesand
financiallosses.Noactofenlightenedgenerosityandselfinterestcanbeexactedfromnearempty,ifnot
emptycoffers.

It was established by the labor arbiter18 and the NLRC19 and admitted by both parties20 that petitioner was
placedunderconservatorshipbytheMonetaryBoard,pursuanttoitsauthorityunderSection28AofRepublicAct
No.265,21asamendedbyPresidentialDecreeNo.72,22whichprovides

Sec.28A.Appointmentofconservator.Whenever,onthebasisofareportsubmittedbytheappropriate
supervising and examining department, the Monetary Board finds that a bank is in a state of continuing
inabilityorunwillingnesstomaintainaconditionofsolvencyandliquiditydeemedadequatetoprotectthe
interestofdepositorsandcreditors,theMonetaryBoardmayappointaconservatortotakechargeofthe
assets, liabilities, and the management of that banking institution, collect all monies and debts due said
bankandexerciseallpowersnecessarytopreservetheassetsofthebank,reorganizethemanagement
thereofandrestoreitsviability.Heshallhavethepowertooverruleorrevoke"theactionsoftheprevious
managementandboardofdirectorsofthebank,anyprovisionoflawtothecontrarynotwithstanding,and
suchotherpowersastheMonetaryBoardshalldeemnecessary. 1 w p h i1 .n t

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UnderSection28A,theMonetaryBoardmayplaceabankunderthecontrolofaconservatorwhenitfindsthat
thebankiscontinuouslyunableorunwillingtomaintainaconditionofsolvencyorliquidity.InCentralBankofthe
Philippines v. Court of Appeals,23 the Court declared that the order placing petitioner herein under
conservatorshiphadlongbecomefinalanditsvaliditycouldnolongerbelitigatedupon.Also,inthesamecase,
the Court found that sometime in August, 1983, some news items triggered a bankrun in petitioner which
resulted in continuous over drawings on petitioner's demand deposit account with the Central Bank the over
drawings reached P143.955 million by 17 January 1984 and as of 13 February 1990, petitioner had over
drawings of up to P1.233 billion, which evidences petitioner's continuing inability to maintain a condition of
solvency and liquidity, thus justifying the conservatorship. Our findings in the Central Bank case coincide with
petitioner'sclaimsthatitcontinuouslysufferedlossesfrom1984to1988asfollows

YEAR NETLOSSESIN
MILLIONSOFPESOS

1984 P144.418

1985 P144.940

1986 P132.940

1987 P84.182

JanuaryFebruary P9.271
1988

These losses do not include the interest expenses on the overdraft loan of the petitioner to the Central Bank,
which interest as of July 31, 1987, amounted to P610.065 Million, and penalties on reserve deficiencies which
amounted to P89.029 Million. The principal balance of the overdraft amounted to P971.632 Million as of March
16,1988.24

Petitionerwasnotonlyexperiencingadeclineinitsprofits,butwasreelingfromtremendouslossestriggeredbya
bankrunwhichbeganin1983.Insuchadepressedfinancialcondition,petitionercannotbelegallycompelledto
continue paying the same amount of bonuses to its employees. Thus, the conservator was justified in reducing
themidyearandChristmasbonusesofpetitioner'semployees.Toholdotherwisewouldbetodefeatthereason
fortheconservatorshipwhichistopreservetheassetsandrestoretheviabilityofthefinanciallyprecariousbank.
Ultimately, it is to the employees' advantage that the conservatorship achieve its purposes for the alternative
wouldbepetitioner'sclosurewherebyemployeeswouldlosenotonlytheirbenefits,buttheirjobsaswell.

13thMonthPay
Withregardtothe13thmonthpay,theNLRCadoptedthepositiontakenbyprivaterespondentandheldthatthe
conservator was not justified in diminishing or not paying the 13th month pay and that petitioner should have
instead applied for an exemption, in accordance with section 7 of Presidential Decree No. 851 (PD 851), as
amended by Presidential Decree No. 1364, but that it did not do so.25 The NLRC held that the actions of the
conservatorrancountertotheprovisionsofPD851.

Initspositionpaper,26privaterespondentclaimedthatpetitionermadethefollowingpaymentstoitsmembers

YEAR MIDYEARBONUS 13thMONTHPAY CHRISTMASBONUS

1984 1monthbasic monthbasic None

1985 monthbasic monthbasic None

1986 monthbasic 1monthbasic monthbasic

1987 monthbasic 1monthbasic monthbasic

However,initsMemorandum27filedbeforethisCourt,privaterespondentreviseditsclaimsasfollows

YEAR MIDYEARBONUS 13thMONTHPAY CHRISTMASBONUS

1984 1monthbasic None monthbasic

1985 monthbasic None monthbasic

1986 monthbasic 1/2monthbasic 1monthbasic

1987 1/2monthbasic monthbasic 1monthbasic

1988 1/2monthbasic monthbasic 1monthbasic

PetitionerarguesthatitisnotcoveredbyPD851sincethemidyearandChristmasbonusesithasbeengivingits
employees from 1984 to 1988 exceeds the basic salary for one month (except for 1985 where a total of one
monthbasicsalarywasgiven).Hence,thisamountshouldbeappliedtowardsthesatisfactionofthe13thmonth
pay,pursuanttoSection2ofPD851.28

PD 851, which was issued by President Marcos on 16 December 1975, requires all employers to pay their
employees receiving a basic salary of not more than P 1,000 a month,29 regardless of the nature of the
employment,a13thmonthpay,notlaterthanDecember24ofeveryyear.30However,employersalreadypaying
theiremployeesa13thmonthpayoritsequivalentarenotcoveredbythelaw.UndertheRevisedGuidelineson
theImplementationofthe13thMonthPayLaw,31theterm"equivalent"shallbeconstruedtoincludeChristmas
bonus,midyearbonus,cashbonusesandotherpaymentsamountingtonotlessthan1/12ofthebasicsalary.
Theintentionofthelawwastograntsomereliefnottoallworkersbutonlytothosenotactuallypaida13th
monthsalaryorwhatamountstoit,bywhatevernamecalled.Itwasnotenvisionedthatadoubleburdenwould
beimposedontheemployeralreadypayinghisemployeesa13thmonthpayoritsequivalentwhetheroutofpure
generosityoronthebasisofabindingagreement.Toimposeuponanemployeralreadygivinghisemployeesthe
equivalentofa13thmonthpaywouldbetopenalizehimforhisliberalityandinallprobability,theemployerwould
reactbywithdrawingthebonusesorresistfurthervoluntarygrantsforfearthatifandwhenalawispassedgiving
thesamebenefits,hispriorconcessionsmightnotbegivenduecredit.32

In the case at bar, even assuming the truth of private respondent's claims as contained in its position paper or
Memorandum regarding the payments received by its members in the form of 13th month pay, midyear bonus
andChristmasbonus,itisnotedthat,foreachandeveryyearinvolved,thetotalamountgivenbypetitionerwould
stillexceed,oratleastbeequalto,onemonthbasicsalaryandthus,maybeconsideredasan"equivalent"ofthe
13thmonthpaymandatedbyPD851.

Thus,petitionerisjustifiedincreditingthemidyearbonusandChristmasbonusaspartofthe13thmonthpay.
WageOrderNo.6

Wage Order No.6, which came into effect on 1 November 1984, increased the statutory minimum wage of
workers,withdifferentincreasesbeingspecifiedforagriculturalplantationandnonagriculturalworkers.Thebone
ofcontention,however,involvesSection4thereofwhichreads

All wage increase in wage and/or allowance granted by employers between June 17, 1984 and the
effectivityofthisOrdershallbecreditedascompliancewiththeminimumwageandallowanceadjustments
prescribedherein,providedthatwheretheincreasesarelessthantheapplicableamountprovidedinthis
Order,theemployershallpaythedifference.Suchincreasesshallnotincludeanniversarywageincreases
providedincollectivebargainingagreementsunlesstheagreementexpresslyprovideotherwise.

On 16 November 1984, the parties entered into a collective bargaining agreement providing for the following
salaryadjustments

ArticleVIII.Section1.SalaryAdjustments.Cognizantoftheeffectsof,amongothers,priceincreasesofoil
and other commodities on the employees' wages and earnings, and the certainty of continued
governmental or statutory actions adjusting employees' minimum wages, earnings, allowances, bonuses
and other fringe benefits, the parties have formulated and agreed on the following highly substantial
packagedincreasesinsalaryandallowancewhichtakeintoaccountandcover(a)anydeflationinincome
ofemployeesbecauseofsuchpriceincreasesandinflationand(b)theexpectedgovernmentalresponse
thereto in the form of statutory adjustments in wages, allowances and benefits, during the next three (3)
yearsofthisAgreement:

(i)EffectiveMarch1,1984P225.00permonthassalaryincreaseplusP100.00permonthasincreasein
allowancetoemployeeswithinthebargainingunitonMarch1,1984.

(ii)EffectiveMarch1,1985P125.00permonthassalaryincreaseplusP100.00permonthasincreasein
allowancetoemployeeswithinthebargainingunitonMarch1,1985.

(iii)EffectiveMarch1,1986P125.00permonthassalaryincreaseplusP100.00permonthasincreasein
allowancetoemployeeswithinthebargainingunitonMarch1,1986.

In addition, the collective bargaining agreement of the parties also included a provision on the chargeability of
suchsalaryorallowanceincreasesagainstgovernmentorderedorlegislatedincomeadjustments

Section2.PursuanttotheMOLEDecisiondatedOctober2,1984andOrderdatedOctober24,1984,the
firstyearsalaryandallowanceincreasesshallbechargeableagainstadjustmentsunderWageOrderNo.
5, which took effect on June 16, 1984. The charge ability of the foregoing salary increases against
governmentordered or legislated income adjustments subsequent to Wage Order No. 5 shall be
determinedonthebasisoftheprovisionsofsuchgovernmentordersorlegislation.

Petitioner argues that it complied with Wage Order No. 6 because the first year salary and allowance increase
providedforunderthecollectivebargainingagreementcanbecreditedagainstthewageandallowanceincrease
mandated by such wage order. Under Wage Order No. 6, all increases in wages or allowances granted by the
employer between 17 June 1984 and 1 November 1984 shall be credited as compliance with the wage and
allowance adjustments prescribed therein. Petitioner asserts that although the collective bargaining agreement
wassignedbythepartieson16November.1984,thefirstyearsalaryandallowanceincreasewasmadetotake
effect retroactively, beginning from 1 March 1984 until 28 February 1985. Petitioner maintains that this period
encompasses the period of creditability provided for under Wage Order No. 6 and that, therefore, the balance
remainingafterapplyingthefirstyearsalaryandallowanceincreaseinthecollectivebargainingagreementtothe
increase mandated by Wage Order No. 5, in the amount of P125.00, should be made chargeable against the
increaseprescribedbyWageOrderNo.6,andifnotsufficient,petitioneriswillingtopaythedifference.33

On the other hand, private respondent contends that the first year salary and allowance increases under the
collectivebargainingagreementcannotbeappliedtowardsthesatisfactionoftheincreasesprescribedbyWage
Order No. 6 because the former were not granted within the period of creditability provided for in such wage
order.Accordingtoprivaterespondent,thesignificantdateswithregardtothegrantingofthefirstyearincreases
are 9 November 1984 the date of issuance of the MOLE Resolution, 16 November 1984 the date when the
collectivebargainingagreementwassignedbythepartiesand1March1984theretroactivedateofeffectivityof
thefirstyearincreases.Privaterespondentpointsoutthatnoneofthesedatesfallwithintheperiodofcreditability
underWageOrderNo.6whichisfrom17June1984to1November1984.Thus,petitionerhasnotcompliedwith
WageOrderNo.6.34

ThecreditabilityprovisioninWageOrderNo.6isbasedonimportantpublicpolicy,thatis,theencouragementof
employerstograntwageandallowanceincreasestotheiremployeeshigherthantheminimumratesofincreases
prescribedbystatuteoradministrativeregulation.Thus,weheldinApexMiningCompany,Inc.v.NLRC35that
 [t]o obliterate the creditability provisions in the Wage Orders through interpretation or otherwise, and to
compelemployerssimplytoaddonlegislatedincreasesinsalariesorallowanceswithoutregardtowhatis
already being paid, would be to penalize employers who grant their workers more than the statutorily
prescribed minimum rates of increases. Clearly, this would be counterproductive so far as securing the
interest of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of
employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or
allowancesandpaytheirworkersmorethanwhatthelaworregulationsrequire.

Section 1 of Article VIII of the collective bargaining agreement of the parties states that "...the parties have
formulatedandagreedonthefollowinghighlysubstantialpackagedincreasesinsalaryandallowancewhichtake
into account and cover (a) any deflation in income of employees because of such price increases and inflation
and(b)theexpectedgovernmentalresponsetheretointheformofstatutoryadjustmentsinwages,allowances
and benefits, during the next three (3) years of this Agreement..." The unequivocal wording of this provision
manifests the clear intent of the parties to apply the wage and allowance increases stipulated in the collective
bargaining agreement to any statutory wage and allowance, adjustments issued during the effectivity of such
agreementfrom1March1984to28February1987.Furthermore,contrarytoprivaterespondent'scontentions,
there is nothing in the wording of Section 2 of Article VIII of the collective bargaining agreement that would
preventpetitionerfromcreditingthefirstyearsalaryandallowanceincreasesagainsttheincreasesprescribedby
WageOrderNo.6.

ItwouldbeinconsistentwiththeabovestatedrationaleunderlyingthecreditabilityprovisionofWageOrderNo.6
if, after applying the first year increase to Wage Order No. 5, the balance was not made chargeable to the
increases under Wage Order No. 6 for the fact remains that petitioner actually granted wage and allowance
increasessufficienttocovertheincreasesmandatedbyWageOrderNo.5andpartoftheincreasesmandated
byWageOrderNo.6.

HolidayPay

Article 94 of the Labor Code provides that every worker shall be paid his regular daily wage during regular
holidays36andthattheemployermayrequireanemployeetoworkonanyholidaybutsuchemployeeshallbe
paidacompensationequivalenttotwicehisregularrate.Inthiscase,theLaborArbiterfoundthatthedivisorused
bypetitionerinarrivingattheemployees'dailyrateforthepurposeofcomputingsalaryrelatedbenefitsis314.37
ThisfindingwasnotdisputedbytheNLRC.38However,thedivisorwasreducedto303byvirtueofaninteroffice
memorandumissuedon13August1986,towit

Toincreasetherateofovertimepayforrankandfilers,wearepleasedtoinformthateffectiveAugust18,
1986,theactingConservatorapprovedtheuseof303daysasdivisorinthecomputationofOvertimepay.
ThepresentPolicyof314daysasdivisorusedinthecomputationforcashconversionanddeterminationof
dailyrate,amongothers,stillremain,Saturdays,therefore,arestillconsideredpaidrestdays.

Corollarily,theActingConservatoralsoapprovedtheincreaseofmealallowancefromP25.00toP30.00for
aminimumoffour(4)hoursofworkforSaturdays.

Proceedingfromtheunambiguoustermsoftheabovequotedmemorandum,theLaborArbiterobservedthatthe
reductionofthedivisorto303wasforthesolepurposeofincreasingtheemployees'overtimepayandwasnot
meanttoreplacetheuseof314asthedivisorinthecomputationofthedailyrateforsalaryrelatedbenefits.39

Private respondent admits that, prior to 18 August 1986, petitioner used a divisor of 314 in arriving at the daily
wagerateofmonthlysalariedemployees.Privaterespondentalsoconcedesthatthedivisorwaschangedto303
forpurposesofcomputingovertimepayonly.InitsMemorandum,privaterespondentstatesthat

49. The facts germane to this issue are not debatable. The Memorandum Circular issued by the Acting
Conservatorisclear.PriortoAugust18,1986,thepetitionerbankusedadivisorof314daysinarrivingat
the daily wage rate of the monthlysalaried employees. Effective August 18, 1986, this was changed. It
adoptedthefollowingformula:

Basicsalaryx12months=DailyWageRate

303days
50.Byutilizingthisformulaevenuptothepresent,theconclusionisinescapablethatthepetitionerbankis
notactuallypayingitsemployeestheregularholidaypaymandatedbylaw.Consequently,itisboundtopay
thesalarydifferentialofitsemployeeseffectiveNovember1,1974uptothepresent.

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 54.Sinceitisaquestionoffact,theInterofficeMemorandumdatedAugust13,1986(Annex"E")provides
foradivisorof303daysincomputingovertimepay.Theclearimportofthisdocumentisthatfromthe365
daysinayear,wededuct52restdayswhichgivesatotalof313days.Now,if313daysisthenumberof
workingdaysoftheemployeesthen,thereisadisputablepresumptionthattheemployeesarepaidtheir
holidaypay.However,thisisnotsointhecaseatbar.Thebankuses303daysasitsdivisor.Hence,itis
notpayingitsemployeestheircorrespondingholidaypay.40

In Union of Filipro Employees v. Vivar, ]r.41 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 employee's salary and in the
computation of his daily rate." This was also our ruling in Chartered Bank Employees Association v. Ople,42 as
follows

Itisarguedthatevenwithoutthepresumptionfoundintherulesandinthepolicyinstruction,thecompany
practiceindicatesthatthemonthlysalariesoftheemployeesaresocomputedastoincludetheholidaypay
providedbylaw.Thepetitionercontendsotherwise.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing
overtimecompensationforitsemployees,employsa"divisor"of251days.The251workingdaysdivisoris
the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays form the total number of
calendardaysinayear.Iftheemployeesarealreadypaidforallnonworkingdays,thedivisorshouldbe
365andnot251.

Apparently,thedivisorof314isarrivedatbysubtractingallSundaysfromthetotalnumberofcalendardaysina
year,sinceSaturdaysareconsideredpaidrestdays,asstatedintheinterofficememorandum.Thus,theuseof
314asadivisorleadstotheinevitableconclusionthatthetenlegalholidaysarealreadyincludedtherein.

We agree with the labor arbiter that the reduction of the divisor to 303 was done for the sole purpose of
increasing the employees' overtime pay, and was not meant to exclude holiday pay from the monthly salary of
petitioner'semployees.Infact,itwasexpresslystatedintheinterofficememorandumalsoreferredtobyprivate
respondentinitspleadingsthatthedivisorof314willstillbeusedinthecomputationforcashconversionandin
thedeterminationofthedailyrate.Thus,basedontherecordsofthiscaseandtheparties'ownadmissions,the
CourtholdsthatpetitionerhascompliedwiththerequirementsofArticle94oftheLaborCode. 1 w p h i1 .n t

Damages

Astoprivaterespondent'sclaimfordamages,theNLRCwascorrectinrulingthatthereisnobasistosupportthe
same.

WHEREFORE,forthereasonsabovestated,the30April1991DecisionofpublicrespondentinNLRCNCRCase
No.020075388,entitled"ProducersBankEmployeesAssociationv.ProducersBankofthePhilippines,"andits
18 June 1991 Resolution issued in the same case are hereby SET ASIDE, with the exception of public
respondent'srulingondamages.

SOORDERED.

Melo,Vitug,Panganiban,andSandovalGutierrez,JJ.,concur.

Footnote

1ReraffledtohereinponentepursuanttotheCourt'sResolutioninA.M.No.00903SCdatedFebruary
27,2001.

2Rollo,3949.

3Ibid.,6076.

4SecondDivision,composedofRusticoL.Diokno,ponenteEdna BontoPerez, presiding commissioner

andDomingoH.Zapanta.

5Rollo,114140.

61bid.,1213.

71bid.,170.

81bid.,39.
9Otherwiseknownas"TheLaborCodeofthePhilippines"hereinafterreferredtoas"[the]LaborCode."

10Rollo,44,284.

11Ibid.,241242,244.

12LuzonStevedoringCorp.v.CourtofIndustrialRelations,15SCRA660(1965).

13TradersRoyalBankv.NLRC,189SCRA274(1990).

14LuzonStevedoringCorp.v.CourtofIndustrialRelations,supra.

15 Philippine National Construction Corporation v. NLRC, 307 SCRA 218 (1999) AtokBig Wedge Mutual
BenefitAssociationv.AtokBigWedgeMiningCo.,92Phil754(1953).

16Supra.

17279SCRA602(1997).

18Rollo,68.

19Ibid.,128

20Ibid.,41,51.

21Otherwiseknownas"TheCentralBankAct."

22IssuedonNovember29,1972.

23208SCRA652(1992).

24Rollo,227.

25Ibid.,125.

26Ibid.,42.

27Ibid.,275.

28Ibid.,243.

29On13August1986,PresidentAquinoissuedMemorandumOrderNo.28removingtheP1,000salary
ceiling,thusentitlingallrankandfileemployeestothe13thmonthpay.

30Section1.

31Issuedon16November1987.

32 National Federation of Sugar Workers v. Ovejera, 114 SCRA 354 (1982). See UST Faculty Union v.
NLRC,190SCRA215(1990)BrokenshireMemorialHospital,Inc.v.NLRC,143SCRA564(1986).

33Rollo,252253.

34Ibid.,295296.

35206SCRA497(1992).SeealsoNationalFederationofLaborv.NLRC,234SCRA311(1994).

36 Executive Order No. 203, which took effect on 30 June 1987, provides that there are only ten (10)
regular holidays New Year's Day (January 1), Maundy Thursday (movable date), Good Friday (movable
date),ArawngKagitingan(April9),LaborDay(May1),IndependenceDayGune12),NationalHeroesDay
(Last Sunday of August), Bonifacio Day (November 30), Christmas Day. (December 25), and Rizal Day
(December30).

37Rollo,75.

38Ibid.,137138.

39Ibid.,75.
 40Ibid.,286288.

41205SCRA200(1992).

42138SCRA273(1985).

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